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Business Strategy : Comparison Between Qatar Airways And Air Asia

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Question:

Discuss about the Business Strategy for Comparison Between Qatar Airways and Air Asia.
 
 

Answer:

Competitive advantage is defined as an edge or superiority over the competitors that allows a company to generate goods or services which are more appealing to customers. The condition of competitive advantage allows an organization to generate better margins or sales than the competitors (Moon and Dathe-Douglas, 2015). Qatar airways have obtained competitive advantage for itself by providing extraordinary customer services. Although the price of the air tickets is high in Qatar Airways; the exceptional services of the company has assisted it in developing a customer base. Along with it, Qatar Airways has a new fleet of modern planes and grand airports that attract many customers (Qatar Airways Media Release, 2016). The geography of the airports also plays a critical role in developing the competitive advantage, as a passenger can use middle-eastern airlines for very long routes with only once changing the plane (Hobica, 2015).

Air Asia has a significant customer base which is developed due to its low cost strategy. During its launch, the airline launched a publicity slogan “Now Everyone Can Fly”. With it, the company was successful in attracting a large number of customers to fly with it (Air Asia, 2016). As per the Porter’s generic strategy, a company can achieve competitive advantage by three generic strategies, namely, differentiation, cost leadership and focus. It can be examined that there Qatar Airways is focusing on the strategy of product differentiation whereas Air Asia is focusing on the strategy of cost differentiation (Bosch and Man, 2013).

Resource and Competencies of Company

In order to obtain competitive advantage over other companies, a company needs to create value in its operations. The value chain analysis is a strategic tool that examines the valuable activities of an organization. From the value chain analysis of Air Asia and Qatar airways it can be examined that:

Inbound logistics: It involves the manner a company obtains raw materials from its supplier. Air Asia is a low cost airline; therefore, it they strategize to purchase oil when the prices are low. Qatar airways have established competitive advantage by developing relationship with their long-term suppliers.

Outbound logistics: Air Asia tries to support all the customer services through online mode. The customers can book their boarding passes and tickets from their computer system. They can also check the flight schedule and time on the company’s website. Qatar Airways has developed competitive advantage by offering excellent customer services at majority of airports.

Operations: Air Asia has implemented various strategies to reduce the operation cost. Qatar airways have implemented several strategies for increasing operational efficiency.

Marketing and Sales: Air Asia has a focused marketing strategy and it targets customers who want cheap flights (Sarkar and Islam, 2013). Qatar airways have also achieved competitive advantage by establishing communication with their customers through different means and creating premier club cards for the loyal customers.

Services: As Air Asia offers low-cost travel, it offers limited services to its customers. Qatar Airways offer excellent services to its customers.

 

Secondary Activities:

Operations: The infrastructure of the company is strong. Over the years, the company has evolved to provide cheapest fare with adequate services. It has also expanded its operations across a large number of countries. Qatar airways have a world class infrastructure and grand airports.

Human Resource Management: The Company acquires several multi-skilled and experienced professionals from different domains. In service companies, human resources are significant to obtain competitive advantage. It is important to increase customer satisfaction and their efficiency.

Technology: It has integrated technology in its operations to minimize operating cost and efficiency.  Qatar airways focus on fostering innovation in the organization to enhance the customer experience.

Procurement:  Air Asia has good procurement services. Qatar Airway obtains benefits in procurement of services through economy of sale and its large size (Qatar Airways, 2016).

VRIO Framework

In order to examine whether the firm is achieving competitive advantage or not from its current resources, VRIO (Value, Rarity, Imitability, and Organization) framework can be used. This framework is acronym of four questions, whether a firm can exploit an external opportunity with its current resources, do the resources or capability of the companies are in the hand of few people, is it difficult to copy the product offered by the company and if the company has the organization structure to capture the value from its resources (Grünig & Kuhn, 2015).  

Value

Air Asia has implemented various strategies to ensure that it establishes value within the system. The company has eradicated over the counter booking system and eliminating all the addition services such as booking system, free food and beverage and limited attendant services. It has also limited the flight frequency and focused on specific destinations to maximize revenue (Radzi et al., 2014). On the other hand, Qatar Airways has created value by providing extraordinary customer services and luxurious ambiance to its customers.

Rarity

Air Asia has modified its business model to provide air travel at a very low cost in comparison to its competitors. The geographical location of Qatar airways provides it opportunity to offer long haul air travel between Europe and Asia with minimum switching.

