Business Environment: Qatar Airways - Assignment Example

Business Environment: Qatar Airways TASK Historical background Qatar Airways is the government-owned flag carrier of Qatar headquartered at Qatar Airways Tower in Doha. Qatar Airways was founded on 22nd November 1993, and began its operations on 20th January 1994. The mission statement of Qatar Airways is “Excellence in everything that we do”. The major objectives of the organisation include increasing corporate agreements, increasing brand value and FTT memberships, targeting preferred market segments, and improving direct sales to reduce distribution costs. As per reports, the Qatar airways recently acquired a 35% stake in Cargolux, one of the biggest all-cargo operators in Europe, and the company is openly targeting Europe for further potential acquisitions (Khan, 2012). Currently the organisation is a full member of the Oneworld alliance, and the firm is expected to spread its business landscape to more global markets over the next years. Legal and financial information As mentioned already, Qatar Airways is the state-owned flag carrier of Qatar. While analysing the financial status of the organisation, it seems that the last fiscal year was not a good period for the company. Recently the US regulators banned Qatar Airways’ five Boeing Dreamliner 787s from the skies citing issues with the airliner’s battery systems (Buller, 2013). Although these aircrafts returned to services after three months, the ban caused the state-owned airline to lose over $200 million in revenues (Ibid). Earlier, the company had suffered a small net loss in the 2011/12 financial year due to high oil prices (John, 2012). Size and structure Qatar Airways connects more than 100 international destinations across Europe, North America, South America, Central Asia, South Asia, Middle East, Far East, and Africa. The organisation has workforce strength of 30,000 employees, with 17,000 employed directly and the remaining 13,000 employed indirectly in its subsidiaries. Qatar Airways operates a number of subsidiaries including The Qatar Aircraft Catering Company, Qatar Airways Holidays, United Media Int, Qatar Duty Free, Qatar Aviation Services, Qatar Distribution Company, and Qatar Executive. Products and services The Qatar Airways delivers many tourism, hospitality, and leisure services to its customers. As noted already, the organisation provides scheduled cargo and passenger services to more than 100 destinations worldwide. The company has classified its products into QR Premium, QR Premium PLATINUM, QR Premium GOLD considering the time-sensitivity and urgency of deliveries. In addition, the firm has other products including QR Pharma, QR Fresh, and QR Charter in order to provide cargo delivery services to customers. Customers and market Qatar Airways is always committed to deliver superior quality services to its customers as the company has recognised the importance of customer loyalty in the aviation industry. The top quality customer service assisted the company to become one of the world’s leading airline services. While evaluating the growth strategy of Qatar Airways, it is identified that the organisation increasingly focuses on niche markets and second-tier destinations (Airlinetrends.com). The company has decided to operate new leisure destinations around the world so as to widen its market coverage. The firm’s promotional strategy greatly focus on advertisements and it has a strong presence in social media. TASK 2 SWOT Analysis SWOT Analysis is a strong strategic planning tool used to analyse internal and external environments of an organisation. Strengths and weaknesses are related to the internal environment of the organisation whereas opportunities and threats are external. Strengths The Qatar Airways practices the value based theory by offering products/services to its customers at affordable rates. This competitive pricing strategy is a great strength of the company as it provides the firm with a competitive edge over its rivals like British Airways that always offer expensive tickets. A relatively low cost of production is another potential strength of Qatar Airways as the company employs cheaper staff, charges all meals and beverages, and operates only three classes of travel. In addition, the organisation maintains a good reputation in Qatar and some Asian market segments like Singapore and UAE. This strong public image assists the company to generate huge volume of sales from these market segments. Finally, Qatar Airways has a strong capital base, and this competitive strength benefits the company to manage financial difficulties successfully. Weaknesses Since the company offers only limited and economic classes of travel, this policy may not meet the tastes and preferences of other customers who like to enjoy upper class facilities. It seems to be the only identified weakness of Qatar Airways. Opportunities The company’s strong reputation in the Asian market offers potential opportunities for the company because currently Asia is turning out to be the economic centre of the world. Asian countries like China and India are hot manufacturing points in the world, and it adds to the future growth of Qatar Airways. Furthermore, growing popularity of tourism, hospitality, and leisure industry raises a set of opportunities to the organisation as the number of domestic/international tourists travelling around is