Operational Issues of Qatar Airways - Case Study Example

Strategic Analysis of Qatar Airways Name Professor Institution Course Date Strategic Analysis of Qatar Airways Executive summary This report is formulated to carry out strategic analysis of the Qatar Airways. Qatar Airways is a government owned Airline Company with headquarters in Doha. The company was established in 1993; however the company began its operations in 1994 (Qatar Airways 2014). In its early years, the company operated regional while serving few routes (Qatar Airways 2014). In 1997, under the directive of the Emir Sheikh Hamad bin Khalifa Al Thani, Qatar Airways was re-launched in 1997 with a vision of turning Airline Company into a leading global airline with the higher standards of services and excellence. Qatar Airways (2014) claims that currently Qatar Airways the company operates a comprehensive network, connecting more than 100 global destinations across Central Asia, Middle East, Europe, South Asia, Middle East, South America, North America, Oceania and Africa from using over 100 fleet aircraft. Table of Contents Strategic Analysis of Qatar Airways 2 Executive summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Operational Issues of Qatar Airways 4 3.0 Operating environment 5 3.1 Political 6 3.2 Economic 6 3.3 Social 7 3.4 Technological 7 3.5 Legal 8 4.0 Porter Five Forces Model 8 4.1The threat of entry 8 4.2The bargaining power of suppliers 8 4.3The threat of substitutes 9 4.4 The competitive rivalry 9 4.5 The bargaining power of buyers 9 5.0 Current strategies 10 5.1 Differentiation strategy 10 5.2 Diversification 10 5.3 Cost leadership strategy 10 6.0 Impediments 10 7.0 Conclusion 11 8.0 References 12 1.0 Introduction With globalization and many airlines getting into new routes, the industry has become so competitive (Szymanski 2011). The situation has made managers to rethink their strategies to sustain competition. One of these companies that were faced to do this is Qatar Airways. As mentioned, Qatar was compelled to restructure upon the directive of the Qatar state Emir in 1997 so as to become a world-class international airline. Qatar Airways has since turned out to be one of the quickest growing airlines in globally with unparalleled growth averaging double-digit growth every year. The company has grown from 4 aircraft in 1994 to more than100 fleets of aircraft in 2014 (Qatar Airways 2014). In light of this information, this report looks to conduct strategic analysis of the Qatar Airways. Some of the issues that will be assessed are operational issues, operating environment (PESTLE), Porter Five Forces Model, current strategic objectives and impediments to the organization in achieving its objectives. 2.0 Operational Issues of Qatar Airways In current highly competitive and volatile airline, Qatar Airways company has had a sound leadership driving its operation to prosperity (Downstreamtoday 2009). The company now operates internationally in all continents. Led by its CEO, Akbar Al Baker, the company has over 30,000 employees, with 17,000 individuals working directly and an additional 13,000 working in the subsidiaries (Qatar Airways 2014). Under the leadership CEO Akbar Al Baker since his appointment in 1996, he has been in the forefront in turning this Airline Company into a high-quality carrier globally. In the Al Baker’s reign, the company has matured to a top force in the regional and international aviation, getting several admirers across the globe for its outstanding standards of operation. In 2014, this Airline reached a highlight reaching 130 routes in its international destination map. According to Qatar Airways (2014) in 2012, the Qatar Airways CEO Akbar Al Baker stated that the company would be joining the Oneworld alliance. This carrier got it’s a full membership one year later in 2013. Qatar Airways has several divisions consisting of Doha International Airport, Qatar Aircraft Catering Corporation, Qatar Airways Holidays, Qatar Duty Free, United Media International, Qatar Distribution Company, Qatar Executive and Qatar Aviation Services (Qatar Airways 2014). These divisions portray its strategy that is implemented through diversification. Qatar Airways (2014) reports that the Qatar Airways also operates business jets consisting of Bombardier Global 5000s, Bombardier Challenger 605s and Global Express XRS in its executive division Qatar Executive which was established in 2009. Due to its outstanding operations the company was feted 14 years after its pre-launch as the Airline of the Year 2011 at Skytrax World Airline Awards where more than 18 million travelers internationally casted their votes. Qatar Airways retained the same position as the Airline of the Year 2012 for the second successive year (Qatar Airways 2014). To have market advantage, it serves all classes of people in the society including First class, Business Class, Economy Class and Inflight entertainment. 3.0 Operating environment Qatar Airways operates in a volatile and competitive environment consisting of strong airlines companies (Downstreamtoday 2009). Locally, the competition is not much bearing in mind those there only four airlines companies namely Qatar Airways, Gulf Helicopters, Qatar Amiri Flight and Qatar Executive. Downstreamtoday (2009) asserts that the Competition is however stiff with Emirates, Dubai Air, Etihad Airways, Air Arabia, British Air, Kenya Airways and US Airway among others. Politically, Qatar can be considered to be a stable nation. This ensures of business confidence in that the Airlines can operate effectively with no any political interference. However, the region in which the company operates have been threatened with air mishap superficial threats of terrorism, the possible outbreak of ‘birdflu’ virus and economic factors like increase in costs of crude oil (Hill 2011, p.42). Based on this, the operating environment can further be assessed using PESTLE analysis. 