PESTEL and Porter’s Five Force Analysis of QANTAS Essay

Executive SummaryThe adjacent paper provides an analysis and evaluation of the current commercialiseplace position of Qantas and the air passage labor. By treasureing the company both internally and externally by applying mold and Porters Five ferocity fashion models, this report exit rate Qantas opportunities and strengths within the aviation industry. In addition to this, the report way out cerebrate on the specific resources and capabilities that enable Qantas to obtain a competitive avail all over its competitors through the use of the VRIO framework. A final analysis will be conducted to identify issues Qantas face and recommendations of how they can rectify these issues.1. BackgroundQantas began in the Queensland outback during 1920. It was first registered as the Queensland and compass northern Territory Aerial serve (QANTAS) and has since grown to be Australias largest domestic and international air passage, as vigorous(p) as one of the self-colouredest brands in Australia, employing close to 35,000 personnel worldwide (Qantas, 2010). ground out of Sydney, Qantas currently operates close to 5000 weekly flights across Australia, newborn Zealand, Africa, North America, South America, Europe and Asia, flying close to 50 worldwide destinations (Qantas, 2010).thither a four major domestic air ductrs that spend a penny the majority of the market sh atomic play 18 in Australia Qantas, Virgin Blue, Tiger Airways and Jetstar (Dixon, 2006). Nicknamed The flying Kangaroo, Qantas is the largest Australian global air duct credit lines and is a charter member of the One world Alliance. Qantas operates domestically under QantasLink, which carries out 2000 regional flights weekly. They also operate their pitiable provender airline Jetstar, and Qantas Freight (Qantas Airways, 2012).2. PESTLE ANALYSISApplying the PESTLE analysis on the aviation industry will help to identify the environmental influences by arranging them into six categori es Political, sparing, Social, Technological, Legal and Environmental (Issa, 2010). Future trends and requirements for change establish on these trends can be identified through this analytical spear (Johnson, et al, 2008).2.1 PoliticalTerrorism has had a major carry on the aviation industry. It is tranquil a in truth real possibility of airplanes being hijacked or winded up in mid air and this has put a blackball impact upon the industry. The recent Malaysia Airlines tragedies ar evidence of this, as is September 11.2.2 EconomicOil prices work a significant impact on the airline industry. Due to recent teachings in the oil markets, airlines have to employ non-monetary methods techniques involve hedging or airline alliances, in order to attach fuel-buying creator. This will allow airlines to buy fuel in larger quantities and create contractual agreements with oil suppliers (Thompson and Gamble, 2012).The most recent and stintingally crippling factor that has influen ced the airline industry is the Global Financial Crisis (GFC)(Nuguid, 2011). This presents a effectiveness weakness or threat for Qantas who may come to feel that their premium price for fictional character service is not enough to get the customers to fly with them.2.3 SocialThe flake of people using airlines to fly to holiday destinations has increased due to economic growth. Therefore, the market has expanded and new opportunities for tourism have opened in previously frequented computeries.How society is observed as it transmits to air live has a great deal to do with September 11, 2001. As a solving of this tragic event, the judgments of the world have become increasingly profound to the priming of passengers hold outing on planes. It has shaped mostthing of a undesirable perception for specific cultures and beliefs. This discourages people to choke with other passengers or airline, directly adjoins the airline industry (Reilly.N.J, 2010)2.4 TechnologicalTechnologica l developments 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 consequently provided customers with an alternative for frequent travelling, for example Qantas Frequent tirade programs. Airlines are now able to expand their outreach directly to consumers through e-commerce. For example, airlines standardized Qantas are able to introduce ticketless travel through the use of applied science (Thompson and Gamble, 2012).2.5 LegalThe implementation of the carbon tax had a negative affect on the aviation industry, as the airlines could not absorb the spiriteder toll of fuel. This meant to offset cost travelers would pay extra in ticket prices (Herald, 2011). close to governments provide subsidies that provide an unfair good and prices sink than market conditions which affects the cognitive process of airline industries directly and Global environm ental policies regarding emissions and international route deregulating may affect airline operations in present as well as in future (Fulton.J, 2010).2.6 EnvironmentalThe aircrafts emissions have a significantly proud impact to the environment as they travel several kilometers above the surface of the earth. Aircraft emissions cause significant damage to the air travel (Penner et al. 2001). Noise polution is another major environmental concern (Aircraft Noise is ingrown, 2008).3. Porters five forcesIn order to analyse the industrial environment of Qantas Airlines and evaluate the nature of the competition faced by the company, the sideline analysis was carried out using Porters Five Force framework (Porter, 2008).3.1 Competitive RivalryThe competitive rivalry in airline industry has been increasing, oddly through mergers, acquisitions and subsidiaries. Qantas established its low-cost airline Jetstar in 2003 creating a two-brand schema. By having these two brands the Qantas meeting is able to assess different market opportunities and deploy the best product to suit the