Business Strategy & Analysis – Qantas Airlines

 Discuss about the Business Strategy & Analysis – Qantas Airlines.

Qantas has been referred to as the largest Australian airlines which connects more than 1,000 destinations all over the globe. It has partnership with more than 25 airlines. The first Qantas Aircraft was launched in the year 1920 and since then, it has grown to as a leading brand in the aviation industry. Qantas has some leading brands operating in regional, domestic and international passenger & freight category along with inflight catering and travel operations i.e. Jet Star, Qantas freight, Qantas link, Qantas frequent flyer, Qantas Holidays, Q – Catering and express ground handling.  It gives employment to more than 30, 000 employees from more than 50 nationalities speaking 40 languages. QANTAS is an acronym which states Queensland and Northern territory Aerial services (Qantas annual report, 2006).

Vision: The vision of Qantas Airlines is to create premium & low fare airlines i.e. Jet Star for the people belonging to the middle class. Qantas Airlines have been known for its world class ethics & integrity and adherence to the rules & regulations.

Mission: Qantas aspires to be one of the largest Australian airlines connecting more than 1,000 destinations all over the globe. Qantas has been known for its world class customer service, loyalty programs & to ensure customer engagement along with efficient sales & distribution strategies have been followed in order to have success in the long run.

QANTAS airlines has worked upon the following five objectives i.e. to ensure safety practices and implementing the same, best customer service, to develop Qantas as a premium brand which would help to improve the productivity of the business in the long run, to achieve simplicity with constant operational efficiency and to select the proper aircrafts for the right route so as to provide finest route network (Qantas annual report, 2006).

This report takes into consideration strategic analysis of Qantas Airlines and the ways in which the market share of the same can be improved. This report will take into consideration the external (PESTLE, Porter’s Five forces & Critical Success Factors) & internal (SWOT & VRIN) analysis. The analysis will help to identify the core competencies which will help the airlines in becoming the market leader. The report would also analyze the current strategies which are adopted by the same and recommendations which would be beneficial for them in the long run.

Strategic Analysis

Methodology

This assignment takes into consideration a detailed strategic analysis of Qantas Airlines keeping in mind both the internal & external analysis for the same. For this assignment, the information is reviewed from the various online sources such as journals, facts & figures of Qantas Airlines, Harvard Business Review (HBR). The method for collecting the information is secondary research.

External Analysis

PESTLE analysis

Political: The aviation sector is highly prone to changes in political environment as it directly affects the travel habits of the customers. Unstable political environment will have an adverse effect on the trade relations with other countries which will in turn affect the number of passengers travelling to & from that country (Prahalad, 2000). On the other hand, stable economic environment in the aviation industry can be seen with regards to partnerships with other airlines which might lead to high levels of profits in the long run.

Economical: It has been seen that, the world economy has become highly volatile in the last few years. Economic environment plays a vital role in influencing the travel and tourism sector. In case of Qantas airlines, developing resilience to the financial cycles has become one of the major challenges for Qantas (Prahalad, 2000). Future program was launched by Qantas airlines in order to ensure that the company is well equipped by optimizing the supply chains along with aircraft utilization and scheduling.

Social: Qantas Airlines operates in more than 40 countries connecting more than 1,000 destinations all over the globe. They accommodate more than 40 million passengers annually. This aspect has been rendered to as a major challenge in terms of social & cultural preferences of the customers (Prahalad, 2000). Customized customer service is an essential aspect for better brand loyalty with lucrative options.

Technological: Use of innovative technology has been referred to as an important task in the aviation sector. Qantas airlines have been associated with the best use of technology in its operations, aircrafts & services. Huge investments are done in the aviation sector to provide its customer with world class experience. Qantas Airlines has been using world class technology in certain areas i.e. prior check in, access to superior lounge & improved safety measures for its passengers (Prahalad, 2000).

Legal: The legal environment in case of aviation sector plays an important role due to high levels of security associated with the same. It has been seen that, different countries have different legal requirements in this sector and penalties are high in nature. Qantas airlines has shown adherence with the legal requirements and its business operations (Prahalad, 2000). It is an important task for all the employees of Qantas to adhere to the Australian or local rules and regulations.

