Qantas Porter Five Forces Analysis

Running Head: BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT 1
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

BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT 3
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