MANAGEMENT1 Executive Summary This report outlines strategic analysis of a multi-national organisation i.e. Jetstar owned by Qantas in relation with various management framework and perspective like PEST tool, VRIO framework, Five forcesmodel and so forth. Jetstar is one of the leading LCC having operations in mainly Australia, New Zealand and some other Asia-Pacific regions. The company is currently on maturity stage of the industry life cycle pushing hard to extend its business under the umbrella of Qantas. The company gain competitive advantage through its significant value added activities and improve the consumer experience by strengthening its functional level strategies.
MANAGEMENT2 Table ofContents Introduction................................................................................................................................3 External Analysis.......................................................................................................................4 PEST......................................................................................................................................4 Industry Life Cycle Process...................................................................................................5 Five Force Model...................................................................................................................7 Internal Analysis........................................................................................................................9 VRIO Resource Model...........................................................................................................9 Competitive Advantage, Profitability of Company, Value Creation of the Company........10 Functional Level Strategy to increase quality, innovation, efficiency and customer responsiveness......................................................................................................................11 Conclusion................................................................................................................................13 Recommendations....................................................................................................................14 List of References....................................................................................................................15
MANAGEMENT3 Introduction Jetstar is a low cost airline company, formed by the Qantas Group in 2003 and today, its aims to provide low fares and allow more people to fly various places. Since its incorporation, the Jetstar Group have make travelled nearly 250 million customers and the group also known to be Asia Pacific largest low fares network in terms of revenue. More than 5000 flights carriers associated to Jetstar Group operate to nearly 85 places in a week (jetstar.com, 2020). All subsidiaries of Jetstar Group have gained various awards while being recognised by the passengers and industry leaders such as top 10 safest LCCs globally by airlineratings.com, best low cost carrier by Travel Weekly Asia 2017, Partner of the year 2012 with Changi Airline Awards and so forth (jetstar.com, 2020a). In relation with Jetstar Group fleet, they have various value based carriers offering low fares throughout Australia, New Zealand and the Asia Pacific region. Some of its impressive fleets include Boeing 787 Dreamliner, Airbus A321neo, Airbus A320 and Airbus A321. Hence, the dual brand approach with Jetstar and Qantas continued to offer them a leadership position in the corporate, premium leisureliness and budget travel groups, all with strong margins.
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MANAGEMENT4 External Analysis PEST Political Factors– This part of the analysis links to the changes in policies by the government considering new procedures and regulations directly or indirectly impacts the corporate in terms of its growth, business decisions and performance. Taking an example of 2016, China and Australia have contracted an open skies pact leading to an open aviation market with removing completely capacity boundaries amid two nations and this will also leads to bringing of new routes (australianaviation.com.au, 2016). The 2017 year also being acknowledged as Australia-China Year of travel, however, it will upturn the rivalry in the marketplace and may carries reduction in Jetstar market share comparing to the local players. Economic Factors– Airline industry can have various opportunities in the nation if there is higher stability in the economy as it presents the business a potential to stand competitive in the business environment. Liberal international aviation plan by the Australian government has wounded the progression prospects of national carriers as said by Qantas group in 2015 that it led to a flood in outbound travel rather than the predictable arrival of tourists. It requires Jetstar to develop competitive strategies to EconomicPolitical SocialTechnological
