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The Qantas group aviation industry was established in 1920 in Queensland outback of Australia. It also known in another name is Queensland and Northern Territory Aerial Services Limited. Qantas employs over 35,000 workers and the Qantas network covering 173 domestic and 42 international flights (Qantas annual report, 2009). Red Kangaroo is the logo of the firm, Qantas group are well known its own two brand airlines such as Qantas brand and Jetstar Brand. The headquarters of the company are located in Mascot, Sydney, Australia with a vision of “World Best Premium and Low Fare Airlines.” (Qantas annual report, 2009) Qantas has differentiation in aviation business because it is only Australian company that has FSC and LCC. Qantas airline also has implemented a hub or spoke transportation system in the operating fleet.
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This report will start with vision of the firm that is important to understand the goal of the organization by driving 5 strategies such as safety in our first priority, Right aircraft Right routes, Customer service excellence, Operational efficiency as well as Two strong complementary brands Moreover, using differentiates and cost leadership of Porter’s generic model analyzes explains Qantas business strategy and Porter’s five forces to analyze in the detail of industry structure. Also, SWOT analysis is applied to comprehend the firm current situation in the aviation market both internal and external factors. Core Competencies can be explained in two main points of the firm such as two brands airline with diversity services and safety reputation. Competitive Advantage use Value Chain to assess the performance of the company. Additionally, this report will provide recommendation strategies and potential fallout to predict possible negative points that will be happened from the recommendation strategies.
II. Identify the corporate mission and its business strategy
According to Qantas Annual Report (2009), the company has stated a strong vision both Qantas and Jetstar Airline that “The World Best Premium Airline and The World’s Best Low Fare Carrier” (p.6).
Figure 1: The Vision of Qantas Aviation industry
Source: Qantas Annual Report, 2009
Refer to the picture 1 to achieve the vision of the company, people in the organization can be main important of Qantas Group to drive 5 core strategies such as safety in our first priority, Right aircraft Right routes, Customer service excellence, Operational efficiency as well as Two strong complementary brands which are Qantas and Jet Star to support the firm to stand out both domestic and international airline market. (Qantas annual report, 2009).
To begin with safety, it can be the first one that Qantas has to recognize for the aviation industry. According to Qantas sustaining the spirit: Sustainability report (2008), it mentioned that the safety of Qantas has sustained leader in the record as the result their security can be trusted from the customers in worldwide. Moreover, the company can drive the airline business to be the international airline standard by adapted the International Air Transport Association’s (IATA) with Operational Safety Audit Certification. Due to the firm is strict to inspect renewals of this internationally Safety audit program every two years.(p.11) Regarding to right aircraft right routes, Qantas operates several flights both domestic and international airlines to match with demand of the customers and covering almost Australia region and international continental. For example, refer to Qantas FactFiles (2010), it announced that There are around 5,300 domestic flights which are operated Qantas, QantasLink and Jetstar per week to serve 59 city and regional destinations in all states and mainland territories. While over 900 international flights are operated from Qantas and Jetstar a week including 173 destinations of the Group’s network in 42 countries.(p.1) The best customer service can also be an important part that make Qantas to remarkable from other aviation industries. For instance, there are diverse programs to create value product to reach customers satisfaction such as provided package trips, lounge facility at the airport, adapted alliance strategy to create the loyal customer and maintaining the customer loyalty.( Qantas FactFiles, 2010) Furthermore, Qantas operational efficiency means all of effective processes that concern the product to make productivity to the firm such as the best suppliers, operations planning including control, Qantas Aviation Service, and expert engineering. Lastly, Qantas operated low-cost subsidiary brand namely Jetstar that focus on low fare airline to expend the aviation market and make the Qantas Group more strong in the worldwide. Refer to centre for Asia Pacific Aviation website (2008), Buchanan stated that
“he believes Qantas Group’s two-airline strategy is key to the Group’s success, stating it gives the airline the best position of any carrier globally in terms of responding to changes in demand patterns or downturns in particular classes of travel. Qantas is one of the few airlines in the world to have successfully run a full-service premium carrier and LCC in parallel.”
