Business Analysis and Valuation

This presentation provides a comprehensive analysis of Qantas, including its company background, mission, business strategy, accounting quality, and disclosure. It explores the competitive landscape of the airline industry using Porter's five forces model and discusses the challenges and opportunities faced by Qantas. The presentation also highlights the importance of high-quality financial reporting and disclosure for the success of the company. References to relevant sources are provided for further reading.

BUSINESS ANALYSIS
AND VALUATION

TABLE OF CONTENTS
A) Company Background and mission
B) Business strategy analysis
C) Accounting Quality Analysis
D) Quality of disclosure for Qantas
REFERENCES

Company Background and mission
Company Background
■ Qantas stands for Queensland and northern territory aerial services limited, established
in 1920.
■ Qantas is one of the largest operator, that operates within Australian air transport
industry. Initially they used to provide demonstration and joy riding flights.

CONTINUE……
Mission:
■ The main mission of Qantas is to become Australia’s leading premium airline services
and to become the best.
■ Their aim is to meet all the expectations of their passengers every time they fly.
■ In order to fulfil their mission they continuously invest within their business so that they
can fulfil their customers expectation level of services.

Business strategy analysis
■ The overall financial performance of a company completely depend in the part on
industries environment.
■ In recent decades airline industry has experienced a sufficient growth.
■ Strategic framework of Qantas can be explained using porters five force framework
model.
■ They can build a sustainable competitive advantage within air transport industry.

CONTINUE……
Porter's five framework model
■ Porter's five framework model will help in analysing the present competition for Qantas
Airways limited.
■ Threat to new entry
■ Bargaining power of suppliers
■ Bargaining power of buyers
■ Threat of substitute products or services
■ Rivalry among existing competitors

CONTINUE……
■ Threat to new entry: It is a moderate threat for Qantas as new entrants in transportation industry brings
innovation, new and different ways of doing business. Due to this Qantas comes under pressure as most
of the entrants uses lower pricing strategy i.e. reduces overall cost of their products or services and
provide new value proportion to their customers.
■ Bargaining power of suppliers: Almost all the organisations in this industry buy raw materials from
various suppliers. If the suppliers are in dominant position then it can decrease the overall profit margin
of Qantas. Qantas is facing big challenges in this industry as suppliers like oil suppliers are dominating
this industry with strong powers due to which challenges of Qantas are increasing.

CONTINUE……
Bargaining power of buyers
■ It is a high threat and most important power in this industry. As most of the customers today
are quite demanding.
■ They want best offering in lower price.
■ Due to this the profit margin in this industry is thin. in order to reduce this threat Qantas
introduced frequent flyers program in which they differentiate services as per their premium
prices like membership fees. this increases their profit margin as well.

CONTINUE……
■ Threat of substitute products or services: If new services or products are introduced
in this industry that meets customer's requirements them profitability of companies
suffer. The main requirement of customers is high speed, security, high quality and
lower price.
■ Rivalry among existing competitors: Recently Australian transportation industry is
becoming quite competitive due to two main participants i.e. Qantas and Virgin Blue.
Qantas uses low cost leadership strategy in order to overcome the threat of Virgin Blue.

c) Accounting Quality Analysis-
■ Qantas which is one of the airlines in Australia is termed as largest airline in terms of fleet size and is third
oldest airline in world as well.
■ Accounting analysis is that process which help firm into detailing us financial transactions or the books of
statement so that it could be clearly analysed by auditor or the accountant.
■ It is very much important that financial report of firm is correct combination of financing and operating
practices.
■ It can also be added that the use of existing accounting practice and these may not be considered
appropriate to company’s performance as well.

CONTINUE……
■ So during this time Qantas should be addressing these problems with help of
reformatting or recasting of the financial activities or statement.
■ With the use of combination of financial and operating activities measuring up both can
be difficult at most of time as will be reflecting management decision making and these
two activities as well.
■ So Qantas is having certain key accounting policies and estimates that mostly includes
adjustments been made into financial statements.

CONTINUE……
These adjustments are like that of:
■ Separation of operating and financial liabilities or assets which will help firm to
distinguish been made into books of accounts.
■ Separation of other financing expense or net interest expense with cash flow or
operating revenue which means that both of them are laid down differently in balance
sheet or profit and loss expenses.
■ Equal tax expense allocation among both financing and operating activities of Qantas so
that expenses generated by tax can be settled down.

d) Quality of disclosure for Qantas
■ The high quality of financial reporting will significantly contribute into the success of
company especially within listed companies.
■ Financial statements are the representation of activities which firm are undertaking on
regular bases and would help in determining quality of information that is taken from.
■ So there are number of factors which need to be considered like forecasting errors,
accounting policies and accounting policy of manager as well.

CONTINUE……
■ It is very much important for disclosure of correct, coherent, accurate, timely and comprehensive
information so that Qantas is working or functioning in the capital market.
■ All this quality of information which needs to be disclosed in annual report will clearly impact
stakeholders especially person who is likely to invest into shares of company.
■ This is also included to be one of prime aim of annual report which is to provide fair review with
development of business of Qantas.
■ The complete information disclosed should be transparent, the sources should be known and authentic
with this it must also be of quality.

CONTINUE……
■ This help into measuring of bias into the reporting of financial and operating information
with evaluating quality of disclosure for Qantas.
■ It is also included that in the traditional form of information collected only quantitative
financial data which were based on past information.
■ Under this new which is based on quality or forecasting of information was ignored so
this is regarded to as wrong way of collecting and reporting of financial and operating
data.

REFERENCES
■ Palepu, K., and et.al., 2015, Business Analysis and Valuation Using Financial Statements - Text and Cases, 2nd ed, Asia Pacific
Edition, Cengage Learning, Australia.
■ Raynes, C. and Tsui, K.W.H., 2019. Review of Airline-within-Airline strategy: Case studies of the Singapore Airlines Group and
Qantas Group. Case Studies on Transport Policy. 7(1). pp.150-165.
■ King, J.M., 2017. Business strategy and airline models for operating managers. In Airline Operations (pp. 31-43). Routledge.
■ Halpern, N. and Graham, A., 2018. Airport business strategy. In The Routledge companion to air transport management (pp. 154-
170). Routledge.
■ Whyte, R. and Lohmann, G., 2016. Airline business models. Air Transport Management: An International Perspective; Budd, L.,
Ison, S., Eds, pp.107-121.