TABLE OF CONTENT

INTRODUCTION………………………………………………………………………..2

COMPETITIVE ENVIRONMENT………………………………………………………2

INTERNAL AND EXTERNAL ENVIRONMENT……………………………………2-3

SWOT ANALYSIS……………………………………………………………………….3

MARKETING OBJECTIVES…………………………………………………………….4

MARKETING STRATEGIES…………………………………………………………….5

MARKETING TOOLS…………………………………………………………………6-9

RECOMMENDATIONS………………………………………………………………..10

CONCLUSION………………………………………………………………………….10

BUDGET ALLOCATIONS………………………………………………………….….11

APENDIX………………………………………………………………………………..12

REFERENCES…………………………………………………………………………..15

GANTT CHART………………………………………………………………………...16

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 INTRODUCTION

Tony Fernandes is the major share holder of Tune hotels and Air Asia. Air Asia is a low
cost air line which caters middle class segment of the market. The main hub of the airline
is in Malaysia. It was the first air line known for complete ticket less system. Tune Hotels
act as a value added service provided by the Air Asia to facilitate their passengers.

COMPETITIVE ENVIRONMENT
At beginning Air Asia was the only airline to offer low cost which is their core
competitive advantage but other competitors in the market are targeting Air Asia’s
weaknesses like there limited resources, no luxury and Specified target market which is
south Asia.
INTERNAL INFLUENCES
The policy and decision of any company is depended on the stakeholders of the company
who include shareholder, customers, suppliers and the affected public. And the major
stakeholder affects the decision in the company.

EXTERNAL

DEMOGRAPHIC/SOCIAL
Destinations like Malaysia, Singapore and Thailand have diverse cultures. In peoples
opinion “through air Asia every one can fly, and views about others are that they provide
variety of packages, and Air Asia says our customer knows what to expect”.
But a sudden decline in Malaysia’s population growth rate to 2.4 could affect Air Asia’s
flights so the management should diversify their strategy or invest in increasing the
number and hours of flights from Malaysia.

POLITICAL/LEGAL
The government of the Malaysia is stable for many years and is providing different legal
incentives for the tourism industry like a pioneer status company can enjoy 5 year
exemption from income tax they will have to pay only 30% of statutory income. The
Pioneer Company can also apply for investment tax allowance (ITA). And the

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destinations like Singapore have no legislation which could adversely affect the business.

ECONOMIC
The increasing Oil prices are also increasing the operating cost of the company hence air
Asia is facing difficulty in maintaining low cost of the airline. Decrease in the
unemployment rate of Malaysia can cause increase in income level and target market
segment of air Asia could decrease. In Singapore inflation has increased and hence air
Asia needs to minimize overheads to maintain the slogan of "Now Every One Can Fly”.
Or Air Asia X could help them to diversify the market (See Table1)

TECHNOLOGY
The Networking facilities are very impressive in Malaysia hence booking of Air Asia is
done through internet. And the refurbish Hubs of Air Asia are made on the state of the art
technology which facilitates the passengers. But Mismanagement of technology can also
have adverse affect on Air Asia business like delay in Bank payments, receiving tickets.
Another technology problem is the limited numbers of Airbus. But the launch of Air Asia
X which has long-haul flights and new aircrafts will help to diversify the target audience.

SWOT
The analysis provides a great perspective of the strengths, weakness, opportunities and
threats faced by Air Asia. (See table 2)

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 MARKETING OBJECTIVES

Introduce Globalize Operations

Currently Air Asia focuses to carry 62 million people till 2013 from the population of
500 million of South Asia. This is about 12.4% of the market.

Increase New Air Fleet

As 50 A320air bus are currently ordered which would increase the capability and
capacity of the company. By the induction of new aircrafts the company would be able to
reduce the maintenance, operational and labor cost.

Break the No frill Perception.

As mentioned by fernendas that their customer knows what to expect from the company
which is no frills. This is the value created by the company but due to the increasing
competition Air Asia can change its value proposition.

MARKETING STRATEGY

There are many ways in which Air Asia can divide the market. (See Table1) But
according to the current situation multiple segmentation would be more effective for the
company. The current strategy is based on the Geographic segmentation as we can
evaluate from their operations that are restricted to Southeast Asia. Which has variety of
customs but Air Asia can divide the market into Behavioral segmentation that is based on
the attitude and knowledge of user like Air Asia can offer different discount packages
with collaboration with tune hotels in off seasons to attract occasional buyers. Or can
offer Quality service with low cost to gain benefit users. But in order to increase the
market share company needs customer equity which only be increased by brand loyal and
heavy users. (See Figure1.1).In order to develop effective combination of segmentation
air Asia needs to divide segments which are measurable like 74% of Malaysia’s
population is middle class, and the middle class segment is easily accessible through
internet and telephone marketing, substantial and actionable.
After evaluating the segments company must decide how many segments to target.
(Figure 1.2) shows how air Asia can target a broad, narrow and niche market. As majority
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of the population in Malaysia is middle class and the fare of the company suggests that
the target strategy is undifferentiated. Selective specialization of products for different
markets must be set by providing Variety of packages to different segments.
Air Asia can also start B2B marketing through collaborating with different business like
beverages in order to provide variety of packages to its passengers.
Upper class can act as a Niche market that requires transportation with facilities like
mobile calls from plane, electronic Conferences through laptops and separate TV display
for every passenger.
In order to create a positioning for the company the marketers have to develop perceptual
positioning maps which represent the perceptions of the consumers. (Figure 1.3) shows
the positioning map on the basis of price and luxury. As said by fernendas the consumer
knows what he is getting which shows that they have positioned their service for
sophisticated buyer but Positioning of the company could also be done for the First time
users by giving then the right price so that they can feel that the price represents the
quality this can be done by dividing the market and setting different prices for different
segments like offering luxury packages with live calls from mobile and laptops with
increased price to Upper class and different packages for lower middle class. (Figure 1.4)

