PESTEL and Porter’s Five Force Analysis of QANTAS Essay

Executive SummaryThe pursuance paper deliver the goodss an digest and evaluation of the current merchandise position of Qantas and the airline attention. By assessing the clubhouse twain internall(a)y and externally by applying PESTLE and Porters cardinal Force frameworks, this report depart assess Qantas opportunities and strengths within the airwave effort. In addition to this, the report will focus on the detail resources and capabilities that en commensurate Qantas to obtain a competitive reward over its competitors with the use of the VRIO framework. A final analysis will be conducted to diagnose issues Qantas face and recommendations of how they rat rectify these issues.1. Back principleQantas began in the Queensland step upback during 1920. It was premier registered as the Queensland and Northern Territory Aerial Services (QANTAS) and has since grown to be Australias largest domestic and international airline, as well as adept of the strongest brands in Aus tralia, employing close to 35,000 personnel beingwide (Qantas, 2010).Based by of Sydney, Qantas soon operates close to 5000 weekly flights across Australia, New Zealand, Africa, North America, South America, atomic number 63 and Asia, flying close to 50 global destinations (Qantas, 2010).There a four major domestic airliners that realise the majority of the trade helping in Australia Qantas, Virgin Blue, Tiger Airways and Jetstar (Dixon, 2006). Nicknamed The flying Kangaroo, Qantas is the largest Australian global airlines and is a read member of the One world Alliance. Qantas operates domestically under QantasLink, which carries out 2000 regional flights weekly. They also operate their low f ar airline Jetstar, and Qantas lading (Qantas Airways, 2012).2. PESTLE ANALYSISApplying the PESTLE analysis on the aura industry will help to identify the purlieual influences by arranging them into cardinal categories Political, Economic, Social, proficient, Legal and Environmental (Issa, 2010). Future trends and requirements for change based on these trends discharge be identified through this analytical tool (Johnson, et al, 2008).2.1 Political terrorist act has had a major ingrain the melody industry. It is still a rattlingreal possibility of airplanes being hijacked or blown up in mid air and this has put a negative impact upon the industry. The juvenile Malaysia Airlines tragedies are evidence of this, as is September 11.2.2 EconomicOil harms have a signifi adviset impact on the airline industry. Due to new-fangled developments in the oil markets, airlines have to employ non-monetary methods techniques include hedging or airline alliances, in order to increase furnish- subverting business leader. This will allow airlines to buy provide in larger quantities and create contractual agreements with oil suppliers (Thompson and Gamble, 2012).The to the full(prenominal)est degree recent and scotchally crippling factor that has influenced the airli ne industry is the world-wide Financial Crisis (GFC)(Nuguid, 2011). This presents a potential weakness or threat for Qantas who whitethorn come to feel that their premium price for quality service is non enough to get the customers to fly with them.2.3 SocialThe number of people victimization airlines to fly to holiday destinations has increased due to economic growth. then, the market has carry and new opportunities for tourism have opened in previously obsessed countries.How society is observed as it transmits to air travelling has a great insure to do with September 11, 2001. As a result of this tragic event, the judgments of the world have become increasingly profound to the background of passengers traveling on planes. It has shaped something of a undesirable perception for particular cultures and beliefs. This discourages people to travel with other passengers or airline, straight off affects the airline industry (Reilly.N.J, 2010)2.4 TechnologicalTechnological develop ments have both created new opportunities as well as threats for the aviation industry. Development in information and communication technologies has enabled strong communication and has wherefore provided customers with an substitute(a) for frequent travelling, for example Qantas Frequent Flyer programs. Airlines are right away able to expand their outreach directly to consumers through e-commerce. For example, airlines like Qantas are able to introduce ticketless travel through the use of technology (Thompson and Gamble, 2012).2.5 LegalThe instruction execution of the deoxycytidine monophosphate tax had a negative affect on the aviation industry, as the airlines could not absorb the higher