AirAsia introduction

8/13/2019 AirAsia introduction

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ........................................................................................................... 1

1.0 INTRODUCTION ............................................................................................................ 2

1.1 ASSUMPTIONS & LIMITATIONS .............................................................................. 3

2.0 MARKET OVERVIEW .................................................................................................. 4

2.1 ENVIRONMENT ANALYSIS ....................................................................................... 5

2.2 REGULATORY ENVIRONMENT ANALYSIS .........................................................

2.3 MACRO!ECONOMIC ENVIRONMENT .................................................................. "

3.0 STRATEGY AND STRUCTURE ................................................................................. 10

3.1 VISION AND MISSION ................................................................................................ 11

3.2 ORGANISATIONAL STRUCTURE AND CORPORATE GOVERNENCE ......... 11

3.3 VALUE CREATING ACTIVITIES ............................................................................ 12

4.0 FINANCIAL PERFORMANCE .................................................................................. 14

4.1 AIRASIA #ORI$ONTAL AND VERTICAL ANALYSIS ....................................... 14

4.2 COMPARISON BETWEEN AIRASIA AND MAS #ORI$ONTAL AND

VERTICAL ANALYSIS ................................................................................................ 15

4.3 RATIO ANALYSIS BETWEEN AIRASIA AND MAS AIRLINE ......................... 1

4.3.1 LI%UIDITY RATIO ANALYSIS ............................................................................... 1

4.3.2 ASSET MANAGEMENT RATIO ANALYSIS ......................................................... 1

4.3.3 PROFITABILITY RATIO ANALYSIS ..................................................................... 20

4.3.4 SOLVENCY RATIO ANALYSIS ............................................................................... 22

4.3.5 S#ARE MARKET RATIO ANALYSIS .................................................................... 23

5.0 CONCLUSION ............................................................................................................. 2"

.0 RECOMMENDATION ............................................................................................... 2".0 REFERENCE LIST ..................................................................................................... 2'

.0 APPENDIX ................................................................................................................... 31

A(()*+,- 1 L/ C/ C,) M/+) E-(*,/* ................................................. 31

A(()*+,- 2 P/)6 5 F/7) M/+) .......................................................................... 32

A(()*+,- 3 D)8,*,,/* /8 R,/ ................................................................................ 33

A(()*+,- 4 V),7 & #/,9/* *:, C/;(,/* ....................................... 34

A(()*+,- 5 M,*/ R,/ A*:, );)* 8/ A,A, *+ MAS A,,*)............................ 42


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EXECUTIVE SUMMARY

In its dynamic and competitive environment, AirAsia has managed to reap great benefits by

practicing low cost advantage to its business model. The combination of technology

advancement, marketing strategy and a strong recognition of various languages used by its

customers, AirAsia has successfully developed its business into a prominent best performance

company in Southeast Asias airline industry.

The purpose of this report is to analyse AirAsia via the Value eporting !ramework. The

creative framework assists readers to have a clearer picture of AirAsias performance in the

non"financial and financial aspects.

The non"!inancial aspects consist of internal and e#ternal analysis of AirAsia by using various

tools including $%ST analysis, $orters & forces model, S'(T analysis and (rgani)ation

analysis. AirAsia has shown its resilience by continuously improving their cost operation by

implementing superior IT systems. Thus during the recent economic downturn, the situation

had turn favourable to AirAsia towards gaining a larger market share. It is recommended that

AirAsia continue to create more new routes to different countries and greater cost control

effort.

The !inancial aspects consist of e#amining the economic performance, financial ratios, and

stock market performance. AirAsia has portrayed strong performance in year *++. 'e can see

that AirAsia has implemented the right business model to win the competition within the

industry. !or the past few months, AirAsias stock performance indicates that investors aregaining more confidence to invest in them due to growth rate in assets as well as the increasing

new routes to different countries.

(n the whole, this assignment will allow readers to grasp important financial and accounting

concepts with emphasis given to -ualitative analysis of AirAsia as a company.

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1.0 INTRODUCTION

AirAsia is one of the fastest growing airline companies in the world with the reputation of

having the largest low"fare airlines, no"frills airline and a pioneer in low cost travel in Asia

0'ikipedia, *++1.

