Strategic Marketing (Jet Star) - Assignment Example

? Strategic Marketing (Jet Star) Contents Contents 2 0. Corporation and SBU background 3 1. Corporation 3 2. Key stakeholders and Influencers 31.3. Overall performance 3 1.4. New Interest 4 1.5. Strategic Business Unit 4 2.0. SBU Situation Analysis 5 2.1 SBU Corporate Appraisal 5 2.1.1. Culture 5 2.1.2. Resources 6 2.1.3. Review of Past Performance 7 2.2. SBU Customers 8 2.2.1 Major Changes and Trends in the Industry 8 2.2.2 PESTEL Analysis 9 2.2.3 Market performance 11 3.0 SBU Competition 13 4.0 Key Findings 14 5.0 SBU Objectives and Goals 15 References 16 1.0. Corporation and SBU background 1.1. Corporation Jetstar Group is an airline corporation with a network of value based carriers, providing everyday low fare services across New Zealand, Australia and the Asia pacific region. Jetstar Airways Private Limited is a part of the Qantas group, as a wholly owned subsidiary. The group company, Qantas was founded in Queensland in the year 1920. The main business of the group includes transportation of customers using their two major airline brands. The group is also involved in subsidiary business, which includes other airlines, and specialist business markets such as catering. Jetstar was established by the Qantas group in the year 2004 as a low-cost service provider. This low cost carrier was established as a part of the group company’s branding strategy, where Qantas focused on the business and premium market and Jetstar focused on leisure market. The mission of Jetstar is to provide every day low fares with the aim of attracting more customers to fly to more places, more often. The objective of the airline is to have the lowest fares on all the routes where it operates and backs every airline fare with a Price Beat Guarantee. Jetstar follow the policy of giving discount of 10 percent in case the route, the fare and the timings of any rival airlines are comparatively similar (Jetstar, 2013). This is the positioning strategy which the company followed to gain a competitive edge. 1.2. Key stakeholders and Influencers A group of people, system or organization, which affects or can be affected by the actions of an organization, are classified as stakeholders (Hsieh 2010, 13). They are the direct influencers to a company which they belong. The key stakeholders of Jetstar are the frequent air travellers and tourists travelling around the world, the government who regulates the law and regulations within the airline industry and supplementary companies that depend heavily on airline industry, companies and industries which directly affect the functioning of airline industry, such as manufacturing, services etc and investors (Lamberg, Savage and Pajunen 2003, 388). 1.3. Overall performance The Jetstar Group is the largest low cost airline in the Asia Pacific by in terms of revenue, the airline carrier is considered as the largest low cost passenger in the Asia pacific region. It has provided service to more than 100 million passengers since its launch in the year 2004. More than 20 million passengers were carried during the fiscal 2011-2012. Jetstar is considered as the fastest-growing airline in the Asia Pacific. It reached this milestone in a short span of seven years. When Jetstar was established in 2004, it had a total of 400 employees (Qantas, 2013). Now the number has grown to more than 7,000 across the Asia Pacific today. The Jetstar Group carries off over 3,000 flights a week collectively, to 57 destinations in 16 countries. It also serves the territories across the Asia Pacific region with a fleet of around 95 aircrafts. The airline has shown steady profits since its inception in 2004. The airline recorded an EBIT (Earnings before Interest and Taxes) of 203 million dollars in 2011-12, and a 20 per cent increase on the previous financial year. During the same period the overall capacity of Jetstar increased by 14 percent and the airline carried 20.6 million passengers, registering an 11 percent increase on the last financial year (Qantas, 2013). The total revenue earned by the airline was reported as 15.7 billion Australian dollars, which was 6 percent more than previous financial year (Qantas, 2013). Apart from this, the group is committed to sustainable growth and development. The company has included itself in leading indexes for sustainable investment. Becoming institutional investor will allow the group to focus on environmental, social and governmental policies and practices. The group is also included in the leadership index for carbon disclosure for Australia and New Zealand. 1.4. New Interest The airline group has ordered 14 Boeing 787 Dreamliners, which will be delivered in the year 2013. These new aircrafts will have better features such as larger windows, upgraded cabin pressure which will reduce jet lag and 20 percent lower fuel consumption than similar sized aircraft. The group has also placed an order for 110 Airbus A320s.the possessions of these aircrafts will help in the growth of the company. These aircrafts will also be added with better facilities such as new engine options, which will help in a 15 percent reduction of fuel consumption. Apart from this, the company has also ordered aircrafts which makes the total aircrafts ordered to 150. 