Question

what are the market structures of Air Asia

Answer 1

Air Asia is one of the most successful Malaysia loe cost airlines in the world. The airline was established in 1993 and began to operate on 18 November 1996. It was originally founded by conglomerate owned by th government. On December 2001, Mr.Tony Fernandez bought the airline. He took an enormous risk to take over the company and compete against Malaysia Air lines. He turned the company around and producing profit in 2002 with only 1year time. MAS and the Air Asia are the two large firms that ate competing towards each other and therefore oligopoly market structure has formed. Oligopoly firms are price makers, they can maximise their profit by setting the price and output levels. This occurs when there are few dominated firms competing in the same market.

Air Asia is also one of the businesses that have successfully adopted low cost strategy to attract consumers through operational effectiveness and efficiency. Thus, Air Asia has successfully positioned itself in customers' mind. In August 2011, a comprehensive collaboration framework was established to enable MAS and Air Asia to explore opportunities to cooperate to form collusion between the two firms. When firms under oligopoly engage in collusion, they make agree to sell their products or services at the same prices, output, market share and advertising expenditure. Thus, each firm acts like a monopoly setting output at Q and price at P. The output and price combination maximises each oligopoly firm's profit.

To dominate the market and maintain the Asia's top low fare airlines, Air Asia came up with the idea to benefit the society, to build trust and larger market share and also earning profit at the same time, with the slogan "Everyone Can Fly". Air Asia adopted the principle of "The Law of Demand" , it states that if all the factors remain same, the higher the price of the good, the less people will demand the goods or services. In other words, the lower the price of the goods the higher the quantity demanded.