TABLE OF CONTENT

Title Page

1.0 INTRODUCTION 1

2.0 ELEMENTS OF MICRO ENVIRONMENT 2

3.0 ANALYSIS ON EFFECT OF THE ELEMENTS TO THE 4

ORGANIZATION

4.0 RECOMMENDATION OF IMPROVEMENTS 6

5.0 CONCLUSION 7

6.0 REFERENCE 8
1.0 INTRODUCTION

Understanding the micro environment in managing a business or organization is very

important and it will determine the success and influence decisions in a business carried on.
Microenvironment can influence a business decision that is made for a long time and it is an
element or elements which cannot be controlled. Micro environment can directly affect the
organization's operations and give a high and faster impact. In fact, this environment can also
provide an opportunity or a threat to a company or organization. The business world has five
elements in micro environment that had to be faced by all businesses that are customers or
consumers, competitors, suppliers, financial institutions, non-governmental organizations or
NGOs as well as government agencies and related agencies.

The organization selected is the budget airline, AirAsia to see the effect of the micro-
environment to the organization. AirAsia was established on December 20, 1993 and started it
operations on 18 November 1996. AirAsia is based in Malaysia and is the first low-cost carrier
company's in Asia. AirAsia's registered office is located in Petaling Jaya, Selangor, while, its
headquarters is in Kuala Lumpur International Airport.

It was originally founded by a government-owned company, DRB-HICOM. On

December 2, 2001, the company is burdened with a very large debts and have been taken over
by Tony Fernandes through his company Tune Air Sdn. Bhd. He is a former executive of
Warner Tune. Tune Air Sdn. Bhd. is the name adopted after Tony took over the token price of
RM 1.00. Since the takeover, Air Asia has managed to record and won numerous awards and
compete fiercely with other airlines including Malaysian Airline Sdn. Bhd. (MAS). Only in
one year, Tony Fernandes has been successful in resolving the debt burden of the company. He
has managed to improve the performance of AirAsia and recorded a high profits.

The vision is to become the largest low cost airline in Asia and serves the 3 billion
people currently do not get the airline service because of poor response and high fares.
AirAsias mission is to treat the workers like members of a big family and be the best company
to work, create an ASEAN brand to the world, reaching the lowest cost that makes anyone can
fly with AirAsia and maintain the highest quality products, includes technology to reduce costs
and increase the level of service. Valued preferred by AirAsia are emphasizing safety, the use
of aircraft for maximum, low cost and no exaggeration, more efficient operation, more
extensive distribution systems and innovative as well as point to point network.

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2.0 ELEMENTS OF MICRO ENVIRONMENT

2.1 The first element is customer. Customers are consumers who purchase goods or services
offered by the organization. The customer is the main target group of entrepreneurs
organization or company. Customers considered the "king" because there are no customers, no
business. Classification of customers ranging from individuals and groups of people whether
in schools, universities, hospitals or government offices. Additionally, organizations or other
companies can also be a client to other organizations as well as by customers comprise the
country or abroad. For example, the consumer market for AirAsia also consists of customers
who are outside the country such as Thailand, Indonesia, and Philippines.

2.2 Second, the provider of the individuals or groups that distribute inputs to organizations or
entrepreneurs such as raw materials, equipment, machinery and others. A good provider will
offer to the businessman or the organization of the high quality, low price, delivery on time
and a longer repayment period and reliable. For example, AirAsia Bhd opportunities for food
and beverage (F & B) to become suppliers of food to the flight passengers. AirAsia now offers
about 20 choices of in-flight meals produced by local suppliers.

2.3 Third, the government or agency in which the activities of the organization through various
regulations enacted to help coordinate, support and develop the organization or company.
Various agencies are also providing advice, training, lending, leasing and other premises. In
addition, the government also provides for a license, permit, citing a variety of taxes and duties
to the organization with the aim of monitoring the organization. Organization or company must
be sensitive to the tax implications on cost and profitability of the company because the
government affecting entrepreneurial activity through the implementation of policies. For
example, the Civil Aviation Act 1969 issued by the government serve as guidelines to airlines
including AirAsia and used as a control, restrictions and conditions by the government.

