Environmental Factors being faced by Qantas-Samples for Students

Question: Discuss about the external and internal environmental factors being faced by Qantas in their global operation. Answer: Introduction The current business scenario is much more competitive for the contemporary business organizations. Competition is ever increasing with the entry of more number of competitors in the market. Therefore, it becomes important for the business organizations to determine their internal and external environment in order to identify their gaps and initiate the process of strategic management accordingly (Vogel Guttel, 2013). Initiation of the strategic management helps the contemporary business organizations to have their strategies in accordance to the environmental factors. In the current competitive business scenario, initiation of the strategic management is more important. One of the major business sectors, which are witnessing huge competition, is the global airline industry. Furthermore, with the entry of the low cost airliners, competition got more intensified. Qantas airways are the leading airliner in Australia and are one of the oldest airliners in the world. It is based in Australia and operates in around the world. According to the reports, Qantas is the leading airliner in Australia with having more than majority of the market share (www.qantas.com, 2018). The objective of them is to be the leading airliner in the global market with having the most number of passenger traffic. However, in the recent time, the emergence of huge number of airliners both in budget and long haul categories put huge challenge for Qantas to maintain their market leadership status. Thus, they are in the need of having effective approaches of strategic management. This report will discuss about the internal and external environments for Qantas in the airline industry. In addition, the industry attractiveness will also be analyzed with the help of the Porters five forces. Other factors such as generic strategies of Qantas and strategic group will also be identified. Value chain and VIRO analysis will be done to determine the sources and sustainability of their competitive advantages. Ownership status of Qantas According to the reports, Qantas is having 51 percent ownership with Australian investors and the rest is having with the foreign investors. Currently, foreign investors hold 47.73 percent of shares of Qantas airways. Foreign investors include British airways and American airlines. In terms of the domestic ownership, Government of Australia sold its entire stake to Qantas. External environment of Qantas Political Qantas is having their operation worldwide. Thus, they have to adhere with different political scenarios in different countries. Having aviation agreements of Australia with major economies helps Qantas to have the access to the major portion of the international air routes (McManners, 2016). However, negative relationships with between Australia and some other countries are creating barriers in free aviation of Qantas. Risk of terrorism especially from the Middle Eastern countries is increasing and posing threat for Qantas (Saha Yap, 2014). Economical Entry of the foreign airliners in the Australian market dented the market share of Qantas. Origination of the global economic recession is also posing threat in enhancing the revenue for Qantas (Lakner Milanovic, 2016). Entry of the low cost aircrafts also putting challenge for Qantas in the shorter routes. Rapid increase in the global price of jet fuel is also reducing the profitability of Qantas (Ryerson Hansen, 2013). It is a threat for the entire airline sector. Social One of the major social advantages for the airline sector is the increase in the preference of the air transportation. Income for average Australian population is growing, which further enhancing the growth of the airline industry. Qantas being a legacy and national carrier of Australia is having positive impression in the market (David, 2013). However, still the airline services are out of reach for major portion of the population and thus, the market is limited. Technological Qantas with having their access to the huge financial resources invests huge in updating their technologies. They are having both online and offline facilities in offering their services to the customers (Guritno Siringoringo, 2013). However, the rapid advancements if technology is having negative implications. This is due to the reason that huge cost is associated with frequent change in the technology. Legal Legal regulations for the airliners are different in different countries. Thus, it is difficult for the airliners to adhere to these differences in their daily operations. Increase in the carbon tax also causing challenges in profitability of the airline industry (Meng, Siriwardana McNeill, 2013). It is also highly probable that airliners may have to face lawsuits for their customer services. Environmental Airline industry is having a huge impact on the environment due to their emissions. Thus, the rules are more stringent for the airline industries. It is important for the airliners to initiate strategies in order to curb level of emissions. Qantas started to procure fuel efficient aircrafts in order to fight the environmental issues (Merkert OFee, 2013). Determination of the industry competiveness The above sections discussed about the external business factors faced by Qantas. This helped to identify different external challenges faced by Qantas in their business operation. However, it is also important to determine the competitiveness of the industry. In order to do so, Porter five forces analysis will be used. Threat of entry Threat of entry is low in the airline industry due to the reason huge investment is required in this sector. It is difficult to achieve economies of scale at par to the established players (Gayle Wu, 2013). It is also difficult for the new entrants to comply with diverse legal formalities, which is difficult for the new entrants. It is difficult for the new entrants to compete with the legacy airliners. Threat of substitutes Threat of substitutes is moderate due to the presence of direct and indirect substitutes. Direct substitutes include the different airliners in the same industry offering similar set of services (E.Dobbs, 2014). Indirect substitutes include other mode of transportation. Customers are having low switching cost. Bargaining power of suppliers Bargaining power of the suppliers is low due to the presence of number of similar set of suppliers. Major suppliers including