Jet Star Airline Strategic Management - Case Study Example

Jet Star Airline Strategic Student’s Name: Institutional Affiliation: University: Jet Star Airline Strategic Executive Summary This report gives an analysis of one of the major Australian airline called the Jet Star, which is highly competing in the business of airline, family, and leisure market, however, it will eventually be the service company, along with its associated strategies and techniques of marketing, which will bring about the differences between the leader in the market, and the loser. This analysis is also going to comprehend the possible solutions to several major strategic issues that confront the corporation to maintain its position as well as protecting its profitability in its major local market. There is stiff competition in the airline business, and the most significant factor to be taken into consideration is the way it will cater and target the segment of the targets, as it is the sole responsibility of the company. In addition, the research will comprehend the findings of the marketing segments and areas to be targeted as well as worked on. Introduction Presently, the industry of airline consists of stiff competition whereby the leader of the market is the brand that delivers its service in a more efficient and meaningful way as compared to its rivals (Porter, 1985). The customers of today will not go for less as they continue growing more service confidence increasing their expectations that range from the convenience in buying airline tickets to the goodwill of the workers. If clients are not satisfied or contended, they will just refuse to buy the services that are offered and go elsewhere. Segmentation Jetstar segment towards the market of leisure, as it is an economical carrier and thus the market of leisure appear to be more price elastic in comparison with the business travelers. The company entered the industry of airline as a strategy of segmentation against the Virgin Blue (Rigas, 2001). The Jetstar was established by Qantas as a direct competition for the already established Virgin Blue, and the strategy of the use of both Jetstar and Qantas was aimed at closing the gap that existed at the lower end of the local market, and also to help in the reduction of the risk of the mainline carrier’s cannibalization. Positioning strategy The airline company positions itself in the market of airline as value-based a carrier. The company perceives as having such values as quality, safety, exceptional service, flair, value for money, mutual respect, innovation and challenge. Regarding innovation, the company asserts that it is dedicated to finding inventive and fresh ways of enhancing its product to better meet the requirements and wishes of individual guests. However, these innovative ideas involve web self-check-in service. This view enables the airline to be distinguished from the rivals much easier, as it has a different outlook distinctive from the other airlines. Customer handling and service recovery Handling customer complaints and service recovery is very critical in the industry of airline and brings about satisfaction in customer needs and loyalty. Moreover, in the past, the airline company has had to put its plans of service recovery into action. For instance, on the sixteenth of April 2007, a flight of the airline company was cancelled with three hundred Australian clients being stranded and left hanging in the airport for more that forty eight hours. Although it is not clear how the airline used the service recovery system whereas the clients were stranded, we were told that the company made personal calls to each and every customer to register its apologies, as well as informing them that they’ll get another apology in writing, besides a five hundred dollar travel voucher, with the prospect of them being allowed to travel in the business class next time (Myron, 2002). Although the recompense is reasonable, the airline should have registered the apologies in a face to face or one on one manner, whereas the clients were stuck in the airport for the recovery service to become more efficient. If the response time for the handling of a complaint is done in good time, about fifty six percent of those clients that are involved in the mess will be contented. Moreover, it has been discovered that about eighty five percent of the time, a client whose complaint was very serious can be converted into a loyal client, so long as the manner in which his or her complaint is handled to his or her expectations. Environmental Analysis The set of conditions and forces that a company operates under is referred to as the organizational environment. These conditions and forces are foreign to corporations, and/but still affect the ability of the manager to be in a position of identifying threats and opportunities, and give the most appropriate response. These conditions and forces are further divided into two different groups, general and task environment (Boxwell, 1994). Task Analysis This kind of environment consists of conditions and forces that have an immediate effect in the organization’s manager. The price of oil and subsequent prices of petrol are a clear force for the industry of airline, with such difficult times Middle East, which is the major source of the crude oil that is used worldwide has seen an increase in the prices of oil that had never been experienced since the oil impediment in the year 1973. In July of the year 2008, we are told that Qantas axed about one thousand three hundred workers to as a direct consequence of the rising cost of fuel. The chief executive officer of the Virgin Blue went on record stating that the increase in the prices of global oils were just doing more harm to the industry of aviation than the terrorist attack of September 11th, or even SARS’s. Until some kind of stability is seen in the Middle East, or even a reasonable price of fuel, this will still be a main expense of this volatile and precious resource. The airline industry’s deregulation also considerably brought down the obstacles or barriers to entry for the new competition. Nonetheless, the apparent question that crosses the mind being what number of the airlines can be accommodated by the Australian market. Until the fall of the Ansett, it appeared that there was room for some two commercial airlines, considering that they had operated in agreement for a period of over fifty years. Then, within a span of several years, the Impulse, a new low fare airline and Ansett collapsed, therefore, there was no magical number as to the total number of airlines that