Solution
Preeta answered on
Aug 22 2020
TITLE PAGE Unit Name – Unit Code – Student Name – Student ID – Campus – Date –
EXECUTIVE SUMMARY:
Strategic analysis is a very important tool to analyze the cu
ent business situation of any company, no matter in which industry is it operating. A company conducts strategic analysis to understand its cu
ent situation and finds the ways to improve these and understands its flaws as well. Some tools of strategic analysis are SWOT analysis, PESTEL analysis, Porter’s five force model, value chain analysis. For this project, Qantas airways have been chosen. Strategic analysis will be done for this company. In this project both internal as well as external environment has been analyzed since both are important for proper analysis.
Contents
EXECUTIVE SUMMARY: 2
INTRODUCTION: 3
PART 1: EXTERNAL ANALYSIS 3
Business background: 3
Industry Type: 4
Analysis of General Environment: 5
Analysis of Industry Environment: 6
Analysis of Competitive Environment: 7
Opportunities And Threats: 8
PART 2: INTERNAL ANALYSIS AND PROPOSAL 9
Resources of the company: 9
Identification of capabilities: 10
Core Competency Analysis: 10
Suitable Information System: 11
Evaluation of the suggested Information System: 11
CONCLUSIONS: 12
RECOMMENDATIONS: 12
REFERENCES: 13
INTRODUCTION:
The most important reason for conducting strategic analysis is that the company needs to match the abilities it has with the su
ounding environment which is constantly changing to ensure that it is performing with its full efficiency and to its highest limit (Teece, 1984). Chiang, Chhajed and Hess, 2003, presented in their research article that strategic analysis is very important for determining the co
ect market strategy that is required for a company. Proper strategic analysis of a company also helps to decide upon the best strategy for the company that is to be adopted for smooth functioning and better profit (Jenster and Hussey, 2001). Fleisher and Bensoussan, 2003, in their book gave another use of strategic analysis that is to analyze the competitors of the business and to formulate the right strategy to handle them and ultimately to beat them in the industry and increase the market shares as well as the profitability.
Qantas airways have been chosen for this project and strategic analysis will be done with respect to this company. Both internal as well as external environment will be analyzed. Qantas airway is the largest airway of Australia in terms of fleet size, international flights and international destinations.
PART 1: EXTERNAL ANALYSIS
Business background:
As already mentioned Qantas airways are the largest airways of Australia. It is third oldest airline in the world, after KLM and Avianca. The company was founded in 1920, but started its international flights in 1935. Its original name, was "Queensland and Northern Te
itory Aerial Services", which has been later a
eviated as Qantas. The company is based at Sydney. It has about 28% passenger share in international market. In domestic market, it has a share of 65%. Qantas is a founding member of the Oneworld airline alliance. It has a few subsidiaries: QantasLink, which mainly fly domestically. Jetstar Airways, it is a low cost airline created in order to compete with low cost airlines. Jetconnect, it was mainly created for Trans-Tasman services. Qantas Freight, it takes care of the air cargo operations of the whole Qantas group. Qantas Holidays, it is a trip organizing unit, books hotels and flights. Almost 26,150 employees work under Qantas. Qantas frequent flyer programme, is designed to reward loyal customers, points are given on the basis of travel class or distance flown, which can be redeemed later. It covers almost 85 destinations internationally. It operates in 38 countries with about 850 international flights per week.
Industry Type:
Qantas mainly deals in Airline industry. In international market its biggest competitors are Singapore Airline, Malaysia Airline, American Airline, united, Delta, Southwest, Cathay Pacific. In domestic market its biggest competitor is Virgin Australia. In domestic market it has been able to retain its market share although there is a fierce competition between Qantas and Virgin Australia. But it just needs to improve its market share in international flights. It generated revenue of $ 16.1 billion in 2017.
Australia is just an island and its economy is slowly prospering. So, airline is a very important industry for Australia’s economy. Williams, 2017, mentioned in his book that US first started the policy of deregulation of airlines which was later followed by other countries including Asia, Europe as well as Australia and this policy has really helped the industry to grow and prosper, which ultimately gave benefit to the economy as a whole.
Analysis of General Environment:
PESTEL analysis is a very important tool to analyze the general environment of a business. Dockalikova and Klozikova, 2014, PESTEL analysis helps to determine the macro environment and is also necessary to understand the cu
ent business position in the su
ounding environment and the adjustments required to adapt to the changing environment.
The political factors that contribute to the analysis are: Australia and China have signed an open pact, which will remove all the restrictions in capacity between the two countries and will open new routes. So, now it is a open aviation market. So, this will be disadvantage for Qantas since there will be increase in competition from Chinese airways as well. Government is supporting Qantas in the cyclical airline industry, and has even passed Qantas Sale Act, which allows it to
ing in outside shareholders and gives more freedom to Qantas.
