The airline industry has been known to be volatile and competitive. It is volatile in the sense that any negative news either from the services such as air mishap, economic downturn, perceived threat of terrorism, the potential outbreak of the ‘birdflu’ virus or the factors of production like rise in prices of crude oil impacts negatively on the strategic position of each of the players in the industry be it market leader, follower or challenger.
The case of Gulf States (Countries) such as Bahrain, Iran, Qatar, UAE, Oman, Kuwait, Saudi Arabia to mention just a few calls for closer attention. This is because the so ‘Gulf’ states are have the resources and capabilities to compete in all the four fronts of marketing mix which is often referred as the 4Ps of People, Price, Place, Promotion. In order to wean their economies away from declining oil reserves some Middle Eastern countries pursue substantial investments into their aviation sector. The bulk of these investments concentrates on the United Arab Emirates and Qatar and comprises fleet expansions stoked by massive airport extensions and development projects. The million dollar question is how Qatar airways can turn its fortune from being a market follower in the Gulf airline industry to a leader. In this academic work also, we would use the following framework for evaluating and writing
Customers: Who are the organization’s customers?
Products/services: What are the organization’s major products or services?
Location/markets: Where does the organization compete?
Technology: Is technology a primary concern of the organization?
Concern for survival, growth and profitability: Is the organization committed to economic objectives?
Philosophy: What are the basic beliefs, values, aspirations, and philosophical priorities of the firm?
Self-concept: What is the organization’s distinctive competence or major competitive advantage?
The airline industry has grown to be one of be one of the largest industries in half century of its existence. Its origin could be deduced from the end of World War l but it was not until World War II that saw peace restored worldwide that accounted for the burgeoning of the business. Statistics have it that the industry often airlift more than 1.5 billion industry worldwide and generates more than $ 300 billion in revenue and employ 1.7 million people worldwide (Hanlon Pg 1,2006). Good to note is the fact that the post World War II airline industry are dominated by state owned airlines known as ” Flag Carriers” and the government which owned them often used them as instruments to further their mercantilist interests or to promote their countries status, power and prestige. Airline business in the Gulf States is often associated with government (Hanlon Pg 2, 2006). Government desire to protect flag carriers often lead to ‘artificial market’, in which the profitability of the airlines were determined more by the competitors that are allowed to fly the route rather the forces of quality and pricing.
Airlines suited in the Middle East currently hold 9% of long haul capacity worldwide. They will be responsible for about 25% of all global long haul aircraft deliveries over the next decade (Flagnagan, 2006). Dubai based emirates airlines accounts for the largest buyer, which approximately 70% of all new long-haul aircraft orders in the Middle East. Some airline commentators predict that come 2012, the airline would double its fleet (Flagnagan, 2006). After Emirates come Qatar airlines. The airline has placed an order of 140 wide body aircraft. The expansion plans of the gulf airline operators are shown in Fig 1 within
Qatar airways just like other airlines in the Gulf States is part of the government strategy to diversify its revenue base, economies, commerce, tourism and global transport importance. The airline has a rich mission statement which is “Excellence in everything we do.” According to a survey carried out by Pearce and David (1987) to analyze the mission contents of airline companies, the mission, it showed that Qatar’s mission statement is one of the best in the world. Amongst 9 points, it has 6 points.
Fleet expansion plans of Middle Eastern carriers (as March 2008). Source Journal of Transport Geography 18 (2008) 388-394
3.0 Current Marketing Mix of Qatar Airways
3.1.1 Product Strategy:
Existing ProductsServices is defined as involving one party offering something that is essentially intangible and where the interaction does not result in ownership of anything (Kotler, 2008). Applying Ansoff product grid matrix, it can be said that Qatar airlines is still in market penetration. This is because the airline as was shown in the introductory section of the work, has projected the number of aircraft it wish to buy before 2012. The attributes of a company in growth stage of company life cycle is expansionary qualities.
ansoff’s product / market matrix
The attributes of market penetration strategy in which Qatar airways are using include
- Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling As part of this growth plan, Qatar Airways will extend its route network to 50 destinations by the end of 2003. It has recently added Manchester and Rome to its increasing route network. It will soon be adding Shanghai, Seoul and Tripoli to its route network. (Airhighways Magazine, 2005, p. 1).
- Secure dominance of growth markets. Qatar airlines have been known to dominate the ever busy African- Middle east air routes. The company always has some flights available from any part of Africa to the Gulf States. The topology of the area has encouraged the airline to operate in product penetration strategy of Ansoff product grid. Its sparsely populated area has encouraged travelling by air for intra-regional transport. Furthermore, a high per capita income that is still increasing quickly, offers a base for a strong aviation industry. But there are socio-economic constraints, limiting both domestic leisure and business travel potential.
