Airasia Vision And Mission Management Essay

In management, certain specific criteria have to achieve in order to reach company’s ultimate goals in the future. Quality is one of the most important requirements where system management is concerned. A quality management system (QMS) process is a business excellence which forms an element of the quality management system of an organisation. The ISO 9001:2000 standard requires organisations seeking compliance or certification to define the processes which form the QMS and the sequence and interaction of these processes.

As this assignment requires managing quality and systems in the chosen organization, therefore, I have chosen, AirAsia: a private Malaysian low-cost carrier (LCC) company, in order to finish this assignment successfully.

1.2 About AirAsia

AirAsia is a Malaysian low-cost airline. It operates scheduled domestic and international flights and is Asia’s largest low fare, no frills airline. AirAsia was a pioneer of low cost flights in Asia. It is also the first airline in the region to implement fully ticket-less travel and unassigned seats.

The airline was established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB-Hicom. On 2 December 2001, the heavily-indebted airline was purchased by former Time Warner executive Tony Fernandes’s company Tune Air Sdn. Bhd. for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27).

In 2003, AirAsia opened a second hub at Senai International Airport  in  Johor Bahru near Singapore and launched its first international flight to Bangkok. AirAsia has since started a Thai subsidiary, added Singapore itself to the destination list, and commenced flights to Indonesia. Flights to Macau started in June 2004, while flights to Mainland China (Xiamen) and the Philippines (Manila) started in April 2005. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia.

A new budget terminal, the first of its kind in Asia was opened in Kuala Lumpur International Airport on 23 March 2006. Built at a cost of RM108 million (US $29.2 million) and spanning some 35,000 square metres (116,000 square feet), the Low Cost Carrier Terminal (LCCT) is the new home for AirAsia Bhd. Initially, the LCCT handled 10 million passengers a year. AirAsia Group is expected to carry 18 million passengers in 2007.

AirAsia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger break-even load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilisation rate of 13 hours a day. AirAsia is currently the largest single customer of the Airbus A320.The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. 

AirAsia Vision & Mission

AirAsia creates values through the following vision and mission:

AirAsia 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.

AirAsia 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

Maintain the highest quality product, embracing technology to reduce cost and enhance service levels

Unit 2

(Unit 2 covers the task 1 of the assignment)

2.1 Operation Management (OM)

Operations Management is at the centre of so many changes affecting the business world. It’s important that managers can analyse the operations of their organisations and suggest and implement the necessary changes to meet these challenges.

2.1.1 Defining OM

Operation management (OM) is a set of activities an organization uses to transforms different kinds of inputs (raw materials, technology etc.) into final goods and services. Operation management is closely linked with quality and productivity. A firm operation management system (OMS) largely determines how inputs are transformed into goods and services. A properly designed and managed operation system plays a major role in determining quality and productivity.

Operation Management system is grouped into six framework areas: (i) Product/service design, (ii) product/service process design, (iii) Planning of operations, (iv) Facilities management and planning, (v) Operations strategy, (vi) People management.

Operations Management is not only connected with frameworks and systems as operations management have many challenges they must be aware of and account for as they could have a major impact on modern organisations in the manufacturing and service industries. Some of these challenges are:

Developments in Strategic Management Policies

Global Sourcing/Competition

Total Quality Management Principles and Certification Quality

Employee Empowerment etc.

The overall system can be shown as follows:

(Input)

Customers

Information

Services

Technology

(Output)

Products

Services

(Process)

Process capital labour

Feedback

Figure 01: Simple OM system

2.2 The Importance of Operation Management in AirAsia

The importance of operations management in AirAsia has increased dramatically in recent years. Significant foreign competition, shorter product and service life-cycles, better-educated and quality-conscious consumers, and the capabilities of new technology have placed increasing pressures on the operations function to improve productivity while providing a broader array of high-quality products and services. With the globalization of markets, firms are recognizing that the operations function can be used to strengthen their position in the market place. Managers in operations management play a strategic and tactical role in satisfying customer needs and making their firms strong international competitors.

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2.3 The Strategic Objectives of AirAsia in Meeting Goals and Objectives

AirAsia Key Strategies

AirAsia makes the low fare model possible and create values through the implementation of the following key strategies:

Safety First Partnering with the world’s most renowned maintenance providers and complying with the world airline operations.

High Aircraft Utilization Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity.