This report attempts to evaluate both the financial and non"financial aspects of AirAsia under

the current economic climate. 2sing the Value eporting !ramework adopted by

$ricewaterhouse3oopers 0$'31, we will review the 4 years performance of AirAsia from the

year *++5 and *++.

There are 6 categories of information under the Value eporting !ramework 0which forms the

basis of our analysis1.

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1.1 A@;(,/* *+ L,;,,/*

The study on AirAsia has some limitations in our research.

. The comparison between AirAsia and 7AS is solely based on the companys financial

figures.

*. The industry comparison is solely based on the principal activity of the airlines in

providing air transportation services where both companies are operating on different

strategic business respectively 07AS8 9ational Air 3arrier (perator, AirAsia 8 :udget

air carrier operator1.

4. The AirAsia :hds financial figure in *++5 is not precisely a fair value due to thedifferent accounting reporting approach been adopted by the company from ;uly *++5

and onwards.

6. The financial figures that are e#tracted from both companies are compiled with the

significant accounting and financial risks policies per stated in respective annual

reports.

&. The market price for 7AS < AirAsia is based on annual average share prices in the

=>S%. This assignment is solely for academic purpose only. The group members shall

not be held liable for any losses incurred based on the information provided.

?. Social study is arguable and sub@ective. 3onsumer habits and behavior changes based

on situation and mood.

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2.0 MARKET OVERVIEW

In the past few years, air travel has been growing at a rate of ? a year and scheduled airlines

carried more than billion passengers in *++B. In 7alaysia, airline operations are separated

into two, namely $assenger airlines and 3argo airlines.

The passenger airliners in 7alaysia comprises of AirAsia, 7alaysia Airline System 07AS1,

!irefly 0which is owned by 7AS1, >ayang">ayang Aerospace 0which is based in Sabah owned

by :er@aya Croup1, Sabah Air and Dornbill Skyways 0which is a helicopter service that

conducts operations in the rural area of Sarawak1. (ther than passenger airliners, there are also

three cargo airliners operating in 7alaysia. They are Athena Air services, 7AS cargo and

Transmile Air Services. Eespite the various kinds of air operators, the airline industry in

7alaysia is being monopoli)ed by two main operators namely 7AS and AirAsia.

.

F,?@) 2 N) I*7/;) 8/ M/ G/


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2.1 E*>,/*;)* A*:,

unning businesses in the airline industry has become tougher in todays competitive era.

:usinesses are not @ust facing higher pressure from increasing number of competitors, but they

also have to compete in a more dynamic and comple# environment. According to :oeing

3ompany, the Airline business models as shown in the following diagram 0:oeing, *++&1.

F,?@) 3 I*+@: E*>,/*;)* C=)*?) S/@7) B/),*? 2005

According to (3onnell and 'illiams 0*++&1, direct competition between full service airlines

and no"frills carriers is intensifying across the world. The old business model focused on

providing full airline service. The new business model aimed to make the business more

efficient leading to cost advantage. The following Table shows the product features of low

cost and full service carriers.

F,?@) 4 P/+@7 F)@) O8 L/ C/ *+ F@ S)>,7) C,)

S/@7) O6C/**) *+ W,,; 2005 (. 25'H2"2

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This Flow"cost revolutionG forces the traditional full"services carriers to respond to this

phenomenon progressively. The emergence and growth of no frills, low"cost carriers have

radically altered the nature of competition within the industry. 7ost ma@or >ow cost carriers

0>331 have e#ploited different operation methods to provide low"fares, which is the >33

business models competitive edge. Dowever, not all >33s carriers are profitable. (nly the

market"leading operators are able to produce a consistent level returns above their cost of

capital 0Eoganis, *++1.

The Flow"cost carrierG business design could be defined by the following three key elements.

F,?@) 5 LCC B@,*) D),?*S/@7) MERCER M*?);)* C/*@,*? 2002

2.2 R)?@/: E*>,/*;)* A*:,

Covernment policies are important drivers for the success of airline industry. In the late +s,

there was an increase in privatisation and deregulation of the airline industry in Asia. It was

noticeable that some Asian countries established open"skies agreements while others allowed

the entry of private airliners.

