Category: Qantas Airways

Introduction

Qantas airways Limited is the national carrier for Australia with its headquarters located in Sydney. The main hub of the carrier is at Sydney airport. It is well known for being the largest in Australia as well as being the oldest to have continuously operated in the world. Qantas operates Jetstar, a low cost carrier which has proven to be a great success. The airline has succeeded in the operation of this two differing airline brands which have been termed to be very strong yet very distinct.

Qantas is among the worlds most prominent full service airlines. Having operated for over 90 years now, it has been grossly profitable and also has been growing at good rate with improvements on its premium standards in its products and also services.

At the same time Jetstar has grown over the few years and has been in operation from domestic flights in Australia to flights within intra-Asia and now across the Asia pacific. The airline has been garnering a lot of profit and it is also among the best low cost airlines in the world (Jetstar Airways 2006).

Strategies

The main competitor of Qantas domestically is virgin blue with its brand of “a new world carrier”. The chief advantage of Qantas is that it has been able to meet the needs of its entire customer base in a profitable manner. The main reason as to why the airline decided to engage in the dual band strategy varies in aspects.

Australian aviation industry is the most liberalized in the world today. Some airlines started the low cost airline business earlier on in the year 2000. The companies in this case are virgin blue and impulse. This was after other entrants had tried to get into the market prior to them. This called for a dire need to protect the position of the company in the market, such that it could be able to maintain a competitive position in the market. This was fallowed by the acquiring of Impulse just before it was declared bankrupt, thus having an upper hand over the competitors.

After the collapse of Ansett and the halting of international travel owing to the September 11^th attacks, the company increased its domestic base and the customer number increased as well. At this time, the competitors being still small and the market share being so large, maintenance of the domestic share proved a bit expensive to Qantas thus the need to go low cost came into the limelight.

Jetstar came up to compete with Qantas in low cost routes that would also have an impact on the profits of Qantas. The biggest issue was to surpass the notion that this was bound to fail, as it had been so in other prior competitors.

In the company’s strategy, Jetstar was based on principles which were learnt from the past failures of the other carriers. In the first place, the airline was bound to have different industrial arrangements and management of operations. In this way, the operation of the airline was veered off the full service boards.

This was supposed to be a totally low cost carrier and not a bridge between the two, as was the case of Australian airlines. At this stage, the company went ahead to introduce a domestic price which was 15% less than that of virgin blue and an international price 20% less than the cheapest competitor (Gregg 2007).

Efficiency in this case was enhanced through the simplification of products and overheads through the use of overheads and also products. Structures in the workplace were established which would be able to suit the operation of the new carrier. These structures were on the industrial relations, pilot rates and also the hiring basis of the employees.

The other strategy was optimization of the group returns other than a collaboration of the two airlines. In this case, there was maintenance of the group oversight of both airlines and a subsequent network of the two which would in turn optimize the group returns.

To avoid the low cost airline interfering with the parent airline, a special committee was established to coordinate the operations of the former. If there were to be any differences in the opinions of the two airlines, the subject was left to the top individuals. The competition between the two airlines has give place for the two airlines to be responsible for setting of their prices based on their own grounds (Rochfort 2009).

Another strategy was a continued investment on products and services. Qantas being the core of the group has been vested with much interest having successfully been ranked among the best airlines in the world. It thus has been continuously supported with credible investment on quality of service to the personnel. This has made the airline to enjoy over 50 percent of the domestic market share, and has an upper hand over its competitor, virgin blue, by surpassing it with over 35 percent premiums.

In the international field, the strategy has worked well in that it was able to make a good start by making over $3 million within the first few months. This has though been met with opposition by those who see it as a way of demeaning conditions posed by Qantas (Simpliflying 2010).

Challenges

At the same time, the company has faced some challenges in the market. A new company, Tiger has emerged, virgin has adjusted its product and made new introductions, more low cost models which are long haul are emerging, privatization of airports and expansion of hub carriers. This can only be controlled by being flexible like transitioning some routes to a lower cost, switching domestic and also the international capacity and being completely low fare through Jetstar (Warne 2006).

Risks

Some of the risks that the company is bound to encounter include the prospective low earnings. This is mainly due to the uncertainty in the cost of fuel and also an increase in the capital expenditure. This however has been supported by the dual system and the strength in the liquidity of the company which keeps it with an upper hand as compared to its chief competitors. The other risk is the increase in competition from some of the key routes. The timing of its recovery is also uncertain, thus making it more risky.

The effective deployment of Jetstar to some of the New Zealand and Japan routes go hand in hand with the maintenance of its risk profile. This gives it the advantage of having maximum profits in cyclic lows. This has been effective in the way Jetstar has grown to be a leading flight in these leisure routes (Standards and Poor’s 2010).

Importance of Jetstar

The focus on Jetstar is more important in that it has and will help the company to maintain its lead in the market shares, both in the domestic and in the international arena. This will enhance an effective competition in cost and thus the Asian leisure travel will have overly grown. With this factor being successful as it is deemed to be, earnings for Qantas will improve in the near term which will be advantageous to it in case the business travel remains stagnant.

References

Gregg, P. (2007) World Low Cost Airline Congress 2007. Web.

Jetstar Airways (2006) Jetstar move to single brand and distribution approach to support growth in Asia. Web.

Rochfort, S. (2009) Qantas revs up Jetstar expansion. Web.

Simpliflying (2010) Australia’s Qantas Airways – the world’s most agile airline brand? Web.

Standards and Poor’s (2010) Qantas Airways Ltd. Web.

Warne, D. (2006) Qantas to finally offer inflight broadband. Web.

Executive summary

This report concentrates on analysing Qantas using the 13 steps of firm analysis. It has established that the business establishment is one of the largest enterprises operating in the aviation sector in Australia. In addition, the company has expanded its operations to international markets. The report notes that Qantas is characterised by strengths such as marketing, versatile businesses and customer satisfaction. Weaknesses of the company are over-reliance on a single market, spiralling oil prices and poor employee relationships. Increased competition from business rivals and increased prices of aviation equipment. The following are the opportunities of the enterprise: expanding global population, better aeroplanes and improved technologies. Various recommendations have also been suggested in order for the management to deal with threats.

Introduction

Qantas was founded in 1920 in Queensland to offer air transport services (Qantas par. 1). Two years after its establishment, it merged with a British air firm to expand services to the UK and neighbouring nations. However, its operations were disrupted in 1942 after the World War II negatively impacted Singapore. It is notable that the firm has experienced many changes with regard to restructuring that were aimed at increasing performance outcomes. It has also been involved in a number of mergers and acquisitions (Mules 2). For example, in 1992, it purchased Australian Airlines from the Australian government. Although the air aviation industry is typified by a high level of competition, the company has always focused on remaining up to date with aeroplanes. For example, in 2005, the management ordered 115 Boeing 787. However, it experienced problems that were related to outsourcing. In fact, by 2009, the aeroplanes had not been delivered to the firm. Thus, it resulted to other ways of acquiring modern aeroplanes that could greatly improve its performance (Bonn and Rundle-Thiele 615; Qantas par. 4). Although its turnover increased in 2013, it is important to underscore that net profit reduced marginally for the 2012-2013 financial year. The first five steps concentrate on external factors while the remaining eight steps deal with internal matters. This paper aims at analysing the firm using the 13 steps of company analysis. In addition, it focuses on giving recommendations that should be adopted by the management so that it would the performance of the business establishment.

External analysis

Step 1: The industry

The company operates in the aviation industry in Australia (Qantas par. 1). It is notable that the sector is characterised by a number of players, which implies that there is a high level of competition. Different airline companies use various methods to attract and maintain customers, who are from local and international markets. It is important to note that the industry is regulated to ensure high levels of safety and business transparency (Bonn and Rundle-Thiele 615).

Step 2: General environment analysis

From a business perspective, it would be critical to assert that the environment plays an important role that could negatively or positively impact any business organisation. In the context of Qantas in Australia, seven elements in the environment could be analysed. These are economic, physical, socio-cultural, global, technological, political/legal, and demographic (Bonn and Rundle-Thiele 616).

Over the years, economic issues have been positively or negatively affecting the firm. For example, dynamics in currency exchange rates have affected the earnings realised by Qantas. Another economic factor is the rate at which money loses value (inflation rate).

Physical elements have enabled the firm to achieve exemplary results. For example, the government has focused on building modern airports that help airline firms to operate effectively. In addition, airport facilities in other nations are developed well to give airline firms modern physical facilities to support their operations (Bonn and Rundle-Thiele 617).

Socio-cultural elements with regard to Qantas could be viewed from a social standpoint. The Australian and international markets are typified by changing cultural attributes due to relatively high rates of migration. If the firm can aim at learning socio-cultural trends, then it can greatly improve its performance.

Global elements impact the business establishment because it operates in both local and international markets. For example, global issues in relation to terrorism might negatively impact the firm because local and international travellers might not travel to destinations that are characterised by terrorist threats (Bonn and Rundle-Thiele 620). In addition, changes in global events might lead to strengthening and/or weakening of the Australian dollar and international currencies. For example, political instabilities in some parts of the world might weak currencies weak and/or strong.

Technological elements have been affecting many organisations in the past. Notably, technological advancements have realised in the recent past. The adoption of the internet in relation doing businesses has been a critical step towards achieving exemplary results. It is notable that the airlines firm uses an online platform, which is used by consumers to book flights across the world. In addition, the adoption of social media platforms, such as Facebook and Twitter, has culminated in better outcomes because the firm can respond to issues in a fast and more effective manner (Bonn and Rundle-Thiele 618).

Political/legal issues of the environment could be used to learn about how the business establishment has been affected by politics and legal matters. In Australia, political events have not negatively affected the firm. In fact, the political atmosphere in the nation has been important to support operations of organisations in the aviation industry. For example, the government has been at the forefront in designing policies that would result in more effective operations in the sector. Furthermore, policies have been implemented with a view to making airline companies improve their outcomes and enhance safety of travellers. In the context of international markets, the enterprise does not have much influence on political/legal issues. However, such issues affect it. For instance, political instability in countries such as Egypt and Afghanistan could imply reduced business activities, which could reduce earnings made by the firm. In relation to demographics in Australia, it is notable that both the middle-aged and the aged are more conscious about safety and prices. Thus, the two issues (safety and prices) could present huge opportunities to the management, which would focus on improving safety trends and using the appropriate approach to set very competitive prices for various destinations. In fact, the two issues could be utilised to gain competitive advantage both in the local and foreign markets (Qantas par. 7). In analysing the demographics of Qantas, one might conclude that there is a good market of middle-income groups in Australian cities that require fast, relatively cheap and safe airline transportation services (Bonn and Rundle-Thiele 619).

Step 3: The industry environment

In analysing the industry environment, it would be critical to look at the five Porter’s forces. First, supplier power is relatively low, and this ensures that firms in the aviation sector could have much influence on suppliers when they are making purchases. Second, buyer power is high, which implies that consumers have to be considered when prices are being set. In addition, other factors have to be put into consideration. Third, issues involved in new entrants prevent many potential companies from entering the sector. For example, business establishments are required to adhere to a minimum capital requirement, safety regulations and personnel requirements, among others. The requirements make the industry hard to enter. Fourth, with regard to substitute products, it is critical to note that there are no alternative services to air transport. However, people could result to travel using effective and fast trains and vehicles. Finally, rivalry among competitors is remarkable in the aviation sector in Australia (Qantas par. 8). Various companies are aiming at attracting and maintaining customers, who would be essential in improving outcomes. Different approaches are used, such as low pricing. It is critical to conclude that the key force in the environment is rivalry among competitors. However, it is prudent to conclude that the industry is quite attractive.

Step 4: Competitive environment

The top three business rivals of Qantas are Virgin Australia Holdings Limited, United Continental Holdings, Inc. and Singapore Airlines Limited. The capabilities that the firms have are excellent physical facilities, competent workforces, effective marketing, and corporate social responsibilities. In addition, they use pricing strategies. Thus, if Qantas adopts high pricing, then it would lose the market to its competitors.

Step 5: Opportunities and threats

Opportunities and threats are external factors that could affect the business establishment. It is essential to emphasise that opportunities would result in better business outcomes while threats would result in reduced earnings. An important opportunity is in relation to the expanding global population, which implies that there would be increased demand for airline transport services. In addition, the management would attract and retain customers using improvements of technological platforms. Finally, the manufacture of modern aeroplanes might result in better services if the management would purchase them. One threat that would affect the company is increased competition from business rivals. Another threat is increase in prices of modern aviation facilities, such as aeroplanes (Qantas par. 3).

Internal analysis

Step 6: The firm’s resources (both tangible and intangible)

Resources within a firm are grouped with the aim of helping the management to make strategic decisions, assessing the worth of a company and allowing investors to reap the benefits of asset ownership (Ringland and Young 67). Tangible assets are used to represent opportunities in relation to the production of goods. They include buildings, land and aeroplanes. On the other hand, intangible resources do not have physical forms, but they are used to represent sources of economic advantages that would result in the future. Examples are goodwill and intellectual property rights (Mules 2).

Based on the financial information of Qantas, the business establishment has goodwill of 195,000 USD. However, property plant and equipment are not reflected on the balance sheet (Fusion Media Limited par. 4). The total value of intangible assets is about 548,000 USD.

Step 7: Capabilities identification

The firm is typified by the following capabilities:

1. Marketing
2. Customer satisfaction
3. Versatile businesses

Over the years, Qantas has been involved in strategic marketing of its services. This has been critical in attracting and retaining customers in the airlines transport sector. Another capability that the company has is in relation to customer satisfaction. The management focuses on ensuring that consumers are handled in the right ways, resulting in loyalty and increased revenues. Finally, the firm has adopted other business activities that are not related to flight services, such as catering and aircraft engineering (Mules 2).

Step 8: Core competency analysis

Core competency analysis could be analysed by conducting four steps that are presented in the table below:

Figure 1. Analysis of the core competencies of the firm.

Step 9: Value chain analysis

Value chain analysis could be done by analysing the primary and support activities of the company (Ringland and Young 20). In this context, the primary activity of the firm is offering airline transport. Support activities include all other activities that are aimed at achieving the goals vis-a-vis the primary activity. They include marketing and CSR activities (Mules 3). Thus, it can be concluded that it has focused on implementing support services in order to achieve its core activity.

Step 10: Weaknesses

Notably, the company is typified by three key weaknesses. First, it has poor relationships with its personnel. The management was involved in conflicts with personnel working in its engineering department in 2008. The conflict resulted from a wage agreement that was effected by the management. However, the issue was solved later and the employees’ wages were increased by between 4% and 5.8%. It is critical to note that the matter was important to the operations of the firm because it could lead to disruption of its activities. In addition, such a matter could make workers have negative trust to the business establishment. Second, Qantas over depends on a single market. Although the firm has entered international markets, it is clear that it generates much of its revenues from the Australian market (Mules 2). Thus, any negative market dynamics in the local market would have great negative impacts on its earnings. Some of possible issues include unstable political atmosphere and economic depression. Third, spiralling costs in the aviation sector, especially fuel costs, have impacted the enterprise negatively (Mules 4). In 2008, the management stated that it could utilise the best approaches to prevent effects of spiralling oil prices. However, the business environment was very very unpredictable. As a result, it was forced to reduce other costs in relation to operations so that it could remain competitive in the market. Some of the costs were those that were related to salaries and flight capacity (Mules 4).

Step 11: Pulling it together (SWOT analysis)

Based on the evidence identified in the internal analysis and external analysis, a SWOT analysis of the firm could be summarised as follows:

Figure 2. A SWOT analysis of Qantas.

Step 12: Current strategies

It is notable that Qantas has adopted three key strategies to achieve its goals (Ringland and Young 34). First, the management has focused on establishing a strong corporate image. This is aimed at making the firm a company to reckon with both in the local and international markets. Second, the firm concentrates on offering exemplary customer service. It achieves this by employing sufficient workers to handle customers. Its main goal of offering high quality customer service is to gain competitive advantage by attracting and retaining consumers (Ringland and Young 34). Third, the management has been at the forefront in terms of adopting corporate social responsibility. This has been aimed at managing the environment, which supports its operations (Mules 3).

Step 13: Strategies

In order for the company to deal with the threats identified in this report, it would be important for it to adopt a set of recommendations at the business level, corporate level and international level. It would be recommended that the management should focus on low pricing, which would be applied at international level to attract consumers. In fact, this would be achieved in relation to pricing strategies adopted by international business rivals. At the business level, the firm should adopt personalised marketing, which would aim at addressing needs of specific customers. At the corporate level, it would be recommended that the business establishment should concentrate on adopting effective communication approaches to pass messages to various stakeholders.

Conclusion

It is evident that Qantas is a giant that specialises in offering flight services and other versatile business services. The 13-step analysis adopted in this report has demonstrated various factors that typify the organisation both internally and externally. Based on the analysis, the firm would utilise market opportunities by adopting the recommendations proposed in this paper.

Works Cited

Bonn, Ingrid, and Sharyn Rundle-Thiele. “Do or die—Strategic decision-making following a shock event.” Tourism Management 28.2 (2007): 615-620. Print.

Fusion Media Limited. Qantas Airways Ltd. (QAN). Web.

Mules, Rachel. “The long haul: The QANTAS-Emirates Alliance.” Busidate 21.3 (2013): 2-4. Print.

Qantas. Home. Web.

Ringland, Gill, and Laurie Young. Scenarios in Marketing: From vision to decision. John Wiley & Sons, 2007. Print.

