Integrative Case Study: Strategic Analysis of Tune Group and AirAsia

David Masese Mokaya

James Cook University Brisbane

Corprate Strategy- Dr. David Ponton

Word Count- 3746

 Integrative Case Study: Strategic Analysis of Tune Group and AirAsia

1. Introduction:

Tune Group, which started as a humble airline company based in Malaysia, has since

undergone an amazing evolution into a multifaceted conglomerate under Tony Fernandez's

shrewd guidance (Yashodha et al., 2012). Initially, the Group had just two planes, and now

the portfolio of the Group is much more comprehensive. The current article explores the

strategic transformation of Tune Group and its main subsidiary, AirAsia. It analyses the

drivers of diversification the competent corporate portfolio management and stresses the

leadership leadership skills of Tony Fernandes (Yashodha et al., 2012). The study does so by

emphasizing these aspects to shed light on the strategic initiatives that liberated Tune Group

from its struggling airline status and helped to create a successful and diversified business,

thus providing the necessary insights into its impressive growth path.

2. Main Drivers of Diversification and Composition of Tune Group’s Portfolio:

The Ansoff Matrix, founded in 1957 by H. Igor Ansoff, was subsequently published

in the "Harvard Business Review." The matrix is very useful to the various stakeholders who

are keen on thoroughly understanding the array of risks that are triggered by multiple

development approaches. It comprises four segments: market penetration, market

development, product development, and diversification (Duck, 2020). AirAsia implemented

the strategy of intensification and diversification in order to develop its network of

operations. Intensification intents can be classified into four major strategies, which are

market penetration, market development, and product development, as stated in the Ansoft

matrix (Sridharan, 2019). Moreover, besides the concentric and conglomerate approach it

adopted, the organization also pursued a mixed strategy.

According to Mudzakkir Nurfarida (2015), brand trust has been categorized into two

dimensions, which are the viability domain and the dimension of intention. The first
dimension, which is the viability domain, is seen when a product meets consumers' needs,

while the second dimension, which is the dimension of intention, is experienced when

consumers love to brand. For instance, even though its shares of AirAsia X may not be

disclosed, it is revealing reading of passengers more than half a million in Q1 2023 and

provides new routes routinely, it possesses a conviction in a place of long-haul budget airline

market (Sepang, 2023). AirAsia owns more than seventy aircraft, which fly to more than 120

destinations and reach over 400 (400) flight destinations on a daily basis from hubs situated

in Thailand, Malaysia, and Indonesia (AirAsia,2018). It guarantees easy, low-cost, and

trouble-free products and services to save money and have high efficiency in every installed

unit.

Indications show that the share is rising in the market for AirAsia X, the part of their

income where unique branding contributed, and the many routes in SE Asia that are

connected as well. AirAsia’s long-haul service, like its good brand equity, can identify with

the same features as a strong mark. This increased show in passenger flow can be interpreted

as high customer confidence or choice of a specific airline. Additionally, the consistently

healthy PLFP of 80% reflects the operational efficiency and the strong flight demand stability

for AirAsia X flights (Sepang, 2023). With AirAsia, you can enjoy the cheapest flights of air

traveling to more than 120 destinations throughout Asia and Australia (AirAsia, 2018).

The organization puts the ERP approach to work as it helps the Company maintain

consistency in operations, makes reporting a faster process, and reduces the time needed to

find information. AirAsia plans to be able to join the best and largest low-cost carriers in the

world. In the same token, the airline was recognized as the winner of "Asia's Best Low-Cost

Airline" in 2023. This will establish a good image of the Company in public and increase the

chances of acceptance and loyalty from their customer base.

 Besides that, the diversification approach will be used as an excellent risk

management instrument. Thus, by diversifying into various sectors, Tune Group ensures that

the investment risk arising from volatilities in the said sectors is, to a large extent, minimized

(Rodrick, 2005). While this diversified portfolio strategy provides the conglomerate with the

opportunity to mitigate sector-specific challenges, it also optimizes the risk-return ratio by

efficient balance.