1.5. Strategic Business Unit Like others airline companies, Jetstar offers varied services. The aircraft provides business and economy class travelling facilities. The airline operates both domestic as well as international flights. The airline provides specific facilities for customers according to their requests. The airline is divided into six group companies. Jetstar has its operations in Australia, Japan, Hong Kong, Vietnam, New Zealand and Singapore. Jetstar New Zealand and Australia are wholly owned subsidiaries of the parent group, Qantas. Rest others have a partnership with the respective country’s domestics airlines. It has provided service to more than 100 million passengers since its launch in the year 2004. Apart from this, the airline service provider is also engaged in supplementary services like providing cars for pick and drop facilities, tie-ups with hotels and travel agents and insurance services. The brand has also opened a shop in its name, which sells products and service like stationeries, luggage bags, toys, decorative items and postcards. Jetstar also provides in-flight entertainment such as ipads to the customers for engagement and better customer experience. Jetstar is considered as the fastest-growing airline in the Asia Pacific (Citizen, 2011). It reached this milestone in a short span of seven years of service. Since the airline has shown a steady growth since its establishment in 2004, the company can further plan to spread its market into other emerging and growing markets. The company is already growing in terms of its capacity and flight population. The low cost airline is a strategic business unit for the group and the company can make plan for the growth and overall development of this unit. The airline recorded an EBIT (Earnings before Interest and Taxes) of 203 million dollars in 2011-12, and a 20 per cent increase on the previous financial year. During the same period the overall capacity of Jetstar increased by 14 percent and the airline carried 20.6 million passengers, registering an 11 percent increase on the last financial year. The total revenue earned by the airline was reported as 15.7 billion Australian dollars, which was 6 percent more than previous financial year. 2.0. SBU Situation Analysis Under the situation analysis of the strategic business unit of the airline group, the macro and micro environment of the group will be reviewed. 2.1 SBU Corporate Appraisal 2.1.1. Culture The culture of the organization has a major impact on the firm’s performance as it directs and shapes the behaviour of employees (Samson and Daft 2009 and Alsem 2007). Every organization has their own cultures which are the key values and beliefs which effect the ongoing operations and overall performance of the organization. Collaborative, customer driven, and innovation in customer services are the key cultures of Jetstar. The company is involved in big and small projects which keep the employees motivated and engaged. The company believes in developing in a culture which is focused on customers. This is achieved by insuring that the customers get the lowest fare and experience a travel which is enjoyable and refreshable. The customer oriented culture of the organization is committed towards providing value for money for the customers. Recruitment is done in such as way through which efficient and customer oriented staffs are selected. Only those people are selected who have the ability and attitude to deliver outstanding customer service and an understanding of delivering on company’s promise. The employees are always focused on minimization of costs. This requires the employees to work smarter and always looking for methods to improve the processes and systems of Jetstar. 2.1.2. Resources Resources of a company are the assets of the organization. Research works of various research scholars such as (Grant, 1991) have found positive relationship between resources based advantage and improvement of business performance. Resources of an organization can be categorized into tangible, intangible and human resources (Rumelt, 1986). Tangible resources are assets of an organization having a physical existence. The tangible resources of Jetstar include its operative aircrafts. The company has a total of 96 aircrafts. Jetstar Group currently services up to 3,000 flights a week and 57 destinations in a total of 17 countries and territories across the Asia Pacific region. Access to latest technological facilities has built the technological capabilities of the company. This has helped in delivering better services to customers in cost efficient manner because deploying technological resources has decreased the value chain cost of the company. Thus, the company is able to maintain a sustainable lowest cost advantage in terms of fright fare. On the other hand, financial resources for the company include monetary capital for investing in new product development, cash assets to channelize the risk associated with investment in new market, high return on investment increases the confidence of shareholders and value chain partners. Apart from this, the other tangible resources of the airline include its insurance policies with the airlines and support services like pick and drop car services, hotel services. These services increase the overall experiences of the customer. The intangible resources of an