Competitive Strategy - Qantas Airlines - Case Study Example

Executive Summary Qantas Airlines is a renowned mane in the airline business industry and has been strengthening its brand name through quality services. This report presents a complete picture of the strategies developed by the company to face its competitors. Porter’s Five Force Model highlights the industry analysis of the company and the competitive advantages of the company have been studies through the SWOT analysis. The organisation has adapted a successful pricing model with new promotional techniques and selling tools to expand the business and develop future markets in other countries. The overall impact shows a positive trend and provides further opportunity for future growth and expansion. Table of Contents Introduction 03 Industry Analysis 03 Strategic and Competitive Advantages 05 International Competitors 07 Future Challenges 07 Conclusion 08 References 09 Introduction Qantas Airlines is one of the major and leading Australian domestic airlines and is the second oldest airline company of the world. It connects the Australian people to more than 80 destinations of the world reaching about 40 countries all round the globe and also has a huge coverage in Australia and New Zealand. The company was founded on 16th November, 1920 in Queensland and developed itself into Australia’s finest airlines company. It helped in generating employment and contributed towards the Australian GDP through its safety, reliability and customer satisfaction strategies (Flight Global, 2010). This assignment highlights the current industry environment analysis and the strategic analysis of the company. We also learn about the competitive advantages that the company poses along with the future challenges that lie in the path to keep the company on a high. Also an evaluation of how the company has an advantage over the other airline companies both in the domestic and international market is made. Industry Analysis The industry analysis of Qantas Airlines can be studies through Porter’s five force model which helps in developing different strategies to successfully deal with the continuous changing business environment (Coley, 2001). The company has certain advantages which helps it run business more efficiently as compared to others. The model is discussed as under: i. Threat of entry of competitors: The current airline industry is so much undated which makes entry for newcomers virtually very low. The high initial set up cost is the biggest contributor in this regard. The high cost of buying and leasing aircrafts, operational activities like safety and security matters, customer service and manpower have added to the high costs and make the industry an expensive one. However opening up of new economies has attracted a large number of competitors to enter the business. Qantas services with low costs are effective in sweeping new entrants and covering large areas. ii. Threat from Substitutes: The threat of alternative way for international airline travels is somewhat limited. The threat of substitutes differs as per the distance to be travelled. Long distance travel has comparatively low threats as compared to the shorter distance. However, the threat for domestic airlines are from road, rail and sea as these means are comparatively lower in costs and the switching over is at ease. iii. Bargaining power of customers: The airline industry has become very competitive and the competition is for the same passengers for all. Also the switching cost amongst the airline operators is very low. This results in high bargaining power of the customers. With the presence of various options for the customers, either brand loyalty or price is considered when selecting an airline, by a customer. Qantas has a frequent flight schedule resulting in loyal customers and also increases the switching costs of the customers when selecting any rival airline service. iv. Bargaining power of suppliers: The determinant factors in influencing the bargaining power of suppliers are switching costs, substitute suppliers, threat of backward and forward integration and supplier concentration. The bargaining power is on the higher side as there are few players supplying flights. This restricts Qantas and other operating airline companies from exercising control over the suppliers and earns more revenue (George, 2006). v. Degree of rivalry amongst competitors: Airline industry faces high degree of rivalry among competitors as most airline companies offer the same products and services with almost same comfort and luxury level. Qantas is facing competition with domestic airlines, in Australia, from Virgin Blue and Tiger Airways and internationally from British Airways and Deutsche Lufthansa. The very little gap of differentiation has led to a fierce degree of rivalry among competitors which reduces profits and blocks the pace of growth. The airline industry is highly competitive which has a direct effect on the ultimate profits. As the bargaining power of the suppliers is too high the airline industry does not exercise control over the suppliers and also high entry costs reduces the chances of competition from new entrants. Qantas can still continue to dominate the market with its frequent flyer programme and keep increasing its number of loyal customers. Strategic and Competitive Advantages The advantages of Qantas Airlines can be more clearly understood with the help of a SWOT analysis which provides an insight of the strengths, weaknesses, opportunities