Strategic Analysis of Qantas: Environmental Factors and Strategies

This report provides a comprehensive strategic analysis of Qantas Airways, examining its internal and external environments within the global airline industry. It utilizes frameworks such as PESTLE, SWOT, and Porter's Five Forces to assess the competitive landscape and identify key factors influencing Qantas' operations. The report delves into Qantas' ownership structure, external factors (political, economic, social, technological, legal, and environmental), and internal strengths and weaknesses. It analyzes the industry's competitiveness, Qantas' generic strategies (cost leadership and differentiation), and its strategic group positioning. Furthermore, the report explores Qantas' value chain, VIRO analysis of competitive advantages, and concludes with recommendations for enhancing its long-term competitive position. The analysis highlights Qantas' efforts to maintain its market leadership, address challenges like increasing competition and fuel costs, and leverage its brand value and service offerings.

Running head: STRATEGIC MANAGEMENT
Strategic management
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Executive summary
The aim of this report is to discuss about the external and internal environmental factors being
faced by Qantas in their global operation. This report used PESTLE, SWOT and Porter five
forces model to determine the environmental factors. In addition, sources of competitive
advantages for Qantas along with their sustainability are also being determined in this report.
The current standing of Qantas in their strategic group is identified. This report concludes with a
few recommended steps, which will help to enhance their competitive advantages in the long
term.

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Table of Contents
Introduction......................................................................................................................................3
Ownership status of Qantas.........................................................................................................4
External environment of Qantas......................................................................................................4
Determination of the industry competiveness.................................................................................6
Determination of the internal analysis of Qantas............................................................................8
Generic strategies of Qantas..........................................................................................................10
Cost leadership strategies..........................................................................................................10
Differentiation strategy..............................................................................................................10
Strategic group diagram.................................................................................................................12
Value chain analysis of Qantas......................................................................................................13
VIRO analysis of the sources of competitive advantages.............................................................15
Recommendations..........................................................................................................................17
Conclusion.....................................................................................................................................17
Reference.......................................................................................................................................19

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Introduction
The current business scenario is much more competitive for the contemporary business
organizations. Competition is ever increasing with the entry of more number of competitors in
the market. Therefore, it becomes important for the business organizations to determine their
internal and external environment in order to identify their gaps and initiate the process of
strategic management accordingly (Vogel & Guttel, 2013). Initiation of the strategic
management helps the contemporary business organizations to have their strategies in
accordance to the environmental factors. In the current competitive business scenario, initiation
of the strategic management is more important. One of the major business sectors, which are
witnessing huge competition, is the global airline industry. Furthermore, with the entry of the
low cost airliners, competition got more intensified.
Qantas airways are the leading airliner in Australia and are one of the oldest airliners in
the world. It is based in Australia and operates in around the world. According to the reports,
Qantas is the leading airliner in Australia with having more than majority of the market share
(www.qantas.com, 2018). The objective of them is to be the leading airliner in the global market
with having the most number of passenger traffic. However, in the recent time, the emergence of
huge number of airliners both in budget and long haul categories put huge challenge for Qantas
to maintain their market leadership status. Thus, they are in the need of having effective
approaches of strategic management.
This report will discuss about the internal and external environments for Qantas in the
airline industry. In addition, the industry attractiveness will also be analyzed with the help of the
Porter’s five forces. Other factors such as generic strategies of Qantas and strategic group will

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also be identified. Value chain and VIRO analysis will be done to determine the sources and
sustainability of their competitive advantages.
Ownership status of Qantas
According to the reports, Qantas is having 51 percent ownership with Australian
investors and the rest is having with the foreign investors. Currently, foreign investors hold 47.73
percent of shares of Qantas airways. Foreign investors include British airways and American
airlines. In terms of the domestic ownership, Government of Australia sold its entire stake to
Qantas.
External environment of Qantas
Political  Qantas is having their operation worldwide. Thus, they have to
adhere with different political scenarios in different countries.
 Having aviation agreements of Australia with major economies
helps Qantas to have the access to the major portion of the
international air routes (McManners, 2016).
 However, negative relationships with between Australia and
some other countries are creating barriers in free aviation of
Qantas.
 Risk of terrorism especially from the Middle Eastern countries is
increasing and posing threat for Qantas (Saha & Yap, 2014).
Economical  Entry of the foreign airliners in the Australian market dented the
market share of Qantas.
 Origination of the global economic recession is also posing

