Qantas Airways Strategic Analysis - Case Study Example

Business strategy report Name Date Course Table of Contents Table of Contents 2 Executive summary 3 Introduction 4 Strategic Analysis 5 Methods 5 External analysis 6 PESTEL Analysis 6 Political 6 Economic 6 Social 7 Technological 7 Environmental 7 Legal 8 Significant influences that may be drivers for change 8 Porter’s five forces framework 8 Threat of new entrants 8 Barriers to entry 9 Threat of alternative products and services 9 Bargaining powers of the customers 9 Bargaining powers of suppliers 9 Strategy canvas 10 Influence of innovations in the industry 11 Strategic capability 12 VRIO Criteria 12 SWOT Analysis 12 Strategy and culture 13 Competitive strategy 15 Business strategy statement 16 Conclusion 17 Executive summary Qantas Airways is an Australian company operating in the airline industry. The performance of the company is virtuous despite the challenges that in the industry. PESTLE analysis indicates that the macroeconomic environment in Australia supports the growth and development of businesses. The microenvironment is however faced with some challenges on the social and environment issues. The external environment in Australia supports the growth and development of businesses. Innovativeness and use of technology has greatly contributed to improvements in terms of service delivery. The internal environment at the firm is stable. The VRIO framework indicates that the services of the company cannot be easily imitated due to the high cost and standards involved. The SWOT analysis indicates that the huge workforce of the company is a major weakness. Forming strategic alliances and partnership can present the company with new opportunities. The organizational culture of the company is aimed at delivering high quality services to the customers. It is recommended that the company should embrace low cost carrier strategy. The strategy is competitive and it has that ability of addressing the challenges facing the company. The low cost competitive strategy is suitable for the industry due to the challenges of low profitability. Introduction Undertaking a strategy review of a business is an important aspect that contributes to its growth and development. The strategy review ensures enables the business to determine the effectiveness of the existing strategy (De & Business Expert Press, 2010). It is also an important step towards determining the challenges facing the business and the most appropriate strategies that can be developed. Strategy review is usually carried out at least one every year by most of the organizations. A lot of expertise is required during the process as the success of the business is dependent on the strategies that are put in place. It is through strategic review that an organization is able to overcome the challenges it faces. The strategic review enables an organization to develop competitive strategies in order to meet its goals and objectives. Qantas Airways Limited is the flag carrier of airline of Australia. It is the largest airline company in Australia in terms of the fleet size, international flights and international destinations (Qantas, 2016). The company has been operating for about a century as it was formed in 1920. Qantas Airway Limited is based in Sydney suburb of Moscat and its main hub is Sydney Airport. The company has a total of 28,622 employees and its operating income is A$ 975 million (Qantas, 2016).The airline environment is quite competitive and it is market with low levels of profits due to the high operating costs. The industry receives a high number of customers who travel from one area to the other. Various economic variables greatly influence the growth and development of the sector. The competition in the industry is also high which affects the profitability of the company. The economic conditions such as inflation as well as increase in the price of fuel are a factor that greatly affects the growth and development of the companies in the industry. As a service industry, the demands from the customers are high (Alam, 2011). Efforts have to be put in place to ensure that the customers are satisfied. The lack of customer satisfaction has negative effects on an organization. Technology is also a factor that is increasingly becoming important in the sector. Strategic review is can therefore be useful in the growth and development of Qantas. The paper thus discusses a strategic review in relation to Qantas Airways Limited. Strategic Analysis Methods The data collection plays an important role in determining the quality of information and research (Denzin & Lincoln, 2011). The data was collected using the internet and from credible sources. The website of the company was used to for obtain the information about the operations and internal issues. Credible business reports available in the internet were use for obtaining the data. The qualitative as well as the quantitative sources of data were used during the research. The quality of information was of importance during the research. This necessitated the use of qualitative sources. All the sources used were scrutinized in order to ensure they are credible. Only the recent sources of information were utilized during the data collection. This was mainly for the purposes of ensuring that the recent strategies of the company are reviewed. All the articles that were used in the research were not older than 10 years. A total of 20 articles were used during the research. This was adequate in obtaining all the information about the strategy. Plagiarism was also avoided when using the secondary sources as all the authours were acknowledge through proper referencing. External analysis PESTEL Analysis Political The political environment in Australia is positive and this has contributed to the growth and development of the company. The policies in the country are friendly to business growth and development (Cumming & Johan, 2013). The laws do not favour the local companies which have contributed to intense competition in the market. Economic Australia has a positive economic environment which has also contributed to the success of the company. The level of inflation is low and hence promoting the use of services provided by the industry. However, the industry suffered a setback during the global recession which affected most countries including Australia (Brown & Reilly, 2009). Social The social environment influences the interaction among the people and the ability to promote diversity (Charlesworth, 2014). Australia has a diverse population although it has been blamed in some instances for anti-social behaviours. The social environment can therefore be considered neutral and it has also contributed to the growth and development of the company which is influenced by the social factor. Technological Australia is technologically advanced as compared to most of the country. The technological environment in the country is positive and this has contributed to the growth and development of the businesses (Staehr, 2010). The use of technology has