| LB5813: Corporate Strategy |
What are the various resources and capabilities of the Group in driving this success? Create a table for VRIO Analysis for this part then explain the resources and capabilities (VRIO). Looking at the SBU strategies, do you see any problems arising for the Tune Group?
Introduction
In 2001. Tony Fernandes and Dato Kamarudin Meranum bought the (ailing government-owned Malaysian Airline – AirAsia – for one Ringgit (MYR).’ They launched their new venture as a short-haul, low-cost Malaysian carrier, with just two aircraft and a lot of debt.
Fifteen years later AirAsia, with its sister long-haul airline AirAsia X, was the largest low-cost carrier in the Mean region and the founding company of the Tune Group, a corporate portfolio under the ownership and guidance of the original founders – Fernandes and Memorandum.
Other ventures in the Group include Tune Hotels, Tune Talk, Tune Money. Tune Sport, Tune Labs, Tune Protect, Tune Studios, Epsom College, and Caterham Cars, among others (see Figure 1). Fernandes and, to a lesser extent, Meranum were highly visible owners who appeared regularly on websites and in the media promoting the group, its services, and philosophy. Always smiling and sporting baseball caps the founders set out to serve the rising class of the less
Tune Air
Tune Air was the first company the two entrepreneurs launched to run an airline – AirAsia – with the slogan ‘Now Everyone Can Fly’.6 The idea of serving potential travelers who had never flown before was one which Tony Fernandes had coveted for a long time. Born in Malaysia, he was packed off to school in the UK as a youngster and when he asked his mother if he could go home for Christmas, she declined because they couldn’t afford the air ticket.
So, in 2001, before Fernandes had reached his 40th birthday, with $250,000 ready to invest and a great friend – Kamarudin – in a similar position, he took the opportunity to buy AirAsia – a failing government-owned Malaysian airline. The price was 1 Ringgit plus a significant amount of the airline’s debt.
Growth came easily and swiftly to the Malaysian operation (see Appendix). The Malaysian government was generally helpful, appreciating that low-cost travel around the country (one where transport infrastructure – road and rail was immature or non-existent) could stimulate and support economic activity.
Economic growth rates were, in themselves, highly attractive at about seven percent. The market was significantly under-developed; in 2001, only six percent of the Malaysian population ever bought a plane ticket and this small percentage of fliers was typical among the population region-wide.
Routes were limited, both locally and internationally, creating the potential for growth. AirAsia ticket prices, at between 40 percent and 60 percent less than the traditional full-service fares, provided a stimulus to market growth as flying became a realistic alternative to taking the bus.
There were few competitors in the market space that we’re able to deliver and sustain the low-cost culture that Fernandes created at AirAsia. Competitors were often low-cost offshoots of full-service airlines whose culture simply didn’t transfer into the energetic and entrepreneurial drive required to find new ways to drive prices down and profits up, at the same time.
There were also the European and American low-cost airline business models; tried-and-tested and ready to copy. While learning from these,’ Fernandes insisted he tailored the AirAsia offering to his local market needs and created some ‘no-frills’ tricks of his own. These included selling advertising space within the cabin and in the annual reports to generate extra revenue