salute of fuel. This meant to offset be travelers would pay extra in ticket prices (Herald, 2011).Some governments provide subsidies that provide an unfair advantage and prices lower than market conditions which affects the functioning of airline industries directly and Global environmenta l policies regarding emissions and international route deregulation may affect airline operations in present as well as in future (Fulton.J, 2010).2.6 EnvironmentalThe aircrafts emissions have a importantly high impact to the environment as they travel several kilometers in a higher place the surface of the earth. Aircraft emissions cause signifi bottom of the inningt damage to the atmosphere (Penner et al. 2001). Noise polution is other major environmental concern (Aircraft Noise is Unhealthy, 2008).3. Porters five forcesIn order to analyse the industrial environment of Qantas Airlines and pass judgment the nature of the competition faced by the company, the following analysis was carried out using Porters Five Force framework (Porter, 2008).3.1 war-ridden RivalryThe competitive rivalry in airline industry has been increasing, oddly through mergers, acquisitions and subsidiaries. Qantas doed its low- comprise airline Jetstar in 2003 creating a two-brand strategy. By having th ese two brands the Qantas Group is able to assess different market opportunities and deploy the best product to suit the opportunity andspecific market conditions this also creates a competitive advantage. New rivals have emerged following the footsteps of Qantas, such(prenominal) as Singapore Airlines and British Airways, and are threatening Qantas market share in the no-frill, low-price trade by offering lower costs and tending customer service (Mouawad, 2010).3.2 Entry BarriersThere are high barriers to premise this industry, as it requires a large initial capital investment. In mating with the price wars and low hit margins, it has become difficult to make whole profit. It is in truth common for airlines to project losses in their financial statements. Therefore a new entrant must be able to do losses at the beginning. Another barrier to institution is the limited accessibility of landing slots in Australian airports. The slots are already reserved by established airline s and are difficult to obtain especially in airports with high passenger demand (Czemy 2008).3.3 Threat of SubstitutesThere are many substitutes in terms of long distance travel such as cars, trains and sail boats and these are generally cheaper. However, air travel has the absolute advantage in terms of time. Thus, the threat of substitute is relatively low.3.4 negotiate power of suppliersBoeing and Airbus are the main aircraft suppliers for large airlines like Qantas. Qantas plans to spend capital investment worth around US$17 billion in to a greater extent fuel efficient, next generation aircraft, such as the Airbus A380, Boeing 787 Dreamliner and Airbus A320 neo (Qantas, 2014). Qantas is heavily dependent on the price of oil for its profit margins, which implies high bargaining power of oil suppliers. Price hedging is limited and high rises in prices can manipulate Qantas fuel costs. Due to the limited number of aircraft suppliers, and the continuous compulsion for fuel, it can be said that the bargaining power of suppliers is quite high. (Thompson and Gamble, 2012).3.5 Bargaining power of buyersConsumers have high bargaining power with Qantas, which is mainly attributed to their price based preference. Receiving the same service, the consumers will select the airline that offers them best encourage for their money. Due tothe widely available information technology tools, such as Flight Center and SkyScanner, consumers have the ability to compare flight work and prices before making their final selection. Since the switching costs for customer is very low, the bargaining power of buyers is high.3.6 AnalysisQantas gains its competitive advantage through its strategic capabilities that are gained from its resources and capabilities. It is through these, that the company can respond to its external environment and succeed. The airline industry is very competitive and as a result, profit margins are usually low. Also, the bargaining of the supplier is ve ry high which undermines companies in the airline industry to exercise control over their supplier. With high entry cost, new competition into the international airline market is very low. Qantas can continue to dominate this market while still competing with domestic market using the Frequent Flyer program to increase loyal customers.4. Opportunities and ThreatsBy conducting both the PESTLE and Five Force analyses for the