Changes Occurring in the Airline Industry and How Qantas Is Responding to the Changes - Assignment Example

Qantas Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecture Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 25th July, 2012. Question one: Changes occurring in the airline industry and how Qantas is responding to the changes The airline industry in Australia as well as industries other all over the globe is going through a period of idealistic change. In these sense basic restructuring is ongoing in the industry, the major changes in the industry are linked to aspects such as the shrinkage of the high end demand in relation to air travel, surfacing of a new cadre of low cost carriers and amplified simplicity of substitute airline offering and the existence of less classy itineries which is mainly due to the internet in combination with other emerging technologies (Quiggin 1997). The instantaneous crumpling of the of high end demand which took place by the end of the year 2000 is seen as a major structural change and it was mainly due to a combination of the technology and economics. Leisure traveler used to select the airlines to travel with based on the price been charged, the business travelers have also joined them and they have become more price sensitive. The change in price sensitivity of the business traveler is seen as a permament change that has occurred in the industry. The change in price sensitivity and the economic downturn which occurred at the latter half of the year 2000, there have been radical changes in the travel purchasing habits. Slashing of the costs related to business travel is viewed as a major change and also been among the corporate individuals first priority and they are using the low cost carriers in instances when they have to make a business trip. Another aspect is that most organizations are minimizing the number of trips they used to make in the course of a business transaction, this is mainly due to the fact that the organizations are more concerned about the price been charged and also due to the emergence of technology they are able to exchange documents using online means. Almost all business have made the above changes in their travel patterns, most of them have substituted the travel with web conferencing and other related technologies such as face to face meetings. Qantas have tried to respond to this change by lowering the cost of the business travelers while at the same time ensuring that they remain competitive. Another change is attributed to the emergence of lost cost carriers in Australia, such as air Asia, Jet star, pacific blue and tiger airways just to mention a few. in the past, flying on a low cost carrier predestined sporadic service and the travelers usually used aging airlines, at present LCCs now offer expedient schedules, state of art aircraft and facilities that meet or at times exceed those been offered by the full service airlines. Qantas has responded to this change by coming up with some low cost carriers operating under their name. An example of such an airline is jet star Hong Kong. With the addition of low cost carriers in their airline categories, they will be able to attract new customers and retain new ones who are willing to use the low cost carriers. They have also responded to these changes by ensuring that their low cost carriers offer the best services as compared to low cost carriers from other airlines. The other change is mainly attributed to the internet. The internet is seen as a perfect supplier of information and data related to travel rather that an alternate to travel. Most airlines companies have griped the change which has been brought about by the internet and they have started to use online ticket this has in one way or another reduced the distribution cost. Most technologically conversant travelers have the ability to evaluate the service offerings of different airlines in a quick and efficient manner and to react to the comparison within a short duration of time. Qantas has responded to this change by embracing the online ticket sales since it seems to be more efficient since it meets the needs of most customers and they can be bale to pay for their tickets at any time. Question two: Qantas Resources and capabilities 2.1 capabilities Capabilities of a company when defined in simple terms can be viewed as an amalgamation as well as collaboration of individual resources so as to reach a desired outcome. Capabilities are also viewed as a combination of both the tangible and intangible resources (Gialloreto 1988). Through analysis of organization capabilities there is a clear deduction of both the core competencies and competitive advantages that Qantas may possess in relation to other airlines. The table below represents the capabilities of Qantas based on the resources mentioned below. Functional area Capability Resources Management Forward thinking Clear objectives Innovative programs and skillful workers Marketing Quality customer service Brand recognition Differentiation Awards, customer loyalty and various advertising mediums Manufacturing Product range High quality products High number of skilled technicians Organization Strong network Revered history and strong supplier support R & D Strong CSR development Innovation, high level of employee knowledge 2.2 Tangible resources 2.2.1 Financial resources Qantas airline has a number of shareholders. There has been considerable decrease in profits which is mainly attributed to high fuel prices and insufficient route networks. Despite all these the airline seems to be performing better than the competitors (Qantas 2010). 2.2.2 Organizational resources Qantas has established partnership with other airlines in the aim of enhancing their networks. The organization has a change plan of been the number one premium airline (Qantas 2011). 2.2.3 Physical resources Qantas has its headquarters in Botany Bay and the total Qantas has approximately 32,000 employees and has the ability to fly to 182 destinations in 42 countries around the globe. As on 1st September 2010, the airline operated a fleet of 252 aircraft comprising of Bombardier Q400s, Boeing 717s, 747s, 767s and 737s, airbus A330S, A380S and A320S and Bombardier Dash 8s (Qantas airways 2010). 2.2.4 Technological resources Qantas sources its airplanes from Boeing and Airbus. By the use of these companies, Qantas leads the travelers to believe that they are more conversant on the quality of parts they use when assembling their fleets. 