Qantas Airways: Strategic Analysis | Strategic Management Assignment Example

Qantas Airways Strategic Analysis Strategic Management Assignment Example

Executive summary

Strategic management is quite necessary for a business organization operating within highly fluctuating and competitive business environment.  Formulation of successful strategy is not an easy task which requires an in-depth analysis of internal and external business environment of the business organization is quite necessary. In context to this fact, the report is aimed to reflect some crucial and effective strategies for Qantas Airways, which will be quite helpful for the organization to address different threats prevailing within existing external as well as internal business environmental factor.  For the purpose of analyzing external business environment of the organization competitive analysis and PEST analysis is done within the report. Along for this for the purpose of having an in-depth analysis of internal competencies of the business organization value chain analysis method is being used in the report
Moreover, the report is also reflecting some crucial opportunities prevailing in the market for Qantas Airways. In the light of internal and external business environmental factors, two intensive business strategies, namely Cost Leadership and diversification are recommended to the business organization for the purpose of addressing threats and avail advantages of opportunities. The report is also providing justification for the application of these two strategies under the light of existing business conditions.

Introduction

The contemporary business environment has become changed quite intensively which has produced some critical issues, such as dynamic global economic conditions and stiff competition prevailing within the market, in front of the business organizations. In order to address such problematic aspects, business organizations are required to undertake some crucial strategies which are best suitable as per the needs and requirements of their external and internal business environment. In regard to this, the paper aims to reflect the strategic analysis of Qantas Airlines so that an effective and justified business strategy can be proposed to the company. In this context, some crucial information regarding existing strategic orientation of the company is quite necessary which is aimed retrieve in this section:

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About the company

Qantas Airways Ltd is one of the most prominent business organizations operating within airlines industry of Australia. The registered name of the company is Queensland and Northern Territory Aerial Services Limited (QANTAS). The company provides passenger and air freight transportation services to its customers in Australia and global level. The company owns two complementary brands namely Qantas and Jetstar. In June 2011, the company was having 278 passenger and 5 freighter aircraft (Qantas Airways Ltd 2012). The company has employed around 35700 employees for commencing its domestic as well as international business operations (Our Company 2012).

History of the company

Qantas Airlines is having some glorious past behind it. The company is regarded as world’s second oldest airlines. The company was incorporated in the year 1920 in Queensland.  The aircraft of the airline was Avro 504K. In its early days, the company used to operate as a domestic airline. The international business of the organization was started in the year 1935. The company started its first international service from Darwin to Singapore. Since then the company is delivering excellent services to its international customers (Our Company 2012).

Current mission and Goals

The mission of the company induces the company to operate within the existing business environment in the most sustainable manner. For this purpose the company is aimed to optimize and improve the economic, social and environmental impact of its business operations so that financial sustainable returns can be provided to the stakeholders of the organization for their investments in the company.
The prime objectives of the company are given as below:

  1. To deliver excellent services to its customers so that value of money paid by them can be enhanced up to a significant level
  2. To enhance their presence in global Airlines industry and its market share
  3. To make some important improvements in business operations of the organization so that their economic, social and environmental impacts can be minimized (The Qantas Group at a Glance 2012).

The company is striving to achieve such business objectives with the help of its different operational business strategies.

Recent developments of the company

In recent period of time, the company has made some significant development in its existing policies operational framework. The company has expanded its business operations across 182 destinations in 44 countries. The company has made some significant advancement it feet capacity to improve its business. In this direction, the company is now operating more than 970 flights each week through its two different brands namely Qantas and Jetstar (The Qantas Group at a Glance 2012).