The economic factors that contribute to the analysis are: Oil price has reduced which has increased the profitability of the business, but it keeps on changing and can rise again. Liberal Aviation policy has been recently
ought by Australian Government, which will affect domestic airlines from prospering. Repel of ca
on tax by the government is a great relief for the airline companies.
The social factors that contribute to the analysis are: Qantas is the largest airline in Australia, so it enjoys enormous public trust, support and has a lot of local loyal customers. It has some program to reward its loyal customers which increase its customer base more. Qantas has subsidiaries and has other domestic partnership to increase its customer base.
The environmental factors that contribute to the analysis are: Qantas uses jet fuel. Environment is highly polluted by aircrafts because of enormous heat and noise. But jet fuel has a low compression rate which increases the efficiency; low heat is generated by use of this. Jet fuel is less inflammable as well so it also decreases the chance of catching fire.
The technological factors that contribute to the analysis are: Wifi and Stan streaming has been started in Qantas flights to enhance the customer’s experiences, since other similar airline are using this. Technology is changing almost every day. Some of the technological innovations are green power, smart materials, in flight apps, Jetsmarters. Right amount if investments are to be made to make the innovations as per the latest trends since innovations are very important to stay in the business.
Analysis of Industry Environment:
Porter’s five forces analysis is an efficient tool to analyze industrial environment. Grundy 2006, in his article stated the same that Porter’s five force model is very competitive and efficient in analyzing business environment.
Potential entrants can always come in the aviation industry and they put a lot of pressure on Qantas in respect of low price, reduced cost. But Qantas can handle those by building economies of scale, by developing new service, by doing more research to find ways to satisfy customers.
Suppliers are powerful. The aviation companies get their raw materials from different suppliers. Some suppliers are in a dominant position and can increase the prices, which will decrease the profitability. But Qantas can take care of these by experimenting in using different material so that if price of one material goes up, other materials can be used. It can also develop some dedicated suppliers who will never overcharge from the company.
Buyers are always powerful. They have a lot of options available with them. So, they will always go for the cheaper flights. To overcome this Qantas can give discounts and other offers to attract customers. Although it has a large customer base yet it need to develop more loyal customers. Innovation and new service will also attract customers.
Substitutes are there. Railways and road transportations are great substitutes for airlines. Moreover they are much cheaper. The only upper hand aviation has is that they are fastest mode of transport. Although aviation cannot compete with other transport in terms of price yet it has to provide cheapest price possible to attract customers from low economic level. Although for international travels it is the only way.
Rivalry among competitors exists in the industry. Qantas has a lot of competitors which
ing down the price and affect the overall long term profitability. This can be overcome by building sustainable differentiation, by building loyal base of customers compared to competitors.
Analysis of Competitive Environment:
In domestic market, Qantas experience advantages from Government as well as local customers and need not to wo
y much about competitors. But cu
ent market reports suggest that it is losing its market shares because of its huge number of competitors. But in international market, other companies which operate even in more countries and generate a lot more revenue than Qantas and obviously have huge market shares. Qantas also need to fly to some more countries increasing its international routes. As per a recent new in business journal, American airline is slashing its services in China and Japan which can be advantageous to Qantas since it can increase its service to those countries. Qantas’s profits are decreasing in international market and needs to be handled carefully if the company wants to retain its position.
Opportunities And Threats:
Opportunities and threats are a part of SWOT analysis. Pickton and Wright, 1998 mentioned in their article that although SWOT analysis doesn’t address the problems directly yet it helps to analyze the cu
ent business situations.
The opportunities for Qantas are now people are travelling by airways more. The economy is prospering day by day. Businesses are also prospering, which is making business people to travel more by flights since it is fastest. Even general people are going more by flights. So, increase in customers is a great opportunity for the whole aviation sector. Qantas needs to adopt the right strategy to lure these new customers, although its big reputation will help. Cu
ently, Qantas is operating in 38 countries, so it has should expand to more countries.
There are a lot of threats faced by Qantas. Competitors are the biggest threat to any company; same is with Qantas. There are new companies entering every day in the industry, posing more threats. Another big threat which the airlines industry is facing is the fluctuation of fuel price, maintenance cost, etc. The companies are struggling to balance their prices with respect to the changes. So, flight prices are also fluctuating because of these.
PART 2: INTERNAL ANALYSIS AND PROPOSAL
Resources of the company:
Resources are very important for any company and can give them competitive advantage in the business (Barney, 2000). A company can have different kind of resources including tangible, intangible as well as human resources. Human resources are most important form of resource, since efficient employees can
ing actual progress in a company and not just some money and machineries. Qantas have all the resources. It has very efficient human resources, that is its key officers are working very hard to make large progress for the company as well as it has a line of efficient employees. Qantas has tangible assets like aircrafts, building, land & improvements, machinery & equipments, inventory, cash, bank etc. It has intangible assets like goodwill as well. Moreover, the company has investment both in tangible and intangible assets. Its accounting ratios are also good, which shows that the company is utilizing its resources well to generate profits.