In *++?, the governments intervention and regulation remained substantial. !or instance,

although Thai AirAsia managed to launch its services between Singapore and Thailand in *++6

successfully, the company still could not e#pand beyond the Singapore"Thailand routes

because it could not ac-uire landing rights elsewhere.

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In 7alaysia, the airline industry is heavily regulated. The authority responsible for overseeing

the industry in 7alaysia is the Eepartment (f 3ivil Aviation 0E3A1. The E3As main

ob@ective is to ensure that the air transportation system that operates via direct service

providers is always safe for passengers. Its priority is to ensure aviation service providers

conduct their activities in compliance with appropriate regulations.

2.3 M7/!)7/*/;,7 E*>,/*;)*

$%ST analysis and $orter & !orce 7odel provide an overall environment analysis of AirAsia.

Also, the analysis of >33 industry reveals the strength and weaknesses as well as the threat

and opportunity for AirAsia.

F,?@) PEST A*:, 8/ A,A,

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P/)6 F,>) F/7) M/+) 8/ A,A,

F,?@) " A*:, U,*? P/)6 5 F/7) 8/ A,A,

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SWOT A*:,

The S'(T analysis is used to determine the strengths, weaknesses, opportunities and threats facing

AirAsia and allows AirAsia to attain its goals.

F,?@) SWOT A*:, 8/ A,A,

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3.0 STRATEGY AND STRUCTURE COST LEADERS#IP STRATEGY

L/ C/

:y pursuing cost leadership strategy, AirAsia has successfully drive cost of its operations

lower relative to its nearest regional competitors namely !irefly. Initially AirAsia has

chosen to lease planes instead of purchasing them 0Ansett 'orldwide, *++1.

Fuel hedgingwas a tactical move that contributed to marginal profit by pegging the price

of @et fuel instead of relying on market crude oil price volatility.

,7) A*+ C= F/

'ith the advent of the (pen Skies Treaty, Air Asia has endeavor to capture more airspace

available regionally, to stimulate new markets via offering more destinations to potentialtravelers.

F,?@) ' S)?,7 S@7@) /8 A,A,

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3.1 V,,/* *+ M,,/* 8/ A,A,

V,,/* S);)*

To be the largest low cost airline in Asia and serving the 4 billion people who are currently

underserved with poor connectivity and high fares.

M,,/* S);)*

AirAsia strives toH

:e the best company to work for whereby employees are treated as part of a big family

3reate a globally recogni)ed AS%A9 brand

Attain the lowest cost so that everyone can fly with AirAsia

7aintain the highest -uality product, embracing technology to reduce cost and enhance

service level

3.2 O?*,,/* S@7@) *+ C/(/) G/>)**7)

O?*,,/* S@7@)

The organi)ationalJcorporate structure of AirAsia, based on its business entities are categori)ed

as belowH

F,?@) 10 O(),/* C/(/) S@7@) /8 A,A,

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C/(/) G/>)**7)

Air Asia has won the award for best corporate governance for best rising Asian companies

*++B. The foundation of its corporate governance strictly relies on its :oard of Eirectors as a

vital source for internal accountability. 3urrently the board consists of 4 insiders 0the firms

3%( and top level managers1 and related outsiders 0not directly involved in day to day

operations of the firm1.

3.3 V@) C),*? A7,>,,)

C@/;)

AirAsia was the first airliner to utilise e"ticketing in order to save cost of issuing physical

tickets. This eliminates the need for large and e#pensive booking reservation systems. The

airlines created convenience for its customers to purchase tickets from post offices or

designated AT7 machines 0Khu, *++1.

P)/()

AirAsias organisational structure is simple and flat, enabling them to achieve more

consistency and cost reduction. !urthermore, the salaries offered by the company were below

its rivals. Dowever, the airline was able to keep its workforce motivated by providing a

competitive remuneration policy. %mployees are offered a wide range of incentives that

includes productivity and performance"based bonuses, stock options. These efforts enhanced

productivity and further strengthened employer"employee relationships. Also, AirAsia has a

corporate safety and training commitment to ensure that their staffs perform their tasks in a

safe and efficient manner 0Annual eport AirAsia, *++1.

