Outsourcing for Qantas Airways: Business Plan and Competitive Analysis

This paper presents a business plan for Qantas Airways, Australia, which is planning to incorporate outsourcing as a business plan in its company strategy. A competitive analysis including application of Porter’s Five Forces Theory has been carried out to study the market position of the brand with respect to its rivals.

Running head: OUTSOURCING FOR QANTAS AIRWAYS
Outsourcing for Qantas Airways
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Executive summary
The aim of this paper is to present a business plan for Qantas Airways, Australia, which is
planning to incorporate outsourcing as a business plan in its company strategy. Outsourcing
as a business strategy is supposed to not only increase the productivity and performance
levels of a company but also enhance its profitability by reducing costs involved. Remote
operations or outsourcing is the preferred business plan for a large number of airline
companies, including Qantas. The paper below presents a critical analysis of the business
plan for Qantas Airlines and also studies the value proposition for the company. A
competitive analysis including application of Porter’s Five Forces Theory has been carried
out to study the market position of the brand with respect to its rivals.

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Table of Contents
Introduction:...............................................................................................................................3
Overview of the company......................................................................................................3
Discussion:.................................................................................................................................4
Business details......................................................................................................................4
Value proposition of outsourcing for Qantas.........................................................................5
Strategic positioning and customer segments........................................................................6
Competitor analysis................................................................................................................6
Porter’s Five Forces theory....................................................................................................7
Hypothesis and business objectives.......................................................................................9
Conclusion:................................................................................................................................9
References:...............................................................................................................................11

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Introduction:
Outsourcing may be defined as a strategy in business where a particular company
appoints another enterprise or a group of people to perform certain tasks or handle operations
or work on a specific project, instead of appointing their own employees to do the same
(Dolgui and Proth 2013). In this particular strategy, the third party service provider or the
external company would then assign the task to their experts or specialists who would work
on the project on site or from the said company’s own premises (Schwarz 2014). As a matter
of fact, outsourcing operations is one of the most commonly opted for business ideas around
the globe today; this is because remote operations would be cost effective, improve the
overall efficiency of the organization, speed up the process of product development and
service delivery and would enable the company to pay heed to what matters – their core
competencies (Oshri, Kotlarsky and Willcocks 2015). The business plan chosen for this paper
is outsourcing, which has been executed by Qantas Airways in Australia.
Overview of the company
Qantas Airways is the most prominent airline in Australia, and also the country’s flag
carrier. It is one of the largest airlines in the world, with respect to size of the fleet,
international destinations and the number of international flights. The company was founded
in the year 1920, making it one of the oldest in the world. With its headquarters in Sidney, the
company accounts for more than fifteen per cent travelers travelling from Australia to various
locations around the world (Qantas.com 2018). Now that the company is no longer bound by
legislative shackles, it will be able to outsource its operations to third party service providers
overseas and in Australia. A major part of Qantas’ operations is dedicated to aircraft
maintenance; the company plans to outsource these services to other companies. Moreover,
the company would no longer have to rely on just its Brisbane operations as the sole base of

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heavy maintenance and aircraft engineering. The company is expanding at a rapid rate and in
order to leverage such expansion, the company would need to make some changes (Gregson
et al. 2015). These changes can be successfully implemented only with operational
flexibility, one of the key benefits of outsourcing.
Discussion:
Business details
The airline sector being extremely competitive and tough, Qantas would have to take
necessary measures to survive and gain an edge over other companies. In 2012, the CEO of
Qantas announced that certain changes would have to be implemented in their operations,
which would involve shifting a majority of their manufacture and operations offshore. The
company shut down its operations in Avalon in Victoria, and the task of heavy maintenance
and part of its aircraft engineering operations will be outsourced. The company would be
implementing what is currently referred to as the outsourcing protocol, which would be
adhered to while running its offshore operations (Hsu and Liou 2013). The reason why
outsourcing was chosen as the business strategy was because the company was rapidly
shrinking in terms of fleet size, which was affecting its sales. It was estimated that
outsourcing the operations would lead to a loss of employment opportunities for more than
three hundred people (Sarina and Wright 2015). In addition, more than 191 million
Australian dollars would be invested in outsourcing the company’s computing operations to
India. Two reputed software firms in India have been deemed reliable enough to handle
Qantas’ operations. These software companies in India would be taking care of the
company’s operational system, air logs, logistics and even finance or human resource
management.

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Value proposition of outsourcing for Qantas
Before devising a business strategy related to outsourcing for Qantas, it would be
important to understand the value proposition, or the value it offers to the company.
Outsourcing is a tool associated with strategic management that enables an enterprise to pay
attention to the core competencies; this would provide the company with a competitive edge
in the industry (Harcourt 2014). To state it simply, outsourcing operations would reduce costs
and positively affect the efficiency of the organization. It is estimated that the organization,
Qantas would increase a growth ranging from nine per cent to thirteen per cent by
outsourcing its computing operations (Daft and Albers 2013). Here are the chief benefits of
outsourcing:
 Improves business focus
 Provides accessibility to world class capabilities
 Accelerates reengineering benefits
 Shares risks
 Availability of resources for focusing on core competencies
 Reduces costs and controls expenses
 Availability of capital funds
Qantas had observed a decline in internal resources and skills, which further fuelled
the need for outsourcing. Value proposition, as a concept is not something new in the case of
outsourcing. As a matter of fact, all service providers are expected to make full use of this
concept in order to attract potential customers, thus giving them a competitive edge. The plan
to outsource its heavy engineering and computing operations is bound to increase the market
share of Qantas by a couple of points at least, and simultaneously enhancing the rate of
inventory turns by at least thirty per cent.

