Posted: June 27th, 2015

Qantas’ strategies for the medium-term future Possible challenges for Qantas and their solutions

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Paper Outline

1. Summary
2. Background Information

• Qantas’ core competencies

1. Qantas’ strategies for the medium-term future
2. Possible challenges for Qantas and their solutions
3. Recommendations

• Conclusion

QANTAS IN THE GLOBAL AIRLINE INDUSTRY

Summary

Globalization has promoted the growth of trade and tourism industries. This has increased demand for travel and has benefited the airlines in many ways. Qantas has been a successful airline that has grown to become internationally recognized. It serves both domestic and foreign markets. However, by 2009, the airline began experiencing financial constrains due to competition. It was also affected by natural calamities like swine flu that discourage travellers. It is possible for this airline to restore its position in business by maximizing on the available resources and expanding its markets. The airline can serve both low and high end markets. This can be achieved by merging with other airlines and differentiating its markets to target each market with the right product. Given that the airline has a wide range of products; it has an added advantage over competitors. This can be used to plan strategically and promote the company’s revenue generation. As the international business activities increase, the demand for travel also increases. This makes airline a favorable business for investors.

Background Information

The airline industry has benefited from globalization and the growth that has been experienced in trade and tourism. The growth in this industry is associated with the global economy that has improved the income situations for most of the middle families. Competition is intense in the airline industry since the growing demand for travel has attracted many investors. Qantas started in 1920 with eight aircrafts that flew internationally until 1942. It was later nationalized until 1992 when it became a private organization. Its shareholders consisted of the British airways and the Australian public. It grew in capacity and formed the Oneworld alliance with other airlines for it to share lounges, joint bookings, and numerous flyer points that improved the quality of services offered by airlines. The birth of Virgin Blue brought a lot of competition and Qantas launched a low cost airline, Jestar, which could compete with Virgin Blue at the same level. Qantas expanded and grew in capacity. It has been awarded various awards for being among the best airlines in the world. Cutting cost became a major aspect in the supply chain, proposing merging and concentrating on the core business to overcome the economic crises. The airline’s profits are going down, and the future is unpredictable especially with the current set backs like the swine flue outbreaks (Hanson, Hitt, Ireland & Hoskisson, 2011). This report will discuss and analyze the issues affecting Qantas airline. It will establish a strategy in which the company can save itself from collapsing, as well as highlight the relevance of the issues being implemented.

Qantas’ core competencies

Qantas has been growing in capacity due to some of its aspects that keep it ahead of its competitors. For instance, the airline operates other services besides airline and travel. These include handling baggage and check-in services and passenger lounges and catering services (Hanson, Hitt, Ireland & Hoskisson, 2011). This is a strong point for this organization because the extra forms of business are related to travelling, which is the core business. The airline has an advantage of concentrating on all travel needs of its passengers into one package. This way, it is easy for Qantas to establish customer loyalty because the passengers will always have a need in one of the diverse services and products that are offered. Diversity is an aspect that attracts customers and gives an organization a competitive advantage because demand increases with an increase in the range of products. The rivalry experienced from other service providers is easily reduced. This is achieved by offering enhanced services that add value to the single service that customers would be seeking. The maintenance and repair business also offers the airline an opportunity to maintain its aircrafts cheaply and thus minimize on the costs of operation (Ferrel & Ferrel 2009).

Qantas has been in operation for a longer period when compared to other upcoming airlines. This makes the brand well known both locally and internationally. Such brand knowledge among local and foreign customers puts the airline ahead of the competitors. The product is widely acknowledged in the market, and the airline can take advantage of this to build customer loyalty unlike the competitors who have to establish a market share. The airline has been in operation for some time thus it is conversant with the market needs. This can be used as a basis to upgrade the company’s products to fit the customer needs and even exceed the customer expectations. Previous experiences can also be used in planning and building strategies that can be used to increase revenue in the future (Lyons & Booth, 2011).

Qantas is also in a position to serve both high profile customers and customers who wish to spend moderately (Brescoll, 2012). Given that the airline is running a high cost and a low cost travel business, the airline can obtain business from all the markets (Hanson, Hitt, Ireland & Hoskisson, 2011). This is an added advantage because the airline does not have a certain target market since it can accommodate both classes of travelers. This indicates that the high profile customers can still be maintained while the organization seeks to attract low cost travelers too. When an organization has the advantage of serving all the markets available in any given industry, it has the advantage of gaining a wider market share than the rest of the competitors (Mintzberg, 2000).

Qantas’ strategies for the medium-term future

Qantas is in a good shape, but the situation may change in the future since most of the revenue sustaining it is mostly from the sale of points, the supermarkets, and other non travel business activities (Hanson, Hitt, Ireland & Hoskisson, 2011). The airline has to plan and establish strategies of attracting passengers and maintaining the costs as low as possible. This is meant to ensure that the airline maintains good numbers of international passengers. This can be achieved by using aircrafts that consume fuel efficiently while accommodating a bigger number of passengers. This should also be accompanied by a fast turn-around in which planes take a long duration in the air. This ensures that fewer costs are incurred, and the revenue generated increases. This strategy can be achieved in the short term given that manufacturers are offering good deals for new large aircrafts. Such an investment will help the company cut down on its cost and increase its capacity (Mintzberg, 2000).

