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Strategic Management

Prepared by Real Assignment Writing


For
[University of Southern Queensland]
[Mahveen Khan]
[u1017503]

Mahveen Khan

u1017503

Strategic Management

Table of Contents
Introduction ................................................................................................................................................... 3
Summary ....................................................................................................................................................... 3
PESTEL Analysis ......................................................................................................................................... 5
Political Factor .......................................................................................................................................... 5
Economic Factor ....................................................................................................................................... 6
Social Factor ............................................................................................................................................. 6
Technological Factor ................................................................................................................................ 7
Environmental Factor................................................................................................................................ 7
Legal Factor .............................................................................................................................................. 8
Five Force Factor .......................................................................................................................................... 8
Suppliers Bargaining Power ..................................................................................................................... 9
Buyers Bargaining Power ........................................................................................................................ 9
Degree of Rivalry.................................................................................................................................... 10
Substitutes Threat .................................................................................................................................. 10
Threat of New Entrants ........................................................................................................................... 11
Strong Management ................................................................................................................................ 12
High Quality Services ............................................................................................................................. 12
Capable Workforce ................................................................................................................................. 13
Customer Loyalty.................................................................................................................................... 13
Effective Management of Cost ............................................................................................................... 14
Conclusion .................................................................................................................................................. 14
References ................................................................................................................................................... 15

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Introduction
This report is based on the case study of Australian Qantas Airlines that is confronting crippling
financial crises from past 12 months. The report starts with the brief summary about industry and
market information to analyze Qantas position in the market. Further, in this report, PESTEL
framework is defined and analyze in terms of organization competing in airline industry and this
analysis is supported with the help of some evidences. The report also includes Five Forces
model relevant to the case study and is supported by the arguments for the company. KSF table
is provided to identify the external forces of industry and particularly of organization for which
arguments are made on the basis of organization. In the end conclusion is provided to summarize
the whole report of given case study.

Summary
The past five years has been turbulent time for the Australian airlines industry with global
economic conditions deteriorating and industry has witnessed major structural changes since late
1990s. The domestic Australian airlines industry was captured by four airlines, but now the
industry has two airlines structure as the Impulse Airlines and Ansett groups subsequent
collapse, which is showing clear signs that the Australian aviation market is entering towards
slowdown (Clark, 2012).
The domestic airline is facing major hurdles as global economic conditions are crashing and also
the consumer confident is falling due to constant threat of terrorist attack and disease outbreak
over the periods and these all things have weighed against air travel demand in Australia. The
Domestic Airlines industry shows strong level of barriers to entry because it the airlines offer
scheduled routes is difficult. The cost of entering the more lucrative commercial routes involve

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high because it craves for more numbers of airlines including the size of airlines to cover each
route. It is observed that although Qantas has major market share but from past few years the
customers are more satisfied by Virgin blue and the airlines has manage to give tough
competition to Qantas (Long, 2008).
Diagram Showing Main Points of PESTEL Analysis

Political
Economic

Environmental
PESTEL
Legal

Social
Technological
Political

Government Policy
Funding & Initiatives

Economic

Social

Inflation
Interest Rate
Exchange
Rate
Culture
Belief
Lifestyle

Intr
Technology

Environment

Legal

Modern
Equipments
Online Service
Web Information &
Communication
Environment
friendly services
Hygienic food
facilities to
customers
and
Rules
and Regulations
employees both
Employment
Law

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PESTEL Analysis
PESTEL is a framework instrument used to investigate and monitor the market and the external
environment factors that can influence the organization and its productivity. PESTEL stands for
1. Political
2. Economical
3. Social
4. Technological
5. Environmental
6. Legal
Political Factor
Political factor affects the organizations and its productivity because the government and its
policy affect economy and businesses. If the policies adopted by government are in favour of
organizations and its business then it helps them to grow and increase the productivity. Political
factors are important for organizations because with the help of it they can gain the idea about
the extent to which government can intervene in the economy. Influence of political factors may
include labour laws, tariffs, tax policy and such other factors.
As per perspective of airline industries, it is analyzed that political factors hold deep importance.
I have observed that stability of political environment is an important factor for airlines
industries, Qantas troubles are increasing because of the political stability and their policy,
corruption and tax rates. As Qantas keep oil control under the organization of the petroleum
exporting countries due to the tax rates the fuel price increases and Qantas profits suffers as

