Emerging Market Assignment

8/11/2019 Emerging Market Assignment

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CONTENT

NO. CONTENT PAGE

ACKNOWLEDGEMENT 2

1. INTRODUCTION1.1 Background of the company and the importance of business strategy. 3

2. OVERVIEW OF THE COMPANYS BUSINESS STRATEGY

2.1 The difference in strategy for developed and emerging market.

2.2 Evaluate the business and entry strategy for a specific emerging market country.

2.3 Explain the most effective way to market the product in the country.

2.4 Determine how to overcome the barriers in marketing the product in emerging market.

2.5 Identify the need for different human resource strategy and staffing policy in emerging

markets.2.6 Explain the strategy to recruit the best human resource and how to retain them.

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3. CONCLUSION 17

4. RECOMMENDATION 18

5. REFERENCES 19

5. APPENDICES 20


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ACKNOWLEDGEMENT


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INTRODUCTION

1.1 Background of the company and the importance of business strategy.

Background of the company

(Refer to Diagram 1 in Appendices)

AirAsia is established in 1993 and has been commencing its operations since 1996. In 2001, Tony

Fernandes of Tune Air Sdn Bhd company purchased this airline from DRB-Hicom. Its first and main base is the Low

Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport, while its secondary hubs are at Kota Kinabalu

International Airport, Senai International Airport and Penang International Airport. Air Asia is well known as Malaysian

low cost airline and even Asias largest low fare, no frills airline.

AirAsia slogan is Now Everyone Can Fly. Being the home of AirAsia, the LCCT is the budget terminal in

KLIA, opened on the 23rdMarch 2006. The LCCT is said to be carrying about 10 million passengers a year. With a

route network that spans through to over 20 countries, AirAsia continues to pave the way for low-cost aviation

through their innovative solutions, efficient processes and a passionate approach to business.

AirAsia was named the Worlds Best Low Cost Airline in the annual World Airline Survey by Skytrax for five

consecutive years in 2009, 2010, 2011, 2012 and 2013 and has been ranked Top 5 among the most recognized and

admired airlines in the Asia Pacific Top 1000 Brands 2008.

AirAsias mission statement is to be the Asia's leading low fare no frills airline and first to introduce

"ticketless" traveling, AirAsia will be unveiling more incentives in the future to encourage more air travel among

Malaysians.

AirAsias vision is to be the largest low cost airline in Asia and serving the 3 billion people who are currently

underserved with poor connectivity and high fares whereas its mission is to be the best company to work for whereby

employees are treated as part of a big family, create a globally recognized ASEAN brand, to attain the lowest cost so

that everyone can fly with AirAsia and maintain the highest quality product, embracing technology to reduce cost and

enhance service levels.

The AirAsia subsidiaries are the likes of AirAsia X, AirAsia India, AirAsia Japan, AirAsia Zest, Indonesia

AirAsia, Philippines AirAsia, Thai AirAsia and Thai AirAsia X.



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Importance of business strategy

AirAsia has a business strategy that is focused on cost leadership which is affiliated with its mission

statement. Nonetheless, its business strategy targets specific markets of price sensitive customers consisting first

time fliers needing flights.

AirAsia constructs and maintains its competitive advantage by providing services at a price that is lower

than its competitors price. The two core characteristics of Air Asias low cost airlines services are operation

effectiveness and outstanding efficiency. The central objective is to achieve bigger cost advantages than the rivals by

continuously penetrating regions for cost reduction along its value chain.

The key that makes AirAsia to having cost advantages over its competitors is through the companys value

chain. Air Asia is able to acquire cost efficient sources contributable to the low cost business model for each activity

in Air Asias value chain.

The importance of this strategy is that these cost advantages constitute AirAsias order winner in competing

with its rivals as the company is able to provide the lowest possible price to the price sensitive customers. In Low

cost carrier industry, cost is the competitive priority and it determines market position.


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OVERVIEW OF THE COMPANYS BUSINESS STRATEGY

Marketing Mix

PRODUCT / SERVICES


Customer Convenience

AirAsia be certain of providing convenient service to make traveling much easier at a more reasonable price

for its customers. Customers can make bookings through a number of ways. This set off AirAsia to be the first in the

world to introduce short text messaging (SMS) through their mobile phones in booking in the airline industry. Also,

AirAsia also recently introduced GO Holiday, an online program where customers can book holiday packages online

in real time.