I**/>,/*

AirAsias aircrafts were designed to minimise wear and tear, cleaning time and cost. This

allows for -uicker turnarounds between flights and helps increase revenues 0Khu, *++1.

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7oreover, the airline leverages on innovative ideas to derive substantial ancillary revenues

from additional services. It has its own branded credit card and offers corporate travels

services. AirAsias planes are also converted into Fflying billboardsG for advertisement. Such

uni-ue innovations led to lower costs and increases in revenues 0:kkok, *++&1.

B*+ *+ I*))7@ A)

AirAsia has a strong brand reputation and the company has won several prestigious awards. It

is associated with globally recognised organisations such as AT


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4.2 C/;(,/*


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4.3 R,/ A*:,


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%@,7 R,/

I*! E*,: R,/ A*:, A,A, B)=+

The highest figure was recorded in *++5 but the trend is moving towards stronger position in

its payment ability from least li-uidity assets to their short term liabilities from *++B to *++.

This might indicate that the company has a healthy inventory and receivables assets

management and its turnover period.

I*+@: A>)?) R,/ A*:, A,A, B)=+ & M:,* A,,*) S:); B)=+

3ompared with AirAsia, 7AS Airline has a weaker inventory and receivables assets

management. This seems to indicate that 7AS Airline is utili)ing debt financing strategy in its

operations. This strategy might need to be reviewed if the strategy is ineffective as 7AS

Airline is running national air carrier business and involves with the intervention of

government in business policies.

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4.3.2 A) M*?);)* R,/ A*:,

T) R,/


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I*>)*/: T@*/>) R,/

I*! E*,: R,/ A*:, A,A, B)=+

!or AirAsia, it showed low rate of inventory turnover due to the business provides low fare

and no frills air transportation services and therefore is not a highly inventory sensitive entity.

AirAsia inventories consist of flight e-uipment e#pendable parts, materials, and supplies and

are carried at average cost, which appro#imates market value. These items are charged to

e#penses when issued for use.

I*+@: A>)?) R,/ A*:, A,A, B)=+ & M:,* A,,*) S:); B)=+

3ompared to AirAsia, 7AS Airline is showing a inventory management compared to AirAsia.

As a national air carrier, 7AS Airline may applying material hedging strategy in where the

materials and parts purchase in bulk basis in order to obtain at a lower price.

2009

2008

(Restated) *2007 2009

2008

(Restated)

2007

(Restated)

Return on Assets ratio (R+A) = %.%%, -*.27, .2%,

_____roit______

Averae total assets

*.7, 2.%%, ."#,

Asse t Mana'ement Analysis

Airasia Berhad Malaysian Airline System Berhad

*Rem arks : !r 2007" the #!m$arati%e

&i'ures are n!t in &air %alue he &i'ure

are the added %alue &r!m the &inan#ial

year ended 0 +une 2007 and ended ,

-e#em.er 2007

T


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I*+@: A>)?) R,/ A*:, A,A, B)=+ & M:,* A,,*) S:); B)=+

!rom figures, both AirAsia and 7AS Airline are moving a positive ability 045"7AS Airline

and B6" AirAsia1 to convert its assets in revenues from *++B to *++.

4.3.3 P/8,


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I*! E*,: R,/ A*:, A,A, B)=+

!rom the figures, it showed that the air transportation industry is heavy competitive in the

market due to low numbers in this ratio. 7eantime, randomi)ed pricing strategy adopted by

AirAsia is supported the organisation moving toward to improve this ratio by increasing the

market demand and profit ma#imisation.

I*+@: A>)?) R,/ A*:, A,A, B)=+ & M:,* A,,*) S:); B)=+

!rom figures, both AirAsia and 7AS Airline 07AS and AirAsia" 51 are moving a positive

trend to generate profits from each dollar of sales from *++B to *++.

