Professional Documents
Culture Documents
Full Assigment
Full Assigment
Malaysia Airline Systems (MAS) like many other airlines is suffering financially,
this is due in part to world events that have occurred recently and market
conditions in Asia, although these market conditions have also been experienced
on a worldwide scale. People have been reluctant to fly after the events of
September 11 2001, the wars in Afghanistan and Iraq, and the outbreaks of the
There has also been the problem of more companies entering the airline market
sector especially the low cost operators such as BMI Baby or Easy Jet. If MAS is
to survive the next 3 to 5 years they are going to have to compete against
powerful carriers like BA and Qantas, low cost carriers, and strategic alliances
such as One world and Star Alliance. To win back and retain customers MAS is
going to have to implement a marketing plan and a strategic business plan, which
is going to have to incorporate the current positioning and branding of MAS and
how they want to be perceived in the future. This essay will attempt to answer the
question 'If MAS is to survive and thrive in the future how would you combine
the resources and skills of the operations and marketing functions over the next 3-
5 years?' This will do using marketing tools and models such as perceptual
maps, SWOT analysis. Being successful is about more surviving and if MAS
is to realize their vision “To be the largest, most successful and most respected
airline in the world”, they are going to have to realize that money will need to
spend.
1
PMN 3023 STRATEGIC MANAGEMENT
Malaysian Airlines is the pride of a nation, they carry the Malaysian flag and their
success is important to the country. This means that they can and have aided
by the government.
MAS have also invested a lot of money on IT, which has left them in a strong
MAS are an award winning company, having diversified into many areas of
travel, even during the difficult era for the airline industry.
1.2 OBJECTIVE
The objectives of our assignment are to find out the problems that Malaysia
Airlines System (MAS) is facing now such as the debt of MAS and the main
competitor of MAS. MAS are facing financial problems currently and many
solutions had taken to solve this problem. Is it this problems can be solved?
Alternatively, their financial problem will become more terrible. Moreover, MAS
is also facing their main competitor in the industry of airlines. What is MAS
the price, promotion or distribution? At the end of this assignment, all the
questions answered.
1.3 MISSION
• To provide air travel and transport service that rank among the best in
• To be a profitable airline.
2
PMN 3023 STRATEGIC MANAGEMENT
1.4 VISION
• An airline uniquely renowned for its personal touch, warmth and efficiency.
1.5 LOGO
3
PMN 3023 STRATEGIC MANAGEMENT
4
PMN 3023 STRATEGIC MANAGEMENT
PROFITABILITY RATIOS
Gross profit Sales - cost of goods sold 8851 - 10951 - 8,588 - 8,675 - 8,378 -
Margin Sales 10,329X100 11,047X100 8,585X100 8,722X100 9,155X100
8851 10951 8588 8675 8378
=-16.70% =-0.88% =0.03% =-0.54% =-9.27%
Operating Profit Earnings before interest -1241X100 365 X100 351 X100 484 X100 -432 X100
Margin and taxes (EBIT) 8851 10951 8588 8675 8378
Sales =-14.02% =3.33% =4.09% =5.58% =-5.15%
5
PMN 3023 STRATEGIC MANAGEMENT
6
PMN 3023 STRATEGIC MANAGEMENT
On the international stage there may not be a threat of new entrants to the
market, because of the current attractiveness of the market sector, although this
can also meant that there will be new competitors created by the merger of two or
more airlines. If two of the big airlines had a good match in their value chain, they
In the local market, there have been new entries recently and there is no
reason why this trend will not continue. Low cost operators have increased in
number recently and could be a threat to any entries hoping to move into this
market. The low cost, no frill operators seem to be making an impact into the
market, as Ryan Air, who recently purchased one of its rivals Buzz and has
The airline industry is full of operators that fly to many locations form
monopoly on flights to a country. This means that the customer will have a lot of
power and be able to select when they want to fly at the price that they are willing
to pay. The power did belong to the airlines in the late 1990's with business
7
PMN 3023 STRATEGIC MANAGEMENT
competition from Airbus and other smaller companies. Boeing has supplied MAS
for a very long time and it is for this reason that the supplier has a lot of power in
this market, as all the staffs at MAS are trained to use the Boeing systems.
3.4 Substitutes
Substitutes are not possible for long cross continental flights, as nothing
can offer the comfort, ease of travel and speed that air travel offers. For short
distance trips, people are able to use coach, train, car or buses, these forms of
travel are also more environmentally friendly and there is a possibility that they
The other big competitor in the Asian flight market is Singapore Airways
and any promotions or discounts that they run will have an effect on taking at
MAS. On a global scale all the big airlines in Europe and America, especially the
ones that have merged in recent times because of world events are competitors.