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they provide customers with various discounts and packages to maintain the hold of maximum
market shares in the market (Johnson, 2008).
Economic Factor
Economic factors have major impact on organizations and on its profitable outcomes because it
affects the business and productivity. The factor influencing organization includes economic
growth, interest rates, as well as exchange and inflation rates. It is observed that if government
offers low interest rate more and more investors are motivated to invest in business, which helps
economy to grow in a positive way (Housden, 2010).
Economic issues are another feature of aviation industry, which affects its profits. I noticed that
current inflation is affecting Qantas business, which is leading towards instability of economy.
Qantas Airways is getting affected by economic crises as financial recession is recorded in
Australia. Due to unstable foreign exchange rates the airlines is getting affected as customers are
finding the cost to be high. The Qantas Airlines is facing huge losses from past 12 months and have taken

decision of reduction of employees.


Social Factor
The beliefs and social culture of people also have major impact on the organization as
populations get attracts to the product or services close to their cultures. The social factor
includes the population growth, age distribution and their attitudes. The organization needed to
understand the peoples attitude and then offer them product and services according to their
interest. The social factors have direct impact on marketers as they need to develop the
understanding about the customers and their desire.

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With the help of my experience with Qantas, I analyzed that it has vast range of customers and
their airlines services influences Australian life that is why they have manage to capture major
market shares. Qantas has strong brand identity due to which they have used Australian national
symbol for their marketing. The airlines after getting complete understanding about customer
behaviour offers low cost prices and packages (Baisya, 2010).
Technological Factor
It is important for organization to use modern technologies and keep changing technologies to
improve the quality of product or services because technological factor also impact
organizations marketing and management goals and objectives.
According to me, it is important for airline industries to consider technological factors as it
influence in major ways to business, it is analyzed that Qantas airways has technological
innovated developments. Airlines have bought two new airplanes, which can fly nonstop
between two continents and can lesser the routes difficulty. I have analyzed that Qantas is trying
to maintain its quality by providing high technological services to customers. Qantas facilitates
customers with online booking now; where ever the customers are they can book their tickets via
online (Dransfield, 2004).
Environmental Factor
From last fifteen years the environmental factors impacts have increases on organization because
the customers are now preferring those products and services that are ethical and pollution free.
The government has also start taking initiative to support green products and starting collecting
heavy duties on product or services which are not environmental friendly.

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With the help of my observation, it is analyzed that the Qantas airlines are not providing
environmental friendly services as its wastage of fuel is not dumped properly which is affecting
the environment of the country and Qantas airlines sometimes decreases emission of fuel to
reduce the cost of fuel which is adding in environmental pollution (Alan Fyall, 2005).
Legal Factor
Legal factors also affect the organization because it includes health and safety matters that are
connected by product or services organization is offering. It is important for organization to have
knowledge about legal and not legal in order to do business successfully.
I analyzed that Qantas airlines have able to maintain health and safety rules for customers,
employees, and providing hygienic food to customers. The Airlines has even prohibited smoking
in airlines and in the premises of Qantas (Brian Smith, 2011).