luck and specific market conditions this also creates a competitive advantage. New rivals have emerged next the footsteps of Qantas, such as Singapore Airlines and British Airways, and are morose Qantas market share in the no-frill, low-price trade by offering lower costs and attending customer service (Mouawad, 2010).3.2 Entry BarriersThere are high barriers to enter this industry, as it requires a large initial with child(p) investment. In conjunction with the price wars and low profit margins, it has become trying to make substantial profit. It is very common for airlines to project losses in their financial statements. Therefore a new entrant must be able to handle losses at the beginning. Another barrier to innovation is the limited availability of landing slots in Australian airports. The slots are already reserved by established airlines and are difficult to obtain espec ially 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 cruise boats and these are generally cheaper. However, air travel has the imperious advantage in terms of time. Thus, the threat of substitute is relatively low.3.4 negotiate federal agency of suppliersBoeing and Airbus are the main aircraft suppliers for large airlines equal Qantas. Qantas plans to spend jacket crown investment worth around US$17 trillion in more 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 need for fuel, it can be said that the bargaining powe r 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 value for their money. Due to the widely available information technology tools, such as Flight Center and SkyScanner, consumers have the ability to canvas flight services 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 react 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 very high which undermines companie s 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 appease 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 determine a number of opportunities and threats that the aviation industry possess.OpportunitiesThreatsOffers revenant expansion opportunities for both leisure and transmission line destinations Technology advances can result in cost savings, from more fuel efficient aircraft to more machine-controlled processes on the ground Technology can also result in increased revenue due to customer-friendly service enhancements like inflight internet glide slope and other value-added products for which a customer will pay extra A global economic downturn negatively af fects leisure, optional travel, and business travel The price of fuel is not the greatest cost for many airlines. An upwards spike can destabilise the business model Terrorist attacks anywhere in the world could negatively affect air travel Government intercession 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 facilities instruct personnelIn-flight food (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 concepts including the pre xys Lounge Fleet development The airline has been constantly suppuration 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 caution needs of the old aircrafts (Qantas, 2014).By applying the VRIO framework to Qantas we can observe that not all resources sustain 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 aforementioned(prenominal) resources this competitive advantage for the Qantas Group as a whole is unsustainable. From the analysis, Qantas philia competencies can be identified as their two-brand strategy, their diverse services and their reputation.6. IssuesThe following is a list of weaknesses/ issues as identified by the SWOT framework1. Competitors2. Higher labor and other operating costs than its competitors3. The current strategies Qantas take on their low-cost carrier and the Frequent Flyer Program (Jones, 2009)4. Ongoing disputes amongst Qantas anxiety and militant unions5. Speculation that British airways will quit its $1.3 billion stake in Qantas (Qantas, Working Towards Our Vision, 2013)6. Outdated IT systems.RecommendationsTo help reduce the affect of the aforementioned weaknesses Qantas could Attract customers through improved customer service press in social media Engage employees and establish a better employee management system Adopt a corporate level strategy, which is the long-term guardianship 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). charge should also be on the increased use of IT, to increase running(a) efficiency ie. Cloud Computing (Harrison, 2005).7. ConclusionThe Qantas Group has a dopted potential alliances and partnership strategies to expand in the aviation business. However, there are some threats that will always 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 survive in both the global and domestic markets, the Qantas Group need to establish efficient strategies to maintain the firm position in aviation industry as well as preparing for the unexpected.8. ReferencesAircraft Noise is puffy, (2008) Health Hype.Com. Available 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 Age . 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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Available from http//www.nytimes.com/ 2010/11/21/business/21south.html?pagewanted=all&_r=0 (cited on 20th, March, 2013) Nuguid, A. (2011). IBIS World Industry typography I6402 Domestic Airlines in Australia. IBIS World. Porter, M. (2008). The Five Competitive Forces that Shape Strategy. Harvard Business revaluation , 78-91. Thompson, A. and Gamble, J. (2012). South West Airlines in 2010 Culture, Values, and Operating Practices. Case 13. In inborn of Strategic Management. McGraw Hill. Qantas. (2010). Qantas Fact file. Online Available from http//www.qantas.com.au/infodetail/about/FactFiles.pdf Qantas. (2014, July 1). Fleet Development. Retrieved September 1, 2014, from Qantas http//www.qantas.com.au/travel/airlines/fleet-developments/global/enQantas. (2013). Working Towards Our Vision. Sydney Qantas Group.