Qantas Airline - Case Study Example

Qantas Airline Name Class Unit Introduction Qantas airlines are leading domestic and international airlines which are based in Australia. The airline was started in 1920s in Queensland which makes it the world oldest airline. The first international flight for the company was made to Singapore from 1935 and later started providing services to UK. By 1956, Qantas had established itself as an international airline. The company has been able to expand their services and improve them to be among the world most respected airline. At the moment, Qantas airlines have been able to operate global services with presence in 42 countries which covers 173 destinations. The company has a large employee base which is estimated to be 35,000 (Hanson et al. 2014). The international airline industry has become competitive with new airlines entering and the low cost flights being offered by some companies. This report analyses Qantas airlines case study and looks at the current situation through analysing issues in the industry, competitors, internal environment, corporate strategy and give recommendations. Analysis of issues in the industry and competitor environment The airline industry has become more competitive leading to low returns. This is due to the market being crowded with more than 620 airlines in operation (Hanson et al. 2014). The industry is also susceptible to the natural calamities such as earthquakes which can disrupt flights. Volatility in oil prices also has a great effect on the industry. Established airlines like Qantas are able to benefit if they have developed destinations due to the changes in the world population. Most of the airlines have a strong national support and have been able to create a better global name. For example, Qantas faces a stiff competition in Asia, where the main competitors are; Virgin Australia, Singapore Airlines, British Airways, Emirates and Cathay Pacific. The competitors have been able to create a good brand image and well trained staff. The competitors also enjoy loyal followers in their area of operation. The airline industry is skilled labour dependent (Fojt, 2006). This has made the airlines to invest in employing highly trained cabin crew, maintenance staff and pilots. Some of the countries have started investing in low paid pilots in their airlines to cut costs. The maintenance staff are also well trained to ensure that the airline has a good safety record. Strategic planning by Qantas has ensured they have highly trained staff. Qantas airlines have been able to maintain a good safety record due to their well trained maintenance staff. Competent maintenance staffs are a strategy that has ensured safety in the airline (Fojt, 2006). The Australian domestic airline industry is very competitive. This has made margins to be low. For example, the expected growth trails at 0.5% for a period up to 2016-17. Qantas have been making strategies to reach a domestic market share of 63% (Hanson et al. 2014). Qantas covers the business and premium while Jetstar covers the budget markets. In the domestic market, Qantas has faced competition from Virgin Australia and Tiger. Virgin Australia has been able to strengthen their brand in the budget market, which has made them a fierce competitor. Tiger airlines have purchased new airplanes and uses low cost strategy aimed at the profitable routes. Buying new planes have been a strategy used to attract new customers and lower the fuel costs. The Australian market is large, but competition is fierce. New companies have been entering the market with low prices. This has reduced Qantas profits in the domestic market (Hanson et al. 2014). Qantas airlines have an advantage in the market due to their large resource base. The airline has a good brand, best slots in the airports, new planes and well trained workforce. Virgin Australia is also well equipped with well trained staff and new airplanes. Despite lower resources, tiger still remains a strong competitor. The airline has good planes, offers low price and have been continually improving. Issues in the internal environment Qantas airlines have been facing several issues in the internal environment. The company internal environment includes areas such as management, financial, marketing and employee relations (Sanchez & Heene, 2005). By looking at the internal environment, all strategies have been based on overcoming competition rivalry. The winning strategy that Qantas seems to be employing is through engaging in areas where they have an advantage (Mules, 2013). The company has been working to discover new advantages that have been unrealised in the industry in order to come up with new strategies. In a situation where the competitors have access to same knowledge such as in airline industry, coming up with new advantages is hard. This has made Qantas to be situational thinkers (Hanson et al. 2014). Qantas have been able to allow their workers to join unions in order to ensure they are in a good working environment (Walsh, 2011). The strikes by the maintenance engineers and baggage handlers in 2008 and 2009 were indicators of the employees’ strength in the company. This was due to the company outsourcing and downsizing. The outsourcing and downsizing strategy have not been well received by the company employees. Outsourcing strategies should only be carried out with careful consideration of their implications on the firm (Keillor & Wilkinson, 2011). The strategy is important as the firm is able to cut cost by producing what they can specialise in a cost effective way (Hanson et al. 2014). The company new management has been under a lot of disputes from the labour unions. The labour unions are not ready for the change through outsourcing and downsizing. For Qantas airlines, outsourcing is a strategy that is aimed at helping the company to have a flexible value chain. A good strategy should be able to help an organisation in achieving its set goals (Lynch, 2006). For Qantas, they want to cut costs of operations due to increased competition. The disputes with the labour unions have led to strikes which have led to high loss to the company (Mules, 2013). This has affected the company’s brand strength and also the employees’ confidence (Hanson et al. 2014). Strategic human resource management is needed for employee engagement (Lynch, 2006). Lack of effective human resource management has led to the lower levels of engagement. For example, the level of engagement is 70%, which is below the average Australian level of engagement. The international performance for the airline has been poor. The increase in competition in the industry has led to loss of business. In the domestic market, the emergence of low cost airlines have made it lose market share (Mules, 2013). This led Qantas to introduce low cost airline (Jetstar). The multi brand strategy has been a strong point for the airline as it deals with emerging competition from low cost airlines. The introduction of low cost airline was a well formulated strategy (Evan, 2010). Coming up with appropriate strategy