Porter’s three generic strategies model such as cost leadership, differentiation, and focus can be used to analyze Qantas’s Business strategy. Refer to Qantas; it has been known that they manage two major brands such as Qantas and Jetstar airlines. Under two core brands, the firm operates various subsidiaries such as Jetstar Airways, QantasLink, Jetconnect, Express Freighters Australia ,Qantas Freight to reach the assorted target group of the customers and expended service business to be completion in the aviation market. (Gregg, 2004)
According to Qantas brand that provide premier price with full service option to serve the customers (Qantas annual report, 2009), it can match differentiation strategy in Porter’s three generic strategies model. Refer to Internet Center for management and business administration, Inc.( n.d.), this strategy offers unique can enhance value of the product to the customers. As the result, customers can feel superior when perceive the product or service. For example, safety and security are the major consideration in Qantas aviation firm. Refer to Qantas sustaining the spirit: Sustainability report (2008), it mentions that Qantas is the leader of safety aviation industry. As over 330,000 flights are operated by the Qantas Group every year. Incidents that arise from time to time cannot escape Qantas firm. Thus, the company can be confident about its world-class management systems and safety programs are distinguishable from other competitors. (p11) Furthermore, regarding to customer service, Qantas has provided Inflight entertainment with full-option in all Qantas international flights such as A380, B747 and A330 aircrafts. Also, Qantas Club lounges with full of necessary facilities are provided to the Qantas’s members at more than 130 lounges worldwide.(Qantas FactFiles, 2010, p.11) As Group route network, the Qantas Group have operated numerous flights to cover 173 destinations in 42 countries together with partner airways. Thus, all of above that are mentioned can make the Qantas group conspicuous from the customers and enhanced value of the product. (Qantas FactFiles, 2010)
Cost leadership Strategy
Moving to cost leadership strategy can be applied by Jetstar that focus on low cost airline to gain market share in difference target with main brand. Due to nowadays, there are many low cost airways emerge worldwide. Thus, the firms that can offer the cheaper price will be gain the customers. Jetstar want to reach the lower price than others fare airlines so the company designs to adapt another strategy such as partnership strategy to deal with the main competitors. For instance, according to Business Traveller Asia-Pacific (2010), Alan Joyce state that ”Jetstar and AirAsia offer unmatched reach in the Asia-Pacific region, with more routes and lower fares than their main competitors, and this new alliance will enable them to maximise that scale. What is more, it is true that low price airline can attract travelers who have small budget, but it is also true that cheap price now is not enough to compete with others. In current years, almost aviations industries have considered about how to the firms getting the customer faster than competitors. Also, Jetstar recognizes about low price with fast sale so the firm tries to create new promotion to attract and gain the customers quickly than another firm. For example, refer to Kelly (2006), he mentioned that Jetstar will offer A$25 to travel agents for every traveler part who booked its new long haul flights on the website or A$20 for bookings via a GDS. Also, agents who can sale a complete wholesale program every Jetstar routes will receive nett fares. It can say that Jetstar can adjust another strategy to build up the main strategy which is cost leadership effective and distinguishable from other low cost airline.
III. Jaxson Smith
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Jaxson is a fun loving longboarding business man.
Nowadays, it can say that aviation business has been high competitive in many countries and almost countries around the world have own airline brand including Australia. Due to airplane has become a popular transportation in remote area with more convenience, faster and reasonable price when compare with another kind of carriers. Refer to Qantas’s industry, although, it can be the largest aviation business in Australia with high domestic passengers (Qantas FactFile, 2010), it is also threaten with another airline company in the worldwide. Thus, learning more Qantas’s airline structure can apply Michael Porter model namely Porter’s Five Forces that regard as rivalry, potential entrants, threat of substitutes, supplier power and buyer power to analyse. (Internet Center for management and business administration, Inc, n.d.)