Environmental: The aviation sector has been criticized for its environmental damage consequences. The growth of the aviation sector in the last couple of years has led to certain alarming issues regarding the carbon emissions caused by the aircrafts & noise pollution. The long term strategies of Qantas Airlines measures and reports its environment which will reduce the environmental issues (Prahalad, 2000). For example, the Begreen initiative at Qantas Airlines aims at managing risks & impact of its business practices in compliance with the rules and regulations. 

  • Porter’s 5 forces Model

Bargaining power of suppliers: Bargaining power of suppliers refers to a force which can analyze the business strategy. Airbus, Boeing & Bombardier is the three main suppliers in the aviation industry. For example, in case of Qantas Airlines it has more than 250 aircrafts including bombardier dash 8s, bombardier Q400s, Airbus A380s, A330s, A320s & Boeing 747s, 767s, 717s & 737s. Therefore, the bargaining power of the suppliers is high in the aviation industry (Porter, 2001).

Bargaining power of buyers: Qantas has been referred to as a premium brand connecting more than 1,000 destinations all over the globe. Qantas Airlines is in full service in flight between domestic & international locations. Qantas operates Jet Star brand as a low cost airplane with varied travel routes. In the current situation, passengers have many options such as to buy the tickets from a travel agent or website or choose the airlines based on its price, quality & service. Therefore, it can be stated that the bargaining power of buyers in aviation industry is high (Porter, 2006).

Competitive rivalry: Though Qantas has been referred to as the market leader on the Australian market but it is threatened by high competition from other airlines companies all over the globe. Based upon the annual report 2009, it is clearly stated that Qantas operates Jet Star to compete with other low fare airlines i.e. Virgin Blue. There are various airlines which have occurred in the aviation industry after deregulation which can compete with Qantas. Qantas shall focus upon differentiation strategy so as to build a strong brand in order to deal with its competitors.

Threats from substitutes: Majority population offers to travel by airplanes between countries and remotes areas as it reduces travel time and is comfortable. There are various substitutes for airplanes i.e. cars, buses, cruise & trains which can affect demand of the aviation industry. Transporting via airplanes has various advantages attached to it i.e. it is fast and convenient means of transportation (Porter, 2005). Therefore, threats from substitutes in the aviation industry might be higher or lower depending upon the customer’s likings.

Threat of new entrants: The threat of new entrants refers to one of the major threats that shall be taken inconsideration by Qantas Airlines. In the airline industry, large amount of investment is required therefore it becomes tough for the competitors to enter this sector. The potential new entrants in Qantas airlines are high after deregulation. Qantas shall think to create a barrier for the new entrants to enter in this sector by using pricing strategy such as Jet Star (low fare airlines). Alliance strategy shall be adopted by Qantas airlines to build difficulty for the new entrants to enter in the aviation sector. This strategy will help Qantas airlines to create a brand reputation and create a superior brand feeling for the customers (Porter, 2001).

The strategic canvas refers to a tool which helps to understand the strategic positioning and successful strategies. The main purpose of strategic canvas is to show the strategic profile of the industry as a whole in comparison with the selected airlines i.e. Qantas and its competitor i.e. Car. It is a value curve which shows factors of competition in the horizontal axis and the vertical axis shows the degree to which the airlines invest in the competitive factors.               

  • Critical Success Factor (CSF)

The critical success factors describe the main parts of the company’s performance. These critical success factors provide a detailed knowledge regarding the company. Some of the critical success factors for Qantas airlines have been defined as under:

Strong management: Qantas has a strong control over its management. They believe in providing the best customer service to its passengers. Therefore, they have trained their officials to provide premium customer services to the same.

Competent workforce: The second success factor at Qantas Airlines is its competent workforce. It has been seen that, they have diverse and competent workforce who operates on board. It is very important to hire highly qualified and competent workforce in the aviation industry. They shall possess good communication skills and the ability to take up responsibility if anything goes wrong in the flight. The training programs held at Qantas shall be customer oriented and aims at continuous improvement (Chatterjee, 2002).

Route system: Route system for any airlines has been referred to as the most reliable success factor. It mainly takes into consideration where to fly and how frequently to fly at the destinations. Qantas connects more than 186 destination sin 40 countries including Australia and more than 120 other countries or destinations (Chatterjee, 2002).

Non-stop flights: It shall be seen that, destination from one point to another shall be nonstop. This helps the plane to minimize its travel time to reach a particular destination. It can be analyzed that, JetStar commenced its long haul flights in the year 2006. Some of the destinations covered by JetStar are Gold Coast to Tokyo & Gold Coast to Osaka, Melbourne to Bali, Melbourne to Bangkok & Melbourne to Singapore, Sydney to Bali, Sydney to Phuket & Sydney to Honolulu, Cairns to Osaka & Cairns to Tokyo (Qantas annual report, 2006).

