Theoretical Analysis of Qantas Airline Company - Example

Theoretical Analysis of Qantas Airline Company Name of student: Institution: Executive summary This paper uses the 13 point-analysis to evaluate the Qantas Company. The analysis is significant in developing strategies that can help the current CEO Allan Joyce to make important decisions since the company spoilt for choice between operating a low price airline and the high price airline. The most relevant part of this analysis is the strategies development that takes place at the business, corporate and international levels. One important factor that strongly comes out from this piece of work is the influence supply power to international companies. Qantas has Airbus and Boeing as its major suppliers. The success of this company has depended largely on this company. Last but not least, the paper recommends the most effective decision that its current CEO should make to ensure that this company continue to operate as the world leading international airline. Introduction Companies use different strategies to grab opportunities and handle possible threats. Hanson et al (2011) defines strategies as coordinated actions and commitments that companies design for exploration of core competencies thereby gaining competitive advantage. This paper chooses airline industry because it has many opportunities as a result of globalization. People use airlines as means of transport at world wide scale thus large companies like Qantas in Australia has made use of this opportunity (Aulech, 2007). Briefly, the company started as a merger with British Imperial Airways and developed its first aircraft (super constellation) in 1958. The management then bought bigger aircraft from Boeing Company as a strategic decision that would later become the basis of the company’s strategy formulation. To comprehensively analyse the company, the paper uses 13-step analysis that covers all aspects of the corporation. Concisely, case study intends to recommend strategies at business, corporate and international levels of Qantas that it can use for competitive advantage. Step 1 This entails the analysis of the industry. Technological advances have globalised the Airline that has enabled people to depend on reliable, timely and efficient air travel as well as their businesses. Qantas Company has grown by overcoming obstacles and records a growth rate of 5% each year (Hanson, 2010b). The good business environment will ensure similar growth trend for about 20 years. On the other hand, the industry’s growth also depends on middle population. Their life style is work oriented, and bank allowances make it possible for them travel. Most significant is that the travel industry is well established, and many university students travel before they get a job. Step 2: general environment analysis The business environment comprises of internal and external factors (Hanson, 2010a). External analysis has two components: scanning and monitoring. In scanning, the management team identifies early signs of changes in the environment and trends. On the other hand, monitoring entails detecting through observations of slight changes in the environment. The other elements include forecasting and assessing. Forecasting is projecting anticipated changes based on the observable changes while screening entails importance of these changes to management strategies. The general environment has dimensions that influence specific industries. These dimensions exist in a broader societal context. There are six segments of the general environment analysis. Demographic analysis includes the population size, age structure, geographic distribution, ethnic mix and income distribution (Hanson, 2010a). The world population is experiencing a changing pattern that established airline like Qantas can utilise to boost its business. The company has gone international, and it depends on the global population. Around 11 countries have hit the 100million population mark. This is a change from the previous situations when USA, China and USSR were the only countries with such high population base (Hanson, 2010b). This provides a resource base for the country. Asian continents are also forging ahead in terms of the population with India becoming a significant threat to European Union. Economists project that around 19 countries will hit 100million mark come the year 2050. In terms of economy, Asian countries are providing a sound economic base. However, Africa is also providing a good resource base in terms of its economy in the global context, is not facing significant pressure since USA dominance has been fading away. The airline company receives a big support from the home country (Australia with excellent economic potential. On the other hand, the company has been engaging in economies of scale. For instance, it merged with British Airways as an economic strategy (Hanson, 2010b). The legal framework of the country also influences the company. For instance, privatisation policy prompted the government to sell the company but under a regulatory framework that requires Australians to have 51% of the company shares. The population had an outstanding share of 55% to exceed the figure required by the Australian legal laws. Social-cultural aspect of the workforce in Australia is outstanding. The workers went on strike in 2008 citing poor working conditions and they out cried the outsourcing policy. This shows how workers put forward their rights before the company and it is an external environmental force that influences the company (Hanson et al, 2011). Step 3: the industry environment Industry environment intensively influences above-average returns and strategic competitiveness of the firm than general environment (Hanson, 2010a). Qantas has a sound supplier power since it gets its aircraft orders from Boeing. This is an established aircraft manufacturing industry in the USA and it is the world’s leading. On the other hand, the company orders some aircrafts from Airbus which is also one of the leading aircraft manufacturing industries in the world. For instance, it currently has 17 orders of Airbus A380, 67 Airbus A320/A321 and 65 of Boeings 787-8 as well as 787-9 (Hanson, 2010b). The buyer power of this company has not changed for quite a while. Being an award winner for six consecutive years, the company has been able to establish its market base. It has a customer base of good spending habits shown by the booming restaurant business that sells meats and many meal components. Key entrants into the company have posed threats to Qantas Company. One of them is the