Figure 2: Porters fives forces model : Industry analysis model
Source: from Oxford College of Marketing website, 2009
Even though, Qantas can be leader aviation firm in Australia, looking at the world of Aviation industry, Qantas can be threatened by high competitions of numerous airline companies around the world. According to Qantas annual report (2009), It is true that Qantas operates Jetstar subsidiary brand to rival with another low cost airline; especially, Virgin Blue Airline, but If the aviation industry looks at only cost leadership strategy, it will not enough in currently competitive situation. It is because almost aviation industries now try to focus low price and service as well as product standing out of competitors. Thus, Qantas can realize that focusing in differentiation strategy is also important to build up strength of the firm to deal with other rivals by cooperating with Woolworths in Frequent Flyer program to maintain loyal customer. (Qantas FactFiles, 2010)
Threat of new entrance
Qantas can be leader domestic aviation industry in Australia (Qantas FactFlie, 2010). However, if it compare with the world’s aviation market, potential of new entrance can strong like low cost airlines. For example, Tiger airways Australia which is owned by Singapore Airlines has been established in 2007 with two bases in Melbourne’s Tullamarine Airport and Adelaide Airport. (Asia News Desk, n.d.) According to Channel news asia.com website (2010), it stated that Tiger Airways in Australia plan to set up new base in Victoria’s Avalon Airport with new flights operating next year to expense their market in Australia. Thus, Qantas need to concentrate on how to create barrier to new entry from foreign aviation industry such as using the entry deterring price strategy with subsidiary brand: Jetstar. (Reference for business, 2006) Also, Alliance strategy can be adapted to build difficulty of new entrance and Qantas’s competitors because it can create brand value by using focus strategy (differentiation) to create superior feeling of the Qantas’s customers.
Threat of Substitute products
Almost people choose airplane to transport between countries or in the remote areas because it can save time and comfortable. Although, there are various substitute products such as cars, buses, trains, and cruise ships that can affect the aviation industry, all of them can be just small threat the aviation firm; especially, the low cost airlines. Due to transportation by the airplane can have several advantages such as fast and convenient. Moreover, the aviation business now tries to boost up diverse options and promotions trip with low price to persuade the customers.
Bargaining power of suppliers
Looking at the aviation industry, there are two main suppliers that have to recognize such as aircraft manufactures and fuel supplier. Refer to aircraft manufacturing firm, there are three aircraft manufactories such as Airbus, Boeing and Bombardier that Qantas aviation business contracts with. (Qantas annual report, 2009) Also, all of these producers are the largest jet manufacturers in the world. (Pope and Huber, 2010 p.1) Thus, the power of aircraft producing company can be strong to deal with the Qantas aviation company. Besides, oil price can be also another major of suppliers that may be powerful to the firm.
Bargaining power of buyers
Obviously, bargaining power of buyers can be high both domestic and international aviation industry. Although, domestically, the Qantas group build up opportunity to rival with Virgin Blue by creating another brand as Jetstar to gain low fare airline market with diversity routes.(Qantas annual report, 2009) It also had more one low cost aviation company to emerge in Australia such as Tiger Airways Australia. (GOV monitor website, 2010) Moreover, the global aviation industry, the bargaining power of buyers can also be strong powerful. Consequence, there are now many aviation industries; particularly, low cost airlines that provide several options and divers promotion to acquire demand of the customers. Thus, Qantas has to impulse its sale with quality product and cheap price in several channels such as travel agency and website to deal with others.
IV. SWOT Analysis
To analyze current situation of Qantas, SWOT analysis can present strengths, weaknesses, opportunity and threat to analyze both internal situation and external situation of Qantas’s firm.