the aircraft manufacturers are having control only on supplying the components (Shi, Zhang Ru, 2013). Brand value of the legacy airliners such as Qantas further reduces the bargaining power of the suppliers. Bargaining power of the buyers Bargaining power of the buyers is high due to the availability of huge options. Good number of similar players in the market offering similar options to the customers. In addition, Qantas itself offers different service levels such as business class and economy class. This further increase the options for the customers Industry rivalry Competitive rivalry is high in the airline industry (Homsombat, Lei Fu, 2014). Presence of number of similar competitors in the market. Aggressive promotional activities such as loyalty programs are being initiated in order to attract more customers. Determination of the internal analysis of Qantas Strengths Brand value of Qantas is huge and favorable, which is helping them to attract more customers in the global market. Qantas is having their global presence and it helps them to cater to large of customers. Being the national carrier of Australia, Qantas is having the support of the government of Australia. It helps them in operating in the global political environment (Latemore, 2013). Having diversified range of service offerings helps in attracting different customer segments. Weaknesses Majority of their flights are Australia based. Thus, their global routes are less utility for the passengers from other countries. They are trailing behind some of the leading global airliners in terms of passenger traffic and number of routes. Various incidents such as price fixing caused negative brand value of them. This caused negative impression among the potential customers (Fournier, 2014). Low market share in the budget airline market. Opportunities Purchasing power of the customers is increasing and thus it is an opportunity for Qantas to tap the growing demand. Offering more global routes from the major cities around the world will help to attract customers from different regions. Initiation of the co-creation and strategic alliances with other brands will help enhancing the brand value (Li, Qian Qian, 2013). Threats Increase in the price of jet fuel will reduce the profitability in future. Initiation of the stringent regulations regarding the foreign investments and employee management will pose challenge for Qantas in the global market. Entry of the domestic carriers in the global market will further increase the competition. Generic strategies of Qantas The above sections have identified various internal and external factors that are being faced by Qantas in their global operation. Thus, it is the time to discuss about the generic strategies initiated by them in order to stay ahead in the competition. Porter generic strategies are of three types, cost leadership, differentiation and market focus. In the case of Qantas, they follow only the cost leadership and differentiation strategies. Market focus is not being initiated by them due to the reason that Qantas is having huge target customer segments ranging from the upper class to middle class. Cost leadership strategies Cost leadership strategies being initiated by Qantas in order to attract more customers in terms of the price and stay ahead in the competition. Qantas initiates cost leadership by offering different style of aircrafts ranging from wide body aircrafts for the long haul flights and narrow body aircraft for the shorter flights (Teeratansirikool et al., 2013). This helps in saving more fuel in the flights. Moreover, the major aircraft inventory of Qantas is consisting of latest and fuel efficient aircrafts such Airbus A-320 and Boeing 747 dream liner. In addition, Qantas is also having the worlds largest passenger aircraft Airbus A-380, which can transport 450 people at once. All these inventories help Qantas in reducing the average cost per passenger in the journey. Differentiation strategy Differentiation strategy helps Qantas in creating distinctive images in the market. In order to create distinctive image in the market, Qantas initiated different service offerings across different customer income levels (Zehir, Can Karaboga, 2015). For instance, Qantas is having Jetstar, their budget carriers to offer low cost flights along with the legacy flights of Qantas. In addition, differentiation is also being initiated by them in terms of the customer services. The approach to the providence of the service to the customers along with the added services such as receiving them in the airport is creating distinctive image in the market (Kaliapeen Hilman, 2014). They also promote frequent flyers programs for their loyal customers and provide unique services Strategic group diagram According to the positioning theory of the segmentation, targeting and positioning (STP) model, Qantas positioned their service offerings as premium airliner in the global market. They are mainly positioned to compete with the legacy airliners in the global market. On the other hand, the budget carrier of Qantas, Jetstar is positioned to compete in the lower customer segments with Air Asia. In terms of the above strategic map diagram, Qantas and Qatar airways are having same price level but Qantas is slightly ahead in terms of the service quality. This is mainly due to the reason that Qantas is more globalized compared to Qatar airways in the airline industry. On the other hand, Lufthansa is positioned as more premium compared to Qantas in terms of both price and service quality. Thus, the key competiveness of Qantas is to provide more premium service quality in the same price level of their current position. It is assumed that service quality involves providence of added services to the passengers. Price level is being assumed as average fixed price rather than the flexibility in the airfares. Value chain analysis of Qantas Primary activities Inbound logistics Inbound logistics are having less importance for Qantas due to the reason that they are less dependent on the external suppliers. Only suppliers of them are the aircraft manufacturers such as Boeing and Airbus (Koo, Tan Duval, 2013). Qantas is having effective relationship building process in order to have seamless flow of the spare parts and services. Operations Operations of Qantas are being designed in such a way that it will have maximum level of satisfaction among the customers. The operations of Qantas are being designed with the use of the latest technologies and approaches. The operations of Qantas also help in creating distinctive image in