Five Force Factor


SUPPLIERS
BARGAINING
POWER

SUBSTITUTES THREAT

AIRLINE
INDUSTRY

Few
suppliers

Effect on the
profitability
Low threats
Opportunity
Cost

DEGREE OF RIVALRY

BUYERS BARGAINING
POWER

High
Bargaining
Power

Increased Competition

Sales and Promotion

Technology and
Innovation
Higher Cost

THREAT OF NEW
ENTRANTS

Lower
threat

Many Buyers
Value

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According to my analysis about the Porters Five Forces Model related to Airline Industry and
linked to the Qantas Airways I have notice that following components:
Suppliers Bargaining Power
Porters model says that when there are powerful and few in numbers suppliers available in any
industry so it causes reduction in the profit margin of the companies in that industry. Talking
about the bargaining power of the suppliers of Qantas Airways I have analyzed that the airways
supplier bargaining power is high. They have very few numbers of suppliers available for their
aircrafts, fuels, logistics handling and hotels and catering services for their customers and staff
members. The suppliers being in less number have the power to bargain over the prices and
restrict the airline companies to have excessive advantage over them. The airline companies are
restricted to exercise control over them. So, in order to maintain their companys good market
position it is important for Qantas to keep good relations and communications with the suppliers.
If they will be unable to maintain good relation with their suppliers they wont be able to gain a
good competitive edge (Oswald, 2012).
Buyers Bargaining Power
According to my analysis, the expectations of the customers from the airlines industries are
increasing day by day. Customers demand factors such as quality of aircrafts, luxuries,
reasonable prices and satisfaction. The competition of the airline industry is very high. There are
several of options available for the customers to select from. This results in high bargaining
power of the buyers. Qantas flights are based on regular flying program which benefits them in
having loyal customers. But with the growing expectations the customers now demand value on
their spending. Qantas needs to have technological development in order to provide their

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customers with complete value on their spending or else these customers can easily switch to the
rival companies (Ahlstrom, 2009).
Degree of Rivalry
It is observed that the degree of rivalry among the industries takes place when there are many
companies present in an industry which leads to several options to choose from for the
customers. This leads the companies to engage in several factors. These factors can be the
increased competition leading to price wars; where companies reduce their service prices in
order to increase their market shares. It also leads the company to technological development and
innovations in their products and services. Because a companys products and services dont
meet the customers satisfaction then the customers will have the choice to switch to the
alternates. In addition, this intensive degree of rivalry requires the companies to have intensive
sales and promotion of their product and services. All these factors thrust the companies to
increased costs (Fyall, 2005).
As evidence we take the case of Qantas which is facing high competition by its rival companies
which includes some Chinese and Malaysian airlines who offer comparatively lower costs than
Qantas. So, in order to maintain a sustainable position and stand with the competitors it is
necessary for Qantas to keep developing and regenerating its products and services (Fyall, 2005).
Substitutes Threat
Substitutes threat takes place when there are other products and services similar to yours
available in the industry. The customers have a choice to select other products instead of your
product. As observed, porters model explains that these substitutes can be the biggest
competition and threat for an industry as the substitutes can highly affect the profitability of a

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particular industry. In our case, the airlines industry has threat of substitutes like railways, ships
and buses. But the threat of these substitutes to airlines is low and limited in some ways. The
substitutes of airways will relatively consume much more time so much people will forgo
travelling in buses and railways as an opportunity cost (Ahlstrom, 2009).
Threat of New Entrants
Porters five forces model explains us that if the entry barriers of an industry are low, and if the
industrys competition level is attractive it will be easily for a new competitor to enter the
industry. This results as a threat to others that are already competing in that industry. When I
analyzed about the airlines industry I observed that the entry and exit barriers of this industry are
high. The costs of buying or leasing jets are extremely high with few suppliers. The government
regulatory requirements are high along with low profit margins. So, here the chances of new
entrants are very low (Oswald, 2012).

KSF Table
Key Success Factors

External Forces

Impact

Strong Management

Political

Capable Workforce

Economical

Customer Loyalty

Social

Effective Management of
Cost

Technological

High Quality Service

Legal

Create issues while


performing their operations
effectively
Reduction in pay scales
affects the working
capabilities
Change in lifestyle, income
and demographic conditions
affect the customers loyalty
towards service
Use of technology and
software cut down the cost
and increase the efficiency
Ethical conditions must be
considered in setting prices
in order to maintain high
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quality service