Frequent flights

AirAsias high frequency service ensures customer convenience is met. The airline practices a quick

turnaround of 25 minutes, which is the fastest in the region, resulting in high aircraft utilization, lower costs and

greater airline and staff productivity.

Nationwide call centre

Launched in April 2002, AirAsias Nationwide call center in Kelana Square is now fully equipped with 180telephone lines providing convenient telephone booking services to its customers. The call center now takes an

average of 6,000 calls daily.

Ticketless service

This concept complements AirAsias internet booking and call center service by providing a low cost

alternative to issuing printed tickets. Customers no longer need to go through the hassle of collecting tickets. It was

launched on 18 April 2002.

Easy payment channels

In line with its Easy to Book, Easy to Pay & Easy to Fly approach,AirAsia became Malaysias first airline to

enable their customers to pay for their telephone bookings by credit card or by cash at any Alliance Bank branches.

Launched on 1 March 2002.


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PRICE


Low fare, no frills

AirAsias fares are significantly lower than those of other operators. This service targets the customers who

will do without the frills of meals, frequent flyer miles or airport lounges in exchange for fares up to 80% lower than

those currently offered with equivalent convenience. No complimentary drinks or meals are offered.

Instead, AirAsia recently introduce 'Snack Attack', a range of delicious snacks and drinks available on board

at very affordable prices and prepared exclusively for AirAsias customers. Customers now have the choice of

purchasing food and drinks on board.

DISTRIBUTION / PLACE

Internet booking

A measure for an efficient low-cost airline is direct booking via the internet. This does away with

commissions and credits to travel agents and the cost of processing tickets. As Asias first online airline, AirAsia

offers a new convenience in buying seats by logging on to its website, http://www.airasia.com/. Customers go

through no more phone calls and no more queuing. The website is currently available in seven languages consists of

English, Bahasa Malaysia, Mandarin, Tamil, Bahasa Indonesia, Thai and Tagalog.

Reservations and sales offices

These are available at airports and town centers for the convenience of walk-in customers.

Authorized travel agents

Air Asia has a direct business-to-business (B2B) engine to its agents. The internet-based real time

inventory-booking engine is also the first in Asia. The agents make immediate payment via a virtual AirAsia credit

card, developed through one of its strategic partners, Alliance Bank.

Improving customer service

Air Asia is constantly looking for ways to improve its services and increase savings for its customers.

AirAsia is the first airline in Asia to have a multi-lingual website with seven languages which are English, Bahasa

Malaysia, Chinese, Tamil, Thai, Bahasa Indonesia and Tagalog.


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PROMOTION

In recent times, Air Asia struck an advertising deal with Time, which will have the local mobile phone

operator's logo painted on one of Air Asia's planes. Moreover, there will be more of these, as well as advertisements

on pull-down trays.

Research and Development


AirAsia has its research and development team to launch a two-month-long free user trial of its onboard

WiFi service that will provide affordable and low-cost Internet connectivity to its passengers. It will be available for

free for up to 60 passengers on selected flights from August until October. However, AirAsia has not given details of

the sectors on which WiFi would be available.

Passengers using the service will have an Internet data quota of 1 megabite (MB) and will enjoy a special

package. This will allow them to chat via applications like LINE, WhatsApp and WeChat. Passengers will be informed

via an in-flight announcement if the plane is equipped with the WiFi service.

The passengers will be able to try the service by logging on to the Connectivity Portal with a digital token

code that is automatically generated upon clicking the Get Access button on the portal. Each token code is valid for

one device and the free user trial will be on a first-come, first-serve basis.

This additional service of giving free WiFi would definitely give way for AirAsia to get more attractions from

its customers. The customers can communicate with family and friends or even business associates in the premises

available with WiFi.


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2.2 Evaluate the business and entry strategy for a specific emerging market country.

Greenfield Strategy

Greenfield investment is a form of wholly-owned subsidiaries entry mode, involving starting-up a completely

new venture that is wholly-owned in a foreign market, instead of acquiring a company (acquisition) or jointly-owning a

new entity with another company (joint venture).