3.1 Political Qatar is a politically stable nation with good foreign relations with its neighbors and other countries across the world (Albright 2004, p.40). According to CIA (2014) Qatar acts as the host of Al Udeid Air Base, which is the hub for every American air operations in the Persian Gulf. This demonstrates its conviction in having peace for growth of the region. Similarly, Qatar has agreed with American forces to use the same airbase to convey supplies Afghanistan and Iraq (CIA 2014). Qatar Airways enjoy political support from the government every year. In 1997, the government supported its restructuring and expansion in the global arena (Qatar Airways 2014). Being state owned, Qatar Airways has continued to receive a hefty aid from the government to boost its operations. 3.2 Economic The economy of Qatar is growing tremendously being driven by oil exploration and sells. According to CIA’s World Factbook, in 2013 Qatar is ranked 2nd with the highest GDP per capita globally and about 14% of families are dollar millionaires (CIA 2014). The research shows Qatar has one of the countries with a high standard of living and no taxation on income (CIA 2014). As such, most people have high disposable income they can use on luxury activities like air travelling. This is in fact good news to Qatar Airways, which operates in an industry which depends most of the disposable income (Yu & Ramanathan 2011, p.332). On the international scene, most people are not economically well off, thus prefer using road transport. To cater for the needs of these people, the company has low-cost airlines operating in economy class. In fact the Economy Class category of this company was awarded the best globally in the Skytrax Awards of both 2009 and 2010 respectively (Qatar Airways 2014). To avoid the cost of jet fuel that is fluctuation quite often, the company is investing in airlines that use natural gas and kerosene. Qatar Airways carried out the first business passenger flight Airbus A340-600 in the world utilizing a mixture of synthetic Gas-to-liquids (GTL) and kerosene fuel, generated from natural gas on its trip from London to Doha (Downstreamtoday 2009). 3.3 Social The contracting of the international economy has made Qatar Airways to re-examine their business strategies (Qatar Airways 2014). Qatar Airways has gotten into partnerships with its stakeholders, i.e. governments, suppliers, customers, employees and competitors in a way to cut social costs. Qatar Airways for example, supports innovation which is founded on open-mindedness, global team-work and partnership. Kotle & Keller (2006) argue that there is every endeavor to provide low-cost services to customers, which is more worried of the cost of flight tickets as opposed to quality of service provide by airlines. 3.4 Technological The invasion of the new internet technologies has enabled travelers to easily adopt air transport owing to the ease of booking flights (Hitt, Ireland & Hoskisson 2011, p.130). Several families in Qatar and other destinations in the West can accessible internet from their residents and can with no trouble make arrangements with regards to transport. 3.5 Legal Qatar Airways belong to transport sector and are subject of public scrutiny. As such, this airline company is controlled in terms of safety and quality by the government’s body in its base in Doha (Szymanski 2011). Qatar aviation industry is controlled by the Qatar Airways Civil Aviation Safety Authority. The body also makes sure that Qatar Airways conforms to environmental laws which curtail emissions and noise (Hitt, Ireland & Hoskisson 2011, p.130). 4.0 Porter Five Forces Model To help assess how attractive Qatar airline market is, we use Porter Five Forces Model. This model can help us understand the threat of entry, the bargaining power of suppliers, threat of substitute, the buyers’ bargaining power, and the competition (Jogaratnam & Law 2006, p.176). 4.1The threat of entry The barrier to entry in the Qatar Airways local market in Qatar is strong for numerous major factors (Szymanski 2011). This includes the fact that the Company is state owned, the company have an upper hand in the scale economies in research and development, monopoly and their strong financial base (Szymanski 2011). Its strong financial base is also boosted by its diversification strategies. It should be noted that the company has several divisions which offer other services away from the transport. 4.2The bargaining power of suppliers According to Szymansk (2011), the supplier bargaining power in the Qatar Airline industry is in a moderate level on the basis of the following assessment. Concerning the suppliers’ numbers in the Qatar airline industry is small. In fact, there are no companies making planes in Qatar. Planes here are imported, therefore, it can be claimed the suppliers have low bargaining power. 