Table of Contents Introduction:Error! Bookmark not defined. Background2 Business descriptionError! Bookmark not defined. Vision2 Swot Analysis…………………………………………………………………………………………………………… Strength………………………………………………………………………………………………………….. Weakness………………………………………………………………………………………………………..
Opportunity………………………………………………………………………………………………………. Threat…………………………………………………………………………………………………………….. Porter’s Five ForcesError! Bookmark not defined. Threat of New EntrantError! Bookmark not defined. Power of Suppliers:Error! Bookmark not defined. Power of consumerError! Bookmark not defined. Product SubstitutesError! Bookmark not defined. Industry CompetitionError! Bookmark not defined. RecommendationsError! Bookmark not defined. ReferenceError! Bookmark not defined.
INTRODUCTION Our purpose in this case study is to research the Swot analysis and Porter’s five forces that impacts Qantas, its stakeholders and strategies in the domestic market. We will look at strength weakness of the Qantas and then also external threats ad opportunities that can affect the company. Then we would look at Porter’s five forces which are the competitors, suppliers, consumers, product substitutes and new entrant. (Fleisher, C. and Bensoussan, B. , 2007). To undertake the case study, primary/qualitative (Qantas Web site) and secondary/quantitative (Internet journals, reports and news) data was collected.
BACKGROUND Qantas was formed by Paul McGuiness, Hudson Fysh, Fergus McMaster and Arthur Baird in Winton, Queensland on 16 November 1920. Qantas owes its name from Queensland and Northern Territory Aerial Services Limited. Qantas Group airlines offer services to 173 destinations in 42 countries – 59 in Australia and 114 in other countries (including those operated by code share partner airlines) and carried 38 million passengers in 2008/09. The Group fleet numbered 246 aircraft (at 1 March 2010) and the company employs around 35,000 people worldwide maintaining over 4700 flights by Qantas and1900 flights by Jetstar each week. viewed 12 may 2010,< http://www. qantas. com. au>) VISION The Qantas Group has a long term vision to operate world’s best premium airline, Qantas, and the world’s best low fares carrier, Jetstar. To attain this, Qantas group is focused on achieving these fundamentals: * Safety is our first priority: * Right aircraft, right routes: * Customer service excellence: * Operational efficiency: (Qantas Annual report) SWOT ANALYSIS SWOT analysis is used to evaluate the fit between an organization’s internal environment (strengths and weakness) and its external possibilities (opportunities and threat) (Fleisher, C. nd Bensoussan, B. , 2007) STRENGTH Strong Market Position * Qantas Airways ranks among one of the leading airlines in the world. The group captures over 30% share in the world airline market over 65% share in domestic market, Australia. (Datamonitor on Qantas) * As per Australian government’s Bureau of Infrastructure, Transport and Regional Economics (BITRE), in year 2009 Qantas had the best on time performance in 2009 and also had the lowest overall flight cancellation rate out of Australian airlines Network of flights Qantas operates 4700 flights each week to more than 70 destinations around the world where as Jetstar operates 1900 flights in 50 destinations Australia, Asia, America and New Zealand (Qantas annual report 2009). In 2009 it operated 33400 flights around the world travelling around 530 mill km over 38 countries. * It covers a wide network all around the world. E commerce * Qantas Airline captured the online market and is awarded as no 1 travel site for online booking and it is visited by nearly 7. 5 mill people per week. Qantas Airline online booking also provides facilities like advance seat selection and online check in.
Jetstar also became first airline in the world to sell tickets through social networking site TwittER and SMS boarding pass. (Qantas annual report ) Loyalty programs * Qantas frequent flier is leading loyalty program in Australia with 5. 8 mill members mill as on 30 June 2009 and revenue from frequent flier increased from $849 mill in 2008 to $1133 mill in 2009. * 400 program partners in Australia including car rentals, financial institutions, restaurants, retailers and hotels. Woolworth group being the latest addition to the frequent fliers club (annual report 2009) WEAKNESS
Dependence on Australia * Although Qantas Airways has expanded to other international market, still majority of its revenue is generated from Australian market. The group generates almost 72. 6% of its revenue from the Australia. This over-dependence on Australia could have a dampening effect on group’s revenues if the economy in Australia does not grow as expected. * Furthermore, the concentration of operations in one area increases the group’s exposure to country specific factors such as labor strikes, changes in economic condition. (Datamonitor, 2009) Falling cash from operating activities Cash flow from operating activity fell by 46. 9% from $2128 mill in 2008 to $1129 mill in 2009 and profit before income tax also fell by 87. 14% from $1408 in 2008 to $181 in 2009 (Annual report ,2009,) * The declining cash position of Qantas group is the cause of ineffective cost management and poor decision making. If this trend continues then will reduce availability of resources to pursue future growth plans. Weak geographic performance * The group has recorded weak performance in few of its geographic regions. Revenues from the Americas and the Pacific were 1. 6% less in 2008 compared 2007.