Introduction

Different environmental factors play a key responsibility in managers’ decisions and organisation’s success. Managers cannot avoid those factors. All the factors need to be analyzed so that managers can take decisions effectively. There are some factors, which cannot be controlled by manager, thus the controllable factors need much attention of the manager.

Background and Environmental Discussion on Qantas

As a result of recent collapse of airlines industry, Qantas Airlines takes few initiatives to change its environment. It is important because this is done to provide the firm with an explanation of the elements in society that straightforwardly affect the industry. Sometimes managers should take some measure to implement appropriate strategies to survive. In order to compete with other airlines industry and to ensure highest facilities for customer, Qantas is committed to alter its environment. Six key factors of environmental issue will be discussed here.

Political & Legal Factors

Politics is one of the most significant issue for Qantas and it has both hopeful and negative affect on success. Political factors in Australia effectively helped Qantas to formulate plans and policies.

Economic Factors

Qantas is experiencing an extremely competitive market as the government strengthens the security laws for internationally and domestically which has led to huge drop in passenger number. The recent increase in oil prices has been a threat for the aviation sector’s success.

Socio-Cultural

Qantas keeps relationship with various regional carriers. Oneworld Alliance is the philosophy that links the need for culture change and the long-term best interest. Qantas used union to increase market share and thus the company flourished.

Demographic

Air travel is must for individuals all over the world. As Australia is not much populated, sometimes Qantas has to attract customers aggressively. Now a day’s air travel is not much costly so Qantas can expect different aged customers.

Technological

By keeping Impulse airlines, which has changed into Jetstar, as a stand-alone unit, Qantas has been able to originate cost savings from using Impulse’s low-operating cost, all-economy class, and efficient staffing/labour practice. The modification in policy has enabled Qantas to apply some of its strategic learning’s from this low cost model develop Jetstar.

Global

Global factor constantly changes due to government interference and the incidents happening on a continuous basis. In spite of population of 20 million, Australia is number four in the world relating to domestic passenger-kilometres-performed. Though there were recent turmoil in the aviation industry of Australia, Qantas was able to increase its profit remarkably.

Task Environmental Analysis

Kotler, P., (2008) argued that task environmental analysis refers to the environment that is related to task completion. It is related to workers selection and training, procedure design etc. Qantas had to analyze this environments element to introduce Jetstar model. Qantas had to learn about its rivals policy and procedures so that Qantas can take competitive benefit. Based on this analysis it took a market segmentation policy.

This wide differentiation strategy includes “Pincer movement tactics”. As the market is becoming competitive day by day, each and every task requires to be completed accurately. Personnel are very important to maintain daily schedules of an airline. As the timing of the flights are really important, personnel need training to do their work within a short time. If Qantas can not fulfil its customers demand, then its customers will go to its rival and thus Qantas’s market share will abate.

Answer to the Question no 2. (A)

Major issues or problems: As a country Australia has involvement with high individualism is high where power detachment is small. It is well known that uncertainty prevention is more moderate and quality of life would be strong. As Qantas has the plan to expand its service over the world, its managers need to know about a country’s economic system because it has the potential to constrain decisions and actions. Other economic issues a manager might require to understand include currency exchange rates, inflation rates and diverse tax policies.

Gomez-Mejia (2007) said that the Economic environment consigns to the features those have an effect on consumer buying power as well as spending patterns where all the Nations to a great extent in their intensity and allocation of income. These countries offer few market opportunities. At the other intense are industrial economies, which constitute rich markets for many different kinds of goods. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets. Australia has such an industrial economy.

In 2004, when aviation industry was suffering from losses, Qantas was the largely profitable airline, strategically well managed the main factors behind this success. Thompson, A. (2007) said that the Strategic management acts as set of managerial decisions as well as actions those settle on the long term performance of the organisation. It varies from Organisation to Organisation on how to well perform for the reason that there are differences in their strategies as well as dissimilarity among their competitive abilities. It is a significant assignment of managers as well as necessitates all the basic management purpose.

For Qantas Strategic management has very significant for the reason that strategic management is able to make a differentiation in how healthy the organisational performs is. The most elementary queries concerning strategy should address why organisations do well and why they fail when they are pursuing with the same environmental conditions as well as they have unstable levels of performance. Studies of the factors that contribute to organisational performance have shown a positive relationship between strategic planning as well as performance. In other hand, it is found that the organisations those uses strategic management, positively they have highly developed levels of performance those make strategic management more attractive and important.

Another reason strategic management is important has to do with the fact that organisations of all types and sizes face continually changing situations. These siftings possibly will be lower organisational significant, nevertheless there are still changes with which managers would be obliged to cope with. As Qantas is a huge organisation it needs to be managed very well otherwise the resources will not earn profit for the organisation. Qantas followed strategic management procedure and thus it was able to cope with uncertain environments. Qantas followed the strategic management process to get superior performance.

The earliest step of strategic management course of action is to recognising the organisation’s up to date mission as well as objectives and strategies. Qantas set its mission, objectives and strategies based on current market situations. It’s also significant for the managers to determining the goals that at present in position and the strategies those are presently pursued. Every organisation has its own mission statement that states the principle intention of an organisation.

• The step 1 in strategic management process is external analysis. Manager in every organisation needs to do an external analysis. They need to know, for instance, what the competition is doing, what pending legislation might affect the organisation, or what the labour supply is like in locations where it operates. In analyzing the external environment, managers should examine both the specific and general environments to see what trends and changes are occurring. After analyzing the environment, managers need to assess what they have learned in terms of opportunities that the organisation and pose threats to another in the same industry because of their different resources and capabilities.
• Step 2 is internal analysis which leads to a clear assessment of the organisation’s resources (such as financial capital, technical expertise, skilled employees, experienced managers and so forth) and capabilities in performing the different functional activities (such as marketing, manufacturing, information systems, HRM and so forth).
• Step 3 refers to formulating strategies. Once the SWOT analysis is complete, managers need to develop and evaluate strategic alternatives and then select strategies that capitalize on the organisation’s strengths and exploit environmental opportunities or that correct the organisation’s weakness and buffer against threats.
• Step 4 refers implementing strategies. As soon as it would be completed to preparing strategies without any delay it must go for accomplishment. A strategy should be determined as good or better only when it goes for implementation. No matter how effectively an organisation has planned its strategies, it cannot succeed if the policies are not executed properly.
• Step 5 is evaluating results: The final step in the strategic management procedure is appraising results. How effectual would be the strategies. Is there any need for adjustment? If any, how long that is necessary. Geoff Dixon who is the CEO of Qantas made strategic adjustments to improve his company’s competitiveness in the information services industry. He did this subsequent to assessing the outcomes of preceding strategies and shaping that changes were needed.

The environment affects managers through the degree of environmental uncertainty that is present and through the various stakeholder relationships those are present between the organisation as well as its external constituencies.

Assessing environment uncertainty: it was the 2nd major issue related to Qantas. Qantas solved this issue by environmental uncertainty matrix. It is remarkable that all the environments are same. Most of them differ by what they call their measure of environmental vacillations; those are the level of change and level of complication within an organisation’s environment. The first of these dimensions is the degree of change. If the mechanism of an organisation’s environment changes repeatedly, that is addressed as dynamic environment. If change is minimal, we call it a stable one.

The stable environment would be that one where there are no presences of new competitors, a small number of technological step forward by existing competitors and modest action by the pressure groups to pressure that organisation as well as so forth. Probably the main environmental concern for Qantas is the increasing trend in oil price.

Qantas assumed that the airline industry is dynamic and thus it took steps to compete with its competitors. The third major issue is control stakeholder relations. Most of the Stakeholders stay within the external environment of the organisation but they can easily affect the organisational decisions as well as some actions may alter. To managing stakeholders is also a very important factor for every organisation and Qantas has been maintaining a sound and healthy relationship with its stakeholders through their effectual management.

Stakeholders should be given importance for the reason that it can guide to other organisation effects such as enhanced expectedness of the environmental challenges, further flourishing innovations, wider extent of trust in the midst of stakeholders and superior range of organisational flexibility to diminish the blow of change. It also influences the organisation performance An organisation’s customers, supplier, socio-political action groups, shareholders, competitors, governments, trade and industry associations, unions, communities, media and employees all together are called stakeholders

Answer to the Question no 2. (B)

The Reconciliation Action Plan was recently introduced in Qantas. The company is committed to give importance to indigenous people. Qantas helps the indigenous community by several ways such as recruitment, employee engagement and community activities. The Reconciliation Action Plan (RAP) has been initiated by Dixon, G., in November 2007. Qantas strives to bridge the gap among non native and aboriginal community by introducing the Reconciliation Action Plan.

For the existence of the RAP, there is a necessary combination and change within strategic planning of Qantas. Strategic planning is the process of maintaining and formulating a strategic fit connecting the organisation’s objectives as well as capabilities within its shifting marketing opportunities. It is concerned with defining clear mission of company, supporting goals setting, and healthy business portfolio designing as well as and harmonising serviceable strategies.

The mission statement of Qantas has to be altered for the reason of introducing of this new plan. Mission statement includes the organisation’s goals, which carry out in the better environment to achieve its success. The success of an organisation depends and deeply concerned on the management of that organisation. On every occasion there would be a change within the organisation and the mission statement positively uphold that necessary change. A successful company like Qantas asks some questions and carefully answers them. These questions would be query about what their business is and who the customers are.

Always the Mission statement would be market driven. Mission statement describes the business in provisions of fulfilling fundamental needs of customer. For example, mission statement of eBay’s states that ‘the world’s online marketplace. The Management always put its emphasis to avoid preparing its mission too short or too broad in length. As Qantas has started a plan for indigenous people, mission statement should contain the service presented to them. Also the mission should always fit with the market environment. The organisation should formulate its mission concerning with its distinguishing competencies. Another remarking criterion of mission statement is to be more motivating. The RAP will put additional responsibility to Qantas.

Answer to the Question no 3

Understanding organisational is significant because business performance greatly depends on understanding and responding to the environment. The external environment indicates to the power, politics or pressure which potentially affect business performance. The external environment is includes 2 components and these are specific and general component.

The specific environment includes those external forces that have a straight and instantaneous impact on managers’ decisions and acts and are directly relevant to the achievement of the organisation’s goals. Each organisations specific environment is unique and changes with conditions. The forces that make up the specific environment are customers, suppliers, competitors and pressure group.

Customers

Qantas has control large international market. As a result customer is significant factor for Qantas. Perceiving customers needs and responding them is the key to success. It’s the customers or client who absorbs the organisations output. This is true even for governmental organisation and other non for profit. Qantas always concern about customer’s interest to take any initiatives. Thus, it has created small cost model of airline. Customers taste can change or thy can become dissatisfied with the organisation’s products or service.

Suppliers

The forward and backward relationship with customers and suppliers is important to manage the company. Managers seek to ensure a steady flow of needed inputs at the lowest price available. Because these inputs represent uncertainties-that is their unavailability or delay can significantly reduce the organisation effectiveness.

Competitors

It is quite natural that organistion has to compete with market players. Managers play vital role to avoid the competition by providing or implementing new plans. The relationship with competitors is antagonistic as it is using head to head advertisement and promotional activities. They represent an environmental force that manager must monitor and to which they must be prepared to respond.

Pressure groups: managers must recognize the special interest group that attempt to control the actions of organisations. As social and political attitudes change, so too does the power of pressure groups.

General environment: Any political socio cultural, demographic and other changes the business environment, increase or decreases the risk. Suppose if Government wants to hike up the oil price for political turmoil, which has adverse impact on the business. Recently UK has signed up the in the single European currency and this decision has serious influence on economy.

Changes in any of these areas usually do not have as large an impact as adjusts in the specific environment do but managers must consider them as they plan, organize, lead and control. Interest rates, inflation, changes in disposable income, stock market fluctuations and stage of the general business cycle are some of the economic factors that can affect management practices in an organisation.

Government can influence what organisations can and cannot do. Some legislation has important implications. Robbins S. P, (2007) emphasis that organisations waste lot of time and money to meet governmental regulations. EU regulation has forced Organisation to change their policy and hence the cost structure has been changed though the geographical location is limited to UK and EU. Other aspects such as Changes in the technological sector will impose a direct impact in the organisation or in overall business process. The transaction cost or information exchanging cost can be reduced as 24 hours call centre, internet facilities are establishing more.

Society, people, friends etc changes the economic conditions. Judge, A. T, (2008) argued that their behaviour, attitude, demand has a direct relationship with the business. For example, as workers have begun seeking more balance in their lives, organisations have had to change by offering family leave policies, more flexible work hours, and even on site child care facilities. As Qantas does business in other countries also, managers need to be familiar with those countries values and cultures and manage in ways that recognize and embrace those specific socio cultural aspects.

Robbins S. P, (2007) argued that employees comes from different area as a result manager should treat them in a different way. By the time, people enter an organisation, their cognitive structure the way they perceive and response to the world around them has been largely determined. This cognitive structure is shaped both by unique personal experiences and by the socializing influences of the person’s culture and it operates both at home and in the workplace. There are two kinds of environment and these are discussing the external and internal factors of the organisation. The internal factors can be found from microenvironment and it mainly concern competitors and suppliers.

On the other hand, Macro-environment influence the microenvironment. Managers have to take other company groups into account. Groups such as top management, finance, research and development, purchase etc. People are considered as most significant asset. As a result the organisation should focus customer’s interest when then consider environment of the organisation. Different studies have concluded that an organisation’s human resources can be a significant foundation of competitive benefit. In order to Achieving competitive success Human Resource Managers are ready, willing, and able to contribute to organisational goals; they work in the organisation and also known as personnel. Human resource forecasts predict an organisation’s future demand for employees.

It involves working with and through people and seeing them as partners, not just as costs to be minimised or avoided. In addition to their potential importance as part of organisational strategy and their contribution to competitive benefit, and organisational strategy and their contribution to competitive improvement, and organisation’s HRM practices have been found to have a significant impact on organisational performance. So manager has to look into many environmental factors to turn out to be successful.

Bibliography

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Chapter 3: Organizational Culture and Environment: The Constraints, (2008). Web.

DeConzo A. D & Robbins S. P, (2007), Fundamentals of Human Resources Management, 8th edition, John Wiley & Sons, Inc., ISBN: 9812-53-171-8.

Dibb, S. Simkin, L. Pride, W. M. & Ferrell, O.C. (2001), Marketing Concepts and Strategies, 4th ed., Boston, USA: Houghton Mifflin.

Gomez-Mejia Luis, Balkin, David & Cardy, Robert, (2007), Managing Human Resource, 5th edition, Prentice Hall, ISBN: 978-0135032749.

Griffin, R. W. (2006), Management, 8th Edition, Houghton Mifflin Company, Boston New York, ISBN: 0-618-35459x.

Kotler, P., & Armstrong, G., (2008), Principles of Marketing, Prentice Hall of India, 10th ed., New Delhi.

Robbins, S.P. & Judge, A. T, (2008), Organisational Behavior, 13th edition, Prentice-Hall, ISBN: 81-203-3-90-0.

Thompson, A. et al (2007), Strategic Management, India: Tata McGraw- Hill Publishing Company limited, 13th edition.

‘SWOT Analysis’ on QANTAS

SWOT is an acronym of “Strengths, Weaknesses, Opportunities and Threats” (Bohm, 2009). Using SWOT analysis technique to assess a business environment is beneficial to any organization. This technique helps in understanding both the strengths and weaknesses of a business venture as well as recognizing opportunities and threats faced by the concerned business. Therefore SWOT analysis act as a support tool to assist an individual or an organization in the business evaluation. The fact that SWOT analysis can help in revealing opportunities makes it an influential tool for periodic evaluation of businesses. In addition, if the management of a given business enterprise can comprehend the faults and threats facing the business, it is possible to eliminate them promptly. SWOT analysis will help Qantas airlines to formulate a viable business strategy, which is helpful in outdoing other competitors within the same industry (Mckeown, 2012).

Qantas Airways Limited is one of the most popular airline organizations worldwide. Concurrently, it is among the companies that started the ‘One World’ alliance. Qantas execute its operations in several countries. For instance, they operate in twenty nations with more than eighty destinations. Essentially, it is the only Australian airline associating with the international airline alliance (Hierling, 2007). Qantas has numerous local networks. In addition, they also have checkpoints in different continents such as Africa, North and South America. These check points can also be found in the south pacific, Europe, and Asia. In analyzing Qantas Airways using SWOT technique, its various aspects ranging from strengths to threats are discernible.

The strengths of Qantas are based on a number of factors. Firstly, it is a well-established airline company with business operations spread all over the world (Bremner, 1994). They also operate both locally and internationally. This implies that the company is in a better position to get lots of profits from its operations. This will enhance its global expansion. Another strength of Qantas Airways as an airline organization is the strong government support it enjoys. The Australian government is supporting the organization massively in the realms of business structures. For instance, when Qantas faced unfair competition from its competitor, Etihad, it received support from the national senate. Barnaby Joyce supports the idea that an enterprise belonging to the government should be checked so that they do not create an unfair competition in an industry. This idea supports Qantas airlines. This is a critical provision when considered critically in the context of SWOT analysis. It is important to recognize that Qantas Airlines has survived in the aviation industry due to numerous efforts made by the organization.