Jetset but the company moved fast to consider a merger with it. In the 1990s, the company experienced new entries like Canadian Airlines, Cathay Pacific, Finnair and Iberia joined Qantas in the international airline business (Hanson, 2010b). However, the company utilised the concept of new entry barriers. It embraced product differentiation by establishing Qantas catering and Qantas Holiday tours to counter its new competitors. The company operates low price (Jetstar) and high price air travels (Qantas) as a substitute product. The two can substitute each other depending on the nature of the market. The low price was a response to Virgins low price model. Most significant force is rivalries among competitors (Hanson, 2010a). When Ansett joined the industry, Qantas saw a drop in its income to 60%. The rivalry in the industry has been fierce since the market crowd varies. Main rivalries include Singapore, Cathay pacific and Malaysia. They have good fleets, brands, excellent staff, loyalty among followers and good websites. The competitors have equally won prices. The nature of the competition is so fierce that brand loyalty diminishes with noticeable price differences. This causes other companies to delay the delivery of new flights while some firms consider mergers. (Hanson et al, 2011). Step 4 Strategic groups emphasise similar strategies through strategic dimensions (Hanson, 2010a). It is greater between international firms like airlines that ensure heterogeneity in their performance. Strategic groups in this context strive to use joint customer services. The companies use the same departure lounges, flyer points and joint flight booking. This gives the customer a variety of destinations. This has led to rivalries since rival firms understands each other’s policies and takes advantage of it. For instance, when Virgin introduced the low-cost model, it posed a threat to the company (Hanson, 2010b). This strategy gives companies capabilities of using internet booking system, lower paid-pilots, standard aircrafts, and good services. This strategy is a threat to rival firms since when prices becomes low, companies in the same strategic group may lose customer loyalty and go to the cheap airlines. Step 5 materials about opportunities and threats (ease to pull from the previous four steps) The company has an array of opportunities ranging from safe airline business environment to loyal customers and dedicated workers (Hanson, 2010a). The growing middle class population is a good business opportunity for the company. On the other hand, dominance of USA in the global market has reduced giving the company good opportunity to compete freely in the market. Economic growth of Africa and India is also an opportunity for the company; it can invest heavily in these untapped markets. Threats come from competitors who have unstable pricing policies the other threat is global financial crisis that once threatened the company in the year 2008 (Hanson, 2010b). Internal analysis (map of internal analysis) (Hanson et al, 2011). Step 6 the firm’s resources, tangible and intangible The company has a large fleet of aircrafts: 224 aircraft, 3 Airbus A380-800, 6 Boeing 747-400ER). Other resources include 17 Airbus A380, 2 A330-200, 67 Airbus A320/A321, 65 Boeing 787-8 and 787-9 (Hanson, 2010b). On the other hand, there are two Qantas catering businesses that add to its resource base. This enables for the company to organise holiday services to the customers, a strategy that most competitors do not have. The other intangible resource is full-service air travel and unionised and well-paid staff. The staffs are an important resource base of the company, and the management has put in place reward system that most of its competitors are unable to adopt. The CEO, Alan Joyce has good leadership skills because he previously worked in Jetstar. The company has a good governance structure that represents all the stakeholders. However, Qantas management has put in place a well organised baggage handling that has been a significant problem in the airline industry. The company’s check-in system is superior to its competitors. It has internet and other automated check in technology that helps it to respond to substitute products from the competitors. Moreover, the company has a good relationship with its suppliers (Boeing And Airbus) as intangible resources. Step 7 capabilities identification The company has been able to put in place a wine supply to supplement its products and services (Hanson, 2010b). This implies plays a key role in the local winery sector and handles about four million bottles per year. On the other, hand, it has a flyer program with five million members thus it is the largest Airline in the Southern hemisphere. These initiatives mean that the company combines both hospitality and travel. In addition, airline industry needs a good maintenance strategy. Qantas engineering has a large scale repair and maintenance business that provides safety to the whole company. This is better than outsourcing of the engineering efforts that some competitors use. Step 8: core competency analysis Core competencies are capabilities which ensure long lasting competitive advantage of a company over its rivals (Hanson et al, 2011). They distinguish the firm and ensure its uniqueness. Capabilities must be valuable, unique, non-substitutable and inimitable. The table below illustrates the four tests for of the core competency. This program has valuable capabilities since the large employee neutralises competitor threats and enables it to exploit new opportunities by the innovative workforce. The second capability is the supplementation of the airline services with the winery business. This initiative needs a lot of capital, and it is costly to imitate. (Hanson et al, 2011) Step 9: value chain analysis This analysis is vital for the firm in understanding its operations that are valuable and the ones that are not (Hanson et al, 2011). Secondly, it helps the management in understanding cost position of the firm. However, the analysis has two elements: primary and supportive activities. Primary activities involve service, operations, sales and marketing, outbound and inbound logistics. Supportive activities are infrastructure management, technological development, management of human resource and procurement. In its primary activities, Qantas Company has embraced online services through online booking. The engineering department through its maintenance of aircrafts and safety measures adds up to inbound activities of the company. Step 10: weaknesses First weakness of the firm is the