A Strategic Analysis of Qantas and the Australian Airline Industry Essay

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The undermentioned paper provides an analysis and rating of the current market place of Qantas and the Australian Airline Industry. By measuring the company both internally and externally. this study will measure Qantas’ strengths and failings. In add-on to this. the study will concentrate on the specific elements that enable Qantas to obtain a competitory advantage over its rivals.

Our squad has established that Qantas is confronting direct competition from new market entrants every bit good as menaces from it’s ain development – Jetstar. As a consequence. Qantas has lost some of the market portion over recent old ages. However. while the dainty of new entrants has affected Qantas. new chances have become available and have encouraged the air hose to believe outside the square.

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The Global Financial Crisis presented many industries with a challenge and Qantas was non excluded from this. In add-on to this. the September 11 onslaughts in 2001 mostly affected the industry as clients became loath to go.

Consequently. it is clear that Qantas has been faced with a assortment of challenges that have resultantly prompted them to believe of alternate ways to obtain a sustainable competitory advantage. Partnering with Tourism Australia. developing Qantas as a trade name. and painting the boeings to publicize an Australian life style have all been successful at accomplishing a competitory advantage. It is recommended that Qantas continues to vie with new market entrants by concentrating on developing the trade name further and bring forthing greater trueness.

Qantas & A ; the Airline industry

Qantas Airways Limited is an Australian public company that obtains its gross predominately from the operation of air hoses. The company operates chiefly in Australia. New Zealand and Asia and is besides established in the UK and the USA. Globally. Qantas employs over 35. 700 persons. At June 30. 2010. international air hoses in Australia were reported to be deserving $ 14. 924. 000. 000. with Qantas estimated to keep 25. 60 % of the market portion. From the same survey. the domestic air hose industry in Australia was reported to be deserving $ 12. 801. 000. 000 with Qantas accounting for 73. 50 % of the market portion. ( IbisWorld. 2010 )

Over recent old ages. the drastic addition in fuel monetary values coupled with the planetary economic crisis has resulted in the increased cost of airfares. Low income. high unemployment degrees and ineluctable catastrophes like the recent ash cloud have seen the demand for air travel in Australia cut down significantly. Specifically. the Qantas Group’s industry gross declined an estimated 1. 8 % per annum over the five old ages through 2009-10. ( IbisWorld. 2011 ) . However. it has been forcasted that the industry with grow by 9 % over 2011-2012. making a gross of $ 13. 400. 000. 000. The possible growing has been attributed to several factors. for illustration. increases in concern related travel and the turning popularity of cheaper air hoses. ( IbisWorld. 2011 ) See Fig. 1

Qantas’ winging concern operates under two chief trade names. Qantas and Jetstar. Jetstar was foremost launched in 2004 and is Qantas’ cheaper air hose.

( IbisWorld. 2010 )
Qantas gross from international flight is reported to be far weaker than it’s domestic concern. While international winging accounted for 22. 5 % of gross over 2009-2010 for Qantas. this figure was well higher 2004-2005. New market entrants and strong rivals were said to be responsible for this diminution. In peculiar. the development of Jetstar and the ability to wing internationally at low-priced proverb Qantas’ international flight concern bead from 46. 3 % of industry sum in 2004-2005 to 23. 0 % in 2010-2011. ( IbisWorld. 2010 )

Conversly. Qantas’ domestic flights generate about 70. 4 % of entire gross revenues and are increasing easy. However. while the domestic flight popularity is increasing. the growing rate is slow in comparing to the industry. This is due to the fact that Qantas has lost some of the market portion over recent old ages with the entryway of new rivals. for illustration. Virgin Airlines and Tiger Airways. In add-on to this. the entryway of Jetstar into the market and the recent fiscal crisis saw more riders aiming the low-priced air hose over Qantas.

The undermentioned probe will include an analysis of Qantas’ external environment by using a Porter analysis of the industry’s competitory forces. In add-on to this. the study will include an analysis of the internal environment at Qantas by carry oning a value concatenation analysis and placing the resources and capablenesss that provide Qantas with a competitory advantage over its challengers. * Please note: All dollar values listed throughout the study are in Australian dollars.