- Increase usage by existing customers – for example by introducing loyalty schemes .A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. There is no evidence that Qatar airways is investing on market research because they are not expanding into unknown routes such as Kula-lumpur – Sydney route.
3.1.2 Pricing Strategy: Going-rate-pricing strategy
Presently Qatar airline practice what is called Going-rate-pricing strategy. The market leader in the middle- east airline industry remains Emirates. Qatar charges its fare based on the price of Emirates which is slightly higher. This is because being the market follower, Qatar does not need to disturb the established market dynamism because it might not be able to compete on the same level with Emirates.
Comparing the price of Qatar and Emirates, on the same route of Kuala-lumpur (Malaysia) – Johannesburg ( South Africa)
Price of Qatar on 21st Nov returning on 23rd Dec from Kuala-Lumpur to Johannesburg
Price of Qatar on 21st Nov returning on 23rd Dec from Kuala-Lumpur to Johannesburg
3.1.3 Promotion Strategy:
Qatar airlines are not practicing product differentiation but it is practicing promotion differentiation. According to its chief Executive Officer Akbar Al Baker he said that ” Qatar By offering a variety of entertainment options, we are able to differentiate our passenger service through live entertainment programming while also setting new standards of comfort to ensure we are the airline of choice” (Rockwell Collins, 2005, p. 1). Some of their promotion strategies are as listed below and experienced by its passengers are as
Biggest and best business class in the Middle East
Interactive Audio, Video on Demand Entertainment System
Largest personal TV screens in the Middle East
Electronic seat controls
In-seat back massage
First Middle East airline in First Class with flat beds
Qatar has engaged the services of Global media industries to help spread the good news. Such internal media include
BBC Campaign to position it as a premium carrier
CNN testimonials from airline staff
Sky News reports as a sponsor of the weather service
Sponsors a travel show through Al-Jazeera
Qatar is a major sponsor of high profile sporting activities such as World Tourism Day, World
Travel and Tourism Council Summit, World Economic Forum, Leading International sports events. Qatar airlines was the official sponsor of 15th Asian Games, Doha 2006. The company has come up with a new product called “Flying Oryx” Newsletter that it distributes to travel agents. The newsletter is also available through its websites. More links could be established to the newsletter through the Internet. The airlines also give away products to passengers that promote the logo of the Burgundy Oryx and “Taking you personally,” such as watches, computer”mice” and hand towels.
3.1.3 Place Strategy:
This places a little impact on the business strategy of Qatar. Qatar airways like any other airways have developed a system of getting their ticket. Unlike the normal businesses, whose distribution channel goes from the manufacturer – wholesaler-retailer-consumer. The normal business cycle Qatar airline and other airways are from the airline operators to consumers when online booking is done or through traveler agent.
- Airline operator
- Airline operator
- Travelling Agent
Traditional Supply channel Online booking channel intermediary booking channel
4.0 MARKET ANALYSIS
4.1 Qatar current market
Qatar airways is one of the leading airline industry in the gulf states. There is no hiding from the fact that Qatar airways is building on the booming market of Dubai to feed the ever busy Dubai route. Qatar currently targets those customers who considers Emirates too expensive. Those that want a little bit high quality and class at an affordable price. Qatar market can be divided into two as follows
Qatar Airways is currently operating in most of the regions of the world.They are presently hoping to expand their routes to include the south pacific routes of Australia and its neighbouring countries. Qatar Airways is a dynamic, high service carrier, which utilises the geographic location of its Middle Eastern hub to link 72 international cities. From the UK the airline operates regular services from London Heathrow, London Gatwick and Manchester to Doha. Onward connections are available to cities including Dhaka, Ahmedabad (coming soon), Chennai, Delhi, Hyderabad, Cochin, Mumbai, Nagpur (coming soon), Trivandrum, Malé, Kathmandu, Islamabad, Karachi, Lahore, Peshawar, Colombo, Denpasar, Jakarta, Kuala Lumpur, Myanmar, Yangon, Cebu, Manila, Singapore, Bangkok, Ho Chi Minh City, Bahrain, Mashad, Tehran, Amman, Kuwait City, Beirut, Muscat, Dammam/Dhahran, Jeddah, Riyadh, Damascus, Abu Dhabi, Dubai, and Sana’a,Bangkok,Hong Kong, Singapore, Kuala Lumpur, Manila, Cebu, Nairobi, Johannesburg and the Seychelles. Qatar Airways entering the US market with flights to New York and Washington, DC direct from the airline’s hub in Doha, capital of the State of Qatar
Below is the demographic basis for the market segmentation for Qatar airways:
Under 12; 13-25; 26-40; 41-55; 55 +
USD 300.00 and over
Muslims (Halal status); Non-Muslims (Non-Halal status)
5.0 STRATEGIC ANALYSIS (SWOT analysis)
SWOT analysis helps to explore the internal and external environmental factors affecting Qatar Airways and hence enable us to make strategic decisions (Aaker, 2005). The recommended strategies that would be adopted in this paper would be based on the on the SWOT analysis of the company.
