Qatar Airways Company - Strategic Retail Plan - Case Study Example

RUNNING HEAD: STRATEGIC RETAIL PLAN – QATAR AIRWAYS Qatar Airways - Strategic Retail Plan Insert Name Institution Tutor 24th March 2012 Table of Contents 1. Introduction………………………………………………………………………………3 2. Qatar Airways Background………………………………………………………………4 3. Situation Audit…………………………………………………………………………...6 3.1 SWOT Analysis……………………………………………………………………....6 3.2 Strengths……………………………………………………………………………...6 3.3 Weaknesses…………………………………………………………………………..7 3.4 Opportunities…………………………………………………………………………7 3.5 Threats……………………………………………………………………………….9 3.6 Market Factors………………………………………………………………………10 3.7 Competitive Factors…………………………………………………………………12 3.8 Environmental factors……………………………………………………………….14 4. Specific Objectives……………………………………………………………………….15 5. Retail Mix……………………………………………………………………..…………16 6. Evaluation of Performance……………………………………………………………….16 7. References………………………………………………………………………………...18 Qatar Airways Company - Strategic Retail Plan Introduction Lewison (1994, p 694) defines a strategic retail plan as an impressive design or blueprint for ensuring success in all of the organization’s business endeavors. A strategic retail plan aims at realizing a strategic fit between the capabilities of the retailer and the environmental opportunities in the present and in the future. Competitive advantage is sustained by a retailer who has achieved a good fit result. This paper aims at outlining a strategic retail plan with regard to Qatar Airways, a retail company with continental presence in Asia. The strategic retail plan would help the company in forecasting on how to increase revenues, profits and enjoy the economies of scale. Every retail company that wants to remain relevant in any competitive industry it needs to carry out an industry and market analysis. Understanding the market is the cornerstone for a company to enjoy competitive advantage. Strategic planning touches on customers, competencies, and competitors. Consequently, the strategic retail plan for Qatar Airways will be based on customer needs, the firm’s capabilities and the competitive environment respectively as argued by Doganis, (2002). A good strategic retail plan will help in carrying out an effective strategic analysis. Strategic retail planning is a process through which Qatar Airways goal of consolidating its market share in Asia is enhanced. The strategic retail plan would help the airline in making long term decision by forecasting its worth in the future. In preparing a strategic plan, tools such as the SWOT and PEST analysis are of immense importance. These tools scrutinize the customers (markets), technology, suppliers markets, labor market, competition, economy and the regulatory environment (Porter, 2008). Markets are analyzed by carrying out a market research while the competitive environment is evaluated using Michael porter’s generic forces. The retail airline industry in Qatar will be analyzed using the industry forces or the barriers to entry forces. Qatar Airways - Company Background Qatar Airways Company is an international airline registered and based in Qatar, offering scheduled cargo and passenger services to over 100 destinations around the world. The mission statement of the airline is “Excellence in everything that we do.” The company has put several measures in place in order to achieve the goals of its mission statement. To achieve the mission statement, Qatar Airways does the following; (1) Puts safety first with the highest standards of safety and security (2) Customer focus—providing genuine service and hospitality, a service that is personalized to each passenger’s needs (3) Commitment to people—employing a dedicated staff, providing them with support and training. (4) Cultural awareness, providing the values and hospitality of Qatar, but understanding and caring for people from all cultures and background. (5) Keeping the company financially strong, with aggressive growth to continue to provide excellence in service. (Qatarairways.com) A Qatar Airways Airbus A320-200 (Source: Wiki) Qatar Airways Company was formed by Qantas airline as part of its strategic management. There were several reasons why the company was formed. One reason is to offer affordable tickets. To top up on this, passengers who travel light pay lower tickets than those who do not have check in luggage. The travel light is currently set to be about ten kilograms. The other reason why jet star was created was to enjoy the economies of scale by being cost leader. Economies of scale mean that the production cost per unit is less compared with the output. The costs are minimized by offering one class of travel, reducing the luggage allowance, charging meals and beverages, and having quicker airport turning points. In addition, Jet Star employs younger and cheaper staff to cut the costs (Doganis, 2002). The company minimizes its parking and maintenance costs by having the aircrafts parked in airports that offer relatively lower parking and maintenance cost in comparison to other major airports. According to the case study, most of the Jet star aircrafts are parked in secondary airports thus ensuring the company enjoys the highest aircraft utilization rates. The other functional aspect is that Qatar Airways has employee service agreements, which other airlines do not have. Such agreements offer flexibility to the employer. Situation Audit for Qatar Airways SWOT analysis SWOT analysis is a tool used in strategic planning. It identifies the strengths, weaknesses, opportunities, and threats facing a firm. The SWOT analysis involves an environmental scan. There are two types of environments; the internal environment and the external environment. In relation to our case, the internal environment represents the airline company, Qatar Airways (Porter, 2008). On the other hand, the external environment represents the country/regions in which Qatar Airways wants to solidify its market presence such as Qatar and around the globe. Strengths and weaknesses are internal while opportunities and threats are external. Some of the strengths, weaknesses, opportunities, and threats that Qatar Airways is