The most important part of the diversification of Tune Group is the visionary

leadership of Tony Fernandes. Fernandes envisions a collaborative confederation where each

branch unit participates as an integral part of one whole. Strategic vision is a driving force

that shapes the conglomerate's business entities into segments that match the competencies

and goals of the conglomerate (Rodrick, 2005). AirAsia is a cooperative that has several

companies in the flight industry, for example, AirAsia X, Tun Hotel, Tune Monkey, AirAsia

Berhad, Thai AirAsia Co. Ltd., AirAsia Japan Co., Ltd., PT Indonesia AirAsia (India)

Limited.

The main purpose of Air Asia is to become the most preferred Company by ensuring

the relationship between its management and employees. Hence, it will continue to hold the

prices of Air Asia tickets as low as possible and embark on the latest technology and

innovations to ensure the highest quality products and improved services. As a result of

collaboration between the Tune subsidiaries, critical synergies and opportunistic cross-selling

are created, which the Group usefully taps into the operational efficiency and goes to the

market to become more competitive and provide a better value proposition.

% of Total
Diversification Relationships among Types of
Firm operating in Firm’s
Level the Firm's businesses Diversification
Revenues
>95% from one
Single (one) business One business Nil
business
Low Dominant business 70-95% from Strong linkages among
(multiple the dominant the Firm's various Concentric
businesses/industries) business businesses
 <70% from Share linkages among
Related Constrained dominant the Firm's multiple Concentric
Moderate to business businesses
High <70% from Limited linkages among
Concentric to
Related Linked dominant the Firm's various
Conglomerate
business businesses
<70% from NO common linkage
Very High Unrelated dominant among the Firm's Conglomerate
business multiple businesses

Overall, the Tune Group's diversification strategy is driven by the needs of market

expansion, risk management, and strategic vision, which underscore its approach to

sustainable growth and market leadership. The combination of brand equity management,

strategic risk management, and aligning its strategies with Fernandes' broader corporate

vision will ensure that the conglomerate remains competitive and resilient in a changing

business environment (Rodrick, 2005).

Challenges:

Tune Group encounters several challenges as it navigates its diversification strategy:

The corporation has an empire that spans multiple industries, each governed by its regulations

and requirements. Implementing widely differentiated legislation dramatically decreases

efficiency and effectiveness (Rodrick, 2005). Failure to meet regulations and standards may

incur fines, litigation, or damage to the reputation that hampers the conglomerate's business

and profitability.

To successfully operate multiple companies, businesses within the portfolio must not

only be joined, but all the operational aspects must also be congruent. Poorly integrated

channels can be a source of incurring the same duties and running the business as well as

creating conflict within the organization (Rodrick, 2005). Creative coordination among

subsidiaries will make them function in a cooperative manner that will account for the

smooth transmission of information between the subsidiaries, work together, and strategic
alignment that needs to be crafted effectively; of course, it is challenging to succeed

successfully.

Industries represented by the Tune Group portfolio composition are different from

Company to Company. Therefore, various factors determine market performance in each

sector. AirAsia is perfectly competent for the rivalry of other low-fare airlines, which are the

Group of Jet Star Airways, Tiger Airways, JAL Express, and Air Arabia. Such competitions

as Jet Star Airways and Malaysia Airlines, which are the closest competitors to AirAsia, are

taken into consideration (AirAsia, 2018). Jet Star Airways is an airline service provider,

marked by low cost, originating from Melbourne and head-quartered in Melbourne. Jet Star

Airways network includes more than 80 destinations which are located in Asia Pacific,

Australia, and also in Honolulu in the USA. It principally flies a medium-haul route network,

connecting the domestic market with regional and international destinations to its passengers.

However, AirAsia is providing a much wider connectivity network, offering more

than 130 destinations from the Middle East and Honolulu at the same time in Asia Pacific

(Leigh, 2018). It can give so many excellent possibilities for travel as well as immersing

oneself in new cultures and practices, hence developing new skills. Jet Star Flying is highly

acknowledged as the safest among the ten leading airlines for traveling around the country of

Australia. As the world becomes a more contestable market, flights to more destinations have

gained more popularity in the world for AirAsia than any other Airline (Leigh,

2018). AirAsia, though, offers service deals at very reasonable prices to its clients in contrast

to the competitors in the airline industry sector. These deals are not only sensible but

affordable to the targeted customers (Leigh, 2018). Rather, Jet Star Airways offers different

aircraft types to their consumers: Airbus 320, Bombardier Q300, Airbus 321, and Boeing 787

Dream Liner. AirAsia has only two kinds of aircraft offered to their consumers, which are the
A330 and A320. However, another thing Jet Star Airways edge over the competitors is that it

has a variety of payment options for customers' convenience (Leigh, 2018).

