Business Strategy

Aligned with its mission statement, AirAsia’s business strategy is centred on costleadership. 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 1.

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. Appendix 2 summarises the sources of cost advantages contributable to the low cost business model for each activity in AirAsia’s 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 LCC industry, cost is the competitive priority and it determines market position.