2.4 Fourth, the financial institution is a source external to finance a new business or expand an
existing business. Assist financial institutions in terms of financial management companies

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such as commercial banks, finance companies, insurance companies and venture capital
companies. Most organizations or entrepreneurs need capital market financing from financial
institutions to start or to expand the business. For example, AirAsia X, which is a company
under Tiger group has made a loan with the bank worth millions of ringgit. However, given the
profitability of the company is good, the bank has no problem to provide a loan to the company
AirAsia. This can be seen when the company AirAsia managed to raise about US $ 250 million
(RM775 million) profit in 2012.

2.5 Fifth, non-governmental organizations (NGOs), in which NGOs can influence the
organization through various campaigns and publicity as well as affecting consumers and the
government. The organization must be sensitive to the role of these bodies and sensitive issues
in the community such as sanitation issues, the environment, health, consumer safety, halal and
haram and others. Non-governmental organizations (NGOs) as an intermediate in the
marketing that helps the company to promote, sell and distribute the product to the buyer.
NGOs also help the company find customers or make sales to customers. For example, airline
AirAsia require a mediator to facilitate the promotion of services sold. Among Physical
Distribution Company assists companies to store goods Airasia customers who have used
services Airasia to send the goods to which the recipient reaches his destination.

2.6 Sixth is the competitor for an organization or business to identify competitors and
understand the ills and competitors activities. Analysing the level of competition in the
industry. Employers also need to know the weaknesses and strengths as well as weaknesses
and strengths of competitors. Organizations or companies must use certain strategies that can
effectively resolve the competition. For example, in terms of price, promotion, product,
distribution and premise. Airlines AirAsia started operations at a low cost compared to its
closest competitor, MAS. In addition, Tiger offers a way to purchase tickets on-line via the
internet. In fact, AirAsia also create Tunes hotel for passengers who need basic accommodation
while they are traveling.

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3.0 ANALYSIS ON EFFECT OF THE ELEMENTS TO THE ORGANIZATION

3.1 Effect from the government or the relevant agencies such as the investor. Investors
contribute capital in business organization aims to make a profit. The goal of return on
investment set by the investor has influence decisions, policies and business activities of the
organization. Some investors inject capital in business organization whether in the form of
currency or high technology because they have a common interest with the business of the
organization. Investors will be engaged in the business travel organization that has been
invested. The effect will be bound and led to the organization under the control of the investor.
This resulted in the organization feel not free to make decision and every decision or planning
should be discussed in advance with the investors. For example, the cooperation made between
MAS and AirAsia in which MAS shares are 20.5% and AirAsia shares are 10% only. The
situation is alarming because it creates a cartel that monopolize the country's aviation sector.
In fact, it was already known that AirAsia was previously the competitor for MAS and it will
creates a bias impact.

3.2 Effect from the supplier where the firm or individual providing the resources needed by the
company or organization to manufacture and produce products and services begin to exploit
price and goods. Provider as a vital link between buyers and companies or organizations in the
delivery system. It will affect the terms of the prices at which the power supply control
fluctuations in the price of goods supplied. This condition causes the price and value of the
products produced in the market is not fixed and is not consistent, because the price can reach
the maximum or minimum level. For example, suppliers to lessen the quality of products and
services available on the market or required by the company. Furthermore, suppliers with their
own bargaining power affect the work and structure of industry costs.

3.3 Effect from the elements of financial institutions. Although this institution helps the
organization financially, however, factors such as interest rate, loan amount and easy or
difficult loans will affect the business of the organization. Loans from the institutions of finance
not only difficult to obtain for new traders because they have no record but had to pay interest
rates the impact of which will burden the organization or new businesses. For example, to

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organizations or companies that are just starting out and need a huge capital. It is difficult for
a company or organization to gain the trust of anybody existing financial institutions.

3.4 Effect from the competitor. Inevitably in the marketing world if the competitors lower the
selling price of the product, do organizations or companies have to remain silent or take similar
action? In addition, when the competitors are using the latest technologies in production, do
organizations or companies have to follow the way of competitor? This are the questions that
should be considered by the organization as a competitor behaviour affects the strategy of the
organization and of course affect the way organizations react to the environment. Marketing
world today is not focused on competition within the country, but the competitors on the day
to reach the border. This is what globalization and borderless world. It gives a good impression
to the development of the organization or company to strengthen the level of organization. For
example, MAS is the main competitor to AirAsia. Therefore, AirAsia management system
must be smart in planning the strategic planning to enhance the marketing and sales of the
company to be on par with the airlines of the other.

