Strategic Management Report: Analyzing Jetstar's Business Strategy

This report provides a comprehensive strategic analysis of Jetstar, a low-cost airline owned by Qantas. It examines Jetstar's external environment using PEST analysis, industry life cycle, and Porter's Five Forces model, evaluating political, economic, social, and technological factors, as well as competitive forces. The internal analysis employs the VRIO framework to assess resources and capabilities, competitive advantages, profitability, and value creation. The report also explores Jetstar's functional-level strategies to enhance quality, innovation, efficiency, and customer responsiveness, concluding with recommendations for strategic improvements. The analysis emphasizes the airline's position in the mature Australian domestic market and its competitive landscape.

Running Head: MANAGEMENT 0
Strategic Management

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Executive Summary
This report outlines strategic analysis of a multi-national organisation i.e. Jetstar owned by
Qantas in relation with various management framework and perspective like PEST tool,
VRIO framework, Five forces model and so forth. Jetstar is one of the leading LCC having
operations in mainly Australia, New Zealand and some other Asia-Pacific regions. The
company is currently on maturity stage of the industry life cycle pushing hard to extend its
business under the umbrella of Qantas. The company gain competitive advantage through its
significant value added activities and improve the consumer experience by strengthening its
functional level strategies.

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Table of Contents
Introduction................................................................................................................................3
External Analysis.......................................................................................................................4
PEST......................................................................................................................................4
Industry Life Cycle Process...................................................................................................5
Five Force Model...................................................................................................................7
Internal Analysis........................................................................................................................9
VRIO Resource Model...........................................................................................................9
Competitive Advantage, Profitability of Company, Value Creation of the Company........10
Functional Level Strategy to increase quality, innovation, efficiency and customer
responsiveness......................................................................................................................11
Conclusion................................................................................................................................13
Recommendations....................................................................................................................14
List of References....................................................................................................................15

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Introduction
Jetstar is a low cost airline company, formed by the Qantas Group in 2003 and today, its aims
to provide low fares and allow more people to fly various places. Since its incorporation, the
Jetstar Group have make travelled nearly 250 million customers and the group also known to
be Asia Pacific largest low fares network in terms of revenue. More than 5000 flights carriers
associated to Jetstar Group operate to nearly 85 places in a week (jetstar.com, 2020). All
subsidiaries of Jetstar Group have gained various awards while being recognised by the
passengers and industry leaders such as top 10 safest LCCs globally by airlineratings.com,
best low cost carrier by Travel Weekly Asia 2017, Partner of the year 2012 with Changi
Airline Awards and so forth (jetstar.com, 2020a). In relation with Jetstar Group fleet, they
have various value based carriers offering low fares throughout Australia, New Zealand and
the Asia Pacific region. Some of its impressive fleets include Boeing 787 Dreamliner, Airbus
A321neo, Airbus A320 and Airbus A321. Hence, the dual brand approach with Jetstar and
Qantas continued to offer them a leadership position in the corporate, premium leisureliness
and budget travel groups, all with strong margins.

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External Analysis
PEST
 Political Factors – This part of the analysis links to the changes in policies by the
government considering new procedures and regulations directly or indirectly impacts
the corporate in terms of its growth, business decisions and performance. Taking an
example of 2016, China and Australia have contracted an open skies pact leading to
an open aviation market with removing completely capacity boundaries amid two
nations and this will also leads to bringing of new routes (australianaviation.com.au,
2016). The 2017 year also being acknowledged as Australia-China Year of travel,
however, it will upturn the rivalry in the marketplace and may carries reduction in
Jetstar market share comparing to the local players.
 Economic Factors – Airline industry can have various opportunities in the nation if
there is higher stability in the economy as it presents the business a potential to stand
competitive in the business environment. Liberal international aviation plan by the
Australian government has wounded the progression prospects of national carriers as
said by Qantas group in 2015 that it led to a flood in outbound travel rather than the
predictable arrival of tourists. It requires Jetstar to develop competitive strategies to
EconomicPolitical
Social Technological