significantly increasing today. Since Qatar Airways has a competitive edge over its market rivals in terms of cost of production and price affordability, the company can easily enter new markets and establish its brand. Threats The common belief that cheaper products/services always compromise quality appears to be a serious threat to Qatar Airways since its services are relatively inexpensive. This misperception may persuade people to switch their demand to other brands that charge highly for their products/services. Rising oil prices poses great threats to Qatar Airways because this situation may influence people to turn toward substitute modes of transport. In addition, governments are making aviation policies stricter in the context of growing threat of terrorism, and this situation makes it difficult for the organisation to enter new global markets. Vertical and horizontal integration Vertical integration can be defined as a process where several phases in the production/distribution of a product or service are managed by a single company so as to increase the company’s power in the market place. In contrast, horizontal integration or lateral integration can be referred to a business strategy to increase market share by simply acquiring a similar company. The Qatar Airways greatly relies on vertical integration strategy to strengthen its business model. The organisation’ vertically integrated operations include a hotel and global travel agencies in Qatar. This airline company opened a 400 room hotel called Oryx Rotana in Doha in 2011 in addition to establishing a tour operation body, Qatar Airways Holidays (Babatunde, 2011). However, the company is yet to consider the horizontal integration practice to increase its market share (ibid). TASK 3 The main economic factors that may impact the operations of Qatar Airways include labour costs, material costs, government policy, currency fluctuations, oil prices, exchange rates, and consumer confidence. It is clear that material costs and labour costs have notably increased over the last five years. As the intensity of competition is very high in the airline industry, airline companies take great efforts to hire qualified and experienced professionals who can significantly contribute to the overall productivity of the firm. Therefore companies are forced to offer competing salaries and other benefits to employees, and this situation naturally leads to high labour costs. According to Pleven (2011), material costs have been on the rise mainly due to increased demand from Asia and this trend results in declined corporate profits. While analysing currency fluctuations and exchange rates over the last five years, it is obvious that frequent currency fluctuations and exchange rate variations greatly affected the global economy. However, today currencies are not so vulnerable to huge fluctuations as the global economy is attaining stability after the recent global recession. Hence exchange rates remain almost stable nowadays. Evidently government policies concerning interest rates, tax rates, transportation costs, and other economic aspects have noticeably changed during the period 2008-13. Over the last five years, governments have notably cut interest rates and tax rates so as to fuel business activities and thereby fasten the economic recovery process. Oil prices have been increasing for the last few years mainly due to the growing demand from emerging countries like China, India, and Brazil. Finally, consumer confidence has improved recently after the shocks of global financial crisis 2008-09. Economic factors such as oil prices, government policy, and consumer confidence are most significant as these factors can significantly impact the sales volume and profitability of Qatar Airways. As noted already, oil prices have been increasing for the last few years and this situation has seriously impacted Qatar Airways. As the organisation operates only limited classes of travel and offer cheaper tickets, it cannot manage oil price increases by charging higher for its products and services. In this context, increases in oil prices will certainly increase the operating costs of Qatar Airways, and this situation in turn would lead to decline in profitability. This is one of the major reasons Qatar Airways experienced some net losses over the last few years. Similarly government policies noticeably affected the operational efficiency of Qatar Airways. As governments have cut down interest and tax rates, business activities have been increased, and this favourable market environment assists the organisation to operate more number of passenger and cargo flights profitably. Since the global economy is fast recovering from the impacts of the recent global recession, consumer confidence is high, and this in turn influences consumer demand positively. When consumers are hopeful about the future economic conditions, they would neither put off their leisure trips nor depend on other alternative modes of transport. Evidences suggest that increased consumer confidence has positively impacted the market operations of Qatar Airways. TASK 4 10 laws relevant to THL manager 1. Managers working under the THL (Tourism, Hospitality, and Leisure industry) should ensure the safety of clients by providing them with the assistance of well trained guides and other improved facilities. 