Strategic Operations Issue at Qantas - Essay Example

STRATEGIC OPERATIONS ISSUE AT QANTAS Course Instructor Institution City/State Date Table of Contents Strategic Operations Issue at Qantas Abstract All companies are focussing in how they will prosper as well as survive in the future. For this reason, a business strategy is normally seen as a plan or set of goals that sets the actions’ long-term direction, which are required for ensuring organizational success in the future. Still, regardless of how big the plan or intention is, the organisational strategy can only turn out to be an important actuality, in practice, if it is enacted operationally. The operations of any company are strategically crucial specifically because nearly all activities in the organization involve the everyday activities in the operations function. Therefore, it is the numerous day-to-day operations’ actions when measured in their entirety that makes the long-term strategic direction of the organisation. For a company to run and operate effectively and smoothly, it must be in a position to utilise as well as implement project, operational, as well as strategic management strategies that enables it to function successfully in the industry. In view of this, this paper purpose is to offer discussion as well as the application of the concepts and knowledge of issues associated with strategic operations in Qantas. Besides that, the problem/issue effect in addition to utilisation of the strategic operations concepts would be evaluated and discussed in details. Background of the Organization In 1920, Qantas Airways was established in Queensland, Australia and is currently the leading Australian airline and amongst the few airlines in the world with the longest history (Qantas, 2012). It started its business by transporting passengers as well as mails in biplanes; currently, its operations have expanded to almost 140 destinations across the globe. Basically, numerous Qantas maintains numerous code share and alliances arrangements; it holds 18% interest in the Oneworld Alliance for global airline that includes renowned airlines such as British Airways and American Airlines. As of mid-2008, Qantas had thirty-eight Boeing 737-800s, twenty-four Boeing 737-400s, five Boeing 737-300s, twenty-nine Boeing 767-300ERs, thirty Boeing 747-400s, ten Airbus A330-300s, as well as six Airbus A330-200s. Besides that, it has super-size Boeing 787 as well as Airbus A380 (Qantas, 2012). In essence, the main business of Qantas Group is transporting customers through its two complementary airline brands; Jetstar as well as Qantas. Besides that, the company operate numerous subsidiary businesses, which include other airlines, as well as focuses on the specialist markets like Q Catering. In addition the brands of the airline operate international, domestic as well as regional services and have a broad subsidiary businesses portfolio ranging from Qantas Frequent Flyer to Qantas Freight Enterprises. Besides that, Qantas has more than 30,000 employees, with almost 93% of them living in Australia. Originally, the company was registered as the Queensland and Northern Territory Aerial Services Limited (QANTAS) and currently is viewed as the world's leading airline as well as the strongest Australian brand. It is for this reason that the company has built a reputation for excellence in customer service, operational reliability, safety, maintenance, as well as engineering (Qantas, 2012). Operational Issue In spite of the achievable as well as successful goals of Qantas, the company is still experiencing an issue of high cost base which has brought about an enormous impact on the company’s operations. As observed by Jacobsen (2014), there are some factors that have an effect on sustaining business operations in Australia; energy costs, bureaucratic red tape, as well as labor costs. Nearly 50% of losses experienced by Qantas are taken up by the carbon tax, and this is exacerbated by Qantas cost structure (Jacobsen, 2014). As indicated by Wells (2013), staff expenses at Qantas make up almost 25 per cent of total revenues. Currently, Qantas more than 30,000 employees across the globe, and average cost per worker is nearly 84,025 US dollars. Even though much effort has been made in attempt to cut the labor cost such as expanding Jetstar brand where labor cost is lower as compared at Qantas, a lot has to be done so as to improve the situation. Besides that, the employments of cheaper employees from countries has increased amongst the competitors, pens and so the average expense per worker amongst the competitors is much lower that at Qantas. Essentially, Qantas has failed to reduce the percentage of revenues it pays to its workers, and in consequence, its labor cost is much higher as compare to that of its competitors. For instance, Singapore Airlines is Qantas major competitor, and when the two airlines are compared Singapore Airlines has almost 30 per cent less labor cost and employees. Undoubtedly, the situation at Qantas is not sustainable bearing in mind that success in business environment is attributed mainly to cost reduction as well as efficiency achieved by means of benchmarking and improving the existing working solutions and techniques. This can be achieved by implementing and imitating conventional solutions such as lean, Total Quality Management (TQM), and six-sigma techniques (Wells, 2013). Qantas market is typified by fierce competition, high costs, as well as low margins; therefore, gaining an edge over such competitors needs the company to deliver an excellent customer experience. For years, Qantas has strived to offer a consistent customers experience from booking to arrival, which is tailored to all preferences of the customers. Little that has been achieved and Qantas has failed to meet the expectations of the customers. Operation Purpose and Objective Qantas has to some extent succeeded in its quest to develop an application for in-flight that can present and aggregate information of the passage to cabin crew with