to counter competition should be timely as in this case. The low cost strategy used by Jetstar have been criticised as it is seen as a means of exploiting employees in order to save costs. There have been claims of poor working conditions for the employees in the low cost sector of the airline. The multi brand strategy has enabled Qantas to acquire 80% of the Australian market share (Hanson et al. 2014). The market rivalries between Qantas and virgin Australia have been getting tougher. Qantas have been suffering from expensive marketing campaigns and high wages for their employees. The airline industry being high rivalries makes it hard to get profits (Keillor & Wilkinson, 2011). To overcome this, Qantas airlines have closed the maintenance facility at Sydney and closed cairns and Adelaide catering. The closures have led to loss of employment with up to 1000 jobs lost (Hanson et al. 2014). Current corporate strategies in the case Selection and development of the markets in which a firm competes is known as the corporate strategy. The corporate strategies have to be drafted in relation to the industries which a firm aims to compete in (Lynch, 2006). In the Qantas case study, corporate strategies are related on how diversified and vertically integrated the firm is. Diversification Qantas airlines have engaged in diversification as one of their corporate strategy. The company has done this with an aim of deriving their revenue from different business (Lynch, 2006). Apart from running airline travel, the company engages in baggage handling, check in and passenger lounges. The company also engaged in catering services. The company catering business is run under two arms; Q catering and Snap fresh. Q catering is aimed at provision of premium catering services while Snap fresh makes frozen meat and related meat products. The catering services are located in several areas in Australia and sells to other airlines as well as Qantas. The company engagement in the wine industry plays an important part in the Australia market. The company also offer holiday travels in addition to its services. This helps the company to utilise the existing value chain (Hanson et al. 2014). Outsourcing Outsourcing is another corporate strategy that has been utilised by Qantas. The firm dropped vertical integration in favour of outsourcing. For example, the company outsources up to 7000IT jobs overseas in 2005 which led to loss of jobs. The outsourcing strategy was not welcomed by the union, which led a strike. The company lost a lot of revenue due to flight cancellation. Outsourcing is an important corporate strategy as the firm is able to concentrate on what they can produce at a lower cost (Lynch, 2006). Despite the advantage of outsourcing, Qantas did not carry the process of outsourcing in the right way. All the stakeholders should have been involved. Making all inclusive strategies helps in reducing incidences such as strikes which can cost the firm a lot of revenue (Worthington, Chris & Kathleen. 2006). There have been merger with Emirates which is a strategy aimed at ensuring the airlines share resources and increase the protection for international industry. The strategy is aimed at giving the airline an advantage. A strategy should be able to bring an advantage to the firm (Baumard, 1999). For Qantas airlines, corporate strategies have been motivated by shared resources, coming up with specific assets and ability to transfer competencies. Sharing resources occurs due to fact that Qantas is able to share the resources through the diversified business (Sathe, 2003). For example, the catering business is able to serve the airline as well as others. This leads to economies of scope and increase in efficiency (Colin, 1999. The organisation is able to take their core competencies and use them in other sectors. The strategies have also helped the firm to come up with specific assets (Johnson & Scholes, 1999). The management has been very keen on the three factors when coming up with their corporate strategies. Recommendations and Conclusion The airline industry has become competitive both in domestic market and internationally. Qantas airlines should invest in more diversification efforts. The organisation should engage in other business activities that will enhance their revenue, which is eroded by competition. Qantas should consult the employees before making strategies that can lead to their discontent (Brigden, 2009). The employees strike has led to bad reputation and loses to the airline. The decision to outsource should be carried out after consultations with all stakeholders who include the labour unions. For example, the employee should give their views and they have to be explained the reasons for the decision. Consultations also helps in coming up with a well laid out dismissal procedure. The company should also ensure that their quest for low cost airline does not exploit employees. For example, the claims of employees being overworked and paid poorly can damage the airline reputation and brand image. The company should realise that their market share is due to their strong brand image which ought to be protected. The company can earn a bad reputation if its employees are engaged in bad working conditions in order to cut costs. The management should ensure that they continue marketing the company brand (Drucker & Maciariello, 2008). Lastly, the relationship between the company and labour unions should be enhanced to avoid future losses due to strikes. References Baumard, P 1999, Tacit knowledge in organizations, London, Sage Publications. Brigden, C 2009, Journal of Industrial Relations. Unions and collective bargaining in 2008, 51(3), p. 365-378. Colin, S. G 1999, Modern Strategy, Oxford, Oxford University Press. Drucker, P. F & Maciariello, J. A 2008, Management, New York, NY: Collins. Evan, G 2010, Qantas Group – Strengthening the Business, Retrieved 13 October, 2014, from http://www.qantas.com.au/infodetail/about/investors/macquarie-conference- presentation.pdf Fojt, M 2006, The airline industry, Bradford, England, Emerald Group Pub. Hanson, D., Hitt, M.A., Ireland, R.D & Hoskisson, R.E 2014, Strategic Management Competitiveness & Gobalisation (5th Asia-Pacific ed.), Cengage Learning, South Melbourne, Australia. Johnson, G & Scholes, K 1999, Exploring corporate strategy, London, Prentice Hall Europe. Keillor, B. D & Wilkinson, T. J 2011, International business in the 21st century, Santa Barbara, Calif, Praeger. Lynch, R.L 2006, Corporate strategy, Harlow, England: FT/Prentice Hall. Mules, R 2013, The Long Haul: The Qantas – Emirates Alliance,Vol. 21, no.3, p. 2-4. Sathe, V 2003, Corporate entrepreneurship: Top managers and new business creation, Cambridge, Cambridge University Press. Sanchez, R & Heene, A 2005, Competence perspectives on managing internal processes. Amsterdam: Elsevier JAI. Walsh, C. R 2011, Airline industry strategies, operations and safety. New York: Nova Science Publishers. Worthington, I., Chris, B & Kathleen 2006, The business environment, Harlow, Financial Times Prentice Hall. Read More