Transportation sale is one of the most important factors in determining the success of the commercial airline operation. Distributive channel or the method of transportation is the way the product is delivered to the airline customer. Thus, each airline company wants to ensure maximum access to consumers keeping the lowest price. That is why, e-commerce became the best solution. The implementation of the airlines by their own means gradually increases with the development of e-commerce distribution schemes (from 20-25% by volume in 2004 to 25-35% in 2005). Just few years ago, agency selling airline was the main channel of distribution of passenger air transport. Today, sales via Internet are equal in volume to the agency sales. The main reason for such a rapid e-commerce technologies usage is that the direct sales via Internet have allowed airlines to reduce fares for transportation.
The main objectives of the essay is to define the major reasons why the usage of the e-commerce is convenient for the airline industry in today`s society, make the analysis of AirAsia using Porter’s value Chain, define the term “m-commerce”, find out the differences between M-Commerce and E-Commerce, create the recommendation of the implementation of m-commerce in AirAsia company.
SWOT Analysis of AirAsia Using Porter’s Value Chain
M. Porter has proposed a scheme that is useful in the resources analysis in the strategic plan. This scheme is called “the value chain”. The basic of Porter's idea is that the degree of evaluation of products or services is determined by how satisfied are the actions, which are necessary for the development and launch of the production into the market, supply and support the product or service (Bartram and Gibson 2000, p. #). These activities must be carefully assessed. In his model, Porter distinguished primary and secondary activities of the company. According to M. Porter, the main activities are grouped into five areas: incoming supplies, operations (production), outbound delivery, marketing and sales, service. All types of major activities are associated with support activities. Porter identifies the four types of support activities: logistics, technical developments, human resource management and infrastructure firms. In order to define advantages and disadvantages of the company, all nine aspects should be taken into consideration (Porter 1998, p. #).
Incoming supplies are the actions such as acquisition, storage and distribution of inputs for the production of products or services. Recently, AirAsia has signed the contract to purchase 60 A320s with options for another 40 aircraft of this type. Thus, it has increased by 20 units scheduled for deployment firm order, which was recorded in a memorandum of understanding on the order for 40 A320s with options for another 40 aircraft of this type. The contract signed by AirAsia has become the largest one-time order for 320 aircraft (including options) received from the Asia-Pacific region. A320 aircraft gradually replaced all the 148 local Boeings-737-300, which are used now by group of AirAsia (which includes airline AirAsia of Malaysia, Thai AirAsia in Thailand and AWAIR in Indonesia). AirAsia will operate both types of aircraft in its fleet renewal period. This contract helped to reduce the expenses of oil and to increase the quality and comfort for the customers (Fernandes 2004, p. #).
Operation consists of actions such as processing, assembly, quality control. AirAsia is a very profitable company due to its collaboration with other companies. The famous partnership the company has established with GE Aviation. Due to it, AirAsia has new technologies and equipments and can maintain the low price for the tickets. Japanese airline ANA and AirAsia agreed to establish a joint venture. LoCall new carrier will be called AirAsia Japan, based in Tokyo's Narita airport and carry out domestic and international flights. 51% stake in AirAsia Japan will hold airline ANA, 49% - AirAsia (Grant 2005, p. #). The new carrier plans to obtain a certificate of the operator of the Japanese aviation authorities in February 2012. The beginning of the flight program is scheduled for August 2012. Due to these collaborations, the company gets lots of advantages, for example, in case of a good contract, the workers receive additional bonuses (Grant 2011, p. #).
Outgoing delivery is associated with the distribution of the products between buyers and includes storage, handling, and inventory management. The company has created many advantages for their customers. Firstly, the company prefers to have simply routs, rather than complex ones. Thus, is case of missing the baggage, it is much easier and quicker to find it and to return to the right place. However, on the other hand, the service is not very convenient for the customers in the other terms. People who fly from one place to the other cannot get their baggage automatically transferred, they have to do it by their own. In addition, AirAsia provides E-tickets that can be bought in the internet, which is cheaper than the printed one (Chaffey 2004, p. #).
