The Qantas Group - Issues in the Industry and the Competitor Environment - Case Study Example

Case study analysis – The Qantas Group Name Institution Course Instructor Date Case study analysis – The Qantas Group Introduction Strategic management usually comprises of the plans, actions and decisions a company implements to make sure that they remain competitive in the world market. Qantas is one such group that is trying to maintain an aggressive attitude in the highly competitive airline industry. Every business organization must have its business strategic goals set towards achieving the required advantages over their rivals. Strategic goals are usually set not to compete with others but the goals are there to ensure that the advantages that will make the company shine are achieved (Homsombat, Lei & Fu, 2014, p. 9). If competition is exhibited towards achieving the goals, it is very likely that the strategic goals will not be sustained over a period of time. The general environment is usually a combination of both internal and external environment. All these factors do matter a lot in the prosperity of any business. The airline industry is a very competitive area and competitors require well laid out strategies to outdo the other. No airline company can continuously maintain the top spot of wrecking in higher revenues for a continued period of time. The general environment for the airline industry is a mixture of both internal and external factors. Most uncontrollable external factors do affect a lot the operation of the airlines. Among the general issues, environmental factors do play a greater role. Earthquakes do affect the flight of aircrafts while the ash from volcanic eruptions like the one experienced in Iceland do cause many flights to be cancelled therefore affecting normal businesses at the airports. Among the general factors that do affect the Qantas group and other airlines is oil supply. Oil is a natural product and its supply does dwindle based on the natural exploitation in combination with world geopolitics. The world population also does play part in the success or failure of the airline industry. In the current world, if the airline industry has to succeed it has to create more destinations to the well populated countries like china India (Small, Harris & Wilson, 2008, p. 36). These are issues in the general environment that do affect every player in the airline industry and how one manages them determines the level of success. Qantas group is one of the major players in the industry is affected by the above mentioned factors. Issues in the industry and the competitor environment Issues in the airline industry as mentioned above do begin with demographic factors. As already reviewed, the demographic factors which are mainly geological are beyond human control and they generally affect every airline including the quanta’s group. Oil which is a natural product does fluctuate on its availability causing the rising and falling of its prices. The unstable oil prices do play a major role in determining how much the passengers should pay in order for the company to benefit (Daft & Albers, 2013, p. 50). Apart from the demographic issues in the airline industry, another key factor is the fierce competition that is being witnessed. Competition in the airline industry can be in two categories. The first category is the competition from other airline companies both domestically and internationally. The second category can be the fact that newer and alternative sources of transport are available. They include the bullet trains which people prefer more than airplanes. However, the competition from other sources like bullet trains can affect everyone and not specifically the Qantas group. Competition from other airlines has to be the main obstacle that highly affects the operations of Qantas airlines. The competition in the airline industry is only based on a limited number of areas. The prices do play a greater role in determining who emerges the victor (Merkert & Morrell, 2012, p. 859). Apart from prices, services offered to passengers or in other terms the customer care services do matter a lot. Qantas is facing a lot of competition from other well established airlines in the industry. To manoeuvre through the highly competitive market, Qantas developed a number of strategies to help the company stay competitive. The strategy of the company was to offer slightly cheaper ticket prices compared to its other close competitors on the domestic front. The plan worked but not that effectively. The market share of Qantas in the domestic scene was reduced to 60 percent. Tactics employed by competitors are different. The strategy of therefore reducing prices by Quanta was not a bad strategy (Park, Robertson & Wu, 2009, p. 449). That has always been the stand of the company. From a business perspective, the move was relevant if Qantas needed and still needs to remain a major player in the field. However, gambling with low prices to woe customers may also be risky considering the fluctuating world oil prices. To make sure that kind of incidence does not happen to Qantas, the group has taken the precaution of ordering modern built airplanes that do not consume a lot of fuel and are environmentally friendly. A good example is the airbus 380 that can carry five hundred and fifty passengers over a distance of ten thousand kilometres. The factor of operating with up to date airplanes is working for Qantas internationally. In the domestic scene, low prices remain an obstacle to pass. This is because in the domestic market, new boys are entering with low prices compared to the Qantas one (Jiang, 2013, p. 21). In a nutshell, according to the current status of Qantas, the strategic step taken to operate under low prices has enabled it to stay competitive. Issues in the internal environment The strategic management of a company requires shedding light on both internal and external factors. Through examining the external environment, the company determines what they might do to conquer the threats. However, understanding the internal environment helps the company to know what they can do. Qantas are using their internal environment effectively to make sure that they have an advantage over the other competitors. The internal environment is made up of various factors which include resources, capabilities and competences (Hong & Zhang, 2010, p. 147). Resources are the assets that the firm owns. Qantas has a variety of resources ranging from assets to human resource. The resources that Qantas has can be divided in to two categories, tangible and intangible resources. Both resources are of great importance in determining the capabilities of a company. The tangible resources include physical, technological and financial resources. Qantas group is well equipped in terms of tangible resources. Other airlines in the industry have been shut down due to lack physical assets like modern air carriers. Qantas airline group is well managed and they give a lot of emphasis in trying to maintain the company’s brand. Qantas has been known to keep up with the latest technology in the industry. They own a fleet of strong machines that are well built and require less service maintenance. This reduces the cost required to maintain their aircrafts. The second benefit of having quality aircrafts is that they attract loyal customers. Without loyal customers in the airline industry, one is very likely to be thrown out of the business. The level of competition is very high and the physical resources do matter a lot. Technologically, quanta’s group has tried to enhance its