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threat in enhancing the revenue for Qantas (Lakner & Milanovic,
2016).
 Entry of the low cost aircrafts also putting challenge for Qantas
in the shorter routes.
 Rapid increase in the global price of jet fuel is also reducing the
profitability of Qantas (Ryerson & Hansen, 2013). It is a threat
for the entire airline sector.
Social  One of the major social advantages for the airline sector is the
increase in the preference of the air transportation.
 Income for average Australian population is growing, which
further enhancing the growth of the airline industry.
 Qantas being a legacy and national carrier of Australia is having
positive impression in the market (David, 2013).
 However, still the airline services are out of reach for major
portion of the population and thus, the market is limited.
Technological  Qantas with having their access to the huge financial resources
invests huge in updating their technologies.
 They are having both online and offline facilities in offering their
services to the customers (Guritno & Siringoringo, 2013).
 However, the rapid advancements if technology is having
negative implications. This is due to the reason that huge cost is
associated with frequent change in the technology.
Legal  Legal regulations for the airliners are different in different

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countries. Thus, it is difficult for the airliners to adhere to these
differences in their daily operations.
 Increase in the carbon tax also causing challenges in profitability
of the airline industry (Meng, Siriwardana & McNeill, 2013).
 It is also highly probable that airliners may have to face lawsuits
for their customer services.
Environmental  Airline industry is having a huge impact on the environment due
to their emissions. Thus, the rules are more stringent for the
airline industries.
 It is important for the airliners to initiate strategies in order to
curb level of emissions.
 Qantas started to procure fuel efficient aircrafts in order to fight
the environmental issues (Merkert & O’Fee, 2013).
Determination of the industry competiveness
The above sections discussed about the external business factors faced by Qantas. This
helped to identify different external challenges faced by Qantas in their business operation.
However, it is also important to determine the competitiveness of the industry. In order to do so,
Porter five forces analysis will be used.
Threat of entry  Threat of entry is low in the airline industry due to the reason
huge investment is required in this sector.
 It is difficult to achieve economies of scale at par to the

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established players (Gayle & Wu, 2013).
 It is also difficult for the new entrants to comply with diverse
legal formalities, which is difficult for the new entrants.
 It is difficult for the new entrants to compete with the legacy
airliners.
Threat of substitutes  Threat of substitutes is moderate due to the presence of direct
and indirect substitutes.
 Direct substitutes include the different airliners in the same
industry offering similar set of services (E.Dobbs, 2014).
 Indirect substitutes include other mode of transportation.
 Customers are having low switching cost.
Bargaining power of
suppliers
 Bargaining power of the suppliers is low due to the presence
of number of similar set of suppliers.
 Major suppliers including the aircraft manufacturers are
having control only on supplying the components (Shi, Zhang
& Ru, 2013).
 Brand value of the legacy airliners such as Qantas further
reduces the bargaining power of the suppliers.
Bargaining power of the
buyers
 Bargaining power of the buyers is high due to the availability
of huge options.
 Good number of similar players in the market offering similar
options to the customers.
 In addition, Qantas itself offers different service levels such as

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business class and economy class. This further increase the
options for the customers
Industry rivalry  Competitive rivalry is high in the airline industry
(Homsombat, Lei & Fu, 2014).
 Presence of number of similar competitors in the market.
 Aggressive promotional activities such as loyalty programs
are being initiated in order to attract more customers.
Determination of the internal analysis of Qantas
Strengths  Brand value of Qantas is huge and favorable, which is helping
them to attract more customers in the global market.
 Qantas is having their global presence and it helps them to
cater to large of customers.
 Being the national carrier of Australia, Qantas is having the
support of the government of Australia. It helps them in
operating in the global political environment (Latemore,
2013).
 Having diversified range of service offerings helps in
attracting different customer segments.
Weaknesses  Majority of their flights are Australia based. Thus, their global
routes are less utility for the passengers from other countries.
 They are trailing behind some of the leading global airliners in
terms of passenger traffic and number of routes.