Marketing and sales are related with acquaintance to the consumer product or service, and include solutions for the pricing of goods, their market promotion, dealer support, etc. On June 12, 2007, AirAsia signed up the contract with the Citibank. The result of it was that the bank credit cards can be exchanged to the vouchers of AirAsia Company. The vouchers provide airport taxi, administrative fees, fuel charges and flights for the customers. For the reason of promotion, AirAsia is the sponsor for different brands, competitions and activities. Thus, the well-known companies, which are in collaboration with the company, are Manchester United, Formula1, AT&T, English Premier League referees and others. The airline AirAsia has extended the sponsorship contract with the team, formerly known as Team Lotus, and now changed its name to Caterham for one more year. AirAsia plans to use the association with Formula 1 to attract customers, enhance image and conduct their own campaigns. Another marketing action was two years ago, when the company offered for its passengers the flights at incredibly low, “bus” prices. Within two years, the price of air travel has been steadily crept up, but AirAsia is still the most popular airline in Asia. Most travelers from Southeast Asia buy tickets and fly with the company again and again, despite the number of new requirements, restrictions and increasing of the price for the tickets (Shari 2003, p. #).
Servicing is aimed at improving or maintaining the value of a product or service and includes pre-training, service outlets, after-sales service, repair, etc. Air Asia is one of the biggest providers of the variety of services to make the collaboration with the company for the customer as convenient as it possible. First of all, the company was the first airline company which provided selling the tickets trough the mobile phone. Secondly, travelers who plan to make several flights with AirAsia from Hong Kong, Macau and Guangzhou, can now do so without having to obtain a transit visa when entering the service Fly-Thru. This service is already available in some points of departure AirAsia aircraft and allows people who commit a few flights, register only once for connecting flights until the airport. In addition Fly-Thru is available to passengers departing from Hong Kong, Macau and Guangzhou, to continue their journey with AirAsia X on a long distance through the transit point of Kuala Lumpur, if the time between connecting flights varies from 90 minutes to six hours. Passengers can fly to the intended destination without the need for immigration clearance and transit visas in Malaysia before the voyage (OECD, 1997).
Logistics are acquisition of resources (components of the manufacturing process). When the experts has announced, that the price for the oil will soon rise up to 200$, the company has decided to reduce the expenses. AirAsia has abolished fuel surcharge and arranged big sale. These surcharges have been levied during the last few years and at the time of cancellation averaged at 47 Malaysian ringgit ($ 13) each direction. This helped to overcome the crisis, which was very hard for the other airline companies (Shari 2003, p. #).
Product development are related to the value creation: ensuring the production process, product development, management of flows of raw materials. The usage of the new technologies allows to create new services and to gain a better profit. Thus, recently AA has announced the launch of a loyalty program for frequent flyers. The buyers of tickets and usage of the services of partner party loyalty program will earn points that can be transferred to the tickets. In Malaysia, the participants can have the debit prepaid card (a joint product of the airline and payment system Visa), which will accumulate points faster. Company also broadly uses internet technologies. AA continues to introduce additional services, such as Ticketless Access. Starting from May 27, 2011 agents can have a plan of seats and request a specific location on flights Air Asia (AK, FD, D7 & QZ). As a result, the agent receives the ability to access the same screen as for booking flights, and to reserve a specific location on the aircraft, which improves the quality of customer service (Kotler 2003, p. #).
Human Resource Management includes recruiting, training, development and promotion of personnel. The major focus AA makes on the proficiency of their employers. Thus, many educational programs are established in the company (Walker 1992, p. #). In 2003, AA started Flight Attendant trainings. The trainings focus on the improvement of the aviation terminology, increasing of the safety standard knowledge. AirAsia has even created a special academy, where everyone can improve their knowledge in the field of aviation.
Infrastructure of the company is the production, ensuring the normal course of the production process. It includes buildings, communications equipment, product, etc. AA has a highly developed infrastructure. AA has near 60 destination districts. Each day AA provides near 500 flights. In addition, the operations are performed from 6 different regions: Kota Kinabal, Johor Bahru, Low Cost Carrier Terminal (KLIA), Bangkok (Thailand), Bali (Indonesia) and Jarkata (Indonesia) (Shari 2003, p. #).