the purpose of improving customer intelligence as well as customer recognition. Beforehand, this timely as well as contextual information could not be accessed by the cabin crew unless the use the manual processes. In order to get approval for development of this application, AWS (2014) posits that the Qantas team had to hastily create a prototype for trials. It was expected that the application could mine information from different data silos and systems around Qantas, and still abide by the airline’s security and privacy requirements. Besides that, the data platform was expected to be economical, and able to meet the changing demand peaks as well as deliver data fast across the globe. At first, the application was made available for almost one thousand cabin crew managers but was later introduced to other customer-facing staffs like check-in personnel as well as airport lounge staff. Despite the introduction of this application, the cost of operation and labor exacerbated. Qantas Work Flow and Operation Issues Flow Chart The Implemented Solution Amazon Web Services (AWS) was adopted by Qantas with the intention of avoiding a lengthy process of capital expenditure approval for development of its concept proof. The AWS brand was considered because of its maturity as well as capability and its known track record for evaluating the service providers. Besides that, Qantas was enthralled by the AWS platform ability to scale down as well as scale up with the requirements of the airline, and did not create the need to lock in a particular resource consumption level (AWS, 2014). Furthermore, Qantas was motivated by the actuality that AWS Management Console enabled the company to clearly view the level of capacity that was being used by the company and the expenditure. After comprehensive consultations with Amazon Web Services, the information technology security specialists at Qantas were contented that Qantas data security requirements in the cloud environment could be offered by the AWS. Additionally, Qantas utilizes Amazon EC2 (Amazon Elastic Compute Cloud) so as to offer the resizable computing capacity needed for supporting demand variations. In view of this, the airline hired the services of Full 360 so as to hastily test and iterate various solutions of big data technology that can meet the company’s strategic goals (AWS, 2014). The airline exploited the AWS platform redundancy to make sure that all instances that a problem is experienced it does not affect the working environment. In spite of espousing all the above mentioned technological solution to improve its operations, the company has failed miserably to reduce its high operational and labor costs. Technological Resources Undoubtedly, Qantas as evidenced above, understands that the digital revolution has generated a new consumer generation who desire for experiences, products and services that are more accessible, flexible as well as customised. The new generation of customers expect to move flawlessly in real time between the virtual as well as physical worlds (PwC, 2014). Advancements in technology have largely changed the place of work since employees can nowadays utilise technology as a ubiquitous tool that replace traditional corporate techniques of operating. For this reason, Qantas has espoused the cloud, mobile, social, and analytic technologies to generate a number of opportunities that can bring value to the company. Armed with novel technologies, Qantas can profitably solve a number of multifaceted social problems, but cannot solve the existing operational issue. Numerous airlines have embraced disruptive technologies, and have invested heavily in the mobile devices, social media, big data as well as cloud computing with the goal of innovatively engaging with customers and collect insights for marketing as well as developing new offerings (Nambisan, 2015, p.103). However, capitalising on the abovementioned technologies has become challenging, and getting allies in the competitive environments has turned out to be harder (PwC, 2014). For this reason, Qantas will have to offer digital tools for training employees who are not pursuing the conventional career paths. Opportunities for Change Change management as observed by Lorenzi and Riley (2000, p.116) is a natural solution that companies require to manage technological change devoid of taking up risk or decelerating the time for marketing new solutions. High prices of oil have overwhelmed Qantas business, especially at the international level, wherein fuel accounts for a high percentage of total cost. As an international airline, Qantas has to develop and implement plans that will account for the oil prices trend. In this case, such plans must consist of lower fuel hedging levels through financial instruments. According to Cobbs and Wolf (2004, p.2), the existing global economy volatility connotes that the utilisation of financial instruments like options as well as swaps for fuel hedging will turn out to be more costly. This higher cost can be solved by utilising such instruments less as well as depending more on measures that are costless so as to protect against the rise of prices. Qantas premium seats for international flights are exceedingly high, and even though it works exceptionally well when the economy is in good shape, it is normally catastrophic in bad economic times. This makes the airline’s performance more recurrent as compared to airlines having lower premium mixes. There is a need for change because in the future the global economy will become more volatile as governments across the globe stiffen their budgets, especially in the developed economies. Basically, Qantas has high premium mixes and will possibly experience earnings that are more volatile; thus, becoming hard and costly for the company to raise capital. For this reason, Qantas must aspire to reduce its premium mix so as to remain competitive in the future (Webber, 2011). Besides that, the present Qantas board lacks profound experience on aviation considering that only three