Final Report of Mas

Executive summary

This report analyses the performance and operations of Malaysia Airlines in regard to its competitive position in airline industry which can be classified as domestic, regional, within a continent and between continents. Malaysia Airlines (MAS) is a national airline and owned by Malaysian government. Apart from conventional airline services for passengers, Malaysia Airlines also involved in cargo and maintenance services. Recent years, the rapid growth of technologies and services in airline industry made the competitions between different airlines intensely, especially for the airlines which have the similar business operations in the same market. For this reason, it is essential for the airline which desire to promote the profitability and have more competitive advantages to formulate further plan depends on the systematic analysis to assist the airline to grab more market share.

From this report, it aims to investigate the factors that influence the development for Malaysia Airlines from both external and internal environment and then to propose appropriate recommendations for this organization to operate its business in a better position. The analysis of this report is mainly focus on the external and internal analysis. For the external part, opportunities and threats are the main areas to be considered and the strengths and weaknesses of Malaysia Airlines are the main areas to be analyzed in the internal part.

According to the analysis of this report, some limitations had been found because of the restriction of time and related resources. However, these limitations just exert little influence on this report and most factors of external and internal environment had been found and further recommendations for the development of Malaysia Airlines also will be proposed and may bring profound influence to this organization.

Introduction

Since the concept of globalization was proposed, it has already been a hot topic around the world. In recent years, the implications of globalization exert influence in the different areas, among these areas; airline industry has developed rapidly and still developing in a high speed because of globalization (Michael and Okubo 2009, 97). At the same time, different airlines strengthen the cooperation with each other to expand their business and take appropriate actions to improve the profitability. This cooperation promotes airline partnership and forms different alliances. Under the alliances, different airlines could have code sharing arrangement which may help them to achieve mutual benefit. However, airlines in different alliance still maintain their own characteristics and have their unique strategies for future development. So the different airlines in different countries still are regarded as representative for national identity (David and Esteban 2007, 385). For this reason, the local government will protect its own regional airlines and restrict the development of airlines from other areas. The protectionism will still exist in airline industry. The following report analyzes the operations of Malaysia Airlines in regards to its competitive position in the airline industry. Although this organization has non-aeronautical revenue sources which include maintenance, repair, overhaul and aircraft handling, its major operation still focus on passenger services. Malaysia Airlines operates its business based on the city of Kuala Lumpur which could be regarded as the center area of Southeast Asia. For this location, it is an intensive area of population and countries, many airlines set up in this area or East Asia and South Asia and even in Oceania. For these airlines, they have the similar routes in same regions which mean they would have direct competitions with each other (David and Gados 2008, 26).

In recent years, the biggest threat and challenge that Malaysia Airlines need to face is the low-cost competitors. For these low-cost competitors, they did effective manage on their budget by analyzing their resources and capabilities (Wooi and Tan 2010, 209). Because most of these airlines were established later than Malaysia Airlines and have a smaller business scale compared with Malaysia Airlines, they took some reasonable actions such as rely on internet to provide booking services at home to their customers. This internet services will allow the passengers able to save more time especially for business passengers. Meanwhile it can help them to reduce relevant cost on overmuch employees and unnecessary commissions paid to agencies (Eric 2008, 71).

From Porter's five forces model. Expect suppliers bargaining power, other four forces include buyer bargaining power, potential new entrants, threat of substitute product and the rivalry among competing sellers all can be the major driving forces for Malaysia Airlines. Aircraft manufactures and local airport agencies are the two major suppliers of airlines. A good working relationship will bring benefit to each other. The buyer bargaining power comes from the customers that they may more care about the price and services. For the part of potential new entrants, threat of substitute product and the rivalry among competing sellers, the biggest problem is about the market penetration and whether Malaysia Airlines could grab more market share. The lack of differentiation and diversification strategies of Malaysia Airlines may restrict its self to have a leadership in the industry and for its future development (Cherie 2009, 162).

From the macro-environment of airline industry, because of impact from global financial crisis, escalation of fuel costs and high security risks due to threats of terrorism, the tendency of the development for airlines seems to be influenced by these factors and this single business for airlines to promote profitability is not enough. To spread out the operations such as strengthen cooperation with local travel agents can help the airlines to attract more and stable passengers (Fariba 2002, 344). At the same time, to conduct mergers and acquisitions for big airlines like Malaysia Airlines can help them to improve the market share and to steady the competitive advantage (John and Williams 2005, 5). This requires the airline to do the enough industry analysis.

In this report, it is mainly focus on the analysis of self development and industrial environment. Before the analysis, background information will be involved, and then according to the analysis from both external and internal aspect, strategy evaluation will be described, ultimately further recommendations for this organization will be proposed and a brief conclusion for this report will be the final part. In order to have a better analysis, the SWOT model will be the main analytical tools to be used to investigate Malaysia

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