Business Strategy for Jetstar Airways: PESTLE Analysis, Competitive Advantage, and Porter's Five Forces Model

This article discusses the business strategy for Jetstar Airways, including a PESTLE analysis, competitive advantage, and Porter's Five Forces Model. It also explores potential business level strategies for the airline's expansion.

BUSINESS STRATEGY

Business Strategy: 1
Contents
Introduction...........................................................................................................................................2
PESTLE Analysis of Jetstar Airways....................................................................................................2
Competitive advantage Jetstar have for the expansion plan...................................................................4
Porter’s five forces model identify and discuss any competitive forces that might affect the expansion
plan........................................................................................................................................................5
Business level strategy the organisation might consider for its expansion.............................................7
Conclusion.............................................................................................................................................7
References.............................................................................................................................................9

Business Strategy: 2
Introduction
Jetstar is an Australian airline headquartered in Melbourne. This airline group has extensive
range of destinations in the Asia pacific region. Jetstar operates nearly 5000 flights a week for
more than 80 destinations. The group carries more than 33 million passenger in a fiscal year.
It is wholly subsidised by Quantas. Globalisation and competition shifting will continue to
build competitive forces to acquire and ensure sustainable advantage for the airlines
(Mhlanga, 2017). For attaining position in the industry, a company has to undertake
environmental analysis to identify external factors, which will influence in working of the
business. The organisation undertakes the analysis of political, social, economic,
environment, legal, and technological factors to make a strategic plan to achieve expansion
(CAPA, 2016). Other analysis such as porter`s five forces model examine various factors that
affect the existence of any airline.
PESTLE Analysis of Jetstar Airways
There is an immense growth in airline industry due to high passenger traffic because of rapid
growing tourism. Airline industry faces major challenges due to changing macro
environmental factors. By Applying PESTLE analysis on aviation industry will identify how
these macro factors influence environment –
Fluctuation in oil prices has major impact on airline profitability (Boin at al., 2017). The
aviation industry brings a number of intrinsic risks. The business risk is not just limited to
change in economic condition. The performance of benefit obligation is calculated timely. A
healthy economy fosters industrial growth. Economic indicators calculate and measure the
economic health of the country. Economic indicators such as gross domestic product,
disposal income, level of business, consumer confidence, and per capita income (Lohmann,
and Spasojevic, 2018).

Business Strategy: 3
Socio-culture factors- The demand for aviation or air travel has been increasing rapidly. This
states changing travel preferences of the young generation. Although the fare prices of
airlines are comparatively high. However, it reduces the travel time as compared to trains and
buses. The personal disposable income has been increasing with purchasing power of the
buyer. Reportedly, the last recorded of GDP per capita in Australia is at 55925.93 US dollars
in 2017, which is highest in all last years (Pearson, Pitfield, and Ryley, 2015).
Technological factors- Technology is a driver within the aviation industry. During Second
World War, technological advancement is the most prominent factor that improves safety of
the aviation industry. Important technological developments include aircraft design,
manufacturing those materials that will produce light and faster speed craft. The growth of
aviation industry includes opening of new airport infrastructure (Taneja, 2017). Technology
helps to build better infrastructural blocks, which enable development of new airport.
Engineering and maintenance systems support new aircraft and avionics. Before construction,
advance security and surveillance is imposed to handle devices.
Environmental factors- Jetstar Airways plans to accomplish and improve fuel efficiency so
that an average of 2% annually. By 2050, the Jetstar Airways focus to reduce 50% co2. The
Quantas is subject to both short and long-term climate related transition risk (Quantas, 2016).
This type of risk is intrinsic part of the business operation of an aviation industry. Climate
change is managed by strengthening the governance, and operational situation. It includes
considering the changing factors and the way these factors effect proximity of climate risks.
Legal factors- The changing industry of airline has withdrawn commonwealth from the
operation of airlines. A private owner owns and operates airport under long-term leases by
raising fund through public. Private business generally focuses on earning more profits.