the market. Outbound logistics Outbound logistics of Qantas are mainly done through online mediums. This is due to the reason that outbound logistics of Qantas involves the providence of service to the customers such as tickets and check in facilities. All these are being done through online mediums, which enhance the customer conveniences. Marketing and sales Qantas is having extensive marketing activities including sponsoring sporting events and teams. In addition, television commercials are being promoted by them to aware the customers regarding the latest offers (Crawford Northey 2013). Initiation of the frequent flyers program also helps them to retain their existing customer base. Service Qantas is having dedicated service portal and helpline for managing the customer queries. Customer community is also being initiated in order to have two ways communication with the customers (Setia, Venkatesh Joglekar, 2013). This helps in effective solution of the customer grievances in the primary stage. Secondary activities Procurement Procurement process of Qantas is effective and efficient, which helps them to have proper aircrafts in place. Such as narrow body aircraft for short haul flight and wide body aircraft for the long haul flights. In addition, the procurement process of them helps them to minimize their cost of operation. Technology development Qantas is having latest and updated technologies in place in terms of aircrafts, passenger safety and customer service. In addition, their internal department for maintenance is also equipped with latest technologies, which ensures the passenger safety. Human resources Human resources are one of the major sources of gaining competitive advantages of them. This is due to the reason that the skill set of the employees in the workplace helps Qantas to provide effective service to the customers. Training is provided in order to enhance the skills of the employees. Employees are being kept engaged with the initiation of the various employee welfare activities. Firm infrastructure Firm infrastructure of Qantas includes the different assets of them. Currently, they are having more than 120 aircrafts for their global operations along with more than 29000 employees around the world. VIRO analysis of the sources of competitive advantages The above value chain analysis identified some of the key sources from where Qantas gain competitive advantages in their business operation. However, the competitive advantages will be effective and have long term impact only when it will be sustainable enough. Thus, VIRO analysis will be used in order to determine the sustainability of the sources of competitive advantages (Urbancova, 2013). Some of the identified sources of gaining competitive advantages for Qantas are human resources, financial resources, brand value and operations. Valuable This is due to the reason that human resources are helping Qantas to deliver effective customer service. Brand value of them is also valuable due to the reason that it helps in increasing the customer attractiveness in the market. Approach and design of the approach of the operations of Qantas helps in creating value for their customers. These valuable resources help Qantas to enter in the new markets and providing positive customer services. Imitability The skills of the human resources cannot get imitated by other competitors. It is unique for Qantas. Brand value of Qantas can also not get imitated. It is difficult for the competing organizations to match the brand value of Qantas. These will reduce the bargaining power of the suppliers and to stay ahead in the competition. Rarity Access to the financial resources by Qantas is rare in nature due to the reason that other airliners will not be able to match the same. In addition, financial resources are also rare in nature and cannot be easily accessed. This helps Qantas to investment more on developing technologies and customer services. Organizational capability Qantas is having the access to the huge financial resources, skilled employees and enhanced brand value. Thus, Qantas is having favorable organizational capability to operate effectively in the global market. Recommendations It is recommended that Qantas should enter the market where still they do not have the presence. This can be termed as market development strategy. This will help Qantas to enhance their business operations and target customer segments. In addition, having more routes in the global market will help Qantas to be a true blue global firm. It is also recommended that Qantas should increase their routes among the non-Australian cities around the world. This is due to the reason majority of the flights of Qantas are centric to Australian cities. Thus, passenger volume for them is limited. Therefore, having more routes among the non-Australian cities will increase the market share. Qantas can now source their aircrafts from the organizations such as Bombardier, ATR and Embraer. This will lower the dependency from the two major suppliers Boeing and Airbus. Thus, the bargaining power of the suppliers will further get discussed. This will also enhance the varieties of aircrafts applicable for different uses and in different routes. Conclusion Thus, it can be concluded that the external and internal environment of Qantas is much more challenging and competitive. It is also being concluded that the Qantas is having variety of sources of gaining competitive advantages, which helps them to have the edge in the market. In addition this report discussed about the generic strategies initiated by Qantas in staying ahead in the competition. Value chain analysis and VIRO framework are being used to determine the sources and sustainability of the competitive advantages. It is being noted that there are some airliners that are ahead of Qantas and some are trailing behind them. Thus, it is more important for them to maintain their competitive advantages in the global market. This report discussed a few recommendations that will help Qantas to have more favorable market position and more sustainability of their competitive advantages. References Crawford, H., Northey, G. A. (2013). The role of the internet in international competitive strategy: the case of Qantas. International Marketing: An Asia-Pacific Perspective, 658-663. David Mc A, B. (2013). Service quality and customer satisfaction in the airline industry: A comparison between legacy airlines and low-cost airlines.American Journal of Tourism Research,2(1), 67-77. Dobbs, M. (2014). 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