AirAsia Competitive Advantages
Sustainable competitive advantage is the basis, which a successful business can be built on. Sustainable competitive advantage is creating customer value, a strategy based on a unique combination of in-house resources and capabilities that cannot be copied by competitors. AirAsia has a lot of advantages, which makes it very competitive. Talking about the significant resources, AA has very supportive and constructive management; it forces the workers to create new ideas and to contribute to the development of the company. In addition, the employees in the company are very professional. Their experience makes the company very competitive in the market place. AA creates lots of capabilities in order to reduce the cost on the tickets and services. The fast turnaround time has lead to increasing of the profit. The other capacity is the law-cost policy. The focus is made on the quality of the details which are used by the company. Lean Distribution System with the e-tickets usage makes the service more convenient for the customers (Taneja 2002, p. #). As the result, they last longer time and save money for the company. According to the recent statistics, AA company wins the market in comparison to others airline companies.
Three major factors that create competitive advantages can be defined. With their help, the company can have low prices for the transportation. Firstly, AA has defined the proper strategic decision by the usage of unique airline type. The workers of the company demonstrate the professional abilities in operating the business (Porter 1998, p. #). Thus, the coat of the production of new airplane has been reduced to 50%. If to evaluate the expenses of AA to the other companies, they are up to 41% lower than in other companies. In addition, the company has superior productivity, which can be seen from the data analysis of the AA researches. According to it, the index spent on the staff cost expanses in 2008 was 0. 29, while the average index in the similar companies was near 1.16 (AirAsia Berhad, 2008). Second competitive advantage is synergy between employees and AirAsia managers. Due to this collaboration, the employees are better motivated to work. Thirdly, the capabilities, which are created by the company, are the major competitive advantage. The tips and methods, which were created by employees, have completed the main company’s strategy of the low cost. The “one type of aircraft concept” made a significant impact on the general competitiveness of the AirAsia Company (Taneja 2002, p. #).
Combining Internet technology, mobile communications and online trading has formed a new creation - the “mobile commerce”, or simply M-commerce, as it is often referred to. Many leaders in the Internet industry benefits painted a wireless e-commerce with the most ardent enthusiasm. Thus, according to Jeff Bezos,the head of Amazon.com, M-Commerce “will be the weirdest thing of all that I ever saw lack of time exhausted the world”. Bezos says, the wireless Internet will permanently alter the way people shop. The man simply cannot resist the benefits of the new style when he can order the authorities to wait for an appointment with the doctor, and he heard from a friend of an interesting book immediately on the spot and buys it. In Finland, for example, mobile commerce has already become a part of everyday life. For the Finns it became quite common to pay for the washing machine, buy a can of beer in vending machines or buy a CD simply by pressing a few buttons on their cell phones (Durlacher 1999, p. #). It goes without saying, M-commerce is in the state of infancy; however, it is developing well in accordance to the natural tendencies, gradually transferring to your phone mobile users’ e-mail, weather forecasts, sports news headlines, banking, and, finally, lots of other useful business services.
Difference between M-Commerce & E-Commerce
M-commerce and e-commerce have a lot of in common. The major thing is that both services are focused on the customer and have been created in order to increase the profitability of the company, due to improvement of the service. Nevertheless, the services have the same purpose. Both of them have universal functions, advantages and characteristics. Thus, two services can be differentiating according to presentation standards, devices used, bearer networks, and operating system. Basic device that is used in e-commerce is PC. M-commerce uses Smart phones, Palmtops ,Cell phones, Video game consoles and Personal Digital Assistants. Operating system used by e-commerce can be Linux, Unix or Windows. PalmOS, Symbian (EPOC), Pocket PC and Proprietary platforms are the operating systems in m-commerce. E-commerce has HTML presentational standard. M-commerce, except HTML, uses HDML, WML and i-Mode. E-commerce uses Microsoft Explorer Netscape, at the same time, when m-commerce uses Nokia browser, Phone.com UP browser and Mobile explorer (Chaffey 2004, p. #).