4.3The threat of substitutes The threat of substitutes is in the middle level in the Qatar airline local market because of the presence of the road (Qatar Airways 2014). People normally like travelling by road because it’s cheap as opposed to aircraft travel which one must have extra disposable income. However, it must be noted that most Qatari households are rich and have extra disposable income because there is no income tax in that country (CIA 2014). 4.4 The competitive rivalry The Qatar airline market has few local market players consisting of only four companies. Such case makes Qatar Airways Company leading airline company in that market. On the international stage, Qatar Airways have to face stiff competition from other established players leaders including Emirates Airways, Dubai Air, British air etc (CIA 2014). Szymanski (2011) contends that one factor which influences the competition in the local sector is the monopoly of Qatar airline industry. Qatar Airways Company controls the industry because it is a state owned company. 4.5 The bargaining power of buyers In the local industry there are four major players comprising Qatar Airways, Gulf Helicopters, Qatar Amiri Flight and Qatar Executive (Szymanski 2011). There many buyers yet few companies offering the services. This means the buyers have low to middle bargaining power in Qatar airline industry. However, the buyers can switch from one player to another with regard to prices and quality of services. 5.0 Current strategies 5.1 Differentiation strategy The company has four classes in its travelling classes; First class, Business Class, Economy Class and Inflight entertainment (Qatar Airways 2014). Qatar Airways is a value-based Company because it provides affordable air tickets and additionally, it has low-cost tickets to economy class travelers. This factor makes Qatar Airways much different from other companies in Qatar and globally. 5.2 Diversification Qatar Airways has eight divisions in its portfolio offering different services. This strategy has helped the company spread its risk compared to companies which relies on one product or services for its revenues (Yu & Ramanathan 2011, p.347). 5.3 Cost leadership strategy Downstreamtoday (2009) posits that Qatar Airways is a cost leader in Qatar airline industry and other Asian nations by cutting its operational expenditures. Even at the international platform Qatar Airways remains as one of the leading companies generally and even in its economy class. The company was feted in 2009, 2010, 2012 and 2013 in different because of its costs and quality services (Qatar Airways 2014). 6.0 Impediments The economy of the world is fluctuating frequently making this airline sector volatile. As a company which relies on disposable income, it becomes very difficult to have stable revenue (Hill 2011, p.67). Jogaratnam & Law (2006, p.179) assert that the airline industry has also become very competitive with the fact there are several companies coming into the market. The airlines are now saturated, and takes in takes the kind of strategy the company puts in place to make it remain a market leader. Another impediment facing the Qatar Airways is the threat of terrorism. This factor has made several people very afraid to travel in Middle East and other Asian countries which experience terrorism and even suicide bombings (Szymanski 2011). 7.0 Conclusion Qatar Airways enjoys local market dominance in all its class segments because of its innovative ways and corporate patronage the Qatar government, but this is just at the local stage. However, there are several opportunities which require taking advantage of at the global stage. To realize this, the airline company must have to lower stiff competition created by Emirates Airlines, Saudi air including some upcoming airlines in its native like Qatar Amiri Flight. Qatar Airways Company will also require enhancing its business, functional and corporate strategies to enable them become more responsive to the ever changing consumer needs. 8.0 References Albright, K 2004, Environmental scanning: radar for success, Information Management Journal, vol. 38, no.3, p. 38-45. Central Intelligence Agency (CIA) 2014, The World Factbook, Viewed on 28th March 2014 https://www.cia.gov/library/publications/the-world-factbook/geos/us.html Downstreamtoday 2009, Qatar Airways Makes GTL History, Viewed on 28th March 2014 http://www.downstreamtoday.com/news/article.aspx?a_id=18626&AspxAutoDetectCookieSupport=1 Hill, C 2011, International Business: Competing in the Global Marketplace 8/e, McGraw-Hill Irwin, New York. Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. 2011, Strategic Management: Competitiveness & Globalization, Concepts. 9th edition, Mason, South – Western, Cengage Learning. p.130 Jogaratnam, G & Law, R 2006, Environmental scanning and information source utilization: Exploring the behavior of Hong Kong hotel and tourism executives, Journal of Hospitality and Tourism Research, Vol. 30, No. 2, p.170-190. Kotler, P & Keller, K 2006, Marketing Management, 12th edition, Upper Saddle River, NJ: Pearson Education Qatar Airways 2014, The Qatar Airways Story: Charting the Rise of One of the Fastest Growing Airlines in the World, Viewed on 28th March 2014 http://www.qatarairways.com/iwov-resources/temp-docs/press-kit/The%20Story%20of%20Qatar%20Airways%20-%20English.pdf Szymanski, A 2011, The competitive analysis of the commercial aircraft industry, Germany, Grin Verlag. Yu, W & Ramanathan, R 2011, Effects of firm characteristics on the link between business environment and operations strategy: evidence from China’s service sector, International Journal of Services and Operations Management, Vol. 9 No. 3, pp. 330-64. Read More