Mission, External Environment, Internal Capabilities and Competencies of the Qantas Group - Case Study Example

Case Study Analysis: The Qantas Group Name Professor Institution Course Date Case Study Analysis: The Qantas Group Introduction This case study is documented to analyze the mission, external environment, internal capabilities and competencies, competitive advantages, and strategic policies and actions of Qantas Group. The case will also discuss reasons for not supporting some or all Qantas' current strategic and provide recommendations two key recommendations for Qantas' executive leadership group. Qantas is an Australian national airline established in 1920 (Qantas 2014). According to Tay (2013), the Airline Company is ranked as the largest in Australia with a market share of 65% in the domestic market and 18. 8% of travelers traveling outside Australia. In 1935, the company started its international services and has since grown in the number of destinations to 65 local and 28 international destinations. Over the years, the company has faced very stiff competition from other established domestic and international airlines such as Virgin Australia, Virgin Blue, JetStar Airways, Singapore Airlines, Singapore Airlines, Etihad airlines, Air New Zealand and Emirates among others (Fickling & Wang 2012). The company has been forced to rethink its strategy so as to sustain change. In 2011, Qantas Airlines therefore announced that it would conduct key structural changes owing to its financial losses and the declining share of the market. The company mission The company mission is actually in line with the structural changes and objectives. According to Qantas website (2014) the mission states that ‘Qantas is the largest premium airline in Australia and are committed to be the best. The mission continues to say that the aim of the company is to meet customers’ expectations whenever they fly and therefore they often invest in their business and always endeavor to offer customers with an excellent services’. This can primarily be summarized as fulfilling shareholder’s value. This mission statement will guide the company’s expands into the Asian market. In a bid to fulfill this mission, the company has outlined various strategic objectives, including restructuring its businesses, put in place cost reductions and efficiency measures, effective financial management, global outsourcing, job cutting and expanding strategic alliances staring with Emirates Airlines (Mules 2013, p.3). Business restructuring would entail separating of the domestic and international management arms of Qantas Airlines External environment Qantas Airline’s capability to continue staying as one of the stronger brands in Airline industry can be attributed to its competence and quality status which comes from the internal environment (Crain 2009, p.33). This involves the company’s strategic objectives and goals which can be realized through its competency. These objectives, however must be very dynamic to sustain external environmental forces which include Political, Economical, Social, Technological, Environmental and Legal (PESTLE). Political IBISWorld (2014) claims that as a national airline, the Qantas on different occasions received political patronage to gain competitive advantage. Over the years, the government of Australia has been dedicated to taking measures that endeavors to assist Qantas to survive the difficult economic times. For instance, for two decades, the government of Australia liberalized the airline industry with focus on state subsidies and tax reduction (IBISWorld 2014). Additionally, The Economic Times (2008) contends that the government entered into an agreement with US government to remove the trade restrictions on the Open Skies airline between the two nations. Economic Qantas Airline Company was certainly affected by the global economic downtown of 2008. A study carried out by the global Air Transport Association shows travelers using both business and first class declined by almost 20% in 2010 in comparison to that of the previous year (Superbrands Australia 2014). In addition, the ever increasing prices of oil also put a negative effect on the aviation sector. Kiechel (2010) contends that due to such conditions prevailing in the market, many airline companies sought for non-monetary methods of benefiting like hedging or joining airline company alliance or partnerships to increase buying power of fuel. Technology The increased growth of airlines was facilitated by the advancement and innovation of in aircraft production. Advancement of technology has also been embraced in fleet manufacturing, and it has ensured quality and long lasting aircraft are made by the two largest manufacturers, Boeing and Airbus. Mules (2013, p.4) claims that today the company owns technologically made fleets, A380 and B737, and even consider refurbishing them before the end of 2014. They are also planning to build the biggest combined fleet A380 in the world. Murph (2010, p.6) holds that internet advancement has enabled many airlines companies utilize such platform to keep a high level of customer focus via user-friendly sites having improved booking procedures. Qantas is one companies with user-friendly site integrated with booking platform for its customers to make reservations. The company uses both the Website and the social media such as Facebook and Twitter to inform their existing customers about their routes and also to attract new customers (Biddle et. al 2011). Other technologies that the company has adopted to manage traffic flow around terminal area (include Departure Manager System and Arrivals Management System (Murph 2010, p.7). Social The airline sector indisputably impacts the everyday life of Australian citizens because of improving trade and tourism (Tay 2013). Therefore, it forms an integral part sector of the economy. On the other hand, the company also depends on disposable of the people, since the airline is a luxury product. However, economic difficulties have resulted declining in the number of people hence affecting operations (Creedy 2009) Environmental Vaughan (2009) posits the airline sector discharges 1.4 tons of carbon II oxide annually from combustion of the fossil fuels. Such conditions results to severe environmental concerns such as air pollution, habitat destruction, ocean acidification and global warning. Due to problems brought as a result of climate change, governments have enforced various policies to ensure airline be in the frontline in environment protection. Vaughan (2009) went ahead to say that Airservices Australia has been set up by the government to offer environmentally-friendly and safe management of airline traffic. In 2013, Civil Aviation Safety Authority enforced a policy on carbon tax, which will make sure airline companies reduce carbon emission into the atmosphere (The Australian 2014). Legal Government laws and regulations normally affect airline companies operations directly. Fiscal