Analysis of information

External environmental analysis:

External business environment of the organization represents some crucial trends, conditions, and forces, which affects the performance of the organization and decisions made by the management. For the business organization, it is quite essential to consider different external environmental factors while taking any decisions. For Qantas Airways, the market of Australia serves as external business environment. The proper and effective analysis of the existing business environment of the organization can be undertaken with the help PEST analysis framework. As per this framework, there are a number of different aspects of external business environment, which can easily be analyzed as below:

Political environment:

In Australia, the political environment for growth of aviation industry is quite regulated. In the region, all the activities undertaken by organizations are regulated by Board of Airline Representatives of Australia Inc. (BARA). The government of the country has designed a specific policy for the development of aviation related infrastructure for the purpose of promoting aviation industry within the country. In this aspect, the government has provided some specific grants and packages for development of airport and other

Economic environment:

The aviation industry of the region has significantly affected through recent global Economic Downturn. This economic downturn has resulted into decrease in the longer term demand, and changes in seasonal schedules of Airlines Industry. It has also affected the capacity of airline companies to have optimal mix of fares for its passengers (Wu 2010).

Social environment:

From the perspective of social aspect of externals business environment, choices and preferences of passenger of Australia have been become quite changed as they have started to prefer world class and innovative facilities. The positive attitude of customer’s towards more dedicated, focused and value added services provided by the customer have imposed the company to change its policies and strategies accordingly (Iatrou, and Oretti 2007).

Technological environment:

In existing business environment, technology has become quite advanced in the context of Aviation industry within the country. In direction to this, there is a significant advancement within designing, techniques and facilities related with aircraft, which has induced the company to change its strategy (Wu 2010).

Competitive environment:

In existing period of time, the level of competition prevailing within the aviation industry of the region is quite brutal as there are a number of different domestic and international carriers operating within pacific regions quite intensively. Different foreign airlines such as British airways, Emirates, and Etihad Airways, are operating within the country quite prominently. In addition to this, different domestic airlines namely, Pacific Blue, Virgin Blue, Ansett, and Airnoth are also making the competition tough for Qantas airways within the region (The Qantas Group at a Glance 2012).

Internal environmental analysis  

Along with external environmental analysis, analysis of the internal business environmental factors is also quite crucial for the business organization. The internal business environmental factors denotes factors which are quite related with internal business operations and skills pursued by the organization. The analysis of internal business environment for the organization can be done with the help of porter’s value chain analysis framework. Although, the framework is designed especially for organizations in manufacturing industry, yet in the service sector like Aviation also, the implication of this framework can be sighted.

Value chain analysis:

As per this framework, there are two different types of activities performed by Qantas, discussed as below:
Primary activities: these are the activities which are primarily conducted by the company for the purpose of delivering its services to the passenger.
(1) Inbound Logistic
As Qantas is an organization operating within service industry, the importance of inbound logistics for the organization decreases. The inbound logistic for this company are passenger aircraft. The company has good collection of highly developed and competent aircraft.
(2) Operations:
The company is engaging in passenger and air freight services. The company has employed highly automotive system for undertaking its different business operations so that the value of services provided by the organization can be enhanced.
(3) Outbound Logistic
Outbound logistic of the company can be denoted by the frequency of flights and quality of its services provided to customers.
(4) Marketing:
The marketing is also one of the most crucial aspects of the internal business environment of the organization. In this context, the company undertakes an intensive marketing campaign and promotion programs for attracting customers. In advertizing the company positioned itself as a low cost brand in the industry.
(5) Services:
The company is striving to reduce the cost of its services so that world class services can be provided in the reasonable prices. In existing period of time, high cost of services is affecting the business organization to be a highly appreciated low cost brand in the Airline industry (Aulenbach 2007).

Support activities:

There are some supporting activities undertaken by the organization for accomplishing primary activities in the most efficient manner.

Human resource management:

The company is employing more than 35700 employees world-wide, among which majority of employees are Australian. The human resource management framework of the organization is not quite competent to manage highly diversified workforce.

Infrastructure

The approach and success of the company is highly dependent upon the development of highly infrastructural Airports within the region. In the region, where proper facilities of airport infrastructure are not available, the success of the organization is not sure.

Procurement

The company is quite selective in terms of the procurement of its different resource. The company is having good relationship with aeronautical engineering firms which can be proved quite effective for the organization to have some innovative technologies. In this way, in terms of procurement of resources the company is having a positive note.

Technology development   

In the context of technological development aspect, the company is delivering some intensive values to its customers as the company employs highly engineered aircraft and automotive processes (Thompson, and Martin 2005).