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gain native market share in Australia and other Asia-Pacific regions. Volatility also
remains a concern for Jetstar and other airline players in spite of their increased
profitability as of declining oil prices.
 Social Factors – These aspects of the analysis helps in understanding consumer
demographics and insights together with various cultural factors in the country where
the business has expanded its roots. Jetstar being an Australia nation-wide airline
enjoys widespread public conviction, support and native customer support. While
aligning Qantas and Jetstar with Asia growth, Edensor (2017) also stated that 20 per
cent of Australians trust the group more than they did 4-5 years ago, as per the
Corporate Trust Survey by Acuity. Jetstar under Qantas also has an opportunity to
develop national partnerships in Australia to increase their consumer base.
 Technological Factors – It concerns with the technological development, patent and
information to enrich the customer experience and gain competitive edge in the
respective sector. Jetstar CIO Claudine Ogilvie stated that - Jetstar is centring its
innovation on growth throughout Asia with technology as a leader and enabler to
develop consumer understanding and employee commitment. In addition, the group
2018 annual report also stated that nonfuel costs were condensed by $254 million via
grouping of technology-based revolutions (investor.qantas.com, 2018). With such
strategies and development, Jetstar can raise customer experience more positively.
Industry Life Cycle Process
An industry life cycle represents significant stages where business function, progress,
prospect and fall within an industry (Huenteler et al, 2016). Some of its typical stages include
start up, growth, shakeout, maturity and decline. The Australian domestic airline industry is a
mature industry that has experienced various numbers of shakeout and rebirths since the first

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flew of Qantas. Strong awareness and understanding of industry life cycle enable Qantas to
deploy and foster new products with huge success over the cycle. In the growth phase and
introduction phase, Jetstar with Qantas bring up bigger number of local flights to various
smaller destinations and this offers the Jetstar customer much greater flexibility when
travelled rurally. With its LCC strategies, Jetstar also comes into its growth phase in 2010
with introducing additional 700000 new seats yearly to various popular destinations of
Australia. Similarly, domestic flights to and from the major Australian cities are some of
main examples of service in the maturity phase. The decline phase was revealed in China in
relation with Qantas Group as of stiff China competition forcing Qantas to drop Sydney-
Beijing route (reuters.com, 2019). To maintain its industry life cycle on a positive note,
Jetstar required to change its positioning strategy while focusing on safety, customer service
and operational excellence.
Five Force Model
Rivalry among existing
firms is highly intensive
Threat of New Entrants is moderate
Threat of Substitute is moderate to low
Bargaining
Power of
Buyers is high
Bargaining
Power of
Suppliers is
high

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 Bargaining Power of Suppliers – Airbus and Boeing are both the main suppliers of
Jetstar and not only this, they have controlled the supply of aircraft globally. From a
long time, Jetstar has been using their aircraft and services and their maintenance
crew also have been conversant with Boeing crafts. Hence, it is tough for Jetstar to
shift to a new supplier and therefore, the bargaining power of suppliers is high and for
the same, both Airbus and Boeing can demand for the higher price.
 Bargaining Power of Buyers – Jetstar services and carrier are mainly expanded in
Australia, New Zealand and other Asia Pacific regions and there people who concern
about the price, quality of services, convenience, comfort and schedule, they can have
various alternatives abound. For instance, in the domestic market, Tigerair is the
direct competitor of Jetstar offering similar services as a low cost carrier (Hanaoka et
al, 2014). Hence, there is a high bargaining power in this case and this requires Jetstar
to focus more on differentiation business strategy to attain a larger market share.
 Threat of Substitutes – In case if Jetstar, the threat of substitute product or service is
moderate to low as Air transportation took less time than other transports in any of the
country. Hence, there is no direct comparable substitute, however, travelling via land
or sea can be seen as a substitute but they also do not match the comfort, services and
time-efficient factors. In Australia, the common form of public transportation includes
bus, train, ferry and light rail.
 Threat of New Entrants – The airline sector is highly competitive and capital
intensive and this also results in various sorts of fixed costs and high barriers to exit.
However, for big airlines such as Fiji Airways is not much challenging to expand into
new markets and it was found that Fiji Airways has been growing in Australia over
the past some years, increasing its peak schedule from 23 to 38 frequencies

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(blueswandaily.com, 2019). This will be a threat for the whole Qantas and Jetstar
Group as the company is already facing tough competition from other international
airlines such as Singapore Airlines. Hence, threat of new entrants can be said to be
moderate.
 Competitive Rivalry – Both internationally and domestically, the competition rivalry
is intense and this causing great impact on profitability and revenue of Jetstar. In case
of Australia's, Qantas and Jetstar jointly have 57 % market share by capacity, against
Tigerair's and Virgin Australia 38% (centreforaviation.com, 2019). The role of Jetstar
as part of the dual brand is better recognised than that of Tigerair's, but that is
progressively ramping up, taking care not to rock the capacity boat too much. Hence,
there is intense competition in the Australian airline industry.
Internal Analysis
VRIO Resource Model
In the highly airline competitive background, competitive advantage is not enough for the
accomplishment of any organisation in the long period of time and therefore, Jetstar must aim
for sustainable competitive advantage while having control of its valuable resources. One of
its significant capability is their low cost strategy and part of the Qantas which is one of the
oldest airline globally and a founder of Oneworld airline association, establishing of thirteen
prodigious member carriers. The USP of Jetstar lies in being the “official flag carrier of
Australia with largest the fleet size and having its presence internationally”. Jetstar resources
and capabilities also get strengthen with the resources and capabilities of Qantas Group
where many businesses are part of its subsidiaries.
Jetstar
Resources/Capability
Valuable Rare Difficult to
Imitate
Exploited by
the
Competitive
implication