Internal situation: Strength
To begin with strong brand image and Reputation, the Qantas group has been established over the past decade, it can be a mature aviation industry that accumulate an experience about flight a long times. There are some awards that can show the firm’s achievement. According to Skytrax world Airline Awards (2010), Qantas is one of top ten of the world’s airline industry to get the Passenger’s Choice awards that are voted by the customers around the world. Furthermore, the firm realizes an important role to commit with society by contributing charity, education, sport and cultural endeavours, in Australia’s regional and distance communities. (Qantas annual report, 2009) All of mention above can help the Qantas firm to look good image in the eye of the customers. Secondary, it can be two brands strong in the world’s aviation industry. Nowadays, there is high pressure from global competitive; especially, the low cost airlines. Thus, Qantas which is under the premier brand with full of service needed to launch subsidiary brand as Jetstar with cost leadership strategy to deal with others low cost airways.(Qantas annual report, 2009) Moreover, Jetstar can be high effective to rival in pressure situation by adjusts another strategy such as differentiation to make value and out stand than competitors. (Internet Center for management and business administration, Inc. n.d.) Also, partnership strategy can be a excellent strategy that the leader of the firm choose to join with AirAsia airline to decrease the price of airline ticket as the result it can be benefit to the Qantas group to gain more economies scale of the aviation industry.( Business Traveller, 2010) Next is safety and security, Almost travelers worldwide concern about safety and security first. Thus, to create trust in safety and security to the customers, the Qantas group has to consider significantly in the safety of aviation industry to reach their customers’ trust. To achieve this objective, the firm has to drive the airline business to reach standard of the international airline by adapted the International Air Transport Association’s (IATA) with Operational Safety Audit Certification. Furthermore, the firm is strict to inspect renewals of this internationally Safety audit program every two years to show optimum response in managing of the company. (Qantas sustaining the spirit Sustainability report, 2008 p.11). Also, customer service can be strength of the Qantas group. Qantas has offered several programs of the best customer services to the customers such as Qantas customer center, Qantas frequent flyer, Qantas lounge at the airport as well as private meeting room. Moreover, Qantas has done alliance with well known brand such as Woolworths to collect the Qantas frequent flyer points. (Qantas FactFile, 2010) It can be successful program that reach the customer satisfaction due to website namely fly low cost airlines, (2010), it showed that Qantas Frequent Flyer member has gone up to 7 million members and it has trended to increase in the future. Lastly, People in the organization can support the aviation industry. According to human resources, the Qantas’s firm realizes that the great employees can support the organization to transfer the value of product to the customer effective. Many training courses can offer necessary knowledge to help the Qantas employees to improve their skills. For example, refer to Qantas Factfile (2010), It mentioned that Qantas has its own firm training program for beginner with advanced technical training for engineers. As the result, the employees with ability can enhance the value of the product of the firm to the customers efficient and also increase productivity of the firm.
Internal situation: Weakness
The company has high operation costs to run aviation business to create the best product and service to deal with competitors. For example, refer to Qantas annual Report (2008), the firm had to spend in the part of labor cost around 30% of the cost base.
External situation: Opportunity
To begin with globalization, it can be an opportunity to the Qantas’s aviation business; for example, Internet can be the part of globalization that people worldwide can connect or exchange information including purchase the product and service. Alternative Fuel such as Bio-derived fuels, methanol, ethanol, liquid natural gas, liquid hydrogen, and synthetic fuels ( Daggett, Hadaller, Hendricks, and Walther, 2006) could create chance for the company to have more bargaining power to fuel supplier. As the result, it can help the firm reduce the capital cost. Also, advance technology can support the benefit to the firm for example, kiosks which are online check-in service that give opportunity the customers to choose the seat and print ticket 24 hours before departure, this machine can decrease the job of the courter staff and saving time to the customers in the line when check in.(Qantas FactFile, 2010)
External situation: Threats
Oil crisis are an important threat for the aviation price due to the aircraft need oil power to serve the aircrafts. Thus if oil price increase dramatically and uncontrolled, it can effect to industry cost of the organization. Refer to Share cafe website (2008), Dixon said that “an increase in base fares is now necessary to partially bridge the widening gap between the actual increase in the cost of fuel and the amount we offset through surcharges or non-fuel cost improvements”. As low budget airlines can be one main threat to the Qantas group as well as alternatives transportation that can threat to aviation business.
