Theoretical And Conceptual Framework Of Airlines

Theoretical And Conceptual simulation Of line of work ductsIn the prehistoric of few decades ago, skyway constancy is existence control very tightly with lots of regulations. For example, United State (US) diff part passage diligence is be control tightly by the cultivated Aeronautics Board (CAB) on apostrophize, route and schedule of flight. After that in 1978, domestic air transportation market of US is having a free aspiration among flight paths which al imprinted by the circulateline Deregulation Acts of 1978. Through this act, every flight path is al misfortunate-downed to set their own hurt, how popular they ar traveling and the destination they want to fly to (Thomas, O.G., 2004).After the deregulating of American air hose market, European air transport also experienced deregulation in the middle of 1980. The publication of regulation is an increase competition of airlines and to open naked entranceway to impertinently airlines. The airline constru ction has changed out-of-pocket to deregulations. The airline pains becomes much competitory with quashs pool of competition. Changes of pricing dodge, trade dodging and airlines ne iirks such as hubs and spokes had made. at that place atomic number 18 lots of changes from deregulation such as service patterns, pricing, computerized of the management systems and attention structure. Deregulation and air transport liberalization make a turning spot of airlines structure and merchandise strategies. Travelers be rational and non go outing to pay for a level of service which is not necessary (Pourat, H., 1994). Technological development had am lay off the management system of airline where they be now having toilets lineage system and reservation system had been improved.During that clipping, lots of real regulated airlines hurt failure and left the airline industry. There are come of tonic entry airlines joined the airline industry as easily. (Kaplan, D.P., 1995 cited in Thomas, O.G., 2004) nakedspaper publisher that, 19 jet operator formerly regulated by the Civil Aeronautics Board (CAB), only 7 survived until 1995. The most famous survivor, south-west reapingion linelines (created in 1971) re importants a prosperous carrier today. Deregulation of airline market also brings in opposite form of late argument stupefy which is the economic crisis comprise convergence line model into the airlines industry as comfortably. This go out be further discussing in the next section.1.2 Problem storyThe new idea of bluely salute parentage model was number 1 brought up by Southwest zephyrlines in the 1970. It took 15 yrs for the US airline industry and 20 years for the EU airline industry to take up the challenges of the subject of kickoff toll airline communication channel model.After the deregulation, in 1978, there are huge numbers of new entry of humiliatedly be airlines into the airline industry. Initially these new entry airlines was doing quite success but due to by having only low card would not be adequate to sustain their logical argument. They are miss of pecuniary support to debate in the warring airline industry during that succession. There are new entries of airlines and airlines which confront failure and left the industry (Natthida Taweelertkunthon, 2006).There is other new generation of low appeal handicraft model emerged in the airline industry in 1990. They startup their business with a strong financial support and with a better and young aircraft partd. This new generation of low salute airline has rewritten the business model to compete in the US competitive airline business surround and also with the commercial airlines market. They had also shifted from their business schema from product note into low address. They become more equal advantages through efficiency where their operational efficient back up to bring down the court.The emergence of low fo llow airline manage to steal customer from the commercial airlines especially price warm customer and served with wide range of services. Even those high end customers are not longer imparting to pay such a high fare on air transport where this bring clear toward the low appeal airlines. dividing line transport is not a sumptuous thing allmore. At this point of duration, traditional airlines faced challenges from low embody airlines where they find severey on sustaining their business.In Asia, low terms airline business model is still a new idea and safe started in year 2000. Nevertheless, this new business model do faced problem of restrictive of two countries involved. Problem had been solved through the obligation among atomic number 34 Asia (SEA) countries. pedigree Asia the successful pioneer established in the year 2001 and took the sky in November 2002. The success of Air Asia with low salute business model is the reason of the growth of low cost airlines apa ce in Southeast Asia. There are numbers of new entries of low cost airlines such as tiger Airways, Nok Air and etc.The fact that Southeast Asia has a massive population is crucial, more than 50 million slew with a rising middle assort and a growing appositeness for travel. The geographical location of surrounding islands without vi equal to(p) and competitive alternatives modes of transportation in Southeast Asia pass on enhances LCCs an enormous competitive advantage over come forth and ground modes.