Porter Five Forces Of AirAsia

orces in a way that improves the position of the organization. Porter's model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.

Bargaining Power of Customers

There are two types of buyer power. The first is related to the customer's price sensitivity. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. This will increase the competitive rivalry, resulting in lower prices, and lower profitability.

The other type of buyer power relates to negotiating power. Larger buyers tend to have more leverage with the firm, and can negotiate lower prices. When there are many small buyers of a product, all other things remaining equal, the company supplying the product will have higher prices and higher margins. Conversely, if a company sells to a few large buyers, those buyers will have significant leverage to negotiate better pricing. Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes.

There is one system use by AirAsia which is named Yield Management System. This is also known as Revenue Management System; it understands, anticipates and reacts to the behavior of customer to maximize revenue for the organization.

This takes into account the operating costs and aids AirAsia to optimize prices and allocate capacity to maximize expected revenues. The optimization is done on two levels in AirAsia which are seat and route.

Every seat is considered an opportunity to maximize revenue. Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier. For routes, it can be done by adjusting prices for routes or destinations that have a higher demand when compared to others. The effective method however...