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V. Core Competencies and Competitive Advantage
Core competencies can mean special characteristic of the organization to enhance the customer value through a better product and service that are attributed from the firm management’s ability to combine technologies, processes, knowledge or expertise greater than another competitor. (Mayhew, 2010) Looking at Qantas Group, the core competencies of Qantas is two brands airline with diversity services. To begin with two brands aviation industry, Qantas and Jetstar airlines are operated by Qantas aviation business. Qantas brand is under concept of a premier airline brand that provide full-service both Australian domestic and international airline business as well as Jetstar that focuses on low cost airlines with diversity route.(Qantas FactFile, 2010) Also, both of two brands try to reach difference target of customer group in airline firm by providing several programs such as Qantas, QantasLink, Jetstar as well as Jetstar Asia to create diversity of the aviation industry.(Qantas annual report, 2009) For example, Qantas, QantasLink and Jetstar operate approximately 5,300 flights a week covering 59 city and regional destinations in all states. Internationally, Qantas and Jetstar operate over 900 flights each week across the network comprises 173 destinations in 42 countries, including Australia.(Qantas FactFile,2010) Due to there are many low cost airlines business emerging around the world so the aviation firm have to rival by created more competitive strategies such as partnership with AirAsia low cost airline to deal effectively with competitors.(Business Traveller, 2010) Also, the company tries to get the customers faster than another firms through several channel distributions such as website, telephone sale, the travel agency, Corporate and government sales, Qantas business travel, Group travel and Qantas travel centers. Also, Qantas operated international airmail to full service option of aviation business.(Qantas FactFile, 2010) Safety and Security can be an important core competency of the Qantas group aviation business due to reach their customers’ trust in the organization, the Qantas firm has to realize significantly about safety of aviation industry by driving the Qantas group airline brand to reach standard of the international airline through adapted the International Air Transport Association’s (IATA) with Operational Safety Audit Certification. Furthermore, the firm is strict to check this internationally Safety audit program every two years, it can show that the company pay high attention to respond in managing of the aviation firm. (Qantas sustaining the spirit Sustainability report, 2008 p.11).
Moving to competitive advantage, Value Chain Model can be applied to analyze competitive advantage by divided into two parts, primary activities and support activities. (Porter, 1985 p.39) However, both activities can increase the value of the product or service.
Primary activity consists with five main steps such as Inbound logistics, Operations,
Outbound logistics, Marketing and sales And Customer service.
Inbound logistics is activities that relate with receiving, storing, and disseminating inputs to the product. (Porter, 1985 p.39) it can mean three largest jet manufacturing business such as Airbus, Boeing and Bombardier that provide aircraft to Qantas aviation industry.(Qantas FactFile, 2010) Moreover, it can include oil supplier and framer who provide food product to catering.
Operations are activities linked with transforming inputs into the final product form. (Porter, 1985 p.39) In the case of Qantas aviation operations, there are several processes of Qantas’s services such as provided channels to book ticket, check-in, catering, baggage claim, security, cooperated with the partners to prepare hotel, rental car as well as travel programs and lounge facilities including meeting room for Qantas’s customers.
Outbound logistics define to activities connected with collecting, storing and physically distributing the product to buyers. (Porter, 1985 p.39) Main Outbound of Qantas is transportation service from one area to others. Thus, the ways that can distribute their service to the customers are an online and through travel agent.
Marketing and sales can mean activities concerned with providing the places which the customers can purchase the product. (Porter, 1985 p.39) Qantas has created many programs to advertise their product such as Frequent Flyer program and Sponsorship Football Federation Australia (FFA) 2010 by using a Qantas Boeing 747 aircraft painted with the words ‘Come Play!’. (World football insider, 2010) Moreover, the company has distributed their product through diverse channels such as travel agency, website, Qantas travel centre and advertising on television.
Customer Service is activities linked with providing service to enhance or maintain the value of the product. (Porter, 1985 p.39) It can be a part of engineering. Refer to Qantas FactFlie (2010), it stated that
“Qantas is a partner in LTQ Engineering which is an engine maintenance Centre of Excellence and joint venture with Lufthansa Technik that overhauls General Electric engines for Qantas, Lufthansa and third party customers. Based in Melbourne, the business employs around 200 people. who maintain the Qantas’s aircrafts engine”
As the part of customer service center which receive the customer’s feedback about the product and service.
