Strategic Management and Theory to Analyse - Case Study Example

Strategic Management Literature –Qantas Group Name: Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 4 2.0 Industry and Competitor Analysis 4 2.1 Suppliers Bargaining Power 4 2.2 Buyers Bargaining Power 5 2.3 Industry Competition 5 2.4 Threat of New Competitors 5 2.5 Threat of Substitutes 6 3.0 Internal environment Analysis 6 3.1 Strength 6 3.2 Weakness 7 3.3 Threats 7 3.4 Opportunities 8 4.0 Corporate Strategies Review 8 4.1 Diversification 8 4.2 Strategic Alliances 9 4.3 Outsourcing 10 5.0 Recommendations 11 5.1 Employee Involvement 11 5.2 Equity Strategic Alliances 11 References 13 1.0 Introduction Globalization has had a series of implications on the global market. In this case, the changes have over the years implicated and changed the overall market operations not only in the global platform but also in the local and domestic markets. One of the most affected industries after the technology industry is the aviation industry. In this regard, global market changes have resulted to changing competition levels as well as competitive edges sustainability changes in the global market. This evaluation focuses on the Qantas Airline, an Australian airline previously government owned to be privatized in the latter years in 1993. As such the review focuses on the internal and external industry environments, the applied corporate strategies as well as potential improvement recommendations. 2.0 Industry and Competitor Analysis An evaluation of the Aviation industry reveals drastically changing factors in the market. In order to sufficiently address this aspect, this evaluation applies the porters’ five forces model. The model, as Evans and Neu (2008, p.137) argued enhances the development of an elaborate industry audit. 2.1 Suppliers Bargaining Power An evaluation of the aviation industry suppliers reveals that there exist two suppliers namely the Boeing and Airbus Company respectively. Therefore, due to their reduced number as well as the high costs of adopting modern technology in the market increases their overall competitiveness and bargain in the market. Therefore, the two suppliers have increased control in the market thus have the sole power and ability to regulate the respective prices. 2.2 Buyers Bargaining Power The industry buyers comprise the consumers who use the aviation industry services right from the flight services to parking and among others in the market. In this case, as evidenced by Mules (2013, p.2), the demographic population structure is changing. Although markets in the USA and western European nations are declining, emerging markets in the Asian and the African markets present viable alternatives. However, due to the large number of international airlines, the buyers have a wide range of choices of transportation services, therefore they have a high bargaining power and to attract them the organisations must develop unique services portfolio and marketing strategies. 2.3 Industry Competition The Aviation industry, as one of the most prestigious organizations across the globe has attracted a wide range of competition. This can be evidenced by the airlines presence both in the international market as well as in the domestic Australian market. On one hand, the international market is characterized by other players such as Emirates, British airways and Singapore Airlines among others. Moreover, Qantas Competition in the local Australian market is mainly from the Virgin Australia airways that offer low cost services in the market. 2.4 Threat of New Competitors The aviation industry is characterized by the presence of high investment needs. In this regard, changing technology in the global market has revolutionized the industry creating increased need to purchase modern day equipments. Therefore, as Coelli, Perelman and Romano (1999, p.255) argued, high operational costs in hi industry reduces the possibility on increased investment. As Peoples (2014, p.297) stated, the existing competitors enjoy economies of scale, a virtue hard to acquire for the new investors in the market. 2.5 Threat of Substitutes One of the looming industry challenges is the increased challenge is fuel use and consumption. In this case, a major threat to the dominant industry suppliers namely Air Bus and Boeing is the possibility of the emergence of airplanes with alternative fuel usage consumption such as the renewable fuel use. Such a development would negate and lender their current technology developments redundant in the aviation industry. 3.0 Internal environment Analysis An internal industry analysis on Qantas Airline involves the evaluation of the organizational internal systems and how the systems interrelate and function to enhance its overall and eventual performance and success in the Aviation industry. In this regard, as Liu, Xu and Zhang (2010, p.228) recommended, in the evaluation of an organizational internal environment, the strength, weakness, opportunities and threats (SWOT) analysis approach is imperative. 3.1 Strength The Qantas Airline Company has developed and established a reputation in the global market through its brand image. In this case, among other strategic competitive edges, the organization has established a competitive edge in that its brand image and reputation is hard to emulate by the competitors. Moreover, the organizational high investments in the acquisition of modern aircrafts serve as its additional operational merit. In this case, as Hanson (2014, p.446) argued, that the organization has increased its investment in acquiring aircrafts to increase not only customer service and satisfaction but also increase profit margins through reduces fuel consumption by the carriers. 