MANAGEMENT5 gain native market share in Australia and other Asia-Pacific regions. Volatility also remains a concern for Jetstar and other airline players in spite of their increased profitability as of declining oil prices. Social Factors– These aspects of the analysis helps in understanding consumer demographics and insights together with various cultural factors in the country where the business has expanded its roots. Jetstar being an Australia nation-wide airline enjoys widespread public conviction, support and native customer support. While aligning Qantas and Jetstar with Asia growth, Edensor (2017) also stated that 20 per cent of Australians trust the group more than they did 4-5 years ago, as per the Corporate Trust Survey by Acuity. Jetstar under Qantas also has an opportunity to develop national partnerships in Australia to increase their consumer base. Technological Factors– It concerns with the technological development, patent and information to enrich the customer experience and gain competitive edge in the respective sector. Jetstar CIO Claudine Ogilvie stated that - Jetstar is centring its innovation on growth throughout Asia with technology as a leader and enabler to develop consumer understanding and employee commitment. In addition, the group 2018 annual report also stated that nonfuel costs were condensed by $254 million via grouping of technology-based revolutions (investor.qantas.com, 2018). With such strategies and development, Jetstar can raise customer experience more positively. Industry Life Cycle Process An industry life cycle represents significant stages where business function, progress, prospect and fall within an industry (Huenteler et al, 2016). Some of its typical stages include start up, growth, shakeout, maturity and decline. The Australian domestic airline industry is a mature industry that has experienced various numbers of shakeout and rebirths since the first
MANAGEMENT6 flew of Qantas. Strong awareness and understanding of industry life cycle enable Qantas to deploy and foster new products with huge success over the cycle. In the growth phase and introduction phase, Jetstar with Qantas bring up bigger number of local flights to various smaller destinations and this offers the Jetstar customer much greater flexibility when travelled rurally. With its LCC strategies, Jetstar also comes into its growth phase in 2010 with introducing additional 700000 new seats yearly to various popular destinations of Australia. Similarly, domestic flights to and from the major Australian cities are some of main examples of service in the maturity phase. The decline phase was revealed in China in relation with Qantas Group as of stiff China competition forcing Qantas to drop Sydney- Beijing route (reuters.com, 2019). To maintain its industry life cycle on a positive note, Jetstar required to change its positioning strategy while focusing on safety, customer service and operational excellence. Five Force Model Rivalry among existing firms is highly intensive Threat of New Entrants is moderate Threat of Substitute is moderate to low Bargaining Power of Buyers is high Bargaining Power of Suppliers is high
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MANAGEMENT7 Bargaining Power of Suppliers– Airbus and Boeing are both the main suppliers of Jetstar and not only this, they have controlled the supply of aircraft globally. From a long time, Jetstar has been using their aircraft and services and their maintenance crew also have been conversant with Boeing crafts. Hence, it is tough for Jetstar to shift to a new supplier and therefore, the bargaining power of suppliers is high and for the same, both Airbus and Boeing can demand for the higher price. Bargaining Power of Buyers– Jetstar services and carrier are mainly expanded in Australia, New Zealand and other Asia Pacific regions and there people who concern about the price, quality of services, convenience, comfort and schedule, they can have various alternatives abound. For instance, in the domestic market, Tigerair is the direct competitor of Jetstar offering similar services as a low cost carrier (Hanaoka et al, 2014). Hence, there is a high bargaining power in this case and this requires Jetstar to focus more on differentiation business strategy to attain a larger market share. Threat of Substitutes– In case if Jetstar, the threat of substitute product or service is moderate to low as Air transportation took less time than other transports in any of the country. Hence, there is no direct comparable substitute, however, travelling via land or sea can be seen as a substitute but they also do not match the comfort, services and time-efficient factors. In Australia, the common form of public transportation includes bus, train, ferry and light rail. Threat of New Entrants– The airline sector is highly competitive and capital intensive and this also results in various sorts of fixed costs and high barriers to exit. However, for big airlines such as Fiji Airways is not much challenging to expand into new markets and it was found that Fiji Airways has been growing in Australia over thepastsomeyears,increasingitspeakschedulefrom23to38frequencies
MANAGEMENT8 (blueswandaily.com, 2019). This will be a threat for the whole Qantas and Jetstar Group as the company is already facing tough competition from other international airlines such as Singapore Airlines. Hence, threat of new entrants can be said to be moderate. Competitive Rivalry– Both internationally and domestically, the competition rivalry is intense and this causing great impact on profitability and revenue of Jetstar. In case of Australia's, Qantas and Jetstar jointly have 57 % market share by capacity, against Tigerair's and Virgin Australia 38% (centreforaviation.com, 2019). The role of Jetstar as part of the dual brand is better recognised than that of Tigerair's, but that is progressively ramping up, taking care not to rock the capacity boat too much. Hence, there is intense competition in the Australian airline industry. Internal Analysis VRIO Resource Model In the highly airline competitive background, competitive advantage is not enough for the accomplishment of any organisation in the long period of time and therefore, Jetstar must aim for sustainable competitive advantage while having control of its valuable resources. One of its significant capability is their low cost strategy and part of the Qantas which is one of the oldest airline globally and a founder of Oneworld airline association, establishing of thirteen prodigious member carriers. The USP of Jetstar lies in being the “official flag carrier of Australia with largest the fleet size and having its presence internationally”. Jetstar resources and capabilities also get strengthen with the resources and capabilities of Qantas Group where many businesses are part of its subsidiaries. Jetstar Resources/Capability ValuableRareDifficult to Imitate Exploited by the Competitive implication