Business Strategy: 4
Government intervene to regulate and run the air transport of their country (Babić, Tatalović,
and Bajić, 2017).
Competitive advantage Jetstar have for the expansion plan
Airlines expand to diversify and position their stake international market. Sometimes
business expand because of its competitors who do not steps to grow, there airline take the
advantage as first movers. International expansion helps airlines to know the wants of
customers all around the world. Jetstar already operates on domestic, regional, and
international level (Businessjournals, 2018). Whereas, its network in northern Australia. The
airways want to expand and regulate its business in northern Australia (Greig, 2018).
Airlines have been adopters of cutting-edge revenue management (RM) technologies since
1970s. Competitive advantage is achieved when the company has its product or service that
can differentiate it from other competitors. Airlines focus on how to price core tickets.
Majority of revenue comes from ancillary items and services such as on-board food, extra
legroom, premium seat selection, and checked baggage. Jetstar airways have noticed that
giving importance to ancillary sales cannot continue to change its revenue management
strategies. Jetstar airways decide to adopt tactics and product suggestion that is most
preferable to customers of northern Australia both at the point of sale and during the journey.
The increasing power of optimising and analysing analytics can create transparency for the
profile customers. As Jetstar airways expand its international operations, Jet airways should
implement efficient fuel using strategies to change the fleet for future generation of B787 so
that they can create cost efficiencies for fuel. Jetstar should review its network and schedule
to make efficient aircrafts for performance maximisation. From achieving performance,
Jetstar reduce the economic risk that is caused due to uncertainty of fuel price. Jetstar airways
considered either merger or acquisition to regulate its international strategies to expand in
Asian regional market. The company should have the potential to increase traffic by

Business Strategy: 5
attracting the customers towards the fare. Security concerns and political issues regarding
uncertainties have interrupted global tourism. Expanding low-cost airlines will encourage
tourism at the international level.
Porter’s five forces model identify and discuss any competitive forces that might affect the
expansion plan
The theory of Porter`s five forces model is based on the five forces that increases the intensity
of competitors and market attractiveness. Porter`s model is useful in both understanding the
strength of the company`s competitive position and opportunity for a company to look for
future profit and move on. Following are the given five forces-
Bargaining power of suppliers- The two major suppliers of Jetstar airways are Airbus and
Boeing. Thinking of shifting or switching to another supplier can cost high. Fuel price is
determined by global oil market. Deregulation has given to restrict competition between
Jetstar airways and Virgin Blue. The competitors of Jetstar airways has launched leisure
traveller by developing their business travel market. In response it its competitors, Jetstar
airways has expanded extensively to broaden its operations. One of the Jetstar airway`s
competitors, Ansett collapsed in regional airlines. Jetstar airway owns wide range of regional
airlines (Forsyth, 2018). It dominates many routes and is the only airline on some routes.
Nevertheless, Virgin blue amalgamated with Ansett group airlines, Kendell and other airlines
compete with the varying services of Jetstar airways.
Threat of New entrants- Threat of new entrants is growing high because there is no barrier on
entry in airline industry because airplanes can be leased if the new entrants do not much
technology and capital to buy a new one (Matusik, and Fitza, 2012). Leasing also reduces the
exit cost from the airline business. Passengers and flyers wish to compromise rather than

Business Strategy: 6
paying higher fare even when the flight services have low standard. Customer loyalty matters
but Low cost rules the flight services for short distance.
Bargaining power of Buyers- Australians has good personal disposable income but it differs
from individual to individual. Australia is a growing country with tremendous potential in the
market. The influx in capacity will pressurise low yields. Burden issues of nonstop flights
from Australia to Vietnam improved Jetstar, until that it has withdrawn since 2012 (Nguyen,
2015). Consumers have strong bargaining power with Jetstar airways, which is attributed due
to low price based preference. Costumers select the same airline, which offers best value for
their money. Technology enables the customers to compare the flight fare and services
through flight centre and sky Scanner. This enables the customer to make best choice out of
all available fare according to their wish because switching costs for the customer is low that
increases the bargaining power of buyer.
Threat of substitutes- Porter`s threat of substitutes defines the availability of the product
which facilitates purchase of another product rather than industry`s product. The substitute
product meets the demand of the customers in the same way the industrial product meets.
Transportation accomplishes many substitutes for long distance such as trains, cruise boats,
and cars are cheaper generally. The major advantage that air travel has is in terms of time
saving.
Rivalry among existing competitors- Main competitors are tiger airways and virgin Australia.
In 2005, it has emerged as international service provider. Level of competition differs within
every sector. Jetstar airways domestic network is extensively strong as it is wholly subsidised
with Quantas. However, low-cost and budget travel niche, which helped Virgin Blue to
establish. By looking at the Virgin Blue success, Jetstar Airways is initiating to expand share
of budget travel market.

