Strategic management

Malaysian airlines
Presented by

content
Introduction
History
Competitive advantage
Pest/swot analysis
Porters 5 forces framework
Value chain analysis
Conclusion and recommendation
references

Introduction
Malaysian Airline System Berhad is theprimary airlineofMalaysia. Malaysia
Airlines (MAS) operates flights from Kuala Lumpur International Airportmainly and
with a secondary hub atKota KinabaluandKuching. From the report, the strategic
management of Malaysia Airlines is analysed. The report is produced for Mr
Mathew Teale. Most of the resources in this report are based on report and journal.
Besides, articles and newspapers are also being used as the secondary resources.
Gather from latest data, Malaysia Airlines has revenue worth as much as RM13
billion. In stategy management, there are Strategy Analysis, Strategy Formulation
and Strategy Implementation which are the process to overcome that external
factor which consist of objective to fulfil(Hambrick, 2007). Under the effect of
globalization, the world has changed in every sector and those changes had
influenced most of the corporation activities with obstacles to execute their
strategy. A company's finances will be affected if their management fails to
formulate and implement the most efficient and suitable strategy. Strategy
analysis, strategy formulation and strategy implementation are the fundamentals
to solve negative factors regardless what is the problems.

History
Malaysia Airlines was founded in 1937 through an ideaby the Alfred Holt'sOcean
Steamship Company in Liverpool work together with the Imperial Airways in from Britain
and Straits Steamship Company in Singapore. This had build the outcome of Malayan
Airways Limited(MAL) on the same year. As usual, this airline faced different types of
industrial challenges throughout these seven decades. Therefore, the company had
improved and repackaged their image and services. Malaysia Airlines started their flight
services originated in Subang Airport and later relocate to Kuala Lumpur International
Airport (KLIA). Malaysia Airlines serve different class of customers in society pyramid.
Therefore, Malaysia Airlines provide different class of seating's which are first class,
business class, and economic class. According to Malaysia Airlines Annual Report on 2012,
incredible loss of RM481,457,000 was hit after the loss on 2011 which was two billion. This
shows the in capabilities of management in Malaysia Airlines to manage the company.
Therefore, the management needs to be rearranged and restructured. Besides, Malaysia
Airlines are facing more competitors in the industry such as Air Asia. To overcome this
challenge, Malaysia Airlines tried to upkeep with their competitors by providing high
quality of services in order to win customer's faith and loyalty so that they could have
stable coming back customers. Their strategy was a success and this can be seen when
several awards are awarded by Sky-trax UK and World Travel Awards. The awards are the
Asias Leading Airline(2011), Asias Leading Business Class Airline (2010) and Five Star
Airline (2012). Malaysia Airlines built up their image as the top airline in Malaysia by
winning those award.

Competitive advantage
COMPETITIVE ADVANTAGE: is whereby a firm has over its competitors, allowing it to
generate greater sales or margins or retain more customers than its competition.
There can be many types of competitive advantages including the firm's cost
structure, product offerings, distribution network and customer support.
Substantially less expensive than other major international airlines
Courteous and comfortable services
Well maintained modern fleet
Excellent in-flight service
Spacious and wide leg room
Airport facilities and services
Extension of the special culture of warmth and friendliness
Improved website and booking engine performance
Competitive promotions

Pest analysis
To analyze the economy in the macro perspective we need to study the Political, economic, social and technological
environment of Asia as a whole.
a) Economics .The rapid growth of Asia fuels the growth of the air travel in Asia. The growth is also because of
the region being geographically dispersed and the countries having a large population. The governments of the
various countries have invested in the development of airlines and travel infrastructure and have made investment
in the airports to make them competitive with the rest of the world. Again with high growth and increase in trade
and business the competition has increased which has led the full service airlines like MAS to start cost cutting. In
the view of many economists Asia would soon be on the top of the global economy growth charts.
b) Political/ Legal: Government policies are important drives for the success of Asia. In the late1990s, there was
increase privatization and deregulation of the airline industry in Asia. It was noticeable that some Asian countries
established open-skies agreements while others allowed the entry of private airlines. For instance, in 1997, a few
LLC spouted quickly after Malaysia signed an open-skies agreement with the United States. Hence, it appears
that although the travel market will be expanded, in reality MAS would also have to operate in a more challenging
environment with intense competitions.
c) Social-Cultural: Surveys revealed that more people were willing to compromise on food and other services in
exchange for lower prices. In fact, it was stated that price of tickets was the single most important consideration
that influenced passengers decision in case of a conscious leisure passengers who are always looking to make
their budgets decrease further. This presents an opportunity for all LCC increase their revenues by offering
travelling at a much lower fare. With the entry of such low cost carriers the competition for the full service airlines
like MAS increased so the company has to segment its market and target only those high class premium business
travels for whom service and luxury is very important and are not concerned about their budget.
d) Demographic: In 2005, the total population in Asia stands at more than 3.5 billion. The United Nations
statistics also show that Asia has an astonishing demographic dividend where more than 35% of its population is
below the age of 25 and more than 55% hovers below the age of 35. This shows that the population of middle age
is group is increasing thereby increasing the number of working population which results in the increase in the
overall disposable income and so the number of business and leisure travelers is bound to increase. This therefore
presents a golden opportunity for MAS.
e) Technological: The technological advancement including introduction of services like internet telephony and
use of various other telecommunication services ( like buying of tickets online) provides MAS a new arena to boost
up its sales by leveraging the new technology. The use of e-commerce and internet based activities which includes
reserving a holiday online and even buying tickets online opens ways to derive ancillary revenues. Technology
advancements sometimes also help in reduction of the operational cost such as savings on commissions for travel
agents.

