This article discusses key issues and challenges that current managers have to encounter in their daily undertakings. In this case, it talks about conflict resolution and labor issues that are supposed to be sorted out for a company to continue executing its operations. The CEO of Qantas Airways Ltd is faced with a labor dispute that has grounded the company’s planes thereby being forced to cancel some flights (Permatasari 1).
Labor strikes are a management issue that different managers might be exposed to as time goes by. Therefore, labor is an important factor of production that has an impact on productivity. This article is very important because it gives managers an insight on what they are supposed to do when they are faced with a strike or labor conflict. A manager should find better ways of dealing with such issues because they ultimately affect performance which can affect the attainment of a given organizations goals.
Synopsis
Key issues
Worker productivity, how business managers should deal with labor issues, conflict resolution, the ability of the external environment to affect management issues in a given organization and decision making when faced complex management issues.
Summary of the article
Labor disputes can be described as strike actions that are undertaken by different trade unions in pursuit of their members’ interests who happen to be employees of various organizations. Employees provide a very important factor of production that is necessary for any organization to continue pursuing its goals.
Managers should be able to hire the best employees who will enable the organization to move forward but this is subject to various terms and conditions that culminate into an agreement. Labor disputes are bound to happen every now and then because of different interests that change in relation to the prevailing conditions in the market.
Strikes can be able to obstruct normal operations of a given organization and such an issue requires a good approach to strategic management for long term sustainability. Good managers should be able to manage such an issue because it will ultimately halt operations as it is the case with Qantas Airways Ltd. Disruptions normally affect clients and this can later on be effected on the company’s stocks (Permatasari 11).
In such cases, managers should be able to come up with good emergency mitigation measures that might not hurt the organization. As much as it can be said that labor conflicts are bound to arise in any business environment, what matters is the ability of managers to navigate in such a scenario through the use of good management skills.
Key lessons
The main agenda of this article is to show that there are labor conflicts that affect an organizations operation which therefore remains as a puzzle to managers. There should be strategies in case there is a labor conflict because it ultimately affects productivity. Managers should be articulate enough to engage everybody because such challenges are very costly to any organization.
Decision making is a very important aspect of strategic management because it gets to a time managers are expected to make quick decisions in the shortest time possible. The external environment players like the government play an important role in such issues and this means that they should be involved.
Therefore, the organization should come up with good measures that will ensure that employees ever changing needs and interests are accommodated without leading to unrest that might halt and affect operations.
Works Cited
Permatasari, Soraya. Qantas CEO Joyce Sees No Quick Resolution to Labor Dispute. Web.
All critical Information needed for the project will be found online.
There will be no need for specialized personnel outside of the project team in the course of the project.
None of the resources needed for the project will cost more than the available budget.
Environmental assumptions
There will be no more incidents relating to safety at Qantas that will force a shift in the objectives of the project.
Operational assumptions
The project team will not need to have any meeting outside of the scheduled ones.
Project team members will produce credible results at each stage of the project so that it will not be necessary to work on portions of the project again.
Project Scope
The project aims at addressing issues of sustainable business practices and change management at Qantas. In particular, the project will focus on the safety of the Qantas planes.
This includes the operations of the planes, the maintenance regimes, emergency procedures and the safety regulatory requirements imposed on the airline. In this respect, it will take into account the image of the airline based on its safety record.
The project will not look at marketing activities, promotion of products, labor union activities and customer service. The only exception is if there is a direct issue connecting the area exempted to safety.
Risks
Resource risks
Information on the safety of Qantas planes will be difficult to come by because of the bad press associated with it. Most companies keep such information confidential or provide versions that present the company in the best light. This may limit the usefulness of the information to the project.
While the team is optimistic that the time allocated and methods identified for the work will be sufficient to see the project through, there is a risk that the project may take longer because of expected difficulty to make time for regular meetings by all team members.
There are no emergency funds for the project. This may affect the capacity of the team to acquire resources.
Operational risks
The skill of the team leader is an important factor in determining the progress of the project. Any lapses will adversely affect the quality of the project output.
Environmental risks
Any sudden changes at Qantas regarding its safety procedures may make the teams work irrelevant.
Constraints
The three key constraints that the project will experience are as follows:
Time is very limited for the project based on the semester calendar. There is no possibility of a deadline extension. This means that the team must be ready to adjust its operational timetable to fit the deadline. It also calls for a careful monitoring of the process to ensure that the team makes progress in its work.
Financial constraints are also significant for this project. This will become serious if there is need to purchase any more resources. This situation may arise if the resources that the team anticipates to find online are not available.
Stakeholders
Qantas is one of the two primary stakeholders. It needs to improve its safety record so that it does not jeopardize its long term business prospects.
The second class of primary stakeholders is the Qantas customers. They need to be reassured of the safety of the planes and the safety procedures at the airline. They deserve to know what the airline is doing to improve its safety record.
Civil Aviation Regulators form an important part of the stakeholder base at the airline. They have the duty of ensuring that all aircrafts are safe for use by the public hence they have an interest in the outcome of the process
The Australian government is also an important stakeholder because it has a duty to protect all the citizens of the country.
Project Team Structure
The project team has a simple structure. It has a project team leader, a project administrator and team members in charge of various roles. The team leader is responsible for overall coordination of the teams’ activities which includes ensuring that the team meets according to schedule.
In addition, the team leader is responsible for the attainment of the project goals by ensuring that all team members play their part. Among the team members, each person has a specific area of the project to research and report to the team. There are members who have stronger research credentials.
They are available to assist the other members to do their research. Also, there are team members who are strong at analyzing information. Their role is to go through the work that other members plan to present to the group for criticism.
Commitment to Quality
The project team aims at providing a high quality report to the stakeholders. This means that in addition to the actual information generated, the final report will have a detailed outline based on industry standards.
To achieve this, the project team members will make sure that their research is of the best quality by getting criticism on their output before presenting it to the group.
Communication and Reporting
There are two levels of reporting in the project. Within the team, the team holds meetings to take stock of progress by all team members. Outside of these meetings, individual members communicate with each other to get assistance and to brief other members of the progress they have made.
Face to face communication happens during group meetings while outside the meetings, members use short message services, phone calls and email to communicate. Outside of this reporting system, the project members will present the final result of the output to project stakeholders. In this case, the course instructor will serve as a proxy stakeholder.
In summary, the team gets a progress report from each team member at least once a week while the project stakeholders will get a final report on the recommendations that the team will develop at the end of the project.
Qantas Airways has been in operation since 1920 when the airline was founded in Australia. The airline is well known for its comfortable and entertaining services.
Passengers who have traveled using Qantas Airways have had the experience of a lifetime given that the company has been awarded many times for its in flight entertainment facilities. The airline operates in 40 countries while serving 140 destinations (Qantas Airways 2012).
The airline has popularized the Sydney hub since it connects many destinations between North America and Australia. The company is also recognized for practicing excellence in the air transport business.
Qantas Airways is hence recognized for its design, excellence and innovation in entertainment. Customers of Qantas Airlines nonetheless face certain risks when they interact with the company. These are elaborated in this paper.
Financial risks
Passengers of Qantas Airways face the risk of financial losses if they fail to make it on time for their flights. This is the same case as for all major airlines which have strict policies to counter lateness. There is always the threat of loss of belongings if passengers are not vigilant while traveling.
Passengers can lose valuable belongings and even money if they are careless while in the middle of strangers. Even though the company is doing well in terms of prestige and flight operations, shareholders are always prone to losses because of uncertainties in the stock markets (Laroche 2003).
