Strategic Management of Jetstar Airline - Case Study Example

Strategic Management Report: Jet Star Airline Name Course Name and Code Table of Contents Table of Contents 2 Strategic human resource management 4 Jetstar Airline 5 SWOT analysis 6 Strengths 6 Weaknesses 7 Opportunities 7 Threats 7 Macro-environment PESTEL 8 Political 8 Economic 8 Socio-cultural 8 Technological 8 Environmental 9 Legal 9 Porters 5 Forces and Key Success Factors 9 Competitive rivalry 9 Threat of new entrants 10 Suppliers bargaining power 10 Customers bargaining power 10 Key Success Factors 11 VRIN framework 11 Valuable 11 Rare 12 Inimitable 12 Organized 13 Identified issues 13 References 14 Strategic human resource management This is a function whose aim is to help companies meet their needs and address their employees’ needs simultaneously (Pearce and Robinson, 2005). The human resource management function comprises of a company’s feature with a remarkable effect on the staff such as pay, hiring, firing, administration, training and benefits. In addition the function also entails the provision of work incentives, information on vacation and sick days as well as information on safety process. Past research denotes that strategic human management entails the macro elements of a company that are linked to the structure, culture, quality, values and commitment as well as matching resources to address the prospectus needs and other long-term personal issues. Evidently, strategic human resource management acts as a guideline for organizations (Pearce and Robinson, 2005). This is because it gives the way forward on how the company should lay down the basis for strategic advantage by constructing an organizational structure that is effective, an appealing design, culture, staff value proposition, appropriate communication strategy, systems thinking as well as organizing the business to undergo change for instance mergers, acquisitions and downturns (Pearce and Robinson, 2005). In other words, strategic human resource management is typically the act of managing individuals. The function requires that the management team thinks ahead and plans in advance on the most appropriate ways on how the company can address the needs of their staff while meeting the goals of the company (Pearce and Robinson, 2005). This greatly impacts on the activities being carried out in the business for instance enhancing the hiring procedures, training programs for the staff as well as appraising the programs within the discipline. Experts have indicated that employing the strategic human resource management in a business is the only appropriate way to create a good working atmosphere that will ensure productivity (Pearce and Robinson, 2005). Thinking as well as planning in advance assists the business to enhance its ways of hiring and retaining employees. For this reason the company is in a position to save as less money is allocated to the hiring and training process of new employees. Strategic human resource management puts emphasis on the codes of ethics of an organization, philanthropy and handling the community effects on the organizational decisions (Pearce and Robinson, 2005). Moreover, it also stresses on the improvement of the living standards of their families, the surrounding community and their staff. The following report will provide the strategic analysis of the Jet star airline. It will encompass the SWOT analysis of Jet star, the macro environment, porter’s five forces as well as the key success factors with the eventual aim of assessing the business level strategy of the airline. Lastly, the report will give recommendations on how the airline can gain further competitive advantage over its competition. Jetstar Airline Jet star is a wholly owned subsidiary of the Qantas and an Australian low cost carrier. The airline has its headquarters in Melbourne (Miller et al, 2010). Qantas established it in 2003 in response to the market inroads that were made by then by the low cost carrier, which was the Virgin blue. Evidently, Jet star operates a huge domestic network making it the largest long haul low cost carrier in the globe. The airline operates to destinations in Asia and the Pacific Ocean with long term to extend their services to Europe (Miller et al, 2010). Jet star takes part in the Qantas frequent flyer programme and operates a fleet of airbus A330 aircraft and A320 family (Miller et al, 2010). Qantas has on order 50 Boeing 787s which are destined for Jet star, to be delivered in 2013. In addition, Jet star operates the domestic service within the New Zealand. Besides, the brand is also operational in a Singapore JV commonly known as the Jet star Asia as well as a Vietnam JV known as Jet star Pacific. In all of these airlines, the parent company Qantas has equity stakes. Established with the Japan Airlines and other Japanese interests is a JV, which is meant to operate a Japan-based low cost carrier, known as Jet star Japan. This is a project meant to start in Dec-2012. Contemporary, the Jet star group gives employment to over 7,000 staff employees across the Asia Pacific region (Miller et al, 2010). SWOT analysis Strengths The continued success of the Jet star airline over the years has enabled it to maintain a superior position in the global market with the likes of Magda Szubanski as their mascot. The airline has a multi skilled staff and this only means that their workforce is efficient. Apparently, their successful reputation has crowned them a Skytrax world airline award at the world airline awards, 2009 as the best low cost carrier. The airline has kept to its advertising promises of low fares all day every day and low fares