organization include features such as corporate images, patents, brands and values and other intellectual property rights exclusive to the organization. The vision of the organization is to become one of Australia’s biggest online businesses and also become one of the top airline service providers in the world. To achieve this, the company has always worked together with a common commitment of excellent customer service and fully complying with the regulations and laws of the industry as well as government. The airline carrier has created a strong brand image in last 7 years. This strong and continuously growing brand image has not only attracted customers but also increased trust among shareholders. Quality of service, constant enhancement in the facilities inside the aircraft, extended presence in various locations of different countries has made significant contribution in making Jetstar as emerging leader in airline industry. Marketing capability, research and development efficiency to deliver better travelling facilities, continuously providing low cost fares and efficient human resource pool are other important intangible resources for the company. Efficient and responsive human resource pool of the airline brand has helped the organisation to decrease the service delivery gap and increase customer loyalty. Jetstar maintains qualified human resource pool including engineers, cabin crew members and air-hostess, marketing team and travel agents in order to increase its strategic capabilities. Strong financial position and market reputation has helped the company to get loan from financial institutions and the government, which has further increased the strategic capability the company to develop portfolio of new aircrafts or new distribution channel by investing capital. 2.1.3. Review of Past Performance The Jetstar Group is the largest low cost airline in the Asia Pacific by in terms of revenue, the airline carrier is considered as the largest low cost passenger in the Asia pacific region. It has provided service to more than 100 million passengers since its launch in the year 2004. Jetstar is considered as the fastest-growing airline in the Asia Pacific. The total revenue earned by the airline was reported as 15.7 billion Australian dollars for the financial year 2011-12, which was 6 percent more than previous financial year. The company has always engaged itself in market research and market development programmes for continuous and sustainable growth of the airline. The company did extensive market research to improve its positioning on cost competitiveness and service exclusiveness. To achieve this objective, the company was engaged in three major campaigns between March 2008 and March 2009.these campaigns were named as; 1. ‘Price Beat Guarantee' 2. ‘Focussed Service Delivery' 3. ‘Low Fares – Good Times’ The implementation of these campaigns resulted in an increase in the overall sales performance. The market share of Jetstar increased to 19 percent within 12 months since the launch of the campaigns. The net present value of the share of the company increased to 128 million Australian dollars. The total market share of the company increased to 19 percent, after the successful launch of the campaigns. 2.2. SBU Customers 2.2.1 Major Changes and Trends in the Industry There has been a 12 percent increase in the geographical expansion of the global airline industry (Lawton, Rajwani, and O'Kane 2011, 225). The total revenue generated in the year 2010, crossed 500 billion dollar mark. According to research companies like Market Line, the industry will be worth more than 714 million dollars by 2015, which represents a 42 percent growth in five years. The aviation sector showed a growth of 6 percent in 2010, in terms of volume. The total numbers of passengers carried were 2.4 billion and the figure is forecasted to climb 28 percent, reaching more than 3 billion passengers in 2015. Within the global aviation industry, domestic flights represent the largest market segment. In terms of volume, domestic demands accounts for more than 65 percent of the overall industry. 45 percent of the global market share in this industry is captured by America. The major challenges faced by people aviation operators are slow economic growth, increasing prices of crude oil and uncertain economic climate. Because of the economic recession, revenues generated by air travel declined, even though the oil prices were falling. Customers started to decrease their leisure and non-essential travel spending, due to rising unemployment, economic volatility and decreasing level of disposable income. This resulted in a decline of global transport industry. In the year 2010, there was an increase in air traffic which served well for the global aviation industry. But continuous rise in the fuel prices is increasing the cost of operations, which in turn has affected the profits in a negative way. Other negative forces present in this industry are unstable exchange rates, raised concern over security, natural disasters and political unrest. 