For instance, there was a workers strike in 2011 that crippled the airline’s operations. The stock prices of the airline can be affected by such occurrences which affect investor confidence. Flight travel also involves many unanticipated expenses such as entertainment (newspapers/ magazines), extra food and drinks, unknown taxes and cargo charges to and from an airport.
Functional risks
Passengers of Qantas Airways face many functional risks. Passengers who pay for flights are assured of excellent services but the quality of these activities is as per the criteria set by the airline. What the managers consider quality might not please customers and so excellence is never guarantee.
For instance, the entertainment facilities installed in the airline in the form of movies and music might appeal to the youth but appear irrelevant to older passengers. Passengers of Qantas Airways carry plastic money in the form of credit cards (MasterCard/ Visa). These do not guarantee successful completion of transactions because some service operators do not accept them in their business facilities. Currency problems also affect many passengers and they may not be able to carry out certain transactions in various locations.
Passengers cannot be certain that their flights will all arrive in time so that they can get to their destinations at the desired time. Some of the functional risks are related to external factors such as unfavorable weather and violence in some regions. These affect the airline’s ability to deliver its services to the customers (Bennett and McColl-Kennedy 2003).
When these situations occur, customers get their flights delayed and they end up arriving late at their destinations. Customers are always liable to suffer from temporal risks involving long queues in airports at certain seasons (Bitran and Mondschein 1997). The airline industry operates on seasons which are described as either high season or low season. During the high season such as around Christmas time, passengers face overcrowding and long queues when boarding flights or booking for air tickets.
Psychological risks
Passengers who are not complacent with international languages such as English, French, Spanish or Chinese might not be able to communicate effectively with flight attendants. This makes it difficult for them to ask for snacks or directions to the bathroom. Psychological factors affect how customers perceive certain situations (Shemwell and Cronin 1994).
Since Qantas Airways is based in Sydney, some passengers might not want to be associated with it. People from conservative regions such as India and the Middle East might only want to travel with Arabian or Indian airlines such as Qatar and Emirates Airlines.
They might fear that their friends and relatives might not approve of their decisions to travel in an airline that offers secular music and movies for entertainment. Business clients might also fear that their prestige might be lowered if they do not travel with airlines such as Emirates, Virgin Atlantic of KLM.
The safety and comfort of passengers traveling on Qantas Airways might be affected psychologically by the sitting arrangement. For instance, those seated at the back seats might experience smells from the bathroom while those seated where the wing of the plane is might not be able to look outside and view features through the window.
Conclusion
Qantas Airways tries to reduce the impact of these risks by elevating the quality of their services to world class standards. Likewise, the airline offers the same services offered by other prestigious airlines. The airline can however strategize on how to how to get sources of entertainment from every region or allow customers to carry their own materials while on the plane.
List of References
Bennett, R & McColl-Kennedy, JR 2003, Services Marketing: A Managerial Approach, John Wiley & Sons, Milton, QLD.
Bitran, G & Mondschein, S 1997, “Managing the Tug-of-War Between Supply and Demand in the Service Industries”, European Management Journal, Vol. 15, No. 5, pp. 523- 536.
Laroche M, Bergeron J & Goutaland C 2003, “How intangibility affects perceived risk: the moderating role of knowledge and involvement”, Journal of Services Marketing, Vol. 17, No. 2, pp. 122-140.
Shemwell, DJ & Cronin, J 1994, “Services Marketing Strategies for Coping with Demand/Supply Imbalances”, Journal of Services Marketing, Vol. 8 No. 4, pp. 14-24
Globalization has promoted the growth of trade and tourism industries. This has increased demand for travel and has benefited the airlines in many ways. Qantas has been a successful airline that has grown to become internationally recognized.
It serves both domestic and foreign markets. However, by 2009, the airline began experiencing financial constrains due to competition. It was also affected by natural calamities like swine flu that discourage travellers.
It is possible for this airline to restore its position in business by maximizing on the available resources and expanding its markets. The airline can serve both low and high end markets.
This can be achieved by merging with other airlines and differentiating its markets to target each market with the right product. Given that the airline has a wide range of products; it has an added advantage over competitors.
This can be used to plan strategically and promote the company’s revenue generation. As the international business activities increase, the demand for travel also increases. This makes airline a favorable business for investors.
Background Information
The airline industry has benefited from globalization and the growth that has been experienced in trade and tourism. The growth in this industry is associated with the global economy that has improved the income situations for most of the middle families.
Competition is intense in the airline industry since the growing demand for travel has attracted many investors. Qantas started in 1920 with eight aircrafts that flew internationally until 1942. It was later nationalized until 1992 when it became a private organization.
Its shareholders consisted of the British airways and the Australian public. It grew in capacity and formed the Oneworld alliance with other airlines for it to share lounges, joint bookings, and numerous flyer points that improved the quality of services offered by airlines.
The birth of Virgin Blue brought a lot of competition and Qantas launched a low cost airline, Jestar, which could compete with Virgin Blue at the same level. Qantas expanded and grew in capacity.
It has been awarded various awards for being among the best airlines in the world. Cutting cost became a major aspect in the supply chain, proposing merging and concentrating on the core business to overcome the economic crises.
The airline’s profits are going down, and the future is unpredictable especially with the current set backs like the swine flue outbreaks (Hanson, Hitt, Ireland & Hoskisson, 2011).
This report will discuss and analyze the issues affecting Qantas airline. It will establish a strategy in which the company can save itself from collapsing, as well as highlight the relevance of the issues being implemented.
Qantas’ core competencies
Qantas has been growing in capacity due to some of its aspects that keep it ahead of its competitors. For instance, the airline operates other services besides airline and travel.
These include handling baggage and check-in services and passenger lounges and catering services (Hanson, Hitt, Ireland & Hoskisson, 2011). This is a strong point for this organization because the extra forms of business are related to travelling, which is the core business.
The airline has an advantage of concentrating on all travel needs of its passengers into one package. This way, it is easy for Qantas to establish customer loyalty because the passengers will always have a need in one of the diverse services and products that are offered.
Diversity is an aspect that attracts customers and gives an organization a competitive advantage because demand increases with an increase in the range of products. The rivalry experienced from other service providers is easily reduced.
This is achieved by offering enhanced services that add value to the single service that customers would be seeking. The maintenance and repair business also offers the airline an opportunity to maintain its aircrafts cheaply and thus minimize on the costs of operation (Ferrel & Ferrel 2009).
Qantas has been in operation for a longer period when compared to other upcoming airlines. This makes the brand well known both locally and internationally. Such brand knowledge among local and foreign customers puts the airline ahead of the competitors.
The product is widely acknowledged in the market, and the airline can take advantage of this to build customer loyalty unlike the competitors who have to establish a market share.
The airline has been in operation for some time thus it is conversant with the market needs. This can be used as a basis to upgrade the company’s products to fit the customer needs and even exceed the customer expectations.
Previous experiences can also be used in planning and building strategies that can be used to increase revenue in the future (Lyons & Booth, 2011).
Qantas is also in a position to serve both high profile customers and customers who wish to spend moderately (Brescoll, 2012).
Given that the airline is running a high cost and a low cost travel business, the airline can obtain business from all the markets (Hanson, Hitt, Ireland & Hoskisson, 2011).
This is an added advantage because the airline does not have a certain target market since it can accommodate both classes of travelers. This indicates that the high profile customers can still be maintained while the organization seeks to attract low cost travelers too.