External Analysis

When finding the external forces that affect the domestic air hose industry there are four countries that need to be discussed ; political. environmental. societal and technological. In discoursing these countries we will be able to find what strengths and failings arise for Qantas as a consequence. During 1990 the Australian authorities decided to deregulate the domestic air hose industry ( Bureau of Transport and Communications Economics. 1995 ) . This has opened up the chances for new air hoses to make concern in Australia. For Qantas this could be seen as a menace as there are traveling to be new participants in the market as it has opened doors for low-priced bearers to come in. However. it may besides be an chance for Qantas to distinguish themselves from the remainder of the domestic air hoses and be the lone one offering a premium service. The most recent and economically disabling factor that has influenced the air hose industry is the Global Financial Crisis ( GFC ) ( Nuguid. 2011 ) . Harmonizing to the House Standing Committee on Infrastructure. Transport. Regional Development and Local Government ( 2009 ) the touristry industry in Australia was hit the hardest which declined at a worse rate than the remainder of the economic system.

As a direct consequence of this the air hose industry specifically has besides seen a important downswing. This presents a possible failing or menace for Qantas who may come to experience that their premium monetary value for quality service is non plenty to acquire the clients to wing with them. Probably the most recent and most outstanding societal alteration that has affected the air hose industry was the September 11 terrorist onslaughts in America ( Ito & A ; Lee. 2005 ) . Although this was non in Australia it still had a big impact on people’s penchants when it came to domestic and international travel. This along with an aging population is decelerating down the air hose industry as the concern for safety of riders has risen. This could be a possible chance for Qantas to offer. in add-on to great quality. a higher safety evaluation for their flights and assist them accomplish an advantage against the resistance. There are ever new engineerings available to better service and quality ; an illustration of such is the debut of the regional jet ( Brueckner & A ; Pai. 2007 ) .

This new engineering provided better service quality and higher flight frequence to the air hose industry. All new engineerings represent an chance for Qantas to increase the quality of their services. This peculiar engineering besides provides Qantas with the chance to increase their flight frequence. The authorities ordinances of the air hose industry in Australia are really slack in comparing to other states taking to fewer barriers to entry. peculiarly at the low-priced terminal of the market. This makes it far easier for possible entrants to come in into the market. So far since the deregulating in 1990 two new major domestic air hoses have entered and done so successfully ; Virgin Blue and Tiger Airways ( Bureau of Transport and Communications Economics. 1995 and Bureau of Intrastructure. Transport and Regional Economics. 2010 ) . Although there have besides been a figure of entrants that have failed to prolong their topographic point in the air hose industry this is non considered as Porter looks merely at the menace of new entrants. non whether entry really occurs ( Porter. 2008 ) .

Pilots have a immense influence over what goes on in the industry as evidenced by the 1989 pilot work stoppage ( Schulte & A ; Zhu. 2005 ) . Even though the pilots were unsuccessful in this case this shows that pilots are much more likely to be able to accomplish alteration in the industry if they choose. Presently there are merely two major providers of aeroplanes. Boeing and Airbus. Bing the merely two major providers in the industry gives them a batch of power to find monetary values and quality. Passengers have a batch less power in the air hose industry as they by and large don’t acquire a whole batch of pick or state in what happens. First. there are high shift costs associated with altering to another air hose. Second. there is non much difference from one air hose to another particularly if the air hose is viing on quality or service ( Investopedia News and Articles. 2010 ) . For the domestic air hose industry at that place truly isn’t any major replacements.

The car industry and perchance the locomotor industry have the most influence here but if you are going from Sydney to Perth there truly is no alternate to the aeroplane. The chief determiners that make air travel non-substitutable include ; clip taken to go. the cost of travel. personal penchant and convenience ( Investopedia News and Articles. 2010 ) . There a four major domestic airliners that have the bulk of the market portion in Australia ; Qantas. Virgin Blue. Tiger Airways and Jetstar ( Dixon. 2006 ) . With Qantas denoting late that they are traveling to concentrate more closely on international services instead than domestic this could alter the market portion mix for the staying three rivals. In sing the assorted forces that determine industry competition we can besides pull a decision as to the profitableness of the industry. Due to the aforesaid forces we can state that the profitableness of the air hose industry is rather low. which is besides evidenced by Porter ( 2008 ) . With regard to Qantas we can state that the menaces of new entrants in the market is non rather every bit high for them as they are offering a premium service. non low-priced and so the barriers to entry for premium services are much higher.