MANAGEMENT9 organisation Flight entertainmentYesNoNoYesCompetitive Parity Comfortable seating for passengersYesYesNoYesSustainable advantage Global presenceYesYesYesNoCompetitive Parity Consumer bill of rightsYesYesNoYesSustainable advantage Low cost approachYesYesNoYesCompetitive Parity BaggageYesYesNoYesSustainable advantage Competitive Advantage, Profitability of Company, Value Creation of the Company Jetstar Group has distinct competitive advantages that set the airline at a distance from its competitor. The dual brand approach to segment and grow markets is their first competitive advantage as together Qantas and Jetstar are taking larger market (57 per cent market share by capacity)shareagainsttheircompetitors.Thenextcompetitiveadvantageistheir structurally advantaged domestic position which has helped the brand to gain trust among the customers and end users. Jetstar positioning in Asia with premier Airline conglomerates is also a competitive advantage for Jetstar in support with its repute for safety and operational excellence and an iconic Australian brand. In terms of profitability, Jetstar holds a significant margin advantage (i.e. 15 per cent) against its major competitors such as Tigerair Australia which is just 2 per cent as of 1H17 (asx.com.au, 2017). Not only in Australia, but Jetstar also has its other subsidiaries like in Japan demonstrating to be stable and profitable domestic market with having more than 50 per cent share in the dynamic LCC market. As per Jetstar 2018 annual report, the Group earned $461m underlying EBIT up 11% (investor.qantas.com, 2018). In terms of value creation, Jetstar Group relies upon three main areas i.e. 5x
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MANAGEMENT10 incremental uplift on marketing spending, increase sales rate of products so as to earn loyalty upon customers group and developing its external clients with revenue share and clip of ticket. It is integral for Jetstar to attain the industry goals and led new business growth underpinned by further improvements and innovation of the coalition business.
MANAGEMENT11 Functional Level Strategy to increase quality, innovation, efficiency and customer responsiveness Qantas corporate level strategy to carry out extension of its air travel services on various regions and this requires significant level of provision from various functional level of organisations. The vital role to be played by its significant functional divisions includes HRM, R&D, sales and marketing and finance. In relation to HRM strategy, Qantas will continue to invest in its people and use various metrics such as balance scorecard to retain their performance for a longer period of time. In 2016, there is a highest ever employment engagement with 79 per cent for Jetstar and to be a reputed Australian organisation, the company ensures to strengthen its diversity programs like 35 per cent of senior roles in the whole Qantas group held by women (qantas.com, 2020). Furthermore, there is also a promotion of leadership and talent integrating with Group-wide succession planning. Jetstar is also involved in strengthening its research and development division with partnering Melbourne based Sissit Group and it helped the organisation in various technological areas such as Jetstar added SMS flight check-in-technology and so transform air travel for the consumers of Jetstar. It benefits them to exploit electronic check-in-options in relation of self- service kiosks and web-check at airports. Jetstar together with Qantas Group invests highly in digital and data marketing to raise their sales capabilities. It was found that 70 per cent of Qantas marketing media expend in digital networks. The marketing team of Jetstar is also passionateand they understand the importance of data shows in building a effective marketing strategy that allows them to work effectively in 17 nations, 70 destinations and 11 different languages (jetstar.com, 2020c). Considering Jetstar financial strategy, its finance teamworksthoroughlywiththedivisionsacrossthebusinesstoallowstrategicand operational results and therefore, continue to offer outstanding value to their customers. In addition, Qantas extended its lead in the corporate market and raised share of the small-to-
MANAGEMENT12 medium commercial marketplace. The constant retrieval in the resources area aided to offset demand weakness in further areas like telecommunication and finance.
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MANAGEMENT13 Conclusion In the limelight of above discussion, Jetstar is successfully operating in the Asia Pacific region and partnered with various renowned airlines brand to carry out its business in dissimilar nations. In Australia and New Zealand, Jetstar Group is own by Qantas entirely while in other regions, it is operated with other names such as Jetstar Asia, Jetstar Japan and so on. The Australian political environment is also favourable for Jetstar and helped the company to extend its maturity stage for a longer period of time in relation with industry life cycle. In addition, Jetstar is currently using low cost strategy to compete in the highly intense airline industry, however, to gain competitive advantage, it is necessary for the organisation to also undertake differentiation approach and practices. Ultimately, the airline also needs to deploy critical initiatives worldwide so as to ensure its strong position and carry on offering exceptional value to its passengers.