AirAsia could emerge South Korea with the Greenfiled strategy. AirAsia can build another subsidiary,

namely AirAsia Korea, where all the physical-related group of structures can be developed. This strategy would able

to allow the company to create new long-term jobs in South Korea by hiring additional employees and probably

expand its infrastructure in surrounding region. This allows AirAsia to build the subsidiary that they desire.

Not to worry much on inadequacy and warranty standardization of facilities, AirAsia is able to get ahead with

expanding its operations in South Korea from ground zero. This strategy provides AirAsia with the advantages of no

risk in losing technical competence to competitors, tight control of its operations, creating job opportunities in South

Korea, obtaining a much greater ability to build the kind of subsidiary AirAsia wants, easier method to build an

organization culture from scratch rather than changing it to the culture of an acquired company and competency to

yield greater long-term return than the acquisition strategy.

Since Greenfield strategy means AirAsia would build a new subsidiary completely owned by itself, AirAsia

can offer job opportunities to the South Korean market thus decreasing the countrys unemployment rate. The

Korean workforce is highly skilled. The Research and Development capabilities, as well as the quality of the

infrastructures are deciding strong points for AirAsia.


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2.3 Explain the most effective way to market the product in the country.

Market Segmentation

In market segmentation, AirAsia may perform a market segmentation based on the South Korean socio-

cultural, user-related, user-situation and benefits-sought segmentation like the company did in Malaysia.

AirAsia can divide the market into four segments comprising the first segment of customers with low income

from the lower social class with low usage rate mostly for leisure purposes and high benefits sought for value of

money to the fourth segment of customers with high income from the upper social class with high usage rate mostly

for business (sometimes with leisure) purposes and low benefits sought for value of money.

Income

Under demographics, income is one of the variables which AirAsia may use to segment its market. Income

indicates the capability of the consumer to travel with AirAsia as customers from different income groups are

attracted to different airlines that suits the expenses. Low-income earners in South Korea are more price sensitive

than high-income earners, thus they would be more attracted towards lower cost carriers. This is because low-

income earners generally have lesser disposable income than high-income earners. For low-income earners, their

main need of an airline ticket is simply to travel from one destination to another. Therefore, the pricing of airline

tickets is a vital factor that influences the South Korean purchasing behaviors.

Social Class

AirAsia may have segmented their market into lower, middle and upper social classesn on the basis of this

variable because different social classes tend to have different purchasing behaviors, brand preferences and

expectations. A consumers social class is associated with the income level that the consumer is earning. Therefore,

if a consumer is categorized as a low-income earner, the consumer will fall within the lower social class.

Usage Rate

Usage rate is one of the variables under the user-related segmentation which AirAsia can use to segment

their market and is divided into low, moderate and high usage rates. Depending on the consumers amount of

disposable income and preferences, consumers will have different levels of usage rates. Consumers who travel

frequently for business meetings would have a high usage rate of air travel as they are required to travel to different

destinations frequently. Consumers with low usage rates are mostly from the low-income category who can only

afford to travel at most twice a year depending on the destination. This is because they have less disposable income


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compared to high-income earners. However, if price levels are affordable, then low-income earners would be able to

travel more often with low cost carriers.

Time

As for the user-situation base, AirAsia is able to use time as one of their variables to divide the market. The

time variable is categorized into leisure and business. Consumers with different purposes of travelling have different

priorities. Low-income earners who are planning to go on a leisure holiday would have the ability to continuously

monitor ticket prices to ensure that they can attain the cheapest price. Travellers on business trips meanwhile would

probably have to pay higher prices because they may need to purchase airline tickets in advance.

Value-for-money

Value-for-money is one of the benefits sought variables which AirAsia can likely use to segment their market

in South Korea. The level of importance of value-for-money can be divided into low, moderate and high whereby

South Korean consumers with lower income levels tend to place high emphasis on value-for-money products and

services. Consumers who place high emphasis on value-for-money, they are mostly working for corporations that are

currently affected by the economic recession happening, thus they are required to reduce their expenses as much as

possible.

Pricing Strategy

To gain competitive advantage, AirAsia is using cost leadership strategies to be implemented in South

Korea. AirAsia would need to remain using the cost leadership strategy in order to satisfy customers as their top

expectation on low cost airline is price. Besides that, differentiation has become a necessity ever since low-cost

airlines entered the market requiring airlines to improve the experience.

