Strategy Implementation - Qantas Airways - Case Study Example

Strategy Implementation: A Case of Qantas Airways Student’s Name Institutional Affiliation Course Name Date of Submission Executive Summary Strategic planning has become a very critical tool that companies use to gain competitive advantage in an industry. As the business environments increasingly become competitive and challenging, companies are realizing that, not unless they develop and implement an effective strategic plan, they cannot succeed. Qantas is a classic example of an Australian airline whose success has been attributed largely to pursuance of effective strategies, including cost leadership, cost containment, strategic alliances, frequent flier and innovation among others. The adoption of these strategies has helped spur growth of the company, making it the leading airline in Australia and Asia-pacific. However, the company still faces a major challenge in implementing its strategies. Although there is good leadership, employees appears not to be involved in the development of the strategies, thereby affecting implementation. Nevertheless, to ensure sustained success, Qantas should consider changing its pricing strategy from low fares to competitive pricing since low fares make customers perceive services and products offered by the airline to be of low quality that impact negatively on the company image. Table of Contents Executive Summary 2 Company Background 4 Strategic Planning 4 Evaluation of the Effectiveness of Qantas Current Strategy 6 Cost Leadership 6 Strategic Alliance 7 Frequent Flier 8 Cost Containment 8 Take a lead in Technological Innovation 9 High Level of Safety 10 Business Expansion into Global Market 10 Recommendations on Strategic Changes 11 Evaluation of the Implementation of the Strategy 11 Conclusion 14 Company Background Founded in 1920, the Queensland-based Qantas Airways has experienced tremendous growth to become the leading domestic airline in Australia (Douglas and Cunningham, 1992). Qantas also ranks among the largest airlines in the Asia-Pacific region today. Currently, Qantas is believed to be the number of one long distance airline in the world and ranks amongst the strongest airline brands in Australia. The airline currently flies in many destinations in Australia and 81 international destinations in more than 40 countries across the globe (Hubbard, Rice and Galvin, 2014). Qantas operates several domestic destinations and links the country with New Zealand. The airline has partnered with other airlines in the region that has seen its passenger base increase significantly. The company estimates that it currently carries more than 30 million passengers every year. Despite the growth that Qantas has experienced over the years, the airline has had to overcome many challenges, including stiff competition from other low cost airline, such as Ryanairs, Singapore Airline, Virgin Atlantic, British Airline and Malaysian Airline among others (Douglas and Cunningham, 1992). Qantas attributes its success mainly to the effective strategic plans that the company has adopted over the years. Accordingly, the strategies have helped it gain a competitive advantage over its rivals in the industry. Strategic Planning Strategic planning has become a very critical tool that companies use to gain competitive advantage in an industry. As the business environments increasingly become competitive and challenging, companies are realizing that, not unless they develop and implement an effective strategic plan, they cannot succeed. Flood et al. (2000) defines a strategic as the measures that a company intends to use to achieve its set objectives. In other words, strategic planning defines where a company wants to be and the means with which to reach there. Therefore, in order to set an effective business strategy, managers must conduct a research about the market in which the company operates to understand the internal and external factors that might impact its operations. Based on the market research, a company cans device effective strategies that offer a competitive advantage. A good strategic plan is beneficial as it enables a company to know where it is going and how to reach there. Accordingly, a company is able to avail the resources and manpower to enable the achievements of organizational goals. Lack of an effective strategic plan is a recipe for failure because such a company will only be reacting to pressures of the industry rather than pursuing a set objective (Verweire, 2014). In fact, research has shown that companies that plan perform better than those that do not have a strategic plan. However, merely having a good strategic plan on paper is not enough to give a company a competitive advantage it might desire. Rather, for a company to succeed, it must ensure that the strategies are effectively implemented (Flood et al., 2000). This might require ensuring that there is the right manpower and the resources needed for the implementation of the strategy. Studies have shown that implementation is normally the most challenging part of strategic management. The studies attribute this to the fact that most managers lack the skills required to ensure effective implementation of strategy. Evaluation of the Effectiveness of Qantas Current Strategy Qantas Airways is the market leader in Australian domestic airline market today. This is despite the high competition its faces from rivals in the industry. The success of Qantas has been attributed largely to effectiveness of the strategies that it currently employs as enumerated below. Cost Leadership Cost leadership is one of the strategies that companies use in the present day business environments as a source of competitive advantage. Qantas is one of the airlines that adopt cost leadership strategy as a means of gaining a competitive edge over its rivals. The airline currently flies many low cost airlines