associated with are discussed in depth below: Strengths of Qatar Airways Qatar Airways practices value based theory by offering affordable tickets to its customers. This fact may help it become a competitive airline in the industry in Qatar and around the world by attracting and sustaining customers. It is imperative to note that majority of the airline firms in Qatar and around the globe such as British Airways offer expensive tickets. Strength of Qatar Airways is a cost leader therefore establishing a market in Qatar airline industry by developing a good strategic plan will help firm in enjoying the large economies of scale. The fact is that it cuts the costs of production by having only three class of travel, charging all the meals and beverages, employing cheaper staff and reducing the luggage allowance. Qatar Airways has a good reputation in the Qatar market and some the Asian market such as Singapore and UAE (United Arab Emirates). A good reputation is classified as strength for Qatar Airways because the firm has already built public image which is a catalyst for having volumes of sales for the company. When a firm a built public image, it des not incur a lot of advertising expenses trying to promote its products. Customers just stream to the firm. Qatar Airways is a company that has a strong capital base. This is strength for the company as the strong capital base cushions it against any the financial difficulties. Weaknesses for Qatar Airways The fact that the company offers only one class of travel may be a threat because other customer’s tastes and preferences may have not been taken into consideration. Opportunities for Qatar Airways Asia is a continent that is considered a strong economic giant in the world. Therefore, chances of the company attaining its goals and objectives in the continent are very high. In addition, countries in Asia are considered as manufacturing countries of most the goods. Businesspersons travel a lot to purchase products there. Therefore, the customer’s reliability is not a problem to the company. It is an opportunity to the company to enter the other markets since the company will have a competitive advantage over other companies because of its products. There are no any other airline companies that offer cheaper airline tickets compared to Qatar Airways in Qatar. Currently, Asia is one of the most populated continents in the world. Therefore, there is availability of cheap labor. In this case, Qatar Airways can cut its costs by employing very cheap labor. If the Qatar Airways succeeds in solidifying its presence in the Chinese market, it will be an opportunity for the company to consider other destinations in the world that it can penetrate and be a market leader in provision of services in the competitive industry. Most countries in Asia such as China allows foreigners to carry out business and invest there as part of its legal system. This makes the legal system procedures short for Qatar Airways to establish in such markets. Qatar Airways will benefit from the technology available in the airline industry in Qatar. This is because Qatar is said to be one of the most technologically advanced countries. It will be an opportunity if the airline company, Qatar Airways achieves customer’s loyalty in the Asian markets. It will be an opportunity for the company to make a market entry in all countries on planet earth as it will diversifies its operations. Diversification helps spread risk making it minimal. It is an opportunity for the airline to establish itself in mainland China. Mainland is a strategic point and this ensures that customer reliability is achievable. It can be an opportunity for Qatar Airlines to enter the world airline market as it can discover other types of businesses that can be beneficial to the company. Threats for Qatar Airways It is believed that cheap is expensive. Customers perception may be that the services being offered by the company are not quality and not up to there expectation. Therefore, it is a threat that the company may not be well accepted by customers. There may be other companies in the market offering a relatively expensive ticket but meet the customers expectations by offering different classes of travel. It is uncertain whether the governments will allow the company to make a market entry, thus a threat. It would be a threat to Qatar Airways if it fails to achieve customer’s loyalty in the Asian airline market. For instance, Air China the world largest airline that is a value based airline may hinder Qatar Airways from achieving customer loyalty. This is because Air China has already won the confidence of most customers. It will be a threat if the technology that Qatar Airways is using is not compatible with the one available in the world airline markets or it is outdated. Failure for Qatar Airways to attain a competitive advantage in the world markets may pose a threat. Airline market is an already flooded market therefore a new market entry may not be possible. Very strong strategies have to be used to achieve set goals thus calling for extra resources such as money, management, and materials. The industry forces may also pose a threat to Qatar Airways Company. Market Factors Porter’s generic forces Michael porter’s generic forces are used to scan the competitive environment. This aspect makes them different from the SWOT and PEST analysis tools, which only scan the environment as a whole. The forces are cost leadership, differentiation and niche strategy. These forces are used at the business unit level and not at the industry level (Porter, 2008). This is because the industry in which a company is operating on may not be doing well, but the company itself is in a position to do well and yield very high returns (Doganis, 2002). In addition, the firm to leverage its strengths uses these strategies. Cost leadership strategy Qatar Airways is already a cost leader in the Qatar airline market and other Asian countries by reducing its operational costs. On the global arena, there might be other airline companies, which are cost leaders. Therefore, it makes it mandatory for the company to revise its strategy, to increase