Opportunities and threats for the company

The external and internal analysis of the company has indicated towards some of the crucial opportunities and critical threats for the company in its business operations. For the future growth of the company, it is quite crucial to consider these opportunities and threats while formulating their business policies and strategies.

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Opportunities available for the company:

The domestic market of the company is Australia which is considered as the fastest growing economic zone across the world. The region is providing some of intensive opportunities for business expansion for the company. In addition to this, there are a number of different untapped and potential markets of Asia and Africa, which can be proved quite opportunistic for the company for business expansion. As the company has owned a low cost brand i.e. Jester, the company can register a strong presence in such potential market. Along with this, after the global economic crisis, the policies of the government regarding development of aviation industry have become quite liberal and supportive which provides some crucial opportunities for the organization (Delfmann 2005).
These are some crucial opportunities which are needed to be grasped by business organization to avail sustainability within existing highly competitive marketplace.

Threats:

There are a number of different threats which can be faced by the business organization in existing environmental conditions. The first and foremost threat for the company is regarding rapidly increasing competition in the industry. Nowadays, aviation industry of Australia has become quite lucrative, which is attracting a number of different new players. Along with this other global airlines like British Airlines, Virginia Airlines, and Emirates Airlines and so on are also expanding them slaves, which are presenting some critical threat for the existence of the company within the market. In addition to this, increasing flue cost, and quite strict labor laws are also some of the important factors which are making the operations of the Airlines quite tough. Furthermore, uncertainty and dynamism of global economy is also one of the most critical risks for the business organization, which has also been struck the global aviation industry recently (Iatrou, and Oretti 2007).
These threats are quite critical for the organization. The organization is required to have some crucial strategies for the purpose of minimizing threats.

There are different threats as well as opportunities in front of the business organization in existing period of time. In order to avail advantages of opportunities and mitigating threats, two crucial corporate level business strategies can be proposed to Qantas Airlines. These recommended strategies are cost leadership and diversification. These two strategies can have long term and sustainable impact over business operations undertaken by Qantas Airlines.
(1) Cost Leadership:
The cost leadership strategy is proposed for Qantas Airways as it will be proved quite helpful for the organization to counter intense competition provided by different domestic as well as international airlines operating in the region. The cost leadership strategy induces the business organization to reduce its operational cost as much it can in order to attain cost leadership within the market. The cost leadership is the condition when, the company starts to avail minimum cost for performing a specific business operation in comparison to any other company in the industry. This situation serves as a competitive advantage for the organization (Hitt, Ireland, and Hoskisson 2009).
As per this strategy, the company should focus upon the cost occurring areas of its operation. After identifying such areas, the company should alter the way of the operation in the way that cost would be reduced or it should find alternative ways of commencing such operations at lower cost. For instance the company should find alter native and cheap source of fuel, or employ new technologies so that process of operations can be shortened and less costlier. In addition to this, the company should also reduce its unnecessary and avoidable operational expenses. The company should include the concept of Keizen Costing its core principles. The concept drives the company to identify unnecessary expenses and reduce them to be cost leader within the market. However the company should also consider that this cost cutting would not affect the quality of facilities and services provided to its customers, which is an important aspect of getting success for an airline company (Hussey 2012).
Diversification:
Another important strategic solution recommended to the company is the geographical diversification. This strategy drives the company to expand its business operations it other potential destinations across the globe. As the domestic market of the company has become quite competitive, it has become quite crucial to look towards the areas which are developing at a rapid pace and having intensive opportunities for the growth of aviation industry. In this strategy, the company should undertake some crucial study of world market for business expansion. In this study the company should mark the destinations in which it can expand itself quit efficiently. Although, the company has considered this strategy for expanding its self in Middle East, Asian, and European region, yet in recent period of time, there is no any significant business expansion by the company come into existence (Iatrou, and Oretti 2007).
There are a number of different important destinations of Asia and Africa, which are quite untapped but having potential. The company should target such destinations and commence its business operations to explore such opportunities. The company can undertake several important measures such merger, acquisitions for getting entered within the market of a new country. However, the getting entered into the new market is not an easy task for the organization as there are some critical issues related with compatibility of the organization with the external business environment of the new country. The organization should undertake an in-depth analysis of external environmental trends of a new market (Holloway 2008).

