Strategic Analysis of QANTAS - Case Study Example

Strategic Analysis of QANTAS Student’s Name Institutional Affiliation Strategic Analysis of QANTAS Executive Summary The following paper aims at strategically analyzing the internal and external environments of Qantas airlines. Qantas airlines is the 11th biggest airline industry and the largest carrier in Australia (Qantas Group, 2013). Numerous strategic issues are likely to affect the future development of the aviation industry in relation to Qantas. This includes the PESTEL model and Porter’s 5 Forces model factors (Hubbard, Rice & Galvin, 2015). The report will use these two models to analyze the external and macro-environment of the aviation industry in relation to Qantas. The paper will also analyze the strategic resources and capabilities of Qantas while offering findings as well as recommendations. Background Information Queensland and Northern territory Aerial Service (QANTAS) Ltd, is an airline organization based in Australia. Currently, it is ranked as the 11th largest carrier in relation to Revenue Passenger Kilometers (Qantas Group, 2013). Historically, the Qantas Company was a government owned company with no aim for making profits or expansion. Nonetheless, in the early 1995, the carrier underwent various organizational and strategic transformations to implement a less intolerant business perspective while focusing on becoming a recognized market force in the commercial airline industry. The Qantas Group’s main business is transportation of passenger through two main courtesy carrier brands including Jetstar and Qantas (Qantas Group, 2013). The organization has a total of 256 aircrafts and employs about 32, 000 employees globally. Other than commercial transportation, Qantas also offers catering, freight, E-commerce, and tourism. The group offers about 182 destinations in about 44 countries including 59 destinations in Australia and 123 in other nations (Qantas Group, 2013). According to Qantas, the airline carried about 41 million customers between 2008 and 2009 (Qantas Group, 2013). Qantas operates predominantly in Australia as its main market with about 65% of the market share. Qantas has developed as an international force in the airline industry, but still faces increased challenges from both internal and external environments. The following paper aims at conducting a strategic analysis of internal and external environments to support critical decisions for addressing pressures from customers, suppliers, and competitors. External Environment Analysis The following part aims at conducting both the macro-environment analysis using the PESTEL model as well as using the Porter’s 5 forces analysis. Macro-environment: PESTEL Analysis The PESTEL analysis offers an overview of the major trends that will affect the industry and its growth in future (Hubbard, Rice & Galvin, 2015). In this case, the analysis applies in relation to the Qantas carrier. Political Major political issues affecting the airline industry in relation to Qantas is the current state of the Australian flight industry. The industry was de-regulated in early 1990, opening up competition among aviation companies (Forsyth, 2003). Moreover, new market policies have allowed the entry of new companies in the industry. One of the main political issues for Qantas is the government backing they received during their merger with British Airways. This strategic merger has led to reduced waste of expansion, utilization, and resources of the earning and network revenues in Asia-Pacific and the European markets. Another political issue is the increased political unrest in the Middle East that is likely to hurt business in these destinations. Economic According to Hubbard, Rice & Galvin, (2015), economic aspects encompass the incomes and spending power of customers in any nation or region. The Global financial crisis was a major blow for the world including Australia where oil prices up surged reducing customer spending power. According to Graham business travel in the Asia-Pacific market reduced by about 24% while in Europe it reduced by 22% (Graham, 2009). Currently, the industry is recovering with the increased competition enabling competitive pricing strategies. Social-Cultural-Demographic The society, culture, and population of Australia have increasingly developed in all areas including education, industrialization, and technologies. The overall standard of living has improved for many Australians. Again, the airline industry has played a significant role especially in education programs. The world has witnessed increased student-exchange programs where students use air travel. Qantas has undertaken its role in this sector by introducing numerous offering such as the Qantas Club and the Qantas Frequent Flyer Program (Qantas Group, 2013). Additionally, the number of consumers who prefer low cost air transportation has risen, which illustrates a change in the airline travel culture. This has affected Qantas because it predominantly offers premium class air transportation that has seen it loose out on the emerging low cost consumer category. Technological Technology is an ever advancing element and the same case applies to the airline industry. The airline industry has developed technological solutions especially for enabling effective and efficient services through automated bookings, reservations, check-in, and payments (Qantas Group, 2013). The need to invest in technology in the airline industry is paramount in achieving economies of scale that can enhance the effectiveness and efficiency of operations. Qantas has illustrates its commitment in technology investments being the first carrier company to perform a landing using satellite technology that is designed on a worldwide landing system (Qantas Group, 2013). Environmental The airline industry is required to comply with numerous environmental regulations under international aviation organizations and authorities. These environmental regulations seek to reduce the impact of the industry and airline companies such as Qantas impact on the environment in their operations. Qantas airline has