Similarly, the revenue from Japan declined by 18. 2%; and from New Zealand by 10. 3% in FY2008. * If this weak performance continues then it will affect overall finacing of the Qantas group. OPPORTUNITY Global tourism industry * The total economic value of domestic tourism is valued at $63. 3 billion as on 31 December 2009. (Tourism Australia) * Australian Bureau of statistics found that tourism markets are forecast to increase next year leading to a 3. 5% net growth in tourism dollars. (tourism Australia) * Since Qantas Airlines has the biggest market share in Australia and a wide etwork of flights, so this increment in global industry can certainly help Qantas to improve its numbers. Fuel economy aircrafts * With the rising competition in the market to deliver low cost airlines, it has become difficult for airline to manage the profit margin. With profit margin of Qantas falling from 6% in 2008 to . 8% in 2009 (Datamonitor, Qantas Airlines) * It will be more difficult to maintain these low price services without proper implementation of fuel efficient aircrafts Demographic changes * The Australian Bureau of statistic found that the Australian population is growing at a faster rate.
The annual growth rate for the year ended 30 June 2009 (2. 1%) was higher than year ended 30 June 2008 (1. 7%). From 30 June 2008 to 30 June 2009, Australia’s population increased by 443,100 people, reaching 21,875,000. (Australian bureau of stats 2009) * There is a social trend in Australia of travelling. So this population increase will help to boost up the Qantas sales in near future. THREAT/ CHALLENGES Rising fuel prices * Threat of continues rising fuel prices is making the airline operation a tough job. If price of crude rises above $100 mark then it becomes difficult for airlines to turn a profit. It also affects consumer’s demand as increase in price means shifting these prices on consumer in terms of higher surcharge. As shown (Anders Lindstrom) that 1% increase in fare there is 1. 5% decrease in demand. (Madhu Unnikrishnan 2010) Security and natural disasters * Natural disasters like volcanic eruptions in uk can cause big loss to the airline. As seen in, due to volcanic eruption there was a loss of demand. Also the holding cost of aircraft lead to a loss of $1. 5 mill to Qantas airlines. ( Andrew Heasley 2010)In future these natural disasters can increase the operating cost of Qantas.
Therefore, some method should be evolved to deal with it. * Also, terrorist attacks like 9/11 has lead to questioning safety in travelling by air. Incidences like these tend to harm the image of air travel and can have dampening effect on the total no of air travels. PORTER’S 5 FORCES Porter 5 forces provides an understanding of an industry and its participants (Fleisher, C and Bensoussan, B. , 2007) Porter’s Five Force analysis is used hereinafter to further analyse the operating environment that Qantas is in and competitive advantage it holds. Threat of a new entrants- medium Australian government policy and legislation currently permits airlines that are 100% foreign-owned to operate domestic airline services within the country. (Turbulent Times 2003) * However, the industry is still heavily controlled in some terms. There is a large amount of bureaucracy involved in setting up a new airline and also in operating aircraft; like operating license. (Datamonitor, Airlines Industry) * Exit from the market is also easy as the aircrafts can be sold to existing companies or running company can be taken over by other company. Power of suppliers – medium There is effectively a duopoly of suppliers of new airliners: Boeing and Airbus. (Datamonitor, Airline industry ) * But the competition and rivalry between these two companies helps to provide alternative financing and cuts down on bargaining power of suppliers. ( Fleisher, C and Bensoussan, B. , 2007) * But if, in future these companies merge and form a monopoly then it can form a strong bargaining power and can affect Airline Industry. Power of consumer – moderate * The emergence of E-Commerce means that the consumer can compare services and prices available.