could exist concurrently in the Australian airline market. In accordance with the report that was published by “Federation of Australian Air Pilots” is stated that the country could only sustain two to three airlines. With the Virgin Blue and Qantas, as well as its subsidiary, the Jet Star Airline, the only significant commercial airlines that operated in Australia, maybe 3 is the magical number but only time can tell (Bradmore, 1996). General Analysis This kind of environment is not the only environment with conditions and forces that shape the face of the industry of Australian airline. This type of environment is just as the name suggests; factors that include socio-cultural, political, economical and technological are just but a few examples. A good example of the socio-cultural force that is presently in play is the outbreak and spread of swine flu. It is true that this is of particular concern and apprehension to the airline industry of Australia, specifically in Victoria, which is the world’s most affected region apart from Mexico which is the origin of the scourge. When swine flu and SARS hit Australia, there was a significant fall of about eight percent in air travel to the country. However, things got back to normal when the two conditions were under control. Technically, even though Australia has not experienced recession, posting another growth of GDP in the June quarter of the year 2009, we find that it is still feeling the impacts of a drop in demand; some regions affected more as compared to others. The Qantas has been on a drive of cost cutting after it lay off up to three thousand, two hundred and fifty employees over the past eighteen months. The steps coincided with a fall in the net profit of about ninety percent to one hundred and twenty three million and the decision of cancelling an order for fifteen new airplanes together with delay in delivering another fifteen. The good news is that even though the country was not in a crisis, a crisis does not ultimately come to a stop, and the business will pick up well (Jane, 2003). In the present age and day, there are steady technological advancements, and the industry of airlines is no different, a good example of such development is the Airbus A380, which is a much larger carrier than was initially possible with the capability of accommodation of carrying eight hundred and forty passengers. The implications of the newly introduced aircraft were both far-reaching and substantial. In other words, there are some negatives and positives about the state of the industry of the Australian Airline. Regarding the state of competition experienced in the industry, we find that markets are naturally compelled to move towards an equilibrium quantity and price and should also correct itself in the process (Walters, 2002). Competitive Analysis In order to make sure that the competitive advantage of a business is assessed in an efficient manner, a proper model should be used where the weaknesses and strengths of the present and probable competitors are assessed. Below is the measurement of the competitive advantage of Jet Star airways; the measurement is concerning the model of Porter’s 5 competitive forces. It is important to assess the competitive advantage of the airline as it was introduced in the year 2003, as a cut-rate airline by its mother company, Qantas, particularly in response to the threat that is posed by the budget airline, the Virgin Blue Airlines. The model of five forces The still competition that is being experienced in the industry of airlines takes the form of cooperation or association rivalry together with individual airlines that compete in the market whereby the Jet Star is at hand. As stated, the airline was established by the Qantas as a response to the launch of another no-frills airline company, called the Virgin Blue, so it was expected that they would consequently be challenged by a new introduction to the economical airline industry. Another airline company called the Tiger airlines was launched in the year 2004 and has plans of taking over the major Melbourne-Sydney route of the Jet Star by increasing the number of daily flights between the two cities from 4 to 9. The introduction of this airline has inevitable threatened the future revenue of Jet Star, so much so that the chief executive officer of Qantas, Allan Joyce stated that Jet Star was seeing that, so as to remain competitive in the leisure market, and it needed to have a direct Sydney to Melbourne services to compete its Avalon operations, ensuring that the profitable market remains with the company and it is not lost to its economical competitors (Rigas, 2002). As we can see above, we find that the barriers for entry into the affordable airline industry are low. The use of extra online services and e-ticketing enables other airlines such as Tiger airlines to compete with the company on the same platform. The pressure of the bargaining powers of the suppliers is something that should not worry Jet Star since it is a service industry. Increase in the suppliers’ costs does not worry them as most of its income comes directly from their fairs. Within the airline industry, clients have a greater bargaining power than ever because of the increased access of the online services and e-commerce to buy products, like fares. This has made it possible for clients to access more information regarding different airlines and compare fares. Conclusion Airlines in the global marketplace of today are faced with rising competition and large margins of profits. We can see that Jet Star has managed to remain relevant in the market by responding effectively and quickly to the changing patterns of the demands of customers. It is also expected that the company would have a smooth run in the industry if it maintains its strategies to win more customers and fight off competition. References Boxwell, R. J. (1994). Benchmarking for Competitive Advantage. New York, NY: McGraw-Hill. Bradmore, D. (1996). Competitive Advantage: Concepts and Cases. New York, NY: Prentice Hall. Jane, B. (2003). 'Virgin looks to treble its profits.' Australian Financial Review, 5th February 2003, p. 45. Myron, J. S. (2002). The airline encyclopedia, 1909–2000. Lanham, MD: Scarecrow Press. Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press. Rigas, D. (2001). The Airline Business in the 21st Century. New York, NY: Routledge. Rigas, D. (2002). Flying Off Course: The Economics of International Airlines. New York, NY: Routledge. Walters, D. (2002). Added Value and Competitive Advantage. Sydney: Macquarie University, Dept of Business. Read More