Qantas also experiences some weaknesses. The first weakness is poor management. The management is unable to develop viable business strategies to address the current competition and other operational challenges. For example, Qantas airlines can collapse easily if its competitor (Etihad) is permitted to purchase much of the Virgin Australia shares. The Qantas Company should have a clear strategy to counter the activities of its core competitors, rather than lobbying for the support of the government and the opposition against Etihad’s move to buy more shares from Virgin Australia. In addition, since it has a number of local networks, it should be at the top for the competition over the most profitable domestic routes. Another indication of poor management is the predetermined dismissal of engineers who work for the company. Barely a month after terminating 535 engineering jobs, a further 36 engineering jobs were again terminated to merge the maintenance services for their aircrafts at Melbourne. This indicates that there are no clear policies and strategies towards organizing for the maintenance services at different locations.

Additionally, Qantas experience weaknesses in its competition tactics. The company can be easily affected by the activities of its competitors. For instance, if Etihad supports the local businesses of virgin Australia, it can incapacitate Qantas. Qantas believe that the partnership between Virgin and Etihad would deluge the available market due to their business capabilities. This could force Qantas to considerably minimize most of its operations locally and internationally. It can affect the company adversely. Other competitors such as Singapore airlines, Etihad, and Emirates among others have enhanced their competitiveness in the aviation industry. Just recently, the value of Qantas shares reduced much due to losses it estimates on operating transnational routes. The concerned losses might emerge from the competition experienced from other rivals in the industry. This shows that Qantas is not able to withstand stiff competition offered by other contenders. It is crucial to recognize various provisions of SWOT analysis based on its viability in analyzing the operations of a given company in a particular business environment.

Finally, Qantas has limited business options. Its policies governing sales have hindered the company’s foreign investments. Actually, Qantas seeks the help of Foreign Investment Review Board to prevent Etihad from buying Virgin as indicated earlier. Even though buying Virgin Australia by Etihad could cause Qantas to collapse, the company can still survives globally.

However, Qantas has several opportunities. Most of the opportunities of Qantas are in its strengths as well as its weaknesses. Customers have increased in the recent past. Since the Qantas has a several profitable routes locally and internationally, it can be able to earn more profits than its competitors. Therefore, it is in a better position to make its services better and grow even more. Additionally, with the government support that Qantas has, the company is able to change its policies and strategies to suit its business environment. Qantas can also be able to lobby support from the Foreign Investment Review Board to look into Qantas sale act. If this act is reviewed, Qantas will have a good opportunity of fair competition within the industry.This can allow Qantas to purchase Virgin Australia and outdo other competitors. In addition, Qantas Company can also change its management. This will provide it with a better opportunity to develop good strategies and policies to enable its prosperity.

The major threat of Qantas Company is both established and emerging competition from numerous competitors. It faces a threat of collapsing if Etihad could purchase lots of virgin Australia’s shares. The company believes that this would reduce their operations on various routes. Due to this threat, the company opts to seek the government’s support to help in stopping this plan of Etihad. The competition faced by the company might also lead to a fall in the shares of the company. According to the company’s management, there could even be more serious consequences of these competitions. Precisely, SWOT analysis is a crucial provision when considered critically in various contexts. Its applicability in analyzing various provisions of Qantas Airways in the realms of business is important.

Porter’s Five Forces Applied to Global Crossing

Porter’s Five Forces (5Fs) are useful in determining the position of a business venture in a given industry. This is important since the concerned organization will be able to know its competitive strengths (Roy, 2011). Knowing business strengths is important in formulating viable strategies meant to enhance competitiveness. Besides, one can easily plan business strategies in a manner that evades losses (Schermerhorn, 2009). Usually, this tool is beneficial in understanding whether the new products and services can be profitable to the company. Porter,s 5Fs model is used to evaluate an industry where an organization operates. In using the Five Forces Tool analysis, it is assumed that there are five major factors governing the power of competition of a business within its industry. These factors include; suppliers’ power, buyers’ power, competitive rivalry, threat of substitution, and threat of new entrants (Griffin, 2011). In analyzing Global Crossing Company using porter’s five forces, numerous factors emerge.

In this context, ‘Global Crossing’ is a company that offers communication solutions to numerous clients globally. The services offered by the company include; sound, data, and collaboration services. The company operates in a number of continents such as Europe and North America. It also operates in Latin America as well as some parts of Asia. There are three main divisions of the company. First is the Global Crossing Telecommunications Limited together with its branches. The mentioned companies offer services to clients in the UK. Another division is the GC Impsat Holdings and its affiliates offering services majorly to clients in Latin America and GCL. Some of its affiliates operate in North America. GCL also operates in Asia, Latin America and Europe, though in small holdings.

The first component of the Porter’s 5Fs Analysis applicable in the Global Crossing’s context is the suppliers’ power. Suppliers’ power refers to the evaluation of how the company’s suppliers are vulnerable to hiking prices. Some of the factors that contribute to this include the total number of suppliers and the distinctiveness in the kind of products or services they offer. If a company has fewer suppliers, there is a higher chance of being controlled by the suppliers since it has fewer choices (Bard, 2008). British Telecom and Light Path were the main suppliers of backhaul to Global Crossing in the United Kingdom and United states respectively. The company reported remarkable increments in cost of its operations in Germany, UK, and the U.S. due to suppliers’ power. For instance, when they acquired Backhaul capacity operating from White Sands to London, clients could be forced to pay more by up to 2.25 million U.S dollars. Again, if the backhaul was purchased from Brookhaven to New York, the customer’s cost could hikes by 0.5 million U.S dollars. These high costs imply that these suppliers have more power over the company. Actually, to deal effectively with this crisis, Global Crossing felt the need to own private networks.

Another element of analyzing Global Crossing using Porter’s Five Forces is the ‘competitive rivalry’. In this context, both the quantity and ability of Global Crossing’s competitors are analyzed. Competition power depends on the number of competitors involved. Companies with more competitors who offer products and services that are similarly striking will certainly have lesser power. This is because; consumers and dealers would have more options to turn to in case they do not get a suitable deal from Global Crossing Company (Mascarenhas 2011). Global Crossing faced a number of competitors. Some of these competitors include; the Colombus-III, which formed a link between Florida and Spain. Actually, European Telco and WorldCom were to start their operations by 1999 December. The company also experienced competition from TAT-14, which commenced its operations by the year 2000. Their total capacity was 640Gbps. The final competitor of Global Crossing was FLAG project which was funded privately. It planned to start its operations by linking Europe to countries found in Middle East. This project was planned to start operating by 2001 with a total capacity of 2400Gbps. For Global Crossing to become the best service provider they have to develop good strategies, otherwise they will be less powerful.

Concurrently, buyers’ power is the third provision of the Porter’s 5Fs. In analyzing Global Crossing Company using this element, it is possible to observe how simple it can be for customers to lower the prices of products and services offered. For buyers to lower prices of products and services, several factors are considered. Some of these factors include; the total number of customers, the benefit that each and every buyer can bring into the business, and the cost that different customer can incur if they were to change from using the company’s products to services of a different company. For a company that deals with few customers only, they are more likely to influence the products offered. This makes the company less powerful. The major customers for Global Crossing are the Global Telecom Team Players and other considerable organizations. The Telecom Team Players then sell the products both to transnational corporations and individual users.

While selling AC-1 products, special sales agents are engaged. Initially, Global Crossing engaged Tyco Submarine Systems Ltd. This product could be accessed by everyone. This implies that the number of buyers were unlimited. This made Global Crossing to have control over the prices it offers in the market. Other products that increased the strength of Global Crossing Company are IRUs for a complete STM-1s and for minor product increases. In addition, there were leases provided in a short term basis. These special products made Global Crossing to have advantage over its competitors.

The 4^th element is the ‘threat of substitution’. This element is based on the capability of clients of the company to access alternative products. If customers can successfully substitute the products or services of the company with a simpler and viable option, the business gets weaker. Since there is no any alternative to the network services offered by Global Crossing, it remains a very powerful business venture. More customers simply pay for the services offered by the company. When it released its IPO through Salomon Smith Barney, it rapidly raised money so fast that it started to advance its operations (Mckeown, 2012). This indicates the complete support for the services offered by the company. It is important to understand the implications of having competitive products in a given industry. This is a critical provision in various contexts. Contextually, Global Crossing is a critical venture in this milieu. The company has to strategize critically so as to remain relevant in the industry.

The last of the Porter’s 5Fs is the ‘threat from new entrants’. This element assumes that it is possible for other competitors to enter into the industry. The position of the company or business can deteriorate if it is very cheap and it takes a very short time for an individual get into the market and compete successfully. In addition, if there is little or no security provided for the technologies of the company then it would be easier for opponents to get into the market rapidly and cause lots competition. However, the business can maintain its position if it has tough and long lasting obstacles to entry (Henry, 2008). The strength of Global Crossing lies from the fact that it can raise lots on money from an IPO. It is not quite easy to get into the market since lots of capital is needed to venture into such businesses. This puts the company in a powerful position as there will be fewer competitors. Precisely, applicability of Porter’s 5Fs is important in establishing and understanding various aspects of the concerned industry. Numerous organizations are able to illuminate their fates in a particular industry based on the provisions offered by Porter’s 5Fs as indicated earlier.

Conclusion

SWOT and Porter’s 5Fs are useful tools for analyzing any business’ operations. SWOT focuses on the strengths, weaknesses, opportunities, and threats of any business in the realms of viability, profitability, and functionality. Porter’s Five Forces emphasizes on the nature of the concerned industry. In conclusion, these tools are very important as they enable an individual to identify the strengths and opportunities experienced in a given industry. This will help in planning and eradicating any poor decision that could lead to disastrous results.

References

Bard, T. (2008). DOEE Getters Venture Basics 101 ECoursebook. Berlin: Venture Basics.

Bohm, A. (2009). The SWOT Analysis. Munich: GRIN Verlag

Bremner, E. (1944). Front-line airline: the war story of Qantas Empire Airways Limited. London: Angus and Robertson ltd.,

Griffin, R. (2011). Fundamentals of Management. New York, NY: Cengage Learning

Henry, A. (2008). Understanding Strategic Management. New York, NY: Oxford University Press

Hierling, M. (2007). The Australian Airline Industry and the Case of Oz Jet – A Strategic Analysis Report: Case Study about Oz Jet and the Airline Industry in Australia. Munich: GRIN Verlag

Mascarenhas, O. (2011). Business Transformation Strategies: The Strategic Leader as Innovation Manager. California, CA: SAGE Publications Ltd

Mckeown, M, (2012). The Strategy Book. New York, NY: FT Press,

Roy, D. (2011). Strategic Foresight and Porter’s Five Forces: Towards a Synthesis. Munich: GRIN Verlag

Schermerhorn, J. (2009). Exploring Management. New Jersey, NJ: John Wiley & Sons

Executive Summary

Market analysis is a vital concept for any business organisations to be able to assess the market needs and based on what is at hand, respond to the needs. Before making a market analysis, it is good to look at a company’s background in order to ascertain how current operations were motivated by past records. Three main tools have been used to analyse the airline industry using the case of Qantas.

These are Strength, Weakness, Opportunities, and Threats, (SWOT), Porter’s Five Forces, and Political, Economic, Socio-cultural, Technological, Legal, and Environmental (PESTLE) factors. At the end of the discussion, it can be noted that Qantas remains a major player in the airline industry at local and international levels amid the stiff competition from other carriers.

Introduction

Qantas Airways Ltd. is an Australian firm that operates in the airline industry at local and international capacities. The ideal to start the organisation was hatched by two individuals back in 1922. Fergus McMaster was convinced to look for interested investors after McGinness and Fysh sold the idea to him.

The history of Australian civil aviation is mainly about the history of Qantas that started from a humble beginning to what defines the future of Australian airspace. The corporation began with a two-passenger plane to the recent Airbus A380 series with carriage capacity of 450 passengers to far destinations.

The Queensland and Northern Territory Aerial Services Ltd, (QANTAS) hard to pass through hurdles to develop its market share with a pull of dedicated staff members backed by very loyal customers. The key pillars of Qantas development are the stakeholders who created it, the workforce, and the customers.

The vertical rise in the company’s growth has made Qantas one of the world’s best long distance international brands and one of the best service providers in Australia. The outstanding growth of Qantas defines the course of international aviation industry (Qantas, 2012a).

In order to critically analyse a firm’s business operations, there are tools that are employed to ascertain the strength and position of a firm. SWOT, PESTLE, and use of Porter’s Five Forces are recommended tools that can achieve this feat. The tools involve evaluation of a firm’s strength by looking at a number of factors that overly defines a successful business organisation.

By taking the case study of Qantas Airways Ltd, this paper vividly explores market parameters that make Qantas outstanding among other world airline brands. From review of the company’s business activities, one concludes whether the firm stands strong and whether sustainability of business activities will be achieved in both short and long terms.

Quantas Airways Background

Description of the Organization

Fergus McMaster was convinced to look for interested investors after McGinness and Fysh gave him a detailed plan for setting up an air service. Fysh and McGinness with the help of flight sergeant Arthur Baird took a trip to Mascot Aerodrome in Sydney to inquire for delivery of 2 Avro planes. An agreement was reached and the Western Queensland Auto Aero Service Ltd was registered.

A rebranding took place later to form the abbreviation, (Qantas, 2012b). The formal establishment of Qantas was in 1920 following registration with chairmanship of Fergus McMaster. There were then a series of air test and joy rides by the founders who experienced technical and physical difficulties while airborne.

The machines were remodelled to suit the needs at that time and the aircrafts could make 54,000km carrying a total of 871 passengers by the biplanes without damage (Qantas, 2012a).

As time passed by, more planes were required in airmail services between Cloncury and Charleville in 1922. Two years later, the first Australian Prime Minister flies Qantas on an official government duty.

The marched achievement seemed to bring new hope for the company and in 1926, Qantas started building its own machines at the Longreach base. The following chronology of events summarises the succeeding history of Qantas:

1927: The firm recruits the first trainee

1928: The launch of the Flying Doctors Service with Qantas offering the air travel services.

1929: Outback network arrives in Brisbane

1931: Trial airmail delivery is made from Brisbane to Darwin

1934: The firm changes its name to Qantas Empire Airways Ltd.

1935: The Qantas DH86 flies overseas, Darwin to Singapore. The flight is to deliver airmail to the UK in liaison with Imperial Airways that was later named BOAC.

1938: The airline to the United Kingdom receives Short C Class airplanes to make trips to Singapore. Imperial Airline obtains the responsibility of the route.

1939-1945: A fully set base takes operation of mechanical works at mascot base known today as Sydney Airport. Qantas gets involved in the WWII as its planes are used to transfer the foot soldiers from the threat of advancing Japanese fighters to New Guinea.

They airplanes also supply foodstuff to soldiers at the battle fields. Qantas also makes history for being the first to make more than 30-hours flight over Perch and Sri Lanka airs to make important links with Allied Forces. The kangaroo logo becomes symbol of Qantas in 1944.

1946: air transport in Australia-UK route recommence and this time the British Airways in a partnership programme. DC3 service is initiated to New Guinea as the flight network reaches new Indian and Pacific Islands destinations. In the same year, Australian regime launches new airline known as Trans-Australia Airlines, TAA in the domestic market with Lester Brain (formerly of Qantas) as the general manager

1947: Government of Australia buys all shares in Qantas, Constellation aircraft sets in, and the first flight is made to Japan

1949: TAA replaces Qantas in the Flying Doctors Service and the Queensland and Northern Territory routes

1953: Along the Kangaroo route to UK, a tourist economy class is introduced

1954: The Super Constellations flies to San Francisco, USA and Vancouver, Canada for the first time

1956: For the Olympic Games in Melbourne, Qantas carries the Olympic flame from Athens to Melbourne

1958: The Qantas’s Super Constellations make a round the world flight

1959: Qantas introduces Boeing 707 series as the first non-American airline. This gain reduces flight times by half for trans-Pacific flights

1960: TAA in charge of operations in the Papua New Guinea from Qantas

1964: TAA launches its first jet by purchasing Boeing 727 series; high performing machines that stimulate the Australian airline industry with their mechanical superiority, speed, and comfort. This results to massive growth of the industry.

1966: The retirement of Qantas Co-founder and Chairperson, Sir Hudson Fysh

1967: Qantas rebrands to Qantas Airways Ltd. TAA launches DC9 that proves to be mechanically sound for going 495 different revenue flights without delay on mechanical breakdown

1971: The introduction of the Jumbo jet; Boeing 747

1974: Qantas evacuates 673 survivors on one flight from the devastation of Cyclone Tracy from Darwin to set new world record

1979: Phasing out of the 707 series and venturing into an all-747 airline. In the same year, the firm rolls out the first Business Class travel experience to customers.

1985: The launch of Boeing 767s. James Strong goes to TAA in order to revitalise the TAA when the government was advancing to stronger deregulation and competition

1986: TAA becomes Australian Airline

1988: Australian airline is incorporated to a public company

1989: Australian Airline in trouble due to pilot’s strike followed by resignation. The government agrees to a deal to make a proposal that would bring together the Australian Airline and Qantas.

1989: Qantas Airways Ltd buys the Boeing 747-400 that the first nonstop flight of 18,001km in accompany jet. The first experience take place in the London-Sydney route.

1990: One John Schaap quits the firm as an executive member to join Australian Airways as its general manager. The departure took only ten months before deregulation of local airline industry in Australia.

1992: Government agrees to sell the stakes of Australian Airline to Qantas valued at $400 million.

