Qantas Porter Five Forces Analysis

This essay analyses Qantas airline using Porter's Five Forces model. The analysis covers supplier power, buyer's power, threat of new entrants, threat of substitutes and complementariness, and intensity of competitive rivalry. The essay also discusses the limitations of the model and suggests strategic measures for Qantas to maintain its market leadership in Australia.

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Business Environment and Strategic Management
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BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT 2
Qantas Porter five forces analysis
In this essay I will analyse Qantas airline using porters’ five forces. I choose to
analyse the airline using the model because currently the airline industry is being affected by
external forces such oil prices, high maintenance cost, declining passengers and increasing
operating cost. This has resulted to price wars in the airline industry which has greatly
affected the profitability of Qantas.
Porters five forces comprises of factors which are supplier power, buyers power,
threat to new entrants, threat to substitutes and complementary and intensity for
competitive rivalry. I discovered that supplier power is very important in the airline
industry. All the three inputs in the airline industry are greatly affected by external forces.
The inputs include fuel, labour and aircraft (Thornicroft, 2017). The second factor I
considered is the buyer’s power. In recent years there has been the introduction of online
distribution system and ticketing, meaning that passengers who are fling are never at the
mercies of intermediaries and agents (Cassell and Spencer, 2010). There has been entrance
of some low cost carriers in the airline industry which have resulted to price wars thus
benefiting the fliers (Cassell and Spencer, 2010). There is also tight regulation on the
demand side .the threat of new entrants is another factor I considered in the five porters
forces model. One needs enormous capital investment to invest in the airline industry, and
also when airlines choose to close down, it usually incurs huge losses (Curtain, &
Mathews, 2015). This means that in the airline industry both the entry and exit barriers are
very high. The other factor I considered is threat of substitute and complementariness. I
cannot consider the airline industry to be at threat to complementariness and substitutes.
The Fifth factor I considered in the porters five forces is the intensity for the competitive

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rivalry (Crandall, 2014). The aviation industry tends to be very much competitive because
of a few reasons which include tight regulation and low-cost carriers (Thomas, 2016b).
Safety is also a major issue leading to a lot of expenses.
Supplier power greatly affects the airline industry and specifically Qantas. Like I
mentioned earlier the three inputs in the airline industry which are labour, fuel and aircraft
prices depend on the power of suppliers. On the other hand the power of suppliers can be
used to analyse a business strategy. Some of the well known suppliers in the airline industry
include airbus, Bombardier and Boeing (Bray, 2017). The Qantas airline has total number of
250 aircrafts supplied by the three suppliers. Thus I can conclude that the supplier power in
this industry is very high.
Buyer’s power has significantly affected Qantas airline. Qantas airline is known to be
a premium brand which connects many destinations across the globe. Qantas airline offers
full services for flights in the international and domestic locations. Qantas also has Jet star
brand which is a low-cost airplane and has some specified travel routes. Considering this
factors together I can conclude that the barging power of buyers can be thought to be high.
The threat of new entrants is another factor I considered in Qantas airline. The airline
industry requires that every airline company to have some specified strategies to keep the
company moving. Exit and entry barriers are also subjected to a lot of regulations. An airline
cannot exit an industry except if there is no good reason why it needs to exit (Curtain, &
Mathews, 2015). Thus the threat of new entrant is one of the significant threats that I would
advice Qantas airline to take seriously. As I stated earlier, to enter the airline industry
colossal investment is required thus it is usually challenging for competitors to enter this
sector (Thomas, 2016b). However, there are potential new entrants in the Qantas airlines
because of deregulation. Thus Qantas needs to come up with a good strategy such as lowering

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price to create barriers for new entrants. Qantas airline needs to come up with an alliance
strategy to deter new entrants in the sector. This will assist the airline to come up with a good
brand reputation and offer their customers good experiences. Thus entry and exit barriers can
be thought to be high
The Qantas airline is not at threat of substitute and complementariness. Most of the
distances which need to be covered by the airline cannot be easily substituted with other
means (Thomas, 2016a). However, the shorts distance can be covered by buses meaning that
that there is still a threat for substitutes. The availability of services such as Wi-Fi,
passenger’s amenities and cartel meals mainly offered by airlines does not bring more
customers either. Many people choose to travel by airline because it is comfortable and it
reduces travel time (Thomas, 2016a). However, transporting people by use of airlines is
attached to some advantages as compared to other travel means. It is one of the fastest means
of transport. Thus I consider threats from substitutes and complementary to be high or low
depending on the customers' likings
Considering intensity for competitive rivalry, Qantas is a market leader in the
Australian airline. It faces a lot of competition from both local and international airlines
(Crandall, 2014). According to the annual report produced in 2009, It is clear that Qantas
operates Jet Star to try and compete with other low-cost airlines such as the virgin blue. Many
airlines have invested in the airline industry because of deregulation thus being able to
compete effectively with Qantas. Therefore Qantas need to come up with a differentiation
strategy for them to build a strong brand.
However, the porter model has some limitation in explaining complexities in the
current organizations and markets (Thornicroft, 2017). If Qantas makes use of this model to
analyses its market and makes strategic decisions, there is a high risk that some issues in the

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organization will be overlooked. Some of these features include the relationship between
buyers and sellers. The organization faces a lot of issues more than just market forces
(Eames& De, 2015). They need to be well informed of corporate ethics, government
legislation and social responsibility. The internal structure of the organization is also critical
when coming up with strategies. The porter's model does not also include the effects brought
about by strategic alliances or sharing of resources and skills as one better way of responding
to opportunities. However the main advantage of this model is that it forms base for further
research and analysis for Qantas. Out of the model the management can analyse a lot of
things in the company.
In conclusion, Qantas is the leading airline in Australia. Over the years the brand has
been able to build its strategy, and it also offers some superior services (Thomas, 2016b).
They have also been able to come up with some low-cost carriers such as the jet star
(Eames& De, 2015). For the past years, the operating margin has been very low because of
some international factors (Eames& De, 2015). The organization management is very well
aware of these issues thus being able to come up with some strategic measures for solving
these problems (Bray, 2017). From the analysis I hope that the organisation will continue
being a market leader in Australia as far as the management will continue to be flexible
enough in making decisions because the market is dynamic.

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References
Bray, M., 2017, The domestic airline industry,in J. Kitay, and R.D. Lansbury, (eds.),
Changing employment relations in Australia, Oxford University Press, Melbourne, pp.
4580.
Cassell, F.H. and Spencer, F.A., 2010, Airline Labour Relations under Deregulation: From
Oligopoly to Competition and Return?, Transportation Center, Northwestern University,
Evanston, Illinois.
Crandall, R.L., 2014, The Airline Industry – Still in Transition, The Fifth William A.
Patterson Transportation Lecture, Northwestern University, Evanston Illinois.
Curtain, R. & Mathews, J. 2015, Two Models of Award Restructuring in Australia, Labour
and Industry, 3(1) 58–75
Eames, J., & De, C. R. C. (2015). The Flying Kangaroo: Great Untold Stories of QANTAS...
the Heroic, the Hilarious and the Sometimes Just Plain Strange. Sydney: Allen & Unwin.
Thomas, I.,2016a, Highfliers fall in Qantas revamp,Australian Financial Review, 5(2), 8-12
Thomas, I., 2016b, Qantas quarrels. Tough new cost controls may mean job losses at Qantas,
and there is bad blood between the unions and management, Australian Financial Review,
6 (2) 110-118.

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Thornicroft, K.W., 2017, Airline Deregulation and the Airline Labor Market, Journal of
Labor Research Spring, X (2), 163-180.
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