PESTEL and Porter’s Five Force Analysis of QANTAS Essay

Executive SummaryThe following paper provides an compend and military rating of the current commercialise position of Qantas and the demeanorline labor. By assessing the company both internall(a)y and externally by applying PESTLE and Porters five dollar bill speciality frameworks, this report depart assess Qantas opportunities and strengths within the aviation manufacture. In addition to this, the report will focus on the specific resources and capabilities that en able Qantas to obtain a competitive vantage 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. compassQantas began in the Queensland outback during 1920. It was first registered as the Queensland and Northern Territory Aerial Services (QANTAS) and has since grown to be Australias largest domestic and international airway, as comfortably as one of the ironlikeest brands in Aust ralia, employing close to 35,000 personnel worldwide (Qantas, 2010).Based out of Sydney, Qantas currently operates close to 5000 weekly flights across Australia, New Zealand, Africa, North America, southeastern America, Europe and Asia, flying close to 50 global destinations (Qantas, 2010).There a four major domestic airliners that have the majority of the market share 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 charter member of the One world Alliance. Qantas operates domestically under QantasLink, which carries out 2000 regional flights weekly. They in addition operate their low fare airline Jetstar, and Qantas Freight (Qantas Airways, 2012).2. PESTLE ANALYSISApplying the PESTLE analysis on the aviation industry will succor to identify the environmental influences by arranging them into six categories Political, stinting, Social, Technological, Legal and Envir onmental (Issa, 2010). Future trends and requirements for change based on these trends can be determine through this analytical tool (Johnson, et al, 2008).2.1 PoliticalTerrorism has had a major affect the aviation 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 recent Malaysia Airlines tragedies are evidence of this, as is September 11.2.2 EconomicOil prices have a significant impact on the airline industry. Due to recent developments in the anele markets, airlines have to employ non-monetary methods techniques include hedgerow or airline alliances, in order to increase fuel-buying situation. This will allow airlines to buy fuel in larger quantities and create contractual agreements with oil suppliers (Thompson and Gamble, 2012).The approximately recent and sparingally crippling factor that has influenced the airline industry is the Global Financial Crisis (GFC)(Nugu id, 2011). This presents a potential weakness or threat for Qantas who may number to feel that their premium price for quality assistance is not enough to get the customers to fly with them.2.3 SocialThe number of people using airlines to fly to pass destinations has increase due to economic growth. Therefore, the market has fill outed and new opportunities for tourism have opened in previously frequented countries.How society is observed as it transmits to air travel has a great deal to do with September 11, 2001. As a return of this tragic event, the judgments of the world have perplex increasingly toilsome 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, directly affects the airline industry (Reilly.N.J, 2010)2.4 TechnologicalTechnological developments have both created new opportunities as well as threats for the aviation industry. Development in information and dialogue technologies has enabled strong communication and hasconsequently provided customers with an alternative for frequent travelling, for example Qantas Frequent Flyer programs. Airlines are now 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 implementation of the carbon tax had a negative affect on the aviation industry, as the airlines could not absorb the higher cost 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 environmental policies regarding emissions and international route deregulation may affect airline operations in present as wel l as in future (Fulton.J, 2010).2.6 EnvironmentalThe aircrafts emissions have a significantly high impact to the environment as they travel several kilometers above the surface of the earth. Aircraft emissions cause significant damage to the atmosphere (Penner et al. 2001). Noise polution is another major environmental concern (Aircraft Noise is carious, 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 following analysis was carried out using Porters Five ram framework (Porter, 2008).3.1 Competitive RivalryThe competitive rivalry in airline industry has been increasing, curiously through mergers, acquisitions and subsidiaries. Qantas established its low-cost airline Jetstar in 2003 creating a two-brand strategy. By having these two brands the Qantas Group is able to assess different market opportunities and deploy the best product to suit the opportunity andspecific m arket conditions this also creates a competitive advantage. New rivals have emerged following the footsteps of Qantas, such as capital of Singapore Airlines and British Airways, and are threatening Qantas market share in the no-frill, low-price trade by offering lower costs and attending customer service (Mouawad, 2010).3.2 immersion BarriersThere are high barriers to enter this industry, as it requires a large initial capital investment. In conjunction with the price wars and low profit margins, it has become difficult 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 entry is the special(a) availability of landing slots in Australian airports. The slots are already speechless by established airlines and are difficult to obtain especially in airports with high passenger demand (Czemy 2008).3.3 Threat of SubstitutesThere are many su bstitutes in equipment casualty of long distance travel such as cars, trains and cruise 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 Bargaining 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 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 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 value for their money. Due tothe widely available information technology tools, such as Flight Center and SkyScanner, consumers have the ability to compare 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 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 very high which undermines companies in the airline industry to exercise control over their supplier. With high entry cost, new competition into th e 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 determine 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 more fuel efficient aircraft to more automated processes on the ground Technology can also result in increased revenue 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 negatively affects leisure, optional travel, and business travel The price of fuel is not the greatest cost for many airlines. An upward spike can destab ilize the business model Terrorist attacks anywhere in the world could negatively affect air travel Government intervention could result in new pricey rules or new international competition5. Resources and CapabilitiesThe following is an evaluation of Qantas internal resources and capabilities. ResourcesCapabilities airport locations/hangersEngineering facilitiesTrained personnelIn-flight food (Neil Perrys involvement)Qantas lounges/restaurantsStorage facilities for inventory, ranging from machinery to uniforms genteelness 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 Chairmans Lounge Fleet development The airline has been constantly maturation 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 keep schedules and meet maintenance call for 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 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 list of weaknesses/ issues as identified by the SWOT framework1. Competitors2. Higher labor and other run costs than its competitors3. The current strategies Qantas include their low-cost carrier and the Frequent Flyer Program (Jones, 2009)4. Ongoing disputes betwe en Qantas management 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 serviceAdvertise in social mediaEngage 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). Focus should also be on the increased use of IT, to increase operational efficiency ie. Cloud Computing (Harrison, 2005).7. ConclusionThe Qantas Group has adopted 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 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. 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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