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Strategic management

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Strategic management

  1. 1. UGB202Introduction to Strategic ManagementIndividual Report on the Application of the Strategic Management ProcessModule Leader: Mathew TealeModule Tutor: Adeline SimStudent Name: Adrian Eu Suk KingStudent ID: SCSWBABM 1111003Submission Date: 11 May 2013
  2. 2. iExecutive SummaryThis assignment requires a writer to write a report of any organisation which is involved intransportation and communication industry. The aim and purpose of this report is to examine thestrategic management process to one of the industries. The strategic management process will bemore emphasise in this report where its importance in the organisation play an important factorin order for the organisation to grow and expand. Malaysia Airlines (MAS) have been chosen asan organisation for this report. Malaysia Airlines is a commercial air travel organisation wherethey provide transportation service throughout the world, specifically 850 destinations in 150countries. The organisation company profile will explain more about the history of theorganisation itself which are the founder of the organisation, the year it start its services, location,service range, revenue and turnover report. After that, a strategic analysis of the MalaysiaAirlines will be explained more which includes general environment, internal environment andcompetitive environment. In general environment, the weakness of the organisation needs toanalyse before the problems and weaknesses itself will take toll towards the organisation. Thetool which is going to be used to overcome the weaknesses are pest analysis and swot analysiswhich consecutively serve its purposes to analyse internal and external factors. In internalenvironment, a situation that can impact Malaysia Airlines business will be evaluated. It isdivided into two categories, value chain analysis and resource based view. Value chain analysiswill be used to add value to the organisation itself while resource based view will be use toexplain how the resources of the organisation can be use to become an advantage, competitively.After done doing that, strategic formulation is needed for Malaysia Airlines. A proper plan andstrategy are needed to achieve the organisation main objectives. Business level strategy andcorporate level strategy will be use to explain the competitive advantage and how corporateparent helps its subsidiary company to grow and expand. International strategy is also inincluded in the strategic formulation in order for Malaysia Airlines to develop its level ofcompetencies and future potential in international arena. Implementation of that internationalstrategy will take to action after evaluation and analysis. In the implementation strategy, a leaderwith a broad scope of vision and mission is needed in order for the action plan to become reality.With a great leadership skill, the employees will be inspired to work more efficient to achievethe objective that had been set. All the explanation above are supported with proper referencesusing journals, books, internet, articles and updated data from Malaysia Airlines from itscompany report. Lastly, a conclusion will be made to conclude all of the information from thereport.
  3. 3. iiTABLE OF CONTENTExecutive summary.........................................................................................................................i1.0 Introduction..............................................................................................................................11.1 Company Profile.......................................................................................................................12.0 Strategic Analysis.....................................................................................................................22.1 General Environment................................................................................................................22.1.1 Scenario Planning...................................................................................................................22.1.2 Pest Analysis........................................................................................................................3-42.1.3 Swot Analysis........................................................................................................................52.2 Competitive Environment.........................................................................................................62.2.1 Porter’s Five Forces.............................................................................................................6-72.2.2 Strategic Groups....................................................................................................................72.3 Internal Environment................................................................................................................72.3.1 Value Chain Analysis.............................................................................................................82.3.2 Resource Based View............................................................................................................83.0 Strategy Formulation................................................................................................................93.1 Business Level Strategy............................................................................................................93.1.1 Industry Life Cycle................................................................................................................93.1.2 Differentiation...................................................................................................................9-103.2 Corporate Level Strategy.........................................................................................................103.2.1 Growth Strategies.................................................................................................................103.2.2 Corporate Parenting..............................................................................................................113.2.3 Strategy Evaluation...............................................................................................................113.3 International Strategy...............................................................................................................12