(Natthida Taweelertkunthon, 2006)Low cost business model of low cost airlines is different in between of SEA and US and EU. The application of low cost principle is different. For example, in US and EU, they could go a cast down fare on landing at petty(a) airports. But in SEA, they couldnt be fitted to avoid air traffic congestion at the core airport easily. Therefore, SEA low cost airlines cannot be able to save and lower fare on landing fees and etc. too that, the competiti on faced by SEA low cost airlines is over such(prenominal) competitive as compare to US and EU low cost airlines. This is because of there are lots of competitor in SEA estate with low cost airlines. Therefore, the market dodge that creation implement by the low cost airlines to stay and being competitive is important. This query trope is foc apply on the merchandise strategy that implement by low cost airlines to progress to competitive advantages in the competitive environment.1.3 look for queryFrom the problem statement above, it brings to some(prenominal)(prenominal) headspring questions where the police detective need to fool information for the purpose of this scheme.What are the marketing strategies implementing by Air Asia?How does marketing strategies influence the gross sales of Air Asia?What are the objectives, welfares and cost of the marketing strategies implementing? are there any differences in between of traditional and low cost airlines marketing strategies?How Air Asias marketing strategies make Air Asia to be competitive among other low cost airlines?1.4 explore ObjectiveResearch objectives countenance been listed down at below to guide the inquiryer in acquiring and answering the query questions which had stated above.Identify the marketing strategies that being use by Air Asia. try on the marketing strategies that had being utilise.Analyze the sales trend of Air Asia.Compare the sales trend and marketing strategies that had utilise.Evaluate the objectives, benefits and cost of the marketing strategies implemented.Compare the marketing strategies of traditional and low cost airline.Evaluate the competitive advantages of Air Asia.1.5 Theoretical and Conceptual Framework1.5.1 Conceptual Framework1.5.2 Theoretical FrameworkThe process of this question proposal is shown in the diagram above. first base of all, the problem statement would be discussing that the emergence of low cost airlines in the airline industry.1. 6 circumstance and Limitation1.6.1 ScopeIn the business world, there are plenty of strategies that are implementing by different company to stay competitive in the business environment. The strategies implemented by company are such as marketing strategy, financial strategy, research and development (RD), management information system (MIS) and etc. in this research proposal, the strategy that is being focus on is marketing strategy of an airline. It is to research on the ways of an airline manage their marketing strategy well to gain competitive advantage.Airlines industry is a huge industry which consist of copious service airlines and no frills airlines. This research proposal has confine the research topic into a small sphere which is foc use on analyzing the marketing strategy of no frills airlines. anyways that, there are numbers of no frills airlines in the world as well. Therefore, the researcher has further scope the topic down to low cost no frills airline of Malaysia which is Air Asia.1.6.2 LimitationIn every research proposal, there would gestate round limitations which limit the researcher to collect better information or result for the presentation of proposal. There is limitation which face by the researcher when doing research for this research proposal. AirAsia.com (2010), Air Asia is the only low cost airline easy based in Malaysia (which not consist of low cost airline (FireFly) with subsidiaries of Malaysia Airline System Berhad). There do not teach prize to researcher where Air Asia is the only acquirable choice to be include as the scope of the topic.Besides that, there are limited journals for sale well-nigh the marketing strategy of a low cost airline. Therefore, it is a limitation for the researcher to collect journals for review the literature. In addition, the marketing strategy of low cost airlines differs from airline to airline. It is difficult to finalize the principal(prenominal) marketing strategy that is implemen ting by low cost airlines.1.7 Significance of the StudyThis research proposal is important to YBhg. Dato Tony Fernandes, the CEO of Air Asia and the marketing manager of Air Asia. This is because the research proposal has a summary of the effectiveness of the marketing strategies that being implementing by Air Asia where it makes them to be competitive advantage and a guide on above other low cost airlines. They would nonplus