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Justification of the strategies

The cost leadership and business diversification strategy recommended for the business organization can be justified on the grounds of existing situations faced by the company. In existing period of time, the company is facing some intensive competition provided by a number of different competitors. The stiff competition in the domestic is shortening the markets share of the company. In order to avoid this situation, the organization is required to provide some distinguished product and service features to its customers for attracting them. In this context, the cost reduction strategy would be helpful for the company to have leverage of providing world class facilities and service at lower prices as compare to its competitors within the market. This will be helpful for the organization to cater the mass market comprehensively and increase its market share, in the most effective manner (Fitzroy and Herbert 2007).
In addition to this, geographical diversification strategy can also be justified under the light of tough competitive status of Australian Market. The aviation industry of the region is now heading towards saturation stage. Owing to this reason, it will be quite essential for the organization to heed upon some crucial and potential regions across the globe. For this purpose, the geographical diversification will be the most suitable business strategy for the organization as it will be proved quite helpful for the organization to explore potential of new market and avoid the competition in the domestic market. In this way, proper application of diversification strategies helps the organization to have a business portfolio, which can be helpful in addressing economic uncertainty prevailing within the market (Wu 2010).

Conclusion 

On the basis of overall discussion made within the report, it can be concluded that Qantas Airlines is one of the most prominent business organizations operating within the Australian aviation industry. The organization is facing some internal and external environmental issues, which are inducing the company to change its existing strategic orientation. In this context, cost leadership and diversification of markets are the two prime strategic options available to the company. The company requires aligning its existing resources with these two mentioned strategies so that it can be implemented in the most effective manner.

References:

Aulenbach, S. 2007. Business Deconstructed – QANTAS AIRWAYS LIMITED.  GRIN Verlag.
Board Of Airline Representatives of Australia. 2012. [Online]. Available at: http://www.infrastructure.gov.au/aviation/nap/files/Board_of_Airline_Representatives_of_Australia.pdf [Accessed on:24th August 2012].
Board Of Airline Representatives of Australia. 2012. [Online]. Available at: http://www.infrastructure.gov.au/aviation/nap/files/Board_of_Airline_Representatives_of_Australia.pdf [Accessed on:24th August 2012].
Delfmann, W. 2005. Strategic Management in the Aviation Industry.  Ashgate Publishing, Ltd.
Fitzroy, P. and Herbert, J.M. 2007. Strategic Management: Creating Value in a Turbulent World. John Wiley & Sons.
Hitt, M.A. Ireland, D. and Hoskisson, R.E. 2009. Strategic Management: Competitiveness and Globalization : Cases. Cengage Learning.
Holloway, S. 2008. Straight and Level: Practical Airline Economics. Ashgate Publishing, Ltd.
Hussey, D.E.E. 2012. Strategic Management: From Theory to Implementation. 4th Ed. Routledge.
Iatrou, K. and Oretti, K. 2007. Airline Choices for the Future: From Alliances to Mergers. Ashgate Publishing, Ltd.
Our Company. 2012. [Online]. Available at:http://www.qantas.com.au/travel/airlines/investors-sustainability-reports/global/en [Accessed on 23st August 2012].
Qantas Airways Ltd. 2012. [Online]. Available at: http://au.finance.yahoo.com/q/pr?s=QAN.AX [Accessed on: 23st August 2012].
The Qantas Group at a Glance. 2012. [Online]. Available at: http://www.qantas.com.au/infodetail/about/FactFiles.pdf  [Accessed on: 23st August 2012].
Thompson, J.L. and  Martin, F. 2005. Strategic Management: Awareness and Change. Cengage Learning EMEA.
Wu, C. 2010. Airline Operations and Delay Management: Insights from Airline Economics, Networks, and Strategic Schedule Planning. Ashgate Publishing, Ltd.

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