Low Fare, No Frills Providing guests with the choice of customizing services without compromising on quality and services.

Streamline Operations Making sure that processes are as simple as possible.

Lean Distribution System Offering a wide and innovative range of distribution channels to make booking and travelling easier.

Point to Point Network Applying the point-to-point network keeps operation simple and lower costs.

Aligned with its mission statement, AirAsia’s business strategy is centred on cost leadership. However, its business strategy targets specific markets; price sensitive customers (including first-time fliers) needing short-haul flights. In Porter’s generic strategies, AirAsia’s business strategy can be categorised into focused cost leadership; quadrant 3A in figure 2.

Competitive advantage

Low-cost Differentiation

1. Cost Leadership 2. Differentiation

3A. Cost Focus 3B. Differentiation Focus

Broad Target

Competitive Scope

Narrow Target

Figure 02: Porter’s Generic Strategies

AirAsia builds and sustains its competitive advantage by providing services at a price that is simply lower than competitors’ price. Operation effectiveness and outstanding efficiency are two main characteristics of low cost businesses including AirAsia. The central objective is to achieve bigger cost advantages than the rivals by continuously searching areas for cost reduction along its value chain. By further analysing AirAsia’s value chain, one can actually determine how AirAsia creates cost advantages along its value chain. These cost advantages constitute AirAsia’s order winner in competing with its rivals as they enable AirAsia to provide the lowest possible price to the price sensitive customers. In low-cost carrier (LCC) industry, cost is the competitive priority and it determines market position.

In order to fulfil their business mission in business, they always have keen to meeting their goals and objectives.

Unit 3

(Unit 3 covers the task 2 of the assignment)

3.1 Business Process

There are a few types of resources that are used to manage the business process, such as people, information, supplies, technology and facilities. The main types of resources are physical, human, financial and technological; they are classed as the ‘four pillars of management’. In M&S business they are using all four of the types if resources mention in the above, and the following will explain each type.

3.1.1 Human Resources

This part of the business ensures that my organisation has all the staff it needs to operate effectively, both centrally at the head office and locally staff training and development, and they are also responsible:

To facilitate employee self service initiatives,

For recruitment and retention

Disciplinary procedures

Grievance procedures

Health and safety

Keeping one step ahead (having a good reputation), i.e., making sure that guidelines and regulations are followed.

Developing an organisational culture which helps to achieve the company’s objectives.

Motivating employees to work to their best ability.

Providing support and training, so as to develop the individual.

Analyse current and future needs for employees.

3.1.2 Financial Resources

Financial resources are a very important department and are always helpful in strategy development, because it enables the organisation to work out how well it is using its resources, and how well the business is performing. In M&S, there role is to:

Measure the overall performance of the business.

Take into account about profitability, gearing, liquidity; to make comparisons with other companies and risk assessment etc…

Cash flow; monitoring income/revenue, monitoring expenditure

Preparing accounts

Raising finance; shares, loans.

Links with other functional areas.

3.1.3 Technological Resources

Technological resource is electronic gateway of technology information and resources for a businesses, it’s mainly used when doing market research for a business. It is a search engine for researchers, customers, staff, or the general public, small firms and is a potential ‘link’ to investment opportunities for investors and a way for the public to find out more about the business. M&S group basically aims themselves at:

Technology access, licensing, patents.

Trademarks

Designs

Copyright

Information and communications

Manufacturing maturity and capacity

Research funding

Technology legislation

Innovation potential.

3.2 AirAsia IT-enabled Resources

AirAsia has fostered a dependency on Internet technology for its operational and strategic management, and provides an online ticket booking services to traveller online. The following shows the home page of AirAsia.com as the company key channel of marketing and sales.

The followings are few system implementations that AirAsia have done in its marketing and sales activities (Yield Management System and Computer Reservation System) as well as operation activity (Enterprise Resource Planning System).

3.2.1 Yield Management System (YMS)

It is also known as Revenue Management System; it understands, anticipates and reacts to the behaviour of customer to maximize revenue for the organization. This takes into account the operating costs and aids AirAsia to optimize prices and allocate capacity to maximize expected revenues. The optimization is done on two levels in AirAsia:

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Seat (Every seat is considered an opportunity to maximize revenue. Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier – for the same seat)

Route (By adjusting prices for routes/destinations that have a higher demand when compared to others). The effective method however is to combine these two levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights.