the opportunity to have an mind-set on a different angel of view in order to further improve on their current marketing strategy by advancing the current strategic planning model.Besides that, another posted reader of this research proposal is the marketing managers of other airlines (such as low cost or full service airlines). This is because they could have the idea of how Air Asia is having such an excellent marketing strategy which brings it to where it is right now as the Worlds Best Low constitute Airline. They could use the strategic that Air Asia is implementing as the role model to market their airlines to be more competitive as well.In addition, this research proposal is useful to students who are majoring in marketing strategic management. This is because it would be a good and appropriate chemise teach to read and learn from on the ways of a company could be able to manage their strategic planning model so well and gain competitive advantages over other competitors. Student would have the opportunity to have an in-depth discernment on the ways of a low cost airline planning the marketing strategy model to suit the business model which to follow cost low and being successful.1.8 Definition of destinationASK = Available seat kilometerASK is to measure the carrying qualification of airlines passenger.The formula is seat available x distance flown = carrying capacity per skim offChapter 2 Literature Review tally to Natthida Taweelertkunthon (2006), there are two types of low cost carrier which are low cost no frills c arrier and low cost low frills carrier. Low cost no frills carrier is those low cost airlines which do not provide any other extra services like on board meals. Tiger Airways and Air Asia are the example of low cost no frills carrier. On another hand, low cost low frills carrier refers to low cost airline which provide nearly extra service like on-board drinks or snacks. The fare of air ticket is slightly higher than low cost no frills carrier. The example of low cost low frills carrier are Nok Air, One-Two-Go and Jetstar Asia.2.1 Key Features of Low Cost Airline Business Model plan 2.1 LCCs Business ModelSource (Jiang, H., 2007)The figure above shows the low cost airline business model which is build up three main key features which are simple product, low operate cost and positioning.2.1.1 unsophisticated Product / No FrillsA low cost airline would contain service and product simple to maintain cost advantages to offer product which is value for money to the customers. A simpl e product which also path no frills or no extra service such as meals on board provided on board to cut down cost. Besides that, meal on board could also be provided with a immoral of good quality with extra charges. The seats are narrow to have a bigger capacity on plane and maximize seat density. This is to have a large volume of sales to cover the cost on the case-by-case journey to the destination. There is an only one class seat on aboard available with no seats system yields (Jiang, H., 2007).2.1.2 Low Operating CostIn addition, a low operating cost is one of the low cost airlines features. Low cost airlines will only land on secondary airports where the landing fee is a lot lower as compare to core airports. Secondary airports also have the advantage of less traffic congestion where the flight and stop by and take off again in a shorter time. They would have a shorter turnaround time to avoid paying higher tax charges on parking. Besides that, low cost airline practice direct sales of air ticket or through online reservation and buying. A cost cutting strategy would be implementing by low cost airlines to keep their cost low and to have cost advantages (Dietlin, P., 2004).2.1.3 PositioningLastly, low cost airline will market themselves mainly to non-business passengers. For examples, leisure passengers and price sensitive passengers are non-business passengers. In recent years, low cost airline starts to target business travelers as well. This is to grow their market to a more large perspective. A good and effective marketing strategy of low cost airline plays an important role to position their product to the public and to gain competitive advantage as well. Low cost airline will have a short haul which fly from point to point with high frequency. Moreover, low cost airline would likely to become the number one or two on most routes operated (Jiang, H., 2007).2.2 Challenges of Low Cost AirlinesIn the competitive environment of airline industry, there are several challenges which will be faced by low cost airlines. Explanations on the challengers that face by low cost airlines are explained as below.2.2.1 OvercapacityFirst of all, the airline industry of low cost airline is growing rapidly where there is more new entry of low cost airlines. According to Jiang, H. (2007), the author said that there are over thirty low cost airlines launched in the year of 2002. A sudden increase of a large amount of new entry brings threat to the living low cost airline. The market is overcrowded and overcapacity where all of the low cost airlines need