2.2.2 PESTEL Analysis To analyse the relevant changes in the macro environment occurring in the airline industry, PESTEL analysis has been done. Since the airline brand caters mainly to the Asia-Pacific region, the analysis is done on the aviation sector of the Asia-Pacific region. Political Government policies have been an important driver which influences the growth and development of the airline industry. With the deregulation of the airline industry, there has been an increase in privatisation in this sector. While some of the Asian countries established open-skies agreement, others allowed the entry of foreign and private airlines into their countries. This indicates that although the travel market has increased, there has been a substantial increase in the number of players and is growing continuously. This states that the company will have tiff competition and a more challenging environment in the Asian market. Economical With the rapid development of the Asian continent, there has been a rise in the number of air travellers. The growth can also be attributed to the diverse geography of the continent and ever increasing population. With the support and investment from government of various countries, the aviation sector has become competitive with the rest of the world. The growth of the Asian countries can induce the company to expand its operations in these emerging markets. Apart from this, increase in international trade and business has resulted in a more intense competition. Social Surveys reveal that people are now ready to compromise on their food and other services for a lower price. In an environment where competition is intense, price of airline tickets can be the single factor influencing the customer’s decision. This presents an opportunity for Jetstar to increase their revenues by offering flights at a much lower fare. Since providing lowest fare is the major differentiating factor for Jetstar, they can gain significant market share and competitive advantage in these markets. The population of Asia and the surrounding territories is continuously increasing. And more than half of the population is below 40. This shows that the population of middle age is group is increasing thereby increasing the number of working population which results in the increase in the overall disposable income and so the number of business and leisure travellers is bound to increase. This therefore presents a good opportunity for Jetstar. Technological The advancement in technology including features such as internet services, use of telecommunication services, online ticket booking has provided the airline firm with a new opportunity to increase its sales by leveraging the new developments in technology. The use of internet based activities and e-commerce which includes buying tickets online and even reserving a holiday online has opened areas to gain ancillary revenues (Shneor 2012, 360). Technology advancements sometimes also help in reduction of the operational cost such as savings on commissions for travel agents. Environmental Any change in the environmental regulations can affect the company because Jetstar operates globally and new standards in the regulations influence the business operations. The company provides transparency on information and develops innovation which improves the sustainable rating. The company is also involved in sustainable indexes such as carbon emission which puts the company is good books. Legal International legislations influence the business of an organisation (Awford, 1992). Some airports are kept exclusive for particular airlines. The restrictions on mergers and acquisitions of airline companies can also affect the way a business is going to be established. 2.2.3 Market performance The Jetstar Group is the largest low cost airline in the Asia Pacific by in terms of revenue, the airline carrier is considered as the largest low cost passenger in the Asia pacific region. Jetstar is operating in six major regions. Jetstar in Australia is a wholly owned-subsidiary of the Qantas group. The international flight was opened in 2006. Jetstar Australia operates in 17 domestic destinations and 15 overseas destinations. In terms of capacity share, Jetstar Australia is the 5th largest airline and 3rd largest in terms of domestic market share in Australia. Jetstar commenced in New Zealand in 2005. It is the second largest airline in this market in terms of both international and domestic market share. Jetstar Asia was launched in the year 2004, with the parent group Qantas having 49 percent stake in the airline. In Vietnam, Jetstar pacific was the first value based carrier. Qantas group holds 27 percent stake and the rest is owned by the state capital of Vietnam. Source- Business Insider The above chart shows the market share of the Qantas group as well as the Jetstar domestic in the Australian market. From the graph it is clear that the company owns almost 65 percent of the domestic Australian market (Reynolds, 2013). Amid competition and customer preferences for lower fares, Qantas airline has seen a decline in their market share but Jetstar group has continued to rise. For this reason the parent company has been banking on the low cost airline for the growth and improvement of the overall market share and performance of the group airline. Source: Centre for Asia Pacific Aviation & Qantas (includes domestic and international operations) The above chart shows the growth of passengers of the Qantas group for the year 07-08. The graph clearly indicates that the total percentage of Jetstar in the passenger traffic of Qantas group has increased international as well as domestic markets (Centre for Aviation, 2008). The low cost airline captured 26.2 percent of the total group traffic in the year 2008. 