External Analysis PESTL Analysis
The important drivers of airline success in Asia is supported by government, most airlines in East and Southeast Asian countries had full or substantial state ownership, management, and control, often subsidized and protected by the governments from competition; with the pursuit of non-business goals, profits were often sacrificed for the sake of cantonal objectives.The political environment in South East Asia for low cost airlines is benign and countries are trying to attract investment in their airline sector.
The pressure is coming on to national governments because of high demand for services which was caused by the high annual GAP growth in the region.Some development countries like Manner, Vietnam and Cambodia, there are great enthusiasm among the government and regulators for inviting low cost airlines to operate, in order to connect the poorly served population as well as inbound tourists.
In this environment, many new low-cost airlines have been set up in the increasingly liberalized regulatory environment.
The markets are also getting to be very complex and challenging with a host of new entrants.
B) Economics Sais’s rapid economic growth and sprouting middle class continues to fuel the growth of air travel in Asia. China, Japan and Indonesia had the largest number of air passengers in Asia in 2012 (as they have large populations which can afford air travel). The highest growth is comes from India because its large population with improving levels of income and affordability is undeserved currently.
Similarly, there is huge potential for Eurasia in the key South East Asian markets of Indonesia, the Philippines and Thailand, as they have high disposable income, and this directly leads to greater affordability of air travel
c) Social-cultural Surveys revealed that more people were willing to compromise on food and other services in exchange for lower prices. In fact, it was stated that price of tickets was the single most important consideration that influenced passengers’ decisions and of course this included without having to compromise on safety and punctuality.
In edition, increasingly over the years cost conscious leisure and business passengers were also looking to make their budge TTS decrease turner. This presents an opportunity for all Laces to increase their revenues by offering traveling at a much lower fare.
E) Technological Eurasia achieved a first mover advantage, by being Sais’s fist airlines to actually provide e-tickets rather than physical tickets. Furthermore, high sales of e-tickets on the website has eliminated consumer’s complex and expensive requirement to go through reservation systems that they would need before buying physical tickets.
In edition, e-commence and internet-based activities (such as online holiday and hotel reservations) are other areas where Eurasia can derived ancillary revenues from. Better still, technology advancements also means having opportunities to reduce operation costs, however, amidst these benefits and cost saving, Eurasia must be mindful that system disruption due to heavily reliance on online sales can pose serious threat to the company if they did not back up their maintenance systems.
Micro Industry Environment analysis There are several forces in Raisin’s external but controllable environment (micro- external) that actually affect their operation.
They are analyses using Potter’s 5 Force model as described below
a) Bargaining Power of Buyers Air Asia faces intense competition with other low cost carriers in the airline industry. For instance, customer’s switching costs from one airline industry is really low. Furthermore, customers always compare prices and service offerings of several budget airlines.
All this proves that customers have high bargaining power. Air Asia has to provide special values that differentiate from competitors.
C) Bargaining Power of Suppliers Fuel and aircraft companies are the main suppliers of airline industry. They are always doing completion among themselves; as a result the bargaining power of supplier is low. The supplier has an upper hand (high power) due to limited number of suppliers (only Boeing and Airbus).
D) Threat of New Entrants Threat of new entrants is moderately low as the entry into the industry requires high capital.
Moreover, the industry is also highly regulated since every potential entrant is required to obtain approval from the civil aviation authority of the particular entry before the company is allowed to be operated. In the South-East airline industry, there are high barriers to entry but Air Asia still faces severe threat from new entrants entering the market place. For instance the government sets particular restrictions to airplane operators such as air service agreements.
Additionally, operating in the airlines industry requires the use of expensive capital that is really difficult to possess in the first place. The Asian government has been involved with deregulation and there has been rapid growth in demand for low cost carriers amongst budget travelers. Hereby, Air Asia faces intense competition from both alternative low-cost carriers and dull service airlines that launch De their own budget airlines in the industry.
Threat of Substitute Products
The possibility threat of substitutes is moderately low; since there are several other substitutes such as cruises, rails, buses and cars. Reiterate is fastest and more convenient than cruise. Eurasia faces very low threat from substitute modes of transportation because their main markets are countries in South-East Asia. But in mommies Malaysia, the threats from substitute
e) Intensity of Rivalry Industry rivalry is moderately high due to competition and high exit cost.
Nonetheless, market participants understand and realizes that price war is destructive for them and thus they tend to avoid direct price competition to make themselves friendly competitors. Competition in airlines industry is very high, we can see that, if the airlines company low their ticket price, other airlines also do the same things, even for sales promotion Dave discount some attitudes have seen.
High growth in the airline traffic presents the opportunity to increase business regionally.
Appropriation and deregulation suggests more opportunities to expand market and increase market share. Surveys showed a change in people’s preferences, I,e, more people are willing to compromise on food and other services in exchange for lower prices. The existence of a large pool of low income passengers who were no longer able to afford or Justify air travel on full-service carriers. Increasingly cost conscious business passengers also looking to make their travel gadgets go further.
Larger working age population; more disposable income. New services such as Internet Telephony provide all LLC with the opportunity to leverage on new technologies to increase sales. Technology advancements provide opportunities to reduce operation costs. Full service airlines start cut costs to compete. Entrance of other Laces. High fuel price decreases yield. Accident, terrorist attack and disaster that affect customers’ confidence. Aviation regulation and government policy. System disruption due to heavily reliance on online sales.
Also learn which political factors affecting hotel industry