2. THL managers will be accountable for accidents and injuries resulting from poor quality infrastructure and equipments. 3. Managers are legally required to promote environmental safety by avoiding environmentally harmful activities like waste dumping and unscientific plastic disposal. 4. THL managers must be committed to promote the balance of nature by protecting ecosystems and biodiversity. 5. They must ensure safe workplace conditions and promote secure employee management practices. 6. THL managers must be always committed to protect clients from credit card theft and other similar internet based fraud. 7. They should also make necessary arrangements to protect clients from robbery, physical assault, and sexual abuse. 8. The managers’ operations must be in full compliance with changing government rules and regulations concerning the THL industry. 9. Managers should not, under any circumstance, admit clients without proper identity cards in hotels or resorts. 10. Finally, managers are required to keep their clients’ personal details secret unless they are asked to do otherwise by a legal agency. EU member states With the joining of Croatia on 1st July 2013, the total number of EU member states increased to 28. The member states of the European Union and their joining dates are listed in the following chart. Member states of EU Joining dates Austria 1 January 1995 Belgium 25 March 1957 Bulgaria 1 January 2007 Croatia 1 July 2013 Cyprus 1 May 2004 Czech Republic 1 May 2004 Denmark 1 January 1973 Estonia 1 May 2004 Finland 1 January 1995 France 25 March 1957 Germany 25 March 1957 Greece 1 January 1981 Hungary 1 May 2004 Ireland 1 January 1973 Italy 25 March 1957 Latvia 1 May 2004 Lithuania 1 May 2004 Luxembourg 25 March 1957 Malta 1 May 2004 Netherlands 25 March 1957 Poland 1 May 2004 Portugal 1 January 1986 Romania 1 January 2007 Slovakia 1 May 2004 Slovenia 1 May 2004 Spain 1 January 1986 Sweden 1 January 1995 United Kingdom 1 January 1973 Advantages and disadvantages for the U.K adapting the Euro currency Lower transactions costs for businesses and people is a major advantage for the UK adapting the Euro currency because this change can cut down transaction costs associated with exchanging currency. This change can also improve business certainty in the country, and the situation in turn would lead to more potential investments in the exporting sector. Better exchange rate stability is another significant benefit. Dealing with a single currency is better to compare prices and to make sound business decisions. However, it may not be possible for the country to maintain an independent monetary policy and national sovereignty while adapting Euro. Another major disadvantage of this decision is that Euro cannot be depreciated by UK in times of recession as it is not an individual national currency. Impact of enlargement of EU on tourism/hospitality industry The enlargement of the European Union is likely to benefit the tourism and/or hospitality industry. According to the World Tourism Organisation, the enlargement of the EU will be helpful to create a “more complete and coherent European tourism industry, which should be recognised in the future European Constitution” (European Business Review, 2014). Evidently the enlargement of EU will result in the fall of political borders and therefore there will be few cross border restrictions to visitors from the member states. Industry analysts link the recent success of Croatian tourism industry with enlargement of the EU in 2013 to add Croatia as a member state. TASK 5 Fast tourism sector growth, growing environmental awareness, popularity of flexible working, increasing fast food consumption, and improving spending capacity are five major social and cultural trends in the UK over the last decade. Evidently the changing patterns of consumption for THL products and services positively influence the tourism growth in the country because modern people are interested to accept new ideas in THL. New trends in the THL industry are in compliance with the changing environmental notions of the modern people because today people are really environmentally conscious. Similarly, changing patterns of THL activities greatly support the concept of flexible working as individuals can easily find their leisure time and the type of leisure activity. The changing THL trend also promotes the fast food culture because fast foods have become an inevitable part of the modern life. Finally, the changing THL patterns and the improving spending capacity of people can be interlinked. An ageing population, or interchangeably population ageing, can be simply defined as a shift in the country’s overall population toward older ages due to increasing life expectancy and/or declining birth rates. Evidences suggest that an ageing population can positively affect the tourism and/or hospitality industry. As industry experts point out, today it is a common misperception that travel and adventure are the preserves of the youth because nowadays people aged 65 and above show great interest in adventurous leisure activities (Chole, 2013). THL managers say that the ageing population in Europe raises potential opportunities for the THL industry because older people are more likely to engage in leisure activities as they have enough free time. Traditionally, it is a trend in Europe that older people find more time to engage in leisure trips and adventurous activities. Therefore the ageing population can