3.0 SBU Competition The major competitors for Jetstar include Ryan Air in Europe and Air Asia in the Asian region. Virgin Australia, tiger always Singapore and tiger always Australia are the other competitors in this sector. Jetstar Ryan Air Air Asia Market Australian low-cost airline Irish low-cost airline. Malaysian low-cost airline Product Differences Airbus A320 and Airbus A330 aircraft, Boeing 787-800. Boeing 737–800 aircraft Airbus A330-300, Boeing 737-300, Airbus A320-200 Product Positioning Providing every day lowest fares. Providing low cost fare to everyone. Low cost and value for money. Distribution Operating in six different regions of Asia- Pacific zone with a total of 35 destinations. Major operational bases at Dublin and London with a total of 176 destinations Six subsidiaries across Asia- Pacific region with a total of 88 destinations. Revenue (2012) 3,500 million Australian dollars 4,325 million Euros 1.62 billion dollars Product Promotion Print ads, Online ads, TV ads Print ads, Online ads, TV ads Print ads, Online ads, TV ads 4.0 Key Findings Basically, Jetstar has utilised its low cost fare structure and has used the human resources efficiently and emphasize on working together as a team. The company has always focussed on fulfilling customer needs, while emphasizing on the relationship and experiences for the travellers. The company has a strict customer oriented culture. The low cost carrier has banked on its employees and other ancillary services to gain an edge over the competitors. The brand name and the powerful image created by Jetstar have been crucial in its continuous growth and positive performance in the market. In terms of technology, Jetstar always tries its best to capture the new advancement in technologies. Besides its concern on rapidly forwarding technology, Jetstar also gives attention to the environmental concerns such as green marketing and global warming. This strong and continuously growing brand image has not only attracted customers but also increased trust among shareholders. Quality of service, constant enhancement in the facilities inside the aircraft, extended presence in various locations of different countries has made significant contribution in making Jetstar as emerging leader in airline industry. Efficient and responsive human resource pool of the airline brand has helped the organisation to decrease the service delivery gap and increase customer loyalty. Jetstar has continuously involved itself in research and development. The campaigns launched by the company as a result of market research helped in the overall growth and increase in the market share of the airline. 5.0 SBU Objectives and Goals Jetstar is recommended to implement the suggested goals and objectives for the next 2 years (2013 until 2015). Goal 1 Maintain current customers and attain potential customers through a good corporate image and competitive price. Goal 2 To provide best value proposition to customers Objective 1 Increase Jetstar’s total market share by 5 percent by the end of 2015. Objective 2 90 percent of customers will perceive the airline to be the best in terms of providing lowest fare and best service by 2015. References Awford, Ian. 1992. “Handling the Legal Consequences of Aviation Disasters: Passenger Compensation.” Disaster Prevention and Management. 1(2). Centre for Aviation, 2008.”Jetstar – Performance”. Centreforaviation. Accessed May 24, http://centreforaviation.com/analysis/jetstar---performance-meeting-expectations-holding-up-well---3910. Citizen, John. 2011.” Jetstar to overtake Qantas says Bruce.” Pprune. Accessed May 24, http://www.pprune.org/archive/index.php/t-457648.html. Grant, Robert. 1991.”A resource based perspective of competitive advantage.” California Management Review, 33: 114-135. Hsieh, John. 2010. “Strategic stakeholder orientations and performance consequences - a case of private non profit performing arts in the US.” International Journal of Non profit and Voluntary Sector Marketing, 15(1):13 Jetstar.2013. “Our Company” Jetstar. Accessed May 24, http://www.jetstar.com/sg/en/about-us/our-company. Lamberg, Juha-Antti ,Grant T. Savage and Kalle Pajunen, 2003. “Strategic stakeholder perspective to ESOP negotiations: the case of United Airlines.” Management Decision. 41(4): 383 – 393. Lawton, Thomas, Tazeeb Rajwani and Conor O'Kane, 2011. “Strategic reorientation and business turnaround: the case of global legacy airlines”. Journal of Strategy and Management. 4(3): 215 – 237 Qantas. 2013. “Investors”. Qantas. Accessed May 24 http://www.qantas.com.au/travel/airlines/investors/global/en. Reynolds, Megan. 2013.”How Qantas Is Using Jetstar to Protect Its Market Share”. Businessinsider. Accessed May 24, http://au.businessinsider.com/chart-of-the-day-how-qantas-is-using-jetstar-to-protect-its-market-share-2013-5. Rumelt, Richard. 1986. Strategy, Structure, and Economic Performance. Harvard: Harvard Business School Press. Shneor, Rotem. 2012.“Influences of culture, geography and infrastructure on website localization decision.”Cross Cultural Management: An International Journal. 19(3): 352 – 374. Read More