AirAsia using low cost airlines pricing strategy for market stimulation is issuing free tickets and competing in

ticket prices setting. AirAsia should conduct regular campaigns in South Korea that offer free or very low cost seats.

These free seats are actually offered on availability since aircrafts still have to depart even if there is only one

passenger, so this promotion does not affect the company financially. Basically, free seats offered to the public

accounted for only one percent of total passenger load while the remaining 99 percent are paid passengers. The

campaigns, not only provide publicity for AirAsia in South Korea, but it adds to its credibility for making good its brand

promise by enabling everyone to fly. This strategy is effective because most of the passengers are price sensitive

people, so that they might consider purchasing the flight ticket.


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2.4 Determine how to overcome the barriers in marketing the product in emerging market.

Limited Government

In South Korea, the top individual income tax rate is 35 percent, and the top corporate tax rate is 22 percent.

A 10 percent surtax on individual and corporate rates and a value-added tax bring the overall tax burden to 25.9

percent of Gross Domestic Product. Government spending is equivalent to 30.2 percent of total domestic output. The

budget balance has been in small surplus, and public debt remains below 35 percent of Gross Domestic Product.

This could slightly put a burden on AirAsia to pay such high tax to the government of South Korea. However,

with proper financial planning, AirAsia can still maintain its low cost carriers without a drastic change in prices of

airline tickets.

Liberalization of Foreign Investment

Prescribed by the Acts of the Republic of Korea, a foreigner may conduct, without restraint, various activities

of foreign investment in the Republic of Korea. AirAsia is restricted from foreign investment in the following cases of

where the company threatens the maintenance of national safety and public order; where it has harmful effects on

public hygiene or the environmental preservation or is against Korean morals and customs and where it violates the

Acts and subordinate statutes of the Republic of Korea.

In order to emerge in the South Korean market, AirAsia has to follow the laws and regulations set by the

government. The management of AirAsia has to be well-equipped and infused in the Korean current business

regulations and culture as to not offend the customers or the country.


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2.5 Identify the need for different human resource strategy and staffing policy in emerging markets.

Selecting the managers with the right skills to perform the job in emerging market is essential. Staffing policy

is the selection of employees for particular jobs. Staffing policy can also be a tool for developing and promoting

corporate culture. Firms pursuing transnational and global strategies have high needs for a strong unifying culture,

and the need is somewhat lower for firms pursuing an international strategy and lowest of all for firms pursuing a

multi-domestic strategy.

In firms pursuing transnational and global strategies, it is expected that the Human Resource Management

(HRM) function to pay significant attention to selecting individuals who not only have the skills required to perform

particular jobs but also fit the prevailing culture of the firm.

Ethnocentric Approach

With ethnocentric approach, AirAsia be able to fill its key management positions of middle management

employee with home-country nationals. For example, apppointing Mazliana binti Mohamad as the Manager of the

Audit and Consulting Service in the South Korea subsidiary. Simultaneously, AirAsia can maintain its organizational

structure at the main office in South Korea. The home country managers level of experience and competencies

could aid in transferring the core competencies of AirAsia to the new subsidiary in South Korea. Also, the managers

would be able to recommend the company and find ways to counterpart with the workers in South Korea.

Polyocentric Approach

By implementing polycentric approach, AirAsia can recruit South Korean nationals to manage the new

subsidiary, AirAsia Korea. For instance, employing Dong-Suk Park as the operation manager in AirAsia Korea.This

approach is suitable for AirAsia to engage in a localizing strategy as local managers will have a much better

understanding on the market environment and culture of South Korea themselves. Correspondingly, this approach

involves smaller number of costs compared to using expatriate managers.

Geocentric Approach

AirAsia should adopt the geocentric approach by searching out for the best board of directors (BOD) from all

around the globe, apart from their nationality for the in South Korea. These positions should be chosen on the

grounds of their own heaps of experience working with previous multinational corporations in various countries and

continents. Nevertheless, AirAsia Korea requires worldwide service which necessitate different thinking from different

people from all around the world. For example, transferring Andrew Littledale as the Chief Financing Officer in

AirAsia Korea.