Qantas, being an established airline, can benefit from the changing patterns in the way people travel all over the world. Travel is influenced by business and economic activities, as well as holidays and leisure. A lot of people are travelling to work including the low income earners. Qantas can take advantage of these changing trends to provide products that satisfy these travel needs. The airline can provide flights that exclude meals and offer attractive packages for business travelers in order to cut down on costs. This will create a target market that is steady since globalization has made travelling a requirement for the international organizations. The costs directed towards travel agent reservation can be avoided by maximizing the company’s products. This ensures that no extra services are outsourced leading to increased revenue at low expenses (Wu, 2009).

The airline industry has attracted many investors, and this has increased competition for Qantas. The airline should take advantage of its established brand to offer services that make it distinct (Lasevoli & Massi, 2012). For instance, it can develop its services and products to offer passengers comfort and luxury. This can be provided in Qantas while the other unit, Jestar, offers low cost travel to medium income earners. Providing leisure passengers with the class they require while offering a bigger business class capacity through Jestar ensures that the airline takes advantage of both markets (Brescoll, 2012).

Possible challenges for Qantas and their solutions

While seeking to expand its operations and increase revenue, Qantas may experience challenges. For example, to make its travel experience more comfortable and luxurious, it will have to add value to its products (Hill & Jones, 2013). This can be achieved through offering extra services like personalized services that may increase labor cost. The airline can separate the services such that Jestar concentrates on the low income travelers while Qantas specializes with the luxury passengers who can pay for the extra service. Defining these forms of services ensures that both markets are served according to their needs. Standardizing the aircraft fleets for each class of passengers will lead to low costs of maintenance and operations (Wu, 2009).

The aircraft cycle is relatively fast, and suppliers are likely to produce new brands at a faster rate than the airline can match (Hanson, Hitt, Ireland & Hoskisson, 2011). The airline can merge with other well established airlines so as to keep up with the market demands. This will give it a great financial power to acquire new aircrafts thus offer schedule options that will attract passengers. It will also have increased opportunities to serve international markets and expand its operations. Scheduling is slowly shifting from maximizing connections and network traffic to reliability in terms of operations. Airlines are seeking to offer less disruptive travel experience to passengers while cutting down cost at the same time. In this case, increasing the number of schedules provides customers with a wider variety to choose from, and this increases business (Wu, 2009).

Recommendations

• For Qantas to achieve maximum revenue from both the luxurious travelers and low income travelers, it should separate its operations. One unit, for instance Jestar, can concentrate on low income travelers while Qantas should focus on high profile customers that need comfort and luxury.
• Merging also gives it a greater opportunity to reach a wider market for international travelers.
• Another recommendation is standardizing its aircrafts to ensure that the operation costs are maintained as low as possible.

Conclusion

Qantas has benefited from the increased demand for travel and received many awards for being among the best service providers in this industry. It has also registered great profits in the past. However, in the recent times, it has experienced low revenue. Formulation of strategies that give the company a competitive advantage is critical for the airline to remain in business. Such strategies include low cost operations and provision of superior services than competitors. Since it is an established brand, it has an advantage over the upcoming airlines. This gives it an opportunity to merge with other established airlines. Obtaining international market is one of the strategies that will see the airline expand its operations.

References list

Brescoll, VL 2012, Who Takes the Floor and Why: Gender, Power, and Volubility, viewed on 1st Aug 2012. http://mba.yale.edu/faculty/pdf/brescollv_who_takes_the_floor.pdf

Ferrel, L & Ferrel, OC 2009, ‘An enterprise-wide strategic stakeholder approach to sales ethics’, Journal of Strategic Marketing, vol. 17, no. 3, pp. 257-270.

Hanson, D, Hitt, MA, Ireland, RD & Hoskisson, RE 2011, Strategic management: competitiveness and globalization, Cengage Learning, Melbourne.

Hill, CWL & Jones, GR 2013, Strategic management: an integrated approach. Cengage Learning, Mason, OH.

Lasevoli, G, & Massi, M 2012, ‘The relationship between sustainable business management and competitiveness: research trends and challenge’, International Journal Of Technology Management, vol. 58, no. 1, pp. 32-48.

Lyons, C & Booth, H 2011, ‘An Overview of Open Access in the Fields of Business and Management’, Journal Of Business & Finance Librarianship, vol. 16, no. 2, pp. 108-124.

Mintzberg, H 2000, The Rise and fall of strategic planning, Pearson Education, London.

Wu, CL 2009, Airline operations and delay management: insights from airline economics, networks, and strategic schedule planning, Ashgate, Farnham, Surrey.