its strength, so that it can fit the new market. Differentiation strategy Qatar Airways is already a value based Airline Company in that it offers affordable tickets and in addition, lowers tickets to those who travel light. This aspect makes Qatar Airways different from other airline companies in china. Niche strategy This strategy aims at focusing all the firms’ resources and capabilities to a special segment in that market that has its needs unmet (Doganis, 2002). The aim of such a strategy is to attain differentiation and cost leadership. In relation to our case, Qatar Airways wants to focus all its capabilities and resources by offering affordable tickets and cutting its operational costs unlike most of the airline companies around the world. Customer survey Customer survey is vital at this point as it will be used by Qatar Airways to determine the customer’s needs. The company should consider customer satisfaction because the services it already offers may not be meeting the customer’s expectations. The level of customer’s satisfaction varies from person to person, from a service to another and from place to place. Therefore, the level of satisfaction depends on a number of factors, both physical and psychological. The information that is to be attained from the survey will be used by Qatar Airways to make decisions regarding the services it is to offer and how. A customer survey is carried out using several determinants. To begin with, Qatar Airways can use the aspect of quality to determine their needs (Porter, 2008). The question as to what standards should Qatar Airways require to give quality services should be put into mind when carrying out the customer survey. The other factor is pricing of the airline tickets. A survey should be carried out regarding the tickets to help the company set affordable tickets (Doganis, 2002). The affordable tickets should be in a position to yield returns optimally to Qatar Airways. Another aspect to be considered is place. Place maybe the airport position or turning points where Qatar Airways airlines will be located. Such places should be at a strategic point to enhance reliability. The relevant data is collected through interviews, questionnaires, case studies or by the use of quantitative techniques. Competitive Factors Qatar Airways Company operates in a very competitive environment. There are several industry forces which dictate the nature of the competition in retail markets. A retail market such as airline markets is affected by barriers to entry, buyer’s purchasing power, supplier’s power, threat of substitute and rivalry among the firms. Retail markets such as airline markets are more attractive when competitive entry is costly. Barriers to entry are conditions in a retail market that make it difficult for firms to enter the market. The entry barriers may include customer loyalty, scale economics, availability of locations, and the ability to cut prices in retaliation. This means that the customers may be loyal to other airline firms despite the fact that those companies charge their tickets more expensive compared to Qatar Airways (Porter, 2008). If Qatar Airways wants to invest in a new retail market around the globe, it is imperative for the company to evaluate the dominance in the given market because, retail markets dominated by a well-established retailer that has developed a loyal group of customers offer limited profit potential and might be a big challenge for a new entry to make profits. On the other hand, cutting of prices in retaliation means that other airline companies in the industry may cut their operational costs to be cost leaders. Scale economies are cost advantages due to a retailer's size. Markets dominated by large competitors with scale economies are typically unattractive. The availability of locations may impede competitive entry. For instance, if Qatar Airways wants to venture the airline industry in Norway, getting a good location to operate from can be a difficult task. A retail market with high entry barriers is very attractive for retailers presently competing in that market, but unattractive for retailers not already in that market. These entry barriers are likely to discourage Qatar Airways, to explore other world markets which need its services. In its quest to explore the world airline retail market, another competitive factor that Qatar Airways will face is the bargaining power of vendor. It is important to note that markets are unattractive when a few vendors control the merchandise sold in it. In these situations, the vendors have an opportunity to dictate prices and other terms, such as delivery dates, and thus reduce the retailer's profits. Certain vendors might have dominated a specific country of their operation making it hard for a new firm to make profits from its investment. The customers (buyers) may pose a threat for making profits to the company as they have the ability to lower prices. This may lead to Qatar Airways getting low revenues and in return low profit margins (Porter, 2008). On the other hand, there might be airline companies (suppliers) in airline retail industry which have already dominated the airline industry in across the globe. These companies pose a threat to Qatar Airways as they have the ability to lead to volume revenues for Qatar government owned company. Qatar Airways should finally put into consideration the level of competitive rivalry in the retail market, which is the frequency and intensity of reactions to actions undertaken by competitors. If the company or any other, that wants to make profits in the retail market, it must plan ways of enhancing its competitive advantage. There are several factors that may lead to intense rivalry include: (1) A large number of competitors that are all about the same size, For instance, Qatar Airways competing with airlines such as British Airways, Air China, Virgin Atlantic and Fly Emirates. (2) Slow growth, if the company experiences slow growth it might be difficult for the firm to put the right manpower in place or introduce new products in the market. (3) High fixed costs and (4) The lack of perceived differences between competing