This paper analyzes the job cut decision made by Qantas in 2014 and its effects on stakeholders. It also compares accounting theories to recommend cost-saving measures.
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Running head: QANTAS - JOB CUT DECISION ANALYSIS QANTAS - JOB CUT DECISION ANALYSIS Name of the Student: Name of the University: Author Note:
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1QANTAS - JOB CUT DECISION ANALYSIS Abstract This paper titled “QANTAS - JOB CUT DECISION ANALYSIS” performs the analysis of the job cut decision made by the company in the February 2014. This report highlights the facts and reasons of this decision and the effect of such decision in the stakeholders of the company. Further, it analyse the stakeholders of the company by using the different stakeholder analysis theories. Lastly, the paper compare the different accounting theories to recommend the appropriate accounting theory to reduce the costs of the company.
2QANTAS - JOB CUT DECISION ANALYSIS Introduction This essay titled “Qantas – Job cut decision” is based on the decision taken by the company to sacks 167 staffs in July 2014. The Qantas is the flagship airline company based in Australia, funded in 1920. The company originally registered as Queensland and Northern Territory Aerial Services Limited (QANTAS). The company widely regarded as world’s leading long distance airline and one of the strongest brand of Australia(Qantas 2019). The main business of the company is the transportation of the customers. This essay contents the fact of the case, reasons and effects of this job cuts(Massola 2014). Along with the comparison of the different accounting theories and determine the, which theories is most important for the company. Discussion Fact of the case The Qantas suffered the loss of $252 million in December 2013 for the last six months. In this respect, chief executive officer said that this result is not acceptable, and the airline will cut the 5,000 full time equivalent positions to return the profitability, in February 2014 (ABC News 2014). After five month, company sacked 167 staff in July 2014 including the 131 engineers and 36 administration staffs. This was the first of the 5000 job cuts. The company was planning to save $2 billion by this job cuts in financial year 2016-17. Reasons and effects of the case The main reason behind this job cut is that the company suffered the loss of $ 252 billion in second half of the year 2013. While, Qantas domestic earned the profit of $57 million, which is decreased by the $ 218 million and international business loss increased $ 262 million from $ 91 million, in the same period in 2012. This loss suffered by the company
3QANTAS - JOB CUT DECISION ANALYSIS became the main cause of the 5000 jobs cuts in the next year. As the chief executive offer said that this kind of the performance is unaccepted by the management of the company. On the other hands, as per the opinions of the various financial and management analysts Qantas can suffer the various problems as mentioned further. The deduction in the numbers of the maintenance engineers would create safety problem. This decision can put the Qantas in drastically undermanned because as noted in the consultation phase, company already do not have enough staff to perform the future works. It also cause the flight delays because some of airplanes would not be have airworthy. As the company already do not have the enough staffs, it also would create the scenario where the aircraft would not get permission to fly. Effect in the stakeholders This job cut decision will be mainly effect the three stakeholders of the company. Those are employees, investors and the customers. In respect of the employee, they have to perform the copious amount of overtime in order to get their daily duties and to face the huge workload. This decision also implement the fear among the employee regarding their job security, which may affect the performance and dedication of the employee towards their jobs (Oxenbridge, et al 2017). Second, one is investor, as the many financial and management analysts predicted that this decision would affect the performance of the company, as the company already do not have the enough staffs to perform the future tasks. This will affect the investors of the company because they also feel the lack of surety in their investments as per the statements made by the analyst. Lastly, the customers of the company will also affected by this decision of the company as the analyst had said, lack of the maintenance engineers can increase the safety problems, delay in flights and the cancel flights.