1993: The government regime offloads 25% stake to make British Airways have ownership of Qantas Airline in a privatisation strategy. Australian Airline merges with Qantas to form Qantas Airways Ltd. with James Strong as the CEO

1994: A new cabin design launches to update service provision

1995: Qantas offloads the remaining 75% shares to the public in the ASX. Qantas becomes one of the world leading service providers in the aviation industry with an operation capability of airlifting 14 million passengers per annum using over 130 aircrafts

1997: Qantas marks the year of the golden jubilee along the Kangaroo network from Australia to the United Kingdom and Japan

2002: The launch of subsidiary airline to operate at international level. The name of the firm is Australian Airlines

2004: Introduction of a new and cheap carrier in the domestic flight known as Jetstar

2006:Australian Airlines stops its services

2008: The A380 series are added to Qantas fleet while second biggest order to be done by any airline corporation is in the pipeline. A380 aircraft is inaugurated to fly from Melbourne to Los Angeles, the technology is of high standards as the Required Navigation Performance finds usage in managing flight. This makes the firm to reduce its carbon emission by significant figures. Installation of Qantas General Electric CF6-80C2 engine to enhance the performance of the B747-400 aircrafts

2010: new check-in system

2012: The arrival of B787 aircraft considered as next generation fleet

2020: Centenary of Qantas, Qantas (2012a).

Location of Organization

• The initial location of the Qantas operations was in Longreach, Queensland to Brisbane
• In 1930, the company’s headquarter was moved from Longreach, Queensland to Brisbane
• In 1938, the company’s headquarters was moved from Brisbane to Sydney as operation base.
• In 1957, a new corporate headquarter was set up along Hunter Street, Sydney

Stakeholders of the Organization

From the chronology of events that have shaped Qantas Group, the company was a private entity when it was founded back in 1922. The growth track led to instant recognition and at some point the government of Australia took over the firm.

Afterwards the government privatised the firm. In a bid to make the firm have an international appeal, British Airways was took a 25% stake at Qantas after the government agreed terms with British Airways in 1993. In 1995, Qantas offloaded the remaining 75% shares to the public in the ASX (Qantas (2012a).

Today Qantas is a public owned company and it is listed in the ASX as QAN. This gives opportunity to anyone who would wish to own the firm a chance by simply buying the stock. Any individual who owns the QAN is a Qantas owner; hence, stakeholder

. The management team spearheaded by the Nominations Committee is free to nominate a new member to the Board of Directors and every stakeholder has the right to approve such nominations during the company’s AGM. Just like other listed companies, only a stakeholder with 51% ownership of the firm can have a direct say on how the firm should run with regard to management and who should be in the Board.

Organizational Structure

The Qantas’ Board is dominated by independent Non-executive Directors who work hand in hand with Executive Directors to carry out Qantas capital intensive programmes. The Board has responsibility of upholding accountability and freedom in a bid to maximise the profit for goodwill of all stakeholders.

The Board of Directors

Source: Qantas (2012b)

The Executive Arm of Qantas

Other than the Board of Directors, Qantas also has the Executive Team that comprises of the following personalities:

• Alan Joyce; The firm’s CEO
• Gareth Evans; CFO
• Lesley Grant; CEO of Qantas Loyalty
• Simon Hickey; CEO of Qantas International
• Jayne Hrdlicka; the CEO of Jetstar Group
• Brett Johnson; the firm’s General Counsel
• Jon Scriven; Group Executive People
• Lyell Strambi; CEO of Qantas Domestic

Board Committees

• Audit Committee
• Nominations Committee
• Remuneration Committee
• Safety, Health, Environment and Security Committee

Board Committee Charters

The Board Charter was adopted by the Board in September 1, 2003. The Committees have the duty of giving comprehensive analysis of all issues affecting the company to the Board for approval. In addition, the Board approved charters for its Committees as:

• Audit Committee Charter
• Nominations Committee Charter
• Remuneration Committee Charter
• Safety, Health, Environment and Security Charter, Qantas (2012b).

Service Analysis

The main Qantas’ service line is passenger transportation and air freight services. These are the services that have seen the company grow in the last decades. The fleet size has increased, the planes have been modernised, and expectations are still high is the fleet renewal plans.

This means that customers will continue to experience superior services at least in the near future. Other than the main services, Qantas owns a number of subsidiary firms as it takes service experiences a notch higher.

QantasLink

This subsidiary, firm has more than 2000 flights per week in 56 destinations spread in metropolis, regions, and across borders (Papua New Guinea).

Q Catering

This is the firm’s group that offers catering services to the travellers and is fully owned by Qantas. It has two main branches: the Q Catering spread across Qantas’ 6 ports in Australia and Snap Fresh that is a modern facility in Queensland specialised in meal production. The meals are supplied to non-aviation destinations.

Qantas Freight

This is Qantas’ subsidiary that manages all the freight issues in the international level for Jetstar, Jestar Asia, and Qantas. In addition, it handles freight in domestic market that is marketed by Australian air Express. Qantas Freight Enterprise runs specialised logistics businesses across the borders done by: Express Freighters Australia (EFA), Jets Transport Express, and Qantas Courier employing 800 workers.

Express Ground Handling

This is Qantas’ subsidiary is fully owned by Qantas Airways and works in liaison with Qantas Airports and Qantas Catering Group. It provides ground handling facilities regional airlines and Jetstar.

Qantas Holidays

This is Qantas’ subsidiary forming union with the Jetset Travelworld Group to offer travel wholesale services. The services cover all the Qantas destinations outreach not only by Qantas itself but also in alliance with other airlines. There have been mergers of Qantas Holidays with other firms to offer a range of travel agency at retail prices.

Qantas Jetstar

This is a low cost airline working in Singapore and Australia since 2004. Whereas the Jetstar Australia is wholly owned by Qantas, “Jetstar Asia is a Singapore-based partnership between Qantas (49%) and Singapore company Westbrook Investments (51%) with the hub based in Singapore” (Qantas 2012c).

Qantas Defence Services

Qantas Defence Services offers flight services to the defence force of Australia in at both local and international levels. This began in the WWII and since then, the government of Australia is in liaison with Qantas to offer air flights. There are warplanes in the Qantas Defence Service docket to suit these needs.

Technology

The Dreamliner’s arrival

Qantas has, since its inception tried to remain one of the best performing airlines not only in Australia but also in the international airline industry. This has been made possible given the firm’s drive to purchase high performing machines in the airline industry. Backed by sound financial background, Qantas embraces any technology that can add value to the passenger transportation and freight services.

Technology must improve if the world is to attain global climatic challenges resulting from the emission of carbon into the atmosphere. In the airline industry, one way of using technology to cut on carbon emission is the adoption of efficient cars.

Qantas has made the Boeing 787 as the foundation of its fleet renewal programme at both the domestic and international services. The firm has placed an order of 50 Boeing 787 cars and the Dreamliner would be delivered around June 2013. The Boeing 787 series are a high technology machines that will make Qantas to be able to fly to far destinations without flight connection. This will boost point-point travels across the globe.

The aircraft’s body is made if composite and light materials and due to light weight, the aircraft travels faster than ordinary aircraft of similar size. It is fuel efficient and able to reach further destinations on full load and is easy and cheap to maintain.

The investment in Boeing 787 series is in line with Qantas belief of providing air transport safely, high quality services, and innovative business ideas that have been the company’s ethos since 1922 (Qantas, 2012k).

To maintain the high level of technology of the Boeing 787 series, Qantas has chosen GE GEnx Engines to maintain the fleet. GEnx meets the requirements to maintain the cars at low cost while paying keen attention to environmental safety standards.

Boeing 787 has the ability to increase fuel efficiency by 20%, make a 20% carbon emission cut, 40% nitrous oxide emission cut, and reduce noise footprint by 50% at airports. This table below shows the technical specifications of Boeing 787:

Source: Qantas, (2012d)

World’s first technology entertainment

The Qantas’ Q Streaming pilot and its passenger were among the first in the world to experience WIFI entertainment technology. In addition, passengers using the technology entertainment car within the airlines of Australia are first to practically try the In-Flight Entertainment technique, (IFE).

Travellers will also be allowed to use WIFI enabled gadgets like laptops. As of February this year, Qantas passengers travelling can now download Q Streaming app available from the iTunes database while passengers who own laptops can easily download the MS Silverlight before plane takes off. The new technology entertainments are making customers to really appreciate services at Qantas.

Great choice is offered for to the customers and their feedback so far has been amazing. As a result, the company will continue to develop its Q Streaming utilities by taking advantage of the new emerging edge wireless technology.

According to Qantas (2012e) “Qantas will continue to enable customers access the Q Streaming content via their own WIFI enabled devices on the dedicated B767-300 whilst finalising plans to extend its application to wider fleet.”

Internal Economic Environment

International corporations like Qantas should undertake SWOT analysis to establish its internal position as an organisation against the external environment. This is critical as it makes it possible to adjust to environment needs of business; for instance, opportunity created through open borders that make it easy to access overseas market, (Hitt, Ireland, & Hoskisson 2008).

It allows managers to review the internal and external business environment with the aim of setting up obligatory roles of a company geared towards company’s mission and vision statements. SWOT analysis helps to restore the glory of an underperforming business to new economic heights.

A firm’s strength is fundamental in maintaining competitiveness, which consumers value most. Competitiveness makes products imitation by other industrial players difficult. Belk and Sherry (2007) note that value is creation is motivated by the satisfying the needs of both producers and consumers according to co-production assessment.

Leveraging in short refers to the harmonisation of internal strength against external opportunities. Planning in management should expect operation constraints when internal weaknesses prevail as it is likely to limit a company’s competitive advantages and opportunities. On the other hand, internal weaknesses are a threat to organizational strengths as they make a firm susceptible to the external economic environment.

Strengths

A business organisation can have a number of possible strengths to boost performance these may include: a pull of skilled manpower, sound book values or financial health, brand name like Qantas that is popular across the globe and adjustment in equipment purchase or installation, inadequate competition, and own premises among. A pull of a skilled manpower helps in the cutting training cost; hence, reduced annual overheads.

A good financial position means that an organisation can service its financial commitment and access more funds like loans. Own premises reduces the amount of recurrent costs.

All these strengths can lead to cost reduction that may be needed to adjust to a short term market need; for instance, sudden rise in jet fuel prices that will automatically affect normal running of the business. Strength therefore can be used to sustain competitiveness.

Product diversity

The core business line of Qantas Airline Ltd is passenger transport and air freight. To this effect, the firm has delivered top quality even in the most trying economic times. Product diversity is equally important to boost critical operations when the main business is faced with fiscal challenges or any other challenges. As such, Qantas runs a series of subsidiaries listed below:

• QantasLink
• Q Catering
• Qantas Freight
• Express Ground Handling
• Qantas Holidays
• JetStar
• Qantas Defence Services

The Qantas Freight operates the freight services with its own fleet that of cars of the Boeing 747-400F and B767-300F. The subsidiary also carries ground handling services in 7 locations in Australia and abroad for its own airlines and other carriers.

The Qantas Defence Service supports the Australian and this began in the WWII era. The subsidiary offers services to the defence forces in Australia and due to the superiority of Qantas the expected level of services needed can be met by the firm’s strength (Qantas 2012c).

By operating subsidiary firms Qantas is in a position to strengthen its asset and revenue base to meet its fleet expansion and renewal programmes. In addition, this strategy is helpful in reducing the dependence level of Qantas passengers’ services that can be affected by political tensions when diplomatic hitches or sanctions occur.

The ground handling services that Qantas Freight offers to even other carriers in far destination like Los Angeles helps the firm in building inter-organisational relations and diplomatic relationship with Australia and America and others.

Number of fleet and types of fleet

The airline since its inception in 1922 has seemed tremendous growth in the domestic and international level. To boost the upward trend, Qantas has been in the forefront to set a number of world records in the airline industry due to its preference for high performance machines. Qantas is the largest airline operator in Australia and this is achieved by fleet development to carry passengers to various destinations across the world.

In the next decade, Qantas has a short term plan of capital investment in the tune of US$23 billion to buy more and high performing aircrafts of the next generation. The fleet capital investment would see the firm buy the more of the Airbus A380s and the most talked about Airbus A320 neo and Boeing 787 Dreamliner (Qantas, 2012f).

The significant point about fleet renewal at Qantas is to facilitate efficient use of fuel in the long run as fuel is a global problem when supply dwindles. Renewal replaces older and more energy intensive machines with low fuel consuming ones. The current fleet of aircrafts at Qantas is Australia’s biggest in domestic aviation industry and one of the world’s best in international airlines.

Qantas won the World Airline Awards for the Best Premium Economy Class. The Trans-Tasman line has a new B737-800 series, superior services of new 747 series that delivers the best Business Class worldwide, among other superior services offered by Qantas. The much talked about Dreamliner is expected to be delivered to Qantas in 2013 and other brand new 50 B787-900 series to arrive by 2016 (Qantas, 2012f).

This kind of fleet superiority in the domestic and global airline industries places Qantas in a strategic position to continue dominating the industry even in the years to come. The company’s prospectus runs for the next 4 years in terms of new airline arrivals only. These kinds of realignments and strategies will ensure that the Qantas remains a strong brand.

Strong corporate governance structure

Corporate governance may be a great strength if properly structured in an organization in order to improve accountability in running activities of the firm. Corporate governance builds formidable relationship between shareholders and business managers. Turner, 2009 observes that’ corporate governance “is used to describe a range of issues relating to the ways in which companies may be directed and controlled” (p. 5).

A broader definition of good governance takes cognizance of the social and business environment, to enhance social functions of a firm in the society. Stakeholders’ roles are critical in the maintenance of competitiveness and long term sustainability of an organisation’s activities (Calder, 2008).

Corporate governance should outline operations with respect to policy structure, its implementation, and other amicable strategies to withhold stakeholders’ preferences.

Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure for its full functionality. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholders’ value. The Board follows the provisions of Australian Securities Exchange Corporate Governance Council’s principles.

Qantas publicly discloses all their policies relating the corporate governance, which builds stakeholders’ trust. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issues that affect the structure. To help in this regard, the Board works on corporate governance structure directed by the following sub-sections:

• The Qantas Constitution
• Corporate Governance Statement
• Qantas’ Executive Remuneration Philosophy
• The Qantas Board
• Board Committee members
• Board Committee Charters
• Qantas Group Business Practices Document
• Qantas Diversity Statement (Qantas, 2012b).

The elaborate nature of Qantas corporate governance and its transparency conforms to all the requirements of corporate governance outlined above. Therefore, the firm’s shareholders and all other stakeholders see accountability of the highest level. They in turn trust the company’s ideals, which is an endorsement to its operations for the sustainability of Qantas.

Weaknesses

It is important to recognise a company’s weaknesses in order to minimise them in future. Weaknesses can be; rented premises, unskilled or semi-skilled workforce, heavy debts, stock imbalance, and unproductive or inefficient machines.

Even though Qantas owns a number of subsidiaries, the subsidiary firms depend on mainstream Qantas services (passenger transportation) and freight. This means that if the mainstream services are affected, there will be a ripple effect that will trickle down to the subsidiary firms.

Therefore the firms should invest in different lines and industries. According to Reuters (2012) Qantas still faces the challenge of fuel costs and the immediate response at times of high fuel costs is to hike fares. This is a weakness because it can lead to lose of customers.

External Economic Environment

Threats

Existence of strikes

Industrial strike poses a great threat to the company performance. During strikes the airline operations are grounded and that leads to reduction of revenue and subsequently gaining by the company’s rivals such as Virgin Australia.

For instance, Qantas first quarter profit of the year 2012 reduced by 52% (CAPA Centre for Aviation, 2012). The main contributing factor to the reduction of the mentioned profit margin is industrial strikes. The company estimate of the revenue loss as result of strike is AUD 95 million.

Competition from other airways companies

The existence of the competition from other airline also is a great threat to Qantas airways market share. Virgin Australia offers stiff competition to destinations which were earlier seen as Qantas airways natural markets. The completion has made Qantas airways to cut off some of the international routes so as concentrate to the domestic market.

Global economic crises

The effects of global economic crisis in 2008 challenged many global business organizations. The aviation industry was also hard hit because the number of tours reduced as travelling became a lesser priority. Currently, the Euro zone crisis continues to affect member countries in Europe.

The global economic crises are a threat to the airline and frantic efforts must be made to minimize their effects. The end result of global economic crisis is that it increases operation cost, reduces business opportunities which in turn leads to loss of revenue to a company.

Fuel prices

The stability of fuel prices in the global market directly affects the operations of airlines. The stability depends on a number of issues; one being political standoff between one or more countries. To stabilize the fuel prices, Qantas ahs a well developed hedging strategy that intends to cushion the effect of unstable fuel prices.

Under the Capital Management and Treasury, Qantas reserves cash revenue of $3.3 billion to facilitate debt problems. Fuel costs, operating foreign exchange, and aircraft capital expenditure are all hedged to respond the incoming challenges.

Of the three hedged funds, fuels cost takes 86% with an effective hedge price of US$116.05/barrel. According to Qantas (2012g), “Hedging approach mitigates risk whilst maintaining upside potential,” (p. 13).

Opportunities

Product diversity

Needs extension to non-airline services

The Oneworld Alliance

Oneworld Alliance offers great opportunity for Qantas to extend its services to further destinations. Through the alliance, it is possible to integrate critical airline operations with the Qantas’ operations.

