Qantas Airways Limited Marketing Planning - Case Study Example

Reflective Report: Marketing Planning Qantas Airways Limited marketing situation analyses provide information that any other company faces in pursuit to perform in the related industry. Conversely, the analyses of its SWOT, PEST and position vis-à-vis the market it operates provide a need to identify elements of a marketing plan with a view to analysing problems and propose solutions. To begin with, marketing situation analysis shows that Qantas Airways Limited faces intense rivalry among different airlines and to be specific, Virgin Australia Airlines which offers the stiffest. To put this in the rightful context, going by the data regarding financial position, in the pre-deregulation days, Qantas Airways Limited and Virgin Australia Airlines competed mostly based on services like meals and in-flight movies. However, in the post-deregulation era the rivalry between the two companies is now taking the form of severe price competition with Virgin Australia Airlines ruthlessly undercutting each other with fare promotions. To counter this effect, Qantas Airways Limited must be specific in its market approach; first, market mixed is the key here. Secondly, catering and other support services to the customers should be specific and unique to what these competitors offer. That is, dealing with prices calls for the Company to provide such services to customers associated with other airlines and such must include corporates, institutions and other Companies. This argument is in tandem with what Graf and Kimms (2011) explain about marketing orientation. That is, the normative philosophy that underlines modern marketing thoughts in airline argues that for airlines to effectively deal with competition from other companies, such firms need to determine specific needs and wants of its customers so as to satisfy them more effectively than their competitors. Secondly, as Çetiner and Kimms (2012) posit, Virgin's mission is to redefine Australia's airline industry and shift from a leader in low-fare market to a new world carrier. This is to mean that for Qantas Airways Limited to be successful with regard to offering catering services that sway customer; their marketing strategies must define market orientation from Shumsky (2006) perspective---a cultural perspective looking for “the company culture that most efficiently and effectively create the needed behaviours that ultimately creates superior value for its customers thus ensuring continuous effective performance” (p. 32). As it has already been, Qantas financial situation has become weaker since 2012, especially when it reported loss for the first time. This is to mean that in light of the competition the Company is facing, the industry is already facing very high fixed costs. That is, the majority of the operations such as landing fees, labour and cost of aircraft among others have been high regardless of how full the Company has their planes. This factor also negates the fact that the marginal cost of adding an extra passenger is almost negligible. Furthermore, this statistics, as it stands show that the margin of every seat sold has a contribution to the bottom directly. While the bottom of this effect is to develop a marketing strategy that undercuts other competitors’ prices till such prices reaches marginal cost, adopting S.M.A.R.T. which is specifically results-focused and time bound. The best marketing strategy for this Company is to create Computer Reservation System and such must be coupled with innovative pricing. As Topalogu (2012) notes, one of the basic element of marketing plan is to assess its situation analysis and specifically, deal with product category review. To this regard, creation of computer reservation system will not be a new strategy to the Company but it enhances pricing overview, distribution profile and sales trends. This marketing strategy can be connected to one noted issue discussed earlier: Qantas turning to international market, particularly Asia market (Qantas Airways, 2013). The interpretation of this with regard to Computer Reservation System is that the Company needs dynamic revenue management so that as it considers adopting the integrated Computer Reservation System dynamic revenue management systems adjust its limit as time passes and the number of seats available in a particular flight increases. This adjustment will further allow the airline to maximize their revenue generation fully through dynamic seat allocation and pricing. As Brueckner and Whalen (2013) note, most airline alliances consider dynamic revenue management as an effective approach in maximizing revenue in the industry. Indeed, most critics argue that compared to static revenue management, dynamic RM has more benefits to airline alliances and this is where Qantas Airways Limited creates the problem as far as what Nguyen (2014) refers as to as “Qantas has steady been failing to concentrate on how to cease to loss and return to make profit” (p. 37). Contrariwise, game theory model assume that firms such as Qantas are (hyper)rational maximisers. This is to mean that in the last 3 financial years, the Company has been striving to achieve the most preferred outcomes with regard to the services it offers and such gas been driven by motives of their competitors. However, in spite of such efforts the Company has been lacking in one aspect; failing to overcome uncertainty by forming competitive conjectures which are subjective to probabilistic estimates of rival Companies such as Tiger Airways. To fight such challenges there is one marketing strategy the Company should adopt, and that is to lease some of its airlines so as to achieve what Belobaba and d’Huart (2011) term as defraying large initial capital investment. The Company should note, according to the information provided by Belobaba and d’Huart that entry into domestic airline is relatively easy as there are no barriers. Secondly, the minimum efficient scale is equally not high because the Company is having the ability to choose to compete in a few markets. Therefore defraying large initial capital investment is the perfect marketing option when aspects such as cheap exit costs are considered. As already noted, airline industry is a highly competitive market. Secondly, statistics has shows that by the end of first quarter the Company had lost $252 million and profit margins had gone very low. Another interpretation of this is that marketing strategies such as discounting of fares, using low fares during slow seasons to cover costs and fill planes is not working with the Company. In addition, mergers such as Northwest/Delta are almost forcing the Company to reconsider its position. Therefore the best marketing strategy with regard to this challenge is doing what Brueckner and Whalen (2013) terms as targeting and segmenting. With targeting and segmenting, the Company should specifically engage in corporate and business level strategies. Scholars such as Shumsky (2006) have defined corporate and business level strategies