Jetstar's Competitive Analysis: DEPSTG, Porter's Five Forces & VRIO

This report provides a comprehensive analysis of Jetstar, a low-cost airline based in Australia, utilizing several strategic frameworks. It begins with a DEPSTG analysis, examining the Demographic, Economic, Political, Sociocultural, Technological, and Global factors influencing Jetstar's operations in Australia, including megatrends impacting the future. The report then applies Porter's Five Forces model to assess the competitive intensity within the airline industry, considering the threat of new entrants, substitutes, bargaining power of customers and suppliers, and industry rivalry. Furthermore, an internal analysis is conducted using the Value Chain and VRIO framework to identify Jetstar's distinctive competencies in areas such as Human Resource Management, Services, Operations, and Inbound Logistics. The analysis highlights how Jetstar leverages these competencies to achieve a competitive advantage and maintain profitability within the challenging airline market.

1.0 Introduction
Jetstar is the values-based (low-cost) airline which is headquartered in
Melbourne. Jetstar airline establish in 2003. It is a subsidiary of Qantas. Qantas’s two-
brand strategy, Qantas Airways for full-premium service airways and Jet star is low-cost
market. The airline fly domestic as well as international service. Jetstar rival to Virgin
Australia and Tiger air Australia.
2.0 DEPSTG analysis and Megatrends in the Australia

Image 1 DEPSTG analysis of Australia

Image 2 Megatrends in the future (Hajkowicz, Cook & Littleboy, 2012)
2.1 Economic of Australia
Australia has one of the largest mixed market economic country in the market. In
2017, Australia GDP is AUD $ 1.69 trillion. The average GDP of Australia 3.4% annually
grow 1901-2000. After Switzerland in the world, Australia is the wealthiest nation in
terms of wealth per adult. The highest level of economic growth is mining the gold-rush
in the 1840s to nowadays. Main of the economic growth in Australia is the areas of the
country where mining and resource industries also the service industry such as

Northern Territory and Western Australia. The GDP of Australia growth 3% by
agriculture. With value-added processing the GDP go up to 12%.
2.2 Political of Australia
Australia is a liberal-capitalistic democracy country. Moreover, Australia has
efficient, open and transparent legal framework. An investment destination stem is the
strength of Australia. Australian government adapted policy to changes is ranked as the
top 2 country in the region. The state is interfering substantially in the economy. The
longstanding and healthy political and economic ties of Europe and European Union,
America, the Middle East and Africa support Australia’s economy stronger. The
company which investment on Australia can benefit the stable political environment can
flow right through to the bottom (Kremer, P. D., & Symmons, M. A. 2015).
3.0 Porter’s Five Forces

3.1 Threat of new entrants
Jetstar target their audience in terms of the sales of tickets. As Jetstar has high
networking marketing, it is used to provide their tickets at a more attractive amount tied
with promotions such as holiday packages where it would include attractions sites tours
(Porter, 1998).
3.2 Threat of substitutes
With the advance of technologies in the 21st century, teleconference could be a
possible threat of substitutes towards airlines. Other than the advance technologies
teleconference, high speed rail could be a threat of substitutes towards airline in the
long term as it is an alternative travelling at a possible lower cost for consumers.
However, those possible substitutes could not provide the same value in terms,
teleconference is not workable for consumers whom wants to travel the world and high-
speed rail would be time costly. Therefore, to conclude, the threat of substitutes towards
JetStar is relatively low. (Kotler & Armstrong, 2010).
Industry Rivalry
- Price sensitive
- Hard competition
between companies
- Low advertising
- High
Threat of new entrants
- High fixed cost
- High switching cost
- Low government policy
- High network effect
- Low
Bargaining power of
customers
- Diverse buyer
- Low switching cost
- High
Threat of substitutes
- Teleconference
- High speed rail
- Other subsitutions cannot
provide the same value
- Low
Bargaining power of
suppliers
- High switching cost
- Low threat of forward
vertical integration
- Fuel price deteremined
by the global oil market
- High