8
PMN 3023 STRATEGIC MANAGEMENT
3.6 Prospects
MAS has signed many code share agreements, with companies such as
MEA, that have created many more routes for MAS to fly, the routes that prove
profitable should be kept going whereas it may prove wise to cut the routes that
prove to be making a loss. There are three main areas where MAS can improve to
enhance its situation, these have become known due to the SWOT and five force
analyses of MAS, These areas are the management, the financial situation and
related business into the MAS group; these have proved a problem because of the
rapid expansion and the downturn in the financial markets. MAS will need a
marketing plan, as part of a strategic business plan and to implement this plan, as
the management system has been called into question it may be wise to re-
evaluate the team and replace them with others that are more energetic and
when they noticed things were going wrong instead of allowing them to propagate
9
PMN 3023 STRATEGIC MANAGEMENT
4.1.1 STRENGTHS
• MAS Has World Class Image
Malaysian Airlines is the pride of a nation, they carry the Malaysian flag
and their success is important to the country. This means that they can and have
been aided by the government. Malaysian Airline System Bhd's (MAS) current
on-time performance of 87% is amongst the highest globally, measured against a
delay of 15 minutes and above. "Barring any wars, large-scale terrorism or
disease outbreaks, the market prospects for MAS are better with steady regional
deregulation, growth of tourism and rising disposable incomes. The full
benefits of the hassle-free process from point to point, however, can only be
realized if both Changi and KL International Airport maintain similar
facilities and procedures. It will defeat the purpose if the passenger has to
confront kinks at one end. MAS have received 'Top Airline-Service Staff
Service' in their World First Class Survey by a UK based in- flight Research
Services in year 1999.
10
PMN 3023 STRATEGIC MANAGEMENT
flag carrier bills itself as the "Golden Airline" and in many ways, it is
justified in doing so. The food and drinks were great. The service was great.
In addition, the best part about it was that each chair had a liquid crystal display
television. The TV had 6 movies, a music channel, and a video game console.
In 2000, MAS was awarded the Five Star Diamond award by the American
Academy of Hospitality Sciences.
11
PMN 3023 STRATEGIC MANAGEMENT
12
PMN 3023 STRATEGIC MANAGEMENT
Malaysia does not have the large base of business traffic enjoyed by our
neighbors to the south and therefore it will be difficult to match them on
absolute revenue performance. To be competitive, we must maintain a cost
advantage.
4.1.2 WEAKNESSES
• Economic Crisis
Financially speaking, pre 2003, MAS made a loss for 5 years running,
although before this MAS was known as a company that was happy to invest for
the future. This may have helped cause the current situation. One of the reasons
for this was the purchase of 25 Boeing planes to be delivered over 5 years the
purchases of the aircraft were made in US Dollar and no hedging method was
used at that time because of the stable currency between Ringgit Malaysia against
U.S Dollar. Unfortunately in1997, Asian countries including Malaysia
incurred economic down turned which, has resulted the devaluation of Ringgit
Malaysia and an increased of interest rate. Consequently, MAS' cost of
purchase increased tremendously.
13
PMN 3023 STRATEGIC MANAGEMENT
MAS factor costs rise, MAS will see a disproportionate increase in costs unless
MAS can become much more efficient with the resources. Of particular concern
is our fixed cost base. MAS have millions of Ringgit invested in some real estate
and equipment through its offices around the world that do not directly contribute
to revenue production.
• MAS Current, and Future, Fleet and Product are Poorly Matched
to MAS' Strategic Realities
The markets in and out of, and around, Malaysia are relatively small.
However, the MAS fleet is predominantly made up of some of the largest aircraft
in their class, putting it in the league of the leading international airlines. In
addition, Mas produced one of the world's most attractive products by upgrading
cabins generous seat pitch in economy and business, and a flat bed in first class.
Unfortunately, stronger yields or loads have not offset higher costs. Given the
limited business traffic, are more dependent on low yield connecting traffic,
and as our aircraft have relatively few seats in them, this drives up unit costs.
A MAS 777-200 has only 247 seats in economy, compared with 293 in
Singapore Airlines
.
• MAS Lack a Disciplined Performance Culture
Discussions with managers and employees have made it clear that today
MAS does not have the leadership, accountability or teamwork needed to survive
and prosper in this more challenging environment. One external analysis suggests
that MAS needs approximately 300 more leaders. Potential leadership talent
definitely exists lower in the organization but it has not been unleashed through
the right opportunities. We are also a company with relatively little experience
with accountability. Based on internal employee survey last year, employees
report little confidence in the management team and managers report that they do
not feel that there are any repercussions for staff who miss targets and deadlines
or who do not meet key performance indicators (which have recently been
adopted). Further, people tend to be jealous of success, rather than being inspired
14
PMN 3023 STRATEGIC MANAGEMENT
4.1.3 OPPORTUNITIES
• Only Airlines Offer International Flight
Malaysia Airline is the national airline of Malaysia that serving
international destination. It is the largest airline in South Asia by fleet size.