When an organization has the advantage of serving all the markets available in any given industry, it has the advantage of gaining a wider market share than the rest of the competitors (Mintzberg, 2000).
Qantas’ strategies for the medium-term future
Qantas is in a good shape, but the situation may change in the future since most of the revenue sustaining it is mostly from the sale of points, the supermarkets, and other non travel business activities (Hanson, Hitt, Ireland & Hoskisson, 2011).
The airline has to plan and establish strategies of attracting passengers and maintaining the costs as low as possible. This is meant to ensure that the airline maintains good numbers of international passengers.
This can be achieved by using aircrafts that consume fuel efficiently while accommodating a bigger number of passengers. This should also be accompanied by a fast turn-around in which planes take a long duration in the air. This ensures that fewer costs are incurred, and the revenue generated increases.
This strategy can be achieved in the short term given that manufacturers are offering good deals for new large aircrafts. Such an investment will help the company cut down on its cost and increase its capacity (Mintzberg, 2000).
Qantas, being an established airline, can benefit from the changing patterns in the way people travel all over the world. Travel is influenced by business and economic activities, as well as holidays and leisure. A lot of people are travelling to work including the low income earners.
Qantas can take advantage of these changing trends to provide products that satisfy these travel needs. The airline can provide flights that exclude meals and offer attractive packages for business travelers in order to cut down on costs.
This will create a target market that is steady since globalization has made travelling a requirement for the international organizations.
The costs directed towards travel agent reservation can be avoided by maximizing the company’s products. This ensures that no extra services are outsourced leading to increased revenue at low expenses (Wu, 2009).
The airline industry has attracted many investors, and this has increased competition for Qantas. The airline should take advantage of its established brand to offer services that make it distinct (Lasevoli & Massi, 2012).
For instance, it can develop its services and products to offer passengers comfort and luxury. This can be provided in Qantas while the other unit, Jestar, offers low cost travel to medium income earners.
Providing leisure passengers with the class they require while offering a bigger business class capacity through Jestar ensures that the airline takes advantage of both markets (Brescoll, 2012).
Possible challenges for Qantas and their solutions
While seeking to expand its operations and increase revenue, Qantas may experience challenges. For example, to make its travel experience more comfortable and luxurious, it will have to add value to its products (Hill & Jones, 2013).
This can be achieved through offering extra services like personalized services that may increase labor cost. The airline can separate the services such that Jestar concentrates on the low income travelers while Qantas specializes with the luxury passengers who can pay for the extra service.
Defining these forms of services ensures that both markets are served according to their needs. Standardizing the aircraft fleets for each class of passengers will lead to low costs of maintenance and operations (Wu, 2009).
The aircraft cycle is relatively fast, and suppliers are likely to produce new brands at a faster rate than the airline can match (Hanson, Hitt, Ireland & Hoskisson, 2011). The airline can merge with other well established airlines so as to keep up with the market demands.
This will give it a great financial power to acquire new aircrafts thus offer schedule options that will attract passengers. It will also have increased opportunities to serve international markets and expand its operations. Scheduling is slowly shifting from maximizing connections and network traffic to reliability in terms of operations.
Airlines are seeking to offer less disruptive travel experience to passengers while cutting down cost at the same time. In this case, increasing the number of schedules provides customers with a wider variety to choose from, and this increases business (Wu, 2009).
Recommendations
For Qantas to achieve maximum revenue from both the luxurious travelers and low income travelers, it should separate its operations. One unit, for instance Jestar, can concentrate on low income travelers while Qantas should focus on high profile customers that need comfort and luxury.
Merging also gives it a greater opportunity to reach a wider market for international travelers.
Another recommendation is standardizing its aircrafts to ensure that the operation costs are maintained as low as possible.
Conclusion
Qantas has benefited from the increased demand for travel and received many awards for being among the best service providers in this industry. It has also registered great profits in the past. However, in the recent times, it has experienced low revenue.
Formulation of strategies that give the company a competitive advantage is critical for the airline to remain in business. Such strategies include low cost operations and provision of superior services than competitors.
Since it is an established brand, it has an advantage over the upcoming airlines. This gives it an opportunity to merge with other established airlines. Obtaining international market is one of the strategies that will see the airline expand its operations.
References List
Brescoll, VL 2012, Who Takes the Floor and Why: Gender, Power, and Volubility. Web.
Ferrel, L & Ferrel, OC 2009, ‘An enterprise-wide strategic stakeholder approach to sales ethics’, Journal of Strategic Marketing, vol. 17, no. 3, pp. 257-270.
Hanson, D, Hitt, MA, Ireland, RD & Hoskisson, RE 2011, Strategic management: competitiveness and globalization, Cengage Learning, Melbourne.
Hill, CWL & Jones, GR 2013, Strategic management: an integrated approach. Cengage Learning, Mason, OH.
Lasevoli, G, & Massi, M 2012, ‘The relationship between sustainable business management and competitiveness: research trends and challenge’, International Journal Of Technology Management, vol. 58, no. 1, pp. 32-48.
Lyons, C & Booth, H 2011, ‘An Overview of Open Access in the Fields of Business and Management’, Journal Of Business & Finance Librarianship, vol. 16, no. 2, pp. 108-124.
Mintzberg, H 2000, The Rise and fall of strategic planning, Pearson Education, London.
Wu, CL 2009, Airline operations and delay management: insights from airline economics, networks, and strategic schedule planning, Ashgate, Farnham, Surrey.
As an airline company, we have the responsibility to act in a manner that will reduce the degradation of environment by ensuring that our operations have the minimum negative effects to the environment.
The first thing that the company must ensure is that all its fleet uses the latest technology in the aviation industry such that carbon emission from the fleet of airlines is reduced. This way, the company will have offered its contributions to the greenhouse effects management menace.
Carbon Footprint Response
As noted by Urip (2010) all companies that deal with transportation have a responsibility to reduce the amount of carbon released to the atmosphere. Qantas airline has invested on the technological path to reduce carbon emissions. The airline seeks to use aircrafts whose engines are of the latest technology to reduce carbon emissions to the atmosphere.
The second strategy utilized by the organization is the use of fuel efficient aircrafts. When an aircraft burns less fuel for specified miles, it means that its contribution to the effects to the atmosphere are limited which makes the aircraft to be environmentally friendly.
Qantas airline on its part has embarked on an elaborate effort to ensure that all of its fleets are fuel efficient to ensure that it does not contribute too much carbon to the atmosphere.
Another strategy that has been employed by Qantas in its bid to manage its carbon foot print is the use of carbon offsetting programs (Qantas Airline 2010). These are programs that are designed to allow individual responsibility of business and persons who use their services.
Carbon offsetting services that are put forth by the airline allow it to charge a premium amount to customers who are willing to reduce their carbon footprints. This extra charge, however, is voluntary in nature.
However, the system has contributed heavily towards making the firm proves its ethical responsibility to the society where by the extra charges charged to the clients who accept the carbon offsetting offer is toped up with some contributions from the airline and later donated to organizations that manage the control of carbon menace.
Through carbon offsetting programs and use of environmentally friendly aircrafts, Qantas airline hopes to protect the Australian environment for sustainability. The group also has adopted another environmentally friendly approach whereby it plants forests and takes care of them till their maturity.
This way, the company is sure that all the carbon produced in its course of running business is taken care of by the forests. These measures are vital approaches that shall guarantee that the firm heavily contributes to the elimination of carbon dioxide in the atmosphere (Qantas Airline, 2010).