AirAsia has realized increased revenue (3-4%) for the same number of aircrafts by taking advantage of the forecast of the high/low demand patterns, effectively shifting the demand from low period to high period and by charging a premium for late bookings. Over the past couple of years, AirAsia have actually lowered prices (essential for LCC) as the YMS has given them the window to increase their revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times.

3.2.2 Computer Reservation System (CRS)

It is an integrated web-based reservation and inventory system. It includes Internet, call center, airport departure control and more. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales commissions that need to be paid to them. Centralized customer data is also maintained by Open Skies and this helps AirAsia to track booking and schedule flight activities with real-time, on-demand reporting feature. The vast booking information that is provided online to the customers acts as a force that brings more customers to use the website thus reducing the customer support costs. An important feature is that Open Skies seamlessly integrates with the already implemented YMS so that the systems can be used in unison for pricing and revenue maximization (by providing information on bookings, schedules etc) and driving down the costs of operation at the same time. This CRS enabled AirAsia to introduce the first ticket less travel option and also provides features such as advanced boarding passes in addition to online booking that enabled the growth of AirAsia as these features attracted customers that did not have the time for purchasing tickets from counters and coming in 1 hour early for securing a seat on the aircraft. AirAsia have proposed to implement a Wireless Delivery System (WDS) to expand it reach via mobile phones. With this, potential customers will be able to book tickets via their mobile phones. This is a strategic move for growth as the Asia-Pacific region has a larger population of mobile phone users rather than internet users.

3.2.3 Enterprise Resource Planning System (ERP)

AirAsia has (May 2005) opted for a full fledged ERP system implemented by Avanade consultants. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and data retrieval processes. (Microsoft Malaysia)

3.3 Quality Audit (QA)

One of the most important objectives of an internal quality audit is measuring the effectiveness of an organization’s quality management system (QMS). For this to happen, executive management must first meet its overriding responsibility of establishing and maintaining a system regarding quality policy, goals, resources, processes and effective performance, including monitoring and measuring the system’s effectiveness and efficiency.

With respect to quality, an organization’s fundamental responsibility is to define the management system used to ensure and safeguard quality. This task begins by identifying the process applications that will be part of the quality system. These should be integrated and coordinated to achieve system objectives; i.e., the processes must be organized in a process approach and supported with necessary resources. Also, the quality system’s performance must be continually measured for effectiveness and efficiency, and active improvement structures must be developed.

Most companies try to set standards by producing a charter which outlines the company’s commitments in serving the customers with quality products and services. Every organisation should define comprehensive procedures by which their products or services can be delivered consistently to the desired level of quality. That’s why Quality Audit is important as we mean the procedural controls that ensure participants are adequately following the required procedures. Below I have identified the importance of quality audit procedures and ways of raising performance.

3.3.1 Defining Quality Audit

Quality Audit (QA) is a way of inspection to evaluate the operation in order to achieve standard required by any organization. Quality Audit is an independent examination of a quality system It measures the effectiveness of an organisation’s quality management system. It is a documented and systematic tool. It should be done periodically by independent and qualified people.

3.3.2 Operating Quality Audit

A Quality Audit approach affects the entire work lifecycle in AirAsia.

Pre-defined standards will impact the way the project is planned

Quality requirements for specific work packages and deliverables will be identified in advance

Specific procedures will be followed at all stages

Quality Methods must be defined and followed

Completed work and deliverables should be reviewed for compliance.

3.3.3 Quality Audit flowchart in AirAsia

AirAsia (AA) is always keen to develop their business at their desired level. They follow the given QA system.

Improving the audit

programme

competence and

evaluation of

auditors

Authority for the audit

programme

Audit activities

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Act

Plan

Check

Implementing internal audit program

scheduling audits

evaluating auditors

selecting audit team

directing audit activities

maintaining records

Establishing

the internal audit program

objectives

responsibilities

resources

procedure and guidance

Monitoring & reviewing

the internal audit program

monitoring & reviewing

identifying needs for corrective

identifying needs for prevention actions

identifying opportunities for improvement

Do

Figure 03: QA Flowchart in AirAsia

3.3.4 Sample questionnaire of QA in AirAsia

To ensure continuous monitoring and development process, AirAsia regulates internal questionnaire system. One of the sample questionnaires is given below:

Questionnaires-Inter QA (AirAsia)

Office Audited:______________

Date:____/______/______

1.