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2.6 Explain the strategy to recruit the best human resource and how to retain them.

Recruiting the best Human Resource

Basic Prerequisites

AirAsia is very particular in hiring its work force as they only want the best of the best in their team. Several of

AirAsias basic prerequisites are as follows:

- Experienced in dealing with the public

- Physically fit with a good attendance record in previous position

- Hard working, flexible and willing to operate on a shift roster

- Over 18 years of age

- Must be in possession of a valid passport and have the right to work anywhere in the world

-

Fluent in English and intermediate in Korean (both written and spoken)

TOEIC


In recruiting flight attendants, AirAsia adopts the global English test standards for recruitment TOEIC test as

standard requirement for the candidates. AirAsia will use the Test of English for International Communication, or

TOEIC test, as a standardized English-language proficiency test. The tests are offered through Eshia & Associates

Sdn Bhd, the country representative of Educational Testing Service (ETS). The TOEIC Listening & Reading test is

implemented as a preliminary requirement for flight attendant candidates. With this test and its 30 year old data, the

airline will get the candidates effective listening and reading skills and can also effectively gauge the candidates

level of competency in speaking and writing.

The Apprentice


The Apprentice Asia is an Asian reality game show in which a group of aspiring young businessmen and

businesswomen compete for the chance to work with the Malaysian entrepreneur Tony Fernandes, who also serves

as the host of the show. Dubbed as The Worlds Toughest Job Interview, the show is the Asian version of the

original American version's The Apprentice. It was aired on AXN Asia and produced by FremantleMedia Asia, All

American Television and Atlantis. On the last show (31 July 2013), Jonathan Allen Yabut of the Republic of

Philippines, a senior product manager, was hired by Tony Fernandes. Andrea Loh Ern-Yu, a civil-and-commercial


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litigation lawyer, of Singapore became runner-up. Yabut beat eleven finalists, winning a one-year contract and a six-

figure salary job in Fernandes' airline, AirAsia.

AirAsia can again use this approah of a ASEAN-wide contest to recruit the best among the best managers

to run AirAsia Korea.

Cabin Crew Recruitment Process


Based on an AirAsia Cabin Crew, the following are the recruitment experience gone through by Kaykrizz.

Day 1 1stStep Document Check

- Prepare complete sets of documents

Height and Weight Check

- Have to reach a height of 157 cm to 170 cm (for women)

2ndStep Police Clearance

3rdStep Interview

- Required to do whatever the interviewer wants (For example, sing a Tagalog song)

- Catwalk

- Asked about herself and previous work experience

4thStep Written Exam

- 25 items on English Grammar to be answered in 30 minutes

Day 2 1stStage - Given 2 minutes

- Explain partner in the most creative way possible

2ndStage - Group of six

- Given 15 minutes

- Prepare a 5-minute presentation

3rdStage - Final Interview

- Ask a lot of questions for the panel to know her as a person

-

For example : What makes you think you are a good fit in this company?


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How to Retain Them


As the World's Best Low-Cost Airline, it's no surprise AirAsia is growing rapidly every day, from Japan to

India, from on-ground troops to inflight crews. Being an AirAsia Allstar means being a part of the AirAsia family. And

as all families should be, the company looks out for its employees, career and aspirations as well as immediate

family. The followings are the benefits and remunerations given by AirAsia in order to retain its work force.

First, for the employees career, AirAsia guarantees a career progression opportunity, a five-day work week,

performance bonus, examination leave and award for long service.

Second, for the employees health and awareness, AirAsia covers hospitalization and surgical expenses as

well as personal accident and term life insurance coverage. Moreover, the company also subsidies food and drinks

so that the employees stay alert and energized.

Third, for the employees inner wanderlust, AirAsia provides yearly free flight coupons and discounts u p to

90% on Concession Travel.

Fourth, for the employees family, AirAsia offer paternity leave, compassionate leave, hospitalization and

surgical expenses for the emloyeesspouse and children.


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CONCLUSION

In conclusion, establishing a new subsidiary in a foreign market, particularly in South Korea possess high

risks. It is crucial for AirAsia to remain realistic for the outcome of the strategy and be well grounded. Whenever the

situation become inevitably uncontrollable, reducing scope, by means of reducing risks, is perceived to be a better

decision rather than pumping up more resources where it will only create more risk when the risk is already high.