Confronting these problems could mean more than strategic management and

leadership to be proactive in this regard. The music provider, due to this, has to develop clean

compliance mechanisms, make a streamlined integration, and monitor and adapt to any

changes in the competitive environment regularly (Rodrick, 2005). Addressing these barriers

gives the scope of Tune Group to increase its resilience exp, lost growth opportunities, and

ultimately maintain its triumph in the multifaceted and successful enterprise.

3. Corporate Portfolio Management:

The relationship between the market demand and companies has continuously been

positive, which is specifically so for businesses that seek to offer high-quality services to

their clients. In 2001, there was a transition in ownership at Air Asia, and there was a

projected shift in service delivery, which promised to become more competitive than branded

carriers (Francis et al., 2013). Clearly, one of the crucial elements of an organization is

analyzing the company portfolio, which is the fundamental factor for the organization's

earnings and growth. Generally, a corporate portfolio would include an analysis, a plan, and

implementation of long-term measures or capital investments that ensure the Company can

face financial hardships, sustaining its brand in the long run (Francis et al., 2013). Airlines'

service across the world market faces huge pressure resulting from pricing and purchase of

any factor of production so as to run the airline. It is crucial to cultivate viable changes and

strategic steps at Air Asia through models like Modern portfolio theory, McKinsey 7S

framework, VRIO, and strategic business units (SBUs) (Shuk-Ching et al., 2010).

Tune Group heavily depends on the different portfolios of frameworks in corporate

management methodologies in order to achieve planned and sound resource allocation and

strategy development for its diversified business while taking all its companies’ best interests
into account (Francis et al., 2013). In modern times, a concept elaborated by Harry

Markowitz called Modern Portfolio Theory (MPT) is used to evaluate and study investment

portfolios in terms of the best balance of higher returns with a minimum risk to achieve it

(Francis et al., 2013). In consideration of the AirAsia's airline portfolio categorization, MPT

can be exploited to evaluate the diversification strategy of the airline in operating different

destination markets as well as the running of corresponding business segments.

Hence, MPT places great emphasis on diversity, which can hedge the risk. AirAsia is

a model of this principle when it extends its route network to cover an array of riches and

countries as well as markets (Francis et al., 2013). The airline has broadened its revenue

sources by considering both domestic as well as global operations, exploiting the needs of

leisure and business travelers, and undertaking both short as well as long-haul flights. With

this diversification, a significant amount of risk could be present in such terrible events as

economic downturns and geopolitical tensions on the overall mental status of the investment

eased (Francis et al., 2013).

Furthermore, MPT shows the connection of certain substances in the portfolio of

assets. AirAsia will study the route correlation between the available segments on a particular

route and the balance, which then leads the portfolio to market ambush elements (Francis et

al., 2013). For instance, if the revenue from specific routes is volatile due to high demand or

price fluctuations, AirAsia may restructure its network routes or adjust flight schedules to

reduce concentration risk and boost revenue stability.

On top of that, MPT operates on the efficient frontier, which is a hypothetical region

of the asset mix pairs that represent those that achieved an optimum result in return/risk scale

or risk/return scale, respectively (Francis et al., 2013). AirAsia can reap the benefits of

applying MPT to determine efficient routes and market allocations to obtain the balanced

risk-and-return characteristics desired. This may require a redistribution of means according

to the routes with high potential of growth or more profitability and, at the same time,

decreasing the input in the routes having low performances or a big risk.

The BCG Matrix is an example of the relevant framework that enables segregating

SBUS into four categories (SBUs) according to their relative market share and rate of market

growth. This classification divides SBUs into four quadrants: Cash Cows, Stars, Question

marks, and Dogs (Kasahara, 2015).