with good times by continuing to offer low costs to its customers. (Pearce and Robinson, 2005). Weaknesses The airline has only had three in-flight incidents from the time it commenced its services. For the airline to keep their fares low, it has been forced to limit their budget in other departments. This has resulted to limited staff and consequently they are being unable to handle irregular situations due to lack of emergency plans. Opportunities Jet star airline is presently examining more new routes (Pearce and Robinson, 2005). The airline needs to increase the number of its weekly return Melbourne-Sydney flights to compete with Tiger Airways (Platt 2009) Its association with associations, for instance the Qantas, can issue prospects for new airport deals as well as routes. (Pearce and Robinson, 2005) Threats Apparently, the legacy airlines begin to cut costs to compete with the airlines operating at a low cost. An occurrence of a serious accident undermines the confidence in low cost carriers Since the industry has low entry barriers, this could lead to increased numbers of competitors within the airline industry (Platt 2009) Macro-environment PESTEL Political It is apparent that the political environment in Australia has led to the success of the patent QANTAS airline industry and so are its airlines (Miller et al, 2010). This is evidenced by the fact that the Australian government through the various departments such as the Department of Defence, plays a major role to ensure that it meets the responsibilities put forth by the Chicago Convection regarding aviation. This In return has led to the success of the airline. Economic Recent past events such as the SARS has affected the security of flights (Miller et al, 2010). The increase of fuels has also affected the fares. As a result, the potential for increased competition in the domestic airline industry through the emergence of new carriers is generally more favourable now than in the past (Miller et al, 2010). Socio-cultural Evidently, the labour market is tight and in particular in the skilled fields requiring motivation. In addition, technology and industrialization has raised the levels of education (Miller et al, 2010). Therefore, the airline industry needs to bridge the gap between the generations for it to be successful. Technological The contemporary society has been characterized by rapid technological growth. It is apparent that companies should combine new and existing technologies in order to respond to the increasing technological development (Miller et al, 2010). This technological advancement has greatly affected Jet star as it necessitates ascertaining that it provides better services as compared to its rivals in the market and that it can be able to meet customers’ future demand. Environmental As part of corporate social responsibility, and in order to gain a good corporate image, Airline companies must adopt strategies to ensure environmental protection. The Jet star Airline has lower emissions compared to other airlines and hence this makes the airline contribute to environmental sustainability (Miller et al, 2010). Legal The liberal policy environment has led to new entrants. Australia's worldwide airline industry is regulated at the Commonwealth level (Miller et al, 2010). Because of this, there has been more restrained competition between Jet star and its competitors. Porters 5 Forces and Key Success Factors Competitive rivalry Apparently, competition within the airline industry is mostly association rivalry and individual airlines, which compete in markets where Jet star is at hand. It is evident that Jet star was introduced by Qantas to respond to the establishment of the no-frills airline the Virgin Blue. Due to this reason, it was expected that they would face challenges (Miller et al, 2010). In 2004, the Tiger airlines were introduced. Currently, they intend to take over the Jet star’s chief Melbourne-Sydney route by increasing their ever day return flights between Melbourne and Sydney from four to nine. Evidently, the introduction of the Tiger airlines has inescapably endangered the future revenue of Jet star a great deal. For this reason, the chief executive of parent Qantas Alan Joyce suggested that for the airline to remain competitive, it needed to have a direct Melbourne Tullamarine to Sydney services complementing its Avalon operations (Miller et al, 2010). This way they would be assured that the profitable market remains with them and it is not lost to the competitors. Threat of new entrants As is evident, the low cost airline industry has quite low barriers for entry. Other airlines for instance the Tiger are able to compete with Jet star with online systems such as e-ticketing systems. Additionally, with the new entrants within the industry, the market remains hugely price sensitive (Miller et al, 2010). Suppliers bargaining power Jetstar does not need to worry about the bargaining power of its suppliers since it is a service industry (Miller et al, 2010).The airline gets most of their revenue their fares. However, an increase in the fuel prices leads to an increase in the airline’s fares. Customers bargaining power Customers within the airline industry have a huge bargaining power due to the extension of e-commerce as well as increased access to online services to buy products, for instance fares (Miller et al, 2010). In addition, the customers are able to acquire more information regarding the various airlines available as well as compare the prices more efficiently with the internet. As a result, this has inexorably forced the Jet star to ferociously compete with the other no-frills airlines to have