Porters Five Forces

Porter’s Five Forces model was initiated by the renowned economic and business strategist Michael E. Porter. Porter identified five pillars that mainly influence organisation and planning of businesses. This model is relevant in modern day given the phase of internet use in business processes that has led to globalization. The five forces are illustrated below:

Source: Porter, (1985)

Bargaining power of Buyers

Customers with substantial bargaining are likely to have a massive take on what should inform a business strategy. The advances in technology and the use of internet ahs significantly increased such of information and for customers. As a result, customers can make fare comparison for the various airlines before booking. The information is available online; for instance, Qantas has its own page for online booking.

Choice is made depending on the desired pack and price for a flight. High bargaining power of customers increases rivalry in the airline industry. Qantas has specialised in the delivery of quality economy and business classes that serve the interest of various categories of customers.

In fact, Qantas has won awards in the provision of superb services. As mentioned earlier, Qantas won the World Airline Awards for the Best Premium Economy Class.

Bargaining power of Suppliers

The number of suppliers who are able to deliver a company’s fleets or any other equipment needed affect suppliers’ bargaining power. In case of supply dominance by one or few entities, the bargaining power of the supplier(s) will be increased as increase in demand for equipment increases.

On the other hand, if there are many suppliers are in an industry, their bargaining power will be diminished leading to low costs of machinery and other equipment. In the fleet development industry, there are limited manufacturers that can deliver state of the art aircrafts to meet Qantas market needs.

For instance, Boeing 787 Dreamliner is s superior kind of aircraft that not every manufacturer has the ability to make in the short run. To this effect, the manufacturer enjoys the bargaining power and Qantas has to give in to any demands given by Boeing.

Threat of New Entrants

New entrants are firms that are not currently in market completion in a given industry; but they have the ability to do so if they decide. In international airline industry, it is absolutely unavoidable to eliminate the threat of a new entrant and alleviate any threat of their market share. Many corporations invest in Research and Development, (R&D) to improve services.

However, threat of a new market entrant relies on a number of factors. First, economies of scale enjoyed by a leading company may act as a barrier to a new entrant that is yet to start service delivery in a given market.

According to Hill and Jones, (2009), “Economies of scale arise when unit costs fall as a firm expands its output. Sources of economies of scale include, cost of reductions gained through mass-producing a standardized output and discounts on purchase of raw materials in bulk.”

Another barrier to entry is absolute cost advantages. When initial resource investment is high for an existing company compared to a potential entrant, there would be very hard scenario for a new entrant to get into market. Government policies may also favour market dominance for some companies; for example, if incentives are given to new entrants, barrier to entry would be significantly reduced for a business organisation.

The forth factor that influences this force paradigm is the cost of consumer switching from one service or product to another. If the cost of switching is relatively low, a new entrant captures some part of the market share whereas if the costs are high, dominant firm would are the beneficiaries. Consumer loyalty on a given brand can be a hurdle for a new firm to enter market.

Threats of substitutes

If market situation allows for substitutability of goods and services from other competitor, then the management needs to find alternative measures to limit the threat. This can be done through finding new markets, adopting competitive fares and low cost product, among other measures that will make the company maintain its market share.

If the degree of substitutability of goods and services is low, threat of market share will be low. Qantas prides itself as a trend setter with the new fleet of cars expected in the future. The firm has the financial ground to support all the ambitious plans in the offing.

In May 2012, Qantas withdrew services in the Auckland-Los Angeles and Singapore-Mumbai routes in a aircraft renewal plan. The plan was to set free 4 of the A330 cars that were in turn taken to the Sydney-Bangkok route. The A330s were to replace the 2 Boeing 747-400 series.

This was a reduction in international flight in favour of domestic trunk network. According the CEO of Qantas the strategy is to ensure that Qantas maintains a minimum of 65% of the domestic market (CAPA Centre for Aviation, 2012).

The plan meant that the trans-continental market was limited in service. As such, Virgin Australia saw an opportunity and planned for a three to four year strategy to roll into the market with A330.

Virgin Australia followed the launch into the route with yet another target of the Sydney-Perth route with A330s and A330 flights from Melbourne-Perth twice in a day. These market entries by Virgin Australia offers substitute services to customers in the aforementioned routes, which is a threat to Qantas.

Rivalry among competitors

All the other forces lead to increased rivalry among firms in a given industry. The airline industry has a number of established airline operators that and new entrants who create stiff competition and rivalry. Depending on the type of brand that an organisation creates to the consumers, popularity will come from product pricing, design, and dedicated funds for advertising.

There is a relationship between price of a commodity and costs involved in production and when prices are low and costs are high, the profit margins are decreased. On the other hand, when competition is low profit margins shoot up. Cost is lowered, prices rise, and profit increases.

In a nutshell, Hill and Jones (2009) point out at four factors that affect level of rivalry, “The intensity of rivalry among established companies within an industry is largely a function of four factors:

1. industry competitive structure;
2. demand conditions;
3. cost conditions;
4. the height of exit barriers in the industry.”

Industry analysts carry out research to determine the number of firms in a given industry. Industrial structures vary and each segment ought to determine the rivalry levels at its own capacity. For instance, in a progressive industry would behave in a particular manner. According to McGahan, (2004), “Under progressive change, the industry’s stability arises from the links between activities rather than from any single proprietary activity.”

The demands of a given industry also influence the intensity of rivalry and for an increase in demand for services and products there will be reduced rivalry between firms. Alternatively, when there is low demand the rivalry between firms increase and the profit margins reduce. This is due to the cost factor.

Reduced demand implies that firms must review prices to have competitive fares. While this happens, there are costs that must be met, for instance, recurrent costs must be taken care of despite the gains made in the sales department.

Qantas has responded to alleviate insignificant rivalry within the airline industry by forming the Oneworld Alliance. The alliance brings together top 12 most successful airlines at the international level to coordinate the running of more than 700 destinations in over 130 countries.

The other airlines in the alliance are: Air Berlin, American Airline, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LAN, Royal Jordian, and S7 Airlines. The intent of the alliance is to bring on board airline firms and make them share the resources they have to boost customer experience; for instance, the 500 airport departure lounges that the alliance members can access across the world (Qantas, 2012h).

Pestle Analysis

Political

The Qantas Group enjoys cordial relationship with the government of Australia since its assistance in the government engagement in the WWII. The firm assisted in airlifting soldiers from the threat of advancing Japanese forces while at the same time dropping foodstuff in tree-tops.

Since then, the Qantas firm continues to serve the defence force by forming the subsidiary, Qantas Defence Service that airlifts soldiers to their destinations with defence jets. Fleet development in the Qantas Defence Services is convincing and hopefully, the relationship with the government will continue to build in the future.

In addition, Qantas is the biggest airline firm in Australia in both domestic and international flights. As such, it is a source of revenue for the government through taxation as a fully tax complaint firm. The government must therefore build policies that favour the firms for the good relationship to continue. Political engagements between government and Qantas employees are guided by policies.

It promotes collaborative relationship with the Australian regime and complies with all legislations that promote corporate ethical standards.

For instance, Qantas does not allow its employees to make political donations in money value or in-kind to any political officer, political parties or officials. When any worker attends a political party meeting, then the firm states that such activities should be seen as personal and not sponsored.

Economic

Qantas group economic performance between 2010 and 2011 are as indicated below:

Qantas Group Segment Performance Summary: 2010-2011

Source: CAPA Centre for Aviation, (2012)

Economic indicators of Qantas financial position are mainly positive. For instance, there has been a steady growth of ancillary revenue since 2010 for Jetstar. In addition, the unit cost performance show that Qantas has succeed in reducing the cost as from 2010 to 2012 going by the first quarter results. These two scenarios are shown in the charts below:

Jetstar Ancillary Revenue and Unit Cost Performance: 1H2011-1H2012

Source: Qantas, (2012g)

Qantas had to retrench 500 engineers at Victoria base in response to economic needs of the firm. After the announcement of the job cuts, it again announced that it would separate its international operations from domestic ones. Moreover, each business is to have its own CEO and report its own financial results.

This move can be interpreted that Qantas wants to streamline individual sectors by reducing losses and increasing profits where necessary.

According to Bamber (2011), “Qantas’ domestic airline made an underlying profit before tax of $552 million in 2010/2011FY, while the international business lost $216 million.” By separating the two, each sector can concentrate on addressing its own issues. In addition, bureaucracy will be made easy as they work as separate entities.

Socio-cultural Factors

CSR policies are important in building the socio-cultural relationship between a firm and the community around it. A good CSR structure addresses both the external and internal affairs of a business organization. External CSR policies focus on the social contract between an organization and the society. Qantas has programmes that enhance harmony between its operations and the community.

For instance, the high technology planes will reduce noise level to people living around airports. Customer reward schemes also build social relationship with customers. Qantas has sponsorship programmes for qualified students who want to pursue further education. There are other socio-cultural programmes that are outlined under the firm’s CSR port.

Technological

The use of technology has been elaborated in the paper before. The main technologies that Qantas has adopted of late are the use of technology in entertainment and flight renewal plans that will bring modern planes to its fleet. The Boeing 787 Dreamliner is a high technology car that has significant impacts on economic, environment, and customer experience.

Legal

As said earlier, Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure operations. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholders’ value. The company complies with all guidelines that are provided by the ASX Corporate Governance Council’s principles.

Qantas publicly discloses all their policies relating the corporate governance. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issues. Most importantly, the Board has its own Constitution that directs all ethics issues and governance structure.

Environmental

Qantas is committed to environmental sustainability other than the economic and social commitments. The firm’s objective is to be top in environmental performance through the implementation of required environment policies geared towards the protection of the current and future generations.

Environmental engagements

Qantas engage all stakeholders in ensuring the community has a variety of environmental programmes that run year in year out. Some of the plans include the firm’s Green Team, which is a group of volunteers who raise environmental awareness campaigns.

In addition, through the Great Barrier Reef Foundation ZooX Ambassadors, Qantas informs its employees on the relationship between climatic changes, the coral reefs, and how these two have an impact in the sustainability of the firm’s operations. The other engagement is eXcel Environment Ward, which awards the most focused employee in the implementation of environmental projects in the Qantas businesses.

The climate challenge

Since global climatic changes are a concern to the whole global community, Qantas prides itself in the development of programmes that cut down on emissions address climate issues. Qantas has set its own emission targets in a bid to reduce the effects of climatic challenges.

As the company core business is airline transport, 95% of Qantas global carbon emissions are due to jet fuel use. A possible avenue of reducing the emission is through use of efficient machines that will cut on the consumption. The figure below illustrates the set goals in reducing emissions at Qantas:

Source: Qantas (2012i)

Reducing aircraft noise

Qantas has the plan of reducing aircraft noise among the communities that live close to the airport by considering the purchase of aircrafts with that ability. The fleets on order including the Boeing 787 Dreamliner have the ability to reduce the noise.

This is why Qantas (2012j) makes firm statement, “Seeking better ways of managing aircraft noise is one of the many ways we continue to develop strong relationships with our communities. We believe that the best solutions emerge through collaboration.” There are also many other strategies put in place to reduce the environmental impact of the firm’s operations.

Impact Of External Environment On Qantas

A firm’s external environment is a three-piece component: the industry, the business and operation environment, and its remote. The three components of external environment can change and affect the operations at international and local levels.

The PESTLE analysis above helps in the definition of remote environment. The industry on the other hand is defined by the Porter’s five forces. The two models of analysis therefore help in the identification of the external business environment and its impact on Qantas.

International travels are characterised by regulatory impediments, which prevent carriers from inflowing to a new destination. Barrier to entry into a new destination is an obstacle to expansion programmes of a carrier. Network alliances open avenues for expansion and gives right to enter into a restricted territory. Network alliance also opens base for resource sharing.

Limited runways for take offs and landings may be a challenge to individual carriers. Finally, network alliances eases competition pressures, leading to a reduction in pricing and can earn supernormal profits.

Alliance members should be weary of threat of new entrants and formulate stringent measures to counter the threats. One way of achieving this is through imposition of regulatory restrictions and initiating frequent flyer programmes.

External business environment is also defined by the entry of other airlines into the market. Incumbency in the airline industry is a great barrier to entry into the industry. However, disruptive technology is a threat to this barrier and an opportunity for a new entrant.

Foster supported by Christensen as quoted by Vlaar et al., (2005) assert that, “disruptive technological change brings about new value propositions and strategic options that may have a devastating effect on established firms and industry structure.” (p. 155). Incumbents are unable to establish radical technological inventions due to protocol issues and conventional organisation structures that take long time to make critical decisions.

Since new entrants face operation difficulties through service imitation and high investment costs in R&D, disruptive technology is a scope towards market breakthrough. Emirates Airline is a new entrant into the market that defied the odds to break into airline industry with great success after short period of time.

According to Shikoh (2005), research by Skytrax in 2005, Emirates was third after Cathay Pacific and Qantas Airways and in front of global brands like British Airways and Singapore Airlines. As mentioned, Emirates instilled a sense of ‘business unusual’ in the industry with more operation strategies that appealed to majority.

The airline industry is a multi billion investment venture that is mainly funded by national governments. Due to this, there is expansion rigidity brought about by legal restriction on routes usage. Network alliances, therefore, involve both liberal bilateral agreements between two government and agreement between partners.

The geopolitics of airline industry is main source of barrier to entry by a new firm and the cause of incumbency by national carriers. This paper has established that other than privatisation, network alliance is one of the ways, through which industry players can expand their operations to new destination.

However, the case of Emirates Airline is unique as the firm defied the barriers to enter into the industry and become a global brand. Disruptive technologies and organisational rigidity are a challenge to the incumbent but give rare opportunities to new entrants. Structural rigidity can also be eliminated by privatisation.

In the airline industry, customer service is important as there is a direct relationship between customers and the employees. Before the management thinks of any effort to improve customer services, there is need of focussing on employee issues for them to respond with exemplary services to customers. In an airline where staffs are discontented, they are likely to replicate poor services to the customers.

Eventually there could be lost business as customers will seek better services elsewhere because there are options. Southwest Airline is among the world leaders in customer service at relatively low price. The firm considers its staff as the selling point. Southwest airline pays remunerates its workforce well and but remains a profit making organisation that has never retrenched its staffs (Bamber, 2011).

Virgin too is following in the footsteps of Southwest airline and in the same line; Qantas should take some strategies from Southwest airline to rejuvenate its economic hitches and the 500 retrenchment of workers in its Victoria base.

According to Bamber (2011) lesson from Southwest airline should be favoured instead of the bid to resorting to private equity funds to purchase Stakes at Qantas. Since the attempt, the share price has steadily fallen.

Impact Of Qantas On External Economic Environment

Qantas being one of the Oneworld Alliance means that the firm is a major player in Australian domestic and international airline industries. Its operations affect those of other carriers. The interrelationship among the world carriers tells the nature of the airline industry. The airline industry is very dynamic and sources of economic rent are diversified.

Due to heavy investment needed in the airline industry, the industry operates either as government owned ventures or by a particular entity. However, global wave of privatization and private business entities entered the industry in the mid 1990s, revolutionising the sector. There are limited cases of merger of firms in the airline industry due to rigid international air agreements that domestic firms adhere to.

Strategic alliances; and alliances between carriers is now the norm in the industry. Alliances between big network carriers are common if compared with those between low cost carrier (LLC), and charter airlines.

According to Forsyth et al., (2011), “This type of airline differ in that the first operate integrated route networks centred around one or multiple hubs, offering passengers a dense network of flight connections, while low cost and charter airlines typically focus on point-to-point networks.” (p. 49).

This paper discusses how various airline operations and activities affect economic rent of firms, engaged in the industry at the global, regional, and domestic level.

Consolidation of the industry is a major source of economic rent as it presents rationales, upon which networks integration would yield benefits. To begin with, working together brings in economies of scale for individual firms to improve technical efficiency. This is because firms in an alliance can share codes, which increases passenger flight rates.

According to risk diversification theory, creating many routes manages adverse effects of depending on a single airline destination. Another reason to form network alliance is that it reduces transaction costs that are passed on to customers. Forsyth et al., (2011) pose that, “Airlines that offer connecting services to passengers and flight forwarders may increase profits by joint marketing of their services on the basis of one stop shopping.”

Shopping at one point saves on transaction costs as passengers don’t need to connect flights but instead buy products and services from a partner in an alliance. In order to make this a reality, firms in an alliance should carry out joint branding and tender seamless travel plans to passengers.

Network alliances is the commonest practice in the world and as Ramón-Rodriguez et al., (2010) posit, “The success of this strategy has led to the creation of one world, Sky-Team and Star Alliance that are now responsible for about 75% of global passengers and 90% of long-haul flights.” (p. 111).

Network alliances eliminate market imperfections, which majorly affect airline operations. Airlines do serve a particular route, and when there is an alliance, interests of passengers who demand flight connection and complementary services will be served. Individual carriers face market imperfection due to uncoordinated price-setting mechanism because of numerous price mark-ups, set by individual carriers.

This reduces marginal costs (MC), leading to decrease in profit margins. Network alliance minimises price mark-ups due to coordination of a joint pricing model that offers complementary services to travellers. Customer also benefit from low prices, set by network alliances.

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Qantas, 2012f, Fleet developments. Web.

Qantas, 2012g, Qantas Airways Limited: 1H12 Results. Web.

Qantas, 2012h, One World Alliance. Web.

Qantas, 2012i. Climate change. Web.

Qantas, 2012j, Noise Management, our commitment. Web.

Qantas, 2012k, Small beginnings. Web.

