Reason for Changes in the Competitive Structure - Qantas Company Airline - Case Study Example

Organization Mission & Vision Organization Mission Organization Vision To provide quality services to the customer so that they are able to identify the spirit of Australia by ensuring proper facilities and services To provide services so that people feel the spirit of the country and provide quality services by ensuring maximum satisfaction Who are we? What do we aspire to be? Qantas Airways is a major carrier in Australia and started operations in the year 1990. The major hub for Qantas Airways is Sydney and Melbourne followed by Brisbane, Adelaide, Perth and Singapore To position the airlines in such a way that it acts as a differentiator as well as provides customer value for money. The company while following this objective looks to ensure that they are able to retain the old customers as well as develop new ones. What do we do? How will we get there? We look towards providing air serviceswhere we look to ensure that people are allowed to travel at a minimum cost Qantas Airways has looked towards ensuring that they use the same fleet of aircrafts and have differentiated between both the class by having different offerings for them Where are we now? How will be measure our performance? The airlines has a fleet of over 142 planes and covers around 41 destinations which includes 20 domestic and 21 international places. The performance of the airline will be measured by evaluating the customer repeat purchase towards the airline and the manner in which the airline gets its fleet filled up Financial Review Financial Category Analysis Revenues The airline had revenue of $14.9 billion for the year ended 30th June 2011 which shows an increase of 10% over the previous year. This highlights growing business and the manner the airline has been able to ensure growth in passenger volume Expenses The airline had an expense of $10.9 billion for the year ended 30th June 2011 which shows an increase of 9% over the previous year. This shows control in cost so that the bottom line grows Earnings The profits were $552 million for the year ender 30th June 2011 highlighting a growth of 56% over the previous period. The analysis shows that the company has been able to cut cost and ensure increase in shareholders profit Assets The airline had an asset of $20.9 million for the year ended 30th June 2011 which shows an increase of 5% over the previous year. This shows that the business has ensured that the growth in business matches with the growth in assets base Liabilities The airline had liabilities of $14.9 million for the year ended 30th June 2011 which shows an increase of 7% over the previous year. This highlights that the liabilities has grown in comparison to the growth in assets and is an area to watch Industry Dominant Features Economic Factors Economic Factors Market Size Ease of Entry/Exit $ 15 billion Easy due to opeoning of economies Scope of competitive rivalry Technology/innovation High as all players offer similar products High as the industry uses latest developments Market Growth Rate Product Characteristics 2.50% Services Stage of Life Cycle Scale Economies Long High as industry look towards having cost effective ways Number of Companies in the industry Learning & Experience effect 88 Increases the business as past experiences help to design better services Number of Customers Capacity Utilization Over a billion High Degree of Vertical Integration Industry Profitability Low High Porter Five Force Model Porter Five Force Model Rivalry among Sellers The rivalry is very high as all competitors offer similar products at similar prices. There are other airline providers who work on similar lines thereby intensifying competition (SCRIBD, 2010). Potential of New Entrant The barriers to entry are high as the investment cost is very high. Still, the policies of the government to open up the economy for foreign players increases the likelihood of new entrant entering the sky Threat of Substitute The threat of substitute is low as people have to use the means of communication while commuting over very long distance at a minimum possible time. Bargaining Power of Suppliers The suppliers have a high bargaining power because this forms a major part of the input cost and there is concentration of supplier. To reduce this Qantas need to work on backward integration of the supplier. (SCRIBD, 2010) Bargaining Power of Customer The customers have a mixed bargaining power. Due to less differentiation and backward integration possible customers switch easily. Qantas on this front to reduce their power and retain customers has worked heavily. Reason for Changes in the competitive structure & business environment The growth in competiton and the opening of economies has made it possible for all the players to use the different technology to their advantage. The advent of new technology and increased customer attitude towards airlines has increased the competition level. Customers look towards using the services of the airline as it is cheaper and quicker because of the growth of low cost airlines. Also, the availability of different services has helped to enhance customer experiences and have thereby increased the level of competition. Key Success Factors Key Success Factors Technology Related Factors Using JIT technology has enabled the airline to ensure that customers have rate differentials based on the time of purchase Quality Related Factors Providing superior services by having airlines at smaller places which has little connnectivity