Malaysia Airline is actually very renowned around the world, this is due to the
reason where Malaysia Airline has been voted and awarded for the best cabin
staff for four consecutive years from 2001 until year 2004.When it come to
international flight, Malaysia Airline is always the first choice for most of the
people simple because Malaysia Airline is one of the world best and most
15
PMN 3023 STRATEGIC MANAGEMENT
comfortable airline services. It is one of only four airlines to have been awarded a
five star rating by Skytrax. Malaysia Airline is the only Asian Airline to offer
services to Ministro Pistarni international Airport in Buenos Aires, Argentina.
MAS also as it’s own in flight magazine going place their own catering services.
16
PMN 3023 STRATEGIC MANAGEMENT
17
PMN 3023 STRATEGIC MANAGEMENT
4.1.4 THREATS
• Main Competitor
Air Asia is a low-cost airline based in Kuala Lumpur, Malaysia. It
operates scheduled domestic and international flights and is Asia's leading low
fare no frills airline and first to introduce "ticket less" traveling (no specific seats
allocated before boarding). Air Asia has been expanding its operations extremely
rapidly and is very popular, but also infamous for frequent significant delays. Its
main base is Kuala Lumpur International Airport (KUL). It currently operates
from the 1st ever low cost carrier terminal in Asia at KLIA. In 2003, Air Asia
opened a second hub at Senai Airport in Johor Bahru near Singapore and
launched its first international flights to Thailand. Air Asia has since started a
Thai Air Asia subsidiary, added Singapore itself to the destination list, and started
flights to Indonesia. Flights to Macau started in June 2004, while flights to
mainland China (Xiamen) and the Philippines (Manila) were started in April
2005. Flights to Vietnam and Cambodia followed later in 2005.
Competition with Air Asia also became threat to MAS because many
passengers prefer use Air Asia service compare than MAS. Air Asia is a one-
airline system provides low-cost airlines. The flight to certain locations can be as
cheap as RM9.99 if the customer book very much in advance. Recently Air Asia
has started to fly to several South East Asian countries; all this was built on their
success story of providing incredibly affordable flight tickets. The emergence of
18
PMN 3023 STRATEGIC MANAGEMENT
Air Asia has filled a gap in the customer demand and has even force other major
Airlines in the region to come up with such a service. From Kuala Lumpur
Thailand to Bangkok and customer from Bangkok that using Air Asia can go
Chiang Mai, Chiang Rai, Nakhon Ratchasima, Udin Thani, Kon Kaen and
Hadyai. Air Asia has been able to grow earnings, achieve strong passenger
growth, and reduce unit costs to remain the leading low-cost pioneer in the region.
Air Asia's very success has bred fears among MAS staffers that its seeming
failures vis-a-vis its upstart competitor could lead to policies that could have a bad
effect on the national carrier. Air Asia has one of the lowest costs in the industry
and they can offer the low fares to consumers irrespective of the oil price.
Although, they revenue management system is very sophisticated and they
address to movements in their cost. Air Asia has encountered and overcome many
adversities, including high fuel prices, in the early stages of its growth. They also
will have more experience than the new LCCs to cope with the new adversities.
Air Asia became main competitor to MAS because they monopoly domestic
route. MAS can’t compete with Air Asia in term of price in domestic route.
Because of this many domestic customer prefer to use Air Asia compare than
MAS. Although Air Asia just monopoly domestic route but it also became
strength to MAS. It is because through domestic route Air Asia get more profit
and successful in industry.
19
PMN 3023 STRATEGIC MANAGEMENT
MAS can simply exit this route. They are committed to serving the nation and
enhancing the country's economic prosperity, and serving the market as they do
today certainly meets the national interest, but it does not necessarily fulfill their
commercial interests. In moving forward, both the Government and MAS need to
establish a workable mechanism to ensure that both the social objectives of the
the interests of MAS and the Government will be guided by the principles laid out
in the Government and the commercial objectives of MAS are catered for. To
this end, GLC Transformation Manual issued by the Putrajaya Committee for
GLC High Performance
20
PMN 3023 STRATEGIC MANAGEMENT
Weaknesses:
• Cultural differences 0.05 1 0.05 Different class and
different taste
• Resources 0.10 2 0.20 Unprofitable resources
• Global positioning 0.10 2 0.20
• Financial management 0.15 2 0.30
• R & D process 0.05 1 0.05
• Administrative
0.05 2 0.10
management
1.00 0.00 2.85
21
PMN 3023 STRATEGIC MANAGEMENT
Threats:
• Other Asian Airlines 0.15 5.0 0.750 Air Asia
• Government regulations 0.10 4.0 0.400 Interior by government
• Increasing of oil price 0.05 4.5 0.225 Fuel
• Increasing burden of debt 0.15 2.0 0.300 Facilities and
accommodation
• Terrorism 0.05 1.2 0.060 11th September-effect
Islamic country
22
PMN 3023 STRATEGIC MANAGEMENT
23
PMN 3023 STRATEGIC MANAGEMENT
4.4.1 SO STRATEGIES
• Spread out the market to global market and increase the number of flights.