regulations like more taxes on tickets raise ticket prices, hence affecting demand. Qantas may experience such changes in international markets; in domestic level the company in most cases gets political patronages like state subsidies and tax reduction (IBISWorld 2014). Other regulations that might affect the operations is that the government control the ownership of Qantas Airline Company. According to Australian Government (2014), the Government has imposed 49% of local-ownership on Qantas Airline to make sure it remains a government carrier and enjoys incentives and the bilateral agreements Internal capabilities and competencies Over the years, Qantas has depended on its internal capabilities, strengths and competencies to be the market leader in Australian Airline market. Some of core competence and capabilities include human resource, strength of the brand, information technology, government support and strong financial base. Qantas considers quality staffs as an important asset to their business (Crain 2009, p.36). From the time of its establishment, the company has been hiring qualified staff through its comprehensive recruitment and selection exercise. In 2013, it was estimated that Qantas had 33,265 employees (Qantas 2014). The company has also created a strong and professional relationship with their employees to ensure that that deliver positively to the performance of the company. The company trains its workforce to make them be updated on current business changes and be active in that change process. Mules (2013, p.3) pines that with increase in the cost of operation and declining profits, the company is now involved in job cutting to streamline its workforce, reduced job duplication, reduce cost of operation and increase efficiency. Qantas is regarded as a strong brand both in Australia and worldwide. Its strength has been contributed by its outstanding marketing and customer’s loyalty program, QANTAS Freight and partnership with Jetstar and Emirates Airlines (Mules 2013, p.2). The company is known for its high quality of services. Qantas owns new fleets of flights Airbus A380 and Boeing 737. Qantas (2014) claims that these aircrafts are installed with entertainment systems in all first class cabins. The company also competes in terms of information technology. Qantas has application programs dubbed ("apps") for iOS, Android and Windows Phone which its customers owing Smartphones can use to get into the internet (Murph 2010, p.6). Similarly, Qantas has adopted technology platforms which enable its customers to book flights. This ensures that its customers do not have to come to the airport or booking offices to book flights. Skelly (2013) claims that the implemented technology offers mobile check-in passes to which connects with Passbook, airport lounges information, fare alerts, and lives updates about flight. These quality services have enabled the company increase its customer quite often. This is manifested domestic and international performance in 2012 where both the Qantas and Jetstar performed strongly, and registered $600m profit (Qantas 2014). However, with increase in competition, Qantas must move with speed with planned structural changes. Strategic actions After two years of dismal performances particularly in 2009 and 2010, Qantas management devised new strategies in 2011 to attract customers and increase profits. As stated earlier, some of the proposed strategies include increasing capacity and reduce operation costs, improve the selected markets, cut jobs, create strategic partnerships, enhance ancillary revenues, provide better services for business and corporation travelers, differentiation and better positioning (Mules 2013, p.3). To increase its marketing, Qantas Airlines signed an agreement with the Emirates Airlines. The strategic partnership was also meant to combine forces to enhance coverage of the two airlines. Fickling & Wang (2012) argue that in this context, Qantas would increase its flying destinations to North Africa and Middle East. Both as strong brands, Qantas-Emirates partnership would ensure competitive positioning, global brand improvement and continuation of dominance of Australia and Dubai markets (Mules 2013, p.3). Another strategic action which may prove to be good in the long is expanding to Asian market. Despites increasing competition from the market, Asian economy has grown tremendously and some country such as Saudi Arabia, Qatar, Singapore, China and UAE among others now have greater disposable income which increases the opportunity for air travel (Fickling & Wang 2012). Key recommendation and conclusion Lowering cost of operations In the recent years, the company has incurred a high cost of operations due to increasing fuel prices, less demand for air travels and several employees hence high wage bills. As such, the company has embarked on cutting jobs to reduce. However, this is not enough because it continues to buy large and fuel consuming aircrafts. Therefore, it will only prudent to reduce fuel consumption through a decreasing number of times the company is using its aircrafts from 13 to10 hours a day. Global outsourcing As part of its restructuring, Qantas Airline proposes to outsource some of its products or services to global companies. Qantas progressively shut down its maintenance plant in Brisbane to outsource such services. While the company may look at it as a strategic move, but many experts disagree with this move claiming it will lead to loss of business knowledge. The company is closing its maintenance services while lay-off its workers including engineers. The plan will make Company lose business knowledge they had invested in engineers during training. Increasing profits through profits through ancillary revenues In the recent years, Qantas profits have declined greatly, making the management look for ways to cot operation cost. While at it, they can use ancillary revenue to increase profits. The company can come up with creative ways such as checked in baggage fees, where they charged passengers for the seats with additional legroom on the long haul aircraft. A cashless cabin can also be introduced where customers use debit or credit cards to purchase meals in the flights Conclusion From the research, it is evident that JetBlue and other companies facing many challenges each and every single day of their operations. Fuel prices are increasing, competition is growing and operational costs are getting high. The company has put in place various changes that they would progressively make as they continue to maintain their dominance of an Australian Airline industry. However, management experts believe that some of the strategies are not viable, such as reducing cost of operation while still buying large and fuel-consuming aircrafts, and global outsourcing. Hence, the case study concludes that the company must review its proposed changes and adopt the recommendations made in this case study. 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