3.2 Weakness Despite its merits and key strengths in the Aviation industry, Qantas Company has a series of weaknesses in its operational and execution model. One of the key organizational weaknesses includes the high organizational operational costs as compared to peers such as the local competitor Virgin Australia Airlines. In this regard, the high organizational operational costs lead to substantially high price that offers the competitors an added market advantage. In addition, the organization is faced with an operational weakness in the presence of few international destinations it covers. Therefore, such few destinations as compared to its international peers offer the competitors an added advantage in terms of the economies of scale in the market. 3.3 Threats The external aviation industry structure is changing and shifting through increased globalization. As such, a number o the industry changes as well as expected future changes will implicate on the organization. One of the changing trends is increasing oil prices. In this case, increased fuel prices imply increased operational costs. Thus, this will require the organisations in the aviation industry to increase their overall services provision costs a virtue in contrast with the current costs regulation and reduction trends. Moreover, emerging Middle East aviation industry and the local population and support base will pose a major threat to the existing airlines in the market through increased price competitions likely to increase their overall losses in the long run. 3.4 Opportunities One of the strategic industry merits and especially for the Qantas airline is the stabilizing and increasing. In this regard, the stabilizing dollar values, ensure that the cost of travelling for the Australian travellers overseas. In this regard, there is bound to be increased overseas travelling as well as domestic industry rise. This will in turn enhance the organizational success into the future based on the fact that it has a superiority and market share control in the local Australian aviation industry. 4.0 Corporate Strategies Review Qantas Airline has over the years develops and applies a series of strategic corporate strategies that have led to its current market position. While as some of the corporate strategies led to its eventual market success, such as its 2008 ranking as the third best international airline, others led to its market failure and its eventual decline from the third to 15 positions in the global airlines ranking. This evaluation focuses on the respective corporate strategies in order to establish their strengths and weaknesses. 4.1 Diversification One of the strategic approaches adopted by Qantas airline is diversification. In this regard, the organization has diversified its operations across the globe. On one hand, diversification is evidenced in the establishment of the Jester Company to focus on providing low-cost air travel services in the domestic Australian aviation industry. This diversification enhanced the organizational market presence. In this case, it captured both the high end and low end market consumer segments thus an explanation to its current Australian domestic market dominance and sustainable competitive edges over competitors such as Virgin Australia airlines. This concept can be explained by a theoretical argument developed by (Hoskisson and Hoskisson, 2008, p.230). In this regard, the author argued on the merits of organizational market diversification, arguing that it increased market control. To this effect, Herrmann (2002, p.283) conducted a study evaluating the implications of diversification. Focusing on the manufacturing industry, the evaluation established that through increased product diversification, organizational revenues were increased. This increment can be explained through two approaches. On one hand, this can be argued as an outcome of increased revenues streams to an organization through increased product and service portfolios. Moreover, this can be explained as a result of decentralized and de-concentrated competition to organizational products. Therefore, based on the above theoretical review, it is apparent that the organizational approach to focus on both market ends in the Australian market has earned it increased success. Moreover, besides focusing on the European markets, the organization has sought to diversify its destination markets in the region through increased destinations as an approach to expand its overall customer base. 4.2 Strategic Alliances An alternative approach adopted by the Qantas Company is through strategic alliances. Its first strategic alliance was developed in 1998 under the one world alliance in alliance with other global stakeholders such as the American airlines, British airlines as well as the Canadian airlines among others. Though this alliance, the organization increased its overall market influence and control in the long run. In this case, the organisations agreed to share traveller lounges as well as other relevant services and facilities supporting the airlines operations. Moreover, a recent development in its strategic alliances development approach was through its alliance with the Emirates Airlines a regional leader in the Middle East and Asian markets. Through this alliance, the organization acquired increased consumer services such as frequent travels to the Middle East as well as increased lounges access in the market. Strategic alliances are categorized as a modern day approach through which organisations can venture into new global markets. Smith (2003, p.264) in a case study of the European airspace argued on the merits of strategic alliances as approaches to increased market expansion and market success. In this case, the authors argued that through increased alliances, organizations acquired increase competitive edges through the sharing of services and products they lack the technique and capacity to individually own. However, as Kamel (2006, p.18) argued, the increased interdependence created by strategic alliances exposes organisations to increased failure and eventual market collapse in the event that one of the strategic partners fails to execute their duties and responsibilities as expected. 