These are the key success factors of the Airline Industry along with the forces that impacts these
factors. The five main factors that play the most important role in the success of the Airline
Industry are discussed as follows:
Strong Management
It is at the core for an airline industry to take advantage of everything. Managing the internal
affairs plays a very important role in the success for an industry. An industry is success when
they have hold on their employees. Airline industry should come up with compensatory
programs for its employees, friendly environment, and strict monitoring on the issues that can
harm the organization. They should have strong strategies to increase their profits with low cost
and more customer satisfaction. The corporate strategies of Qantas Airways have an objective of
achieving more customer satisfaction. But as we analyzed the case we came to know Qantas
invested high costs on their advertisements rather than developing new technologies and
innovations to earn more customers. Their customers seemed dissatisfied with the airways
qualities. This is one reason of mismanagement and this gave competitors the advantage over
them and they rapidly gained more and more customers satisfaction.
High Quality Services
The increasing competition in the airlines industry has great impact on the role of the in-flight
services both on the managerial and operational level. The companys success in one way or the
other depends on how much they focus on satisfying their customer. The in-flight service of any
airline company shows the image of the whole company. This is why it is very important for

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airline industry to maintain a good and well developed in-flight service. All the implementations
company establish in their services should meet all the expectations of the customers.
If we talk about the in-flight services of Qantas Airways as our evidence, they were very focus
on providing their customers with complete satisfaction. Gradually with the increased
competition and high rivalry their focus diverted in improving their companys marketing and
advertisement. They invested more on advertisement and less on development which in the result
affect their in-flight services quality.
Capable Workforce
It is observed the capable workforce plays a very essential role in the Airline Industry. Highly
skilled, confident and competence workers are vital for this industry. As these workers leaves an
impression on the minds of the customers about your company. The workers should be trained
enough about how they have to deal with the in-flight situations and also how they have to
communicate with the passengers. Their attitude has to be very much friendly and polite. So,
Qantas Airways conduct different training programs where train their workforce to be more
focused about the customers satisfaction and enhance their abilities and communication skills.
Customer Loyalty
Relating to our case of Qantas Airways the company was highly concerned on keeping their
customers. As mentioned above Qantas programs were based on regular flying strategies to gain
and keep more and more customers and in that way their customers were loyal to them benefiting
the company in attaining a sustainable competition advantage. So, this explains us that it is very
essential for Airline Industries to have loyal customers.

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Effective Management of Cost


It is important for the success of an organization that they must utilize their cost effectively in
order to remain stable in the era of strong competition. I personally observed that there are lot of
organizations particularly service provider organizations are very keen to use appropriate
strategies in order to enhance the efficiency of their operations to the utmost level like Qantas
Airways.

Conclusion
To conclude this report it was analyzed that the PESTEL framework helps organization to
investigate and monitor the market and its environment affecting its productivity. It is consist of
political, economic, social, technological, environmental and legal factors that have direct impact
on organizations. It was observed that Qantas airlines is facing financial crises and have in losses
from past 12 month. With the help of PESTEL framework Qantass performance is evaluated
and evidence are gathered which highlighting the problems where it is lacking behinds. Further it
is was observed that the Five Forces affecting the organization which consist of bargaining
powers of buyers and customer, degree of rivalry and threats of new entry and substitutes. It was
analyzed that the Qantas airline have major market shares but the Virgin Blue airlines is slowly
capturing market share.

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References
Ahlstrom, D., 2009. International Management. s.l.:Cengage Learning.
Alan Fyall, B. G., 2005. Tourism Marketing: A Collaborative Approach. 1st ed. s.l.:Channel
View Publications.
Baisya, R. K., 2010. Winning Strategies for Business. 1st ed. s.l.:SAGE Publications India.
Brian Smith, P. R., 2011. Creating Market Insight: How Firms Create Value from Market
Understanding. 1st ed. s.l.:John Wiley & Sons .
Clark, P. P., 2012. Buying the Big Jets: Fleet Planning for Airlines. 1st ed. s.l.:Ashgate
Publishing, Ltd..
Dransfield, R., 2004. Business for Foundation Degrees and Higher Awards. 1st ed.
s.l.:Heinemann.
Fyall, A., 2005. Tourism Marketing. s.l.:Channel View Publications.
Housden, M., 2010. Market Information and Research. 1st ed. s.l.:Routledge.
Johnson, 2008. Exploring Corporate Strategy. s.l.:Pearson Education India.
Long, S., 2008. The Perverse Organisation and Its Deadly Sins. 1st ed. s.l.:Karnac Books.
Oswald, P. S. L., 2012. Designing and Executing Strategy in Aviation Management. s.l.:Ashgate
Publishing, Ltd.

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