out of eleven members have worked at a senior level at an airline company. In the airline industry, it takes a number of years in the aviation work so as to completely comprehend its complexities. Recommendations Recommendations to improve the operations efficiency at Qantas involves offering additional trainings as well as seminars to the workers to learn about the ever changing technology, generate new safety measures, espouse new technologies, strengthen its processes, and look for valuable means of countering financial issues. In order to improve Qantas operations, the company has to offer seminars and training that can further broaden the employees’ knowledge; thus, offering them adequate information valuable for improving the company operations. This is in consideration of the fact that employees are the key function in business operations, and so they are valuable for the realization of long-term goals. Besides that, Qantas should espouse cost leadership strategy which is useful for making the airline a lower-cost airline in the airline industry. In view of this, low costs may be realised by means of economies of scale in service provision, accessing low-cost raw materials or using innovative to offer services. In this case, satisfactory revenue can be achieved by Qantas when it makes a considerable profit margin on all its services, balanced by a high sales volume. Furthermore, the development of the in-flight application was valuable to Qantas because it enabled the company to understand the essence of cloud computing. Still, the more the company utilise technology, the more it will become confident while carrying out its operation as well as production workloads. It is worth noting that successful warriors in the price wars are always ahead of their competitors through utilisation of a number of tactics: They concentrate only on a single or a few consumer segments; they offer one benefit that outdo their competitors; and they strive for low prices through operations that are efficient in keeping the costs down. Qantas should understand that when companies ultimately realize they will lose in the price war to the low-cost players, they attempt to do product differentiation as a last resort. To overcome its present operation issues and succeed in the competitive aviation market, Qantas should design services, continue innovating new services and products provide a unique product mix, and sell experiences. Qantas need an operational audit so as to look for ways to improve the effectiveness as well as the efficiency of its operations and may include an analysis of the current internal controls. Excelling in some of its operations performance objectives may as well assist Qantas to pursue a business strategy rooted in a resultant competitive factor. Still, it is imperative to take into account that business strategy success relies not just on the operations ability to realise excellence in the seemly performance objectives, but significantly on customers appreciating the selected competitive factors that are based on the nosiness strategy (Barnes, 2008, p.24). Conclusion In conclusion, the report paper has offered discussion as well as the application of the concepts and knowledge of issues associated with strategic operations in Qantas. As argued in the report, the organization develops strategies as well as plans so as to manage the challenges as well as opportunities that crop up in it its particular environment of operation. For this reason, it has been suggested that Qantas should design a system that can reduce cost and produce quality services within the required time frames. With these strategies, Qantas can resolve its strategic operations issues as well as conflicts that can bring about negative effects on the organization’s operations. Undoubtedly, putting internal controls that are cost effective in place could have prevented Qantas operation issues before they occurred. References AWS, 2014. AWS Case Study: Qantas. [Online] Available at: HYPERLINK "http://aws.amazon.com/solutions/case-studies/qantas/" http://aws.amazon.com/solutions/case-studies/qantas/ [Accessed 8 August 2015]. Barnes, D., 2008. Operations Management: An International Perspective. New York: Cengage Learning EMEA. Cobbs, R. & Wolf, A., 2004. Jet Fuel Hedging Strategies: Options Available for Airlines and a Survey of Industry Practices. Finance, vol. 467, pp.1-22. Jacobsen, P., 2014. Qantas is hamstrung by high labour costs. [Online] Available at: HYPERLINK "http://www.theaustralian.com.au/opinion/letters/qantas-is-hamstrung-by-high-labour-costs/story-fn558imw-1226846324503" http://www.theaustralian.com.au/opinion/letters/qantas-is-hamstrung-by-high-labour-costs/story-fn558imw-1226846324503 [Accessed 2 August 2015]. Lorenzi, N.M. & Riley, R.T., 2000. Managing Change: An Overview. Journal of the American Medical Informatics Association, vol. 7, no. 2, pp.116–24. Nambisan, S., 2015. Embracing Entrepreneurship Across Disciplines: Ideas and Insights from Engineering, Science, Medicine and Arts. Northampton, MA : Edward Elgar Publishing. PwC, 2014. Harnessing technology. [Online] Available at: HYPERLINK "http://www.pwc.com/gx/en/issues/technology.jhtml" http://www.pwc.com/gx/en/issues/technology.jhtml [Accessed 2 August 2015]. Qantas, 2012. Qantas Through the Years. [Online] Available at: HYPERLINK "http://www.qantas.com.au/travel/airlines/history-through-the-years/global/en" http://www.qantas.com.au/travel/airlines/history-through-the-years/global/en [Accessed 8 August 2015]. Webber, T., 2011. Qantas: a ten-point plan. [Online] Available at: HYPERLINK "http://insidestory.org.au/qantas-a-ten-point-plan" http://insidestory.org.au/qantas-a-ten-point-plan [Accessed 8 August 2015]. Wells, P., 2013. Cost-heavy Qantas must look beyond government bailout. [Online] Available at: HYPERLINK "http://theconversation.com/cost-heavy-qantas-must-look-beyond-government-bailout-21206" http://theconversation.com/cost-heavy-qantas-must-look-beyond-government-bailout-21206 [Accessed 8 August 2015]. Read More