Continuous promotions & in – flight services: The service promotion in the aviation sector refers to targeting the loyal customers and focus upon high revenue customers. The inflight services such as choice of seats, type of aircraft, easily booking the tickets & class of service at Qantas makes premium airlines as compared to other airlines. Qantas has also been recognized for its use of cardiac defibrillators in their flights. Proper training is provided to the employees so that they are able to use the physician kit and cardiac defibrillators in case of any emergency on board.

Efficient use of cost: Maximization of the revenues by use of competitive pricing or innovation/ creativity shall attract many profitable avenues. Effectively managing the costs and focusing on price and effective procurement of fuel shall be referred to a key success factor.

Strategic Capability

VRIO/ VRIN Matrix

It shall be seen that, in this highly competitive environment competitive advantages are not sufficient for the success of any organization in the long run. Every organization shall aim to have sustainable competitive advantage. In order to         have sustainable competitive advantage, the organization does not only need to be in control of valuable resource but it shall also be rare & inimitable.

VRIO Analysis Qantas Airlines

Resources

Valuable

Rare

Inimitable

Flight entertainment

Yes

No

No

Comfortable seating for passengers

Yes

Yes

No

International presence

Yes

Yes

Yes

Customer bill of rights

Yes

Yes

No

Low cost strategy

Yes

Yes

No

Baggage

Yes

Yes

No

Qantas Airlines offers more than 30 channels and various radio signals in flight for its passengers. They also provide newly release movies on flights which have more than 3 hours of flight time. It has been seen that, every month the flight entertainment channels are reviewed and revised. This resource is valuable for its customers and passengers who invest their money are looking for options which make their travel a memorable one. This resource is also rare in the aviation industry. This resource is not inimitable as other airlines provide the same amenities at a lower rate. It has been seen that, intensive marketing strategies are followed by Qantas to make sure that they are known for its extra service.

Qantas Airlines is known for its comfortable and convenient seating plan for its passengers. With the help of web check in kiosks, the passengers are able to choose the exact seat just a day before their flight. This makes the flying experience a memorable one for its passengers. The passengers tend to enjoy their flight. This is not inimitable as other airlines might not be able to follow the same.

The third resource identified for Qantas Airlines is its international presence. It has been seen that, Qantas Airlines connects more than 1,000 destinations all over the globe. It has increased its international presence in the past many years. Qantas has been referred to as a premium airline in Australia and other regions.

Qantas has created customer bill of rights for its employees. It refers to a bill which consists of various do’s and don’ts. The customer bill of rights has been formulated to make the customers feel safe & secure during the entire flight process. The bill consists as to what is to be done exactly if anything unusual happens in the flight. It is a rare resource as other airlines emphasize on customer service but none of them come close to Qantas.

It has been seen that, majority of the airlines tend to charge for the checked in baggage i.e. the baggage which the passengers take inside the flight. They do the same to increase their level of revenues. Qantas Airlines do not charge their passengers for the checked in baggage. They are tagged as “bags fly free”.

The last resource identified in case of Qantas Airlines is its low cost strategy. They have a brand by the name Jet Star which is known as a low fare airline. This is not inimitable as there are many other low cost airlines in the aviation industry.

Strengths

Ø  Qantas Airlines has a strong business strategy.

Ø  The company has strong brand reputation and brand recognition which has even received an award for best premium economic class.

Ø  The company emphasizes on providing better safety and best customer service to its passengers (Maritan, 2011).

Ø  Based upon Skytrax awards, Qantas airlines have been referred to as one of the ten top airlines to get passenger’s choice awards.

Ø  The firm believes contributing towards the up liftment of the country by means of charity, education & cultural endeavors (Johnson, 2011).

Ø  Jetstar has been referred to as a brand which caters to the low cost airlines and leadership strategy to deal with other low cost airlines.

Ø  Partnership strategy would be referred to as an excellent strategy wherein the premium airlines can join hands with Air Asia so as to decrease the prices of the tickets which will help Qantas to gain economies of scale in the aviation sector.