  4. 4. iii4.0 Strategy Implementation.......................................................................................................134.1 Strategic Leadership...........................................................................................................13-144.2 Change Management.............................................................................................................144.3 Role of Systems.....................................................................................................................144.3.1 Organization Structure........................................................................................................154.3.2 Organizational Process........................................................................................................154.3.3 Strategic Control Systems...............................................................................................15-164.3.4 Corporate Governance........................................................................................................165.0 Conclusion.............................................................................................................................176.0 List of References...............................................................................................................7.0 Appendices
  5. 5. 11.0 IntroductionMalaysian Airline System Berhad is the primary airline of Malaysia. Malaysia Airlines (MAS)operates flights from Kuala Lumpur International Airport mainly and with a secondary hubat Kota Kinabalu and Kuching. From the report, the strategic management of Malaysia Airlinesis analysed. The report is produced for Mr Mathew Teale. Most of the resources in this report arebased on report and journal. Besides, articles and newspapers are also being used as thesecondary resources. Gather from latest data, Malaysia Airlines has revenue worth as much asRM13 billion. In stategy management, there are Strategy Analysis, Strategy Formulation andStrategy Implementation which are the process to overcome that external factor which consist ofobjective to fulfil(Hambrick, 2007). Under the effect of globalization, the world has changed inevery sector and those changes had influenced most of the corporation activities with obstacles toexecute their strategy. A companys finances will be affected if their management fails toformulate and implement the most efficient and suitable strategy. Strategy analysis, strategyformulation and strategy implementation are the fundamentals to solve negative factorsregardless what is the problems.Company ProfileMalaysia Airlines was founded in 1937 through an idea by the Alfred Holts Ocean SteamshipCompany in liverpool work together with the Imperial Airways in from Britain and StraitsSteamship Company in Singapore. This had build the outcome of Malayan AirwaysLimited(MAL) on the same year. As usual, this airline faced different types of industrialchallenges throughout these seven decades. Therefore, the company had improved andrepackaged their image and services. Malaysia Airlines started their flight services originated inSubang Airport and later relocate to Kuala Lumpur International Airport (KLIA). MalaysiaAirlines serve different class of customers in society pyramid. Therfore, Malaysia Airlinesprovide different class of seatings which are first class, business class, and economic class.According to Malaysia Airlines Annual Report on 2012, incredible loss of RM481,457,000 washit after the loss on 2011 which was two billion. This shows the incapabilities of management inMalaysia Airlines to manage the company. Therefore, the management needs to be rearrangedand restructured. Besides, Malaysia Airlines are facing more competitors in the industry such asAirasia. To overcome this challenge, Malaysia Airlines tried to upkeep with their competitors by
  6. 6. 2providing high quality of services in order to win customers faith and loyalty so that they couldhave stable coming back customers. Their strategy was a success and this can be seen whenseveral awards are awarded by Skytrax UK and World Travel Awards. The awards are the Asia’sLeading Airline(2011), Asia’s Leading Business Class Airline (2010) and Five Star Airline(2012). Malaysia Airlines built up their image as the top airline in Malaysia by winning thoseaward.2.0 Strategic AnalysisThe process of helping a company to have further understanding regarding their externalenvironment is what we call strategy analysis. Strategy analysis can maximize an organizationspotential, capability and interation between environment. Profit can be achieved if MalaysiaAirlines execute the three strategic processes which are analysis, formulation andimplementation. By doing the analysis of external evnironment and evaluating the internalenvironment, we are able to use the chances and discover the industrial potential in the future.2.1 General EnvironmentIn order to help Malaysian Airlines in fitting itself to conquer the weaknesses, several analysissuch as PEST, scenerio planning and SWOT are carried out. Besieds, general environment actsas a tool to identify the weakness in Malaysia Airlines which may lead to external environmentthat changes rapidly (Henry, 2008:41).2.1.1 Scenario PlanningScenario planning is defined as procedure of visualizing what upcoming situation or events areprobable, what their effects would be like, and how to respond to, or benefit from,them(BusinessDictionary, n.d.). Scenario planning not only can help to identify future oppoturnity, but alsohelps an organization to make critical decision. This can help an organization to utilizeopportunity and stay away from the threat. The scenario planning is mention by Henry (2008) asa method to find changes and uncertainty in their industry and promote systematic thinking andeven decision making under spontaneus situation. However, Malaysia Airlines did not do properscenario planning which make them faced great loss as stated in their annual report 2012. As a
