The micro and macro environment factors that have contributed to the early success of AirAsia are on Microenvironment: marketing intermediaries, customer markets, competitors, customers. In Macro environment economic, technological are present.
moderately high due to almost no switching cost for customers to switch from
one LCC to another. In addition, the access to the internet allows customers to
have close to full information on prices charged by the LCCs. Threat of
substitutes is moderately low; there are several substitutes such as cruises, rail,
bus, and car. However, the archipelago geographical structure of Asia has made
air travel the viable, efficient, and convenient mode of transportation. Threat of
new entry is moderate; high capital requirement and government barrier such as
air service agreement can act as barriers to entry. However, the deregulation of
aviation industry in Asia Pacific region has resulted in more competitors entering
the market. Furthermore, many full service airlines enter the LCC industry by
launching their LCC version. For example, Nok Air set up by Thai Airways is a
part of LCC industry in Thailand. Finally, industry rivalry is moderately high due
to price as the basis of competition and high exit cost. However, market
participants tend to realize that price war is destructive for them thus they avoid
direct price competition and they turn into 'friendly' competitors. Appendix 3
summarises Porter's five forces specific to LCC industry.
Based on the environmental scanning performed, the demand for LCC is
expanding thus LCC industry will keep growing rapidly. The LCC industry
attractiveness and profitability will attract many full service airlines to launch its
LCC version adding the degree of rivalry in this industry. As the implication,
AirAsia, current market leader of LCC in Malaysia, Thailand, and Indonesia, will
face competition from both existing and new players. In order to sustain its
competitive advantage, AirAsia needs to leverage its competency in creating cost
advantages across multiple value chains