In the airline industry, there are several measures that are being employed to control the carbon menace. As noted by Wankel and Malleck (2008) most airlines have adopted the use of online booking, ticketing and electronic receipts or flight confirmation notifications.
These are among the measures that have been put forth in the industry to caution the world against the escalating levels of carbon pollutants. A good example of this in the airline industry is the WestJet airline that has little paper work to reduce cost and environmental pollution.
Another practice that has been advocated by Holloway (2008) and Newell, and Paterson, (2010) is the use of fuel efficient jets that ensures that there are less emissions to the atmosphere and efficient use of fuels. Qantas is slowly becoming renown in this area, which is making the company to gain a competitive edge in the market.
In conclusion, it is recommendable that all airlines should embrace the use of advanced technology in jet engines to ensure that the consumption of fuel and emission of poisonous gasses is put in check.
It is also recommendable that the use of carbon offsetting programs be encouraged to ensure that travelers have an initiated and direct response to the question of carbon footprint. Airline companies such as Qantas must ensure that all the contributions from the customers in the carbon offsetting program submitted to the right organizations having been topped up with the company’s contributions.
Reference List
Holloway, S., 2008. Straight and level: practical airline economics. New York: Ashgate. Print.
Newell, P. and Paterson, M., 2010. Climate Capitalism: Global Warming and the Transformation of the Global Economy. London: CUP. Print.
This assignment is a case study of Qantas airline, which is based in Australia. The assignment discusses the case as well as how the case is updated by the article titled ‘Qantas survival strategy a reality check for unions’.
Qantas airline was exclusively owned by the Australian government but the changes in the aviation industry which started in early 1980s, saw the government sell some of its shares (45%) to other shareholders including British airways in 1993 (Creedy 19).
Up to and until 2007, the firm used to make huge returns despite the deregulation of the aviation industry initiated by the United States. In the wake of the 2008 global financial crisis, the firm’s returns started dwindling.
This made the CEO, Mr Alan Joyce come up with a strategy to ensure that the firm remained competitive in the highly liberalized aviation industry. In this regard, the firm increased capital on its low-cost subsidiary Jetstar airline to compete with other airlines like Malaysian airlines, British airways, Thai airlines and Emirates.
The article is about how workers’ unions work and more specifically, the Qantas workers’ unions. It updates the case by using it as a case study to illustrate the capitalistic nature of many unions. The argument of the authors of the article is that unions are capitalistic in nature contrary to the common rhetoric that they are socialistic in nature.
It also updates the case by the argument that the global financial crisis forced Qantas to strategize on how to sack the highly paid Australian workers and replace them with others from China who could accept low wages and poor working conditions. This was however resisted by the union.
The resistance by the workers’ union was not driven by logic or rationality, but rather, by self-interests. This is because when the firm had the monopoly to control prices, the unions were contented because they were benefiting from the returns of the high prices of products which were passed on to the consumers.
Their bargaining power was however compromised by the highly liberalized global aviation industry which made it possible for any firm to outsource labour and capital so as to remain in business.
Work Cited
Creedy. ‘Qantas and BA struggle to take off”. The Australian, 4 December 2008: 19.
During the period ranging from mid 1990s to 1999, the global aviation industry experienced a rapid growth arising from increase in demand for air travel. In addition, there was an increase in Gross Domestic Product (GDP) in most countries.As a result, the industry grew with a margin of 4% to 6% annually.
However, this trend was reversed at the beginning of the 21st century as a result of changes in the international business environment. The airline industry is characterized by a high degree of volatility. As a result, changes in the international business environment have a significant effect in the operation of all firms in this industry.
One of the firms that operate with in the airline industry is Qantas Airline Limited. The airline operates within the Australian airline industry. Since its establishment in 1920, the airline has managed to establish a portfolio of businesses which include Qantas Holiday, Qantas Frequent Flyer Program, Qantas Freight, Qantas Catering, Qantas, Engineering, and Qantas Defense services within the industry.
The firm serves diverse customer categories that include corporate customers, the government, leisure travelers, wholesalers and travel agents. Some of the contemporary issues facing the firm relate to the recent economic downturn, increase in fuel prices and threat of terrorism.
These issues have affected the performance of Qantas Airline in the Australian Stock Exchange. In an effort to understand how these issues have affected the firm, the researcher sought to conduct an in-depth analysis of the issues.
Analysis of the contemporary issues
Financial crisis
In its operation, Qantas Airline faces numerous financial risks which have a potential of creating a problem in the firm’s future cash flows. The financial risks emanate from changes in the global economic environment.
For example, the recent global economic recession that originated from failure of the US financial institution affected the operation of the firm in a number of ways. For example, there was a reduction in demand for air travel amongst customer in different categories.
During this period, consumers sought alternative means of transport both in the local and international market. Considering the fact that consumers are price sensitive, one of the sectors which pose intense competition to the firm is the low cost airline.
According to Gross and Schroder (2007, p.12), low cost carriers are offering less expensive mode of air travel. As a result, most consumers are considering the low cost carriers as the most cost effective mode of air travel.
Low cost carriers have a higher cost advantage compared to full service carriers which averages 51% as illustrated by Figure 1 below (Cento, 2009, p.21).
Figure 1: Comparison of Low Cost Carrier with Full Service Carriers.
Cost reduction
Cost per seat
Full Service Carriers 100%
Low cost carrier
High aircraft utilization
-2
82
Higher seating density
-16
84
Lower cabin crew cost
-3
79
Outsourcing maintenance
-2
75
Use cheaper secondary airport
-4
73
Minimal station cost
-7
66
Fewer passenger services
-5
61
No agents/GDS commissions
-6
55
Reservation cost
-3
52
Fewer costs
-3
49%
The increased adoption of this business model within the airline industry is posing a threat in the survival of traditional airlines such as Qantas Airlines. The low cost carriers operate within the same route as Qantas thus leading into a significant reduction in the firm’s sales revenue hence its profit.
During its 2009 financial year, the airline’s profit amounted to &181 million. This is a lesser amount compared to its profit during the 2008 financial year which amounted to $ 1,408 million. This indicates a rapid reduction in its profitability.
Reduction in the sales revenue culminated into the firm experiencing a significant decline in the firm’s cash flow. According to Loudon (p.297), the global airline industry is characterized by high fixed, high capital investment and intense price competition.
Therefore a reduction in the firm’s cash flow may affect the firm’s working capital. As a result, the firm would not be able to meet its operation cost. In an effort to survive in such economic environment, the firm may decide to source debt finance from financial institutions.
However, some financial institutions are not willing to advance debt finance to airlines due to the volatile nature of the industry. In such a situation, financial institutions increase the cost of borrowing as a risk mitigation measure.
In addition to interest rate exposure, the airline firms also face currency exposure which arises from fluctuation in the exchange rate. This is due to the fact that its expenses and revenues are denominated in different currencies.
Increase in fuel price
The profitability of the airline industry is dependent on changes in fuel prices (Vedder, 2008, p. 18).
This is due to the fact that jet fuel forms a key component in the operating cost of airlines. Currently, Qantas Airline is facing a risk of fuel crisis as a result of changes in the geopolitical environment in the Middle East countries which are a producer of fossil fuel.
The unrest in the Middle East countries is leading into a shortage in fossil fuel hence affecting the price. According to Loudon (p.299), changes in fuel prices have a direct effect in the cash flow of airlines. In the short term, the airlines revenue may be marginally affected.