to different destinations across the globe (Huber, 2011). The company introduced low cost airlines a couple of years ago and has significantly transformed the company into a profit making business. Just recently in 2011, Qantas suffered losses amounting to $244 million, which was a historical loss for the company. However, the fortune of the company has been turned around through the introduction of low cost airlines that are highly on demand by price conscious customers. Presently, there are many low cost airlines across the global. As such, airlines that are capable of charging cheap fares stand a great chance to gain customers, particular the price conscious customers (Hubbard, Rice and Galvin, 2014). Accordingly, Qantas has been able to charge cheap prices that have helped in attracting many customers to the airline, thereby giving it a competitive edge over rivals. In fact, the number of customers flying the airline has increased to over 30 million due to the low fares that it charges its customers. The increase in customers has also resulted in the increase in profits made by the company. As such, it can be authoritatively stated that the cost leadership strategy has been effective in driving growth and success of the airline. Strategic Alliance Strategic alliances have emerged as one of the most sought strategies in the airline industry. Strategic alliance is a business strategy that involves companies coming together and pulling resources, manpower, technology and learning to help enhance competitiveness. Although there are many alliances that have failed, Qantas has effectively utilized this strategy to enhance its competitiveness in the airline industry. So far, Qantas has formed alliances with more than 15 of the world’s leading airlines across different regions in the world. Some of the airline that Qantas has partnered with includes Airberlin, British Airways, Qatar Airways, Emirates, American Airline and Malaysian Airline (Sandilands, 2015). Forming strategic alliances has been of great benefit to the airline since it has enabled Qantas explore some of the international markets that it could not have otherwise reached because of legal challenges. For instance, its alliance with Emirates has enabled it explore Dubai and most parts of Asia Pacific. The same applies to the regions accessed by its other partners (Sandilands, 2015). The adoption of strategic alliance with other airline has also been effective for Qantas as it has helped minimize the competitive threat from major rivals in the industry. Competition has always been the major threat to Qantas since it was founded. Many airlines have emerged in the industry, thereby increasing the threat of competition. However, to minimize the threat of competition, Qantas decided to partner with its major challenges, thereby permitting route-sharing with its competitors (Elisha, 2013). Today, routing and cost are the main determinants of customer flight choice. Therefore, the adoption of rout-sharing through strategic alliances has helped Qantas block the competitive threat associated with preferential routing in the travel destinations that Qantas flies. Frequent Flier Frequent flier program is another strategy that Qantas introduced in the recent times to help it attract and build loyalty with its customers (Elisha, 2013). Under the frequent flier program, customers flying Qantas are awarded point that they can exchange for premium travels or obtain gifts from the airline. This strategy has been effective for Qantas since it enables the airline to the member segments and their behaviors, thereby resulting in the provision of quality products and services. The success of this strategy is seen from the membership that the frequent flier strategy has drawn to the airline. Currently, Qantas frequent flier program has over 6 million members with the numbers rising all the time. The increase in membership implies an increase in the loyal customers that fly with the airline. Accordingly, it is partly because of the effectiveness of the frequent flier strategy that Qantas currently has more than 30 million customers with the numbers on the rise (Elisha, 2013). Cost Containment High operation cost is one of the major factors that contributed to the huge losses suffered by Qantas in 2011. As reported earlier, the airline suffered a loss of about $244 million in 2011. Therefore, to control the cost pressures and turnaround the fortune of the airline, Qantas decided to adopt cost containment strategy. Cost containment is a strategy that involves controlling the expenses that a business incurs to keep it operational. In fact, the airline plans to reform the business by cutting its annual operation by $2 billion (Robbins et al., 2014). Because fuel cost is the major contributor of the high cost of operations, Qantas plans to cut the fuel cost by $555 million for the 2014/2015 financial year (Elisha, 2013). The cost containment strategy has been effective for the company since it has helped keep the cost of operation low, thereby ensuring increased profitability. During the last financial year, Qantas posted an after tax profit of $560 million. The massive turnaround is partly attributed to its move to adopt the cost containment strategy that has helped keep expenses low, thus ensuring increased profitability. Take a lead in Technological Innovation As part of its strategy to increase sales growth and customer satisfaction, Qantas has decided to take a lead in technological innovation by enhancing the quality of its service provision to customers by introducing different technologies. In 2007, Qantas become the first airline to introduce a technology that allows travelers to stay connected while in-flight (Huber, 2011). The technology allows passengers send and receive SMS and emails, as well as make calls using their mobile phones and other electronic devices just like the ordinary person