Other than that, the top management should become the driving force in any new project AirAsia should

uptake now and in the future. By applying good leadership skills, it will boost the employees morale and attract them

to be more positive towards the changes. The top management should also be responsible in emphasizing the

benefits to their subordinates and producing supporting policy to ensure the success of the company.

Additionally, communication between all levels of management should always be kept open and active.

Employees should be encouraged to communicate with the project team and management. Any useful information

should be distributed in a timely manner. By this way, the implementation problems can be identified in early stage

and corrective actions can be taken at the appointed time.


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RECOMMENDATION

For recommendation, Air Asia being the lead in low fare airline in Asia, its low cost attracts more and more

customers and its market value and has increased its revenue. However, knowing it from near its share price is

unstable therefore management should focused on sustainable development with utilizing marketing mix as

mentioned above and should focused on customers as customers are key point for the companys success. Merely

low cost will not be sufficient to survive in the competitive market.

Furthermore, AirAsia can improve local responsiveness as well as avoiding flight being delayed due to flight

and routes difficulties. AirAsia can spend more in marketing and promotions, especially in advertisements. To better

promote AirAsia globally, in the year 2016, AirAsia do sponsorships with the Olympics in Rio de Janeiro, Brazil. This

will definitely increase the companys income in addition to expose and maintain the brand worldwide.


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REFERENCES

References

(n.d.). Retrieved from

https://www.codewit.com/articles/cgn/Understanding%20Marketing%20Mix%20in%20Air%20Asia%20Airline%20Bhd%20by%20Onwutalobi%20Anthony-Claret.pdfv

korea.net. (1999-2014). Retrieved September 18, 2014 , from Foreign Direct Investment (FDI):

http://www.korea.net/AboutKorea/Economy/Foreign-Direct-Investment

2014 Index of Economic Freedom. (2014). Retrieved September 18, 2014, from South Korea:

http://www.heritage.org/index/country/southkorea

AirAsia.com. (2014). Retrieved September 18, 2014, from Corporate Profile: http://www.airasia.com/my/en/about-

us/corporate-profile.page

Wikipedia. (2014, September 13). Retrieved September 18, 2014, from AirAsia: http://en.wikipedia.org/wiki/AirAsia

Wikipedia. (2014, June 13). Retrieved September 18, 2014, from The Apprentice Asia:

http://en.wikipedia.org/wiki/The_Apprentice_Asia

Wikitravel. (2014, September 4). Retrieved September 18, 2014, from Seoul: http://wikitravel.org/en/Seoul

Aurange, V. (2014, January 9). Slideshare. Retrieved September 18, 2014 , from AirAsia India: Strategies for Next 3

Years: http://www.slideshare.net/vipulaurange/airasia-india-strategies-for-next-3-years

Bureau, M. (2014, August 8). Money Indices. Retrieved September 18, 2014, from AirAsia launches free trial of WiFi

service: http://www.moneyindices.com/detail_news.php?id=5428

Kaykrizz. (2013, October 14). Blogspot. Retrieved September 18, 2014, from Be A Flight Attendant:

http://beaflightattendant.blogspot.com/2013/10/air-asia-cabin-crew-recruitment.html

Kho, C. (2005). ademia.edu. Retrieved September 18, 2014, from Air Asia - Strategic IT Initiative:

http://www.academia.edu/5027380/Air_Asia_-_Strategic_IT_Initiative_Submitted_by

L, J. (2014). ademia.edu. Retrieved September 18, 2014, from Air Asia: http://www.academia.edu/4487772/Air_Asia

Reporters, B. (2014, February 22). Business Standard. Retrieved September 18, 2014, from AirAsia set for takeoff:

http://www.business-standard.com/article/companies/airasia-set-for-takeoff-114022100637_1.html

UKEssays.com. (n.d.). Retrieved from http://www.moneyindices.com/detail_news.php?id=5428


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APPENDICES

Diagram 1

Diagram 2

Diagram 3


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Diagram 4

Diagram 5

Diagram 6


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Diragram 9

Diagram 10

Emerging Market Assignment

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