3.3Bargaining power of customers
According to Jetstar’s 2012 annual report, buyer’s power concentration It has been seen
to be quite high in the Chinese Airline industry. (Jetstar, 2012). However, as Jetstar
offers operation on certain flights which other airlines don’t, this provide Jetstar to
leverage on this advantage. But as mention, with the advance technologies in the 21st
century, consumers are also exposed to more market information through the web
which gives consumers the knowledge to choose. Therefore, to conclude, the
bargaining power of customers toward Jetstar is still relatively high.
3.4 Bargaining power of suppliers
Under suppliers in the airline industry, there is a few sectors to look upon such as fuel
supplier, aircraft supplier, food supplier, merchandise supplier, etc. and there are only a
few numbers of suppliers in the Chinese market that deals with the material required by
the airline industry (Porter, 1998). The supply demanded by the airline industry in China
is totally depended upon their market condition. Therefore, in terms of the bargaining
power of suppliers, there is no substitutes for Jetstar as there is limited suppliers that
provide the product used for the industry.
3.5 Industry rivalry
Upon research, there are approximately 59 low fare airlines that falls in the Chinese
market. Within these 59 airlines, there are reputable airlines such as Boeing Airways,
Air China, China Eastern Airline. As there is also low advertising done by Jetstar over
the years of establishment as compared to other airlines, these could lead to Jetstar
losing their numbers of potential consumers. Therefore, in conclusion, in terms of
industry rivalry for Jetstar, with the number of airlines available, it easily falls under the
high zone.
4.0 Internal Analysis

Table 4 :Value Chain Analysis

4.1 Human Resource Management (HRM)
After analysing the value chain with VRIO analysis, Jetstar distinctive
competencies is HRM. A recent article published by (McCaughey, DelliFraine, McGhan
& Bruning, 2013) shows that having work life balance is essential for employees and
working too much could cause one to develop illness and mental condition. Jetstar
identified their distinctive competencies from time to time, organising programs in
relation to well-being for their employee. From this, employee may felt more valued to
the organisation and dedicated to their work which could empower serval factors of the
value chain activities such as increasing marketing and sales goals, stronger bonds in
inbound logistics and providing top-notch services which could conclude, Jetstar
maximising their employee productivity to achieve better business performance and
creating value firm to earn more profit.
4.2 Services
The value chain and VRIO analysis also identified Services as Jetstar
competencies. With technology advancing rapidly, gone were the days where
consumers have to check in personally at their carrier’s counter at the airport. Jetstar’s
innovation had created the Jetstar’s mobile application which enable customer to track
their flight or even self-checking in. This Hassle-free application can strengthen the
relationship and trust between Jetstar and their customer as efficiency is met.

4.3 Operations
Another competencies from Jetstar identified by the value chain and VRIO
analysis is Operations. The Qantas transformation program is created 2011 to deliver
substantial strategic benefit such as maintain earning uplift, reduction of ex-fuel unit cost
and revenue initiatives programs. It was reported in Qantas financial report 2017 that
both Qantas and Jetstar group achieve an approximate amount of $1.4billion underlying
profit before tax ("QANTAS GROUP FULL YEAR 2017 FINANCIAL RESULT", 2017). It
was noted that this achievement is the second highest-performance in the 97-year
history. The value created for this program is therefore viable framework which allows
the airline to continue maximising their profit in future years.
4.4 Inbound Logistics
The last competencies identified by the value chain and VRIO analysis is
Inbound logistics. In regards to the Qantas transformation program, it was mentioned
that sourcing for lower costs on certain parts of plane plays a vital role in securing the
$1.4 billion profit. To summarise, the value created for Jetstar is not just saving a huge
amount of revenue, but also tighten the relationship of their internal organisation. In
order to source for raw materials and manufacturing parts, several departments are
involved and employees are expected to work closely in the whole procurement

planning. The value is created by Jet star because the cost of production of the
parts of the plane are cheap and the operational efficiency is excellent. The flat
organizational structure of Jet star helps in the creation of a decision making
process that is effective. There are programs in Jet star that is related to personal
well-being and it helps the employees in accomplishing work-life balance. There
is facility in Jet star for tracking the flight details that can help Jet star in rising
above the competitors.
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