a well-developed plan with the goal of reducing CO2 emissions by 50% before 2050 (O’Sullivan, 2012). According to O’Sullivan, (2012), 95% of the CO2 footprint by the airline comes from its flying operations. Legal Just as other industries, lack of complying with laws as well as ethics can lead to legal reputations. For Qantas, the main legal challenge or issue they are facing is in relation to carbon tax. Without complying with the carbon tax, the company may face increased and expensive legal consequences. Porter’s 5 Forces The Porter’s 5 Forces is also used to understand the external environment of the airline industry as it applies to Qantas airlines Bargaining Power of Buyers Overall, the airline industry faces high pressures because buyers or consumers have increased bargaining power. This is because the industry offers different packages and offerings based on consumer preferences. There are business travellers, leisure travellers, and air travellers (Cederholm, 2014). These services also range from premium to low-cost services. The entry of many airlines in the business also means that the consumers have the power to choose between different carriers (Cederholm, 2014). Bargaining Power of Suppliers Additionally, the aviation industry is not so large in terms of suppliers and only a few companies can easily develop aircrafts for international carriers such as Qantas. The overall bargaining power of suppliers is high (Cederholm, 2014). Currently, only Boeing manufactures commercial airlines for Qantas. This means that Qantas relies solely on Boeing as their single supplier for commercial aircrafts. Additionally, the increased oil crisis and challenges means that oil or fuel suppliers may have increased bargaining power over Qantas. Technology companies are also limited based on increased innovations, meaning that they possess more bargaining power when it comes to new technologies, their implementation, and advancement (Cederholm, 2014). Aviation authorities also increase pressure on the airline industry especially in complying with regulations. Overall, the airline industry has always and will continue to face high pressure due to supplier’s increased bargaining power since suppliers make higher returns than airlines such as Qantas (Cederholm, 2014). Threat of Substitute The threat of substitutes in the airline industry is relatively low. This is because transportation through the air remains the fastest means of transport or commercial transport in sea and water. Even with the development of superfast railway lines, they cannot transport passenger from one continent to another. This means that such technologies of superfast trains are limited to countries or specific regions, thus not a threat to international and regional air travel. Overall, the threat of substitutes is low as of now, but in the future things may change, but currently no predictions pose a threat. Rivalry amongst Existing Firms The rivalry among existing airlines in the airline industry has been popular internationally. In Australia, the same case applies as Virgin Airlines teamed up with Delta Airlines to compete against the rival coalition of Qantas and American Airlines (Freed, 2015). The domestic market has received increased rivalry offerings, alliances, and strategies that have seen most of the airlines encounter losses in their operations. Internationally, Qantas also faces increased rivalry with premium airline companies such as Singapore Airlines, which is the second biggest and best airline in the world. Threat of New Entrants Currently, there is no threat of new entrants, but of increased competition from current players in the international aviation industry. Being a well-established brand, Qantas does not have any threat of a new entrant since the commercial especially premium passenger travel requires huge investment and time to grow to similar standards. The current threat of Qantas is based on current competition from already established airlines such as Virgin Airlines or Singapore Airlines. Overall, the main strategic issues for Qantas to consider include their relationships with suppliers, customers, and competitors. As illustrated both suppliers and consumers have high bargaining power in the aviation industry. Qantas should shift its strategic focus on developing consumer relations while developing supplier partnerships to enable a successful future. Internal Environmental Analysis The internal environment analysis reveals the resources and strategic capabilities of the Qantas airline. One of the main resources of Qantas is its experience gained over the years as the world’s second airline. The experience in the airline industry has enabled Qantas to develop numerous capabilities such as a huge fleet of aircrafts, management excellence, and strong operational strategies. Moreover, Qantas airlines also receive increased support from the Australian government as the oldest airline in the country. This has enabled the company to develop and expand its market dominance in the Australian aviation industry. Currently, Qantas has over 250 aircrafts and operates about 65% of the Australian market (Qantas Group, 2013). The increased number of aircrafts is also a key resource since it enables effective service delivery with on-time travel and arrival operations. Additionally, the huge number of aircrafts and experience or being in the business for long has seen Qantas operate in over 150 destinations around the world (Qantas Group, 2013). Another major resource is Qantas’s investment in technology. The huge investment in technology has resulted in a reputable brand known for its timely and quality services to customers. Moreover, it has been at the forefront in terms of technology advancement with the first landing using satellite technology. Lastly, the company possesses huge amounts of assists in terms of property, equipment, and plants as well as intangible assets (Qantas Group, 2013). The main capabilities of Qantas are especially in terms of customer engagement. The company has been able to undertake market research in addition to frequent1 customer relations through