Malaysian Airlines corporate strategy Essay Example | Topics and Well Written Essays - 2000 words

Malaysian Airlines corporate strategy - Essay Example The paper tells that facing a tough economic environment, strong rivals and governmental interventions, Malaysian Airlines is facing a situation where it is fighting to remain operational. Low cost operators are developing different capabilities in their operations that are leading to a competitive advantage for them. Industry wide standards are evolving so rapidly that it is becoming difficult for airlines who have massive operational scale to adapt there processes to theses changes in a small period of time. In these times company has to thoroughly scrutinize its business processes to tighten up cost and in effect maintain those margins that allow it to remain competitive in the industry. However, there is a limit to this measure and therefore company has to explore other options. Malaysian Airline has been facing serious threats from the low cost competitors. The competitors are trying to capture the market share of Malaysian by using different low cost strategies. Low cost strate gies allow the organization to create a cost leadership and impose serious competitive challenges for other organizations. In this particular case study, the competitors of Malaysian airline are offering heavily discounted seats in core markets, this in turn allows them to influence demand and set new standards in the market. Apart from this, another competitive action taken by the low cost competitors is of E-ticketing, since it’s a onetime cost which allows the airline to avoid cuts or commissions of different parties, who were involved with booking tickets for example agencies, queues and staff. Another factor which has allowed the competitors to offer services at relatively low cost is the low cost airports. This has tremendously reduced their cost and is one of the reasons for them to offer such low fares. The competitors are able to attain and maintain zero accommodation cost for airline staff. This has become possible because the operations of these competitors are des igned in such a manner that they do not require their cockpit staff to spend a night at a hotel after the flight. The staff comes back home immediately on the next flight. Code sharing has also allowed them to keep their expenses low. Lastly, these competitors have implemented performance linked compensation i.e. these companies have tied their compensation with the performance of the airline employees, giving them an incentive to keep performing exceptionally. Impact of the Actions of Competitors on Malaysian Airline: The strategies and actions implemented by the low cost competitors have some serious impact on the Malaysian airline. The airline has been forced to offer better service standards. Obviously, this measure would require the airline to incur more cost. Low cost airline has set a new benchmark for operations; these latest operations require airlines to cut every ounce of unnecessary cost, thereby squeezing capital expenditure. Low cost competitors due to their smooth ope rations have set fares prices so low that it has caused big airlines with massive operation to explore ways to lower their fares. Due to their massive scale, such airliners are facing difficulty to offer competitive rates. Since low cost operators charge such a low cost on domestic flights, it has put pressure on airlines like Malaysian airline to increase the passenger load on domestic flight in order to keep domestic services operational. Low cost flight carriers are now moving towards countries and regions liken ASEAN, China and India, thereby attacking the most probable markets for big airlines like Malaysian Airlines. Probable Actions for Malaysian Airline: Malaysian Airline has to take several measures and steps in order to overcome the increasing competitive pressure by the low cost competitors. The company can take measures in order to facilitate the process of downscaling unproductive operations for example certain domestic or regional flights. Apart from this the company c an also follow the Airline BTP2 manual