Capstone Strategy Assignment Reports

CAPSTONE
STRATEGY

Introduction
• This presentation speaks about various theoretical strategic concepts applied
practically to one of the leading low cost airline – Jetstar.
• It will help the audience about how a company gain competitive advantage
and sustainable performance in dynamic business environment.
• Some of the major theories and framework used in the assignment includes –
PESTEL, SWOT, and VRIO.

Overview of Jetstar
• Incorporated under the Qantas Group, Jetstar is a low-cost airline established
in 2003 and since its establishment, the airline has carried more than 250
million travellers.
• In relation with revenue, Jetstar Group is one of the biggest Asia Pacific low
fare networks.
• Jetstar Group runs more than 5000 flights in a week to approximately 85
locations (jetstar.com, 2020).

External Environment
Assessment of Jetstar – PESTEL
FrameworkPESTEL Framework has bee applied on Jetstar below leaving a direct and indirect
impact on company decision making and strategic direction–
■ Political Factors – These factors concerns with change and practices of
government policies and regulations. For instance, there is a big opportunity
to Jetstar in terms of opening of new routes as China and Australia have
signed up an open skies pact in 2016 (reuters.com, 2015).
■ Economic Factors – Jetstar growth has been hampered due to liberal
international aviation policy by Australian government as there is increase in
outbound travel rather than the likely arrival of tourists.

External Environment
Assessment of Jetstar – PESTEL
FrameworkContinue –
■ Social Factors – Being a national airline of Australia, Jetstar enjoys wide trust
of the community and public and it was also stated by Edensor (2017) that 20
per cent of Australia have faith in Jetstar Group more than they did 4-5 years
ago.
■ Technological Factors – Technological development is very important to
maintain a competitive edge in the industry like Jetstar using various
combination of technological-based innovation helped the company to reduce
nonfuel costs by $254 million.

External Environment Analysis
of Jetstar – PESTEL Framework
Continue –
■ Legal Factors – Legal factors can have an adverse impact on the business of
airline like last year, Jetstar paid $1.95 million in penalties after duping
travellers and making false showcases about customer guarantee rights
under the Australian Consumer Law (accc.gov.au, 2019).
■ Environmental Factors – These factors relate to business performance on
environment indicators and policies. Some of company environment initiatives
include fly carbon neutral program, sustainable aviation fuel, flying start and
StarKids.

External Environment
Assessment of Jetstar – PORTER
Framework■ Bargaining power of suppliers is high as Jetstar have only two suppliers
i.e. Boeing and airbus and this has dominated the supply of aircraft not only
for Jetstar but also for other airlines in the world.
■ Bargaining power of buyers is high in the industry due to presence of
other Low cost carriers (LCCs) in both domestic and international market such
as Tigerair.
■ Threat of substitute in case of Jetstar is moderate due to presence of other
travelling mods including sea, buses, light rail and ferry.

External Environment Analysis
of Jetstar – PORTER Framework
■ There is low threat of new entrant as the airline industry requires huge
capital investment also carries along with fixed cost and extensive barriers to
exit. However, there is no challenge for the leading airlines such as Fiji
Airways and this airline is also planning continuously to expand in Australia for
past several years.
■ There is intense competition rivalry in this sector and talking about market
share in Australia, 57 % held by Jetstar and Qantas collectively in terms of
capacity and Virgin Australia and Tigerair holds 38%.

Internal Environment Analysis of
Jetstar – VRIO Framework
Jetstar
Resources/Capability Valuable Rare Difficult to
Imitate
Exploited by the
organisation
Competitive
implication
Flight entertainment Yes No No Yes Competitive
Parity
Comfortable seating
for passengers Yes Yes No Yes Sustainable
advantage
Global presence Yes Yes Yes No Competitive
Parity
Customer bill of rights Yes Yes No Yes Sustainable
advantage
Low cost strategy Yes Yes No Yes Competitive
Parity
Baggage Yes Yes No Yes Sustainable
advantage
The airline
industry in which
Jetstar is highly
competitive and
Jetstar must aim
for sustainable
competitive
advantage while
having effective
control over its
valuable
resources.
The company
have not
strategized yet
towards
developing
international
presence and this

Competitive Advantage
• On the basis of company resource and capabilities, Jetstar has two major
competitive advantage i.e. – Dual brand strategy with Qantas Group and cost
leadership.
• The dual brand strategy helped Jetstar to take better control over its
resources and reduce intense competition in Australia against other low cost
airlines such as Tiger Air.
• It was identified that both Qantas and Jetstar holds 57% market share by
capacity in Australia and because of this association, the company is well-
known globally.
• The cost leadership strategy is another competitive advantage of Jetstar and
it also well supported by margin advantage. In simple words, Jetstar has 15 %

SWOT Analysis
Strengths
• Positive brand reputation in both global
and domestic market.
• Price guarantee and customer
guarantee programs.
• Loyal customer base as of brand
goodwill and low prices.
• Associated name of Qantas, of the
premier and oldest airline in the world.
Weakness
• High maintenance overheads as of in-
effective utilization of employees and
resources.
• Higher turnover of employees as due to
low wages.
• Limited customer services as of being
following low cost approach.
• Not having international presence.