its experience since establishment (Rice & Martin, 2015). The capabilities to focus on consumers have enabled Qantas to effectively keep up with changing consumer demands. Another major capability is the provision of excellent and quality passenger travel services. Qantas is the leading airline in the Australian market with a 65% market share based on its excellent and quality services. Qantas is the only airline to offer on-time and quality air travel services with increased consistency (Rice & Martin, 2015). Even delays in flights are announced as early as possible close to weeks or months before illustrating increased service delivery. Additionally, the company also offers attractive and value-based programs for both consumers and employees (Sarina & Wright, 2015). Qantas has also been able to ensure effective cost-reduction measures that have been successful. Overall, the internal environment of Qantas is well-developed in terms of strategic business focus. The company has been able to leverage or transform its key resources into strategies. Key Issues and Findings The PESTEL analysis has revealed numerous issues that relate to the current trends and future growth capabilities of the airline industry and how they may affect the Qantas Group. In the political areas, Qantas has an optimistic future based on the increased support from the government in terms of healthy competition as well as expansion efforts. The company should use this opportunity to advance its expansion strategies such as mergers and acquisitions. Moreover, the company should consider expanding to emerging markets to avoid the increased risks associated with political unrest in the Middle East, which is one of its major markets. The changing economic environment in the world has seen people seek low-priced air travel. This is in relation to both the social, cultural, and economic aspects of the aviation industry. A large percent of the Australian population is mainly middle class who are increasingly seeking low cost air travel. Qantas mainly focuses on premium air travel, which is a concern govern increase in customers preferring low cost air travel (Ahlstrom & Bruton, 2009). This is a major threat to the future growth of the company, meaning the company should strategize on attracting low cost travel consumers with competitive and attractive air travel rates. In terms of technology, Qantas has remained in the forefront, which is a major key success factor in its overall strategy. Increasing effectiveness in development and use of technology is paramount for successful growth in the future. However, the airline has a lot to do in terms of environmental sustainability. Businesses all over the world are increasingly adopting environmental sustainability as part of the organizational and corporate strategy. The increased environmental regulations and risks associated with carbon taxation pose threats for the operations of the company. Overall, the company should focus on developing long-term strategies as well as short –term strategies based on these critical issues to guarantee a successful future. Furthermore, the main strategic issues for Qantas to consider include their relationships with suppliers, customers, and competitors. As illustrated both suppliers and consumers have high bargaining power in the aviation industry. Qantas should shift its strategic focus on developing consumer relations while developing supplier partnerships to enable a successful future (Rice & Martin, 2015). Overall, the internal environment of Qantas is well-developed in terms of strategic business focus. The company has been able to leverage or transform its key resources into strategies. Increased focus is needed to enhance consumer relations as well as employee relations. Nonetheless, the internal environment offers increased strengths for Qantas. Conclusion The overall strategic analysis has revealed numerous issues for Qantas in terms of its future growth. Key issues revealed in the analysis include increased bargaining power from consumers and suppliers as well as increased rivalry among competitors. Additionally, the socio and economic factors have increased the number of airline consumers seeking low-cost travel packages. The key issues recommended for Qantas include strategic expansion to new markets as well as development of domestic markets with competitive offerings. Qantas has a strategic position in the aviation industry, but should focus on developing strategies for successful growth in the future. References Ahlstrom, D., & Bruton, G. (2009). International management: Strategy and culture in the emerging world. Cengage Learning. Cederholm, T., (2014). Bargaining power of the airline industry’s customers and suppliers. Retrieved from http://marketrealist.com/2014/12/bargaining-power-airline-industrys-customers-suppliers/ Forsyth, P. (2003). Low-cost carriers in Australia: experiences and impacts. Journal of Air Transport Management, 9(5), 277-284. Freed, J. (2015). Virgin Australia and Etihad seek to renew Kangaroo route ties. Retrieved from http://www.smh.com.au/business/aviation/virgin-australia-and-etihad-seek-to-renew-kangaroo-route-ties-20150814-giz0q9.html Graham, A. (2009). How important are commercial revenues to today's airports?. Journal of Air Transport Management, 15(3), 106-111. Hubbard, G., Rice, J. & Galvin, P. (2015). Strategic management: Thinking, analysis and action (5th ed.). Australia: Pearson Education. O’Sullivian, M., (2012). Fuel and taxes lift Qantas airfares. Retrieved from http://www.smh.com.au/business/fuel-and-taxes-lift-qantas-airfares-20120202-1qvnh.html Qantas Group, (2013). Company profile, history, and procurement. Retrieved from http://www.qantas.com.au/travel/airlines/purchasing-policy/global/en. Rice, J. & Martin, N., (2015). Lessons in management from Qantas and Myer. Retrieved from http://theconversation.com/lessons-in-management-from-qantas-and-myer-38221 Sarina, T., & Wright, C. F. (2015). Mutual gains or mutual losses? Organisational fragmentation and employment relations outcomes at Qantas Group. Journal of Industrial Relations, 0022185615590905. Read More