on the ground. The strategy has been effective since it has helped attract many customers who want a different customer experience fly Qantas. Following the increased demand for an easy way of booking tickets, Qantas introduced online booking system that enables customers from all over the world to book tickets online (Business Review Australia, 2011). This has helped not only enhance efficiency by reducing the queues, but also cut the cost of operations. This is because the introduction of the online booking system has resulted in a significant reduction in the number of staff and booking agents for the airline. Recently, Qantas became the first airline o introduce the first ever 3D virtual reality technology headsets that allows customers to enjoy virtual tours and cinema-style movies. Although it was costly introducing this technology, the payoff has been great since it has enhanced the level of customer satisfaction, thereby resulting in increased sales and profitability for the airline (Carswell 2015). High Level of Safety The aircraft is regarded as the safest mode of transport. However, there are many incidences accidents and disappearance of airlines that make people put safety among the top list of things that they look at when choosing an airline. Accordingly, to attract and build customer loyalty, Qantas has put safety among its top priorities (Robbins et al., 2014). In this respect, the airline has beefed up security in its airplanes to ensure that terrorists are not given a chance to fly the airplanes. Additionally, the airline employees a team of expert pilots and security men on the ground to ensure that the safety of its passengers is not put at risk. The strategy has been effective in the sense that it has made Qantas one of the safest airlines to travel in worldwide. When a passenger boards Qantas airplanes, he/she is assured of his/her security and that of the luggage. As such, this has helped the airline attract millions of travelers from all over the globe, thereby contributing to the success of the company. Business Expansion into Global Market Qantas has been facing stiff competition in the domestic market from local competitors, such as Ryanairs. Therefore, to maintain its position in the airline industry and minimize competitive pressure, Qantas opted to expand its business into the international market as part of its growth strategy (Business Review Australia, 2011). Currently, Qantas operates in more than 81 travel destinations in more than 40 countries across the globe. The expansion into the international market has been effective since it has enabled Qantas increase its market share every time it expands into an international market. Additionally, the expansion strategy helped reduce competitive pressure, as well as enhance its brand recognition worldwide. Recommendations on Strategic Changes Most of the strategies that Qantas has employed over the years have contributed immensely to the success of the airline. Nevertheless, there are certain changes that the airline needs to make to its strategies to ensure sustainability and future success. Firstly, as much as charging low fares has helped in attracting customers to Qantas, the airline need to change this strategy going forward in order to remain competitive. Charging low fares appears to be proving counterproductive to the airline because it makes many travelers perceive the quality of services and products offered by the airline to be below standard (Huber, 2011). Most customers, especially the frequent travelers are being made to think that the airline offers poor quality services and products, which is impacting negatively on the airline. As such, it would be critical that the management of the airline change its pricing strategy to charging competitive prices and even premium as this will make customers develop confidence on the quality aspect of the products and services offered by the airline. Evaluation of the Implementation of the Strategy As noted earlier, a strategy is a very important tool that a company uses to drive business growth and success. However, the strategy implementation is the most important part of a strategic plan. Strategy implementation involves turning the strategies and business plans into action to ensure the achievement of business objectives. However, it is surprising that, as much as most businesses know their strategies and plans for the business, few succeed in implementing their strategies effectively. Verweire (2014) notes that most large companies struggle when it comes to translating the strategic theory into actions to ensure successful implementation and the sustainability of the strategies. The challenge faced by companies in strategy implementation was confirmed in a Fortune Magazine that suggested that about 70% of fail to succeed in implementing strategy. Qantas appears to be amongst the big companies that have found it difficult implementing its strategies. On paper, Qantas has a very strong strategy that is enough to make it become the number one airline worldwide. Nevertheless, the implementation of the strategies has always been a tall order. This is partly because the management of the airline has not been able to effectively translate the theory into action to ensure effective execution. The first critical element required to ensure successful implementation of a strategy is ownership. Flood et al. (2000) argues that the management must ensure that the employees are given a chance to participate in the implementation of the strategy. Failing to involve the employees in strategy implementation is usually the beginning of strategy failure. Research has also shown that lack of ownership is the most common reason strategies fails. Therefore, as much as Qantas appears to do well currently, its strategy implementation has certain problems that need to be addressed to ensure success. As elaborated earlier, Qantas