Ramón-Rodríguez, A. B., Moreno-Izquierdo, L. & Perles-Ribes, J. F., 2011, ‘Growth and internationalisation strategies in the airline industry’, Journal of Air Transport Management. 17(2) pp. 110-115.

Reuters, 2012, Qantas raising fares to tackle high fuel cost. Web.

Shikoh, R., 2005. Global branding the Emirates way. Web.

Turner, C., 2009, corporate governance: A practical guide for accountants, Butterworth-Heinemann, New York.

Vlaar, P., Vries, P. D. & Willenborg, M., 2005. ‘Why incumbents struggle to extract value from new strategic options: Case of the European airline industry’, European Management Journal, 23(2), pp. 154-169.

Executive Summary

Market analysis is a vital concept for any business organisations to be able to assess the market needs and based on what is at hand, respond to the needs. Before making a market analysis, it is good to look at a company’s background in order to ascertain how current operations were motivated by past records. Three main tools have been used to analyse the airline industry using the case of Qantas.

These are Strength, Weakness, Opportunities, and Threats, (SWOT), Porter’s Five Forces, and Political, Economic, Socio-cultural, Technological, Legal, and Environmental (PESTLE) factors. At the end of the discussion, it can be noted that Qantas remains a major player in the airline industry at local and international levels amid the stiff competition from other carriers.

Introduction

Qantas Airways Ltd. is an Australian firm that operates in the airline industry at local and international capacities. The ideal to start the organisation was hatched by two individuals back in 1922. Fergus McMaster was convinced to look for interested investors after McGinness and Fysh sold the idea to him.

The history of Australian civil aviation is mainly about the history of Qantas that started from a humble beginning to what defines the future of Australian airspace. The corporation began with a two-passenger plane to the recent Airbus A380 series with carriage capacity of 450 passengers to far destinations.

The Queensland and Northern Territory Aerial Services Ltd, (QANTAS) hard to pass through hurdles to develop its market share with a pull of dedicated staff members backed by very loyal customers. The key pillars of Qantas development are the stakeholders who created it, the workforce, and the customers.

The vertical rise in the company’s growth has made Qantas one of the world’s best long distance international brands and one of the best service providers in Australia. The outstanding growth of Qantas defines the course of international aviation industry (Qantas, 2012a).

In order to critically analyse a firm’s business operations, there are tools that are employed to ascertain the strength and position of a firm. SWOT, PESTLE, and use of Porter’s Five Forces are recommended tools that can achieve this feat. The tools involve evaluation of a firm’s strength by looking at a number of factors that overly defines a successful business organisation.

By taking the case study of Qantas Airways Ltd, this paper vividly explores market parameters that make Qantas outstanding among other world airline brands. From review of the company’s business activities, one concludes whether the firm stands strong and whether sustainability of business activities will be achieved in both short and long terms.

Quantas Airways Background

Description of the Organization

Fergus McMaster was convinced to look for interested investors after McGinness and Fysh gave him a detailed plan for setting up an air service. Fysh and McGinness with the help of flight sergeant Arthur Baird took a trip to Mascot Aerodrome in Sydney to inquire for delivery of 2 Avro planes. An agreement was reached and the Western Queensland Auto Aero Service Ltd was registered.

A rebranding took place later to form the abbreviation, (Qantas, 2012b). The formal establishment of Qantas was in 1920 following registration with chairmanship of Fergus McMaster. There were then a series of air test and joy rides by the founders who experienced technical and physical difficulties while airborne.

The machines were remodelled to suit the needs at that time and the aircrafts could make 54,000km carrying a total of 871 passengers by the biplanes without damage (Qantas, 2012a).

As time passed by, more planes were required in airmail services between Cloncury and Charleville in 1922. Two years later, the first Australian Prime Minister flies Qantas on an official government duty.

The marched achievement seemed to bring new hope for the company and in 1926, Qantas started building its own machines at the Longreach base. The following chronology of events summarises the succeeding history of Qantas:

1927: The firm recruits the first trainee

1928: The launch of the Flying Doctors Service with Qantas offering the air travel services.

1929: Outback network arrives in Brisbane

1931: Trial airmail delivery is made from Brisbane to Darwin

1934: The firm changes its name to Qantas Empire Airways Ltd.

1935: The Qantas DH86 flies overseas, Darwin to Singapore. The flight is to deliver airmail to the UK in liaison with Imperial Airways that was later named BOAC.

1938: The airline to the United Kingdom receives Short C Class airplanes to make trips to Singapore. Imperial Airline obtains the responsibility of the route.

1939-1945: A fully set base takes operation of mechanical works at mascot base known today as Sydney Airport. Qantas gets involved in the WWII as its planes are used to transfer the foot soldiers from the threat of advancing Japanese fighters to New Guinea.

They airplanes also supply foodstuff to soldiers at the battle fields. Qantas also makes history for being the first to make more than 30-hours flight over Perch and Sri Lanka airs to make important links with Allied Forces. The kangaroo logo becomes symbol of Qantas in 1944.

1946: air transport in Australia-UK route recommence and this time the British Airways in a partnership programme. DC3 service is initiated to New Guinea as the flight network reaches new Indian and Pacific Islands destinations. In the same year, Australian regime launches new airline known as Trans-Australia Airlines, TAA in the domestic market with Lester Brain (formerly of Qantas) as the general manager

1947: Government of Australia buys all shares in Qantas, Constellation aircraft sets in, and the first flight is made to Japan

1949: TAA replaces Qantas in the Flying Doctors Service and the Queensland and Northern Territory routes

1953: Along the Kangaroo route to UK, a tourist economy class is introduced

1954: The Super Constellations flies to San Francisco, USA and Vancouver, Canada for the first time

1956: For the Olympic Games in Melbourne, Qantas carries the Olympic flame from Athens to Melbourne

1958: The Qantas’s Super Constellations make a round the world flight

1959: Qantas introduces Boeing 707 series as the first non-American airline. This gain reduces flight times by half for trans-Pacific flights

1960: TAA in charge of operations in the Papua New Guinea from Qantas

1964: TAA launches its first jet by purchasing Boeing 727 series; high performing machines that stimulate the Australian airline industry with their mechanical superiority, speed, and comfort. This results to massive growth of the industry.

1966: The retirement of Qantas Co-founder and Chairperson, Sir Hudson Fysh

1967: Qantas rebrands to Qantas Airways Ltd. TAA launches DC9 that proves to be mechanically sound for going 495 different revenue flights without delay on mechanical breakdown

1971: The introduction of the Jumbo jet; Boeing 747

1974: Qantas evacuates 673 survivors on one flight from the devastation of Cyclone Tracy from Darwin to set new world record

1979: Phasing out of the 707 series and venturing into an all-747 airline. In the same year, the firm rolls out the first Business Class travel experience to customers.

1985: The launch of Boeing 767s. James Strong goes to TAA in order to revitalise the TAA when the government was advancing to stronger deregulation and competition

1986: TAA becomes Australian Airline

1988: Australian airline is incorporated to a public company

1989: Australian Airline in trouble due to pilot’s strike followed by resignation. The government agrees to a deal to make a proposal that would bring together the Australian Airline and Qantas.

1989: Qantas Airways Ltd buys the Boeing 747-400 that the first nonstop flight of 18,001km in accompany jet. The first experience take place in the London-Sydney route.

1990: One John Schaap quits the firm as an executive member to join Australian Airways as its general manager. The departure took only ten months before deregulation of local airline industry in Australia.

1992: Government agrees to sell the stakes of Australian Airline to Qantas valued at $400 million.

1993: The government regime offloads 25% stake to make British Airways have ownership of Qantas Airline in a privatisation strategy. Australian Airline merges with Qantas to form Qantas Airways Ltd. with James Strong as the CEO

1994: A new cabin design launches to update service provision

1995: Qantas offloads the remaining 75% shares to the public in the ASX. Qantas becomes one of the world leading service providers in the aviation industry with an operation capability of airlifting 14 million passengers per annum using over 130 aircrafts

1997: Qantas marks the year of the golden jubilee along the Kangaroo network from Australia to the United Kingdom and Japan

2002: The launch of subsidiary airline to operate at international level. The name of the firm is Australian Airlines

2004: Introduction of a new and cheap carrier in the domestic flight known as Jetstar

2006:Australian Airlines stops its services

2008: The A380 series are added to Qantas fleet while second biggest order to be done by any airline corporation is in the pipeline. A380 aircraft is inaugurated to fly from Melbourne to Los Angeles, the technology is of high standards as the Required Navigation Performance finds usage in managing flight. This makes the firm to reduce its carbon emission by significant figures. Installation of Qantas General Electric CF6-80C2 engine to enhance the performance of the B747-400 aircrafts

2010: new check-in system

2012: The arrival of B787 aircraft considered as next generation fleet

2020: Centenary of Qantas, Qantas (2012a).

Location of Organization

• The initial location of the Qantas operations was in Longreach, Queensland to Brisbane
• In 1930, the company’s headquarter was moved from Longreach, Queensland to Brisbane
• In 1938, the company’s headquarters was moved from Brisbane to Sydney as operation base.
• In 1957, a new corporate headquarter was set up along Hunter Street, Sydney

Stakeholders of the Organization

From the chronology of events that have shaped Qantas Group, the company was a private entity when it was founded back in 1922. The growth track led to instant recognition and at some point the government of Australia took over the firm.

Afterwards the government privatised the firm. In a bid to make the firm have an international appeal, British Airways was took a 25% stake at Qantas after the government agreed terms with British Airways in 1993. In 1995, Qantas offloaded the remaining 75% shares to the public in the ASX (Qantas (2012a).

Today Qantas is a public owned company and it is listed in the ASX as QAN. This gives opportunity to anyone who would wish to own the firm a chance by simply buying the stock. Any individual who owns the QAN is a Qantas owner; hence, stakeholder

. The management team spearheaded by the Nominations Committee is free to nominate a new member to the Board of Directors and every stakeholder has the right to approve such nominations during the company’s AGM. Just like other listed companies, only a stakeholder with 51% ownership of the firm can have a direct say on how the firm should run with regard to management and who should be in the Board.

Organizational Structure

The Qantas’ Board is dominated by independent Non-executive Directors who work hand in hand with Executive Directors to carry out Qantas capital intensive programmes. The Board has responsibility of upholding accountability and freedom in a bid to maximise the profit for goodwill of all stakeholders.

The Board of Directors

Source: Qantas (2012b)

The Executive Arm of Qantas

Other than the Board of Directors, Qantas also has the Executive Team that comprises of the following personalities:

• Alan Joyce; The firm’s CEO
• Gareth Evans; CFO
• Lesley Grant; CEO of Qantas Loyalty
• Simon Hickey; CEO of Qantas International
• Jayne Hrdlicka; the CEO of Jetstar Group
• Brett Johnson; the firm’s General Counsel
• Jon Scriven; Group Executive People
• Lyell Strambi; CEO of Qantas Domestic

Board Committees

• Audit Committee
• Nominations Committee
• Remuneration Committee
• Safety, Health, Environment and Security Committee

Board Committee Charters

The Board Charter was adopted by the Board in September 1, 2003. The Committees have the duty of giving comprehensive analysis of all issues affecting the company to the Board for approval. In addition, the Board approved charters for its Committees as:

• Audit Committee Charter
• Nominations Committee Charter
• Remuneration Committee Charter
• Safety, Health, Environment and Security Charter, Qantas (2012b).

Service Analysis

The main Qantas’ service line is passenger transportation and air freight services. These are the services that have seen the company grow in the last decades. The fleet size has increased, the planes have been modernised, and expectations are still high is the fleet renewal plans.

This means that customers will continue to experience superior services at least in the near future. Other than the main services, Qantas owns a number of subsidiary firms as it takes service experiences a notch higher.

QantasLink

This subsidiary, firm has more than 2000 flights per week in 56 destinations spread in metropolis, regions, and across borders (Papua New Guinea).

Q Catering

This is the firm’s group that offers catering services to the travellers and is fully owned by Qantas. It has two main branches: the Q Catering spread across Qantas’ 6 ports in Australia and Snap Fresh that is a modern facility in Queensland specialised in meal production. The meals are supplied to non-aviation destinations.

Qantas Freight

This is Qantas’ subsidiary that manages all the freight issues in the international level for Jetstar, Jestar Asia, and Qantas. In addition, it handles freight in domestic market that is marketed by Australian air Express. Qantas Freight Enterprise runs specialised logistics businesses across the borders done by: Express Freighters Australia (EFA), Jets Transport Express, and Qantas Courier employing 800 workers.

Express Ground Handling

This is Qantas’ subsidiary is fully owned by Qantas Airways and works in liaison with Qantas Airports and Qantas Catering Group. It provides ground handling facilities regional airlines and Jetstar.

Qantas Holidays

This is Qantas’ subsidiary forming union with the Jetset Travelworld Group to offer travel wholesale services. The services cover all the Qantas destinations outreach not only by Qantas itself but also in alliance with other airlines. There have been mergers of Qantas Holidays with other firms to offer a range of travel agency at retail prices.

Qantas Jetstar

This is a low cost airline working in Singapore and Australia since 2004. Whereas the Jetstar Australia is wholly owned by Qantas, “Jetstar Asia is a Singapore-based partnership between Qantas (49%) and Singapore company Westbrook Investments (51%) with the hub based in Singapore” (Qantas 2012c).

Qantas Defence Services

Qantas Defence Services offers flight services to the defence force of Australia in at both local and international levels. This began in the WWII and since then, the government of Australia is in liaison with Qantas to offer air flights. There are warplanes in the Qantas Defence Service docket to suit these needs.

Technology

The Dreamliner’s arrival

Qantas has, since its inception tried to remain one of the best performing airlines not only in Australia but also in the international airline industry. This has been made possible given the firm’s drive to purchase high performing machines in the airline industry. Backed by sound financial background, Qantas embraces any technology that can add value to the passenger transportation and freight services.

Technology must improve if the world is to attain global climatic challenges resulting from the emission of carbon into the atmosphere. In the airline industry, one way of using technology to cut on carbon emission is the adoption of efficient cars.

Qantas has made the Boeing 787 as the foundation of its fleet renewal programme at both the domestic and international services. The firm has placed an order of 50 Boeing 787 cars and the Dreamliner would be delivered around June 2013. The Boeing 787 series are a high technology machines that will make Qantas to be able to fly to far destinations without flight connection. This will boost point-point travels across the globe.

The aircraft’s body is made if composite and light materials and due to light weight, the aircraft travels faster than ordinary aircraft of similar size. It is fuel efficient and able to reach further destinations on full load and is easy and cheap to maintain.

The investment in Boeing 787 series is in line with Qantas belief of providing air transport safely, high quality services, and innovative business ideas that have been the company’s ethos since 1922 (Qantas, 2012k).

To maintain the high level of technology of the Boeing 787 series, Qantas has chosen GE GEnx Engines to maintain the fleet. GEnx meets the requirements to maintain the cars at low cost while paying keen attention to environmental safety standards.

Boeing 787 has the ability to increase fuel efficiency by 20%, make a 20% carbon emission cut, 40% nitrous oxide emission cut, and reduce noise footprint by 50% at airports. This table below shows the technical specifications of Boeing 787:

Source: Qantas, (2012d)

World’s first technology entertainment

The Qantas’ Q Streaming pilot and its passenger were among the first in the world to experience WIFI entertainment technology. In addition, passengers using the technology entertainment car within the airlines of Australia are first to practically try the In-Flight Entertainment technique, (IFE).

Travellers will also be allowed to use WIFI enabled gadgets like laptops. As of February this year, Qantas passengers travelling can now download Q Streaming app available from the iTunes database while passengers who own laptops can easily download the MS Silverlight before plane takes off. The new technology entertainments are making customers to really appreciate services at Qantas.

Great choice is offered for to the customers and their feedback so far has been amazing. As a result, the company will continue to develop its Q Streaming utilities by taking advantage of the new emerging edge wireless technology.

According to Qantas (2012e) “Qantas will continue to enable customers access the Q Streaming content via their own WIFI enabled devices on the dedicated B767-300 whilst finalising plans to extend its application to wider fleet.”

Internal Economic Environment

International corporations like Qantas should undertake SWOT analysis to establish its internal position as an organisation against the external environment. This is critical as it makes it possible to adjust to environment needs of business; for instance, opportunity created through open borders that make it easy to access overseas market, (Hitt, Ireland, & Hoskisson 2008).

It allows managers to review the internal and external business environment with the aim of setting up obligatory roles of a company geared towards company’s mission and vision statements. SWOT analysis helps to restore the glory of an underperforming business to new economic heights.

A firm’s strength is fundamental in maintaining competitiveness, which consumers value most. Competitiveness makes products imitation by other industrial players difficult. Belk and Sherry (2007) note that value is creation is motivated by the satisfying the needs of both producers and consumers according to co-production assessment.

Leveraging in short refers to the harmonisation of internal strength against external opportunities. Planning in management should expect operation constraints when internal weaknesses prevail as it is likely to limit a company’s competitive advantages and opportunities. On the other hand, internal weaknesses are a threat to organizational strengths as they make a firm susceptible to the external economic environment.

Strengths

A business organisation can have a number of possible strengths to boost performance these may include: a pull of skilled manpower, sound book values or financial health, brand name like Qantas that is popular across the globe and adjustment in equipment purchase or installation, inadequate competition, and own premises among. A pull of a skilled manpower helps in the cutting training cost; hence, reduced annual overheads.

A good financial position means that an organisation can service its financial commitment and access more funds like loans. Own premises reduces the amount of recurrent costs.