macro-environment we are able to chequer a number of opportunities and threats that the aviation industry possess.OpportunitiesThreatsOffers continual expansion opportunities for both leisure and business destinations Technology advances can result in cost savings, from much fuel efficient aircraft to more automated processes on the ground Technology can also result in increased receipts due to customer-friendly service enhancements like inflight internet access and other value-added products for which a customer will pay extra A global economic downturn negati vely affects leisure, optional travel, and business travel The price of fuel is not the greatest cost for many airlines. An upward spike can destabilise the business model Terrorist attacks anywhere in the world could negatively affect air travel Government intervention could result in new costly rules or new international competition5. Resources and CapabilitiesThe following is an evaluation of Qantas internal resources and capabilities. ResourcesCapabilitiesAirport locations/hangersEngineering facilitiesTrained personnelIn-flight intellectual nourishment (Neil Perrys involvement)Qantas lounges/restaurantsStorage facilities for inventory, ranging from machinery to uniforms Training facilities for flight attendants and pilotsNew IT systems to promote more efficient operations including the evolution of e-tickets New development in cost effective service (e.g. with food, cutting costs on ingredients) New developments for the frequent flyer scheme to adapt to competitors similar conc epts including the Chairmans ambush Fleet development The airline has been constantly growing since its inception as a result of increasing fleets. Qantas has been purchasing Boeing aircraft makes like the 747-400. The availability of more aircrafts meant that the company can maintain schedules and meet maintenance needs of the disused aircrafts (Qantas, 2014).By applying the VRIO framework to Qantas we can observe that not all resources give birth a competitive advantage. Jetstar, QantasLink and the Qantas brand in general are all strong resources that allow Qantas to sustain their competitive advantage. However, from the aforementionedresources this competitive advantage for the Qantas Group as a whole is unsustainable. From the analysis, Qantas core competencies can be identified as their two-brand strategy, their diverse services and their reputation.6. IssuesThe following is a constitute of weaknesses/ issues as identified by the SWOT framework1. Competitors2. Higher grok and other operating costs than its competitors3. The current strategies Qantas include their low-cost bearer and the Frequent Flyer Program (Jones, 2009)4. Ongoing disputes between Qantas management and belligerent unions5. Speculation that British airways will quit its $1.3 billion stake in Qantas (Qantas, work Towards Our Vision, 2013)6. Outdated IT systems.RecommendationsTo help reduce the affect of the aforementioned weaknesses Qantas could drag customers through improved customer serviceAdvertise in neighborly mediaEngage employees and establish a better employee management system aggrandise a corporate take aim strategy, which is the long-term direction of an organisation (Porter, Smith, Fagg), for Qantas this will focus on cost reduction. Develop a business level strategy that focuses on the need for differentiation (Michael A. Hitt, 2006). Focus should also be on the increased use of IT, to increase operational efficiency ie. bribe Computing (Harrison, 2005).7. Concl usionThe Qantas Group has adopted potential alliances and partnership strategies to expand in the aviation business. However, there are some threats that will forever affect them such as fuel costs, low cost airlines and alternative transportation. Qantas has remained strong by applying their core competencies like their two-brand strategy and their service diversity.To buy the farm in both the global and domestic markets, the Qantas Group need toestablish efficient strategies to maintain the firm position in aviation industry as well as preparing for the unexpected.8. ReferencesAircraft Noise is Unhealthy, (2008) Health Hype.Com. ready(prenominal) from http//www.healthhype.com/aircraft-noise-is-unhealthy.html (cited on 20th, March, 2013) Czemy, A (2008). Airport Slots International Experiences and Options for Reform. Ashgate Publishing, Ltd. Dixon, G. (2006, February 23). Qantas not afraid of competition. The fester . G.G. Dess, G.T. Lumpkin, M.L. Taylor, A.A. Thompson, and A.J . Strickland III, strategic Management (Boston, McGraw Hill, 2004) pp. 141-148. Harrison, M. A. (2005). 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