MANAGEMENT14 Recommendations Jetstar today operate in various intercontinental routes ferrying holidaymakers from Australia to Asia and some of selected paths to the USA. However, Japan is current their biggest growth region as the CEO of Jetstar also stated that low cost carriers have nearly 10 per cent of the aviation market in Japan and are presenting tight opposition to bullet trains and buses (Cummins, 2018). Jetstar is also having an opportunity to looks towards China as of rising middle class signifying sufficient opportunities to develop into tourism trade in the nation. Considering its future growth plans, Jetstar should also put technology at the centre as airline industry have low margins and high costs and the organisation can differentiate from its competitors while focusing on technological investments and digital strategy. Ultimately, providing consumers with simple but safe travels will also help Jetstar to elevate the negativity associated with budget brands.
MANAGEMENT15 List of References asx.com.au.(2017)InvestorsDay2017[ONLINE]Availablefrom: https://www.asx.com.au/asxpdf/20170505/pdf/43j1n2fsbc9w3p.pdf [Accessed 15/03/2020]. australianaviation.com.au. (2016)AUSTRALIA SIGNS OPEN SKIES AGREEMENT WITH CHINA[ONLINE] Available from: https://australianaviation.com.au/2016/12/australia-signs- open-a-skies-agreement-with-china/ [Accessed 15/03/2020]. blueswandaily.com (2019)Australia-Fiji market grows as Qantas takes advantage of newly expandedbilateraltolaunchSydney-Nadi[ONLINE]Availablefrom: https://blueswandaily.com/australia-fiji-market-grows-as-qantas-takes-advantage-of-newly- expanded-bilateral-to-launch-sydney-nadi/ [Accessed 15/03/2020]. centreforaviation.com. (2019)South Pacific Aviation Outlook 2018[ONLINE] Available from:https://centreforaviation.com/analysis/airline-leader/south-pacifica-aviation-outlook- 2018-411231 [Accessed 15/03/2020]. Cummins,N.(2018)HowBigCanJetstarGrow?[ONLINE]Availablefrom: https://simpleflying.com/how-big-can-jetstar-grow/ [Accessed 15/03/2020]. Edensor,H.(2017)AUSSIESTRUSTQANTASMORENOWTHAN5YEARSAGO [ONLINE] Available from: https://www.travelweekly.com.au/article/20-more-aussies-trust- qantas-than-5-years-ago/ [Accessed 15/03/2020]. Hanaoka, S., Takebayashi, M., Ishikura, T. and Saraswati, B. (2014) Low-cost carriers versus full service carriers in ASEAN: The impact of liberalization policy on competition.Journal of Air Transport Management,40(1), pp.96-105.
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MANAGEMENT16 Huenteler, J., Schmidt, T.S., Ossenbrink, J. and Hoffmann, V.H. (2016) Technology life- cycles in the energy sector—Technological characteristics and the role of deployment for innovation.Technological Forecasting and Social Change,104(1), pp.102-121. investor.qantas.com.(2018)QantasAnnualReport2018[ONLINE]Availablefrom: https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/ file/annual-reports/2018-Annual-Report-ASX.pdf [Accessed 15/03/2020]. jetstar.com(2020c)Marketing[ONLINE]Availablefrom: https://www.jetstar.com/au/en/careers/marketing [Accessed 15/03/2020]. jetstar.com.(2020)JetstarGroup[ONLINE]Availablefrom: https://www.jetstar.com/au/en/about-us/jetstar-group [Accessed 15/03/2020]. jetstar.com.(2020a)JetstarGroupAwards[ONLINE]Availablefrom: https://www.jetstar.com/au/en/about-us/our-awards [Accessed 15/03/2020]. qantas.com. (2020)Performance against our Strategic Pillars[ONLINE] Available from: https://www.qantas.com/in/en/qantas-group/delivering-today/performance-against-our- strategic-pillars.html [Accessed 15/03/2020]. reuters.com. (2019)Qantas to drop Sydney-Beijing route due to competition from Chinese carriers[ONLINE] Available from: https://www.reuters.com/article/us-qantas-china/qantas- to-drop-sydney-beijing-route-due-to-competition-from-chinese-carriers-idUSKBN1XM0MQ [Accessed 15/03/2020].