Internal Analysis
Value Chain Analysis
“Value is the sum that purchasers are willing to pay what for a house provides them and the measure it can sell. ” ( Osegowitsch. 2011: 82 ) Conducting a value concatenation analysis. a construct popularized by Michael Porter. offers insight and apprehension of a business’ activities that give it sustainable. competitory advantage. Qantas’ offerings to the market. harmonizing to its mission statement as of its Annual Report 2010. is safe. air hose travel at sensible monetary values to both international finishs and domestic 1s. through its complementary trade name Jetstar. The Qantas Group asserts that it strives for a sustainable hereafter through a two-brand scheme ( that of Qantas and Jetstar ) supported by its portfolio of concern investings. This internal analysis will seek to analyze The Qantas Group’s scheme through measuring its primary activities and its support activities.

They use Altea Inventory. which is an inventory direction merchandise. This system for illustration. has helped Qantas proctor rates and menus with immediateness. “Altea Inventory provides instant informations on demand and engagements to set pricing policy as possible rider tonss rise or autumn. Altea enables Qantas make up one’s mind where to do seats available at certain monetary value levels” ( Amadeus Case Study ) Harmonizing to CIO John Willett ; Design lucidity means that major agenda alterations are comparatively easy to suit. leting more efficient usage of clip of Qantas proficient staff. The flexibleness that came with Altea allows Qantas to concentrate on gross and how to better it throughout the twelvemonth. ( Amadeus Case Study ) With respect to onsite stock list. Qantas has extended stock list handiness “to support care and inspection and repair plans for a broad scope of client technology demands. ”

Operationss
Qantas is divided into 3 groups ; Commercial. Customer and Marketing. and Operations. Its Operations group comprises technology. airdromes. providing. flight operations. operations be aftering and control and Qantas Aviation Services. These

To maintain their operations running expeditiously. Qantas has its ain technology division. called ‘Qantas Engineering’

Output Management
Frequently used in air hose. hotel and advertisement industries. Involves the construct of Qantas offering a ‘perishable’ good – being their aeroplane place that if isn’t sold prior to flight. will ‘perish’ . “For airlines. output directors use widely accepted statistical tools to calculate seat demand. taking into history historical information and seasonal variables. For illustration. there is heavy demand on domestic paths during weekday peak periods and to leisure finishs during vacation periods. but there may be troughs in demand at other times. Each flight has its ain single prognosis. Output directors look at factors every bit diverse as economic swings which affect longer-term demand. seasonal agenda alterations and alterations in aircraft capacity to accomplish an optimum mix of menus. In today’s environment. and without yield direction. air hoses would happen it more hard to do a net income and clients would be denied the wide scope of menus and services offered. ” ( Qantas Fact Files )

Selling and gross revenues
Qantas have their ain ‘customer and marketing’ division. They have heavy engagement in selling and position it as critically of import. The “Still Call Australia Home” was re-launched given slack in net incomes in 2009. The original run cost $ 6m but in 2009 when it was re-launched. they “deliberately merely filmed in Australia and we have used the international footage we have from old runs to pull off the costs associated with it” ( The Australian. 2011 ) harmonizing to CEO Alan Joyce. * Qantas appointed new caput of Marketing in 2009 ( hypertext transfer protocol: //www. bandt. com. au/news/qantas-makes-marketing-move )

Qantas’ secondary activities
Procurement
Normally. Qantas seeks proposals from assorted providers – so as to keep a degree of competition amongst providers in an effort at having the best offer. However on occasion. they do merely seek the services of a individual provider. As is consistent with their procurance procedure. Qantas ask for formal commands or stamps and one time they have been received. commence dialogues with prospective providers. At times. this can replace the tendering procedure. but usually it is done alongside it. as a farther measure in their competitory benchmarking procedure. ( Qantas Procurement Report: p. 1 ) Ultimately. their purpose is to beginning the best service from providers. at the most competitory monetary value. in a mode that is understood and just harmonizing to all participants.

Human Resource Management
The Qantas Group employs about 37. 000 people. 90 % of which are based in Australia. ( Qantas Website ) The magnitude of Qantas’ operations and its copiousness of employees have forced Qantas to develop competitory Human Resources ( HR ) schemes and maintain competitory advantage. HR is divided into four subdivisions in The Qantas Group: 1. Corporate

This includes duties such as wage. employee benefits. industrial dealingss and other cardinal undertakings that basically make this group in charge of organizing schemes that will be carried through the other degrees of HR 2. Business Sections

HR squads within peculiar concern sections of The Qantas Group. who deliver and implement the schemes as formulated at the Corporate degree 3. Shared Servicess
The cardinal support unit that offers to help employees. respond to enquiries and basically offer support in all the typical HR duties such as enlisting and wage 4. Learning and Development

This subdivision relates to the development of developing plans to learn. train and farther better Qantas employees.
This layout of HR duties is proven to be an effectual construction for many big companies and has served Qantas efficaciously.