What is known as Cash Cows are precisely those SBUs that are the major competitors

and hold a significant share in stable markets having low growth levels (Kasahara, 2015).

They earn great profit day in and day out and, however with very little expenses for the

upkeep. Instead of stars, which operate in highly saturated markets, SBUs are more active

and aim to gain the largest market share in markets experiencing high growth. These units are

too expensive and require large-scale investment to ensure their retention in the market

neighborhoods (Kasahara, 2015). Question Marks have a minor share in a dynamic and fast-

growth market; namely, investment into them is needed to either develop them into stars or

bypass them by selling them. However, in a low-growth market, there is a lower share for

dogs are relatively risky assets. They generate very little profit and may start showing very

poor performance, and thus, they are evaluated for either divestment or restructuring

(Kasahara, 2015).

Furthermore, through the implementation of the Directional Policy Matrix and the

Ashridge Portfolio Model Tune Group can be managed efficiently. The Directional Policy

Matrix assesses SBUs based on their competitive position and market attractiveness,

classifying them into strategic quadrants: either grow, build, hold, or harvest (Kasahara,

2015). It can devise its direction regarding each SBU, which is very important for the Firm.

The Ashridge Portfolio Model classifies stock business units by their strategic alignment and
leveraging resource dividends and groups them into two quadrants based on strategic fit and

resource capability.

This kind of framework has the function of providing Tune Group with a structured

investment decision approach where each Stand-alone Business Unit receives proper

guidance on everything from investment to divestment to its strategic position (Kasahara,

2015). Aligning the key instruments with this click, Tune Group can revise its portfolio,

boost its competitive position, and increase the value of each one of its business units.

Value-added within Tune Group:

Through the branch of Tune Groups, value is produced by assessing and incorporating

resources and capabilities into the labor. VRIO analysis and the McKinsey 7S framework are

two essential methods employed to achieve this goal.

The VRIO Analysis technique determines sources and capabilities both inside and

outside the Sections. Firstly, it includes the ratio of the resource being valuable, rare,

inimitable, and supported by the organization (Dehtyarova et al., 2018). After a vertical

analysis, the Tune Group will have a clearer picture of the major forces that affect the

performance of its SBUs. It will promote the appropriate use of funds in good SBUs and

concentrate the strategic view on others.

The McKinsey 7S framework evaluates whether an organization's different

components help its effectiveness and value creation through key pillars. It assesses seven

key elements: form consensus on norms, management framework, working mechanism,

governance, operating philosophy, human capital, and competencies (Dehtyarova et al.,

2018). , Tune dissects the interaction of these various dimensions that, in turn, yields

information on how the components work together to safeguard value maximization in every

SBU. For instance, an organization may have two unique settings: first, shared beliefs and

cultural values may help it to generate innovation and put the customer at the center; second,
an effective organizational system and a talented workforce may enable the process of

operations and the delivery of high-quality products (Dehtyarova et al., 2018).

VRIO Analysis and McKinsey 7S framework can serve the final purpose of Tune

Group for a better understanding of competitors' advantages as the sources of competitive

advantage and value creation within the SBUs (Dehtyarova et al., 2018). This enables

resource allocation to be manageable, strategic planning effective, and organizational

development operations to be implemented right, which are factors that eventually lead to the

prosperity and sustainability of the huge Firm.

4. Leadership, Resources, and Capabilities:

Evaluation of Tony Fernandes' leadership:

Tony Fernandes's leadership within the Tune Group has been marked by

entrepreneurial and inspirational qualities. These two qualities have been very important for

the conglomerate's success and readiness (Wong, 2014).

Like a real entrepreneurial leader, Fernandes possessed a talent for coming up with

unconventional strategies and, at the same time, taking into consideration well-calculated

moves to improve the business (Wong, 2014). He was responsible for the transformation of

the then-small airline into a multisectoral conglomerate by virtue of the diversifications in the

fields of hospitality, telecommunications, and financial services. Fernandes's vision and

ability to view new possibilities have become the key factor for operating a business and

discovering opportunities that lie behind every market fluctuation and trend (Wong, 2014).