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organisation
Flight entertainment Yes No No Yes Competitive
Parity
Comfortable seating
for passengers Yes Yes No Yes Sustainable
advantage
Global presence Yes Yes Yes No Competitive
Parity
Consumer bill of
rights Yes Yes No Yes Sustainable
advantage
Low cost approach Yes Yes No Yes Competitive
Parity
Baggage Yes Yes No Yes Sustainable
advantage
Competitive Advantage, Profitability of Company, Value Creation of
the Company
Jetstar Group has distinct competitive advantages that set the airline at a distance from its
competitor. The dual brand approach to segment and grow markets is their first competitive
advantage as together Qantas and Jetstar are taking larger market (57 per cent market share
by capacity) share against their competitors. The next competitive advantage is their
structurally advantaged domestic position which has helped the brand to gain trust among the
customers and end users. Jetstar positioning in Asia with premier Airline conglomerates is
also a competitive advantage for Jetstar in support with its repute for safety and operational
excellence and an iconic Australian brand. In terms of profitability, Jetstar holds a significant
margin advantage (i.e. 15 per cent) against its major competitors such as Tigerair Australia
which is just 2 per cent as of 1H17 (asx.com.au, 2017). Not only in Australia, but Jetstar also
has its other subsidiaries like in Japan demonstrating to be stable and profitable domestic
market with having more than 50 per cent share in the dynamic LCC market. As per Jetstar
2018 annual report, the Group earned $461m underlying EBIT up 11% (investor.qantas.com,
2018). In terms of value creation, Jetstar Group relies upon three main areas i.e. 5x

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incremental uplift on marketing spending, increase sales rate of products so as to earn loyalty
upon customers group and developing its external clients with revenue share and clip of
ticket. It is integral for Jetstar to attain the industry goals and led new business growth
underpinned by further improvements and innovation of the coalition business.

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Functional Level Strategy to increase quality, innovation, efficiency
and customer responsiveness
Qantas corporate level strategy to carry out extension of its air travel services on various
regions and this requires significant level of provision from various functional level of
organisations. The vital role to be played by its significant functional divisions includes
HRM, R&D, sales and marketing and finance. In relation to HRM strategy, Qantas will
continue to invest in its people and use various metrics such as balance scorecard to retain
their performance for a longer period of time. In 2016, there is a highest ever employment
engagement with 79 per cent for Jetstar and to be a reputed Australian organisation, the
company ensures to strengthen its diversity programs like 35 per cent of senior roles in the
whole Qantas group held by women (qantas.com, 2020). Furthermore, there is also a
promotion of leadership and talent integrating with Group-wide succession planning.
Jetstar is also involved in strengthening its research and development division with partnering
Melbourne based Sissit Group and it helped the organisation in various technological areas
such as Jetstar added SMS flight check-in-technology and so transform air travel for the
consumers of Jetstar. It benefits them to exploit electronic check-in-options in relation of self-
service kiosks and web-check at airports. Jetstar together with Qantas Group invests highly in
digital and data marketing to raise their sales capabilities. It was found that 70 per cent of
Qantas marketing media expend in digital networks. The marketing team of Jetstar is also
passionate and they understand the importance of data shows in building a effective
marketing strategy that allows them to work effectively in 17 nations, 70 destinations and 11
different languages (jetstar.com, 2020c). Considering Jetstar financial strategy, its finance
team works thoroughly with the divisions across the business to allow strategic and
operational results and therefore, continue to offer outstanding value to their customers. In
addition, Qantas extended its lead in the corporate market and raised share of the small-to-

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medium commercial marketplace. The constant retrieval in the resources area aided to offset
demand weakness in further areas like telecommunication and finance.