Information Technology
The Qantas Group’s IT division is preponderantly based at a caput office in Mascot. Sydney. The IT division consults and plants within the countries such as: * Undertaking and Program Management * Business Systems Analysis

* Testing and Quality Assurance
* Services and Relationship Management
* Architecture ( Qantas Website – Information Technology )

Infrastructure
Qantas’ substructure is huge and of course demanding of high volume and efficiency given the company’s line of concern. With a fleet of 254 aircraft. the care of “superior infrastructure” ( Qantas 2010 Annual Report. p. 9 ) . as coined by The Qantas Group. is imperative. The company manages the aircraft. in add-on to 14 international sofas every bit good as several multi-tiered domestic sofas. The reclamation of the fleet every bit good as other substructure is made possible through an “investment-grade recognition rating” . doing Qantas a desirable borrower for loaners. Furthermore. the company systematically experiences strong cash-flows and as such. is able to supervise and guarantee high liquidness. The Qantas Group’s substructure is supported by a system of effectual adoption and investment. every bit good as maintained liquidness so its non-current assets and bing substructure is unafraid and kept up-to-date.

Qantas’ Resources and Capabilities
When analyzed merely. The Qantas Group boasts many capabilities/resources that potentially offer it competitory advantage. including ; * Resources: * Airport locations/hangers

* Engineering installations
* Trained forces
* In-flight nutrient ( Neil Perry’s engagement ) * Qantas lounges/restaurants * Storage installations for stock list. runing from machinery to uniforms * Training installations for flight attenders and pilots * Capabilities: * New IT systems to advance more efficient operations – such as the development of e-tickets * New development in cost effectual service ( e. g. with nutrient. cutting costs on ingredients or possibly where the nutrient is prepared ) * New developments for the ‘frequent flyer’ strategy to accommodate to competitors’ similar constructs – such as the Chairman’s Lounge * Fleet development: “The air hose has been invariably turning since its origin as a consequence of increasing fleets. Qantas has been buying Boeing aircraft makes like the 747-400.

Bibliography
1. Brueckner. J. . & A ; Pai. V. ( 2007 ) . Technological Invention in the Airline Industry: The Impact of Regional Jets. International Journal of Industrial Organization. 27 ( 1 ) . 110-120 2. Bureau of Intrastructure. Transport and Regional Economics. ( 2010 ) . Avline 2009-10. Australian capital: Australian Government. 3. Bureau of Transport and Communications Economicss. ( 1995 ) . Deregulation of Domestic Aviation in Australia. Canberra: Australian Government. 4. Dixon. G. ( 2006. February 23 ) . Qantas non afraid of competition. The Age. 5. Douglas. E. . & A ; Cunningham. L. ( 1992 ) . Competitive Strategies in Australia’s air hose deregulating experience. School of Business Discussion Paper. Paper 28. 6. House Standing Committee on Infrastructure. Transport. Regional Development and Local Government. ( 2009 ) . The Global Financial Grisis and regional Australia. Canberra: Commonwealth of Australia. 7. Investopedia News and Articles. ( 2010 ) . The Industry Handbook: The Airline Industry. Retrieved August 17. 2011. from hypertext transfer protocol: //www. investopedia. com/features/industryhandbook/airline. asp # axzz1VGZxffGH 8. Ito. H. . & A ; Lee. D. ( 2005 ) . Comparing the impact of the September 11 Terrorist Attacks on International Airline Demand. International Journal of the Economics of Business. 12 ( 2 ) . 225-249. 9. Nuguid. A. ( 2011 ) . IBIS World Industry Report I6402 Domestic Airlines in Australia. IBIS World. 10. Porter. M. ( 2008 ) . The Five Competitive Forces that Shape Strategy. Harvard Business Review. 78-91. 11. Schulte. P. . & A ; Zhu. Y. ( 2005 ) . Globalisation and Labour Relations in Australian Airlines Industry: A Case Study of Pilot Experience. In A. Gupta ( Ed. ) . 4th Global Conference on Business & A ; Economics Proceedings ( pp. 1:1-19 ) . Lynchburg. United States of America: Association for Business and Economics Research. 12. Osegowitsch. T. . Strategic Management. McGraw-Hill AusTralia. NSW. 2011. P.

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