Thus, this Company reaps profit and market expansion.

Moreover, he portrays inspirational and transformational leadership that he uses to

instill motivation and, as an agent of change, drives the organization to learn new skills and

industries (Wong, 2014). His infectious enthusiasm, along with his ability to think outside the

box and look beyond the horizon, have made them undertake change and aspire for great
accomplishments. Fernandes is generating an environment of innovation and relentless

perfection where the employees are being motivated to be creative and unseat the status quo.

By means of effective communication and writing, he brings the members a feeling of

purpose and motivation, which turns the Group into a first-person team (Fitriyana et al.,

2022).

In essence, Tony Fernandes's entrepreneurship and innovative leadership are the

magnets that attract the Tune Group's growth and diversification (Fitriyana et al., 2022).

Through his unique leadership approach of harnessing creativity, embracing change, and

empowering his team, Fernandez has done a great job of equipping the conglomerate with a

sustainable future in a dynamic and highly competitive business environment.

Future Potential:

Determining Tune Group's strategic assets and liabilities could help determine its

future potential if it is assumed that it has the capability to sustain growth and overcome

potential future problems.

Through the participation of Tune Group in different areas, mainly its resources and

capabilities, the Group possesses a competitive advantage. Firstly, the brand name of

AirAsia, one of the major subsidiaries of the Company, is a promising strategic asset that is

worth having regard to (Muralidhara, 2023). As a result of this high trust, the customer base

is more loyal, and this will facilitate market penetration and broader customer base loyalty.

Furthermore, Air Asia has a key feature of a low-cost operative approach, which allows the

airline to provide lower prices than competitors and broaden the customer base (Muralidhara,

2023). The high efficiency of this function is one of the major contributors to the increase in

the profitability and competitiveness of the airline business at Tune Group. Not only that, as

Tune Group spans different industries like hospitality, telecommunications, and financial
services, it diversifies the revenue routes, which foster this business against the risk of an

undesirable industry-specific change (Muralidhara, 2023).

However, on the other hand, the holding may bear some liabilities that could further

impact its growth prospects. Firstly, shareholders should note that the Group is heavily

dependent on Airlines, including AirAsia, and, therefore, suffers from oil and fuel price

volatility, regulatory changes, and geopolitical uncertainties (Muralidhara, 2023).

Diversification to other industries besides electronics helps alleviate the risk and makes the

Company more resilient as well. Also, in the case of a mature market like the airline industry,

a high level of saturation and cutthroat competition has capped the potential for further

growth and profitability achievement (Muralidhara, 2023). Tune Group should keep

innovating and discover new market spaces if it wants to continue its growth linearity. Also,

economic instability may be caused by financial difficulties like unemployment or the

pandemic, and this will definitely decrease the amount of travel demand and spending by

customers, which will impact the income and profitability of Tune Group.

For its further success, the Company can use its competitive advantages and do its

best to isolate possible threats; however, this implies a head start (Muralidhara, 2023).

Strategic plans that include diversification into new markets and new industries, focusing on

innovation and technology development, and developing risk management measures can

continue, making Tune Group stronger and more competitive in the global market.

Conclusion:

The chronicle of Tune Group from a small airline to a conglomerate gives the idea of

the prowess of strategic management and leadership under the leadership of Tony Fernandes

in diverse sectors (Fitriyana et al., 2022). Through perfect market timing, delivering value

across diverse portfolios, and carefully shaping strategy, Tune Group has cemented its

footprint in a multitude of (Fitriyana et al., 2022). Nevertheless, the corporation has made
some progress in this. However, it must grapple with difficulties, particularly the sheer

complexity posed by bureaucracy and integration difficulties while handling a wide-ranging

portfolio (Fitriyana et al., 2022). However, Fernandes, with his foresightedness and strategic

planning ability, still has the option of Tune Group for continuance growth in the uncertain

business condition. The appropriate tactic of constant strategic watchfulness in tandem with

the relevant reactivity to the changes in the market can allow Tune Group to make the most

of the opportunities, strengthen its competitive advantage, and also provide more

justifications to become a leading player in the world ranking (Fitriyana et al., 2022).

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