4.4.2 WO STRATEGIES
• Joint venture with other countries airlines will trim down cultural barriers.
Besides that, can gain more information and secret of their development
• Accentuate more on R & D and new technology. R & D will help MAS to
24
PMN 3023 STRATEGIC MANAGEMENT
4.4.3 ST STRATEGIES
4.4.3.1Joint venture
• Amalgamate with world class airlines such as Star Airlines, Lufthansa and
Singapore Airlines. This will help MAS to exchange their technology and
business plan.
to meet customer needs directly or indirectly more rapidly than its main
4.4.4WT STRATEGIES
• Provide more funds in the future. Which is can examine the financial
cause of action.
basis.
25
PMN 3023 STRATEGIC MANAGEMENT
5.0 RECOMMENDATION
penetration and joint venture. MAS had taken lot of alternative to solve their
and get profit in their future. Our group provides some recommendation that MAS
Malaysia Airline should listen, understand and try giving the best
feedback with the customer problem to increase the management efficiency. For
the customer problem, MAS can get the information by collect the random
sample in flight, do the benchmarking survey and can get the information trough
the internet. Beside that, MAS can get the information from customer’s trough
their staff because staffs are very important people to contact intimately with
performance and others. The company should tracks and analyses all the feedback
MAS should create esprit among its cabin crew by divide the staff
members in small units. By flying together with their own team can make more
comfortable and the crew feel like they are part of a team. Flying together, as a
units, allows them to build a strong teamwork and the team leader will get to
26
PMN 3023 STRATEGIC MANAGEMENT
know their strengths and weaknesses well. By this concept, MAS will have good
The job rotations in executive rank between departments for a few years
are important to understand the overall of the management. This policy has
more of the organization than they would otherwise. It also promotes a corporate
also creates an appetite for change and innovation as people constantly bring fresh
In order for MAS to eliminate last minute cancellation, the prepaid system
(from travel agents) do not “play around” with the loose MAS system. Payment
and forfeited.
focus because this part also influence the financial management in overall the
company. To avoid the problem in overstocking in this part, MAS should apply
27
PMN 3023 STRATEGIC MANAGEMENT
the principles just-in-time (JIT) system. By the implement the JIT system, the
MAS can apply the mobile check-in service to manage status of their
(typically shortly prior to departure). The service is different for status and basic
customers. Prior departure status customers receive a check-in request via SMS.
They only need to reply with “y” for yes followed by the flight number that
was giving in the check-in request message. They will then get a confirmation-
SMS with flight information. In contrast to status customers, basic customers and
(Wireless Application Protocol). In five steps, they must enter the URL, M&M
number, as well as last name. Then they must select the flight. All customers
having used the SMS Check-in have to pick up their boarding pass at Quick
Check-in machines supporting reduced pick-up times. This service can improve
new market opportunity. This can reach by doing joint venture. It provides access
market might enter to a better market during the joint venture. For example, if
MAS joint with Air Asia, MAS might enter better market opportunity, which is
lead by Air Asia Airline such as their high amount of local passengers. Besides
28
PMN 3023 STRATEGIC MANAGEMENT
that, through joint venture the partners also might share its strength in terms of
For instance, Air Asia has one of the best promotions strategies in the
airline industry, therefore if MAS venture with Air Asia, MAS can share their
increase profit. As return to Air Asia while sharing the strategies is by offering
them more MAS domestic flights which is not profitable to MAS. Other a
System, Thai Airways International and United Airlines. Star Alliance has the
joint marketing agreement and they apply a joint marketing campaign during the
alliance.
29
PMN 3023 STRATEGIC MANAGEMENT
6.0 CONCLUSION
threat from their competitors. The main competitor for MAS is Air Asia. The
others. MAS do many things to compete with Air Asia and their want to win in
this competition because of this Malaysia Airlines System plans five central
thrusts to compete with Air Asia. Have many cause or factor MAS facing in their
financial problem such as in term of fuel cost, operate on unprofitable route, staff
leases, handling and landing fees, renovation of aircraft cabins, order fir six
Airbus A380 planes and sponsorship programme. To solve this problem MAS
management, MAS also used turnaround strategies such withdraw from routes,
internal cost cutting: labor downsizing, fares increased and sale of assets.
Malaysia Airlines System also take five central trust plans to make effective
solution for their problem. The plan includes flying to win customers, mastering
30
PMN 3023 STRATEGIC MANAGEMENT
BIBLIOGRAPHY
Malaysia.
31