2009

2008

(Restated) *2007 2009

2008

(Restated)

2007

(Restated)

Return on uity ratio (R+) = 1!.&1, -&"., %%."2, #*.!1, *.#, 2".**,

_______roit______

Averae total euity

/r!&ita.ility Analysis

Airasia Berhad Malaysian Airline System Berhad

*Remarks: !r 2007" the #!m$arati%e

&i'ures are n!t in &air %alue he &i'ure

are the added %alue &r!m the &inan#ial

year ended 0 +une 2007 and ended ,

-e#em.er 2007

T


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!rom figures, both AirAsia and 7AS Airline are moving a positive trend to generate

investment returns to shareholders 0++"7AS Airline and ?*" AirAsia1 from *++B to *++.

4.3.4 S/>)*7: R,/ A*:,

T


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As compared to 7AS Airline, 7AS Airline adopting different financing strategy compared to

AirAsia. 7AS Airline is focused on debt financing to increase operations 0due to high debt to

e-uity ratio1. As a national carrier, 7AS Airline believed this could potentially generate more

earnings than it would have without this outside financing sub@ect if this were to increase

earnings by a greater amount than the debt cost 0interest1. This strategy is also able to satisfy

shareholders due to more earnings gained. Dowever, 7AS Airline must be careful in managing

this strategy due to this approach may outweigh the return of 7AS Airline generates that may

lead to bankruptcy.

4.3.5 S=) M) R,/ A*:,

T


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I*!E*,: R,/ A*:, A,A, B)=+

!rom the figures, the decrease in the $J% ratio in *++B is mainly due to the decrease in share

price during the recession but not really related to the confident of the investor on AirAsia.

Dowever, the trend is improving in *++ as the share price is increase and gaining investor

confident again.

I*+@: A>)?) R,/ A*:, A,A, B)=+ & M:,* A,,*) S:); B)=+

The $J% ratio growth trends of AirAsia are higher than 7AS Airlines from *++B to *++. This

is indicating that investors confident to invest in AirAsia higher than 7AS Airlines due to

aggressive growth rate in assets, e#panding its flight routes services in 7alaysia, Indonesia and

Thailand to cater to the rising demand for budget flights.

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T


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T


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5.0 CONCLUSION

N/*!8,**7, ()8/;*7)

AirAsia has addressed all foreseeable risk in its comprehensive risk framework. They have

strong internal asset and operating management within the group. Air Asia is the first airline

implementing fully ticketless air travel system and keep improving the service value to its

customers. Apart from that, the company had still a lot of room for growth in their flight routes

and e#panding its e#isting related diversified business units.

F,**7, ()8/;*7)

AirAsia stands a strong position in every segment measurement from *++B to *++. The

companys significant improvement in *++ based on its strength and opportunities has placed

itself well to provide e#posure to growing markets. 7eantime, the strong li-uidity, solvency

measurement has proven that Air Asia has outshined them especially in this high capital

investment in this industry. The company has the ability to fund new aircraft purchases and

repay loans no longer a ma@or concern as operating cash flows has strengthen. Dowever, the

selected a set of financial ratios we have analysed which is satisfy the independence criterion.

It has no absolute ade-uacy in terms of measuring the overall financial profile of an

organisation and always sub@ect to -uestions of @udgement 0>aurent, 51.

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.0 RECOMMENDATION

:ased on detailed analysis above, some recommendations are given below to maintain Air

Asia current healthy financial positionH

%nhance its strategic business planning includes the continuation of cost"controlling

efforts, increasing its list of destination cities flight routes and e#panding its related

diversified business units.

Improve timeliness in its service level in flight schedule and aircraft maintenance

services.

etire some of its older, more maintenance"intensive aircraft to contribute to Air Asias

costs and consideration leasing the fi#ed assets to reduce li-uidity burden.

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".0 REFERENCE LIST

AirAsia Annual eport and !inancial Statements *++5, accessed on ** 9ovember *++

LhttpHJJwww.airasia.comJmyJenJcorporateJirannualreport.htmlM

AirAsia Annual eport and !inancial Statements *++B, accessed on ** 9ovember *++


AirAsia Annual eport and !inancial Statements *++, accessed on ** 9ovember *++


AirAsia :erhad !ourth Nuarter 0(ctober"Eecember1 eport *++, accessed st Eec +

LhttpHJJwww.airasia.comJiwov"

resourcesJmyJcommonJpdfJAirAsiaJIJAAO6N+O$ressOelease.pdfM

:a)ley 7., Dancock $., :erry A. and ;arvis . *++?, 3ontemporary Accounting, Thomson, ? %dition,

Australia.