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4QANTAS - JOB CUT DECISION ANALYSIS Implication of the stakeholder theory As per the Edward Freeman’s stakeholder theory, company has the responsibility to all of its stakeholders, who directly or indirectly claims any stake upon the company like employees, shareholders, customers and same like. The any decision made by the company directly affect their stakeholders. As per the second level of the Edward freeman’s theory for the stakeholders, at the time of the negative situation, company can enhance its efficiency in the industry only by balancing the interest of all the stakeholders (Anderson and Brauns 2015). Qantas needs to perform the further stated functions to motivate their stakeholders. Company need to talk with their entire stakeholder to ensure their importance in the organisation. They need to arrange the meeting with their shareholders and investors to explain their plans, causes and needs of the plan along with the expected outcomes of such plan. Similarly, firm needs to make sure that their employee keeps their faith in the organisation, help them to feel secure related to their job and arrange some motivational sessions for the employees (Ramirez 2015). For the customer’s motivation, company need to improve their services. By providing their best services to the customer, company can show positive effect of their decision. Implication of accounting theory In this case, of Qantas, this essay consider the Relevant Cost theory of accounting to analyse the decision made by the company to job cut. The reason behind choosing this theory is that this theory is relevant to the case and simply give the result that what the stakeholders should need to do in this situation. As per this theory, management make their decision by comparing the cost of the resources and their contribution towards the
5QANTAS - JOB CUT DECISION ANALYSIS profit making of the company (Bryce, Ali and Mather 2015). If their contribution is more in the profit making of the company than their relevant cost, then company continues its operation with such stakeholder otherwise not (Tantalo and Priem 2016). The outcome of this theory for the employees that they have to perform well and more productively in order to save their job. The shareholders or the investors of the company need to understand the situation more deeply and have to forecast the future performance of the company in the basis of the need and effect of this decision, before investment (Joubert, Garvie and Parle 2017). Lastly, the customers of the company need to have faith in the company and observe the change before making any perception about the company. Theories of cost savings There are many cost saving theories in the accounting like Supplier consolidation, Function cost analysis, Component consolidations, reverse coasting, Low cost country sourcing, cost driver analysis and it alike. Here, the comparison of Function cost analysis theory and Low cost country sourcing theory is performed to determine the best theory for the Qantas to cost saving (Blank 2016). The low cost country outsourcing is a strategy in which a company purchase its resources from such countries where the cost of production and labours is low, in order to reduce the cost of operating expenditures. The other theory is Function cost analysis; it is an economic technic of research the systems for optimising a proper parity between operating system or properties and expenses incurred to achieve those properties and functions. The first theory is more related to the manufacturing companies as this theory focuses only in production of the resources in other countries which cost of production is low (Lockström 2017). Therefore, this essay recommend the second theory, which is Functional cost analysis to the Qantas to reduce company’s cost. Implementation of Function cost analysis theory
6QANTAS - JOB CUT DECISION ANALYSIS The main objective of function cost analysis is to achieve the highest customer satisfaction as well as reducing the all related costs of the firm to achieve the maximum customer satisfaction. This theory will help the company to identify the high cost-consuming unitswiththelowproductivity(KetokiviandMahoney2016).Thisalsoassistthe management of the Qantas to replace these unproductive unit costs with the more productive units with lower cost consumption. It also allow the company to focus on the more productive units rather than the units that consume more cost with less production. This theory is best suits Qantas to minimize its cost to provide maximum satisfaction to their customers. Conclusion The paper concludes that the Qantas announces the 165 job cuts due to the loss suffered by the company in the last second half of the financial year 2013. This affect the main three stakeholders those are employees, shareholders and the customers of the company along with the performance of the company. The paper also analyse the stakeholder theory to ascertain the stakeholder’s move toward this decision. This paper recommends the Function cost analysis theory of to the company to perform the cost saving.