Ø  The next strength for Qantas airlines is safety & security measures. It has been seen that, all the passengers concern about safety & safety hence Qantas consider about the same. It is said that, the airlines adhere to all the safety measures listed by the airlines authority (Johri, 2010).

Ø  Customer service can also be referred to as a major strength for Qantas airlines. Qantas had variety of customer service programs such as Qantas loyalty program, Qantas frequent flyer, Qantas lounge at the airport for meetings.

Ø  Qantas airlines have various training programs for its employees & technical training for engineers (Gale, 2006).

Ø   Qantas Airlines is the member of one world alliance which includes various big airlines such as British Airways, Canadian Airways, American Airways and Cathay Pacific Airlines. The purpose of this alliance is to help each other and provide facilities to the passengers who are flying in a connecting flight. 

Weakness

Ø  Qantas is unable to control its staff members. It has been seen that, the company provides inadequate training to its employees

Ø  Qantas main focus is on safety first. Everyday flight is on board for full 24 hours but the engineers strike for holidays which can affect the functioning of the airlines (Maritan, 2011).

Ø  The operations cost for Qantas Airlines is very high to create the best product & provide better service as compared to its competitors.

 

Opportunities

Ø  Technological advancements in the aviation industry could be referred to as one of the main opportunities.

Ø  Qantas uses world class technology in their products and services in order to provide convenience to its passengers (Forgang, 2004).

Ø  A 2D barcode is used instead for passengers travelling domestically to check in. This is a new check in service in command at Qantas Airlines.

Ø  With the rise in globalization and use of internet, Qantas airlines have an opportunity to connect or exchange information regarding the product or service (Chevalier-Roignant & Trigeorgis, 2011).

Ø  Various alternatives for fuel i.e. use of bio-derived fuels, methanol, ethanol, synthetic fuel, liquid hydrogen & liquid hydrogen (Bowman, 2007).

Ø  Use of advance technology such as kiosk for web check in rather than waiting in queues. This gives the passengers the liberty to choose their own seat and print it just half an hour before the departure.

Threats

Ø  One of the major threats in the aviation sector can be seen in regards to inflated oil prices. It has been seen that, rise in oil prices are dramatic and uncontrolled (Delfmann, 2005).

Ø  The second threat for Qantas airlines is from the low budget or low fare airlines or other transportation alternatives such as buses, car or bullet trains (Chatterjee, 2002).

Ø  Economic crisis also refers to one of the main threats for Qantas Airlines. It will affect the aviation business in the long as people will travel less by aircrafts and opt for other means of transportation (Business analysis, 2008).

Ø  Environmental problems which are caused by the aviation sector can also be referred to as the major threat. Some of the environmental issues caused by the aircrafts are noise pollution, pollution in the air and volcanic explosions (Cadle, et al, 2014).

Ø  Deregulation in the aviation industry will have an adverse effect over Qantas airlines

Culture refers to the set of beliefs which drives the employee’s behavior. These refers to the behaviors of the employees is based upon these underlying beliefs. It shall be seen that, the strategies align with the business strategy which leads to a success of the organization in the long run. In case of Qantas Airlines, providing world class service to their customers is the main motive. Therefore, the training programs held at Qantas Airlines focus mainly on how to provide a convenient flight for all the passengers (Ansoff, 2005).

Qantas Airlines comes into existence in the domestic & global market. It shall be seen that, the internal resources shall align with the business strategy so as to overcome the unforeseen circumstances. Based upon the critical success factors mentioned above in this report, the competitive strategy of Qantas airlines can be seen in regards to a competent workforce. The employees at Qantas are customer friendly (Stalk, 2002). The management at Qantas acknowledges the importance of excellent customer service in the airlines industry. Qantas tend to recruit the right kind of people for the right kind of job and training them in the best possible manner. The superior infrastructure i.e. world class flight experience can also be referred to as the competitive strategy for the same. It provides the best flying experience and has been awarded as the “premium airlines of Australia”. Qantas is also actively involved in customer social responsibility (CSR). It has a charitable trust which involves donation for the welfare of the community or society as a whole.

Business strategic statement

Vision: Is to become most loved & profitable airlines

Mission: Is to connect the passengers through friendly & cost effective air travel

Strategy statement: To use cost effective and differentiation strategies and become the leading airlines all over the globe

Conclusion & Recommendations

Recommendations for future:

Expeditionary marketing shall help Qantas Airlines to gain advantages from this strategy but high cost of operation might also be incurred

A unique service style shall be adopted by Qantas in order to provide world class customer service. In order to adopt the same, hug investment would be required and training programs shall be used to support this strategy (Airlines, airports & airspace, 2006).

