The Performance of Qantas Airline - Case Study Example

Management Report: Name: Unit: University Affiliate: Date Of Submission: Chief Executive Officer Qantas Airline Australia 20th December, 2014 Dear ………. The purpose of this report was to analyze the performance of Qantas Airline using SWOT analysis and porters five forces model in order to establish areas that require improvement. The analysis established that though Qantas remains to be a market leader in Australia, the company has been experiencing a high cost of operations, and there is a threat of stiff competition from low-cost airlines operating in Australia. There is thus need for strategic measures to be taken to ensure that the company remains competitive. The report recommends improvement in technology, investment in corporate social responsibility and human resource as appropriated action measures that need to be taken. Yours sincerely Yours sincerely …………… Introduction Qantas Airline is Australia’s flag carrier and is the second oldest airline in the world. The headquarters of the airline is in Mascot in Sydney (Qantas, 2014). Qantas prides itself with 65% share of the domestic market and 18% of all passengers that are traveling in out of Australia. The airline business in Australia and international marketplace has been experiencing a lot of competition (Qantas, 2014). This report will purposely analyze the position of Qantas in the current competitive airline business. The report will also provide recommendations and strategies that the airline should employ in order to maintain its position. Air transport has become one of the commonly used means of transport in the world. The number of airlines flying local and international routes has grown. Thus as the competition intensifies there is a need for Qantas to devise strategies that will ensure it remain competitive. The report will outline the current situation of the company and carry out a situation analysis of the company using SWOT analysis and porters five model. From SWOT and porters model, the report will recommend new goals and strategies for company and justification for the goals. Qantas Current Situation Qantas is the leading premium rate airline in Australia; the company’s capital expenditure has been very high. In February 2014, Qantas announced $2 billion program for reducing capital expenditure (Qantas, 2014). Qantas exists to provide efficient transport in Australia and outside. The main aim of Qantas is to ensure that the expectations of the customers every time they fly, and thus the airline has continued to invest in areas that ensure that exceptional services are guaranteed to customers. In line with this is the mission statement “‘We remain Australia's leading premium airline, dedicated to remaining the best. Our aim is to meet your expectations anytime time you take a flight, and we continue to invest in our enterprise and strive to offer you an exceptional service level” (Qantas, 2014). SWOT Analysis SWOT analysis entails a structured method that is used to carry out evaluation about strengths, opportunities, threats and weaknesses that a business may be experiencing or a project. SWOT analysis entails identification of the internal and external factors that affect a business either positively or negatively (Menon, 2007). The findings of the SWOT analysis are crucial in devising strategies that aim at improving the business (see attachment I). Strengths Qantas is the second oldest airline in Australia. Qantas boasts of as strong corporate image and has a frequent flyer program; this loyalty program is the largest and has over 6.8 million customers. Due to changing climatic conditions and awareness, many people choose businesses that have aligned themselves to sustainable environmental practices. Qantas airline is actively involved in Corporate Social responsibility (CSR) activity; the company launched Fly Carbon Neutral Program that is aimed at evoking customers to contribute some cash aimed at offsetting flight emissions (Brigden, 2009). Weaknesses Qantas largely relies on the domestic market for much of its customer base. The overdependence of Qantas on the domestic market only places the airline vulnerable to changes in domestic downturns and possible political factors. The increasing cost of operations poses great risk to the company. Opportunities There have been concerted efforts by Australian government to ensure that there are open skies in strategic nations such as UK, New Zealand and USA (Brigden, 2009). This is an opportunity for unrestricted operation capacity. The airline is poised to rip from the growing number of air travelers other regions such as Asia Pacific. For instance, the economic stability enjoyed in Asia Pacific since 2005 presents an enormous opportunity for the firm to grow and tap into the new potential customers (Detaminator, 2009). In addition, technological advancement presents an opportunity for Qantas to improve efficiency and connect to passengers. Threats Qantas faces threat of excessive competition from low-cost airlines that are targeting the Australian domestic market. The global challenge of terrorism has been a great challenge for aviation industries (Detaminator, 2009). Following September 11th, 2000 attacks, there was a marked decrease in air travel. However, this picked after two years though security issue has been a major concern in aviation industry (Coughlin, 2002). This has seen airlines invest more resources and time to security checks that have ended increasing the operation costs. Porter's 5 Force Model Porter’s five forces of discovery are powerful tools a business can use to analyze its situation in terms of strengths and weaknesses (Kotler, Hansen, Goodman, Brandy & Keller, 2009) see attachment II. Supplier power Suppliers are an important component of any business; they are part of micro-environment of the business (Kotler, Hansen, Goodman, Brandy & Keller, 2009). In the Porters case, supplier power is analyzed in terms of the ability to cause price rises (Porter, 2008). According to Porter (2008), the fewer the suppliers, the more likely that they (suppliers) have the power over the business. In the aviation industry, competition is very high and thus forces of demand and supply affect suppliers. For Qantas, the business has low power over suppliers. For instance, emergence of low-cost airlines gives suppliers the ability to choose the airline that gives them the best bargain. Buyer power Buyers are very