This industry is highly price sensitive; consumers seek out the most cost effective way of travel. * Brand loyalty is low. Though, attempts like introduction of loyalty schemes, for example Qantas Airlines Privilege Club have been made by Airlines Companies to increase loyalty. * This price sensitivity serves to increase buyer power. However, the large number of customers acts to reduce buyer power, since airlines do not feel the impact of losing an individual customer. Overall, buyer power is assessed as moderate. (Datamonitor, Airlines Industry 2009) Substitute – low Generally , other forms of transportation like rail, bus can be considered as substitutes to airline industry due to the high airfares * Domestic market But, In Australia these cannot be considered as direct substitutes because of two reasons 1. train travel and bus services are limited with services being confined to more densely populated areas (Datamonitor, Airline industry) 2. These services are more time consuming. For example In the image (Australia travel search) it can be seen that a trip from Sydney to Melbourne can take 14. 3 hours by car, 10. 5 by rail, but same distance can be covered in 1. hr by air. * Therefore, there is very low from substitutes. Competition- medium to high Virgin blue * Virgin Blue started in august 2000 with 2 aircrafts 1 route and 200 employs. It was launched as first sustainable low fare airline in Australia. However unlike other no frill low cost carrier, this offers affordable prices with other options like on board meal, entertainment, blue zone sitting, live in flight television , on “pay for use” basis. * Virgin Blue has a market share of 31% operating 2100 flights to 24 Australian cities carrying 18. 2 mill passengers in 2009 with revenue increased by 12. % from $2,334 mill in 2008 to $2,635 mill 2009. (virgin Blue, 2010) Tiger Airlines * Tiger Airlines is low-cost airlines; they have a total of 19 aircrafts, 9 of which operate in Australia. It was established in September 2004. The airline operates flights to 33 destinations across 11 countries. As on april 2010 Tiger Airlines carried a total of 507, 000 passengers, an increase of 45% over April 2009 with a net profit after tax of 14. 1 million US$. (Tiger Airways, 2010) * Tiger reported revenue from Australian operations jumped from $S110m to $S208m as the Singapore-based group turned a 2008-09 net loss of $S50. m into a net profit of $S28. 2m for the year ended March 31. (Steve Creedy 2010) Australian market has become a competitive place for airlines industry, with the deregulation of this industry and entry of new foreign competitors has led to drop of Qantas’s market share. Recommendation for next 5-10 years 1 Environmental friendly aircrafts Social and culture values are changing in Australia. The introduction of Fly Carbon Free especially on international routes can attract more environment friendly consumers. It is therefore to be encouraged as this will boost both the image of Qantas brand name. Jetstar focus on small business enterprises Qantas (Jetstar) has focused only on lower income segments. It should now move from low income segment to target market of small and medium businesses with medium income. Although these both segments has been realized by Virgin Blue and this might be the reason why it has gained more than 30% of the market share in 10 years. Although, restructuring does not sound a good strategy at difficult economic situations but preparing the company for future growth has to be kept in mind. 3 Improving the cash flow from operating:
Qantas is losing on its operating cash more can be done in the following areas: A) Introduction of newer and more fuel economy aircrafts which will cut cost and B) Hedging on the price of oil in the international market will help Qantas ease the sudden price rise of oil. C) Switching from A 320 to A321 which has 37 more seats and 5 percent less operating cost will help to improve cash flow 4 Geographic performance With it loose performance in Japan and other Asian economies Qantas group should focus on making alliance with Japanese and other Asian Airlines to improve its market. REFERENCE 1 Fleisher, C and Bensoussan, B. 2007, Business and competitive analysis methods, Wharton School pub, ACM Online Book Programe 2 Qantas Group,2009,Annual report 2008-2009,viewed on 12 may 2010 [online] Available at < http://annualreport. qantas. com. au/ > 3 Datamonitor Asia Pacific, December 2009, Airlines in Australia,datamonitor, 0125-0756, viewed may 10 2010. 4 Tourism Australia 2010, Markets- Australia, Tourism Australia, viewed on 14 may 2010, < http://www. tourism. australia. com/en-au/markets/australia. aspx > 5 Datamonitor Asia pacific, 29 January 2009, Qantas Airlines, datamonitor, viewed on 12 may 2010. Australian Bureau of Statistics 2009, Australian population, june 30, viewed 12 may 2010, Australian Bureau of Statistics online. 7 Madhu Unnikrishnan , Business Editor, Aviation Week at 5/4/2010, viewed 10 May 2010 <www. aviationweek. com/aw/blogs/commercial_aviation> 8 Andrew Heasley, ‘Qantas freeze on flight departures’ , Sydney Morning Herald, April 2 2010, viewed 12 may 2010, <http://www. smh. com. au/travel/travel-news/qantas-freeze-on-flight-departures-20100419-spf1. html> 9 Turbulent Times: Australian Airline Industry Issues 2003, Research Paper no. 10 2002-03. Economics, Commerce and Industrial Relations Group. 0 Australia travel search,2010,viewed 15 may 2010, http://www. australiatravelsearch. com. au/trc/transport. html 11 Virgin Blue, about us, viewed 11 May 2010,http://www. virginblue. com. au 12 Tiger Airways, about us, viewed 10 May 2010http://www. tigerairways. com. au 13 Virgin blue,2009,Annual report 2008-2009,viewed on 12 may 2010 [online] 14 Available at <http://www. edocumentview. com. au/vba/2009/1882/default. htm? voting=false#p=55&c=2&v=1 > 15 Steve Creedy, ‘Tiger Airways flies into clear skies Down Under’, The Australian, 15 may 2010, viewed 17 may 2010, <http://www. heaustralian. com. au/business/tiger-airways-flies-into-clear-skies-down-under/story-e6frg8zx-1225867002995 > APPENDIX 1 SWOT STRENGTH * STRONG MARKET POSITION * NETWORK OF FLIGHTS * FREQUENT FLIERS TIE UPS * E COMMERCE | WEAKNESS * AUSTRALIAN DEPEDENT * DECLINING CASH FLOW * WEAK GEOGRAPHICAL PERFORMANCE | OPPURTUNITY * GLOBAL TOURISM INDUSTRY * FUEL ECONOMY AIRCRAFTS * DEMOGRAPHIC CHANGE| THREATS * FUEL PRICES * CLIMATE DISASTERS| 2 Qantas financial 2009