However, the long term effects may be adverse since the cost will be passed on to the customers. By the end of March, the management of Qantas announced an increase in its ticket prices in its domestic market.
For example, travelling within Australia increased with $ 10 while the cost of travelling to New Zealand was increased with a margin of 8%.
The management team cited the skyrocketing price of jet fuel as the major cause. During its 2nd quarter in 2011, the firm estimates its jet fuel cost to be US $ 2 billion.
In an effort to survive in this dynamic environment, the Qantas Airline had decided to reduce its size of management team and its domestic and international capacity.
Threat of terrorism
According to Seidenstat and Splane (2009, p.250), the global airline industry is also faced by a risk of increased terrorism. Most terrorism groups around the world are targeting airline companies to undertake their attacks as illustrated by the September 11, 2001 attack in the US.
Terrorism adversely affects airline sales revenue. This arises from the fact that the customers’ preference for air travel is significantly reduced.
Solution
Despite the changes in the international business environment, it is vital for firms to develop a high competitive advantage. This will enable them to survive in the long term as going concern entities.
According to Hoskisson, Hitt and Ireland (2008, p.108), there are various ways through which a firm can develop competitive advantage. However, the firm has to ensure that its products or services are unique from those of its competitors and that they cannot be easily imitated.
Adoption of the Low Cost Carrier Model
Considering the changes in the global airline industry, it is important for Qantas to develop strategies to safeguard against incurring decline in its cash flow. For example as a result of the global economic crisis, the airlines management team should consider integrating the low cost carrier business model.
This will enable the firm to operate cost effectively. The resultant effect is that the airline will be able to adjust its pricing strategy so as to deal with the prevailing price wars.
Adjusting the price will contribute towards the firm increasing its sales revenues and hence its profitability since a large number of customers will be attracted to the airline (Wu, 2009, p. 23). Increase in profitability will enable the firm meet its high fixed costs and other operating costs.
Alternative source of Jet fuel
Considering the effect of rise in jet fuel prices on the firm’s operation, it is paramount Qantas Airlines to undertake a comprehensive cost-benefit analysis with regard to utilizing alternative fuel. A research conducted by NASA in US revealed that utilizing alternative is cost effective (National Research Council, 2006, p. 104).
The firm’s management team should consider utilizing alternative jet fuel rather than over depending on petroleum based fuel. Some of the alternative fuels which should be considered include gasified fuels derived from coal and natural gas fuel.
According to a research conducted by NASA on the effectiveness of these fuels, it was revealed that these fuels have the necessary energy required to fly a commercial flight. One of the alternative jet fuels which the firm should incorporate is biofuel.
The firm can venture into production of biofuel using different agricultural crops such as soya and jatropha. Other alternative fuels which the firm should consider utilizing include methanol, ethanol, and hydrogen (Bassam, 2010, p. 16).
By utilizing these alternative fuels, the firm will be able to caution itself against increase in the petroleum based jet fuel which is highly volatile to changes in the political environment. By integrating alternative fuel, the firm will be able to operate in a social responsible manner.
This arises from the fact that firm will be able minimize emission of carbon dioxide which is a major cause of climate change (Hackey & Neufville, 1999, p.243).
Safety measures
Airline companies have a responsibility to ensure that their customers are safe. Considering the rise in the rate of insecurity within the industry, Qantas, airline should consider enhancing the security of the passengers.
One of the ways through which the firm can enhance its security is by integrating a technology that screens all the passengers to ensure that there are no threats in the course of the flight.
In addition, the airline should ensure that people within its facilities are not threatened by terrorism. For example, firm should employ sufficient and professional security personnel.
Conclusion
The analysis illustrates indicates that the Qantas Airline is faced with a number of challenges emanating from the macroeconomic business environment. The major contemporary issues that the firm is facing includes changes in the global economic crisis, rise in the price of jet fuel and threat of terrorism.
These business changes in the macroeconomic business environment within the airline industry are beyond control of firms in this industry. However, management teams of firms within the Australian airline industry such as Qantas can develop strategies aimed at countering changes in the international business environment.
Recommendations
In order to survive in the volatile airline industry, it is vital for Qantas Airline to consider the following recommendations.
The management team should consider integrating the low cost carrier model. This will enable Qantas to appeal to a large number of potential customers since it will be able to price its flight more fairly.
The airline should also consider utilizing alternative fuels such as hydrogen and biofuel. This will improve the firms’ commitment towards environmental conservation by limiting the amount of emissions.
Reference List
Bassam, N., 2010. Handbook of bioenergy crops: a complete reference to species, development and application. London: Earthscan.
Cento, A., 2009. The airline industry: challenges in the 21st century. Heidelberg, Germany: Physica-Verlag.
Gross, S. & Schroder, A., 2007. Handbook of low cost airlines: strategies, business processes and market environment. Berlin: Enrich Schmidt Verlag.
Hackey, J. & Neufville, R., 1999. Lifecycle model of alternative fuel vehicles: emissions, energy and cost trade-offs. Transportation Research Part A: Policy and Practice. Vol. 35, issue 3, pp. 243-266. Massachusetts: Massachusetts Institute of Technology.
Hoskisson, R., Hitt, M. & Ireland, D., 2008. Competing fro advantage. Mason, OH: Thompson.
National Research Council. 2006. Decadal survey of aeronautics: foundation for the future. Washington, D.C: National Academies Press.
Loudon, G., 2004. Financial risk exposure in the airline industry: evidence from Australia and New Zealand. Australian Journal of Management. Vol. 29, issue2. Sydney:The Australian Graduate School of Management.
Seidenstat, P. & Splane, F., 2009. Protecting airline passengers in the age of terrorism. Santa, Barbara: Praeger Security International.
Vedder, H., 2008. Strategic alliances in the aviation industry an analysis of past and current developments. Munchen: Grin-Verl.
Wu, C., 2009. Airline operation and delay management; insights from airline economics, networks and strategic schedule. Farnham: Ashgate.
This study recommends that Qantas outsource its heavy machinery services to Asia in order to reduce the company’s costs of operations. Also key in the success of the company is a focus on the development of the company’s strategies around four major areas of competency which are attraction of new customers, management of company fleet of planes, management of employees and management of finances. These findings have been developed through a comprehensive analysis of Qantas’s core business strengths and competencies together with an analysis of the Australian aviation industry.
Preliminary findings identified that Qantas is heavily reliant on the development of the Australian economy as well as an increase of passenger demand. Additionally, the company’s performance is greatly boosted by the fact that it has developed good bilateral relationships with other leading airline market leaders. These competencies together with upcoming new opportunities in the aviation industry are set to see the company post increased growth and revenue. However, as this progress is expected, the company is bound to experience a number of legal and union barriers. These factors are further discussed in detail.
Qantas Business Strategy and Corporate Mission
Launched in 1920 as Queensland, Australia’s Qantas undertakes both local and international flights across the globe. The company boasts of being among the largest global airlines in the world; propelled by its prudent strategies as well as an upheaval of its mission statement of being the leading provider of global transport and logistic services in Australia and the world at large (Martin, 1997, p. 53).
Qantas reports that the industry has just come out of an all time low in financial performance, although the aviation industry still remains challenged in light of increasing competition and volatility. With regards to these developments, the company’s latest annual report maintains its two-airline strategy to counter the industry’s unpredictable nature. Qantas is of the opinion that this strategy provides some sense of flexibility where it can ride through the different economic cycles of the aviation industry and leverage the various cycles existent in the market.