With an increase in fuel price, the airlines shall opt for a cheaper alternative for the same

Hence, it can be concluded that Qantas is referred to a premium airlines brand connecting more than 1,000 destinations all over the globe. Qantas has some leading brands operating in regional, domestic and international passenger & freight category along with inflight catering and travel operations i.e. Jet Star, Qantas freight, Qantas link, Qantas frequent flyer, Qantas Holidays, Q – Catering and express ground handling. Qantas has been known for its world class customer service, loyalty programs & to ensure customer engagement along with efficient sales & distribution strategies have been followed in order to have success in the long run. This report takes into consideration strategic analysis of Qantas Airlines and the ways in which the market share of the same can be improved. This report will take into consideration the external (PESTLE, Porter’s Five forces & Critical Success Factors) & internal (SWOT & VRIN) analysis. The analysis will help to identify the core competencies which will help the airlines in becoming the market leader. The report would also analyze the current strategies which are adopted by the same and recommendations which would be beneficial for them in the long run.

References

Airlines, airports, and airspace. (2006). Washington, D.C.: Transportation Research Board.

Abell, D.F. (2000). Defining the Business: The Starting Point of Strategic Planning, Englefield Cliffs, N.J., Prentice Hall.

Ansoff, H.I. (2005). Corporate Strategy, McGraw-Hill: New York.

Bowman, C. (2007). Competitive and Corporate Strategy, Irwin: London.

Business analysis. (2008). Workingham, Berkshire: Kaplan Pub.

Cadle, J., Eva, M., Hindle, K., Paul, D., Rollason, C., Turner, P., Yeates, D. and Cadle, J. (2014). Business Analysis. Swindon: BCS Learning & Development Limited.

Chatterjee, S. (2002). Competitive strategy. Boston, Mass.: HBS Pub.

Chevalier-Roignant, B. and Trigeorgis, L. (2011). Competitive strategy. Cambridge, Mass.: MIT Press.

Delfmann, W. (2005). Strategic management in the aviation industry. [Cologne]: Kölner Wissenschaftsverlag.

Forgang, W. (2004). Strategy-specific decision making. Armonk, NY: M.E. Sharpe.

Gale, B.T. (2006). Value-Based Marketing and Pricing, Customer Value Inc.,: Boston.

Grundy, T. (2003). Gurus on business strategy. London: Thorogood.

Hall. W. (2004). Review of research: Competency-based training and assessment, Adelaide, National Centre for Vocational Education Research.

Harvard Business Review. (2002). Charting Your Company’s Future. [online] Available at: https://hbr.org/2002/06/charting-your-companys-future [Accessed 23 Aug. 2016].

Holloway, S. (2002). Airlines. Aldershot, Hants, England: Ashgate.

Ibeh, K. and Davies, S. (2009). Contemporary challenges to international business. Basingstoke [England]: Palgrave Macmillan.

Johnson, V. (2011). Exploring Strategy, 9th ed., Prentice Hall, Essex.

Johri, A. (2010). Business analysis. Mumbai [India]: Himalaya Pub. House.           

Maritan, C. (2011). Competitive strategy. Cheltenham [u.a.]: Elgar.

Palepu, K., Healy, P. and Bernard, V. (2000). Business analysis & valuation. Cincinnati, Ohio: South-Western College Pub.

Peoples, J. (2012). Pricing behavior and non-price characteristics in the airline industry. Bingley, U.K.: Emerald.

Porter, M. (2001). Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press: New York.

Porter, M. (2005). Competitive Strategy: Creating and Sustaining Superior Performance, The Free Press: New York.

Porter, M.E. (2006). “What is Strategy?”. Harvard Business Review, vol.74, No.6, pp. 57-76.

Prahalad, C.K. (2000). “The Core Competence of the Corporation.” Harvard Business Review, Vol. 68, No. 3, pp. 79-91.

Qantas annual report 2006. (2006). Mascot, N.S.W.: Qantas Airways Ltd.

Stalk, G. (2002). Competing on Capabilities: The New Rules of Corporate Strategy, Harvard Business Review, Vol.70, No.2, pp. 57-70.

Treacy, M. (2003). The Discipline of Market Leaders, Perseus Books: New York

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