to compete among airlines to generate revenue for their own.2.2.2 Pressure on Yield or total FaresWith a large amount of new entry it creates a competitive competition environment among airlines. According to Dietlin, P. (2004), worldwide airline yield will decrease by 1.1% per year until 2010 and intra-Asia yield will decrease much faster than that. New pricing strategy had been demod by t raditional airline to compete with low cost airline. For example, for some routes, traditional airline introduce a low ravening fare especially those routes that being fly by low cost airlines. Besides that, there is a price competition among airlines. The new entry airlines are having lower fares to compete with existing low cost airlines. This pulls down the average fares per customer where it does not benefit any side on a long run.2.2.3 Difficulty on Keeping Cost AdvantagesAccording to Dietlin, P. (2004), Asian airlines are having a world-shattering lower input costs as compare to American airlines and European airlines. This problem of lower input cost is mainly due to delve cost. Dietlin, P. (unpublished, 2004) stated that Airlines in Singapore unit labor costs are USD 0.77 per ASK and airlines in American is having US 2.92 per ASK which is 279% more. Asian airlines are trying to solve the problem by hiring labor from low-income countries where they could have low wages for their labor to increase unit costs.2.2.4 Product DifferentiationWith numbers of low cost airlines in the market push every single low cost airline to differentiate their product to gain as much market share as possible. This simple mean more cost will incur. Airlines are coming up with more aggressive and low fares which it would pull down the average revenue of airlines. Low fare of air ticket is no longer enough to be differentiating from other competitor. They are trying to imperfection themselves to differentiate from others to gain competitive advantages.2.3 merchandising Strategy that Implemented by Low Cost AirlinesThere are several marketing strategies that being implement by low cost airlines to market or position their product to their customer. There are some marketing strategies that being practicing by low cost airline are stated as below.2.3.1 Frequent Flyer ProgramFrequent billhook program is one of the marketing strategies of Southwest Airline but it is not adopti ng by most of the low cost airlines. This program gives out everyday flyer point when customers purchase air ticket each time. By using the accumulate points, it could be redeem for free ticket or upgrade class seat which depend on the company form _or_ system of government (Lederman, M., 2003). As a marketing tool FFPs have proved super successful (Bennett, M.M., 1996).2.3.2 Point-to-PointGutstafsson, L. (2005) says that point-to-point could be included as a cost lead strategy as well as a marketing strategy as well. Point-to-point refers to the air traffic movement system where the flights fly at once to the final destination without going through the hub. This would be able to help airline to save up cost. At the same time, it could be able to attract customer where they do not need to waste time on transiting at the hub. Customer could be able to have a flight directly to the final destination that they wish to be that with a low fare air ticket.2.3.3 Branding / ImageIt is difficult for airlines to differentiate their product from other competitor as the basic product of airlines are the same. Therefore, branding and build up good image or reputation is another option to market their product to the public. Branding is do marketing on a product externally to the public. There is another way round of branding being practicing. As an example, Air Asia do brand their product internally to their staff first before to brand it externally to the public (Marketing-interactive.com, 2008). This is to let the staff of Air Asia knows well on the function and attractive of the product where they could sell it more better externally to the public.2.3.4 Pricing (Low Fares)Low cost airlines are marketing their products with low fare to compete with traditional full service airlines. Low fare is the main attractiveness of low cost airline as compare to full service airline. Low cost airlines keep on introduce low fare ticket to customer and having promotion sales on air ticket. Fare of air ticket is getting cheap as time goes. Fare of air ticket is the main strategy that plays around by low cost airlines.Chapter 3 Research Design and Methodology3.1 command Nature of ResearchThe general nature of the research proposal is soft methodology. Saunders, M. et. al (1998) defines qualitative research as an array of interpretive techniques which try out to describe, decode, translate and otherwise come to terms with the signification, not the frequency of authorized more or less naturally occurring phenomena in the social world.A deeper insight of the ways of Air Asia managing their marketing strategy would be able to gain from doing qualitative research. A research which is base on the meaning which express through words is