  7. 7. 3way to stop this situation continue to grow, Malaysia Airline should really consider and thinkdeeply of their scenario planning. Besides, the ultimate growth of Airline industry showsinfluence to Malaysia Airline scenario planning. Therefore, Malaysia Airline should make use ofPEST and SWOT analysis to identify deeply their market environment.2.1.2 PEST analysisPEST analysis most commonly is used to measure a market. By doing the PEST analysis,Malaysia Airlines will link the entire four factors that may affect their business in general andcompetitive environment. As a Malaysian national flag airlines, it is compulsory and a must forthem to follow and obey the political decision and governmental policies. Being an airlinecompany in Malaysia, always need to cope with the taxes which have been a big obstaclesespecially during economy crisis. According to Malaysia Airlines annual report 2011, MalaysiaAirlines had experienced a huge loss as RM400 millions even before taxation is done. Thisshows how pathetic and badly the situation of the company was. Furthermore, our current PrimeMinister Datuk Seri NajibTun Razak announced that the minimum wage of private sectors inPenisular has been set for RM900 and RM800 for those in Sarawak. This increases the burden ofMalaysia Airlines which has approximately 18,000 workers. As a way to overcome the newpolicy and adapted to it, Malaysia Airliens hence introduced a new rewarding plan to theirworkers. t. In coping with the new policy, Malaysia Airlines has announced on their strategy tooffer permanent staff a maximum two years of unpaid leave only and excluding their subdiarieswhich are Maswings and FIrefly.Airlines biggest expenses will be the crews’ wages and fuel expenses. As global fuel price isincreasing, it influenced Malaysia Airlines operating cost for sure which will directly result theloss in their profit. Besides, unstable fuel price that influenced economy will affect their sharesprice in stock exchange too. (sharif, Ranjbar and Arumugam , 2011). Furthermore, MalaysiaAirlines had increased their flight ticket fares as a way to cover up the administration andoperating cost. As the increment of ticket fares occurred, local citizens with lower or mediumincome holders to lessen their frequency to travel on flight. Besides, one of the undeniablefactors is inflation which causes the value of money to be lowered extra money from the wages
  8. 8. 4unable to do much extra occasion planning. Prior to the Asian Financial Crisis in 1997, MalaysiaAirlines suffered in the massive losses of RM260million. As a way to overcome the crisis, theairlines cut a lot of routes which are unprofitable such as Brussels, Darwin, Honolulu, Madrid,Munich and Vancouver. Besides, approximately a decade later in 2011, frightening loss ofRM2.52billion was “achieved” by Malaysia Airlines and breaks its historical record. Thisincident had push the management to terminate the flight to Surabaya, Karachi, Dubai,Johannesburg in January of the same year. The action was unable to calm the managements wholater ceased the routes to Cape Town, Buenos Aires and Rome in February 2011.For social factor, we know that there are different types of people with different preference inthis country, so with different culture and thinking in society, not everyone would like to useflight as their transportation option. This is due to the fear factor that stuck in their heart to feelinsecure with the flight transportation. Therefore, safety is always one of the main feature to beconcerned and make sure the society feel safe with their services. Safety instructions are beingbriefed before the flight depart every time and this can prevent chaos to occur if there is anyaccident occurs. Besides, insurance is also one of the option for customer to purchase in theirflight ticket. This can relieve the insecurity of passengers when they choose to use MalaysiaAirlines.In terms of technology, Internet has lead our world to globalization and information explosionera. Malaysia Airlines sees this as an opportunity to promote their company services to the youthconveniently. The customers can purchase the flight tickets easily from their website rather thandrive to their branches and queue up which will be even more expensive and time consuming.Hence, Malaysia Airlines is able to deduct and decrease overhead cost and their budget in extraoffices and infrastructure. However, not everyone are well-skilled in using the internet and someof the rural areas in our country still lack of such services which seems common in most of thecity. Besides, credit or debit card is a necessity in order to purchase from online ticketing system