:kkok *++&, PAirAsia aircraft to become flying billboards viewed online 4+th 9ovember *++,

LhttpHJJwww.bkkok.comJnewsJnewsOarchivedJairasia"aircraft"to"become"flying"

billboards.htmlM

Eoganis, ., *++. The Airline :usiness in the *st 3entury. outledge, >ondon.

Eudney, E., ;irasakuldech, :., 0*++B1, Peturn $redictability and the $J% atioH eading the %ntrails,

The ;ournal of Investing, !all *++B, Vol. 5, 9o. 4, pp.5&" B*.

Darvard :usiness eview 0*51, PSummaries of :usiness esearchH 7arket 3apitali)ation ates ofIndustrial %arnings, pp.5&"B+

=immel et al 0*++?1, QAccounting" :uilding business skillsQ, *nd %dition, ;ohn 'iley < Sons,

Australia.

>aurent, 051, PImproving The %fficiency and %ffectiveness of !inancial atio Analysis, ;oumal of

:usiness !inance < Accounting, Vol. ?,9o.4, pp. 6+R64.

>ive Trading 9ews (nline 0*++1 P:ursa 7alaysia at 4+ 7onth Digh, AirAsia 3onsiders Eividend,

(nline, *6th August, accessed st Eec +

LhttpHJJwww.livetradingnews.comJbursa"malaysia"at"4+"month"high"airasia"considers"dividend"B6B.htmM

7AS Airline Systems :erhad Annual eport and !inancial Statements *++5, accessed st Eec +

LhttpHJJmalaysiaairlines.listedcompany.comJar.htmlM

7AS Airline Systems :erhad Annual eport and !inancial Statements *++B, accessed st Eec +


7AS Airline Systems :erhad Annual eport and !inancial Statements *++, accessed st Eec +


* / $ a g e
http://www.airasia.com/my/en/corporate/irannualreport.htmlhttp://www.airasia.com/my/en/corporate/irannualreport.htmlhttp://www.airasia.com/my/en/corporate/irannualreport.htmlhttp://www.airasia.com/my/en/corporate/irannualreport.htmlhttp://www.airasia.com/my/en/corporate/irannualreport.htmlhttp://www.airasia.com/my/en/corporate/irannualreport.html


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9ew Straits Time 9ewspaper (nline 0*++1 PAirAsia shares top 7AS for first time, (nline, &th

(ctober, accessed st Eec + LhttpHJJfindarticles.comJpJnews"articlesJnew"straits"

timesJmiOB+?JisO*+++&Jairasia"shares"masJaiOn&&&&B6&JM

(3onnel, ;., < 'illiams, C.. 0*++&1. $assengers $erceptions (f >ow 3ost Airlines And !ull Service

3arriersH A case study involving yanair, Aer >ingus, AirAsia and 7alaysia Airlines, ;ournal

of Air Transport 7anagement Vol. pp. *&"*5*

Strategic Advantage *++&, 7ichael $orterQs !ive !orces Analysis, Strategic Advantage, Inc. $hoeni#,

accessed online *&th 9ovember *++ LhttpHJJwww.strategy6u.comJassessmentOtoolsJinfo.phpU

s8*M

The Star (nline 0*++1 PAirAsia overtakes 7AS in market cap, (nline, **th (ctober, accessed st

Eec + LhttpHJJbi).thestar.com.myJnewsJstory.aspU

file8J*++J+J**JbusinessJ5*5?**5


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.0 APPENDIX

A(()*+,- 1 L/ C/ C,) M/+) E-(*,/*

01 Simple $roduct

" 3atering on demand for e#tra payment

" $lanes with narrow seating 0but huge capacity1

" 9o seat assignment

" 9o fre-uent flyer programmes.