Brand Related Factors Using fleets which are comfortable and have more leg space has ensured that they are able to brand themselves differently from their competitors Marketing Related Factors To eye the business sector Qantas airways offers Corporate Plus fare offers new incentives like access to lounge, baggage up to 32 kg and priority check in (George, 2006). Qantas Airways also offers loyalty programs like velocity for frequent traveller (Gunter, 2007) Skills Related Factors Hiring the best talent that have the required experience and skills have enabled to deliver quality service Industry Attractiveness Factors Considered The growth potential is high as the industry is growing at a pace of 2.5% and having low cost airlines will increase the business potential The competiton presently favors profitability and the increase in competiton will slowly reduce the amount of profit and increase competition The industry profit will be favourably affected by the driving forces as it will ensure better services The position of Qantas Airways is very strong and with the quality of services and flights the position is bound to become stronger Qantas has been able to work on competitors weakness and garner a major share of the airline market Qantas will be able to defend itself against the other factors because of the relative strength and service rendered by the airlines The degree of risk is low in the industry as economic refors are be made to ensure the growth of the airline industry The problem facing the industry is rising oil prices Present Competitive Strategy Present Competitive Strategy The revenues are growing at a brisk pace of 10% due to increase in the volume of business The company has been able to ensure growth by motivating employees, better turnover rates and highly skilled employees The company by looking to have low cost carriers has been able to attract new customers at the same time retain the old ones The share prices have been stagnant due to downturn in the economy but the manner the airline has performed over the years it is bound to go up The bottom line i.e. the profits are increasing at a rapid pace The company has a sound brand image due to quality services provided by the airline The overall financial strength shows that the company has been able to maintain the required leverage between debt and equity and has an opportunity to grow in the future   SWOT Analysis Strengths Weakness Qantas has a strong brand name due to the number of years the company has been operating. Fear that the change in business model might backfire and might also loose the leisure segment Increasing market share Difficulty in positioning themselves clearly Increasing market penetration   Continuous improvements in the facilities   It has a large fleet of flights with efficient technology   Opportunities Threats Expand in new market Increasing fuel prices Enter small business places which has few flights Increasing threats from new local players Tap the price conscious customers   Company Competive Position Key Success Factors Company Qantas Virgin Swiss Lufthansa Services 1 2 4 3 Leg Space 1 4 2 3 Flights tp different Destinations 2 1 3 4 Timely Service 1 4 3 2 Cost Effective 2 1 4 3 Differentiator 1 4 2 3 Weighted Competive Strength Key Success Factors Weight Company Qantas Virgin Swiss Lufthansa Services 10 1 2 4 3 Leg Space 1 1 4 2 3 Flights to different Destinations 2 2 1 3 4 Timely Service 8 1 4 3 2 Cost Effective 6 2 1 4 3 Differentiator 4 1 4 2 3 Issues facing the company To position the airlines in such a way that it acts as a differentiator as well as provides customer value for money. The company while following this objective looks to ensure that they are able to retain the old customers as well as develop new ones. Generic Strategy Generic Strategy Low Cost Provider The airline is having some low cost airlies and looks to tap the low end customers Broad Differentiator The airline has differentiated itself by providing quality service Best Cost Provider The airline is the best cost provider as it looks towards having JIT which ensures tivkets at low price when booked early Focussed Strategy of Low Cost Not Applicable Focussed Strategy of differentiator Not Applicable Appropriate Strategy The most appropriate strategy will be the performance test as it will help to identify the manner in which Qantas Airlines has grown which will be reflected in the financial statement. This can be revied and checked as the financial statement gets audited thereby having validity and reliability of the findings. This will help to increase the value of the test as it will ensure that the findings are tested on factual growunds and will increase the relevance of the test. Recommendations Qantas Airways with a relative change in its outlook is looking to position its product in between the leisure customers who are price conscious and the business class who want facilities even at a higher price (Treacher &Pollard, 2004). To ensure better services Qantas Airways should look towards ensuring that they use the same fleet of aircrafts and differentiate between both the classes by having different offerings for them References George, T. 2006. New Corporate Plus Fare Delivers Significant Cost Savings to Corporate. News & Press Release, Qantas Airlines Pty Ltd Gunter, P. 2007. Qantas Airways Velocity Program. Airline Business Media Partner, Edition 7 SCRIBD. 2010. Executive Summary since 1994, Qantas has grown. The Times New York Company Treacher, K. & Pollard, J. 2004. 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