  9. 9. 5which also will be a obstacle for some of the senior citizens. Lastly, we shall concern about thestability of Malaysia Airlines proxy server which is overloaded sometimes.2.1.3 SWOT AnalysisSWOT analysis is a method where a structured planning can be done by evaluating the 4 factorswhich are strengths, weaknesses, opportunities and threats (Humprey, 2005). Malaysia Airlinescan use SWOT at their own benefits to understand more about the external environment.Malaysia Airlines is a well known brand name which has become strength of this company toexploit. With its 70 years of experiences in the airline industry, this brand name has won theheart of the customers where’s loyalty is important to them. In addition, Malaysia Airlines arehighly recognized by the international organisation. Plus, Malaysia Airlines are also has beensupported by the Malaysian government for years. With this, they can depend on the governmentif they are having a financial problem or other difficulties which can benefit them. MalaysianAirlines won a lot of prestigious awards in the past 10 years and their broad network ofdestinations also has become their strength that led the potential and loyal customers to choosethem. Thereby, with this entire strength combine, chances of Malaysia Airline to win and takecontrol of the industry are higher.Malaysia Airlines and other companies are not excluded from the organisational weaknesses.The increasing fuel price had cause Malaysia Airlines huge loss as much as RM1.36million.Other than that, their operating cost such as landing fees ishigherthatin which areaffecting their financial. This entirely affected their profit and thus giving them problem to bedealt with. Price war with Air Asiaalso has affected their target in controlling the localmarket.Since Malaysian income per capita is lower than other countries, therefore MalaysiaAirlines are now focusing more with the middle and upper class customers.Malaysia Airlines has analyse its opportunities in the market. Aircraft passengers have beengrowing as much as 13.5% every year. By this, Malaysia Airlines are going to take thisopportunity to expand their services in other countries such as China and Japan where the peopleover there always travel abroad. The increasing numbers of cargo industry also have become aprofitable sector for Malaysia Airlines. In 2010, the increasing numbers of air cargo service has
  10. 10. 6risen to 26.5%. As a result of that, Malaysia Airlines can manage to get a lot of profit in thisgrowing industry by exploiting the opportunities and turn it into a profit.In threats, fuel price have been a problem for Malaysian Airlines for years. Inevitably, MalaysiaAirlines operating cost may also increase if the fuel prices increase. Not only that, internationalairlines such as Cathay Pacific Airways, Singapore International Airways and Garuda IndonesiaAirways are competing with Malaysia Airlines internationally and Air Asia domestically. Thethreat of new entrant also be a factor for Malaysia Airlines to deal with if financial institutionpolicy changes. Lower interest rate and credit loan willallownew airliners to enter the industry.The more new airliners enter the industry; the likelihood of Malaysia Airlines to struggle in thebusiness will be higher. In order to cope with that, Malaysia Airlines need to be more prepared.2.2 Competitive EnvironmentAccording to Mack (2010), competitive environment is defined or explained as a dynamicsystem for the business to compete positively in. At such, analysis technique of Porter FiveForces Framework is executed to understand the environment.2.2.1 Porter’s Five Forces FrameworkPorter five forces is a framework which analyzes the industry and business strategy developmentto determine the competitive strength (Porter, 1979). By using this analyzing technique,Malaysia Airlines can identify the threat of new entrants. Since the needs to start an airlinescompany are hard, consequently, the threat of new entrants has reduced. Furthermore, brandname is important to the customers these days. Adding to that, to go into this business not alsoneed high capital but also need an establish brand name. Thus, rather than start an establish brandname, the new threat entrants will focus more on the loyal customer. The only new threatentrants Malaysia Airlines need to focus more are the international airlines.
  11. 11. 7There are two companies that are competing against each other in the aircraft manufacturingindustry which are Boeing and Airbus. Since Malaysia Airlines are choosing Boeing as theirmain aircraft, therefore, Boeing has no option to increase their aircraft prices. If Boeing increasestheir aircraft price, most probably Malaysia Airlines will change their aircraft to Airbus.Consequently, Malaysia Airlines can use its bargaining power of consumer to bargain the aircraftprice. This undoubtedly will be an advantage to Malaysia Airlines to save their buying cost thatled Boeing with no other choice to sell its aircraft to Malaysia Airlines since they’re having atough time in competing in the aircraft manufacturing industry.The bargaining power of suppliers is depending on the numbers of alternatives the consumer has.For Malaysia Airlines, it is difficult to change to another aircraft manufacturer such as Airbussince their maintenance staff areexperienced with Boeing’s aircraft. By changing the aircraftmanufacturer, Malaysia Airlines need to spend a lot of money to train their maintenance staffwhich and switching cost is high.Therefore, the power of suppliers cannot be a negative factorsince Malaysia Airlines only rely on one aircraft manufacturer. Plus, the power of suppliers isinsignificant where Malaysia Airlines has their own aircraft maintenance subsidiary company.For fuel, the bargaining power of suppliers is not really high since in Malaysia there is only littlepetrol organization and the price is set by the government.2.2.2 Strategic GroupsStrategic groups are used to classify or identity the companies that are having the similarbusiness model or mixture of strategies applied. (Porter, 1980). As a well known 5 stars airlinescompany, Malaysia Airlines always offer various place of destinations throughout the worldwhere Airasia only provide certain well-known and popular destination. However, Airasia as thelow cost carrier, has advantages in competition as they can always attract customers in Asia thatalways go for cheaper option.