enabled the company to improve on its ability offer high quality services to the customers. Environmental The environmental situation in Australia is neutral. A lot of controversies have been generated in Australia concerning the environmental issues. The airline industry in Australia is known for emitting high levels of pollutants (Khalili & Duecker, 2013). Qantas has however been making continuous improvements in order to ensure that its environmental record is within the acceptable levels. Legal The legal environment in Australia is positive and the laws and regulations that are in place are promotes the growth and development of businesses. The laws enacted are usually for promoting the interest of the businesses (Cumming & Johan, 2013). All the companies are required to abide by the laws and regulations that have been put in place. Qantas is law abiding and it has been faced with minimal legal challenges. Significant influences that may be drivers for change Technological has a lot of influence and it is likely to be the main driver of change. The use of new technology can reduce the costs of operations and it may also improve on the ability to deliver services. Technology in the airline industry has contributed to a reduction in the cost of operation (Khalili & Duecker, 2013). The environmental issues are also a driving force for change at the company. Most of the customers are increasingly becoming sensitive regarding the environmental issues. Customers are shunning away from the companies with poor environmental records as it has negative effects on sustainability. Australia has seen an increase in activism in the recent past regarding the environmental issues. Porter’s five forces framework Threat of new entrants The airline industry requires a huge amount of capital and investment in order to enter the market (Al-hawari & Mouakket, 2012). The threat of new entrant is therefore low in the industry. Qantas is not likely to face the threat of new entrants in the near future as it is also well established. Barriers to entry The high capital costs as well as intense competition in the market is one of the main barriers to entry. A new firm may take years before it is able to attract customers in the market (Elmorchid, et al, 2013). This therefore presents a major barrier and this has seen only a few companies continue to operate in the industry. Threat of alternative products and services The company mainly provides transportation service to the customers. However, unlike the other means of transportation it has more advantages. It is fast, safe and more luxurious as compared to the other means such as road and rail transport (Desai, et al, 2014). This makes the threat of alternative products and services quite low. Bargaining powers of the customers The bargaining power of the customers is dependent on their ability to put pressure on the company to lower its prices (Lumpe, 2008). The company has higher bargaining powers as compared to the customers. This gives it an advantage during the process of determining the prices for the air tickets and other services. However, the company is considerate and it has put in place measures such as loyalty programs to enable the customers afford the prices of its products. Bargaining powers of suppliers The company is dependent on the suppliers for various products including fuel which is used on a daily basis. The bargaining power of the suppliers is higher than that of the company (Qantas, 2016). This has greatly impacted negatively on the ability of the company to be competitive in the market. Strategy canvas The strategy canvas is a diagnostic tool that is used to develop the strategy of a company through the analysis of competition based of various factors (De & Business Expert Press, 2010). The table below is an analysis of the competition facing the company. Competitive factors Qantas Airways Scores out of 10 Virgin Australia Scores out of 10 Toll aviation Scores out of 10 Fleet size 10 8 6 International flights 10 7 6 Customer satisfaction 9 10 8 Use of technology 9 9 8 Environmental conservation 8 7 6 Human and financial resources 10 9 7 Safety 10 10 8 Strategy canvas map Influence of innovations in the industry Innovations in the airline industry have impacted positively on the delivery of services (Betz, 2010). It is through innovations that the customers can carry out their transactions online from any location. This has eliminated the need for customers to visit the offices of the company to carry out the transactions. It is also through innovations that the quality of services has improved in the industry. The customers can be served within a shorter period of time. Handling of cargo has been simplified through the use of innovations (Betz, 2010). Innovations have also played an important role in improving on safety and reduction of environmental pollution. Strategic capability VRIO Criteria The VRIO criteria play an important role in terms of examining the internal environment of an organization (Lin, et al, 2012). Qantas Airways has adequate resources that enable it to create value for its services. The company is financially stable and it is well equipped with resources that makes it effective in carrying out is activities. Technology is utilized at the company for the purpose of improving on the business processes (Qantas, 2016). The company encourages innovation among the employees. This has seen a lot of investments injected for research and development which has led to innovations. Rarity plays an important role in enabling the company to achieve competitive advantage. The services of the firm are unique as different packages are provided to the customers. Technology has enabled the company to come up with innovative ways of serving the customers. In terms of limitability, most of the services of the company can be imitated by the competitors. However, it is too costly and this may discourage most of the competitors. Innovations at the company continue to play a vital role in the development of new services that are unique (Qantas, 2016). The VRIO criteria therefore indicate that the internal environment of the company is good. SWOT Analysis Strength Opportunities Large fleet. Good public and brand image (Qantas, 2016). Financially stable. Support from the government. Availability of advanced and modern equipment. Highly trained and qualified personnel. Venturing into the new emerging global market. Use of technology to develop new innovative services. Develop new innovative services in the hospitality sector. Entering into a joint venture with the local as well as the international companies. Developing strategic partnership with the local companies. Weaknesses Threats Huge workforce that takes up a large percentage of revenue (Qantas, 2016). Lack of diverse workforce High operating costs which affects profitability. Increasing price of fuel. Competition from the international well established companies. Industrial actions which grounds the operations of the firm. Strategy and culture Cultural web of the company The cultural web