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 Various incidents such as price fixing caused negative brand
value of them. This caused negative impression among the
potential customers (Fournier, 2014).
 Low market share in the budget airline market.
Opportunities  Purchasing power of the customers is increasing and thus it is
an opportunity for Qantas to tap the growing demand.
 Offering more global routes from the major cities around the
world will help to attract customers from different regions.
 Initiation of the co-creation and strategic alliances with other
brands will help enhancing the brand value (Li, Qian & Qian,
2013).
Threats  Increase in the price of jet fuel will reduce the profitability in
future.
 Initiation of the stringent regulations regarding the foreign
investments and employee management will pose challenge
for Qantas in the global market.
 Entry of the domestic carriers in the global market will further
increase the competition.

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Generic strategies of Qantas
The above sections have identified various internal and external factors that are being
faced by Qantas in their global operation. Thus, it is the time to discuss about the generic
strategies initiated by them in order to stay ahead in the competition. Porter generic strategies are
of three types, cost leadership, differentiation and market focus. In the case of Qantas, they
follow only the cost leadership and differentiation strategies. Market focus is not being initiated
by them due to the reason that Qantas is having huge target customer segments ranging from the
upper class to middle class.
Cost leadership strategies
Cost leadership strategies being initiated by Qantas in order to attract more customers in
terms of the price and stay ahead in the competition. Qantas initiates cost leadership by offering
different style of aircrafts ranging from wide body aircrafts for the long haul flights and narrow
body aircraft for the shorter flights (Teeratansirikool et al., 2013). This helps in saving more fuel
in the flights. Moreover, the major aircraft inventory of Qantas is consisting of latest and fuel
efficient aircrafts such Airbus A-320 and Boeing 747 dream liner. In addition, Qantas is also
having the world’s largest passenger aircraft Airbus A-380, which can transport 450 people at
once. All these inventories help Qantas in reducing the average cost per passenger in the journey.
Differentiation strategy
Differentiation strategy helps Qantas in creating distinctive images in the market. In order
to create distinctive image in the market, Qantas initiated different service offerings across
different customer income levels (Zehir, Can & Karaboga, 2015). For instance, Qantas is having
Jetstar, their budget carriers to offer low cost flights along with the legacy flights of Qantas. In

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addition, differentiation is also being initiated by them in terms of the customer services. The
approach to the providence of the service to the customers along with the added services such as
receiving them in the airport is creating distinctive image in the market (Kaliapeen & Hilman,
2014). They also promote frequent flyers programs for their loyal customers and provide unique
services.

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Price HighLow
High
Service quality
Low
Qantas
Lufthansa
Qatar airways
Air Asia
Strategic group diagram

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According to the positioning theory of the segmentation, targeting and positioning (STP)
model, Qantas positioned their service offerings as premium airliner in the global market. They
are mainly positioned to compete with the legacy airliners in the global market. On the other
hand, the budget carrier of Qantas, Jetstar is positioned to compete in the lower customer
segments with Air Asia. In terms of the above strategic map diagram, Qantas and Qatar airways
are having same price level but Qantas is slightly ahead in terms of the service quality. This is
mainly due to the reason that Qantas is more globalized compared to Qatar airways in the airline
industry. On the other hand, Lufthansa is positioned as more premium compared to Qantas in
terms of both price and service quality. Thus, the key competiveness of Qantas is to provide
more premium service quality in the same price level of their current position.
It is assumed that service quality involves providence of added services to the passengers.
Price level is being assumed as average fixed price rather than the flexibility in the airfares.
Value chain analysis of Qantas
Primary activities
Inbound logistics Inbound logistics are having less importance for Qantas due to the
reason that they are less dependent on the external suppliers. Only
suppliers of them are the aircraft manufacturers such as Boeing and
Airbus (Koo, Tan & Duval, 2013). Qantas is having effective
relationship building process in order to have seamless flow of the
spare parts and services.
Operations Operations of Qantas are being designed in such a way that it will
have maximum level of satisfaction among the customers. The