3.5 Effect of the elements in customer satisfaction. All product and output exists after a review
of the market is made. No organization can survive without customers and users. The impact
of customers to the organization is positive if the organization or company able to provide good
and excellent service to customers. Although organizations have to deal with the vagaries and
whims of customers, customers have much impact on the company because of purchasing
power is high.

3.6 Effect of the elements of non-governmental organizations or NGOs where the positive and
negative effects on the organization or company. This is because non-governmental bodies
seems to help the company in making the promotion of the company. In fact, from a company
that does not know about the community began to realize the existence and benefits of the
company. However, this NGO has also had a negative effect on the organization or company
with negative issues that could threaten the stability of the company. For example, non-
governmental bodies when viewed from a positive outlook also helped the airline AirAsia in
promoting and introducing the company in the eyes of society and the world through a

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particular advertisement. However, from the negative point of view, the NGO also defamed
the company with hot issues such as the AirAsia is accused of being cruel of not allowing
mothers and children affected by measles to catch a flight.

4.0 RECOMMENDATION OF IMPROVEMENTS

The organization must constantly evaluate whether the release of the product or
equipment can meet the user requirements or not. The outcomes need to have innovative,
creative and thriving so that the needs and tastes of consumers in line with technological
developments the world today. For example, AirAsia are necessary to make arrangements to
ensure the success of a promotional strategy that has been carried out. The services provided
should be improved so that customers do not complain. The aim of the company is to provide
customer satisfaction.

Organizations need to take any action that can meet the needs of investors in the short
term as well as long-term investors. For example, AirAsia should play a good role with the
government or agencies related to all issues and matters so that the problems can be discussed
in a good and transparent way.

The organization needs to recognize the suppliers, constantly interacting and

communicating with them. In fact, the organization should establish and maintain a good
relationship with suppliers as suppliers supply materials needed by the organization to be
merchandise that can be sold and meet consumer tastes. For example, AirAsia has set
conditions to the suppliers who want to work together to meet the demand and supply that they
need to sell high quality products and services. However, if the supplier fail to comply the
needs, both the suppliers and company can discuss together and find a solution.

The organization needs to develop strategies that give them a better rate of return.
Organizations or companies need to know their strengths and weaknesses compared to
competitors. This is because it is easy for the organization to carry out strategies to overcome
competitors. For example, a promotion strategy which was introduced by AirAsia that was
highlighting the advantages and benefits of the company compared to other competitors.

The financial institution where the authorities or parties involved such as financial
agencies and the finance ministry have to be smart to play their respective roles. In fact,

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conditions and policies adopted before this should be relaxed based on the ability of an
organization or a company. Moreover, in determining any company or organization that
deserves either loans or financial assistance, should be conducted in a fair and equitable
manner. For example, AirAsia is fortunate to be given the trust by the bank for a loan during
the initial intake of Tiger even with high volumes. This is because the banks are confident in
the company.

5.0 CONCLUSION

When an organization starts to operate, it is not in a situation of strategic or unchanged.

The organization is in the wider environment. In this environment, there are forces that can be
controlled and cannot be controlled, which will provide an opportunity and a threat to the ability
of a company or organization to continue to operate. Environment refers to the factors that
impact positively or negatively on the ability of a company or organization to continue to
operate and grow, while maintaining transaction with buyers and target consumer. Changes
always occur in the environment and it can happen gradually or suddenly and unpredictable.
This can give the impression of depth and surprise to the company or organization.

What can be seen, the microenvironment consists of forces that are inside and outside the
company or organization for small and generally cannot be changed by the actions of the
company or organization only. In other words, a company or organization can be influenced
by the environment, but also a company or organization cannot influence this environment. A
company or organization need to know to design strategies that should be adjusted so that a
company or organization can obtain and maintain a company or organization, especially in the
competitive environment. This environment is seen indirectly connected with the company or
organization. It is clear here, to make good planning, company or organization must understand
microenvironment.

In conclusion, AirAsia can properly manage its micro environment and making it a very
successful company.

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 6.0 REFERENCES

1. MyMetro by Hafiz Ithnin, 2013

2. Philip Kotler, Gary Armstrong Principles of Marketing 14th Edition 2011

3. Strategy and environment as determinants of performance: Evidence from the Japanese

machine tool industry, Suresh Kotha andAnil Nair, 2007

4. http://www.astroawani.com/news/author/goh-thean-eu