differently. However, Topalogu (2012) looks at the term as a situation where Companies strategise where to compete. On the same note Topalogu (2012) adds that business level strategy as the case where firms strategise how to compete. Bringing this within the context of the Company, Qantas Airways Limited’s strategy has been to compete worldwide; mainly in the transportation of passengers. Therefore to achieve the goal, it has to adopt Economy Plus class tag that provides on both domestic and international routes. The Company, compared to other lower cost carriers such as Tiger Airways can cater for both business and pleasure travels therefore making it easy to adopt this strategy. In addition, based on its SWOT analysis, the Company prides itself for having able to conquer Asian market where its growth has steadily been increasing. Taking advantage of this, the adoption of Economy Plus class tag must be accompanied by two elements; utilization of cost-effective and differentiated strategies at the same time. The understanding of human behaviuor as Graf and Kimms (2011) put it has always been looked upon as a compulsory basis for practicing the discipline of strategic marketing. So far, as the case of Qantas Airways Limited is concerned, it is apparent that weighing its situation with regard to basic elements of marketing plan, psychological and economic models have failed to bring a versatile understanding of the factors that forms the basis for valuation. To contextualize this argument, competition as it has been noted has shifted from price to technological development. Such has also been embedded on three basic segments; the update of fleet, the improvement of physical facilities on airplanes and the new check-in technologies. With such in mind, this shift is brought by what human behavior that has been brought by compulsory basis for practicing the discipline of strategic marketing. As a matter of fact, such human behaviours did not even positively respond to the innovations such as BoardConnect technology, Check-Mate, app for iPhone and mobile boarding passes and media streaming that were introduced late in 2011. Therefore in light of contemporary marketing strategies as well as what has been described as compulsory basis for practicing the discipline of strategic marketing there was a missing link which ultimately instigated the problem such as what has been shown in chart 2, 3 and 4 (increasing in Australian Dollar and GDP over years but such is not translated in the Company’s financial performance). The best way to counter this effect is a marketing plan that adopts ‘Buyer Power.’ According to Shumsky (2006), buyer power is the authority travellers have to negotiate what they should have especially in the instances of outside options. The power that Qantas Airways Limited customers have is varied depending on the options available to them and the origin-destination city pair. This problem can be dealt with by adopting yield management techniques as well as competitive pricing which will in turn allow the Company to extract significant consumer surplus in a smaller remote markets and such will work well where travellers have no much choice and for direct long-haul flights preferred by business travellers. The best way to implement this strategy is through adoption of signaling theory. That is, analyzing technological position of this Company vis-à-vis that of Virgin Australia Airlines the former lags behind. Therefore it should not adopt signals that provide Virgin Australia Airlines with advance information regarding its intention as such could hurt its competitive position. The cornerstone of this argument is that Buyer Power has a significant meaning in this commercial situation, and consequently for marketing. In such intense commercial competition, it is definite that the exploration of, particularly, social identity and pleasure offer much in the need for understanding travellers’ behaviours. Looking at the SWOT, internal and external analyses of Qantas Airways Limited one thing for sure is obvious as far as marketing is concerned. Marketing though the best way to save this Company cannot contrary to beliefs such as that of Topalogu (2012) create any basic needs for this Company. It may, based on the analyses cited above, be instrumental in suggesting methods for fulfillment of the strivings which are already inherent. To arrive at this suggestion, marketing, as a strategic tool must fulfill the identified demands by also analyzing motivations of their customers in accordance with current theories and science. The solution is to increase the size of alliance practicing dynamic revenue management which subsequently increases the effectiveness and benefits that can deal with the situation. Looking at the trend within the Company and its close competitor, it can be revealed that due to adoption of dynamic revenue management the control will be sub-optional for Qantas Airways Limited since there is arbitrary local fare valuation within its codeshare paths. As previous data has shown, increasing the size of alliance practicing DRM subsequently increases the effectiveness and benefits accrued. This underpinning is backed by the fact that competitions in airline alliances bring overproduction and building of capacities among Companies such as Qantas Airways Limited. Conceptualizing this suggestion, Graf and Kimms (2011) contend that airlines compete on operational decisions like inventory. Therefore as partners within an alliance increases, Qantas Airways Limited is able to consolidate their flight networks thus reducing what Netessine and Shumsky (2005) term as redundancies in their market of operations in which the aforementioned airlines operate. References Belobaba, P and d’Huart, O. (2011). A Model of Competitive Airline Revenue Management Interactions. Journal of Revenue Management and Pricing Management. Vol. 11, 1, 109-124. Macmillan Publishers Ltd. Brueckner, J., & Whalen, W. (2013). The Price Effects of International Airline Alliances. The Journal of Law and Economics, 43, 78-132. Çetiner, D. and Kimms, A. (2012) Approximation nucleolus-based revenue sharing in airline alliances. European Journal of Operations Research 220(2): 510–521. Graf, A &Kimms, A. (2011). An option-based revenue management procedure for strategic airline alliance. European Journal of Operational Research, 215: 459-469. Nguyen, K. (2014, February 27). Qantas results: Airline posts $252 million loss, cuts 5000 jobs, freezes wages. Yahoo Finance. Retrieved from http://au.finance.yahoo.com/news/qantas-results--airline-sells-brisbane-airport-lease-for--112-million-221118676.html Qantas Airways. (2013). Qantas annual report 2013. Retrieved from www.asx.com.au Shumsky, R. (2006). The southwest effect, airline alliances and revenue management. Journal of Revenue and Pricing Management, 5: 83-89. Topalogu, H. (2012). A Duality Based Approach for Network Revenue Management in Airline Alliances. Journal of Revenue and Pricing Management. Vol. 11, 5, 500–517. MacMillan Publishers Ltd. Read More