PRODUCT DECISION
Before designing a product or a service marketers have to define three different levels of
service first is the core benefit. In second stage Actual features are defined and in end
augmented service. In case of air Asia fast and economic transportation is the core
benefit, clean environment is the actual service they give. And the augmented product is
the after service that is the online feed back system available for passengers.
Air Asia is an air line service hence it is intangible and for Service quality which is the
basic decision, most customers rely on signals from the place, price, equipment and
communication of service provider. Air Asia’s online ticketing and 24/7customer service
gives a good impression in this area. Internal marketing is the concept which says to
improve services the airline should motivate and train their employees
Airline service is also inseparable from the provider and the service provider represents
the style/design and features. Here style mean the distinct appearance of the company
and product like red in Air Asia has establish a high reputation of safe and clean flight.

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The refurbish airport of air Asia has also indicates he decision involved in designing a
service. As services are also perishable hence it becomes more important for air Asia to
bring back its passengers and in order to do so they have to work on Japanese ideology
that is continuous improvement in customer management through Support Services.
Another decision involved is the labeling or the tag line. Air Asia tag line is that now
every one can fly which not only attracts regular users also people who use other
transportation.
PRICE DECISION

In recent years Malaysia has become a tourism hub and government of the country has
also provided many incentives like tax allowance to hotels and airlines. This has
increased the demand for travel and due to the cheap pricing of air Asia people who
previously traveled through buses and trains now prefer Air Asia.
There are three different ways in which price can be set
 Cost base pricing
 Value base pricing
 Competitor base pricing
Air Asia can use their good reputation in the market to increase their price by Value
Based pricing. By changing the perception of the people they can introduce prestige and
style to their attributes which can be developed through right combinations. Further more
Air Asia can use selective prices for different segments in the market. Like offering
telephone calls, online conferencing, Video gaming facilities to Business class at higher
price and can also offer Christmas packages for occasional buyers.
Air Asia can adjust its pricing strategy to satisfy various customers and different
situations. Different strategies are Discount and Allowance pricing, segmented pricing,
psychological, promotional, geographical and international pricing.
Air Asia can increase its prices by considering psychological affect on the consumers.
Because according to the American research center about 75% people perceive that high
price service provides high quality.
But currently Air Asia is using Reference pricing that can back fire for example if
another air line has RM10 and Air Asia has RM9.99 then Customer may think that
service with RM 10 may have more quality and they will lose the customer.

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In order to create value they can use Penetrating strategy in some segments and after
Maturity Stage they set Skimming strategy.

PLACE DECISION

In Air Asia’s case the marketers will opt for pull strategy in which the activities of the
producer are defined by the consumer demand. Basically in this strategy the activities are
directed toward customers and this is the exact case in Air Asia. And when the demand is
high the company can increase its prices to gain maximum profit.
But today’s research tells that big organizations use both strategies simultaneously in
different situations.
Now Air Asia can use pull strategy in Malaysia and Singapore because there is great
demand travel and even after penetrating strategy Air Asia can use skimming strategy to
gain maximum profit. But when air Asia will start its operation globally they might face
different competitors so they can use push strategy by using price adjusting strategy.

Air Asia has to consider that their potential customers are value seekers and if they are
able to convey their value to the customer they will win the market share. As mentioned
before pricing strategy will help the airline to create value and promotion and integrated
communication will help to communicate the value. They can cooperate with traveling
agents on commission to promote and sell their tickets internationally.
Currently Air Asia is using telephone, and internet to distribute its services and have built
an online ticketing channel. In order to evaluate different channels first we have to define
the objectives.
In Air Asia’s case the company needs to identify several segments and the different level
of customer service required.
Air Asia is currently using direct marketing strategy and distributing its services through
Southeast Asia. But in order to operate globally the air line can use multiple channel
strategy in which it can collaborate with industrial distributors in different regions to
distribute its services. For example air Asia can collaborate with Mc Donald’s to sell its
tickets with different packages of meal in America. Or can have contract with eBay to
sell the tickets on promotional prices.

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Another question is that how many distribution centers must be establish according to my
analysis Air Asia should chose selective distribution. This would also help the air line to
built good relation with channel members and it would provide market coverage with
controlled cost.
Good relations can be established by organizing conventions and trade shows to promote
the channel members and vendors.