and threats of the organisation considering both the internal and the external factors affecting the same (Bamber, 2006). A SWOT analysis of the airlines company is as under: Strengths Leading market operator in airline business of the Australian economy. Renowned for its superior airline service and high level of customer satisfaction in all departments. A big pool of loyal customers and a big brand image of its own. One amongst the oldest airline operators of the world. Strong support from the Australian Government. A pioneer airline business leader in the world. Lucrative and cheap pricing strategy. Weaknesses Huge infrastructure cost resulting in costly services. Difficulties in controlling and monitoring international markets and its operations. Having a huge diversity in culture has resulted in conflicts and clashes among employees from different cultures. Hugely concentrated in Australia and the adjoining areas. Very limited number of international flights and few Boeings 737 in the fleet. High dependence on business and first class passengers for profits. Opportunities Huge scope to widen business by targeting new Asian markets. The high level of infrastructure costs has backed low level of competition from new entrants. Can enter into tie ups with other airline operators to strengthen its position in the global market. The frequency of air travellers are increasing rapidly. Bigger and stronger financial base in Australia, internally, being a native company. Threats The frequent hike in the fuel prices has shot the cost of operation up. New industrial policies and rising air traffic are matters of concern. Rising labour costs and inflation are added problems. Huge intervention from the government of other countries where Qantas Airways connects and operates. Major competition from other airlines companies. This SWOT analysis shows that Qantas Airlines has its own strengths and weaknesses which enable the company to develop its own contingency plans against its competitors to mitigate the alarming threats and weaknesses. Also the huge opportunities in the existing and uncovered market provide sufficient scope for expansion and generation of higher revenues. International Competitors Apart from the government rules and regulations an important area of concern for the Qantas Airlines is the intense level of competition that the competitors offer. The major competitors of Qantas are Air New Zealand Ltd., Virgin Blue Airlines and Tiger Airways. The joining of Ansett Australia and Star Alliance, in May 1999, gave Star Alliance a strong position to compete with Qantas Airlines at the global upfront. Star Alliance provided Freight Charter which offers a low cost as compared to Qantas Airlines which attracts a large portion of potential customers towards their services (Harcourt, 2009). On the global level Singapore Airlines and Emirates offer tough competition as compared to domestic airlines services. The Virgin and British Airlines also go neck to neck with Qantas Airlines as major international competitors. With the introduction of Jetstar has helped the company to fight domestic competition in a much better and successful manner. Future Challenges Qantas is lauded as one of the most financially sound airlines company as it stood out the situation of global crisis with still profits reflecting in its books. A serious challenge that lies forward is the spiralling jet fuel prices and to meet the same with good returns to the shareholders as the crisis situation had resulted in low rate of returns (Hamel and Prahalad, 2004). Also entering into the markets of Asia is not as simple as some of the Asian airlines like the Singapore Airline offer some tough competition in this market. The Singapore Airlines also has full-flight services to major Australian cities. Tourism from China to Australia has increased, over the recent years, a lot and capturing the Chinese market is a challenge ahead for the company. Thus, the future of the all airline companies, especially Qantas has a bright chance to rule over the industry and capture a lion’s share in the areas of its operations. Conclusion This report provides an insight on the industry analysis and the competitive advantages of Qantas Airlines and also its future operations. It focuses on the different strategies that the company adapts to develop its products and services through the Five Force model and also to develop the working plan as per the SWOT Analysis which helps in understanding the competitive edge of the company. The report finally concludes with the international competition level in the existing markets with the future challenges and benefits from those and new markets. It provides a clear picture of how the company monitors and checks its resources to emerge as a market leader in airline business. References Bamber, T. (2006). Market analysis of Qantas Airlines and Virgin Blue Airlines, Business Category, OPPaper.com, page 6 Coley, A. (2001). Qantas Airways Fire sale wreaks havoc online. Business News, CBS Interactive, A CBS Company Flight Global. (2010). Airline Profile: Qantas, Retrieved July 31, 2013, from http://www.flightglobal.com/landingpage/qantas.html George, T. (2006). New Corporate Plus Fare Delivers Significant Cost Savings to Corporate. News & Press Release, Qantas Airlines Pty Ltd Harcourt, T. (2009). Pigs can fly – The economic implication of swine flu, Australian Trade Commission Hamel, G. & Prahalad, C.K., (2004). Competing For The Future. 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