adoption of outsourcing strategy that caused workers’ unrest in the year 2008. This denies the nationals chances for employment. The result was financial setback due to cancellation of flights. The other weakness, though a strategy, is adoption of low cost and high cost air services which the management developed in response to low price policy that competitors were using. This is a weakness because the organisation should focus on how to differentiate its products and services rather than imitate the existing strategies (Hanson et al, 2011). In addition, the management must put in place a proper staffing criterion. Poor staffing made the company adopt outsourcing that would later become part of the policies of the company. This policy is unpopular with most employees as the move usually renders them jobless when the company exports work force. Step 11: pulling it together In this stage, the paper uses SWOT analysis to evaluate the company (Hanson et al, 2011). The strength of the company is that it has reputable suppliers; Boeing and Airbus that provide avail aircrafts. The other strengths of Qantas Company include dedicated work force, popularity among customers and the flyer program with five million members thus the company uses large membership as strength. The only weakness it has is the adoption of the outsourcing policy that has faded the loyalty and commitment of workers in service delivery. There is a variety of opportunities in the airline industry but the company has capitalised in the winery industry and catering because they help to increase the capital base. The threats come from competitors that use low pricing and are ready to use any new technology to knock off the company from its current market position. Step 12: current strategies The first strategy is mainly to ensure profitability of Qantas and Jetstar as a move to strengthen market position. One of its sustainable strategies is the restructuring of the company’s international businesses so as to eliminate losses through merging with partners (Airline Leader, 2013). The most important strategy is the targeting of Asian market (QANTAS, 2013). Japan has a good market base hence investing in the Asian continent will increase profitability of the company. This is because Asian countries including Japan, India and the famous China have a sound economic background (Airline Leader, 2013). Step 13: strategies development Firstly, business strategy entails coordinated and integrated commitments that help firms gain competitive advantage (Hanson et al, 2011). The company gains this superiority through exploitation of its core competencies specifically the individual markets for each product. There are five business strategies that include cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership/differentiation (Hanson et al, 2011). Cost leadership strategy suits the company especially Jetstar airline. This strategy minimises costs by harnessing flight services that require low cost inputs. The management can best develop this strategy through monitoring competitors or the outsiders. Currently, the management is at a cross road and is undecided on whether to use both high cost and low cost pricing strategies. The other advantages of this strategy are that it requires few management layers, effective training of the staff and simplified planning framework. International strategy is where a firm sells its products and services beyond the local or domestic market (Hanson et al, 2011). The best international business strategy for a global industry is the global strategy. In this context, the firm produces standardised products to international markets, but the home office dictates the competitive advantage. The strategy also focuses on economies of scale that entails different resources to achieve common goals and objectives. It also requires sharing of resources. For instance, Qantas can merge with British Imperial and share resources in an equal basis. If the two firms form a merger, they will definitely exploit competencies through effective resource utilisation. The internationalisation also helps firm share resources thus increasing their capabilities. Finally, the airline company can develop a strategy at the corporate level (Hanson et al, 2011). In this strategy, firms work closely to realise their shared objectives. Strategic alliances in corporate strategy enables assist with partnership development of additional resources and extra capabilities as a basis of a novel competitive advantage. Diversifying strategic alliance best suits Qantas Company since it creates room for new product expansion without the completion of a merger. This strategy makes it possible for firms to evaluate and assess benefits of the future merger. The other advantage of such a strategy is the spreading of risks. For instance, Qantas Company can enter into a corporation with its associates in the “Oneworld group” (Hanson et al, 2011). Conclusion In summary, the company has capitalised on the opportunities that exist in the airline industry. On the other hand, it has been able to stand stiff competition through development of strategies that integrate modern technological innovations. This paper recommends a business strategy that will allow the company to capitalise on its competencies through commitments and coordination. The global strategy can be the best international strategy where the firm has many branches all over the world but the main hub is in Australia. Finally, the paper recommends strategic alliance as a corporate strategy which will make the firm achieve competitive advantage at the international level. References Airline Leader, (2013). Qantas banking on Asian strategy to fix international woes. [Online]. Viewed on 14th September, 2013, http://www.airlineleader.com/regional-focus/qantas-banking-on-asian-strategy-to-fix-international-woes Aulech, S. (2007). Business deconstructed-QANTAS AIRWAYS LIMITED. GRIN Verlag Hanson, D., Hitt, M. A., Ireland, R. D and Hoskisson (2011). Strategic management: competiveness & Globalisation. Cengage learning Hanson, D (2010a). A summary of the case analysis process. Retrieved from: Hanson, D (2010b). Qantas in the global airline industry. Retrieved from: www.cengage.com/resource_uploads/.../0170186288_243677.pdf Tinseth, R. (2013). Boeing: The Power of 12. [Online].Viewed on 14th September 2013, http://www.boeingblogs.com/randy/ QANTAS, (2013). Qantas Announces Network Improvement as Part of Asia Strategy. [Online], accessed on 14th September, 2013, http://www.qantas.com.au/travel/airlines/media-releases/feb-2013/5486/global/en Read More