SWOT Analysis of Qantas - Case Study Example

Strategic Management Student’s Name Professor Date Introduction According to Hansen et al. (2011) strategic management is the process of monitoring an organization’s practices, in order to ensure that the implemented practices enable the organization to achieve its goals. Through the integration of the implemented strategy, a company aims at improving performance, maximize its profits and gain a competitive advantage over its rivals (Chandler et al. 2000). Therefore companies are keen to formulate strategies that are tailored to exploit an organization’s internal and external environment. This process requires an organization to constantly assess the productivity of its strategies (Hansen et al. 2011). This essay is going to focus on how the internal and external environment influences the running of an organization. This will be achieved by conducting an analysis on Qantas Airlines using the SWOT analysis, Porter’s five forces of analysis and four sources of competitive advantage. In discussing the strategic management of Qantas airline, it is important to first identify the company’s mission statement and its business strategy. According to Qantas Annual Report (2009), Qantas’ corporate mission reads, “The world Best Low Fare Carrier”. Qantas continues to use its mission statement as a business strategy to operate its organization and several of its subsidiaries. According to Qantas Annual Report (2009) the Qantas brand has maintained loyal customers by providing premier services and prices. Therefore, Qantas has mainly adopted the differentiation and cost leadership strategy as their main strategy to gain a competitive advantage over its competitors. SWOT Analysis of Qantas The swot analysis presents the current state of Qantas analysis. This analysis discusses the strengths, weaknesses, opportunities and threats of an organization. Strengths Over the years, Qantas has maintained a strong relationship with its shareholders. For instance the company continues to thrive by sustaining customer loyalty through a reputable brand image and services (Sky Trax Airline Awards, 2010). Additionally the company trains its employees exclusively thus maximizing on performance and labour output. Nonetheless Qantas has signed partnership deals with other companies such as AirAsia as a means to increase their market base and reduce travel fare. Such a strategy has enabled the company to stay loyal to its mission statement as a “low fare carrier,” attracting millions of passengers across Asia and Australia. According to Sky Trax Airline Awards (2010) Qantas operations have maintained tight security thus gaining more trust from its customer as safety is a priority in the aviation industry. With this attributes, the company enjoys advantages by increasing productivity and customer satisfaction. Weaknesses One of the major weaknesses experienced by Qantas is the increased maintenance cost incurred by the airline. According to the Qantas annual report (2008) the company has in the past been forced to commit 30% of its finances to paying its employees. This is a setback for the company it may end up facing financial constraints in the near future, which may lead to increased fares and reduced labour force. Opportunities Daggett et al. (2006) affirm that the use of alternative fuel in the transport industry is quite economical. Therefore if Qantas is able to adopt the use of liquid hydrogen, ethanol or methanol, the company is likely to cut a lot of its operation costs. The company also has an opportunity in investing in new technology which will advance its operations through the internet and help it reduce labour costs. Additionally the company can take advantage of the growing world economy to go global and increase its market base (Balenger et al. 2000). With its premium prices by partnering up with other airlines in Africa, Qantas will increase its profits substantially. Threats Qantas faces major threats in the increased number of competitors in the aviation industry as well as the recurring oil crises across the globe. The oil crises is likely to affect Qantas to greater lengths since it operates on low costs already and has issues with their operation costs (Daggett et al. 2006). Five forces analysis Porter’s five forces of analysis mainly concentrates on industry analysis by evaluating the competitions, products and consumers (Porter, 1985). Industry competition With the emerging new airlines in Australia and around the world, Qantas operations and customer base are threatened. Thus Qantas needs to focus on a strong leadership strategy as opposed to solely focusing on differentiation strategy. However the company has implemented a strategy by forming partnerships with Woolworths, and coming up with a program that seeks to increase their market base maintain loyalty among consumers (Qantas Annual Report, 2008). This places Qantas one step ahead of its consumers. Threat of new entrant Despite the fact that Qantas has maintained a strong market base in Australia, the possibility of emerging new rivals in the aviation industry is quite high due to globalization. For instance in 2007 a Singapore owned airline, Tiger Airways, established itself in both Melbourne’s Tullamarine Airport and Adelaide Airport (Channel News Asia.com, 2010). Therefore