Sources and future
sustainability of competitive
advantage• The source of the competitive advantage of Jetstar is associated to its
attachment with Qantas Group as well as low cost approach.
• The future sustainability of company strategy can be revealed further when
Jetstar plans international expansion like in China where there is growing
middle class and have many opportunities to expand the tourism trade in the
country.

Conclusion
• Jetstar is successfully operating in the Asia Pacific region, however, there are
some strategic opportunities and risks associated in its business environment.
• In relation with opportunities, the company have various opportunities in
terms of expansion of routes in the regional places. The company can also
raise the share of business passengers and also embrace over projected
boom in the Trans-Tasman routes.
• In relation with risks, Jetstar sustainability can be influenced by other low cost
airlines and increasing fuel costs also represents as a greater threat.

Recommendations to Jetstar after
COVID-19 Crisis
• The COVID-19 crises cause a significant impact on Jetstar airlines in terms of
decrease in travel of passengers, increasing over-heads costs, employee
retrenchment and putting more restrictions by government.
• Jetstar must have to change its strategies and operations after COVID-19
crises. It is necessary to propose a data-driven, action oriented and digitally
supported “flight plan” to emerge stronger from COVID-19 crisis.
• Jetstar should develop new flight plan in post COVID-19 economy and
therefore, takes in consideration of various air travel demand scenarios which
are somehow associated to the duration of the COVID-19 Crisis and airline
market structure scenarios (formed by consolidation, intervention of

Recommendations to Jetstar after
COVID-19 Crisis
• Jetstar also needs to improve upon its strategy and operation in three major
areas i.e. analytics for reliable and useful real-time information, demand
simulation, customer care initiatives to ease call center pressure.
• Analytics for reliable and useful real-time information – It includes
analysing the frequency of flights that would operate on cash loss in the next
sixth month and beyond. Analytics can also be used to anticipate and prepare
for the outcomes of reservations and cancellations in real time.
• Demand Simulation – Jetstar must prepare with the necessary packages,
promotions and deep discount plans in advance for both low cost travellers
and business passengers.

Recommendations to Jetstar after
COVID-19 Crisis
• Customer Care initiatives to ease down the pressure on call centres –
Here, Jetstar needs to source more reliable personnel's to ensure that its
airline has simple and re-assuring self-service competencies that enable
passengers, to cancel, re-booking or change the time of their tickets without
having call to the customer care or different travel agents. In addition, the
sourcing of new personnel's can be made and promote in order to ensure
customers that there are no chances of out breaking of COVID-19 virus from
any of flight attendant. Hence, it will help Jetstar to gain more number of new
customers.
• The sourcing of new personnel's can also be made in terms of airport security
services as it was previously outsourced by Jetstar to another agency.

Recommendations to Jetstar after
COVID-19 Crisis
• Jetstar being a LCC opt for cost based pricing strategy in relation with the
operational area and customer experience. However, it is recommended to
Jetstar that for the next one year, the company must have quality focused
strategy such as offering of daily fresh meals to passengers, providing proper
care to all the employees and staffs in terms of tools, masks and equipment's
and working with regulatory bodies to bring out necessary change proactively.
• Ultimately, there will be many opportunities in a re-booted global economy
that can be undertaken by Jetstar in order to improve its brand equity and
geographic reach all over the world. For instance, Jetstar can operate on
medical evacuation flight to develop good relation with other country
government.

References
■ Edensor, H. (2017) AUSSIES TRUST QANTAS MORE NOW THAN 5 YEARS AGO
[ONLINE] Available from:
https://www.travelweekly.com.au/article/20-more-aussies-trust-qantas-than-5-
years-ago/
[Accessed 09/04/2020].
■ jetstar.com. (2020) Jetstar Group [ONLINE] Available from:
https://www.jetstar.com/au/en/about-us/jetstar-group [Accessed 09/04/2020].
■ reuters.com. (2015) Australia and China open skies in landmark air agreement
[ONLINE] Available from:
https://in.reuters.com/article/australia-air/australia-and-china-open-skies-in-la
ndmark-air-agreement-idINKBN0KX03B20150124
[Accessed 09/04/2020].
■ reuters.com. (2015) Australia and China open skies in landmark air agreement
[ONLINE] Available from:
https://in.reuters.com/article/australia-air/australia-and-china-open-skies-in-la
ndmark-air-agreement-idINKBN0KX03B20150124
[Accessed 09/04/2020].
■ accc.gov.au. (2019) Jetstar to pay $1.95 million for false or misleading claims