  12. 12. 82.3 Internal EnvironmentAn internal environmental analysis is an extensive review of all aspects of a companysoperations, internal guidance and mission. (wiseGEEK, n.d.). Value-chain analysis and resource-based view can be used as analysis tools.2.3.1 Value-chain AnalysisMalaysia Airlines primary income is based from logistics services and secondary activities areaircraft maintenance and technology development. By coordinate these value chain analysisactivities, Malaysia Airlines can have a lower cost structure and increase the value of outcomeproduct. By increasing the value of outcome product, Malaysia Airlines can compete better inthe industry by understanding the connection between each of the value-chain activity.Additionally, a proper coordination with their union, customers and suppliers can reduce costand adds up the bonding between customers and company itself. As its outcome, improvement ofthe performance in Malaysia Airlines primary and secondary activities can be achieved andhigher profit can be gained in the process. .2.3.2 Resource-based ViewAirline industry was slammed pretty hard globally in previous years. Terrorists attack on 11stSeptember 2001 still horrified the hearts of passengers globally. The strong competitiveenvironments by low cost carriers such as Airasia in Malaysia is also causing the national flagcarrier to restructure their operations. Their resources such as airplanes and crews quality need tobe concerned and look into deeply. As the oldest flight carrier company in Malaysia, they shalluse this advantage to continue to stay at the frontline in airline industry by using its availablesufficient resources efficiently with the help of government and come up with efficient strategiesas a way to compete and stabilize its own potision in airline industry. .
  13. 13. 93.0 STRATEGY FORMULATIONFormulation of strategies is necessary in order for Malaysia Airlines to achieve its mission andobjectives. An excellent structure and organize strategies will beneficiary to Malaysia Airlines incompeting in the airline industry.3.1 Business Level StrategyBusiness level strategy is very important where it will be use as a method to develop the strategyat a maximum level. In addition, it is crucial for Malaysia Airlines to implement and adapt to thisstrategy because it’s a way for them to make use all of their resources and competency in theairlines industry to accomplish its corporate level strategy.3.1.1 Industry Life CycleIn any industries, introduction, growth, maturity and decline development stages have to gothrough including industry products. Malaysia Airlines has gone through the introduction phasewhere they had been through a lot of difficulties and up and down since 1937. But unfortunately,Malaysia Airlines financial report has shown that the company is suffering from internal andexternal environment where they are facing profit losses. Malaysia Airlines is now in the growthstage where they are trying to impose a new efficient strategy to cover up their losses from 2008to 2012. Malaysia Airlines profit are at the highest in 2008 as much as RM15,570,141 anddecreasing slowly in the past 5 years and the lowest is in the year 2009 that decline as much asRM11,605,111. Factors that cause this financial downturn are the increasing price of the fuel,competitiveness of other airlines, poor marketing strategy and high operating cost. In copingwith this matter, Malaysia Airlines is now broadening their flight destination and suspend someflight from a destination that give less profit, improve quality of service in order to createcustomer demand and thus progressing in the growth stage.3.1.2 DifferentiationMalaysia Airlines impose differentiation strategy by creating various types of seat class such asEconomic Class, Business Class and First Class. This is to ensure that all the variety of services
  14. 14. 10that being offer are affordable for the different type of customers. It is also to increase theadvantages in competing by delivering the value added product to differentiate Malaysia Airlinesservices from other airline competitors. Adding to that, by letting the customers choose whattype of services they want, the loyalty of the customer would be increased. This shows thatMalaysia Airlines are coping with price sensitivity, switching cost, higher entry barriers andthreat of substitutes, in the five forces. As a result, Malaysia Airlines has successfully competedin the airline price wars that let the company to gain back profit in 2011.3.2 Corporate Level StrategyCorporate strategy signifies actions for Malaysia Airlines to take in gaining its competitiveadvantage. Specifically, to help Malaysia Airlines in an advantage where they can control themarket and maximise profit for a long period of time. Thus, this strategy helps Malaysia Airlinesto improve its strategy and at the same time giving them a great position in controlling themarket.3.2.1 Growth StrategiesAny company can practice four strategies specifically for the growing process. By now,Malaysia Airlines are targeting to penetrate the international control the local market. MalaysiaAirlines are trying to use its existing services and products to increase their sales. MalaysiaAirlines achieve it by