Qantas needs to formulate a new strategy that will create a barrier of entry by other airlines. According to Porter (1990) this can be achieved by implementing a focus strategy through subsidiary products, or forming alliances. Threat of substitute product The existence of substitute products for Qantas is the alternative means of transportation such as; buses, ships, cars or rail. However, air travel has a significant advantage as opposed to other means of transportation as it is fast and convenient. With the introduction of low budget packages by Qantas, the company has obtained a significant advantage over other alternative means of transport. Hence the threat of substitute product for Qantas is low (Qantas annual report, 2008). Bargaining powers of suppliers According to Qantas annual report (2009) the company has contracts with Airbus, Boeing and Bombardier. Additionally these three manufacturing companies are the main distributors of aircraft spare parts. Hence, Qantas does not have a wide variety of suppliers to choose from. Bargaining powers of buyers According to Barney and Herstely (2006) as globalization advances the bargaining powers of customers in the market place continues to advance. Australia is opening doors for new investors in the country therefore leading to the introduction of new airline services such as Tiger Airways (Channel News Asia.com, 2010). This provides the consumers with a number of airlines to choose from apart from Qantas. The Four Sources of Competitive Advantage Organizations operating in a competitive environment must possess sources of competitive advantage that will enable the company to meet its objectives and satisfy consumer needs (Porter, 2004). The four sources of competitive advantage include: Cost Qantas has obtained an overall cost advantage that has enabled it to maintain a loyal client base. Through the introduction of subsidiary brands that offer low travel fares to its customers, Qantas has managed to control fixed and variable costs. As a result the company has been able to offer quality products and services which compare to consumer expectations while at the same time stay ahead of its competitors (Qantas Annual Report, 2008). Differentiation According to Sky Trax Airline Awards (2010) Qantas has provided consumers with alternative brands that enable them travel at a subsidised cost, this makes it stand out as an airline and popular among consumers. According to Hubbard (2004) for a company to sustain its advantage in a market, it must come up with its own unique style through advertising and marketing. For instance, the company has partnered up with Woolworths to come up with the Frequent Flyer Program which has contributed in increasing its customer base. Product line scope Qantas operates several subsidiary brands under it which provide full service to both domestic and international customers. According to Qantas annual report, (2009) with the brand Jestar, the company aims at maximizing its profits through its operations across 173 destinations and 42 countries. To gain a competitive advantage over its rivals the company’s partnership with Air Asia has enabled it to effectively operate the low cost brand. Time to market Qantas uses diversity as a means to market its products and capture the attention of customers. For instance the company operates Qantas, QantasLink, Jestar and Jestar Asia to enhance its brand and attract huge profit margins (Qantas Annual Report, 2009). Moreover the company has used its CSR as a means to reach customers through sponsoring activities such as the Football Federation Australia in 2010. Conclusion Qantas Group Company has grown from being just a brand to a leader in the Australian Aviation industry. The company has mainly relied on partnerships and alliances as a strategic move to grow its brand and expand its market base. According to De Rond (2006) having strategic alliances as part of a running a business is essential for a company to thrive in a very competitive environment. Despite its success, the company still faces a number of setbacks arising from, rising fuel costs, increased management costs and alternative mode of transport for customers. Stacey (1996) argues that a company can be able to overcome its shortcomings by adjusting its business dynamics. Therefore for Qantas to be successful in a global environment, the company needs to diversify its services through advanced technology. References Barney, J & Hesterly, W. (2006). Strategic management and competitive advantage, Pearson, New Jersey. Belanger, J., Berggra, C., Bjorkman, T. & Kohler, K. (2000). Being local worldwide, Cornell University Press, USA. Chandler, A., Hagstrom, P. & Solvell, O. (2000). The dynamic firm, Oxford UP, USA. Channel News Asia.com, (2010). Tiger Airways:No. 1 in Asia and Australia for Ancillary Revenues. [Online]. Retrieved From: www.wcarn.com/news/12/12369.html [Accessed on 27th August 2015] Daggett, D., Hadaller, O. & Walther, R. (2006). NASA: Alternative Fuels for Aviation. [Online]. Retrieved From: [Accessed 28th August 2015] De Rond, M. (2006). Strategic alliances as social facts, Cambridge UP, Cambridge UK. Hanson, D, Hitt,M, Ireland,D & Hoskisson, R. (2011). Strategic management: competitiveness and globalisation, Melbourne: Cengage. 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