the inexpensive airfare as well as increase their revenue. The low fares kindle the potential market with a successful up pull effect, and hence the airline is in a position to upsurge fares to meet the increased demand (Miller et al, 2010). Key Success Factors It is apparent that the Airline commenced with only 400 employees and since then the team has grown to about 7000 people (Miller et al, 2010). This has been made possible by the fact that Jet star has selected its apps to enhance its human resource process. One of the major success factors of the company is the software developer which not only helped the airline gain new flexibility and efficiencies by helping in their employment functions but it also ensured performance management(Miller et al, 2010). Besides, the airline also ensured that it differentiated their products and services by flying within a radius of five hours from Singapore as compared to its competitors who flew to places within a radius of four-four from Singapore (Miller et al, 2010). In addition, online ticketing was another success factor of the airline. It was commenced in 2004 and its advertisement prises announced. VRIN framework The VRIN framework is part of a wider scope of the strategic scheme of a company (Barney and Hesterly, 2010). This is a framework that is used to evaluate all the resources the company to determine whether they are a source of a sustainable competitive advantage. Valuable A resource or capability is seen to be valuable if only it is in a position to allow companies exploit opportunities as well as overcome the threats present in the environment (Barney and Hesterly, 2010). The Jet star’s airline most important resources provide valuable capabilities for instance the ability to fly further than its rivals. The airline’s research and development gives the company an opportunity to produce differentiated services and as a result it has been able to be successful (Barney and Hesterly, 2010). In addition, the airlines desire to ensure that their customer’s needs are met by producing customer specific and offering affordable prices has also contributed to their success. The company has been able to maintain a competitive advantage over the competitive rivalry by ensuring that the capabilities and resources are in a short supply. Rare A resource is said to be rare if it has not been possessed by other competitors (Barney and Hesterly, 2010). For instance, the brand name of the airline is widely recognized and this makes it a valuable and rare resource. The airline is at an advantage of remaining competitive especially because they ensure that their resources are in short supply and that their resources such as the research and development team and advertising team have capabilities that are rare and valuable hence a sustainable competitive advantage. Inimitable Evidently, an inimitable resource is one that is very hard to create or imitate any products to substitute it (Barney and Hesterly, 2010). A rare as well as a valuable resource and capability offers a competitive advantage so long as a subsequent possession of the resource in question or a close substitute is not found bother firms (Barney and Hesterly, 2010). The jet star airline has been the leading company in the industry since it produces unique products at a lower cost and hence has been able to beat their competitor’s products both in long term as well as short term quality ratings. Organized This is the criterion that determines the capability of a resource to be a basis of a competitive and sustainable advantage (Barney and Hesterly, 2010). It is apparent that the possession of a rare and valuable resource is not enough to help a company gain a competitive advantage. The airline in question has been able to beat its rivals due to the fact that they are able to capture any value in their rare resources (Barney and Hesterly, 2010). This they achieve by having effective control systems, compensation policies, reporting relationships as well as management interface with the value adding functions in the company and the customers. In addition they have been able to maintain their competitive advantage since they are innovative. In addition the airline is known to use new technology in order to ensure that they meet their customers’ needs by producing the goods that satisfy them Identified issues It is apparent that the Jet star Airline ought to largely focus on upholding its supremacy in its major routes by either reducing the forecasts, and/or up surging the number of flights being supplied. In addition, the airline requires investing more resources toward straining their staff to ascertain better provision of customer service as well as to eliminate any undesirable media attention about service Besides, the airline needs to put into consideration such issues as operational cost working commission as well as cost cutting working towards differentiation strategies and workforce efficiencies in their setting of strategies and implementation. This is so as they could be able to attain and maintain a competitive advantage in the industry. References Barney, J. B., and Hesterly, W. S. (2010). VRIO Framework. In Strategic Management and Competitive Advantage (pp. 68-86). New Jersey: Pearson Miller, F. P. Vandome, A. F. & John, M. 2010, Jetstar Airways. London: VDM Verlag Pearce, J., & Robinson, R. (2005). Strategic Management, 9th Ed. New York: McGraw-Hill. Platt, C. (2009). No more first class for Qantas long-haul flights, The Age. Accessed on March 15, 2012,http://www.theage.com.au/executive-style/business-travel/no-more-first-class-for-qantas-longhaul-flights-20090528-boeh.html Read More