is a useful tool that diagnoses the status quo of the culture of the company (Snell, et al, 2015). It also plays a vital role in representing the paradigm of the organization and how it is manifested in the day to day behavior at the organization. The assumptions that are core to the culture of the company are also represented in the culture web. At Qantas, the power structure is hierarchical with most of the decisions being made by the top management. The employees have to respect the senior members of staff. Consultations within the company are however encouraged and this has impacted positively on the working relations (Qantas, 2016). The power structure at the company encourages innovations and teamwork. This has played a vital role in solving complex problem and delivering high quality services to the customers. The customers at the company are considered as the most valuable assets. The employees at the company are usually encouraged to listen to the customers and provide them with the highest quality of services (Qantas, 2016). The organizational structure of the company is flexible for the purposes of ensuring that the employees are able to work closely with each other. All the new employees of the company have to be introduced to the organizational culture. All the daily activities of the employees have to be a reflection of the organizational culture. Continuous improvements are also encouraged at the organization. Good governance is an important aspect of control at the organization. The members of the management have to display high levels of integrity at all times. This is an important strategy that has enabled the organization to develop a good brand image among the customers. The organizational culture in most cases is part of the strategy of the company that enables it to achieve its goals and objectives (Snell, et al, 2015). Competitive strategy The most appropriate strategy for the company involves the low cost carrier strategy. This strategy focuses on reducing the operation cost as well as the prices for the air tickets (Squalli, 2014). This strategy is useful in enabling the firm to reduce the high operating cost and increase the profit margins. Low cost carrier strategy requires the company to effectively manage its fleets and ensure that it owns relatively new aircrafts of a single type. The company has a large fleet and this strategy will result to efficiency in terms of the management. The strategy is also useful in enhancing the in-flight services. This involves provision of high quality meals and service which may come at an extra cost. The company will also have to diversify its operations at different smaller airports around the country. Smaller airports are usually less congested which enables the aircrafts to make a high number of trips. The strategy offers lower fares which play an essential role in reducing the marketing costs (Roy, 2009). The strategy also involves the use of technology to carry out various processes and activities leading to a reduction in the operating costs. The strategy has the ability of improving on the efficiency and competitiveness of the organization. The strategy has the potential of responding effectively to the microenvironment (Desai, 2014). This is through reduction of costs and expanding its presence in the wider market where the economic conditions are viable. The environmental problem which is characterized by high levels of pollution can also be reduced through the use of the strategy through a proper fleet management and purchase of modern aircrafts. The strategy can be successfully implemented at the company due to its strengths. The company is financially stable and this may make it easy for the changes to be implemented. The good brand image of the company will impact positively in attracting more customers. The support from the government is a major benefit for the company in the implementation of the new strategy. The strategy is competitive and this will have a positive influence at the company in promoting its growth and development. In the airline industry, a competitive strategy is required due to the high levels of competition (Qantas, 2016). The strategy will enable the company to exploit new opportunities through diversifying its services to the smaller airports. More revenue will also be generated as a result of the competitive strategy. The number of staff may however be reduced as a result of the implementation of the strategy. Business strategy statement The business strategy statement is useful in defining the objectives of the strategies and how they can be achieved (International, 2013). Qantas value proposition is to offer low cost pricing to the customers in order to enhance affordability. The customers form the core of the company and must be provided with high quality affordable services. To ensure that the customers receive value for their money, the company intends to utilized technology and innovations. A continuous service improvement tailored to meet the needs of the customers is an important priority for the company. All the employees of the company will be required to perform their duties with high levels of integrity in order to meet the needs of the customers. The company is set to inject more funds to research and development in order to come up with more innovative services that meet the needs and standards of all the customers. Qantas is willing to cooperate with other local as well as the international companies for the benefits of the customers. Technology will play a leading role in the growth and development of the company. The technology used will be friendly to the customers to ensure ease of use. Qantas is intends to cut its levels of emission by 50% as a means to promote sustainability. Conclusion In conclusion, it is evident that the company is operating under a favourable economic and political environment. The airline industry is faced with challenges due to the high operating costs. It is evident that the company faces stiff competition in the market. The company has a higher bargaining power then the customers. It is evident that the company is financially stable although it faces challenges due to the high number of employees. The organization culture at the company promotes a close working relation among the staff members. It is evident that the firm has embraced the use of technology to improve on its efficiency and levels of customer satisfaction. The internal environment of the company is stable which promotes a good working relationship as well as business growth and development. It is evident that the company is a market leader in Australia in the industry hen compared to its closest rivals. The low cost carrier strategy is appropriate in enabling the company to meet its goals and objectives. It is evident from the business statement that the new strategy of the firm targets business growth and development. The new business strategy has the ability of cautioning the company from the possible threats in the market. 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