Strategic Management of Jetstar Airline - Case Study Example

Strategic Management Jetstar Airline Customer Inserts His/her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 28/06/ 2011 PART A: History of Jetstar Airline and its Competitors Jetstar Airline was established by Qantas in 2003. It is therefore owned and managed by Qantas. Its headquarters are in Melbourne, Australia. Jetstar Airline is highly associated with low-cost consideration for the services it provides. It commenced its domestic services in 2004 and its international services in 2005 to New Zealand. In the same year, 2005, Jetstar merged with Valuair and continued operations under their own brands. The first flight of Jetstar’s sister airline, Jetstar Asia Airways took off in 2004 from Singapore to Hong Kong, marking Qantas entry into Asia low-cost market. At the end of 2005, Jetstar started its operations out of Sydney, Melbourne, Brisbane and Gold Coast. At the present, Jetstar flies from Australia to the United States, Thailand, Singapore, Bali and Japan, as well as out of Sydney to Kuala Lumpur. Jetstar major domestic competitors are: Virgin Blue, Qantas Domestic, Rex, SkyWest, Virgin Australia and Tiger Airways. On the other hand, Jetstar international competitors include: Air New Zealand, Emirates, Pacific Blue, Singapore Airlines, V Australia, THAI and Qantas International among others. One of the major competitive strategy of Jetstar its cost consideration, that is, Jetstar has all along focused on operating and offering its airline services and products at low cost.. At one time, Virgin Blue had to sue Jetstar due to the low cost strategy though it was unsuccessful. Jetstar and its Competitors Analysis of Operations Jetstar Australia operates as part of the Qantas Group hence it is fully owned by Qantas. The merger of Jetstar and Valuair has led the Qantas’ ownership of about 42.5 per cent of both airlines following the merger. With regards to domestic market share, Jetstar is the third largest airline. On the other hand, Jetstar is the top 5 international airline by capacity share. The Jetstar Australia operates across seventeen Australian domestic destinations and fifteen short and long haul overseas. As at February 2011 Jetstar Australia and New Zealand based fleet comprises of 59 aircraft which includes: 44 airbus A3230s, 6 Airbus A321s and 9 Airbus A330-200s. Subsidiaries of Jetstar Australia are Jetstar Airways Limited in New Zealand and Express Ground Handling. The major competitors of Jetstar Australia are Tiger Airways and Virgin Australia. Tiger Airways is based in Melbourne being Tiger’s hub and fully owned by Tiger Airways Holdings. Tiger competitive strategy comprises of increasing its total market size through an increase in the number of passengers, control operating costs of the airline while at the same time maximizing the number of sectors served by its aircraft keeping costs low by avoiding expensive airports. Virgin Australia considered the possibility of establishing a low-cost offshoot to fend off Tiger Airways. However, it decided to put efforts in funding its new trans-Pacific carrier, V Australia and to increase business travel share. Jetstar SWOT Analysis and Five Forces Model Jetstar Five Forces Model relates to: competitors, customers, suppliers, substitutes and rivals. Since Jetstar operates in a low-cost airline industry, there are few barriers for entry making the market remains quite price sensitive. There is a high bargaining power for consumers due to the use of e-commerce and increased access to online services and products. SWOT Analysis relates to the Strengths, Weaknesses, Opportunities and Threats. Further, Jetstar Strengths and Weaknesses are factors internal to its business operations, while Threats and Opportunities are factors external to its business operations (Jones and Hills, 2007). Jetstar strives to exploit opportunities. Strengths of Jetstar include: having a multi-skilled workforce which leads to efficiency, a successful reputation based on its low cost strategy, operating with only three types of fleets, its capability to operate domestically and international and the buy on board strategy in all its domestic routes offering food and beverages hence making it possible for Jetstar to continue keeping fares low. Jetstar weaknesses include: it has had three in-flight incidents which attracted a low opinion about its operations; and limiting budgets in department in order to keep fares low which has led to few staff members being unable to handle irregular situation due to lack of emergency plans. Opportunities available for Jetstar include: presentation of a number of new routes, association with Qantas which can release prospects for new routes and airport deals, increase in fuel prices might draw out unprofitable competitors and its dominance in may route due to its pricing power. The fact that, Jetstar is in Australia presents a political wise opportunity for Jetstar since Australia has a stable political structure. Threats include: possibility of accidents that could undermine confidence in low cost carriers as well as terrorists attack, disaster and the overall effect of the accidents. Jetstar Financial Analysis As at 27 June, 2011 the Jetstar Airways fleet comprised of 59 per cent in service and 48 per cent on order while there was zero in storage. This could be associated with Jetstar internal and external business environment and effective competitive