strengthening the bond with their customer to keep using its airlines and atthe same time bringing new customer. For that reason, Malaysia Airlines are now starting toincrease their promotion using social and mass media. Other than that, Malaysia Airlines are alsoimproving their website to become more convenient and easy with less procedure for all thecustomers that wish to book a ticket.In surviving in the mature market, Malaysia Airlines should prepare more for its opportunity toexpand its growth. Malaysia Airlines as a pioneer and leading the local airlines industry shouldincrease more their competitiveness in competing in the international market. Taking ASEANcountries as a first step, Malaysia Airlines should understand more each of the countrygeographically, culture and religions. By developing this understanding, customers will tend to
  15. 15. 11choose Malaysia Airlines that in the end would increase their sales, profit and penetrate theinternational market.3.2.2 Corporate ParentingMalaysia Airlines as parent company of MAS Cargo, MASwings, MAS Aerotechnologies andetc. Malaysia Airlines as the corporate parent can achieve a lot of profit if they integrate all of itssubsidiaries company as an individual business unit. Malaysia Airlines can save cost inmanaging all of its subsidiaries company. Not just that, a proper integration between thesubsidiaries company can help Malaysia Airlines to derive its economic scale that will furthermove them in accomplishing their goals. Concurrently, Malaysia Airlines can help itssubsidiaries company and put them into an advantage where they can make use ofMalaysiaAirlines expertise and resources. As a result of that, Malaysia Airline’s subsidiaries companywill be enhance in controlling their budget, making decision and planning process. Nevertheless,if any economic catastrophes occur, therefore, it will become disadvantage for Malaysia Airlinesif its subsidiaries company is in the economic crisis.3.2.3 Strategic EvaluationIn following the variety formulation strategic plan, strategic evaluation is the most important partbefore implementing all of the strategies that been plan. The strategies will be evaluate andassess to find out its efficiency. In addition, the consistency of the strategies must be in a longterm where the use of the strategies itself can benefit Malaysia Airlines in the coming yearsrather than being a yearly plan. It’s obvious that not all of the strategies will become a success,but at least an initiative to evaluate the plan been done in order to minimize the risk. Thus,Malaysia Airlines need to select a proper and the best strategies that can help them in realizingtheir goal and objectives.3.3 International Strategy and GlobalizationGlobalization is a worldwide issue where customer’s needs and wants are being standardized. Itcan cause positive and negative effect on any organization depending on how they cope andmake use of the globalization itself as an advantage to them. For instance, the globalization onfuel price, landing fees and aircraft spare part prices are now standardized accordingly. But
  16. 16. 12luckily Malaysia Airlines have their own resources for these three needs where they have theirown aircraft maintenance subsidiary company and support from Malaysia government.Inmarketing their product, Malaysia Airlines can use its global brand name to maximize marketingefficiency. For this reason, Malaysia Airlines should use this opportunity to expand their wing inthe international market. Nonetheless, Malaysia Airlines also need to be aware and choose theright strategy if they want to penetrate the market.4.0 STRATEGY IMPLEMENTATIONWell plan strategies are not going to work well with an organization if it’s implementedinadequately. In getting success in implementing the strategies, Malaysia Airlines need toincrease their efficiency in communication, managing their resources and improve theiremployee’s morale. Leadership also playsits role in making Malaysia Airlines to gain success inimplementing the strategies. Therefore, all the staff in Malaysia Airlines should work together inrealizing the strategies to become reality.4.1 Strategic LeadershipThe leader is the only one that can determine the future of any company. Without them, thechances of any company to collapse and bankrupt will be high. That is because the needs of aleader in a company affect the path of the company whether it can generate income and bevictorious or it can only make profit losses and bankruptcy in the end. Not a lot of people can bea great leader but everyone can have the traits of a leader which are visionary, inspire and drivetheir followers to achieve success.It can be said that Malaysia Airlines leadership has weaknesses in scenario planning that causesmarket share and revenue losses. For this reason, leadership of Malaysia Airlines should applythe vision trait in order to cope with changes and for the sake of the company continuity. Whenleaders are able to master the vision trait, it will be easier for them to collaborate, motivate, trust,and interdependence amongst their staff. Plus, the coordination and path of Malaysia Airlineswill be in the same direction of achieving common objectives that may lead Malaysia Airlines toa bigger industry.