Employee Name and Age:

——————————————————- & ————

2.

Why do you like AirAsia?

3.

What services of AirAsia you do prefer and why?

4.

How would you circle AirAsia’s on board steward service? (circle)

1. excellent 2. very good 3. good 4. not good 5. dissatisfied

5.

6.

The ticketing prices of the AirAsia is……(circle)

1. very high 2. high 3. right 4. cheap 5. cheaper.

The qualities of the services are…….(circle)

1. very high 2. high 3. right 4. cheap 5. cheaper.

7.

What service of AirAsia that you think need to be improved and why?

8.

Do you think AirAsia should increase their price and at the same time retain their quality? If Yes, why?

9. AirAsia acceptance to customers……(circle)

1. high 2. acceptable 3. low 4. very low

10.

Do you think AirAsia should expand their aviation business outside Asia?

11.

Your valuable comments on AirAsia services(if any):

Thank you for your kind response…

Figure 04: Sample Questionnaire of AirAsia’s QA

Embed Quality Audit (QA) System in AirAsia

To reach their vision, AirAsia must embed Quality Audit System with a careful attention. AirAsia audit service offers ‘ticketing and services’ on minimum standards and require clear, regular reporting from AirAsia’s offices on areas such as annual accounts (including performance reviews), data audit, internal audit, and risk management. During QA, AirAsia follows the following procedures to do it.

Objectives

Audit scope

Identification of audit team leader and members

Date and place where the on-site audit activities were conducted

Audit criteria and findings

Conclusions

Unit 4

(Unit 4 covers the task 3 of the assignment)

4.1 Monitor Systems and Challenges of Business Strategy in AirAsia

By monitoring system of AirAsia, they have some certain challenges that could hamper their business in the long run. The major challenges are given below:

Major Challenges

Increasing competition because of increasing number of low cost airline competitors, and aggressive competition against the large or traditional airline companies

Customer decrease because of poor economy

Rising of the fuel prices

Higher labour cost

Inadequate infrastructure

Route and flight utilization

Safety and security issues of aircraft crash or being attacked

Not only AirAsia, observation says that lots of airline companies are facing challenges in aviation business. Therefore, AirAsia’s strategic business development department are continuously working out their respective issues to minimize risks.

4.2 Recommendations on Business Improvement

By applying the following business strategies, AirAsia can improve their business in aviation industry in Asia region.

1. Customer Relationship Management (CRM)

Customer Relationship Management (CRM) application will be one of the area of strategic IT implementation that AirAsia can focus to achieve high values to both shareholders and customers.

In long term, customer relationships should be fostered for AirAsia to maintain competitive advantage and profitability. When planning and implementing CRM application, management is recommended the following approaches:

Customer segmentation – mileage-based segmentation is inadequate, rather should focused on value-based and needs-based approaches can guide investment decisions and drive greater insight into the needs of high value customers.

CRM initiative development – to differentiate from other competitors, AirAsia should not adopt the “fast follower” approach to CRM initiative development, i.e. learning from other competitors’ approach (e.g. installing kiosks for fast check-in). AirAsia should implement CRM program in favour of investing in initiatives with a high return, which respond to the needs and desires of their own customers

Organizational design and management – AirAsia needs to train the employees, empowering them with a complete view of the customer and clearly articulating the employee’s role in the CRM strategy.

2. By applying PDCA cycle

W.E. Deming’s PDCA cycle (or Deming wheel) is the well-known basis of continuous improvement.

P = Plan. Collect and analyse data of current methods or the problem areas so as to formulate a plan of actions what are intended to improve performance.

D = DO. Implement improvement plan. In this stage the action plan is tried out in the operation.

C = Check. Measure and confirm results

A = Act. Standardise and learn lessons. Standardise if it has been successful, if not, learn what you can from trial.

This cycle never stops. When the last stage is over, the new cycle starts again.

As part of my recommendation on business improvement of AirAsia, I would recommend the mentioned systems.

4.3 Conclusion

AirAsia is one of the leading LCC airlines in south-asia region. AirAsia must also run a long-term performance evaluation to capture and document any new knowledge, analyse actual benefits and losses, analyse existing problems and alternative solutions so that in future company can face any sort of challenges. As regards to this assignment, all the relevant important information has been inserted and accomplished remarkably.

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