To conclude, m-commerce uses a bigger amount and variety of devices and tools. M-commerce is more convenient due to the sizes of mobile phone, and its service can be used anywhere. E-commerce is limited, because of the inability to access the Internet in some regions. What is more, m-commerce and e-commerce have other applications in order to capture possibilities. The information, such as schedule of flights, dinning guide, travel direction, the cost of the tickets, is widely gathered with the help of m-commerce more than with e-commerce. In addition, many customers prefer m-commerce, rather than e-commerce as the payment system.
After the evaluation of AirAsia Company, few recommendations can be made. Thus, the m-commerce and e-commerce have advantages both, to the customers and AirAsia Company. Especially the advantages can be seen from the implementation of the software that was presented by Microsoft Company – Vista. In order to increase comprehensiveness, AirAsia should establish a tough collaboration with Microsoft Company. This will help to have updated supply of the software and other tools that will bring only advantages for the further development of the company. In 2009 it was announced, that Microsoft Company has created new software – Windows Mobile. It became the developed version of the well-known software – Vista. This version was created specially for m-commerce users. New device is very convenient due to its similarity to the computer operational system. The software represents new opportunities for mobile users, such as sending e-mails trough the phone, voicemails, text messages. In addition, the included calendar allows checking on the appointments. Vista mobile software also allows for the customers to receive the latest news about the company. For AirAsia, the software is also very convenient. Due to the customers base, the company has very profitable advertisement scheme. Thus, the sms sending service informs the customers with the latest discounts for the tickets and convenient flights. Customer, in his turn, can better plan his flight using m-commerce service. Kathleen Tan, Executuve President of AirAsia Company, said, “We believe in leveraging on leading edge technology, such as Windows Vista, to enhance the customer experience with our brand. The collaboration allows us to expand our marketing channels by providing instant information on AirAsia’s promotions and updates to the region” (Press Release 2007, p. #). When the e-commerce was being promoted, it has lead to the big increasing in productivity of the company. M-commerce has made the even bigger influence on the service and general productivity of the company. The major benefit of the implementation of m-commerce was expanding the market and the amount of customers. Implementation of Vista software and the usage of m-commerce service make the company very competitive and gives a lot of advantages for its customers. The main advantages for the customers are the following. First of all, with the help of e-commerce, the customers have possibility to book the tickets, find out information about destination, prices, itineraries and others. With the help of m-commerce, the customers can from any place and at any time get the information on the web page of AirAsia Company to see if the flights are on time, check the traffic traditions and the conditions of transportations. In addition, the service is available 24 hours per day and 7 days per week. All the facilities, which are provided by AirAsia Company, help to develop the company, increase the amount of customers and the profit of the company.
To conclude, the competition in the airline industry has been raised up during the last few years. In order to be a profitable and developed company, AirAsia decided to implement new technologies and, with their help, increase their productivity. The successful model was created due to the strategy of the e-commerce and m-commerce usage of in the company. As the assisting services, e-commerce and m-commerce provide more convenient service to the customers. Thus, due to the services such competitive advantages of the company as fast turnaround time, high utilization of aircraft, low fare, low cost, lean distributional system, with the help of usage the e-tickets, have been implemented. The developed productivity of the company forces the customers to use their services. The SWOT analysis of the company showed that AirAsia provides not only the necessary service, but also the productivity is raised up by the proficiency of the workers, who are in the constant stage of improvement. Not a minor contribution to the development of the company made the decision to use the unique uniform aircraft. It will reduce the learning curve. The focus, made on the innovative technologies, allows the company to keep comparably low cost for the tickets and services, which is one of the major advantages of the company. Thus, the collaboration with the company Microsoft has a lot of advantages both, for AirAsia Company and for the customers. The usage of the Vista software for the mobile phones puts the m-commerce on the other stage of development. Being the first company that has implemented m-commerce in the airline industry, AirAsia has gained lots of advantages from it. What is more, this step allowed creating the law prices on the services, which became one of the major competitive advantages of the company.