2.2 Explanation of theories
There is a theory in Chapter 1 name as Five Factor Theory. In this theory, we choose only 4 factors in this assignment. There are generalship of commander, moral influence, weather, and terrain.
The first factor is generalship of commander. This factor is refer to the commander stands for the virtues of wisdom, sincerity, benevolence, courage and strictness. In business field, commander can consider as the management to analysis the business opportunity and threat (Taovalue, 2017). Commander is the head of the military mean commander is same as the management which is the head of the company. So, management consider the leader in the company. A good commander need have a good experience, predictable about the opportunity and threat in the business field, have the plan about the company way to success and able to maintain discipline of the employee in the company. Integrity of company is important because it indicated the trust of employee and public toward the company. Besides that, determination also important because the management must have determination to develop or give up for the product or the procedure in the project. The transparency also important because the high transparency able to attract more investor to invest to the company.
The second factor is moral influence. This factor is refer to the measure and policies that adjust the people with the sovereign to have the complete common agreement and maintain harmony with each other (Taovalue, 2017). The moral influence can make the employee in the company have the common mission and purpose. With this, the employee knows the requirement of the company and try to achieve it. Besides that, the business that conduct must be moral and not breach the law. By this, employee will more hardworking because they know that company is a conscientiousness organization and proud in work in the company. It also need to ensure all the parties that have relationship with the business such as supplier, employee and society is having the benefit from the business and ensure will not harm the society.
The third factor is weather. The weather is indicated the important factor that not in company control (Taovalue, 2017). The important factor can be the new market that want to enter, the trend in the industry and the competition in the industry. The new market that want to enter consider the uncontrol factor because the company do not know the need or want of the market and may lead to fail if handle in the wrong way. The trend of the industry may change very fast because of the technology advance and the competition within the industry is a difficult for the company because the competitor can be experienced and adoptable to the difficult environment.
The last factor is terrain. The terrain is the factor that control by the company. The factor can be the financial strength of the company, the profitability of the company and the ability of the company face the crisis (Taovalue, 2017). Those factors are control by the company because the factors are control by the company management to face the external threat in the business field. The financial strength is important to the company because the project that undergoing need the huge investment and most of the investment is long term need to wait a certain period to get back the profit. The profitability of the company is control by the company because the company is deciding the portion of profit need to earn from the customer. Lastly is ability to face crisis, the company have the contingency plan to handle the crisis and prevent the company to enter the crisis.
2.3 Implementation in business practice
First of the theory that will practiced by AirAsia is generalship of commander. The AirAsia group as we known that this group is facing the financial problem and profit less is making before Tan Sri Tony Fernandes. In year 2001, Tony bought AirAsia from Malaysia owner named DRB-Hicom by the value of a token of Rm 1 and they agreed to take over the huge debt of the entire company which is Rm 40million. AirAsia is potential company that able to earn the huge profit. The fact of AirAsia is a lose making company because the company is lack of the leader which is generalship of commander to manage the company. A good company need a good leader to lead the company to the success future. For a bad leader, how was good of the company is will also be face loss because of the lack of ability of the leader to manage the company.
In September 2001, Tony and his partner were managed AirAsia in the extremely challenging environment because AirAsia is the company that almost want to close down. Tony need to make AirAsia to become settle the debt of RM40 million and make the profit the future. With the good leadership of Tony and his partner, RM40 million debt is pay in less than 2 years after take over the company. Tony and his partner are fully utilized the asset that available that time which are two Boeing 737, one destination which is Langkawi and 250 staff. Now, AirAsia become the company that pay an interim dividend of 12sen a share (Star, 2018). The statement indicated that AirAsia is earning profit and giving the dividend to the shareholder.
For second theory which is moral influence. AirAsia practiced the theory of moral influence by Tony and his partner make the vision to democratize the air travel and free it from the clutches of the elite by offering the low fares and high quality of service from AirAsia. The vision that set by Tony and partner let the employee who work in AirAsia know requirement or the standard that company want to achieve. So, the employee will have common interest while working which is ensure the low cost of the air travel. The employee will do the action that to help the company accomplish the vision.
AirAsia doing charity also as the moral influence in the company. The employees knows that company they work in are doing the charity instead of keep earn profit to achieve the entire profit level. In 2016, AirAsia is having a campaign for the Cancer Charity. AirAsia is give the 10% of every flight booking from 15 August to 16 September to National Cancer Council of Malaysia (MAKNA). For this event, AirAsia is raised RM350,000 for the MAKNA. Besides that, AirAsia also create the new platform for Asean Social Enterprise. AirAsia is launch the pop-up shop in KLIA2 that are selling Asean social enterprises product. AirAsia is creating market for the social enterprise. AirAsia also help the Asean social enterprise to promote their product by introduce four GOOD boxes filled with the goodies with large of gift item which selling at RM100 per box.
Next, we would like to discuss about the theory of weather used in business practice by Air Asia Berhad. Initially the confidence in global air traffic industry had been severely destroyed after the activity of 911 terrorism. This could be the terrific news for all the airline companies. But then, the founder of Air Asia, Tony Fernandes believed that the discounted operation will change the air traffic industry into a new era through Southeast Asia. Therefore, he bought over the company which is in heavily indebted by using 1 ringgit in year 2001. Anywhere would also be very high restrictive market for Air Asia when first bought but after that, the revolution stated above had a little success due to the operations with India, Indonesia, Thailand and Philippines through joint ventures. The marketing of Air Asia is good and therefore those countries had confidence in Air Asia and Tony Fernandes had the business opportunities to cooperate with the local business partners and slowly expand the company as well. Air Asia also believes that the strengthening of the joint ventures operations would also benefit to the company too.
In year 2007, Air Asia also found that their company needs long-haul airline to bring them further in future. In other words, it also means that market restriction in long-haul flight is strong for Air Asia. Therefore, Air Asia built up its sister company named AirAsia ‘X’, which provides long-haul flights for their customers. In this way, Air Asia can serves customers who needs long distance flight in cheaper way. This is also mean that Air Asia had penetrate into a new market to go further in future. The booking system for both Air Asia and Air Asia ‘X is also updated and very convenient for customers to book air flight online like others airline company.
As we can see that Air Asia had implemented the theory of weather into their practice. Although there are some factors that is not under control by Air Asia, they tried to fix out the problem to prevent being eliminated and create new opportunities for themselves. Until year 2017, Air Asia Berhad had grown into success and now is ranked number 26 in the world.
In addition, we would like to discuss about the next theory which is terrain theory. Terrain theory basically means that the factors that can be controlled by the company. Based on the annual report of Air Asia Berhad in year 2006, Air Asia Berhad had disclosed his highest profit in this year which is amounted to RM 2 billion. Based on the statistic, the cost per available seat kilometer (CASK), with excluding fuel, is actually increased from year 2013 until year 2016. The stress in CASK actually determined the ability of Air Asia Berhad to handle this problem.
Because it is under stress condition, Air Asia Berhad tried to improve it by increase the utilization. For example, the fleets flew average 12 hours per day had increased into 14 hours per day in order to reach more utilization on the cost. Moreover, the old aircraft had been replaced with the new aircraft as well. This is because the new aircraft, A321s had additional 6 seats in capacity and also the fuel efficiency had been increased by 15% compare to old aircraft. This would be quite an amount for Air Asia to save. In addition, digitalization had been implemented in the company in order to provide greater efficiency and reduce cost as well. Last but not least, the associated companies with Air Asia will share their great and better practices with Air Asia in order to work together in one line to improve efficiency and cost saving as well.