  17. 17. 13Malaysia Airlines is now operating in a competitive environment. So, the vision of leadershipcan’t be sluggish. Leader task is not just dealing with external factors but also playing animportant role on observing employee’s attitude. Therefore, a leader should know and oblige toinspire and motivate employees if they’re lacking with something that will affect the vision ofthe company. Giving the employees rewards are the best thing to do in making the companyvision to become a reality.Leader needs to be proactive in handling situation. The needs of keeping the vision on the righttrack and the same time monitoring its progress is necessary so that Malaysia Airlines will bemore prepare in enduring and responding towards the changes that happen. Moreover,democratic leader is important where the leaders itself can put themselves with the employeesand communicate with the employees. Encouragement and understanding can be developingwith the employees if any conflict happen and then settle together as a team. By doing this, thework rate and performance of Malaysia Airlines will improve and in the end will increase theprofit and maximizes the resources that they have.4.2 Change ManagementCompetitiveness in airlines industry has become fiercer than before. Due to that, MalaysiaAirlines should be ready to embrace and adapt to changes in order to compete in the market. Inachieving this, Malaysia Airlines should improve their state division management. This isbecause every state division especially in Sarawak is having trouble with the competitivenessfrom low cost airlines such as Air Asia and the new low cost airline, Malindo Air. Therefore,Malaysia Airlines should take a strategic change to their state division in coping with theexternal environment.Poor leadership has been one of many factors that cost their profit losses and customer loyalty.By implying a proper marketing strategy, Malaysia Airlines will be able to challenge the localairline industry. Adding to that, improvement in every managing structure in each state divisionis a must since the capabilities and set of skills of each employee can be outdated under some
  18. 18. 14circumstances. Thus, changes and improvements are needed in order to comply with customer’sneeds and achieving goals.4.3 Role of SystemsExcellent plan strategies won’t work unless leaders and human resources play their role inimplementing the strategies.4.3.1 Organizational StructureOrganizational structure is a fundamental that can affect the strategy implementation. Effectiveuse of labor by giving specific task can contribute an advantage in competing in the industry. Ingeneral, the four organizational structures are functional, divisional, entrepreneurial and matrix.Malaysia Airlines are now using divisional structure to conduct their corporate parenting bydividing resources in each division. It is essential for them in order to gain profit. Using thisstructure, Malaysia Airlines are decentralizing the power of making decision to each division andthat give a clearer goal to the employees to achieve. Nevertheless, the plentiful number ofdivisions will cost a lot and sharing of knowledge will be lesser. To respond to that, MalaysiaAirlines should manage all the division under one command center by using network structureand all the information gathered need to be transmitted to headquarter.4.3.2 Organizational ProcessMalaysia Airlines organizational processes are of consist of entrepreneurial and competence-building. In entrepreneurial process, employees will bemotivated by delegating some tasks tothem that of course will increase their discipline and efficiency compared to strict control. Inbuilding competency, employee differences of capabilities will be given a specific task to themin order to gain trust amongst the Malaysia Airlines and the employees itself. By implementingthis, a more proactive and efficient workforce can be produced in the process of achieving thegoals.