Business Strategy: 7
Business level strategy the organisation might consider for its expansion
Business level strategy details the plan, which provides value to customers and win the
advantage of competitive advantage by using and squeezing the core competencies in the
service market. Business leaders consider market details to make and establish strategies for
marketing and pricing. With the ultimate goal of satisfying needs of customers with airline
services, business use strategies to gain competitive advantage (Leonard, 2018). With the
increasing demand in air transport for the next 20 years, Qantas and Jetstar will have the
ablity to lead the airline industry. The Qantas`s domestic group has proven. Currently the
group is giving satisfactory return to its existing shareholders. Jetstar has built leading
position in its domestic market (Australia). The profit has been increasing at Qantas loyalty
and Jetstar with the rise in Asia`s people and their customers. Jetstar is planning to build a
pan-Asia brand with $85 million increase in profitability from Asia.
(Source: Colgan, 2016)

Business Strategy: 8
Create add-on services- Install setup to support the customer with unique services by
offerings. Training to new comers is a good way to manage greater revenue and add value to
services (SunTrust, 2018).
Faster service- Providing faster services to customers attract them for the convenience.
Creating new strategic offerings can deliver products to customers as soon as possible, which
allow the company to extract and wipe premium price and get a competitive market edge
(SunTrust, 2018).
Bundling products- By adding new product into the mix can increase the variety of offerings
to customers. One’s the customers are aware of offerings, there is possibility of repetitive
selling of goods to the existing customer (Whyte, and Lohmann, 2015).
Conclusion
Before forming business strategies for expansion, Jetstar airways have to use some common
tools to identify and analyse macro factors of the environment. Some of the tools such as
PESTEL analysis, Porter`s five forces model, and VIRNE (value, inimitable, rare, and not
substitutable) framework helps the company to identify the micro and macro factors, which
influences the operations. Jetstar Airways have the advantage at the marketplace because it is
wholly subsidised by Quantas. Most of the airlines focus on responding positively to the
services in the aeroplane, which may increase revenue management. Jetstar airways should
design its marketing strategy that focuses on customer wants.

Business Strategy: 9
References
Boin, R., Coleman, W., Delfassy, D., and Palombo, G. (2017) How airlines can gain a
competitive edge through pricing. [online] https://www.mckinsey.com/industries/travel-
transport-and-logistics/our-insights/how-airlines-can-gain-a-competitive-edge-through-
pricing [Accessed 25/07/18]
Whyte, R. and Lohmann, G. (2015) The carrier-within-a-carrier strategy: An analysis of
Jetstar. Journal of Air Transport Management, 42, Pp. 141–148
CAPA, (2016) Jetstar Pacific plans fleet and international expansion for 2016 as VietJet
competition intensifies. [online] https://centreforaviation.com/analysis/reports/jetstar-pacific-
plans-fleet-and-international-expansion-for-2016-as-vietjet-competition-intensifies-270869
[Accessed 25/07/18]
Matusik, S. F. and Fitza, M. A. (2012) Diversification in the venture capital industry:
leveraging knowledge under uncertainty. Strategic Management Journal, 33(4), pp. 407–426
Lohmann, G. and Spasojevic, B., (2018) Airline business strategy. The Routledge
Companion to Air Transport Management, p.139.
Pearson, J., Pitfield, D. and Ryley, T., (2015). Intangible resources of competitive advantage:
Analysis of 49 Asian airlines across three business models. Journal of Air Transport
Management, 47, pp.179-189.
Babić, R. Š., Tatalović, M. and Bajić, J. (2017) Air transport competition challenges.
INTERNATIONAL JOURNAL FOR TRAFFIC AND TRANSPORT ENGINEERING (IJTTE),
7(2), p.144.

Business Strategy: 10
Quantas, (2016) Qantas Annual Report 2016. [online]
https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf
[Accessed 25/07/18]
Nguyen, T. K., (2015) Benchmarking passenger air transport marketing activities in
Vietnam: case company: Etihad Airways.
Mhlanga, O. (2017). Impacts of the macro environment on airline operations in southern
Africa. African Journal of Hospitality, Tourism and Leisure, 6 (1).
Taneja, N.K., 2017. Driving airline business strategies through emerging technology. US:
Routledge.
Leonard, K. (2018). Five Types of Business-Level Strategies. [online]
https://smallbusiness.chron.com/five-types-business-level-strategies-781.html [Accessed
25/07/18]
SunTrust, (2018) Organic Growth Strategy - Expanding your Competitive Advantage.
[online] https://www.suntrust.com/resource-center/commercial-corporate/article/organic-
growth-strategy-expanding-your-competitive-advantage#.W1hJOdIzbIU [Accessed 25/07/18]
Businessjournals, (2018) 5 benefits of international expansion. [online]
https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/12/5-benefits-of-
international-expansion.html [Accessed 25/07/18]
Greig, D., (2018) When does Airline Competition become Predation. In Competition versus
Predation in Aviation Markets. US: Routledge.
Forsyth, P., (2018) Predatory Behaviour in Australian Aviation Markets. In Competition
versus Predation in Aviation Markets. US: Routledge.

Business Strategy: 11
Colgan, P. (2016). Qantas is trying to manage these mega-trends that could apply to any
startup. Retrieved from: https://www.businessinsider.com.au/qantas-is-trying-to-manage-
these-mega-trends-that-could-apply-to-any-startup-2016-8