All these strengths can lead to cost reduction that may be needed to adjust to a short term market need; for instance, sudden rise in jet fuel prices that will automatically affect normal running of the business. Strength therefore can be used to sustain competitiveness.

Product diversity

The core business line of Qantas Airline Ltd is passenger transport and air freight. To this effect, the firm has delivered top quality even in the most trying economic times. Product diversity is equally important to boost critical operations when the main business is faced with fiscal challenges or any other challenges. As such, Qantas runs a series of subsidiaries listed below:

• QantasLink
• Q Catering
• Qantas Freight
• Express Ground Handling
• Qantas Holidays
• JetStar
• Qantas Defence Services

The Qantas Freight operates the freight services with its own fleet that of cars of the Boeing 747-400F and B767-300F. The subsidiary also carries ground handling services in 7 locations in Australia and abroad for its own airlines and other carriers.

The Qantas Defence Service supports the Australian and this began in the WWII era. The subsidiary offers services to the defence forces in Australia and due to the superiority of Qantas the expected level of services needed can be met by the firm’s strength (Qantas 2012c).

By operating subsidiary firms Qantas is in a position to strengthen its asset and revenue base to meet its fleet expansion and renewal programmes. In addition, this strategy is helpful in reducing the dependence level of Qantas passengers’ services that can be affected by political tensions when diplomatic hitches or sanctions occur.

The ground handling services that Qantas Freight offers to even other carriers in far destination like Los Angeles helps the firm in building inter-organisational relations and diplomatic relationship with Australia and America and others.

Number of fleet and types of fleet

The airline since its inception in 1922 has seemed tremendous growth in the domestic and international level. To boost the upward trend, Qantas has been in the forefront to set a number of world records in the airline industry due to its preference for high performance machines. Qantas is the largest airline operator in Australia and this is achieved by fleet development to carry passengers to various destinations across the world.

In the next decade, Qantas has a short term plan of capital investment in the tune of US$23 billion to buy more and high performing aircrafts of the next generation. The fleet capital investment would see the firm buy the more of the Airbus A380s and the most talked about Airbus A320 neo and Boeing 787 Dreamliner (Qantas, 2012f).

The significant point about fleet renewal at Qantas is to facilitate efficient use of fuel in the long run as fuel is a global problem when supply dwindles. Renewal replaces older and more energy intensive machines with low fuel consuming ones. The current fleet of aircrafts at Qantas is Australia’s biggest in domestic aviation industry and one of the world’s best in international airlines.

Qantas won the World Airline Awards for the Best Premium Economy Class. The Trans-Tasman line has a new B737-800 series, superior services of new 747 series that delivers the best Business Class worldwide, among other superior services offered by Qantas. The much talked about Dreamliner is expected to be delivered to Qantas in 2013 and other brand new 50 B787-900 series to arrive by 2016 (Qantas, 2012f).

This kind of fleet superiority in the domestic and global airline industries places Qantas in a strategic position to continue dominating the industry even in the years to come. The company’s prospectus runs for the next 4 years in terms of new airline arrivals only. These kinds of realignments and strategies will ensure that the Qantas remains a strong brand.

Strong corporate governance structure

Corporate governance may be a great strength if properly structured in an organization in order to improve accountability in running activities of the firm. Corporate governance builds formidable relationship between shareholders and business managers. Turner, 2009 observes that’ corporate governance “is used to describe a range of issues relating to the ways in which companies may be directed and controlled” (p. 5).

A broader definition of good governance takes cognizance of the social and business environment, to enhance social functions of a firm in the society. Stakeholders’ roles are critical in the maintenance of competitiveness and long term sustainability of an organisation’s activities (Calder, 2008).

Corporate governance should outline operations with respect to policy structure, its implementation, and other amicable strategies to withhold stakeholders’ preferences.

Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure for its full functionality. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholders’ value. The Board follows the provisions of Australian Securities Exchange Corporate Governance Council’s principles.

Qantas publicly discloses all their policies relating the corporate governance, which builds stakeholders’ trust. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issues that affect the structure. To help in this regard, the Board works on corporate governance structure directed by the following sub-sections:

• The Qantas Constitution
• Corporate Governance Statement
• Qantas’ Executive Remuneration Philosophy
• The Qantas Board
• Board Committee members
• Board Committee Charters
• Qantas Group Business Practices Document
• Qantas Diversity Statement (Qantas, 2012b).

The elaborate nature of Qantas corporate governance and its transparency conforms to all the requirements of corporate governance outlined above. Therefore, the firm’s shareholders and all other stakeholders see accountability of the highest level. They in turn trust the company’s ideals, which is an endorsement to its operations for the sustainability of Qantas.

Weaknesses

It is important to recognise a company’s weaknesses in order to minimise them in future. Weaknesses can be; rented premises, unskilled or semi-skilled workforce, heavy debts, stock imbalance, and unproductive or inefficient machines.

Even though Qantas owns a number of subsidiaries, the subsidiary firms depend on mainstream Qantas services (passenger transportation) and freight. This means that if the mainstream services are affected, there will be a ripple effect that will trickle down to the subsidiary firms.

Therefore the firms should invest in different lines and industries. According to Reuters (2012) Qantas still faces the challenge of fuel costs and the immediate response at times of high fuel costs is to hike fares. This is a weakness because it can lead to lose of customers.

External Economic Environment

Threats

Existence of strikes

Industrial strike poses a great threat to the company performance. During strikes the airline operations are grounded and that leads to reduction of revenue and subsequently gaining by the company’s rivals such as Virgin Australia.

For instance, Qantas first quarter profit of the year 2012 reduced by 52% (CAPA Centre for Aviation, 2012). The main contributing factor to the reduction of the mentioned profit margin is industrial strikes. The company estimate of the revenue loss as result of strike is AUD 95 million.

Competition from other airways companies

The existence of the competition from other airline also is a great threat to Qantas airways market share. Virgin Australia offers stiff competition to destinations which were earlier seen as Qantas airways natural markets. The completion has made Qantas airways to cut off some of the international routes so as concentrate to the domestic market.

Global economic crises

The effects of global economic crisis in 2008 challenged many global business organizations. The aviation industry was also hard hit because the number of tours reduced as travelling became a lesser priority. Currently, the Euro zone crisis continues to affect member countries in Europe.

The global economic crises are a threat to the airline and frantic efforts must be made to minimize their effects. The end result of global economic crisis is that it increases operation cost, reduces business opportunities which in turn leads to loss of revenue to a company.

Fuel prices

The stability of fuel prices in the global market directly affects the operations of airlines. The stability depends on a number of issues; one being political standoff between one or more countries. To stabilize the fuel prices, Qantas ahs a well developed hedging strategy that intends to cushion the effect of unstable fuel prices.

Under the Capital Management and Treasury, Qantas reserves cash revenue of $3.3 billion to facilitate debt problems. Fuel costs, operating foreign exchange, and aircraft capital expenditure are all hedged to respond the incoming challenges.

Of the three hedged funds, fuels cost takes 86% with an effective hedge price of US$116.05/barrel. According to Qantas (2012g), “Hedging approach mitigates risk whilst maintaining upside potential,” (p. 13).

Opportunities

Product diversity

Needs extension to non-airline services

The Oneworld Alliance

Oneworld Alliance offers great opportunity for Qantas to extend its services to further destinations. Through the alliance, it is possible to integrate critical airline operations with the Qantas’ operations.

Porters Five Forces

Porter’s Five Forces model was initiated by the renowned economic and business strategist Michael E. Porter. Porter identified five pillars that mainly influence organisation and planning of businesses. This model is relevant in modern day given the phase of internet use in business processes that has led to globalization. The five forces are illustrated below:

Source: Porter, (1985)

Bargaining power of Buyers

Customers with substantial bargaining are likely to have a massive take on what should inform a business strategy. The advances in technology and the use of internet ahs significantly increased such of information and for customers. As a result, customers can make fare comparison for the various airlines before booking. The information is available online; for instance, Qantas has its own page for online booking.

Choice is made depending on the desired pack and price for a flight. High bargaining power of customers increases rivalry in the airline industry. Qantas has specialised in the delivery of quality economy and business classes that serve the interest of various categories of customers.

In fact, Qantas has won awards in the provision of superb services. As mentioned earlier, Qantas won the World Airline Awards for the Best Premium Economy Class.

Bargaining power of Suppliers

The number of suppliers who are able to deliver a company’s fleets or any other equipment needed affect suppliers’ bargaining power. In case of supply dominance by one or few entities, the bargaining power of the supplier(s) will be increased as increase in demand for equipment increases.

On the other hand, if there are many suppliers are in an industry, their bargaining power will be diminished leading to low costs of machinery and other equipment. In the fleet development industry, there are limited manufacturers that can deliver state of the art aircrafts to meet Qantas market needs.

For instance, Boeing 787 Dreamliner is s superior kind of aircraft that not every manufacturer has the ability to make in the short run. To this effect, the manufacturer enjoys the bargaining power and Qantas has to give in to any demands given by Boeing.

Threat of New Entrants

New entrants are firms that are not currently in market completion in a given industry; but they have the ability to do so if they decide. In international airline industry, it is absolutely unavoidable to eliminate the threat of a new entrant and alleviate any threat of their market share. Many corporations invest in Research and Development, (R&D) to improve services.

However, threat of a new market entrant relies on a number of factors. First, economies of scale enjoyed by a leading company may act as a barrier to a new entrant that is yet to start service delivery in a given market.

According to Hill and Jones, (2009), “Economies of scale arise when unit costs fall as a firm expands its output. Sources of economies of scale include, cost of reductions gained through mass-producing a standardized output and discounts on purchase of raw materials in bulk.”

Another barrier to entry is absolute cost advantages. When initial resource investment is high for an existing company compared to a potential entrant, there would be very hard scenario for a new entrant to get into market. Government policies may also favour market dominance for some companies; for example, if incentives are given to new entrants, barrier to entry would be significantly reduced for a business organisation.

The forth factor that influences this force paradigm is the cost of consumer switching from one service or product to another. If the cost of switching is relatively low, a new entrant captures some part of the market share whereas if the costs are high, dominant firm would are the beneficiaries. Consumer loyalty on a given brand can be a hurdle for a new firm to enter market.

Threats of substitutes

If market situation allows for substitutability of goods and services from other competitor, then the management needs to find alternative measures to limit the threat. This can be done through finding new markets, adopting competitive fares and low cost product, among other measures that will make the company maintain its market share.

If the degree of substitutability of goods and services is low, threat of market share will be low. Qantas prides itself as a trend setter with the new fleet of cars expected in the future. The firm has the financial ground to support all the ambitious plans in the offing.

In May 2012, Qantas withdrew services in the Auckland-Los Angeles and Singapore-Mumbai routes in a aircraft renewal plan. The plan was to set free 4 of the A330 cars that were in turn taken to the Sydney-Bangkok route. The A330s were to replace the 2 Boeing 747-400 series.

This was a reduction in international flight in favour of domestic trunk network. According the CEO of Qantas the strategy is to ensure that Qantas maintains a minimum of 65% of the domestic market (CAPA Centre for Aviation, 2012).

The plan meant that the trans-continental market was limited in service. As such, Virgin Australia saw an opportunity and planned for a three to four year strategy to roll into the market with A330.

Virgin Australia followed the launch into the route with yet another target of the Sydney-Perth route with A330s and A330 flights from Melbourne-Perth twice in a day. These market entries by Virgin Australia offers substitute services to customers in the aforementioned routes, which is a threat to Qantas.

Rivalry among competitors

All the other forces lead to increased rivalry among firms in a given industry. The airline industry has a number of established airline operators that and new entrants who create stiff competition and rivalry. Depending on the type of brand that an organisation creates to the consumers, popularity will come from product pricing, design, and dedicated funds for advertising.

There is a relationship between price of a commodity and costs involved in production and when prices are low and costs are high, the profit margins are decreased. On the other hand, when competition is low profit margins shoot up. Cost is lowered, prices rise, and profit increases.

In a nutshell, Hill and Jones (2009) point out at four factors that affect level of rivalry, “The intensity of rivalry among established companies within an industry is largely a function of four factors:

1. industry competitive structure;
2. demand conditions;
3. cost conditions;
4. the height of exit barriers in the industry.”

Industry analysts carry out research to determine the number of firms in a given industry. Industrial structures vary and each segment ought to determine the rivalry levels at its own capacity. For instance, in a progressive industry would behave in a particular manner. According to McGahan, (2004), “Under progressive change, the industry’s stability arises from the links between activities rather than from any single proprietary activity.”

The demands of a given industry also influence the intensity of rivalry and for an increase in demand for services and products there will be reduced rivalry between firms. Alternatively, when there is low demand the rivalry between firms increase and the profit margins reduce. This is due to the cost factor.

Reduced demand implies that firms must review prices to have competitive fares. While this happens, there are costs that must be met, for instance, recurrent costs must be taken care of despite the gains made in the sales department.

Qantas has responded to alleviate insignificant rivalry within the airline industry by forming the Oneworld Alliance. The alliance brings together top 12 most successful airlines at the international level to coordinate the running of more than 700 destinations in over 130 countries.

The other airlines in the alliance are: Air Berlin, American Airline, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LAN, Royal Jordian, and S7 Airlines. The intent of the alliance is to bring on board airline firms and make them share the resources they have to boost customer experience; for instance, the 500 airport departure lounges that the alliance members can access across the world (Qantas, 2012h).

Pestle Analysis

Political

The Qantas Group enjoys cordial relationship with the government of Australia since its assistance in the government engagement in the WWII. The firm assisted in airlifting soldiers from the threat of advancing Japanese forces while at the same time dropping foodstuff in tree-tops.

Since then, the Qantas firm continues to serve the defence force by forming the subsidiary, Qantas Defence Service that airlifts soldiers to their destinations with defence jets. Fleet development in the Qantas Defence Services is convincing and hopefully, the relationship with the government will continue to build in the future.

In addition, Qantas is the biggest airline firm in Australia in both domestic and international flights. As such, it is a source of revenue for the government through taxation as a fully tax complaint firm. The government must therefore build policies that favour the firms for the good relationship to continue. Political engagements between government and Qantas employees are guided by policies.

It promotes collaborative relationship with the Australian regime and complies with all legislations that promote corporate ethical standards.

For instance, Qantas does not allow its employees to make political donations in money value or in-kind to any political officer, political parties or officials. When any worker attends a political party meeting, then the firm states that such activities should be seen as personal and not sponsored.

Economic

Qantas group economic performance between 2010 and 2011 are as indicated below:

Qantas Group Segment Performance Summary: 2010-2011

Source: CAPA Centre for Aviation, (2012)

Economic indicators of Qantas financial position are mainly positive. For instance, there has been a steady growth of ancillary revenue since 2010 for Jetstar. In addition, the unit cost performance show that Qantas has succeed in reducing the cost as from 2010 to 2012 going by the first quarter results. These two scenarios are shown in the charts below:

Jetstar Ancillary Revenue and Unit Cost Performance: 1H2011-1H2012

Source: Qantas, (2012g)

Qantas had to retrench 500 engineers at Victoria base in response to economic needs of the firm. After the announcement of the job cuts, it again announced that it would separate its international operations from domestic ones. Moreover, each business is to have its own CEO and report its own financial results.

This move can be interpreted that Qantas wants to streamline individual sectors by reducing losses and increasing profits where necessary.

According to Bamber (2011), “Qantas’ domestic airline made an underlying profit before tax of $552 million in 2010/2011FY, while the international business lost $216 million.” By separating the two, each sector can concentrate on addressing its own issues. In addition, bureaucracy will be made easy as they work as separate entities.

Socio-cultural Factors

CSR policies are important in building the socio-cultural relationship between a firm and the community around it. A good CSR structure addresses both the external and internal affairs of a business organization. External CSR policies focus on the social contract between an organization and the society. Qantas has programmes that enhance harmony between its operations and the community.

For instance, the high technology planes will reduce noise level to people living around airports. Customer reward schemes also build social relationship with customers. Qantas has sponsorship programmes for qualified students who want to pursue further education. There are other socio-cultural programmes that are outlined under the firm’s CSR port.

Technological

The use of technology has been elaborated in the paper before. The main technologies that Qantas has adopted of late are the use of technology in entertainment and flight renewal plans that will bring modern planes to its fleet. The Boeing 787 Dreamliner is a high technology car that has significant impacts on economic, environment, and customer experience.

Legal

As said earlier, Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure operations. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholders’ value. The company complies with all guidelines that are provided by the ASX Corporate Governance Council’s principles.

Qantas publicly discloses all their policies relating the corporate governance. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issues. Most importantly, the Board has its own Constitution that directs all ethics issues and governance structure.

Environmental

Qantas is committed to environmental sustainability other than the economic and social commitments. The firm’s objective is to be top in environmental performance through the implementation of required environment policies geared towards the protection of the current and future generations.

Environmental engagements

Qantas engage all stakeholders in ensuring the community has a variety of environmental programmes that run year in year out. Some of the plans include the firm’s Green Team, which is a group of volunteers who raise environmental awareness campaigns.

In addition, through the Great Barrier Reef Foundation ZooX Ambassadors, Qantas informs its employees on the relationship between climatic changes, the coral reefs, and how these two have an impact in the sustainability of the firm’s operations. The other engagement is eXcel Environment Ward, which awards the most focused employee in the implementation of environmental projects in the Qantas businesses.