Swot analysis

STRENGHT:

1. Strong Backing of Malaysian Govt

2. It has extensive operations in South Asia, Middle East, Australia and other global destinations
3. One of the most popular airlines across the world
4. Strong brand recall and visibility due to excellent advertising and marketing
5. The company has a strong workforce of over 20,000 employees
6. It covers over 50 international and 35 domestic destinations with a fleet size of over 100
WEAKNESS:

1. Relying Heavily on International Onward Moving Traffic

2. Very Little Domestic Traffic and limited market share growth
OPPORTUNITY
1. Increasing Global Presence
2. More Routes internationally to popular destinations
3. More services and choices to customers at airport facilities
THREAT
1. Rising Fuel Costs
2. Changing govt, Policies and regulations of regulatory bodies
2. Increasing Competition in SE Market

Porters 5 forces framework

Porter five forces is a framework which analyzes the industry and business strategy development
to determine the competitive strength (Porter, 1979). By using this analyzing technique, Malaysia
Airlines can identify the threat of new entrants. Since the needs to start an airlines company are
hard, consequently, the threat of new entrants has reduced. Furthermore, brand name is
important to the customers these days. Adding to that, to go into this business not also need high
capital but also need an establish brand name. Thus, rather than start an establish brand name,
the new threat entrants will focus more on the loyal customer. The only new threat entrants
Malaysia Airlines need to focus more are the international airlines.
There are two companies that are competing against each other in the aircraft manufacturing
industry which are Boeing and Airbus. Since Malaysia Airlines are choosing Boeing as their main
aircraft, therefore, Boeing has no option to increase their aircraft prices. If Boeing increases their
aircraft price, most probably Malaysia Airlines will change their aircraft to Airbus. Consequently,
Malaysia Airlines can use its bargaining power of consumer to bargain the aircraft price. This
undoubtedly will be an advantage to Malaysia Airlines to save their buying cost that led Boeing
with no other choice to sell its aircraft to Malaysia Airlines since theyre having a tough time in
competing in the aircraft manufacturing industry.
The bargaining power of suppliers is depending on the numbers of alternatives the consumer has.
For Malaysia Airlines, it is difficult to change to another aircraft manufacturer such as Airbus since
their maintenance staff are experienced with Boeings aircraft. By changing the aircraft
manufacturer, Malaysia Airlines need to spend a lot of money to train their maintenance staff
which and switching cost is high. Therefore, the power of suppliers cannot be a negative factor
since Malaysia Airlines only rely on one aircraft manufacturer. Plus, the power of suppliers is
insignificant where Malaysia Airlines has their own aircraft maintenance subsidiary company. For
fuel, the bargaining power of suppliers is not really high since in Malaysia there is only little petrol
organization and the price is set by the government.

Value chain analysis

Malaysia Airlines primary income is based from logistics services and secondary
activities are aircraft maintenance and technology development. By coordinate these
value chain analysis activities, Malaysia Airlines can have a lower cost structure and
increase the value of outcome product. By increasing the value of outcome product,
Malaysia Airlines can compete better in the industry by understanding the connection
between each of the value-chain activity. Additionally, a proper coordination with their
union, customers and suppliers can reduce cost and adds up the bonding between
customers and company itself. As its outcome, improvement of the performance in
Malaysia Airlines primary and secondary activities can be achieved and higher profit
can be gained in the process. .

Conclusion and recommendation

MAS though currently does not have a strong presence in the region, the macro
environment of Asia presents vast opportunities to enlarge the companys market
shares. The Airline businesses are closely linked to economic activities in Asia and the
world. As such, MAS needs to be cognizant with the business cycle so that it can to
take full advantage of such effects especially when there are changes in discretionary
income and consumer spending patterns. The company should also keep in mind that
increases in the demand of fuel and limited supply can lead to higher fuel price that
will decrease the yield. Last but not least, the impact of crisis such as 9/11 (2001) and
SARS outbreak (2003) was able to hit the airline industry badly and as such they
continue to pose serious threat to airlines.

References

http://myassignmenthelp.info/assignments/marketing-strategy-malaysi
an-airlines-porters-forces-model-pest-analysis/
http://www.coursework4you.co.uk/essays-and-dissertations/value-cha
in-analysis.php
http://en.wikipedia.org/wiki/Malaysia_Airlines
http://www.scribd.com/doc/53389253/malaysia-airline-competitive-ad
vantages
http://www.mbaskool.com/brandguide/airlines/524-malaysian-airlines
.html