In addition, the company upholds the opinion that the two-airline strategy will help it maintain a robust business strategy in coming years. The two-airline strategy incorporates the low fare Jetstar and the full service Qantas which the company hopes to sustain in the long run (with regards to the stiff competition that is characteristic of the aviation industry) (Business Day, 2010).
The main goal of creating jetstar was to provide the lowest costs airline in the world. This strategy was expected to sustain growth in the coming few years and live to be a positive and energetic brand as the company’s corporate mission demanded of it. This strategy has been tried out in 2010 through the adoption of the iPad as an in-flight entertainment system. This was only unique to the airline because no other company had undertaken such an initiative (Business Day, 2010).
Plans are still underway to improve this corporate strategy with fifty recent purchases of Boeing 787 to effectively rejuvenate the two brands. The first batch was expected on June 2010. Fifteen of the new planes will be allocated to the Jetstar brand while the A330-200s will be reallocated to the Qantas brand and the B767-300s will be eliminated from normal operations (Business Day, 2010).
Elimination of old planes brings us to another of Qantas’s core business strategies which is cost cutting and grounding of old airplanes. In this regard, the company has had a good record of diligence and discipline in minimizing its costs over the past few quarters. For instance, in the last quarter, revenues fell by close to 13.4% but the costs were equally slashed by approximately 16.2% (Business Day, 2010).
This measure has enabled the company realize minimal costs as compared to previous years but it has also been supplemented by suspension of flights to unpopular routes. This strategy has enabled the company experience full flights even in light of the recent recession; though its low fares have also been identified to enhance the same (Nigam, 2010).
Industry Structure
Key success factors for the Australian aviation industry and indeed the world have had a positive impact on Qantas. Through a comprehensive strategic analysis of Qantas, the key success factors for the Australian industry have always been the analytical tools for the aviation industry in which the company operates. Considering Qantas majorly relies on the Australian market for its primary customers, this industry analysis is essentially inspired by the tremendous progress the Australian aviation industry has had over the past few years.
The Australian aviation industry has largely endured the motions of the recent financial crisis better than most aviation markets did. While other aviation industries recorded a significant drop in passenger and cargo services, the Australian aviation industry grew. Of the total domestic and international passenger volumes, the Australian passenger volume increased by 1.4% in the year 2009 when the world was experiencing a decrease in passenger volumes. For instance, America recorded a drop of 5.2%; United Kingdom (UK) recorded a drop of 7.2% while Spain recorded the highest drop of 8.1% while other major aviation markets like Germany posted even lower drops (Australian Government, 2010).
The Australian aviation industry has therefore been supported by increasing volumes in passenger services both domestically and internationally. However, the input of the Australian government cannot go unmentioned because through government initiatives, many Australians have been able to travel within and out of the continent for both business and leisure purposes. This was majorly undertaken through a government’s stimulus package that saw many Australian’s keep their jobs and become very confident about travelling (Australian Government, 2010).
Finally, the productivity of the Australian aviation industry has been largely supported by the growth of the Australian economy. Considering Australia is located in one of the most isolated continents in the world, the economy has been largely dependent on the aviation industry. Increasing economic performance, especially compared to other developed economies has therefore increased the demand for Aviation services and consequently led to the increase in demand for Qantas’s services.
SWOT Analysis
Qantas SWOT analysis describes the factors influencing the company’s performance and also justifies its business strategies to date. The company’s growth and future sustainability is also largely dictated by the SWOT analysis.
Strengths
As the Australian aviation industry witnessed an increase in profit margins, Qantas has also seen a significant increase in profit margins. Also key to its success strategy has been the company’s range of subsidiary businesses. This diversity has enabled the company achieve considerable gains from different business portfolios like catering, luggage handling, and engineering sectors (Plunkett, 2009). This has effectively enabled the company manage its supplier obligations and also effectively control the maintenance costs in the long run.
Qantas is also in partnership with other similar companies namely: the American, British, Canadian and Cathay airlines to form the One World Alliance which has effectively enabled the company manage its non-core business activities. Such activities include the ticketing service; advertising and maintenance procedures which have also enabled the company reduce its cost margin as well as cut down costs in certain functional areas such as ticket pricing. In addition, the company has also been able to effectively connect its passengers with different flights while on transit.
The final business strength is the company’s good record of resource management as Australia’s number one airline company. It subsidiary business entities have also provided supplementary services to the company’s main business ventures (Hierling, 2007, p. 16).
Weaknesses
One of the company’s core weaknesses lies in the fact that the company has a poor reliability record especially with regard to safety concerns. For instance, in the period 2008/09 the company had various safety incidents with some of its planes. Although nothing happened, these occurrences greatly dented the company’s image and left a lot to be desired with regard to their safety policies and procedures (Hierling, 2007, pp. 16-17). The company has also experienced one of the worst strikes in the airline industry in 2009. This almost brought the company to a near standstill because operations were uncoordinated by striking workers even though the protest was not sanctioned by their trade unions. The company’s operations were therefore marred by major delays even affecting the operations of other companies.
Opportunities
One of the company’s major opportunities lies in the open skies policy. With the Implementation of this policy, the company is set to enjoy a liberalization of the industry in light of current stringent rules and immense government legislation. Other benefits the company is set to enjoy include a liberalization of the competitive landscape, market driven pricing, equal playing opportunities for all competitors and the freedom to undertake cooperative marketing agreements with other like-minded companies.
Threats
As regards the company’s threats, Virgin Blue poses a lot competition especially with regards to market share because it is the only strong competitor in the Australian aviation market (Hierling, 2007, p. 16). This SWOT analysis can be further summarized as follows:
SWOT Analysis
Strength Increase in its profit margins Wide range of subsidiary businesses. One World Alliance
Qantas has a number of core competencies that have elevated it to be a world-class market leader. First, the company enjoys some form of monopoly of the Australian aviation industry and is therefore immensely knowledgeable on how the Australian aviation market operates. This fact has even made it a highly sought target for partnership agreements with similar airline companies like British Airways and Deccan in India as a strategy for penetration into the Australian market. Secondly, Qantas enjoys sound bilateral relationships with other world leading airlines in the One World Alliance that enabled it achieve a world-class stature (Hussey, 1998, p. 375).
Strategy Recommendations
One of the most viable options for Qantas is to outsource its heavy maintenance services to Asia. Asia is a good destination because as compared to other outsourcing destinations, it is relatively cheap. Moreover, it is in close proximity to Australia. This should especially be done with regards to its long haul fleet of airplanes. This strategy is bound to increase the level of specialization and improve efficiency in the organization because specialized maintenance functions will be undertaken by a specialized company in Asia. In the same regard, the company can also reduce its operational costs because it will not be required to undertake the same services locally (Clark, 2007, p. 208). This will mean a reduction in staff and maintenance costs which are usually expensive in the long run.
The company’s strategy should also seize to be general or specific on only a few functional areas. Studies have affirmed that the airline industry is supported by the pillars of customer attraction, finance management, fleet management, and human resource management which need to be supported by all airline companies that want to withstand the highly competitive nature of the aviation industry (McCabe, 2010).
Thus, the success of Qantas will lie on the company’s strategy to attract many customers, how it will manage its fleet, how it will manage its people and how it will manage its finances. However, with regards to attracting its customers, Qantas has been able to sustain low prices even in light of increasing costs of operations although more still needs to be done with regards to management of the other three core areas. However, this does not mean that it will be smooth sailing all the way after adoption of these strategies because a number of hurdles still lie on the way.