2.3 Intangible resources Human resources Qantas has employed capable and high skilled personnel. With the high demand for skilled personnel Qantas will have to offer a number of incentives to the employees so as to retain them (Easdown & O’Brien 2003). Qantas has a well-organized customer care services. Customer care service in the airline industry is seen as a major factor to be considered by the customers when making their flights (Qantas airways 2010). 2.3.2 Innovation resources Over time Qantas has put in place a number of strategies to imply that it is an imaginative and inventive company. One of such strategy is the ability they offered to the customers to be able to check and book their flights via the internet. 2.3.3. Reputational resources Qantas has over the longest period enjoyed strong brand recognition. Qantas places a lot emphasis on the customer care services and with such high recognition customer loyalty is increased. Qantas has also gunned various awards such as been the winner of the world best premium economy class airline award at the 2012 world airline awards that were held at Farnborough air show. 2.4 core competencies The core competencies of organizations are termed as the activities that a company tends to perform better than the competitors and its other internal activities and that are most crucial to competitiveness and profitability. By the extraction and reviewing of the core competencies of any organization, competitive advantages and the strengths of Qantas can be identified. The VRIO will be used to extract the strengths and weaknesses of Qantas. 2.4.1 VRIO Resources and capabilities Valuable Rare Costly to imitate Non- substitutable Brand recognition Yes Yes Yes Yes High R & D spending Yes No Yes Yes Clear objectives Yes Yes No Yes Quality customer service Yes Yes No Yes Forward thinking Yes Yes no Yes High quality products Yes Yes Yes Yes Strong network Yes Yes Yes Yes Product range Yes Yes Yes No Strong CSR development Yes Yes no Yes Question 3: Qantas future strategy The strategy that Qantas airline can adopt is a corporate strategy; the corporate strategy will assist Qantas in its diversification and in offering low cost budget air travel so as to satisfy the increasing demand for market segments (Johnston & Scholes 1999). Presently most travelers are more concerned about the price been charged on their travel and most of them are opting to use the low cost carriers rather than the full service. In essence the airline industry is behaviorally differentiated into two broad categories. One of the category is that of the travelers who place a high importance on the price of air fares above everything else and the other category is those customers who are more than willing to pay for a higher price for premium service. Through the formation of the alliance with the low cost carriers, Qantas will be able to uphold and at the same time take advantage of on its existing first-class brand and the learning curve advantage that it possesses in the full service industry and at the same time satisfying the escalating demand for LCCs by travelers. This can be arrived at by the use of parallel incorporation into the related LCC airline sector through the development of associations with existing LCCs via an impartiality substitute arrangement. This strategy will act in the benefit of Qantas which is a well-known carrier and it will also go a long way in dealing with the threats posed by the low cost competitors for the following reasons. One of the reasons is that each airline will center on their core capability so as to generate synergy and economies of scope. This strategy brings both benefits of the specialty of the Qantas airline and the other LCCs they make a decision to form an alliance with. Also when Qantas forms an alliance with the existing LCCs operating in the country there will be a considerable exchange of human capital. The exchange of human capital is more than just the exchange of the able bodied men working in the companies, but the transference of skills as well as experiences across the airlines. The two airlines will benefit in the transfer of knowledge and skills and they will learn from each other. Also through the formation of the alliance the airlines will be able to share both in intangible resources and the tangible resources possessed by each of the airline in the aim of creating a competitive advantage. In relation to the intangible resources, Qantas can use their professional MRO amenities to repair the LCCs fleet so as to improve the quality of services offered to the travelers and to ensure that their customers are safe; this will ultimately lead to an increase in the number of passengers travelling using their airline and that of LCC. Also by the sharing of the tangible resources there will be a significant reduction of cost which will ensure greater economies of scale in both companies and it will eliminate the need to rely on a third party to keep the companies aircrafts safe and reliable. Qantas also need to ensure that there is route rationalization between it and its LCC. Through rationalization they will be able to eliminate their head to head competition in certain regional routes. Through rationalization of the routes they will eventually avoid the duplication of resources and further lead to a reduction in costs. The careful and considerate implementation of this strategy will help in countering the growing threat been posed by LLCs while at the same time offering the benefits of economies of scope, transfer of some core competencies and sharing of infrastructure across the two companies. This will assist Qantas in creating and sustaining a competitive advantage in the airline industry over its major competitors. References Easdown, G. & O’Brien, S. 2003, “Job Axe Falls at Qantas”, The Herald Sun, April 10, p. 12. Gialloreto, L. 1988, Strategic Airline Management: The Global War Begins, Pitman, London. Johnston, G & Scholes, K 1999, Exploring corporate strategy: text and reading 5th edition, Prentice hall, New Jersey. Qantas 2010, Qantas annual report, Viewed 25th July 2012, Qantas 2011, Qantas annual report, Viewed 25th July 2012, Qantas airways 2010, Fact file, Viewed 25th July 2012, Quiggin, J. 1997, “Evaluating Airline Deregulation in Australia”, The Australian Economic Review, Vol. 30, No. 1, pp. 45-56. Read More