These activities can help the primary activities to work effective. There are four parts under the support activities such as Firm Infrastructure, Human Resources, Technology, and Procurement. (Porter, 1985 p.40) First of all, firm Infrastructure define to structure of the industry like functional departments such as financial department, engineering department, management and accounting department. Regarding to human resources, the Qantas’s company recognize that the great employees can be support the organization to transfer the value of the aviation service to the customer effective. Consequence, there are many training courses which can offer necessary knowledge to help the Qantas employees to improve their skills. For example, refer to Qantas Factfile (2010), It mentioned that “Qantas has advanced technical training facilities, making it one of the few airlines with its own industry training program that includes apprentices and advanced technical training for engineers to certify the release of aircraft and components into service.” As the result, the employees with ability can enhance the value of the product of the firm to the customers efficient and also increase productivity of the firm. Also, technology development which are engineering and maintenance division has an improtant role in the Qantas group aviation business to supporting activity in any airlines to association with the safety of passengers and creating reputation to the Qantas group. This process can support the main action by enhancing the value of the product to be differentiate from another competitor. In the part of procurement, refer to Qantas Spirit of Australia (n.d.), Qantas’s procurement has the objective to make the most of value from all suppliers relationships to achieve reliability, ethic and sustainable in the aviation business. Also, practices and dealings with suppliers are necessary to reach sustainable in the business. Reducing the cost of the organization and maintaining as well as improving quality product and service including technology can be focused on this process.
VI. Strategy Recommendations
Currently, almost companies worldwide have increasingly focused on cost leadership. Also the Qantas group aviation industry is one of those companies that adapted this strategy by launched LCC airline such as Jetstar brand to deal in the global aviation business. Although, cheap price can be attract traveler, there are few low cost aviation company that can survive and maintain their economist of scale. Refer to expeditionary marketing strategy, it focus on “a series of low-cost and fast-paced market incursions”. (Hamel and Prahalad, 1994 p.261). It is not mean low cost strategy that can be good enough in the global business but fast also has to recognize. For example, the travel company creates package or promotion that full of service such as transportations, accommodation, entertainment places, activities option and food. Refer to this package may be common for tour company but if the company try to launch the program before others company with variety of interesting options and offering cheap price via diverse channels. It can help the firm access the customer quick and finished their product sale before competitors. Regarding to several channels to distribute the product and service, travel agent can be an important channel that has to recognize. Due to travel agents; especially, famous tour agent can be an effective channel to impulse sale to the aviation company. Thus the Qantas should make a good relationship with the travel agent and sometime the firm has to create how to monopolize with those travel agents to decrease competitors. What is more, to maintain their economist scale, the company should also realize the value of the product such as safety, punctuality and the best service to the customers not just fast and cheap and also expectation the product to the global market.
Unique Service Style
According to differentiation strategy in three generic of Porter’s model (Internet Center for management and business administration, Inc, n.d.), Qantas group brand already adapted to use in the premier brand as Qantas brand but in the case of low cost airfare such as Jetstar can also adjust this strategy to create the value of the product. Generally, cheap price can be easy to attract the customers but nobody will not want to purchase cheap price to get terrible service and lack of security for their life. Thus the Qantas group with safety reputation can create low cost airfare with differentiation from another competitor to gain the customers and maintaining loyal customers of the company. For example, the price of ticket that already included the price of baggage may set up little bit expensive than others low cost airlines without luggage price. It can be attract the customers; especially, women. Due to almost women need space for their clothes and cosmetic that is often liquid may be banned to carry in a passenger area. Also, on the board, the firm should provide food similar the food at the destinations airport to introduce their culture to the customers before visit the place. As the result, the image of the company will be strong and this action may be interesting to customers by word of mouth.
VII. Potential Fallout
Refer to the part of recommendation strategies; it had to explain about Expeditionary Marketing and Unique Service Style. Although, those recommendations may create the benefit to the company and maintaining the firm’s product selling in the future, it can also create possible negatives to the firm.
Refer to Expeditionary Marketing, it is good that the company can gain advantages from this strategy, but high cost of operation can be the major effect to the firm.
Unique Service Style
The part of service differentiation, it can create variety of advantages to the firm, it also produce possible issue to the organization such as high cost to service operation due to the organization need to invest about training program to support this strategy. Some food may unfamiliar for the custo
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