strategy of operating at low cost. In addition, the capital share of Jetstar between 27 June, 2011 and 3 July, 2011 is expected to be at 82.5 per cent in domestic operations and 17.5 per cent in international operations. This shows that the domestic capacity share of Jetstar is remarkable compared to its domestic competitors. As well, Jetstar should strive to improve on its international capacity share, though at a 17.5 per cent stand, Jetstar could be said to be doing well internationally. PART B: Jetstar Mission ‘New’ Mission Statement “To be a leading airline dedicated to delivering the best flying experiences to all esteemed people at the lowest costs possible” Jetstar’s New Values Statement to reflect the future direction Courtesy- showing respect and a caring attitude to the esteemed Jetstar’s clients and crew members. Innovation- developing new airline products and services that will meet the current and future clients’ need and remain highly acceptable. Safety- taking it our responsible, the safety of our clients’, their luggage and information as well as every crew member. Teamwork- striving to assist each other in our diverse areas, where every crew member is required to contribute so as to meet the travelers’ needs. Cleanliness- having the cleanest work places and equipments for a healthy environment for us and our customers. Achievements- celebrating our customers’ achievements as well as those of crew members and the airline at large. Jetstar’s Strategic Objectives for the next 3-5 years Financial objective is one strategic objective that can be developed for Jetstar Airline. Financial objectives shows a company’s commitment to results related to good cash flow, creditworthiness, growth in earnings and a positive return on investment, growth in dividends and appreciation in the value or price of stock. In addition, Jetstar can focus wider profit margins, an attractive economic value added performance (EVA) and a sustainable increases in market value added (MVA). These can be achieved through expanding is airline operations and having a competitive advantage above other airline firms in Australia. Nevertheless, Jetstar can continue with its low-cost consideration. The second strategic objective for Jetstar is strategic market. This relates to Jetstar focus in sustaining and improving its competitive strength and long-term position achievable through customer value creation. Strategic market objectives for Jetstar will aim at increasing its market share, being a leader in technology and innovation as well as becoming better than its competitors through quality of service and products. Jetstar will consider gaining a wider geographical coverage compared to its competitors. Jetstar’s product line will be more attractive, services to its customers will be superior leading to high levels of customer satisfaction. Finally, the third strategic objective for Jetstar can be internal operational objectives. This will require Jetstar to focus on its business operations that have an impact on developing customer value and satisfaction. In addition, focus in maintenance of the core competencies in Jetstar rely solely on its internal operational objectives. Jetstar will have an opportunity to focus and analyze its operations at its functional areas. Functional areas include: marketing, production, finance, human resource and research and development. The internal operational objectives bring about cohesion of objectives and strategies of the different functional areas or units in an organization. Overall, the firm has its strategic plan; and hence the internal operations strategy unifies departmental efforts towards the strategic plan. Jetstar’s Key Strategies for the next 3-5 years One key strategy for Jetstar is provision of high quality services. Jetstar can do this in routes or markets where airline services are unavailable or where they are very low. This will be achieved through the use of latest aircraft of the right size for the market or the route. Passengers’ or travelers’ comfort provides a base in selecting the type of the aircraft right for the target market or route. These aircraft with the latest aviation technologies and navigational equipment will help ensure the highest level of reliability, punctuality, safety and customer satisfaction in the target market and routes. Another key strategy for Jetstar is to partner, cooperate or associate with larger, more established and high regarded airlines in Australia and in other nations. Airlines companies with a high profile provide an extensive range of connections in terms of their fares, frequent-flyer mileage sharing and other client advantages among others. This key strategy will lead to creation of a new Jetstar Airline operating in many geographical locations, regarded as travelers’ first choice airline and internationally recognized. To achieve a high profile rating, Jetstar will also focus on the competences and skills as well as the professional etiquette of its employees. Jetstar staff members should strive to acquire the collaborative skills necessary in the airline industry and applicable to the current customer’s needs. References Jones, Green R & Hill, Charles W.L. (2007), Strategic Management: An Integrated Approach, Cengage Learning, Belmont. http://www.centreforaviation.com/profiles/airlines/jetstar-airways-jq http://www.scribd.com/doc/37230878/Analysis-of-Jestar-s-Task-and-General-Environment Read More