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operations of Qantas are being designed with the use of the latest
technologies and approaches. The operations of Qantas also help in
creating distinctive image in the market.
Outbound logistics Outbound logistics of Qantas are mainly done through online
mediums. This is due to the reason that outbound logistics of Qantas
involves the providence of service to the customers such as tickets
and check in facilities. All these are being done through online
mediums, which enhance the customer conveniences.
Marketing and sales Qantas is having extensive marketing activities including sponsoring
sporting events and teams. In addition, television commercials are
being promoted by them to aware the customers regarding the latest
offers (Crawford & Northey 2013). Initiation of the frequent flyers
program also helps them to retain their existing customer base.
Service Qantas is having dedicated service portal and helpline for managing
the customer queries. Customer community is also being initiated in
order to have two ways communication with the customers (Setia,
Venkatesh & Joglekar, 2013). This helps in effective solution of the
customer grievances in the primary stage.
Secondary activities
Procurement Procurement process of Qantas is effective and efficient, which
helps them to have proper aircrafts in place. Such as narrow body
aircraft for short haul flight and wide body aircraft for the long haul
flights. In addition, the procurement process of them helps them to

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minimize their cost of operation.
Technology development Qantas is having latest and updated technologies in place in terms of
aircrafts, passenger safety and customer service. In addition, their
internal department for maintenance is also equipped with latest
technologies, which ensures the passenger safety.
Human resources Human resources are one of the major sources of gaining
competitive advantages of them. This is due to the reason that the
skill set of the employees in the workplace helps Qantas to provide
effective service to the customers. Training is provided in order to
enhance the skills of the employees. Employees are being kept
engaged with the initiation of the various employee welfare
activities.
Firm infrastructure Firm infrastructure of Qantas includes the different assets of them.
Currently, they are having more than 120 aircrafts for their global
operations along with more than 29000 employees around the world.
VIRO analysis of the sources of competitive advantages
The above value chain analysis identified some of the key sources from where Qantas
gain competitive advantages in their business operation. However, the competitive advantages
will be effective and have long term impact only when it will be sustainable enough. Thus, VIRO
analysis will be used in order to determine the sustainability of the sources of competitive
advantages (Urbancova, 2013). Some of the identified sources of gaining competitive advantages
for Qantas are human resources, financial resources, brand value and operations.

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Valuable  This is due to the reason that human resources are helping
Qantas to deliver effective customer service.
 Brand value of them is also valuable due to the reason that it
helps in increasing the customer attractiveness in the market.
 Approach and design of the approach of the operations of Qantas
helps in creating value for their customers.
 These valuable resources help Qantas to enter in the new markets
and providing positive customer services.
Imitability  The skills of the human resources cannot get imitated by other
competitors. It is unique for Qantas.
 Brand value of Qantas can also not get imitated. It is difficult for
the competing organizations to match the brand value of Qantas.
 These will reduce the bargaining power of the suppliers and to
stay ahead in the competition.
Rarity  Access to the financial resources by Qantas is rare in nature due
to the reason that other airliners will not be able to match the
same.
 In addition, financial resources are also rare in nature and cannot
be easily accessed.
 This helps Qantas to investment more on developing
technologies and customer services.
Organizational
capability
 Qantas is having the access to the huge financial resources,
skilled employees and enhanced brand value.

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 Thus, Qantas is having favorable organizational capability to
operate effectively in the global market.
Recommendations
 It is recommended that Qantas should enter the market where still they do not have the
presence. This can be termed as market development strategy. This will help Qantas to
enhance their business operations and target customer segments. In addition, having more
routes in the global market will help Qantas to be a true blue global firm.
 It is also recommended that Qantas should increase their routes among the non-Australian
cities around the world. This is due to the reason majority of the flights of Qantas are
centric to Australian cities. Thus, passenger volume for them is limited. Therefore,
having more routes among the non-Australian cities will increase the market share.
 Qantas can now source their aircrafts from the organizations such as Bombardier, ATR
and Embraer. This will lower the dependency from the two major suppliers Boeing and
Airbus. Thus, the bargaining power of the suppliers will further get discussed. This will
also enhance the varieties of aircrafts applicable for different uses and in different routes.
Conclusion
Thus, it can be concluded that the external and internal environment of Qantas is much
more challenging and competitive. It is also being concluded that the Qantas is having variety of
sources of gaining competitive advantages, which helps them to have the edge in the market. In
addition this report discussed about the generic strategies initiated by Qantas in staying ahead in
the competition. Value chain analysis and VIRO framework are being used to determine the