4.3 Outsourcing One of the strategic approaches adopted by the current Qantas Airline CEO is outsourcing. Through this approach, the organization resulted to increases sourcing of services considered noncore to its operations. Consequently, this has led to reduced operational costs for the airline. However, the strategy application has faced numerous and increased operational challenges from the contenders of the process. In this case, the resultant downsizing and the expected increased employee retrenchment by the organization continues to raise a strategic operational challenge. This is especially form the employee unions that perceive and fight on a strategy to ensure that despite the adopted route to reduce on the overall production costs, also retain an emphasis on the argument to retain the current organizational employees workforce in the long run. Therefore, this evidences that despite the merits accrued form the application of this strategy to the Qantas airline profit margins, it remains unsustainable on the HR motivational aspects in the organization. 5.0 Recommendations Based on the above industry, internal and corporate analysis of the Qantas airline Company it is apparent that changing structures necessitate structural and strategic changes in the market. Therefore, this evaluation section develops two strategic recommendations for improving the organizational performance in the market 5.1 Employee Involvement One of the identified weaknesses by the organizational strategic management is low employee involvement. As such, this can be classified and categorized as the approach and instance through which the employees are directly involved in the development of the strategic organizational plans. Through this approach, it would increase the overall employee motivation and corporation in the organisations. Gagnon, Lamothe, Fortin and Cloutier (2005, p.35) argued that increased employee resistance and eventual decline on motivation has risk of declining organizational productivity. Therefore, in order to avert some of the experienced organizational challenges as evidenced in its current situation, the management should seek approaches to incorporate employees in the decision making process. 5.2 Equity Strategic Alliances Strategic alliances as Kuglin and Hook (2002, p.24) discussed have various categories. An evaluation of the organizational strategic alliances evidences the fact that it has developed technical support partnerships. However, none of the alliances is based on equity. Therefore, this evaluation recommends that the organization should consider establishing equity alliances. Through such an alliance, it would acquire enough operational funds to mitigate against the challenge of increased downsizing as well as retrenchment of the employees. This would in turn promote employee motivation, corporation and eventually long term productivity and market success. References Coelli, T., Perelman, S. & Romano, E. 1999, "Accounting for environmental influences in stochastic frontier models: With application to international airlines", Journal of Productivity Analysis, vol. 11, no. 3, pp. 251-273. Evans, G.E. & Neu, C. 2008, "The Use of Strategic Forces to Understand Competitive Advantages Provided by Information Technology", Journal of International Technology and Information Management, vol. 17, no. 2, pp. 137-III. Gagnon, M., Lamothe, L., Fortin, J.,& Cloutier, 2005, "Telehealth adoption in hospitals: an organizational perspective", Journal of Health Organization and Management, vol. 19, no. 1, pp. 32-56. Hanson, D., 2014, Case 5: The Qantas Group in the Global and Domestic Airline Industries in the Late 2012, University of Tasmania Herrmann, P. 2002, "The Influence of CEO Characteristics on the International Diversification of Manufacturing Firms: An Empirical Study in the United States", International Journal of Management, vol. 19, no. 2, pp. 279-289. Hoskisson, R. E., & Hoskisson, R. E., 2008, Competing for advantage. Mason, OH: Thomson/South-Western. Kamel, M. 2006, "Collaboration for Innovation in Closed System Industries: The Case of the Aviation Industry", Engineering Management Journal, vol. 18, no. 4, pp. 16-22. Kuglin, F. A., & Hook, J., 2002, Building, leading, and managing strategic alliances: How to work effectively and profitably with partner companies, AMACOM New York. Liu, Y., Xu, C. & Zhang, Y. 2010, "An Analysis on the International Competitiveness of China's Traditional Medicine Industry Based on the SWOT Model", International Journal of Business and Management, vol. 5, no. 7, pp. 225-229. Mules, R., 2013, The Long Haul: The Qantas – Emirates Alliance, Busidate, vol. 21, no. 3, pp. 1-9 Peoples, J., 2014, The economics of international airline transport, Emerald, Bingley, U.K. Smith, D.J. 2003, "Strategic alliances and competitive strategies in the European aerospace industry: The case of BMW Rolls-Royce GmbH", European Business Review, vol. 15, no. 4, pp. 262-276. Read More