Potential Fallout
Outsourcing a majority of the company’s maintenance services may probably cause a number of job losses. The rough approximation is about 2500 jobs (Rochfort, 2006). Most of this impact will be felt in Australia because approximately 90% of the company’s workforce is based in the locality (Rochfort, 2006). In addition, there a number of legal barriers expected to be advanced by the Australian Licensed Engineers Association which is likely to surface in protection of Engineers’ rights if the company seeks to outsource its services.
The Qantas sales act is the major legal barrier to this kind of strategy because its enactment preceded Qantas’s privatization in 1995. The act stipulates that “of the facilities, taken in aggregate, which are used by Qantas in the provision of scheduled international air transport services (for example, facilities for the maintenance and housing of aircraft, catering flight operations, training and administration), the facilities located in Australia, when compared with those located in any other country, must represent the principal operational centre for Qantas” (Rochfort, 2006).
Qantas’s management is therefore expected to prove that it is not in breach of the law as its tries to strike out a balance between caring for the needs of its employees and stakeholders while also ensuring the company’s prospects for growth is on course. The sales act therefore needs to be reevaluated with regard to the company’s rights in legal foreign ownership. Without any legal amendments to the act, existing legislation is likely to limit Qantas’s access to capital. A lot of union activity should also be expected if the company intends to pursue this strategy (Rochfort, 2006).
References
Australian Government. (2010). Opening Address To Airservices’ 2010 Waypoint Conference. Web.
Clark, P. (2007). Buying The Big Jets: Fleet Planning For Airlines. London; Ashgate Publishing, Ltd.
Hierling, M. (2007). The Australian Airline Industry and the Case of OzJet – A Strategic Analysis Report: Case Study about OzJet and the Airline Industry in Australia. Sydney: GRIN Verlag.
Hussey, D. (1998). Strategic Management: From Theory To Implementation. London: Butterworth-Heinemann.
Martin, S. (1997). The Impact Of Privatisation: Ownership And Corporate Performance In The UK. London: Routledge.
Plunkett, J. W. (2009). Plunkett’s Transportation, Supply Chain and Logistics Industry Almanac 2009 (E-Book): Transportation, Supply Chain and Logistics Industry Market Research, Statistics, Trends and Leading Companies. New York: Plunkett Research, Ltd.
As suggested by Teeple, 2000 globalization is thought of as various mechanisms or processes that aim at creating and consolidating a unified world in terms of economy and culture characterized by a complex link of information sharing that is world wide.
With this concept, the world has experienced free movement of people, goods and services and capital between and among countries made possible by the advent in technology information. As a result the world has no doubt turned into a global village fashioned by interconnectedness and interdependence.
It is evident that through globalization cultures are being exported throughout the world as various societies are compelled to evolve and co-exist with the changes brought about by globalization. It is worth remembering that globalization has impact not only in terms of economy but culture, politics as well as environmentally.
All these have brought about contemporary issues when doing business in the international arena. Having in mind that businesses need to stay competitive, there is thus need to adequately and timely address the emerging contemporary issues (Swanson, 1993).
For the sake of this assignment, Qantas airlines will be used in providing insights on issues facing airline industries when doing business beyond borders. The airline was founded back in 1920 and is the flag carrier of Australia. The airline is Sydney where it has its main hub.
The airline has been deemed to be a four star airline according to Skytrax. Globally, it has been voted to be the 7th best airline although this is a drop from previous years. It also trades in the Australian stock exchange markets. Being the second oldest airline in the world, it started going international back in 1935. Currently, the airline operates both domestic as well as international flights.
Among the international destination include; Africa (South Africa), East Asia (China and Japan), south Asia (India), southeast Asia (Indonesia, Philippines, Singapore and Thailand), Europe (Germany and UK), North America (U.S), South America (Argentina). Domestic destinations include Queensland, northern territory, and New South Wales among others.
This thus shows clearly that the airline operates internally since its flights are destined to all continents. The essay will thus elucidate on the major contemporary issues facing the airlines, the available alternatives and finally one best alternative is selected for recommendation (Chesterton & Markson, 2008).
Key contemporary issues facing Qantas airlines
One major issue facing the airline is with regards to safety and security. Considering the happenings of September 2001 in United States of Americas and in the recent past where individuals have been intercepted carrying detonators and bombs, there customers have raised concern and are scared on who to trust when travelling to other countries.
With such a case customers have already shifted to other airlines that have been deemed to be more secure inn terms of screening. It is worth noting that all these issues concerning terrorism have been heightened by technological advancement. Terrorists need not to travel to be given instructions on how to execute the evil act; this can be comfortably accomplished through various means such as e-mails despite the geographical distance.
Additionally, it is worth to note that the recent happenings especially in Middle East countries and some countries in Africa particularly Egypt, Libya and Tunisia have threatened the airline business expansion strategy. The political instability which has seen to it that the various infrastructures and security issues have been negatively affected jeopardizes the airlines plans of expanding its business.
According to Joshi, 2009 stiff competition in the airline industry is another contemporary issue facing Qantas airlines. It is worth noting that while carrying out international business; it finds itself fighting with other giant companies such as British Airways, Virgin Atlantic which is new in business among others.
It has been shown that when a firm does not have a sound plan on how to tackle competition, it can easily find it self in trouble and even close its business operations. Just like any other organization whether for profit or non profit ethical issues when failed to be adequately addressed or prevented from happening can negatively impact on an organization.
Although the airline has not yet been reported to have violated the rules of business to gain enormous profits at the expense of the relevant stakeholders, there is need to have plans in place to ensure this does not happen. Similarly, the world has come to realize that to save the environment; individuals to corporate have been called upon to cut down on their carbon footprints.
This is one area that the airline has found it rough (Daniels et al., 2007). Cutting down on carbon footprint will enhance a cleaner environment. Having in mind that the only constant is change, the recent technological advancement is one issue that has proved to be a challenge to each and every organization Qantas airlines not being an exception.
A number of organizations that have mastered how to manage technological adoption have used the same as a competitive advantage. The airline in the wake of early 2000 was lagging behind in adopting technology (Chesterton & Markson, 2008). However, when it did, the strategy was not well crafted to be successfully utilized in marketing, training workers as well as attaining the demands of customers.
Another serious contemporary issue that was and still proves to be a challenge to the airline is with regards to customers issues. It has been noted that the firm has lost control over the customers. This has been attributed to technological advancement and competition.
Additionally, there is need to note the demographic changes in the customers that need the airlines services (Chesterton & Markson, 2008). The younger generation needs latest entertainment equipment among other sophisticated things. On the same note due to technology and better education the expectations of customers have tremendously change as majority demand for high quality and sophisticated services.
Operating cost creep and financial crisis not only have a domestic impact but also a global impact. Interestingly, when there is a financial crisis for instance the one that happened between 2008 and 2010, majority of the potential travelers opted to tighten the zips of their wallet and only spend their money on necessary goods and services.
At such times the currency tremendously loss value (Kaplan, 2005). For that matter the industry failed to enjoy enormous revenues and profits forcing it to lay off some employees. On the same note, uncontrollable costs such as government taxes and tariffs, insurance as well as utilities have tremendously risen.
This coupled with the unpredictable jet fuel prices has negatively impacted on the airlines business. Additionally, there are a number of global uncertainties apart from terrorism. For instance diseases outbreaks such as SARS have negatively impacted to the industry.