Imitability

In the airlines business, the high capital requirement makes imitability of the business difficult. However, one of the Air Asia’s imitable characteristics is path dependency and fast turnaround times. The work culture and efficiency in the organization’s operations are hard to imitate. The competitive advantage of Qatar Airways is its excellent customer services, location and grand lounges and airports. They are hard to imitate due to high capital requirement.

Organization

The work culture of both the organization is competent and integrates efficiency and productivity.

Balance Scorecard

Balance scorecard is the strategic performance evaluation tool that is use to examine the efficacy of the strategies and its measures on the external outcomes. It examines four key areas, namely, customers, finance, growth and finance (Niven, 2010).

 

Balance scorecard of Air Asia

Customer

Objectives

Measures

Initiatives

Cheap flights between destinations

Low cost

No frills flight

A comfortable environment

 Use of online ticketing

 

 

Internal Business Process

Objective

Measures

Initiatives

Productivity

% output

Elimination of non-value added activities, buying oil and other resources when the prices are low

Reducing operations cost

 

Reducing luxury facilities and inflight attendance

Learning and Growth

Objective

Measures

Initiatives

Skilled Staffing

% of skilled staff to total

Change in HR policy

Process Innovations

Increased output

Modifications in organizational policies

Finance

Objective

Measures

Initiatives

Increase Revenues

Current revenue is 5,416 RM million (2014)

Regular Supervision

Reduce Cost

Current expenses are 4,562 (2014) (Air Asia five year financial highlight)

Supervision

Optimal Utilization of Resources

Profit margin

 

Balance scorecard of Qatar Airways

Customer

Objectives

Measures

Initiatives

 Luxurious facilities

Providing exceptional services and recruiting highly talented staff

Analysis of quality problems and employment of adequate controls

Value for money

The airlines tries to address all the needs of the customers

 

 

Internal Business Process

Objective

Measures

Initiatives

Productivity

 

Hiring highly skilled workforce

On time delivery of services

 

 

Learning and Growth

Objective

Measures

Initiatives

Skilled Staffing

 

Recruiting best talent and provide excellent pay scale

Process Innovations

 

Modifications in organizational policies

Strategic Communication

Fast decision making

Implementing technical measures

Finance

Objective

Measures

Initiatives

Increase Revenues from the current profit of 103 million dollar(Jones, 2015)

efficiency development

 

Optimal Utilization of Resources

 

 

Red ocean or blue ocean strategies

At present, most of the industries experience red ocean market wherein the companies compete with other rival companies to grab maximum market share.  It denotes cut throat competition between the rival companies. It can be analyzed that the market grabbed by Qatar Airways comes under red ocean strategy and the company has grabbed substantial market share by implementing several strategies. In contrast to it, blue ocean strategies are focused to tap unknown and new market space. It manages to establish market with minimum competition and risk (50minutes.com, 2015). Air Asia has implemented various strategies that are focused on the long haul and low-cost market which was untapped earlier. Therefore, it comes in the category of blue ocean strategy (Berg Consulting, n.d.).

 

Ansoff matrix to identify the strategic direction pursued by company

The Ansoff matrix presents the four major strategies that are used by the business organizations to achieve corporate growth. A business can create market share by the combination of developing new products or exiting products in emerging markets or established markets which are indicated in the Ansoff matrix. These four strategies are market penetration, market development, product development and diversification. It could be examined that Air Asia has implemented the growth strategy of market development by seeking the long haul and low cost market. In market development, a company seeks to pursue new and unexplored market segments. The market development can be on the basis of geographical location or identification of new market need. Since the firm is expanding into new market, it is a riskier strategy (Evans, 2015).

In contrast to it, Qatar Airways has implemented the growth strategy of market penetration and product development. In the product development strategy, a company develops new market for the existing market or customers. The product development strategy is an appropriate strategy if the strength of the company is associated with specific product rather than specific customers (Evans, 2015). Qatar Airway is a prominent airway in the Middle Eastern countries. It is trying to establish itself in European countries and the USA by developing their ‘services’  and providing better services to the customers.

Strategic direction by organic growth, mergers & acquisition, or strategic alliance

The strategic direction refers to the group of actions that implement the organization’s strategy. In the airlines business, the companies expand themselves in the international markets to expand their market share. Air Asia has implemented the strategy of joint ventures to create market share in the Asia markets and launched several joint ventures in different countries, like, India, Japan and China. Qatar Airlines is a government organization. It has established strategic alliance with Oneworld, an alliance for frequent international travellers (Partnet Qatar Airway, 2016).