greatly benefit the THL industry despite some other serious economic challenges of this phenomenon. TASK 6 The Technological factors that may impact Qatar Airways include R&D investment, pace of technological change, information technology, telecommunications, and availability of skilled professionals. The global financial crisis 2008-09 greatly hit even corporate giants, and then companies realised the significance of innovations to survive the crisis. In an effort to enhance product/technological innovations, companies have been investing heavily in R&D for the last few years. Nowadays companies also consider increased R&D investment as a potential way to gain consumer confidence and to enhance brand loyalty. The pace of the technological changes has been very high since the turn of the 21st century. Currently companies would go out of the business unless they are able to keep pace with technological advancements. Realising the seriousness of this situation, Qatar Airways has notably increased its R&D investment over the last five years. Similarly, information technology has undergone unimaginable changes over the last decade, and now IT plays an inevitable role in every facet of the human life. Qatar Airways takes great efforts to utilise the growing opportunities in the IT sector. As part of this initiative, the organisation has fully computerised its corporate offices and installed advanced IT facilities so as to offer improved services to its customers. The telecommunications sector has significantly advanced over the years, and hence today people can communicate with others from different parts of the globe at absolutely free costs using the facilities provided by internet. The development of mobile phones greatly changed the way people communicate each other and video chatting facilities greatly contribute to a better communication experience. Improved communication is inevitably important for airline companies and therefore Qatar Airways effectively utilises even recent advancements in the telecommunication sector. Finally, availability of skilled professionals is not a big deal today because large enterprises have already made budgetary provisions for recruiting academically brilliant students via campus interviews and giving them further job-specific training. Recognising the increased availability of technically skilled candidates, the Qatar Airways has developed improved mechanisms to recruit and train skilled personnel. Today internet is very popular and majority of the people have access to internet mainly because mobile phone technologies are designed to support internet. Evidently the increased use of internet by consumers can have a great influence on Qatar Airways because this situation is favourable for the company to provide its customers with a great shopping experience. To illustrate, the increased accessibility of internet assists the organisation to provide web based services like online ticket booking, leisure trip booking, and hotel booking. Hence, internet benefits the Qatar Airways to make the firm’s services convenient and affordable to its customers. Taking advantages of advanced internet technologies, the firm can save a considerable amount of time from activities like manual ticket booking. Hence, the increased use of internet by consumers is beneficial for the organisation to cut down its operating expenses and improve overall operational efficiency. In short, high popularity of internet based services help Qatar Airway to meet its customer needs 24×7 hours without using human labour. References Airlinetrends.com. The world’s 10 most innovative airlines. [online] available at: http://www.airlinetrends.com/wp-content/uploads/2012/06/Innovative_Airlines_2012-airlinetrends.pdf [accessed 1 May 2014]. Babatunde, J. 2011. Qatar Airways moves into hospitality, tour. Vanguard. [online] available at: http://www.vanguardngr.com/2011/05/qatar-airways-moves-into-hospitality-tour-packaging/ [accessed 1 May 2014]. Buller, A. 2013. Special Report: Turbulent Times For Qatar Airways. Gulf Business. [online] available at: http://gulfbusiness.com/2013/06/special-report-turbulent-times-for-qatar-airways/ [accessed 1 May 2014]. Chole. 2013. Europe’s aging population means older travellers are on the rise. Tourismlink. [online] available at: http://www.tourismlink.eu/2013/09/europes-aging-population-means-older-travellers-are-on-the-rise/ [accessed 1 May 2014]. European Business Review. 2014. EU enlargement as a stimulus for tourism. [online] available at: http://www.europeanbusinessreview.eu/page.asp?pid=488 [accessed 1 May 2014]. John, Z. D. 2012. Qatar Airways makes small net loss in the last financial year due to high oil prices. Gulfnews.com. [online] available at http://gulfnews.com/business/aviation/qatar-airways-makes-small-net-loss-in-the-last-financial-year-due-to-high-oil-prices-1.1078028 [accessed 1 May 2014]. Khan, N. 2012. Mergers and acquisitions in Mideast airline industry. Arabian Supply Chain. [online] available at: http://www.arabiansupplychain.com/article-7536-mergers-and-acquisitions-in-mideast-airline-industry/1/print/ [accessed 1 May 2014]. Pleven, L. 2010. High Cost of Raw Materials: Surging Prices, Fueled by Emerging-Market Demand, Hit Profits and Consumers. The Wall Street Journal. [online] available at: http://online.wsj.com/news/articles/SB10001424052748704830404575200530701532768 [accessed 1 May 2014]. Read More