Question

What is the external environment (Environment factors) facing by Air Asia? Please explain in more detail in at least 3 areas. (No need to explain for all PESTEL, just environment only)

Answer 1

External Environmental Factors that impacted the Growth of Air Asia

Various external environmental factors such as political, economic, socio-cultural and technological factors impact the growth and development of Air Asia. In relation to political factors, Air Asia receives support from the Malaysian government as well as Prime Minister Mohammad. However, unsupportive regulations and policies that are imposed by foreign countries where Air Asia operates its business would negatively affect its growth. Reduction in regulation of the airline industry in South-East Asia also positively contributes to the growth of Air Asia by providing new opportunities for expansion and niche markets.

Economic factors such as conducive investment environment that attracts investors, existence of business partners such as Thai Air Asia and Indonesia Air Asia and high economic growth and development also leads to the success of Air Asia. Air Asia is also able to growth because it can effectively imitate business operations and strategies form other industry players and developer redesign the strategies to more profitable ventures. The economy is also favorable for growth and development of a business. For example, Air Asia is able to obtain capital through various means such as through initial public offering (IPO) (Grant 2010). The presence of a market segment with unmet or underserved needs also provides an ample opportunity for the growth of Air Asia. In addition, Air Asia is capable of growing due to the expansion of the low-cost air transport industry which provides new investment opportunities to the company. However, it is also important to note that the presence of competing firms such as Ryanair and Jet Blue in the low-cost carrier industry provides stiff competition to Air Asia. As a result, the ability of Air Asia to grow is negatively affected.

Socio-cultural factors such as the existence of low-income earners who want cheap air transport services also facilitates the growth of Air Asia by providing a ready market for its business. The huge population of approximately 500 million also provides a ready market. Similarly, Air Asia is able to employ workers with diverse social and cultural backgrounds. This enables the company to comprehensively understand the social and cultural needs of the target market, and consequently be able to provide services that meet the needs of customers. This leads to continued growth and success of Air Asia.

Lastly, technological factors such as availability of appropriate technology like computer reservation systems (CRSs) and yield management systems (YMSs) also facilitates the growth of Air Asia by enhancing its ability to provide high quality services at low costs. Similarly, the availability of interactive media such as Facebook and the internet helps Air Asia to place advertisements about its products more easily, hence facilitating its growth.

Moreover, technological developments such as the CRSs positively impacts operations of the company by enhancing cost reduction strategies, hence facilitating growth. The availability of highly transferable technologies such as YMSs also enables Air Asia to acquire new technologies that are used during provision of services, hence positively contributing to its growth.

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