 

Conclusion

In the present portfolio, the business strategy of Qatar Airways and Air Asia has been explored. It has been examined that both the companies have focused at a different market share. Air Asia has implemented the blue market strategy and tapped the new market of long haul and low cost market share. In order to achieve it, it implemented several strategic such as elimination of over the counter ticketing system and provided minimal services at the fight and the airport. The current strategies of the company are evaluated from the VRIO framework and the resources and competencies with the value chain framework. In contrast to it, Qatar Airways has established a market with luxury travel and exemplary services. Thee geographical location of the company also present it a competitive advantage of establishing shortest travel routes between destinations in Asia and the USA. With the help of these competitive advantages, the company has established a market share for itself in foreign markets like Europe and Asia. In can be evaluated that the company is operating red ocean strategy where it is competing with other airlines by offering excellent services and grand air travel. It has also formed alliance with Oneworld, an alliance of frequent international travellers.

 

References

Moon, S. and Dathe-Douglas, S. (2015). The Ultimate Competitive Advantage: Why Your People Make All the Difference and the 6 Practices You Need to Engage Them. BenBella Books, Inc.

Hobica, G. (2015). What makes those Middle East airlines so special? USA Today. [Online.] Available at: https://www.usatoday.com/story/travel/columnist/hobica/2015/09/29/etihad-emirates-qatar-airlines-gulf-carriers/72986680/ [Accessed on: 18 December 2016].

Qatar Airways Media Release. (2016). [Online.] Available at: https://www.qatarairways.com/iwov-resources/temp-docs/press-kit/The%20Story%20of%20Qatar%20Airways%20-%20English.pdf [Accessed on: 18 December 2016].

Air Asia. (2016). With AirAsia, now everyone can fly direct to Luang Prabang. [Online.] Available at: https://www.airasia.com/in/en/press-releases/with-airasia-now-everyone-can-fly-direct-to-luang-prabang.page [Accessed on: 18 December 2016].

Bosch, F.A.J. and Man, A.P. (2013). Perspectives on Strategy: Contributions of Michael E. Porter. Springer Science & Business Media.

Sarkar, M.S. and Islam, R. (2013). Competitive Market of Air Industry and Competitive Advantages for Customer Satisfaction through Pricing Strategy of Air-Asia. Journal of Applied Sciences Research 9(4), 2505-2512.

Davies, B. and Ellison, L. (2003). The New Strategic Direction and Development of the School: Key Frameworks for School Improvement Planning. Psychology Press.

Qatar Airways. (2016). New Agreement Set To Facilitate Qatar Tourist Visa Application Process. [Online.] Available at: https://www.qatarairways.com/bh/en/press-release.page?pr_id=pressrelease_touristsvisas [Accessed on: 18 December 2016].

Radzi et al. (2014). Theory and Practice in Hospitality and Tourism Research. CRC Press.

Grünig, R., & Kuhn, R. (2015). The Strategy Planning Process: Analyses, Options, Projects. Springer.

Peng, M.W. (2016). Global Business. Cengage Learning.

Niven, P.R. (2010). Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. London: John Wiley and Sons.

50minutes.com. (2015). Blue Ocean Strategy Concept - Overview & Analysis: Innovate your way to success and push your business to the next level. 50 Minutes.

Berg Consulting. (n.d.). Case Study – AirAsia. UCSI Blue ocean strategy regional center.

Parrtner Qatar Airways. (2016). Our partners. [Online.] Available at:  https://www.qatarairways.com/PrivilegeClub/Partners.page [Accessed on: 18 December 2016].

Air Asia Five year finiancial highlight. (2014). [Online.] Available at:   https://www.airasia.com/my/en/about-us/ir-5-year-financial-highlights.page [Accessed on: 26 December 2016].

Jones, R. (2015). Qatar Airways Reveals $103 Million Annual Profit. Wall Street Journal. [Online.] Available at:   https://www.wsj.com/articles/qatar-airways-reveals-103-million-annual-profit-1434384433 [Accessed on: 26 December 2016].

Evans, N. (2015). Strategic Management for Tourism, Hospitality and Events. Lonsdon: Routledge.

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