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Conclusion
In the limelight of above discussion, Jetstar is successfully operating in the Asia Pacific
region and partnered with various renowned airlines brand to carry out its business in
dissimilar nations. In Australia and New Zealand, Jetstar Group is own by Qantas entirely
while in other regions, it is operated with other names such as Jetstar Asia, Jetstar Japan and
so on. The Australian political environment is also favourable for Jetstar and helped the
company to extend its maturity stage for a longer period of time in relation with industry life
cycle. In addition, Jetstar is currently using low cost strategy to compete in the highly intense
airline industry, however, to gain competitive advantage, it is necessary for the organisation
to also undertake differentiation approach and practices. Ultimately, the airline also needs to
deploy critical initiatives worldwide so as to ensure its strong position and carry on offering
exceptional value to its passengers.

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Recommendations
Jetstar today operate in various intercontinental routes ferrying holidaymakers from Australia
to Asia and some of selected paths to the USA. However, Japan is current their biggest
growth region as the CEO of Jetstar also stated that low cost carriers have nearly 10 per cent
of the aviation market in Japan and are presenting tight opposition to bullet trains and buses
(Cummins, 2018). Jetstar is also having an opportunity to looks towards China as of rising
middle class signifying sufficient opportunities to develop into tourism trade in the nation.
Considering its future growth plans, Jetstar should also put technology at the centre as airline
industry have low margins and high costs and the organisation can differentiate from its
competitors while focusing on technological investments and digital strategy. Ultimately,
providing consumers with simple but safe travels will also help Jetstar to elevate the
negativity associated with budget brands.

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List of References
asx.com.au. (2017) Investors Day 2017 [ONLINE] Available from:
https://www.asx.com.au/asxpdf/20170505/pdf/43j1n2fsbc9w3p.pdf [Accessed 15/03/2020].
australianaviation.com.au. (2016) AUSTRALIA SIGNS OPEN SKIES AGREEMENT WITH
CHINA [ONLINE] Available from: https://australianaviation.com.au/2016/12/australia-signs-
open-a-skies-agreement-with-china/ [Accessed 15/03/2020].
blueswandaily.com (2019) Australia-Fiji market grows as Qantas takes advantage of newly
expanded bilateral to launch Sydney-Nadi [ONLINE] Available from:
https://blueswandaily.com/australia-fiji-market-grows-as-qantas-takes-advantage-of-newly-
expanded-bilateral-to-launch-sydney-nadi/ [Accessed 15/03/2020].
centreforaviation.com. (2019) South Pacific Aviation Outlook 2018 [ONLINE] Available
from: https://centreforaviation.com/analysis/airline-leader/south-pacifica-aviation-outlook-
2018-411231 [Accessed 15/03/2020].
Cummins, N. (2018) How Big Can Jetstar Grow? [ONLINE] Available from:
https://simpleflying.com/how-big-can-jetstar-grow/ [Accessed 15/03/2020].
Edensor, H. (2017) AUSSIES TRUST QANTAS MORE NOW THAN 5 YEARS AGO
[ONLINE] Available from: https://www.travelweekly.com.au/article/20-more-aussies-trust-
qantas-than-5-years-ago/ [Accessed 15/03/2020].
Hanaoka, S., Takebayashi, M., Ishikura, T. and Saraswati, B. (2014) Low-cost carriers versus
full service carriers in ASEAN: The impact of liberalization policy on competition. Journal
of Air Transport Management, 40(1), pp.96-105.

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Huenteler, J., Schmidt, T.S., Ossenbrink, J. and Hoffmann, V.H. (2016) Technology life-
cycles in the energy sector—Technological characteristics and the role of deployment for
innovation. Technological Forecasting and Social Change, 104(1), pp.102-121.
investor.qantas.com. (2018) Qantas Annual Report 2018 [ONLINE] Available from:
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/
file/annual-reports/2018-Annual-Report-ASX.pdf [Accessed 15/03/2020].
jetstar.com (2020c) Marketing [ONLINE] Available from:
https://www.jetstar.com/au/en/careers/marketing [Accessed 15/03/2020].
jetstar.com. (2020) Jetstar Group [ONLINE] Available from:
https://www.jetstar.com/au/en/about-us/jetstar-group [Accessed 15/03/2020].
jetstar.com. (2020a) Jetstar Group Awards [ONLINE] Available from:
https://www.jetstar.com/au/en/about-us/our-awards [Accessed 15/03/2020].
qantas.com. (2020) Performance against our Strategic Pillars [ONLINE] Available from:
https://www.qantas.com/in/en/qantas-group/delivering-today/performance-against-our-
strategic-pillars.html [Accessed 15/03/2020].
reuters.com. (2019) Qantas to drop Sydney-Beijing route due to competition from Chinese
carriers [ONLINE] Available from: https://www.reuters.com/article/us-qantas-china/qantas-
to-drop-sydney-beijing-route-due-to-competition-from-chinese-carriers-idUSKBN1XM0MQ
[Accessed 15/03/2020].