retailers. Environmental Factors /PEST analysis for Qatar Airways Market attractiveness is significantly affected by environmental factors commonly known as PEST analysis. PEST analysis is concerned with the political, economic, social and technological factors. For a company such as Qatar Airways to remain attractive to its customers in the retail airline industry, it must evaluate its environmental factors. Politically, Qatar is a stable country. This assures of business certainty in such a way that the company can operate successfully without any political interference. In case of regulations, which reduce the attractiveness of a retail market, it increases the market size. A larger market size results to economies of scale. Economic Factors, due to poor economic status of the larger population in the world, most passengers tend to use roads as the means of transportation. This results in reduction of passengers for the Qatar Airways. Stiff competition from low-cost airlines on the international stage can lead to losses. The cost of insurance is very high for Qatar Airways which is mandatory if the airline has to operate internally and externally. Some retailers are more affected by economic conditions than others. Social Factors, most people are reluctant to fly. The main reason why people are reluctant to fly is because of the notion that flying is for the loyal people or certain group of individuals. This is a challenge that faces Qatar Airways and needs to be addressed through campaigns of their products. Qatar Airways needs to rebuild confidence in air travel. Social factors which affect the performance of the firm range trends in demographics, lifestyles, attitudes, and personal values affect retail markets' attractiveness. Technological Factors, improved technology leads to economies of scale in production due to expanding market size, a factor that Qatar Airways has to put consideration. Technology in the airline industry has changed the manner in which people buy/sell tickets thus reducing costs of infrastructure leading to overhead savings. Technology improves service delivery by Qatar Airways because its customers can book flights online from the comfort of their homes. The reason why Qatar Airways has to keep up to date with the latest technology in the market if the fact that When a retail market is going through significant changes in technology, present competitors are vulnerable to new entrants that are skilled at using the new technology. Specific Objectives The main objective of Qatar Airways is to attain a market share of 70% in Qatar through; 1. Improved customer service 2. Cost-reduction 3. Differentiated pricing strategy Another objective of the firm is to increase volume of sales by 40% in a span of 3 years. This would increase profits by 40%. Retail Mix Retail mix refers to the combination of marketing activities by which the retail managers must determine the optimum mix of activities and coordinate the fundamentals of the mix. A good created retail mix creates a unique retail image in the consumer’s minds. This indicates that a careful planning of the mix is crucial for the development of the desired store image. Retail managers must clearly defined each fundamental of the mix and ensure that it is consistent with others. The retail mangers of Qatar Airways must include conventional retailing elements in their mix. The basic elements for conventional retailing for Qatar Airways include; location, pricing, merchandise assortments, customer service, advertising and promotion. Having a good pricing strategy for the company would increase volume of sales and enhance customer loyalty. The pricing strategy must be developed in reference to market demands, competitive rivalry and cost of production. Evaluate Performance and Make Adjustments The above strategic retail plan, indicates that Qatar Airways has the potential of achieving its market objectives. The company has its own strengths and weaknesses, opportunities and threats. It is also most likely that it will experience the industry factors. These industry factors can be integrated with the porter generic strategies to help the company in dealing with competitive rivalry in the industry (Porter, 2008). The strategic retail plan has taken into consideration the aspect of customer satisfaction, which is done using a market research or customer survey. This is because without loyal customers, a company such as Qatar Airways cannot achieve its mission or even remain relevant in an industry. At the present time, customer satisfaction is a key objective among the objectives of organizations apart from profitability. There is no market that does not have its own risks and threats. Therefore, Qatar Airways should make a market entry in around the globe to achieve its objectives and enjoy the economies of scale. It is recommendable for the company to apply the strategic retail plan well to attain and sustain a competitive edge. Already, the company’s existing strategies are cost leadership and differentiation together forming the focus niche strategy. Therefore, it is recommendable to look for alternative strategies to be strong strategically. Qatar Airways should use franchising as the entry mode in destinations it has not ventured. Franchising entails paying fees and royalties to a parent company to identify with its trademark, sell services and use its business system or format. In this case, Qatar Airways will identify a Company in the region of its interest that is already doing well to enter the retail markets with ease (Doganis, 2002). The reason why such an entry mode is recommendable is that it is associated with low political risks, costs and allows simultaneous expansions. The mode also has its own disadvantages such as the parent company turning out to be a competitor. Therefore, Qatar Airways can avoid such a risk by putting a clause in the contract it is to sign. References Balmer, JM and Greyser, SA (2003), Revealing the corporation: perspectives on identity, image, reputation, corporate branding, and corporate-level marketing an anthology, Routledge, New York. 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