SUNWAY UNIVERSITY BUSINESS SCHOOL FINAL EXAMINATION FOR THE BSc (HONS) IN BUSINESS STUDIES ACADEMIC SESSION SUBJECT : AUGUST 2013 SEMESTER : MKT3074 MARKETING STRATEGY EXAMINATION : DECEMBER 2013 TIME ALLOWED : 3 HOURS + 10 MINUTES READING TIME INSTRUCTIONS TO CANDIDATES This question booklet contains two sections. Section A: Answer ALL the compulsory questions. Section B: Answer TWO questions out of THREE questions All answers must be written in the answer booklets provided using blue or black INK. IMPORTANT NOTES TO CANDIDATES Materials Allowed Standard Items : Pen, Pencil, Eraser or Correction Fluid, Ruler It is your responsibility to ensure that you do NOT have in your possession any unauthorised notes or any other means that would improperly help you in your work. If you have any unauthorised materials with you, hand it to the invigilator BEFORE reading any further. DO NOT REMOVE THIS QUESTION PAPER FROM THE EXAMINATION HALL [This paper contains SIX questions printed on FIVE pages, including cover page]
PART A: CASE STUDY: COMPULSORY QUESTIONS AirAsia: The Sky s the Limit AirAsia was the first airline in Asia to introduce the budget, no-frills airline concept. It was founded in 2001 by Chief Executive Officer (CEO), Tony Fernandes and his three partners when their company, Tune Asia Sdn. Bhd., bought the fledgling AirAsia, a Malaysian government-linked airline. Since then, the growth of this Lowcost Carrier (LCC) has been the envy of many. Today it is a public listed company boasting a large fleet of aircrafts flying to more than 61 domestic and international destinations. It flies 108 routes and operates more than 400 flights daily from hubs in Malaysia, Thailand and Indonesia and focuses on providing convenient and affordable air travel for the mass middle-class market. AirAsia offers savings of up to 60 % compared to MAS s rates, and the company s tagline, Now everyone can fly, truly reflects the company s pledge to its customers. The airline was launched during a turbulent period when people were hesitant to fly due to the aftermath of the 2001 terrorist attacks. Visitors concerned about longdistant travel started to look for holidays in neighbouring countries which invariably worked well for AirAsia when it started to fly regional routes. Asians were enjoying the benefits of higher incomes and good economic growth and although many could not afford long-distance holidays, they were open to the idea of travelling to neighbouring countries. In addition, extensive media coverage on LCCs helped consumers understand the no-frills concept. The Internet also provided AirAsia with the opportunity to reach more customers through online booking. Fernandes, a strong believer in leadership role, insists on a mutual corporate culture. As CEO, Fernandes ensures that he is accessible to all his staff by giving them his mobile telephone number. In mid-2003, he secured the support of the former prime minister of Malaysia, Tun Dr. Mahathir Mohamad to network with neighbouring countries in an effort to develop an open-skies agreement. Since then, Indonesia, India, Thailand and Singapore have granted landing right to AirAsia. Although it has limited resources, AirAsia has been able to fulfil its customers needs by collaborating with partners. For instance, it appoints authorised travel agents to cater to travellers who are uncomfortable with making their booking over the Internet. Travellers without credit cards can also pay for their tickets by cash at any Alliance Bank branch in Malaysia. With the right partners and a strong marketing strategy focusing on the promise of low fares and good brand experience, Air Asia has evolved from an ailing company into one that has netted a profit of $14.4 million in its third year of operation. The global financial crisis in mid-2008 affected many industries, including the aviation industry. Fewer business and leisure travellers were flying due to the economic recession. Corporations and government agencies issued orders, as part of an austerity drive, for less travel or, when necessary for their senior employees to travel economy-class. This became an opportunity for LCCs such as AirAsia to grow their market share. Indeed, the number of passengers choosing AirAsia grew by more than 21 % in the first quarter of 2009, and by 2010 the company was able to turn over a core operating profit margin of 23.3 %. Page 2 of 5
The cornerstone of AirAsia s success is its constant drive to lower costs. It has the world s lowest unit costs of 2.3 US cents per ASK (Available Seat Kilometre). The carrier makes profit by keeping cost low while maintaining a high rate of aircraft utilisation, quick turnarounds, low distribution costs using online booking, and ancillary income such as its Supersize charge for excess baggage. To keep costs down and ensure a quick aircraft turnaround of 25 minutes, its cabin crew do multitasking by serving customers and cleaning. Full-service carriers view the growth of LCCs as a threat. Some of these carriers have decided that if they cannot beat the low-cost carriers, they will join them. Singapore Airlines and Qantas launched their LCCs, Tiger and Jetstar Airways respectively, in a bid to maintain their market share. These LCCs, with the support of their resourcerich parent companies, were able to invest more and therefore sustain initial losses. The low-price strategy used by LCCs reflects strongly in their campaigns. For AirAsia, its promotions, namely the recent Free Seats campaign, were a hit with travellers. However, rising fuel prices and landing charges are putting pressure on AirAsia s ability to keep costs low, therefore threatening this balance. To offset this, LCCs are engaging fuel hedging and fuel surcharges, and using fuel-efficient aircrafts. Using secondary airports also helps to reduce landing charges. It is also heartening to see LCCs forming alliances to lower operating costs. AirAsia and JetStar have been working together since 2010 in areas such as procuring of aircraft and inventories. The two airlines also plan to carry each other s passengers stranded by breakdowns and other disruptions. Capitalising on its success, AirAsia has introduced AirAsia X, an associate company of AirAsia in 2007 to offer long-haul budget travel to destinations between four and eight hours from Kuala Lumpur. AirAsia X complements AirAsia s current route network where one can fly AirAsia X from Hangzhou to Kuala Lumpur and then fly AirAsia from Kuala Lumpur to other ASEAN destinations. The low-cost business model seems to have worked well for AirAsia. The challenge remains for the company to continue to maintain the balance between cost and profitability using innovations that will attract its target market. Source: Kotler, P. & Armstrong, G. (2012). Principles of Marketing. 14 th Ed. Essex: Pearson. pp. 118-119. Page 3 of 5
Answer ALL the compulsory questions. (1) Discuss the micro and macro factors that would affect AirAsia s performance in the current competitive environment described in the case? (2) By focusing on low prices, has AirAsia pursued the best strategy? Why or why not? Justify your answer by drawing on appropriate theory. (3) Given AirAsia s current situation, with bigger competitors following its business model, what other recommendations would you make to CEO Tony Fernandes for the future of his company? (16 marks) (TOTAL MARKS = 40 MARKS) Page 4 of 5
PART B: ESSAY QUESTIONS Answer any TWO (2) questions. Each question carries 30 marks. Question 1 (a) As a newly appointed marketing officer in a hypermarket, please prepare a report to the marketing director on the process of developing an effective CRM strategy for your organisation. (b) Many companies have recognised the importance of data mining. Discuss the underlying logic of data mining for strategic purposes. (20 marks) (10 marks) QUESTION 2 (a) Assume you are assisting Proton in determining information needs for monitoring its automobile targeting and positioning strategies. What are your recommendations? (b) What is a strategic partnership? Discuss the major factors that encourage the formation of strategic partnerships among companies. (18 marks) QUESTION 3 (a) The planning process of a new product can be longer than expected. Identify and discuss the possible factors that could affect the length of the process? (b) Using appropriate examples, discuss what is meant by channel migration; and the issues that a manufacturer faces in dealing with migration issues. (18 marks) Page 5 of 5