important for any business. They are the source of revenue and thus losing a buyer is a big blow to a business. In analyzing the power of the buyers, the key factor to consider is how the buyers can dictate the price of a product business is offering. This is analyzed in terms of the cost of the individual buyers switching from the products offered by a business to the competitors’ products. The buyers can dictate upon business that deals with fewer powerful buyers (Porter, 2008). Qantas enjoys a big pool of passengers in Australia who have trusted the airline for the many years and maintained through its loyalty program. However, these passengers are also targeted by other airlines that equally have great travel services. Therefore, Qantas has low power of the passengers as they can easily switch to other airlines. Competitive rivalry This force relies on the number and capability of the competitors. The presence of many competitors that are offering products and services that are attractive and similar gives a business low power. According to Porter (2008), if the business is unique and with few competitors, it enjoys tremendous strength. Qantas faces stiff competition from both domestic and international airlines that target the Australian passenger and have ability to offer attractive packages. Qantas thus has weak power over the competitors. Threat of substitution This force depends on the power of the buyers to find an alternative of the product. Businesses that have easy substitution weaken their power (Porter 2008). Air travel can be provided by other airlines, and there is also a threat from electric train travel. Qantas faces strong threat for substitution if there are no strategies to overcome the possible threat from passengers switching to competitors. Threat of new entry The power of business is affected by the capability of easy entry to the industry by competitors. For the businesses that little time and money are required to enter the market, they have weak power. Pointers to threat of new entry include few economies of scale and lack of protection of the businesses’ technologies (Porter, 2008). Qantas enjoys a big market share in Australia. The aviation travel industry is capital intensive, hence very few players can enter which places the company at a strong position. Recommendation of new goals and strategies Qantas should invest in new technology that is efficient, especially in booking services and security checks. Technology use is advisable as a cost-effective measure for Qantas in reaching its potential customers. The company should also increase its CSR in Australia in order to keep the brand and corporate image. Furthermore, it should invest in more efficient human resource capital in order to assure quality service to its passengers. Justification of new goals and strategies Qantas is the leading premium rate airline in Australia; the company’s capital expenditure has been very high. Qantas in February 2014 announced $2 billion program for reducing capital expenditure (Qantas, 2014). Thus, the use of technology in key areas will be crucial in reducing the cost of operation. Nowadays many companies use CSR to promote brand image (Ghodeswar, 2008). In addition, CSR acts as competitive strategy, thus to maintain customer loyalty Qantas should increase the CSR activities (O’Brien, 2001). According to Armstrong, (2006), in any industry, efficient human resource is crucial in driving performance of an organization and thus Qantas will best be positioned if it invests in high qualified personnel. Tactical plans Investment in technology: Qantas should streamline the advertisement and online booking services. This can be through creation of a social platform where the company can interact with customers and market its packages to the many possible passengers trafficking online sites. This will enable the company to reach more international customers CSR: Most of the Qantas CSR has focused on environmental issues; the company should devise new CSR activities that will ensure that that it asserts its role as a global responsible player in areas of health and education. However, this should be approached in a manner that does not overstretch the operational cost of the airline. Human resource capital: Qantas need to invest in regular training and advancement of its already existing employees in order to align to new industry requirements and technological developments. It should also put in place HRM practices that ensure competitive selection and recruitment process for employees. Conclusion The aviation industry has become very competitive, for airlines to withstand the competition they have to devise strategies that are unique and that guarantee passenger's value for their money. Quality of service has become the main competitive factor with many airlines investing in CSR, employee training and utilizing the new technologies to reduce costs. For Qantas to continue to keep its domestic market share and expand the global market share, it thus needs to improve its service provision and reduce the cost of operations by devising strategic operation measures based on current market forces and projections of the future trends. References Armstrong. M. (2006).Human Resource Management Practice Handbook (10th edition). London: Kogan Page. Brigden, C. (2009). Unions and collective bargaining in 2008, Journal of Industrial Relations 51(3), pp.365-378. Coughlin, C. (2002). Aviation Security and Terrorism. The Economic Issues in Aviation Review 84 (5), pp. 9-16. Datamonitor. (2009). Airline Industry Profile: Asia-Pacific. Asia- Pacific Journal, 1 (2), pp. 13-29. Ghodeswar, M. (2008). Brand identity building in competitive markets: A conceptual model. Journal of Product and Brand Management, 17 (1), pp. 4-12. Kotler, P., Hansen, T., Goodman, M. Brandy, M. & Keller, K. (2009). Marketing Management. London: Pearson Education. Menon, A. (2007). Antecedents and Consequences of Marketing Strategy Making. Journal of Marketing 63 (2), pp. 18–40 O'Brien, D. (2001). Integrating Corporate Social Responsibility with Competitive Strategy. Center for Corporate Citizenship. Porter, M. E. (2008). The five competitive strategies that shape strategy. Harvard Business Review. Qantas. (2014). Qantas Fact File. Retrieved from, http://www.qantas.com.au/travel/airlines/about-qantas/global/en, 21/12/2014. Attachments Attachment I: SWOT Analysis applied to Qantas Attachment II: Competitive 5-Forces, applied to Qantas Read More