systems. The technology used to check in passengers in the airline has been enhancing to eliminate the current world terrorists threats. In terms of financial resources, Qantas has shown its ability to generate funds internally. They also have a policy of low borrowing capacity. On the organization department, Qantas has always adopted the integrated system of management. Through this system, the company has a formal system of planning and coordinating the planned systems (Nair, Palacios Fernández & Ruiz Lopez, 2011, p. 51). Apart from the physical resources that Qantas successfully has, the group has also tried to balance the human resources to achieve the brand of the company. Qantas has invested heavily on finding capable human resource. Qantas uses effective and innovative human resource powers to make sure that the company remains effective and stays on course to achieving its stated goals. The human resource sector is limited to a few individuals who are paid well thus ensuring that service delivery is also of high standards. The use of effective and innovative human resource has great benefits to Qantas. The first benefit is that they are always innovative trying to propel the company forward. Motivated employees also tend to stay long in the company and Qantas ensures that by empowering their human resource department. Different airlines especially the small companies do not treat their employees well as they pay them peanuts. This is the reason for their poor performance and failure to improve in the industry. Qantas capitalizes on that by ensuring that their human resource is well managed to ensure that they stay motivated and perform their duties well (López-Bonilla & López-Bonilla, 2013, p. 205). So far from examining Qantas internal and external environment, we can conclude that the strategy taken by the company is the cost effective leadership domestically. Through cost effective leadership, the company is able to operate under low prices to maximize on the profits made on the domestic front. On the international face, due to the level of competition that is witnessed there, the company cannot afford operating under low prices (Albers, Heuermann & Koch, 2010, p. 245). One of the company weaknesses has been an issue on high prices that they set. The strategy of operating under high prices internationally is effective considering that service delivery is good and the brand is performing well. Setting low prices can easily compel Qantas in to bankruptcy. It is therefore important to concentrate on service delivery while operating under normal prices. Most researchers argue that the intangible resources are superior compared to the physical resources in determining the success of a company. However, on most occasions, the two factors go hand in hand. The case analysis extract of Qantas indicates that the company has been trying its best to promote the human service resource. Corporate strategies To survive in the airline industry, Qantas requires more than one strategy to compete both internationally and domestically. The approach on the domestic front are different with the international approach however, there are some other factors that are common for both scenes. Qantas as analyzed in the case study has been using different strategies to try and stay competitive in the fierce market. Initially, the airline company had decided to go with cost effective leadership on the international and domestic fronts. However, a case study presented through analysis of the Kmart incidence, it became apparent that the strategy was not going to work. Kmart attempted to set low prices to compete with Walmart and they declared bankrupt later. The same was likely to happen to Qantas if they had not blended to other strategies. Operating under low costs does not fully cover risks associated to the always fluctuating fuel prices. A company can be grounded due to that. To be safe on the international scene, Qantas has decided to operate under high prices (Barbot, Costa & Sochirca, 2008, p. 272). Other competitors in the industry are operating under the same prices but what attract customers are the other strategies initiated by individual companies. Qantas has decided to concentrate on developing its brand and improving on service delivery. These are most important factors that do determine customer loyalty (Chapple, Moerman & Rudkin, 2010, p. 130). One of the Qantas strongholds is the area of customer loyalty. They are able to do this because they have strategically worked to achieving that. The company has superior general and specific customer services that work hand in hand with the latest technology. The general approach by Qantas is based on ensuring service delivery while ensuring that the targeted objectives are achieved. The safety record of the company is on the record high. Little accidents have happened while also little security issues have been raised in heir facilities. This is simply because of the technologic investment that the company has made. Through acquiring advanced aircrafts, less breakdowns are witnessed thus ensuring the safety of passengers. The general business strategy of Qantas is reducing the total operational costs to maximize on their net profits. Qantas has been operating under different cooperative strategies to sustain itself in the airline industry. Qantas as mentioned above has formed various ventures with other companies for the mutual benefit of reducing the operational costs. The joint venture is formed between Qantas and Emirates Company including other airlines from different continents. The joint venture ensures that companies can share departure lounges, flyer points and ticket bookings. Qantas also formed a merger with British Airways to counter the international competition they were facing. British Airways had share holdings in Qantas but in the year 2009 they sold 25% of their holdings (Gillen & Gados, 2008, p. 30). Qantas have however announced a ten year old merger plan with Emirates. The mergers are formed by Qantas to have a share in the internationally competitive market (Amankwah‐Amoah & Debrah, 2011, p. 41). Recommendations Qantas have been analyzed to be performing poorly internationally and have high ticket prices. Apart from those issues, they also have poor human resource management practices with a lot of worker strikes being witnessed recently. The company requires developing a stronger system of human resource management to ensure that their employees do not defect to their competitors. In terms of remaining competitive in the international scene, the company requires t continue forming alliances while maintain their superb service delivery. Qantas should also be consistent in serving the Asian market despite the stiff competition witnessed in the area (Reeves & Deimler, 2009, p. 13). References Albers, S, Heuermann, C & Koch, B 2010, “Internationalization strategies of EU and Asia–Pacific low fare airlines,” Journal of Air Transport Management, vol. 16, no. 5, pp. 244-250. Amankwah‐Amoah, J & Debrah, YA 2011, “The evolution of alliances in the global airline industry: A review of the African experience,” Thunderbird International Business Review, vol. 53, no. 1, pp. 37-50. Barbot, C, Costa, Á & Sochirca, E 2008, “Airlines performance in the new market context: a comparative productivity and efficiency analysis,” Journal of Air Transport Management, vol. 14, no. 5, pp. 270-274. Chapple, S, Moerman, L & Rudkin, K 2010, “IFRIC 13: accounting for “customer loyalty programmes,” Accounting Research Journal, vol. 23, no. 2, pp. 124-145. 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