  19. 19. 154.3.3 Strategic Control SystemsIn improving the employee’s performance and at the same time retaining their performance,control and reward systems are a must. Well rewarded employees undoubtedly will perform verywell. By implementing this, Malaysia Airlines can manage to deliver consistent services to theircustomers. Plus, motivated work force surely will lead Malaysia Airlines to gain profit. As aresult of that, employees that perform with excellence and if the satisfaction towards their job arehigh, the probability of staying longer with Malaysia Airlines are also high. Thus, this will surelyeliminate the cost of looking for new employees.Malaysia Airlines as corporate parent also need to use control and reward system in order toincrease the motivation of the employees to achieve goals that being set. By means of givingthem reward based on their performance, the employee’s tendency of performing at their bestmost likely will be high. By doing this, a more standardize employee performance can beachieved. In addition, controlling the employees is not necessarily being strict with them butbeing understanding is the greatest option to choose where employees automatically will increasetheir work rate that will lead Malaysia Airlines to compete vigorously in the industry.4.3.4 Corporate GovernanceCorporate governance is where business is managed for the shareholder according to the rightand wishes of the stakeholder. It is also where an organization is responsible for thestakeholder’s interest in the organization itself. Corporate governance ensures that thestakeholderreceives something in the forms of money or others.Malaysia Airlines should take theapproach in implementing what they want to do to the stakeholder so that the stakeholder willfeel secure. Openness with stakeholder is a must where company’s finance and planmust beshare to win their trust. Any decisionsare made by Malaysia Airlines can affect stakeholder trust.Hence, leadership and management of the organization are responsible in balancing the needs ofstakeholders. Finally, a more synchronize and efficient corporate governance is necessary inplanning strategies which can fit the organizational structure that in the end getting control of themarket.
  20. 20. 16ConclusionStrategic management is very important for every organisation. Small organisation to giantorganisation requires strategic management to expand and improve their managing ability.Adding to that, it can also help them to compete in the industry where all the strategies can beused to cope with the industry competitiveness itself. Strategic analysis, scenario planning,PEST and SWOT analysis, Porter five forces, strategic formulation, strategic implementation;and other strategies are important to imply within the organization. Not just for the sake ofgetting profit, but also for long term future. All of the strategies mentioned above can helpMalaysia Airlines to increase their profits and cover their losses. Not just that, the strategies alsocan help dealing with the external factors such as competitors, policies, and most importantly theinternal environment itself. Efficiency, cost saving and opportunity exploitation can be achievedif the strategies are carried out with proper planning. In conclusion, strategic management are notjust a strategy but it can make as a stepping stone to achieve success where it can be used toanalyze strengths and weaknesses that surely will put Malaysia Airlines at great advantages.ReferencesAnsoff, I. (1965), corporate Strategy, McGraw-Hill, New York.
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  22. 22. 18Hitt, M. A, Ireland, D, Hoskisson, R, (2009), Concepts Strategic Management: Competitivenessand Globalization, ninth edition, South Western, a part of Cengage LearningIreland, Hoskisson, Understanding Business Strategy. SOUTH WESTERN.Kanter, R.M. (1983), The Change Masters. Simon & Schuster, New York.Kaplan, R.S., Norton, D.P., (1996), Using the balanced scorecard as a strategic managementsystem, Harvard Business Review, 74 (1), 75-85Lindgren, M. &Bandhold, H. (2009), Scenario Planning: The link between future and strategy,Palgrave MacmillanLynch, R. (2009), Strategic Management, 5th edn, Prentice HallLussier,R, N, Achua, C, F (2010), Leadership: Theory, Application, & Skill Development, FourthEdition, South Western"Malaysia Airlines Subsidiaries".Malaysia Airlines.Mintzberg, H., Waters, j.a., (1985), Of Strategies: Deliberate and Emergent, StrategicManagement Journal, 6 (3), 257-72Malaysian Airline returns to profit in 2007, exceeds financial targets. Forbes. 25 February 2008.Mohamed, ZA, Ho, JA. & Wong, FY. (2010), Strategic Management, Oxford University Press.Porter, M.E. (1980) Competitive Strategy, Free Press, New York, 1980.Porter, M.E. (2004 [1985]), Competitive Advantage: Creating and Sustaining SuperiorPerformance, Free Press, reprinted in abridged form in: De Wit, Bob & Meyer, Ron, Strategy.Process, Content, Context. An international perspective, 3rd edition, London: Thomson, p. 258-267.Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard businessReview, January 2008.Schoemaker, Paul J.H. “Scenario Planning: A Tool for Strategic Thinking,” Sloan ManagementReview. Winter: 1995, pp. 25-40."The MAS Way: Business Turnaround Plan." (Archive) Malaysia Airlines. 27 February 2006. p.44.Ulrich, D, Smallwood, N, (2012), What is Leadership?, Advances in Global Leadership, Volume7
  23. 23. 19"World Airline Directory." Flight International. 30 March 1985. p. 94."3rd Floor,Administrative Building, MAS Complex, Subang International Airport, Subang, Selangor,Malaysia. MA 37614."

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