has been pursuing a cost-cutting strategy as a way of keeping operation cost low to ensure profitability. The strategy involves out-sourcing overseas, be it engineering or information technology services. Accordingly, this business model has left out employees that have no role whatsoever in the implementation of the business strategy. As such, the strategy is fully owned by the management and forced into the employees to implement the changed. This is a serious mistake that Qantas needs to address to ensure effective implementation. In fact, when employees are not involved in the strategy development and are only forced to implement it, this is likely to create resistance because the employees might not know the benefits of the strategy to the organization and how to implement it. Secondly, organizational alignment is key to effective implementation of a strategy. It has been noted that lack of organizational alignment makes managing change and implementation of a strategy difficult. Estimates indicate that about 70% of workers in a company would change if the organization provides them with a good reason why change is needed (Flood et al., 2000). Unfortunately, Qantas appears to be having a difficult time convincing its employees of the need to pursue certain strategic plans. For instance, Qantas has been facing a difficult task trying to convince its workforce of the need for forming strategic alliance with other airlines. The difficulty is attributed largely to lack of organizational alignment that is a necessity for effective strategy implementation. Thirdly, for a strategy to be translated into action, a motivational leadership is required. Speculand (2009) noted that good leadership is required to ensure people are rally people towards the implementation of the strategy and manage the actions of the people. In fact, most strategies fail at the implementation because of poor leadership. However, Qantas chief executive officer Alan Joyce has been very effective in ensuring that the strategies are implemented. Joyce has always played a leading role in implementing change by not only participating in the development of the strategies, but also participating actively in the implementation of the strategies through leadership (White, 2004). For instance, in order to reduce operation cost that has been a major problem for the company, the CEO reveals that she has initiated a cost-cutting measures that will see the airline reduce the size of its workforce by at least 1000 positions, as well as ensure the implementation of a pay cut for the CEO and the board. Certainly, the effectiveness of the strategy implementation is, in part, attributed to the motivational leadership provided by the current CEO who plays a leading role in ensuring that the strategies are implemented. Conclusion Strategy is a very critical tool for business success. A strategy is important because it acts as a roadmap that defines where a company wants to go and how it intends to reach there. However, the success of any company depends on the effectiveness of the strategy and its implementation. As elaborated above, Qantas is one of the Australian airlines whose success is largely attributed to the development of effective strategies. The airline has been pursuing different strategies, including cost leadership, strategic alliances, cost containment, frequent flier and innovation. Pursuance of these strategies has seen the company turnaround its fortunes from being a loss making company to a profitable venture. Currently, Qantas is the largest airline in the domestic and Pan-Asian region. Although the strategies have been effective in promoting the airline’s growth and success, implementation of the strategies has always been a tall order to the airline. Like many big companies, Qantas has been facing a major challenge in translating theory into action. Accordingly, this has been affecting negatively on the implementation process. Above all, it would be highly advisable that Qantas change its low fare strategy to a competitive pricing strategy since customers appear to associate low fares with poor services and products, which impacts negatively on the company image. References Business Review Australia. (2011). Qantas unveils new international strategy. Retrieved from http://www.businessreviewaustralia.com/leadership/63/Qantas-Unveils-New-International-Strategy Carswell, A. (2015, January 29). Qantas introduce world-first 3D virtual reality technology headsets allowing virtual tours and cinema-style movie. The Daily Telegraph http://www.dailytelegraph.com.au/news/nsw/qantas-introduce-world-first-3d-virtual-reality-technology-headsets-allowing-virtual-tours-and-cinema-style-movies/story-fni0cx12-1227200835995 Douglas, E., Cunningham, L. J. (1992). Competitive strategies in Australia’s airline deregulation experience. Sidney Business Discussion Paper, 28, 1-27. Elisha, A. (2013). Qantas to implement dramatic cost-cutting strategies. Retrieved from http://www.arabianindustry.com/markets/news/2013/dec/5/qantas-to-implement-dramatic-cost-cutting-strategies-4531475/#.VhQEhG6TZLu Flood, P. C., Dromgoole, T., Carroll, S., & Gorman, L. (2000). Managing strategy implementation. Hoboken, NJ: Wiley. Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic management. Sidney: Pearson Australia. Huber, A. J. (2011). Effective strategy implementation: Conceptualizing firms' strategy implementation capabilities and assessing their impact on firm performance. Boston, MA: Springer Science & Business Media. Robbins, S. P., Bergman, R., Stagg, I., & Coulter, M. (2014). Management. Sidney: Pearson Australia. Sandilands, B. (2015). What might the Emirates Qantas alliance look like by 2023? Retreived from http://blogs.crikey.com.au/planetalking/2015/04/20/what-might-the-emirates-qantas-alliance-look-like-by-2023/ Speculand, R. (2009). 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