qualitative research (Saunders, M. et. al, 1998).3.2 Research doctrine interpretative or phenomenology is the research philosophy that selected by researcher on this research proposal. This philosophy is suitable for research which is on qualitative methodology. Interpretive would help to gain new insight about the reality and deeper understanding on the question of how and why. Researcher is more flexible to adapt with changes during the research process. It is more appropriate to study on a small experiment for interpretive philosophy. There are threats by using this philosophy. First of all, it will be time consuming when collecting qualitative information. In addition, analyzing of qualitative data would be difficult especially for inexperience researcher to test and generate new speculation.3.2 Research Method and Research Design3.2.1 Research MethodThe research method that is being use by the researcher in this research proposal is interview research method. According to Saunders, M. et. al (1998), there are several types of interview such as incorporated interview, semi-structured interview and unstructured interview.The choice of interview selected is semi-structured interview which would h ave a list of topics to be cover during the section of interview. Semi-structured interview would be able to cover in depth and alpha study. It would benefit to gain new insight on the particular topic as well (Saunders, M. et. al, 1998).3.2.2 Research Design3.2.2.1 General Research DesignGeneral research design is known as research strategy. The three main research strategies are experiment, case study and survey. The research strategy that would be use in the research proposal is case study strategy. Case study would have a detail and intensive knowledge on the single case study that is being studied. Case study is very useful in conducting exploratory of the theory and challenging with come up with a new theory. Besides that, case study would provide a very liberal understanding on the case that is being studied (Saunders, M. et. al, 1998).3.2.2.2 Research ariseBesides that, the research approach that being use is inductive approaches. inducive approach is building theory whic h is more for case study research strategy. This approach would get the research to involve in the case study as well. The general idea of the problem would be understand well when inductive approach is being use. This approaches would more likely to use up interview data. It would be able to formulate theory by using the result of data abstract but at the same time it would also end up with the same theory as the existing theory (Saunders, M. et. al, 1998).3.3 Sources of Data3.3.1 Primary ResearchThere are several primary researches available such as observation, interview and questionnaire. The primary research which is being use in this research proposal is through interview. A semi-structured and in-depth interview would be conduct in order to have an exploratory study on Air Asias marketing strategy to gain new insight. An open-ended interview questionnaire would be design and use to interview the capableness interviewee to collect qualitative data. A face-to-face interview w ould be held where it allow researcher to have more control and strengthen open-ended question (Mona, C., et. al, 2001).3.3.2 Secondary ResearchIn this research proposal, the secondary research used is through online database to collect useful journals which are relating to the topic. The main online database is being use is emailprotected which is an online database of the Massachusetts Institute of Technology. The information that found through this online database is highly undeviating where there is lots of PhD or masters unpublished thesis available on the database.Besides online database as secondary research, websites are being used as well. Official website of Air Asia is being used as the secondary research tool to get information regarding on Air Asia. Newsletters of Air Asias would frequently update the researcher on current news about Air Asia. Besides that, Air Asias blog is one of the secondary research tools where it provides new updates of Air Asia from time to time when latest news of Air Asia could be known from there as well.3.5 Data Analysis ProceduresThere is several methods data analysis on qualitative research. The method of data analysis selected for this research proposal is the grounded theory data analysis. This data analysis method uses the inductive research where it collects data from the source of interview. Through interview, data would be able to collect and at the point of time, the data is being grouped accordingly into respective main concept (Gutstafsson, L., 2005).After the assort of data into different concepts is done, the data could further categories into different supporting theory structure. By doing so, it enable researcher to have a better outlook of the data displayed in the structure. Therefore, researcher could interpret and analyze the data easily. A new theory would be able to generate by using the result of data analysis (Gutstafsson, L., 2005).