It is worth mention also that bird flu also brought a considerable loss tot eh firm. Although no one has control over natural disasters, the volcanic eruption in Europe as well as bad whether in countries of destination brushes the industry the wrong way (Joshi, 2009).
Alternative actions
According to Daniel, et al, 2007 there are several options that the firm can take to address the raised issue before things go beyond hand. In business, one option is to do nothing and leave nature takes its course. Secondly adopting a culture of a learning organization has been brought forth by numerous scholars to be another alternative that can be adopted in solving a myriad of issues facing an organization.
Thirdly, it will also be rational if the airline sought to form alliances with other similar organization. This can be done by forming partnerships, merging as well as acquiring other firms. Similarly reengineering and restructuring will call for the organization to fully change everything with regards to how it does business.
To successfully tackle the issue of competition, the airline can resort to gain competitive advantage through offering customers high quality in-service, improved security and safety measures among others. The service can include comfortable seats that are well spaced, sophisticated entertainment services similarly the variety of food served need to be further expanded to include endless list of bites drinks and other foodstuffs (Kaplan, 2005).
Alternatively, the airline can actively engage in adopting a promotional strategy that will help show case Australia. This will help enhance international tourism hence increasing customers or passengers’ numbers. To meet the demand of increased number of passengers, it might be rational for the firm to increase the number of flights.
Lastly and more importantly, I propose that the firm need to come up with policies and code of conducts that will be inline with the host country to help curb ethical issues (Chesterton & Markson, 2008).
Evaluation of the alternatives
All the proposed alternatives have their stronger and weaker sides. Not doing anything is a reactive strategy that will make the firm loss the trust of all its stakeholders starting from passengers. The only advantage with this alternative is that it requires no financial budget, however if the worse happens then the whole organization will be brought to its knees.
Adopting culture of an organizational learning has numerous advantages but one major one is that it will make the organization be an environment where its workforce are open minded and willing to adopt change (Travis, 2007). The major problem with the strategy is that it will take time and resources for it to be realized.
Reengineering and restructuring will mean that the company changes almost everything ranging from its vision and mission statement. The new picture created may be appealing to some of the existing customers as well as new ones. However, the alternative calls for allocation of huge resources and might results to losing loyal customers.
Merging, alliances as well as acquisition helps organization pull together resources hence have a sound when it comes to negotiating for a number of issues in business. It also helps cut down running costs there by increasing profit margin (Laurie, 2001).
However there are higher chances of conflict of interest when organizations merge or form a partnership. Offering of high quality in-service will definitely attract customers but only for a short term. On the other hand, the venture is too expensive and it can be easily copied by the competitors eventually making the whole initiative obsolete.
Developing policies and code of conducts that are in line with the laws and regulations of host country will help in upholding higher standards of ethics. Nonetheless, this limits individuals not to think outside the box hens inhibiting innovation and creativity (Travis, 2007).
Conclusion and Recommendations
From the analysis of the proposed alternative, I suggest the airlines adopt the one with regards to a learning organization. It is worth mentioning that a learning organization has a number of benefits. For instance it will help the airline maintain higher levels of innovation and creativity hence being competitive.
Similarly, a learning organization will better place Qantas airlines in responding to external factors hence maintaining competitive advantage (Senge et. al. 1994). Similarly, learning organization when it comes to the issue pertaining to changes, the firm will be at an advantage as it can adopt change quickly and successfully.
In situations where the relationship between the organization and their relevant stakeholders are analyzed, a learning organization through the five characteristics of a learning organization (team learning, system thinking, mental models, and personal mastery and shared vision) makes it to be people-centered firm. This brings with it a number of advantages such as improved corporate image.
References
Backman, M. & Charlotte B. 2003. Big in Asia: 25 strategies for business success. Basingstoke: Palgrave Macmillan
Chesterton, A. & Markson, S. (2008). “Qantas QF30 drama potentially threatens jumbos’ future”. The Sunday Telegraph. July 27 2008.
Daniels, J., Radebaugh, L., Sullivan, D. 2007. International business: Environment and operations. New York: Prentice Hall.
Joshi, R. 2009. International business. Oxford University: Oxford University Press.
Kaplan, S. 2005. Bag the elephant: How to win & keep big customers. New York: Wiley & Sons.
Laurie, D. 2001. From battlefield to boardroom: winning management strategies for today’s global Business. New York: Palgrave.
Senge, P. et. Al.1994. The fifth discipline fieldbook: Strategies and tools for building a learning organization. London: Sage.
Swanson, C. 1993. The dilemma of globalization: emerging strategic concerns in international business. Greenwich, Conn.: JAI Press.
Teeple, A. 2000. “What is globalization?” In McBride, S. Globalization and its discontent. London: Macmillan.
Travis, T. 2007. Doing business anywhere: The essential guide to going global. Hoboken: John Wiley & Sons.
This idea aims to utilize the internet to be able to reach more customers as well as potential clients. It is an innovative idea given the fact that the Qantas has not yet embraced the use of the World Wide Web as a marketing tool. This method of marketing is also cheaper compared with the conventional ways of marketing, like running advertisements in the broadcast media, as well as doing roadshows. It is also easy to reach a larger target market internationally since the internet is not limited to distance as compared to other forms of marketing that are limited to the individual customer’s preferences (Acker 2011).
Thus, Qantas can embrace this marketing idea to enable development and acquire more business. The concept is simple as it involves starting the company’s social media account, such as Facebook, Twitter, and Instagram. Qantas then assigns some marketing executives the duty of promoting the Bali route through these accounts and answering customers’ questions and complaints. Furthermore, the use of an email database can be employed to help keep in touch with our customers by sending them regular newsletters, happy birthday cards, and anniversaries. Thus, by doing so, Qantas will develop a personal touch with the travelers and, in the process, increasing their loyalty leading to more business growth through referrals.
Loyalty Scheme
In the previous years, Qantas was able to acquire many customers for the Bali route, but it has not developed a means to reward these customers for their loyalty. Thus, this idea seeks to strengthen the bond between the company and its customers. The scheme will work in such a way that customers are given smart cards like the ones given in supermarkets and retail stores (Kerin 2012). The customers can then use their cards to pay for trips at a given discount. This will encourage them to be loyal, and even potential customers will be lured to become clients due to the promise of getting frequent discounts as a result of the loyalty scheme. The discounts will not be limited to the Bali route only, but to all other routes, the airline operates in.
Improved Customer Service
This is the most basic marketing idea that is often ignored by most companies. This idea seeks to reduce the number of client turnover, which has led to a reduction in business in recent days. Qantas is to come up with a twenty-four-hour customer service call center that is designed to resolve customer complaints. This will increase customer confidence, as well as create a good brand name for the company through referrals and word of mouth among the customers and their associates. Thus, a good brand name will lead to more travelers being convinced to use the Bali route since they already trust Qantas.
Promotions
Qantas should offer promotional gifts to customers that travel by their Bali routes. This idea will work to ensure that clients are given free t-shirts that are labeled Bali route or other free products. Furthermore, Qantas can come up with a system whereby if the individual travels via the Bali route, then they qualify for a free trip through Bali using Qantas airline. Thus, such a promotion is exciting to the general public, and many people will travel through the route so that they can get a free trip. This will, in turn, increase the client base leading to business growth (Turban 2010).
Reference List
Acker, D 2011, Developing Business Strategies, John Wiley, New York. Web.
Kerin, R 2012, Marketing: The Core, McGraw Hill, New York. Web.
Turban, E 2010, Electronic Commerce, Prentice Hall, London. Web.