The climate challenge

Since global climatic changes are a concern to the whole global community, Qantas prides itself in the development of programmes that cut down on emissions address climate issues. Qantas has set its own emission targets in a bid to reduce the effects of climatic challenges.

As the company core business is airline transport, 95% of Qantas global carbon emissions are due to jet fuel use. A possible avenue of reducing the emission is through use of efficient machines that will cut on the consumption. The figure below illustrates the set goals in reducing emissions at Qantas:

Source: Qantas (2012i)

Reducing aircraft noise

Qantas has the plan of reducing aircraft noise among the communities that live close to the airport by considering the purchase of aircrafts with that ability. The fleets on order including the Boeing 787 Dreamliner have the ability to reduce the noise.

This is why Qantas (2012j) makes firm statement, “Seeking better ways of managing aircraft noise is one of the many ways we continue to develop strong relationships with our communities. We believe that the best solutions emerge through collaboration.” There are also many other strategies put in place to reduce the environmental impact of the firm’s operations.

Impact Of External Environment On Qantas

A firm’s external environment is a three-piece component: the industry, the business and operation environment, and its remote. The three components of external environment can change and affect the operations at international and local levels.

The PESTLE analysis above helps in the definition of remote environment. The industry on the other hand is defined by the Porter’s five forces. The two models of analysis therefore help in the identification of the external business environment and its impact on Qantas.

International travels are characterised by regulatory impediments, which prevent carriers from inflowing to a new destination. Barrier to entry into a new destination is an obstacle to expansion programmes of a carrier. Network alliances open avenues for expansion and gives right to enter into a restricted territory. Network alliance also opens base for resource sharing.

Limited runways for take offs and landings may be a challenge to individual carriers. Finally, network alliances eases competition pressures, leading to a reduction in pricing and can earn supernormal profits.

Alliance members should be weary of threat of new entrants and formulate stringent measures to counter the threats. One way of achieving this is through imposition of regulatory restrictions and initiating frequent flyer programmes.

External business environment is also defined by the entry of other airlines into the market. Incumbency in the airline industry is a great barrier to entry into the industry. However, disruptive technology is a threat to this barrier and an opportunity for a new entrant.

Foster supported by Christensen as quoted by Vlaar et al., (2005) assert that, “disruptive technological change brings about new value propositions and strategic options that may have a devastating effect on established firms and industry structure.” (p. 155). Incumbents are unable to establish radical technological inventions due to protocol issues and conventional organisation structures that take long time to make critical decisions.

Since new entrants face operation difficulties through service imitation and high investment costs in R&D, disruptive technology is a scope towards market breakthrough. Emirates Airline is a new entrant into the market that defied the odds to break into airline industry with great success after short period of time.

According to Shikoh (2005), research by Skytrax in 2005, Emirates was third after Cathay Pacific and Qantas Airways and in front of global brands like British Airways and Singapore Airlines. As mentioned, Emirates instilled a sense of ‘business unusual’ in the industry with more operation strategies that appealed to majority.

The airline industry is a multi billion investment venture that is mainly funded by national governments. Due to this, there is expansion rigidity brought about by legal restriction on routes usage. Network alliances, therefore, involve both liberal bilateral agreements between two government and agreement between partners.

The geopolitics of airline industry is main source of barrier to entry by a new firm and the cause of incumbency by national carriers. This paper has established that other than privatisation, network alliance is one of the ways, through which industry players can expand their operations to new destination.

However, the case of Emirates Airline is unique as the firm defied the barriers to enter into the industry and become a global brand. Disruptive technologies and organisational rigidity are a challenge to the incumbent but give rare opportunities to new entrants. Structural rigidity can also be eliminated by privatisation.

In the airline industry, customer service is important as there is a direct relationship between customers and the employees. Before the management thinks of any effort to improve customer services, there is need of focussing on employee issues for them to respond with exemplary services to customers. In an airline where staffs are discontented, they are likely to replicate poor services to the customers.

Eventually there could be lost business as customers will seek better services elsewhere because there are options. Southwest Airline is among the world leaders in customer service at relatively low price. The firm considers its staff as the selling point. Southwest airline pays remunerates its workforce well and but remains a profit making organisation that has never retrenched its staffs (Bamber, 2011).

Virgin too is following in the footsteps of Southwest airline and in the same line; Qantas should take some strategies from Southwest airline to rejuvenate its economic hitches and the 500 retrenchment of workers in its Victoria base.

According to Bamber (2011) lesson from Southwest airline should be favoured instead of the bid to resorting to private equity funds to purchase Stakes at Qantas. Since the attempt, the share price has steadily fallen.

Impact Of Qantas On External Economic Environment

Qantas being one of the Oneworld Alliance means that the firm is a major player in Australian domestic and international airline industries. Its operations affect those of other carriers. The interrelationship among the world carriers tells the nature of the airline industry. The airline industry is very dynamic and sources of economic rent are diversified.

Due to heavy investment needed in the airline industry, the industry operates either as government owned ventures or by a particular entity. However, global wave of privatization and private business entities entered the industry in the mid 1990s, revolutionising the sector. There are limited cases of merger of firms in the airline industry due to rigid international air agreements that domestic firms adhere to.

Strategic alliances; and alliances between carriers is now the norm in the industry. Alliances between big network carriers are common if compared with those between low cost carrier (LLC), and charter airlines.

According to Forsyth et al., (2011), “This type of airline differ in that the first operate integrated route networks centred around one or multiple hubs, offering passengers a dense network of flight connections, while low cost and charter airlines typically focus on point-to-point networks.” (p. 49).

This paper discusses how various airline operations and activities affect economic rent of firms, engaged in the industry at the global, regional, and domestic level.

Consolidation of the industry is a major source of economic rent as it presents rationales, upon which networks integration would yield benefits. To begin with, working together brings in economies of scale for individual firms to improve technical efficiency. This is because firms in an alliance can share codes, which increases passenger flight rates.

According to risk diversification theory, creating many routes manages adverse effects of depending on a single airline destination. Another reason to form network alliance is that it reduces transaction costs that are passed on to customers. Forsyth et al., (2011) pose that, “Airlines that offer connecting services to passengers and flight forwarders may increase profits by joint marketing of their services on the basis of one stop shopping.”

Shopping at one point saves on transaction costs as passengers don’t need to connect flights but instead buy products and services from a partner in an alliance. In order to make this a reality, firms in an alliance should carry out joint branding and tender seamless travel plans to passengers.

Network alliances is the commonest practice in the world and as Ramón-Rodriguez et al., (2010) posit, “The success of this strategy has led to the creation of one world, Sky-Team and Star Alliance that are now responsible for about 75% of global passengers and 90% of long-haul flights.” (p. 111).

Network alliances eliminate market imperfections, which majorly affect airline operations. Airlines do serve a particular route, and when there is an alliance, interests of passengers who demand flight connection and complementary services will be served. Individual carriers face market imperfection due to uncoordinated price-setting mechanism because of numerous price mark-ups, set by individual carriers.

This reduces marginal costs (MC), leading to decrease in profit margins. Network alliance minimises price mark-ups due to coordination of a joint pricing model that offers complementary services to travellers. Customer also benefit from low prices, set by network alliances.

Reference List

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Introduction

Since the beginning of the aviation industry, numerous transformations have occurred in the course of the business with some organization shifting their strategies to adopt the changes while others have suffered bankruptcies. The global airline business has faced hazardous situations since the great recession of 2009. The event saw the whole industry suffer losses of approximately 90.4 billion dollars (He & Balmer, 2017). The skyrocketing oil prices, long international recessions, failing demands, sharp price-cutting, shattering consumer confidence, and reduced yields in income per mile significantly impacted the airline industry. The circumstances resulted in bankruptcies and shrinkages in networks and service levels across the globe. Although Emirates airlines faced the same challenges as other airline companies, the organization tackled the situation effectively against the prevailing sector norms on enhancing contraction (He & Balmer, 2017). Therefore, this paper attempts to assess the operations of Emirates Airlines and its merger with Qantas Airline Company, and how the movement influenced the function of the corporation.

Strategic Position and Sustained Competitive Advantage of Emirates Airline

A macro environment assessment has been identified to review various external factors that impact business and shed light on future trends that may impact the business. The analysis of the PESTLE concept will help in understanding the industry competition and outline aspects of the development of marketplaces and commerce (Raynes & Tsui, 2019). Using this concept helps Emirates Airlines develop a strategy to enable it to attain a competitive advantage.

Political Pressures

Air travel between nations is through negotiated agreements, which entails aviation regulations between governments that impact the success of an airline organization’s operations. Numerous state administrations have strict guidelines on foreign carriers to operate specific routes in their domestic markets to safeguard the national and designated airlines. For instance, in the case of Emirates Airlines, however, Dubai is an exposed marketplace (Alshubaily, 2017). The economy’s open skies policy has helped Emirates to become a carrier that can compete with the leading international airline companies. The airline firm has grown in structure and scale not through protection but through competition. Emirates Airlines is in constant competition with the ever-growing global carriers that take advantage of Dubai’s open skies policy (Alshubaily, 2017). Moreover, it has experienced the advantages of global market dividends from penetrating international terminuses such as Australia, New Zealand, and America owing to the existing arrangements on inclusive traffic privileges from the three administrations. The aviation deregulation has also boosted airlines to develop for route entry, the exit of air carriers, competitive transport charges, and service frequency.

Economic Forces

Emirates Airlines handles numerous currencies considering its international operations, thus vulnerable to the exchange rate fluctuations and alterations in the global macroeconomic events. The United Arabs Emirates (UAE) economic growth is significantly supported by the country’s oil industry (Alshubaily, 2017). Conversely, the recent venture into new sections, such as trade and business to make the UAE an attractive target market is secondarily promoting carriers in the area, and the Emirates Airlines Company is not excluded. The declining oil price is usually regarded as positive progress for the airlines, though it can negatively influence the demand (Alshubaily, 2017). The commercial airline trade is one of the most active and well-developing segments in the contemporary world as it affects fiscal progress.

Social and Cultural Forces

Cultural and social factors have impacted the development of strategies within the Emirates Airline Company. Both local and international marketplaces where Emirates Airlines operates have cultural diversity. Dubai, the United States, Canada, and Australia are multicultural states thus benefits come from a variety of clients’ trends according to their attitudes, values, education, lifestyles, and religion (Alshubaily, 2017). For instance, in the United States, three-quarters of high-income societies make a trip to various destinations annually. Therefore, Emirates Airlines has opportunities in destinations where the trend of air travel is socially developed. Such has significantly influenced the company’s competitive advantage over other competitors in the industry.

Technological Forces

Modern technological innovations are a success driver in the airline business. The demand for technological improvements to become the first motivator in the industry will develop the opportunity for attracting more of the lucrative commercial market. Emirates Airline’s management is aware of the principle of maintaining investments in the current technological innovations, thus pursuing its differentiation in the five-star standard airline. Emirates’ recent order book stands at 244 aircraft of the newest Airbus and Boeing, with an overall value of approximately 60 billion dollars (Göv, 2020). Furthermore, the airline company aims to be a forerunner airline company in technological advancements. Emirates Airlines has signed an in-flight mobile phone coverage contract with the Aero Mobile Corporation, thus establishing the use of mobile phones onboard (Göv, 2020). Over a significant number of years, Emirates has gotten recognition from the international aviation website as the leading flight company in entertainment and luxury due to its adoption of current technological innovations.

Environmental Forces

Since environmental protection and safety of the passengers are part of the Emirates Airline Company’s mission objective, the company has been utilizing the low sulfur diesel as per the requirement of the state administration. The fuel has 10 parts per million (ppm) of sulfur which was further reduced to 500ppm. The move has significantly helped the organization in addressing emissions. The carrier also employs the Flex Track system, which is an air steering channel that enables it to overcome the auspicious weather. The initiative has aided in regulating 3800 tons of gas on a voyage to the Australian marketplace and 12000 tons of carbon dioxide emissions within a year (Göv, 2020). Therefore, the environmental sustainability approaches adopted by Emirates Airlines have further enabled it to gain a competitive edge in various markets despite their strict environmental laws.

Legal Forces

Legal limitations to satisfy distinct markets should be considered by the management of Emirates Airlines. State administrations have introduced restrictions on the airline company to serve the travelers to minimize the competition from the domestic flights. For instance, the Chinese 1.3 billion population cannot be reached by airline unless the Chinese government opens its airspace to the carrier (Göv, 2020). Therefore, to realize the global demand, regulatory approval should be undertaken by the company.

Emirate’s Strategic Decision to Create Alliance with Qantas

The strategic alliance between the Emirate and Qantas Airline Companies saw the two companies move from the traditional alliance model to the competency framework. The partnership was aimed at delivering benefits to all divisions of the companies. A conceptual framework is a concept that vastly defines performance excellence within a business ( Johnson, Whittington, Scholes, Angwin, & Regnér, 2017). The framework normally comprises various competencies that are employed for numerous occupational responsibilities within a corporation. Furthermore, the framework is how companies communicate which behaviors are acceptable, required, valued, recognized, and rewarded relating to specific roles. For instance, considering threshold resources, the cabin crew and well-trained employees of the Airline Company have enabled it to effectively manage its operations and pacify clients. The corporation has a practical and present fortified fleet of 265 airplanes with an estimated age of 4-6 years which is the pillar of the carrier’s competitive edge above the companies in the business (Johnson et al., 2017). Consequently, the threshold competencies that have propelled the company to its current market position is the advantage of terminal three which allows disturbance-free and prompt dealing of passenger traffic. Choosing new routes and regularly pursuing the new marketplaces and route decisions have helped in developing new streams of income for Emirates Airlines. However, the limitation of entry of new economies and threats requires 6 to 12 months of analysis to regulate the risks and achieve sustainable market conditions (Johnson et al., 2017). The competency framework, therefore, helps in improving the corporation’s threshold resources.

Conversely, the competency framework further helps in analyzing and understanding the Emirates Airline Company’s distinctive resources. The strategic decisions made by the company to partner with Qantas will enable the companies to boost the skills of their employees through training. For instance, the Emirates Airlines employee training college allows the Airline Corporation to equip its workers according to its employment requirements (Johnson et al., 2017). The move to an ally will also help Qantas Carrier train its workforce thus boosting its competitive edge. Similarly, technological changes have resulted in the transformation of consumer experience, thus making it more personalized. Such an innovative shift has further improved operations which presently comprise robotics, biometrics, automation, and backing office functions.

Additionally, the zero accident policy and the management of crafts by the 85C checks undertaken annually are advantageous for the smooth running of both airline companies. The alliance was intended to improve realize environmentally-friendly operations for both companies to boost their profitability. The focus on the environment through the employment of the Flex Track initiative and using ECO-thread technology for recyclable and environmentally responsive bottles reflect the sustainable operations of Emirates Airlines (Johnson et al., 2017). The presence of availability of new aircraft, such as the Boeing 777 which are structured to provide luxury services to the consumer further makes the company distinct from its rival airline companies (Johnson et al., 2017). Therefore, the corporation’s strategic decision has played a vital role in ensuring the company remains competitive in the market and achieves a competitive edge in the aviation industry.

VRIO Analysis for Emirates and Qantas

VRIO Analysis for Emirates.

VRIO Analysis of Qantas.

According to the VRIO framework it has been concluded that the biggest resources of the Emirates airline is its staff and technology that enables it to make the system function appropriately. The additional competencies are luxury experiences for the consumers, digital transformation, and environmental friendly programs that develop core competitive edge for the airline company (Zou & Chen, 2017). On the other hand, from the VRIO outline for the Qantas airline, it can be observed that the company’s core resources are the technology and the luxury that enable it offer its clients the best experiences during their travel experiences. The organization’s other competencies include staff, environmental friendly initiatives, entertainment which influence the firm’s functions (Zou & Chen, 2017). Therefore, the strengths of both Emirates and Qantas Airline Groups significantly rely of technology and luxury experiences, whereas their weaknesses are risks related to entering new marketplaces.

Conclusion

The Emirates justly deserve to be the leading airlines in the aviation business. The company has been serving markets with high class preferences, a factor that has influenced its success and competitive advantage in the industry. Furthermore, the airline company’s merger with Qantas has significantly impacted the organizations achievement in entering new markets, such as the Australian market. However, the firm should avoid some of the vital aspects which resulted to the downfall of aviation echelons in the world. Its management should, therefore investigate the oil prices, financial mishandling, and the changing regulatory policies.

References

Alshubaily, A. (2017). Exploring the key success factors for young airlines. A focus on emirates airlines and its regional competitors’ strategy for success. Saudi Journal of Business and Management Studies, 2(1), 30–37.

Göv, S. A. (2020). Strategic Alliances in Airline Business: Comparision of Skyteam, Oneworld, Star Alliance Groups.Yönetim Bilimleri Dergisi, 18(38), 815–837. Web.

He, H.-W., & Balmer, J. M. (2017). Alliance brands: Building corporate brands through strategic alliances? In Advances in Corporate Branding (pp. 72–90). Springer.

Johnson, G., Whittington, R., Scholes, K., Angwin, D., & Regnér, P. (2017). Exploring strategy. Financial Times Prentice Hall.

Raynes, C., & Tsui, K. W. H. (2019). Review of Airline-within-Airline strategy: Case studies of the Singapore Airlines Group and Qantas Group.Case Studies on Transport Policy, 7(1), 150–165. Web.

Zou, L., & Chen, X. (2017). The effect of code-sharing alliances on airline profitability.Journal of Air Transport Management, 58, 50–57. Web.