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Strategic positioning and customer segments
An examination of the brand positioning of Qantas Airlines would be necessary in
order to understand its standing in the market with respect to its competitors. Research shows
that Qantas stands at the top when it comes to the airline industry, in terms of service and
quality (Bellin 2016). The target customers for Qantas would be upper class travelers who
prefer luxury over expenses and regular flyers who use the airline for business or pleasure
purposes. The market for Qantas would be segmented on the basis of per capita income of
these travelers. People with a higher income would prefer to avail premium air traveling
services.
Competitor analysis
Qantas has held the position of being the premium airline in Australia, offering world
class facilities to its customers. The management at Qantas has made the most of their unique
brand positioning in the market; yet, with the decline in the number of travelers traveling
business class, the sales of Qantas has taken a toll. This is because more and more customers
are becoming price conscious. Globally, Qantas faces tough competition from Singapore
airlines and Qatar Airways with regards to the number of international travelers and price; as
a result, the international sales of Qantas dropped by almost 4 per cent in the past few years.
Within Australia, there are a large number of local airlines which pose a serious threat to
Qantas as far as domestic travel is concerned. For example, Jet Star has introduced a number
of low cost options for the passengers. As a direct consequence, the number of passengers
opting for Jet Star has increased as compared to that of Qantas (Sarina and Lansbury 2013).
However, Qantas still holds a leading position in terms of premium levels of service and
convenience. Qantas also provides in-house entertainment for its customers and terminal
services which have been rated as top notch repeatedly. Moreover, Qantas has been taking
adequate measures to use regular inputs from customers and peer comparison to increase the

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quality of service provided by the company. Qantas has been successful in carving out a
special position for themselves in the airline industry, and customers who have proved their
brand loyalty to them over a prolonged period of time have volumes to speak about their
customer service. With regards to Cargo, Qantas faces severe competition from Lufthansa;
the latter offers coverage and pricing which are incomparable, which Qantas has still not been
able to implement.
It must be ascertained that this particular industry is extremely competitive, with each
company striving to exceed the expectations of customers. Virgin Australia is one of the
many competitors of Qantas, with respect to the market share. This airline attempts to
increase the profitability of the business by providing services at comparatively lower prices
and introducing more domestic and international flights (Francis, Humphrey and Aicken
2017). As a matter of fact, a number of airlines are attempting to use outsourcing as a
business strategy to increase their sales, which has added pressure on Qantas to incorporate
the same. In the competitor analysis of Qantas, it must be stated that there are a number of
local brands and new entries which pose a threat to the existing reputation of Qantas.
Porter’s Five Forces theory
The Porter’s Five Forces theory has been used to analyze the competitive environment
of the airline industry in Australia where Qantas operates.
Rivalry
In the Australian airline industry, there exists intense rivalry between different
companies, including Qantas (Truxal 2013). For example, Qantas competes with the
aforementioned competitors in price and levels of service delivery. This has forced Qantas to
reduce operational costs and simultaneously adopt strategic management tools like
outsourcing which would improve profit margins. As a matter of fact, a number of Qantas’

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competitors are providing direct flights, which is a massive bonus for the customers. To keep
up with these competitors however, Qantas has introduced a number of loyalty programs
which lure in customers.
New entrants
The threat from new entrants is relatively low in the case of Qantas; although new
domestic players would find it easy to get licenses, the capital investment that would be
required to run an airline operation is massive, and not something that small scale enterprises
would be able to sustain. However, as far as international flights are concerned, the potential
threat from new entries is comparatively higher.
Substitutes
In this case, the threat from substitutes is almost negligible. While one might argue
that there are several substitutes like bus, cars and other modes of public transport, none of
these are sustainable for long distances. However, traveling by water is considered to be
cheaper than traveling by air. Nevertheless, customers still prefer airways over water vessels
because of convenience and because the latter is time consuming.
Suppliers’ power
In the Australian airline industry, the supplier power is extremely polarized; the
investment made by the manufacturers for the sake of the suppliers, it would be difficult for
them to increase rates (Forsyth 2017). Also, since there are a large number of airlines, the
supplier power is comparatively low.
Buyers’ power

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The power of buyers in this industry is relatively higher since there are a large number
of service providers in and out of Australia that provide similar services; naturally, the
customers have a plethora of options at their disposal, ranging from exclusive services to low
cost traveling services. This automatically increases the purchasing powers of the buyers.
Hypothesis and business objectives
Hypothesis
The business strategy of outsourcing is bound to increase the sales rates of the
company and improve its global operations.
Business objectives
The business objectives would be as follows:
 To increase sales rates
 To retain position of Qantas as the premium choice in air travel
 To increase profitability of the company by at least 10 per cent.
 To reduce load of heavy maintenance on headquarters
 To bring in talent from around the world to pave the way for smoother functioning.
Conclusion:
To conclude, it must be reaffirmed that while Qantas Airlines remains one of the top
brands in the Australian industry, it now faces tough competition from a number of local
airlines like Virgin Australia or Jet Star. Additionally, since Qantas expanded its horizons
globally, it has become increasingly difficult to regulate and manage international operations
out of their home base. Naturally, a need was felt to adopt outsourcing as a business strategy;
the company is planning to outsource its computing operations (amongst others) to India and

10OUTSOURCING FOR QANTAS AIRWAYS
other countries to reduce expenses, improve performance and increase productivity of the
organization. Outsourcing as a business plan is expected to enable smoother operations; since
more employees, spread out across the globe, would be at the disposal of the customers, it is
also bound to increase customer satisfaction levels along with customer retention.

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