Identification of capabilities:
Hafeez, Zhang and Malak, 2002, stated in their article that identifying the capabilities that a company possesses is very important for its strategic analysis as well as to understand the areas to improve or the capabilities that can be used to gain competitive advantage. Some time although a company has great plan for innovation and strategy for that, but it might lack the capability of investing the required money. Qantas is capable enough to take on any innovation or can face any challenge with its huge resources. It is earning high revenue every year after all and has competitive advantage in its domestic market as well. Qantas’s marketing strategy is also very good and is utilizing all the advantages it has. The company has government support as well and even a special bill has been passed for it. It is also very capable to maintain its aircrafts and repair as required.
Core Competency Analysis:
Christensen, 2006, described in his article that core competency analysis is very important in this world of innovation. This analysis must be done in order to assess if it’s competent enough for the market. Kandampully, 2002, mentioned similar importance for core competency analysis, and added that for a company to be fully competent must have technological advancement or should be at least capable of
inging technological innovations, it should have thorough knowledge of the industry it is operating in, a well and organized network to gather all the information of the industry. Qantas has all the factors mentioned by Kandampully. Competition always doesn’t mean bad, although it is difficult to maintain market share in the face of stiff competition yet makes a company realizes that there is enough business in the industry which is worth fighting for. Qantas is the greatest Australian airline which proves its competency in the domestic market.
Suitable Information System:
Avison and Fitzgerald, 2003, stated in their article that every company must develop a information system as per their requirement, they even suggested some methods, techniques and tools to decide upon the co
ect information system. Gunasekaran and Ngai, 2004, mentioned in their research paper that information system can help a company in the management process as well as in integrating the value chain and supply chain. Qantas can take up Transaction Processing Systems, Management Information Systems.
Evaluation of the suggested Information System:
Transaction Processing Systems will help Qantas in E tickets and E reservations. Since using this system will enable assemble, process, accumulate, demonstrate, modify or terminate transactions. Management Information Systems can be used by managers to analyze the situations and take managerial decisions. This information system creates summary, exception and ad hoc reports. So, accurate decisions can be taken using the information system. This system will also provide planning tools to plan for the future events.
CONCLUSIONS:
After analyzing the whole environment both internally as well as externally, the conclusion is there are few factors which is in the favor of Qantas and there are a few factors which is against it. But Qantas is a very big and old company, with a huge business. In the analysis of the internal environment, the company is capable and competent, only needs to increase its market share in international flights. External factors are in no one’s control and keeps on changing but Qantas is capable enough to change as per the circumstances.
RECOMMENDATIONS:
· Qantas should expand to more countries, expanding its international routes.
· It should invest in the new technological innovations in the aviation industry.
· It should make research and
ing more new kind of services to attract more customers.
· Information systems need to be integrated in the system for better functioning.
REFERENCES:
Teece, D.J., 1984. Economic analysis and strategic management. California Management Review (pre-1986), 26(000003), p.87.
Chiang, W.Y.K., Chhajed, D. and Hess, J.D., 2003. Direct marketing, indirect profits: A strategic analysis of dual-channel supply-chain design. Management science, 49(1), pp.1-20.
Jenster, P.V. and Hussey, D., 2001. Company analysis: determining strategic capability. IEEE.
Fleisher, C.S. and Bensoussan, B.E., 2003. Strategic and competitive analysis: methods and techniques for analyzing business competition (p. 457). Upper Saddle River, NJ: Prentice Hall.
Williams, G., 2017. The airline industry and the impact of deregulation. Routledge.
Dockalikova, I. and Klozikova, J., 2014, November. MCDM Methods in Practice: Determining the Significance of PESTEL Analysis Criteria. In European Conference on Management, Leadership & Governance (p. 418). Academic Conferences International Limited.
Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), pp.213-229.
Pickton, D.W. and Wright, S., 1998. What's swot in strategic analysis?. Strategic change, 7(2), pp.101-109.
Barney, J.B., 2000. Firm resources and sustained competitive advantage. In Economics Meets Sociology in Strategic Management (pp. 203-227). Emerald Group Publishing Limited.
Hafeez, K., Zhang, Y. and Malak, N., 2002. Determining key capabilities of a firm using analytic hierarchy process. International journal of production economics, 76(1), pp.39-51.
Christensen, J.F., 2006. Wither core competency for the large corporation in an open innovation world. Open innovation: Researching a new paradigm, pp.35-61.
Kandampully, J., 2002. Innovation as the core competency of a service organisation: the role of technology, knowledge and networks. European journal of innovation management, 5(1), pp.18-26.
Avison, D. and Fitzgerald, G., 2003. Information systems development: methodologies, techniques and tools. McGraw Hill.
Gunasekaran, A. and Ngai, E.W., 2004. Information systems in supply chain integration and management. European Journal of Operational Research, 159(2), pp.269-295.