PROMOTION

Currently Air Asia is using Affordable strategy by giving only transportation and safe
environment. Some other strategies are Competitive Parity Method and Objective task
Method and according to my Marketing plan Air Asia should adopt Objective Task
Method in which the budget is set according to the objective of the organization. Some of
the ways they can promote are:
 Air Asia can showcase their portfolio on Manchester United website who is also
known as red Devils and the Red color would also complement the airline.
 Sponsor Rock concerts in the region.
 Video games industry have evolved through the last century and now they are the
second highest profitable and reachable medium in USA .Air Asia can utilize this
medium to advertise.

The marketers of Air Asia must observe the buyer readiness stage then develop any
advertising strategy. If the customers are unaware then the marketers must create
awareness and knowledge. And if the customers are already aware then the marketers
must develop the liking and the conviction in the consumers which would lead to the
purchase of the service.
The Air Asia’s logo is NOW EVERY ONE CAN FLY which has persuasive ability and is
also emotionally attractive general population.
The Tag line can be made more appealing and more humorous by saying
“NOW EVERY ONE CAN FEEL THE SENSATION OF FLYING WITH AIR ASIA”

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Conclusion
Air Asia with [Link] has become one of the first airlines to offer booking on
telephone and on online. My marketing plan suggests that Air Asia would achieve the
desired objectives if they follow multiple strategies. The given objectives are effective to
increase the market share till [Link] will encourage the management of the airline to
establish joint ventures with other airlines. The objectives will guide the establishment to
train their employees up to international level. The purposed marketing strategy will help
the company to provide mobile services and video conferencing till 2008. If the
mentioned strategies are followed Air Asia could become the market leader in low cost
airlines in the [Link] Air asia will become a ASEAN brand.
WORD COUNT: 2340

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 BUDGET ALLOCATION
Activity based costing method is used to divide the different costs that are required to
achieve the objectives.

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 RESEARCH COST $
Survey in 15 cities of Singapore ,Malaysia for
Changing Factors of environment
10,000
Online research and survey cost for behavior
segmentation
6000
FIXED COST
Maintenance of equipment and planes

labor and transportation cost

5000
Financing cost for100 A380s aircrafts.
New Premises
Online Advertisements 7000
VARIABLE COST
training cost
20% Commission for international travel agents 10,000
and marketing agencies 3000
Mediation cost for Call Centers
10,000

Joint Ventures with Jet Star in Europe 1000

Rent,Electricity,Insurence and Depreciation 10,000

Sponsoring Concerts and Conventions

TOTAL 9000

15000

12000

10,000

94,000

APPENDIX
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 Table 1

Unemployment rate of Malaysia: 3.5% (2006 est.)

"
Year Unemployment rate Rank Percent Change Date of Information
2003 3.80 % 163 2002 est.
2004 3.60 % 163 -5.26 % 2003 est.
2005 3.00 % 23 -16.67 % 2004 est.
2006 3.60 % 32 20.00 % 2005 est.
2007 3.50 % 36 -2.78 % 2006 est
Source:[Link]

Table 2

STRENGTHS WEAKNESS
Low cost Air carriers.
Near metropolitan cities and Limited Number Of flight Hours
near resorts belt. Limited Number of Aircrafts
The first with ticket less system Only South Asian target market
Fast online Booking

OPPORTUNITY THREAT
Great Capacity to expend the Increasing Fuel prices
market Competitors with bigger fleet
New International Markets Consumer preference
Induct new aircrafts
Increase Number of Flights to
destinations
Start B2B Marketing

INFLATION RATE (Table 3)

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 Inflation rate (consumer Percent Date of
Year Rank
prices) Change Information
2003 1.90 % 168 2002 est.
2004 1.10 % 189 -42.11 % 2003 est.
2005 1.30 % 31 18.18 % 2004 est.
2006 3.00 % 90 130.77 % 2005 est.
2007 3.80 % 111 26.67 % 2006 est.

Table 1

Different Segmentation Variables For Air Asia

Currently operating in metro cities of

GEOGRAPHIC
south East Asia.
e.g. World Region, Country
&City
Can launch international hubs.e.g.
Australia.

DEMOGRAPHIC Air Asia can design packages with

e.g. Age, Gender, Family size and additional features to avail the
income and Occupation benefits from people with different
income level
PSYCHOGRAPHIC Air Asia can divide the market into
E.g. social class, life style and people who are compulsive buyers.
personality and who travel regularly

Diversified packages in Off peak

BEHAVIORAL
seasons can attract occasion buyers
Occasion, Benefit seekers, loyal, non-
user
With fare RM9.99 can attract non
users

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Figure 1.1

Figure 1.2

TARGET MARKETING STRATEGIES

Mass Segmented Niche Micro

Marketing Marketing Marketing Marketing

TARGETING
TARGET NARROWLY
BROADLY

References
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 Kotler, P.2005, Principles of Marketing, 11the Edition, Pearson publication,
London.

 Malaysia Unemployment [Link] November 29,2007 from

 [Link]

 Inflation eases in Singapore [Link] November 29,2007 from

[Link]

 APCEL Report: [Link] November 29,2007

[Link] 29 Nov2007

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