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7QANTAS - JOB CUT DECISION ANALYSIS Referencesand Bibliography ABC News. (2019).Qantas sacks 167 staff, union warns of flight delays. [online] Available at: https://www.abc.net.au/news/2014-07-08/qantas-lays-off-167-staff-as-part-of-cost-cutting- program/5582404 [Accessed 30 Mar. 2019]. Anderson, M. and Brauns, T., 2015. Industrial relations in Queensland under an LNP government.QUTL.Rev.,15,p.4.https://heinonline.org/HOL/LandingPage? handle=hein.journals/qutlj15&div=17&id=&page= Blank, J.L., 2016, June. Frontier Estimation of a Cost Function System Model with Local LeastSquares:AnApplicationtoDutchSecondaryEducation.InNorthAmerican ProductivityWorkshop(pp.103-118).Springer,Cham. https://www.researchgate.net/profile/Jos_Blank/publication/322905397_Frontier_Estimation _of_a_Cost_Function_System_Model_with_Local_Least_Squares_An_Application_to_Dutc h_Secondary_Education/links/5c46f7be299bf12be3da23b5/Frontier-Estimation-of-a-Cost- Function-System-Model-with-Local-Least-Squares-An-Application-to-Dutch-Secondary- Education.pdf Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017.Cost-benefit analysis:conceptsandpractice.CambridgeUniversityPress. https://www.nrc.gov/docs/ML1233/ML12338A400.pdf Bryce, M., Ali, M.J. and Mather, P.R., 2015. Accounting quality in the pre-/post-IFRS adoptionperiodsandtheimpactonauditcommitteeeffectiveness—Evidencefrom Australia.Pacific-BasinFinanceJournal,35,pp.163-181. http://tarjomefa.com/wp-content/uploads/2017/08/7411-English-TarjomeFa.pdf Forsyth, A. and Stewart, A., 2016. Of Kamikazes and Mad Men: The Fallout from the Qantas Industrial Dispute.Melb. UL Rev.,36, p.785.
8QANTAS - JOB CUT DECISION ANALYSIS Harrison, J.S., Freeman, R.E. and Abreu, M.C.S.D., 2015. Stakeholder theory as an ethical approachtoeffectivemanagement:Applyingthetheorytomultiplecontexts.Revista brasileiradegestãodenegócios,17(55),pp.858-869. http://www.scielo.br/pdf/rbgn/v17n55/1806-4892-rbgn-17-55-00858.pdf Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet.The JournalofNewBusinessIdeas&Trends,15(2),pp.1-11. http://www.jnbit.org/upload/JNBIT_Joubert,_Garvie_Parle_15(2)_2017.pdf Ketokivi, M. and Mahoney, J.T., 2016. Transaction cost economicsas a constructive stakeholder theory.Academy of Management Learning & Education,15(1), pp.123-138. https://journals.aom.org/doi/pdf/10.5465/amle.2015.0133 Kumar,N.,Andersson,D.andRehme,J.,2015.Logisticsoflowcostcountry sourcing.International Journal of Logistics: Research and Applications,13(2), pp.143-1 Lockström, M., 2017.Low-cost country sourcing: Trends and implications. Springer Science & Business Media. Massola, M. (2019).Qantas cuts 5000 jobs, posts $252 million first half loss. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/qantas- cuts-5000-jobs-posts-252-million-first-half-loss-20140226-33i4c.html[Accessed14Feb. 2014]. Nas, T.F., 2016.Cost-benefit analysis: Theory and application. Lexington Books. Oxenbridge, S., Wallace, J., White, L., Tiernan, S. and Lansbury, R., 2017. A comparative analysis of restructuring employment relationships in Qantas and Aer Lingus: different
9QANTAS - JOB CUT DECISION ANALYSIS routes,similardestinations.TheInternationalJournalofHumanResource Management,21(2), pp.180-196. Qantas(2019).OurCompany|Qantas.[online]Qantas.com.Availableat: https://www.qantas.com/travel/airlines/company/global/en [Accessed 30 Mar. 2019]. Ramirez,R.,2015.Stakeholderanalysisandconflictmanagement.Cultivatingpeace: conflict and collaboration in natural resource management, pp.101-126. Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy.Strategic ManagementJournal,37(2),pp.314-329. https://www.researchgate.net/profile/Richard_Priem2/publication/265690092_Value_Creatio n_Through_Stakeholder_Synergy/links/59d8c055aca272e60966bf7b/Value-Creation- Through-Stakeholder-Synergy.pdf