Where to compete?
How to compete?
How to compete?
Source: Adapted and modified from Aaker, D. A (1998), “Strategic Market Management”, 5th Edition, John Wiley & Sons, Inc., USA, p 40
5.1 INTERNAL ANALYSIS
- Brand Recognition
The airline has been able to build a strong brand that was described by Kelly Kaur, Marketing Director, as “getting to know the audience and using communication to build loyalty, stimulate desire, create confidence and build awareness”.
The airline has been noted for offering consistence services which was one of the criteria that enabled it to get a FIVE STAR RATING.
- FIVE STAR RATING
Qatar Airways is just one of the few airlines in the world ranked “Five Star” by Skytrax, the independent aviation industry monitoring agency. The same organization Skytrax also named Qatar Airways’ cabin crew as “Best in the Middle East” for the third year running and fifth best in the world, following a survey of more than 12 million passengers worldwide. (World Economic Forum, n.d., p. 1).
Qatar Airways are the proud winners of the TTG Travel Awards 2009 – Airline of the year. In recognition of the world class service and their commitment to offer only the best to over 80 destinations worldwide
- Numerous Flights
The airline currently operates a fleet of 42 all-Airbus aircraft, which is expected to triple in size to 110 aircraft by 2015.
Qatar Airways recently made an agreement to buy up to 60 of the new generation Airbus A350s. The airline also plans to acquire 20 Boeing 777s,with a total value for both orders set to be worth US$ 15.2 billion
Many still believe that Qatar cannot maintain their high standard for a very long time because they are not too experienced in the industry.
Many people still believe that the airline is Arab based because of their Logo. Qatar Airways logo uses an animal (Arabian oryx) that may be familiar to people in the Arabian Gulf, but not to people outside the region.
- National Carrier
History has shown that most national does not last and they are often abused by the government. People would love to invest so that they can control or have shares in the business but that’s not the case here.
5.2 EXTERNAL ANALYSIS
- Booming tourism industry
The present surge in tourism in the gulf states is plus for the company to expand its business capacity.
The Airlines has gained some reputation in the region and in Europe and its other sites
- Strategic alliances
The airline has the reputation of forming strategic alliances with some airline operators in the pacific rim. This can be done either via bilateral with the respective government.
The incident of 9/11 is a wheel in the spanner of most airline industry. It has greatly reduced the ability of airline operators to attract many frequent fliers.
- New Entrants
There is possibility of new entrants to the market especially Etihad. Etihad has the financial capacity to compete on the same level with Qatar
The industry itself is known to exhibit high volatility. This may be in the form of fuel price, technology change or epidemic and natural disasters.
6.0 PROJECT RECOMMENDATION STRATEGIES
6.1. Market penetration via new products:
- Low cost
Qatar airways have the leverage to engage in more competitive prices that what they are offering presently. They should borrow a leave from what Qantas did. Qantas came up with a low cost carrier called JETSTAR. The low cost strategy can compete in the low cost flight category of the airline industry while the parent company keeps their normal standard.
Qatar airways have the brand image to form strategic alliances with many similar airlines where they can get the benefits of economics of scale. This might come in the form choosing one airline company in the continent to form a loop. They might borrow a look from what Singapore airlines deed as shown below.
- Air New Zealand
- Star Alliance
- Dinners Club
Singapore Airlines’ alliance network; strategic alliance, follower ( Kotler Pg 812, 2008)
6.2 Maximizing sales revenue
- Reduction of booking agents
Commissions and other incentives to sales staff add to the operational cost of the company. These costs either passed on to the customers or absorbed by the organization lowers the margins of the company. The company should come up with a structure of appointing GSA (General Sales Agent) in major cities and towns. They might even pass it to the post office to sale for them since they post office has their fixed cost already running.
- Web Friendly Site
The company should as a matter of urgency design a friendly user web site. Their current web site is not user friendly. They should borrow a cue at Airasia website. Airasia website is fast, user friendly and updates every minutes. This has greatly encouraged customers to use the web more frequently than physical office space thereby limiting people or place contacts to the barest minimum.
In its relatively few years of operation has shown that they can ranked amongst the best in service delivery. They have grown from a small company to a major player in the airline industry. They have put in place sound management principle and good chief executive Akbar Al Baker believed his airline was leaking significant amounts of revenue. A series of short diagnostic exercises confirmed his hunches needs continuous improvement.
The company has adopted a relatively moderate marketing mix by targeting its customers, positioning the company World Class Young, but growing fast – Forward Thinking, open-minded On-time, Clean image Friendly/helpful/warm/hospitable airline. The People is good, Price affordable, Place great and Promotion best.
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