0*1 $ositioning

" 9on"business passengers

" Short"haul point"to"point traffic with high fre-uencies

" Aggressive marketing

" Secondary airports

" 3ompetition with all transport carriers

041 >ow (perating 3osts

" >ow wages

" >ow airport fees

" >ow costs for maintenance

" Digh resource productivity

" Short ground waits due to simple boarding processes

" 9o air freight, no hub services, short cleaning timesX and high percentage of

online sales.

There are two >33s modelsH. Independent Airlines 0e.g. AirAsia, Southwest, ;etblue, yanair, and %asy@et1

*. $arent airlines 0e.g. !irefly, ;etstar, ;etstar Asia, Valuair, and Tiger1

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A(()*+,- 2 P/)6 5 F/7)

TD%AT (! 9%' %9TA9TSH LOW

Threat of 9ew %ntrants is DICD whenH #,?= L/

%conomies of scale are low

3apital J Investment re-uirements are lowSwitching costs are low

Access to industry distribution channels is low

$roduct differentiation is low

The likelihood of retaliation from e#isting industry players is low

Covernment policies creating barriers are low

$('% (! :2%SH #IG#

$ower of :uyers is DICD whenH #,?= L/

3oncentration of buyers relative to suppliers is high

$roduct differentiation of suppliers is low

$rofitability of buyers is low

Important of suppliers input to -uality product is low

Threat of backward integration by buyers is high

Switching costs are low

TD%AT (! S2:STIT2T% $(E23TH MODERATE

Threat of Substitute $roduct is DICD whenH #,?= L/

The differentiation of the substitute product is high

:uyers willingness to substitute

The relative price and performance of substitutes

TD%AT (! S2$$>I%SH #IG#

Threat of suppliers is DICD whenH #,?= L/

3oncentration of buyers relative to suppliers is high

Availability of substitute product is low

Importance of customer to suppliers is low

Eifferentiation of the suppliers products and services is high

Switching costs of the buyers is high

Threat of forward integration by the supplier is high

I9T%9SIT (! IVA>H #IG#

Intensity of ivalry is DICD whenH #,?= L/

9umber of competitors is highIndustry growth rate is low

!i#ed costs are high

Storage costs are high

$roduct differentiation is low

Switching costs are low

%#it barriers are high

Strategic stakes are high

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A(()*+,- 3 D)8,*,,/* /8 R,/

atio Eefinition

Nuick atio 0Acid

Test atio1

7easures an organisation immediate least li-uidity of its current assets to pay

back its short"term liabilities. The least li-uidity of the current assets is e#clude

inventory and prepaid assets. The higher the numbers indicate better paying

capabilities. 7eantime, the lesser value of this ratio 0e.g. less than 1 shows the

higher changes the company unable to pay off the liabilities when payment due

Inventory Turnover

atio

Shows the efficiency of an organisation to manage their stock level. Digh level

of inventory is considered unhealthy due to they are representing an investment

with a rate of return e-ual to )ero and also causing trouble when the

inventories getting cheaper.

eturn (n Assets

atio

Indicator of how profitable an organisation is relative to its total assets. This

ratio gives an idea as to how efficient management is at using its assets to

generate earnings. The higher the numbers indicate the better in an

organisationQs ability converting asset to profits.

9et $rofit 7argin

atio

7easures profit on an organisation that can be generated by each dollar of

sales. The higher the number indicates better position of an organisation to

generate profit by each dollar of sales. In addition, profit margin ratio also may

imply howQs an organisation using compromise its pricing strategy in order to

achieve its strategic business strategy.eturn (n %-uity

atio

7easurement of the ability of an organisation to generate investment returns to

the shareholders.

Eebt To %-uity

atio

7easurement of an organisation e-uity and debt to finance its assets. A high

numbers indicates that an orgnisation has been aggressive in financing its

growth with debt. This can result in volatile earnings as a result of the

additional interest e#pense.

$J% atio 7easures the relationship between market price per share and earning per

share by anlaysing the share valuation versus the actually income generate by

an organisation. The high the $J% ratio indicates the investor willing to pay

more for each unit of income.

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4& / $ a g e


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4? / $ a g e


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6+ / $ a g e


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6 / $ a g e


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6* / $ a g e


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AirAsia introduction

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