Macro analysis
According to Kotler as quoted in Jain, Trehan & Trehan ( 2005, p.10)macro environment includes forces that create opportunities and pose threat to the business units. It includes economic, demographic, natural, technological, political, and cultural environments. In this assignment, we look at these factors regarding Qantas an Australian airline as part of a wider analysis for the company.
- Economic analysis, this analysis puts into consideration the economic cycles which affect the general Australian economy thus inevitably affect Qantas Airline as well. One of the most notable economic effects was the recession; the recession contributed to multiple job losses and reduced the spending power of the people as these had less discretionary income resulting from pay cuts and increased cost of living. This greatly affected the number of people opting to travel. The overall effect of this was lesser revenue for Qantas which had to ground some of its planes; this however was the scenario with all airlines that had to do with a lesser number of customers than was the norm. Another economic factor affecting the airline was the rise in oil prices. Airlines are highly dependent on fuel and any increase in oil prices greatly eats onto the company revenues. For Qantas airline however the effect of oil prices was considerably reduced following hedging contracts initiated by CEO Dixon which ensured the company bought its fuel at half the going price (Hanson 2010).Besides these negative impacts of the economy the airline stands to gain from increased dispersal of wealth across Europe which requires that investors travel constantly. The other factor is infrastructure development which makes it attractive to travel by air; there are also benefits from the strengthening of the Euro which is likely to prompt more people to travel.
- Technological factors, technology advancements are mainly tailored towards costs saving and improving efficiency. However, it is not possible to control advancement in other sectors which to some extent affects the ground covered by advancements in the airline industry. One of the positive technological strides is a design of better planes that consume less fuel and achieve a higher speed of travel, this ensures efficiency and cuts on airline costs. Green technology has also more consumers opting for a means of travel that has little or no effect on the ecosystem. Also, the growth of internet usage has enabled travelers to book online which is convenient. Other advancements include self-check-in which has reduced the overall time travelers have to spend on security procedures, technology has also made it possible to access the internet and make calls on board, something which has made the airline industry more attractive. Technology, however, has not been all good for the industry as the development of teleconferencing has reduced the need for travel, also development and awareness on the use of GPS has helped people travel on their own, reducing the number of people who would have used air travel.
- Political legal factors, among the most notable factors, is industry deregulation which has made it possible for foreign carriers to use foreign airports with less preferential treatment, political intervention during looming or actual financial crises has ensured airlines remain operational by providing the much needed financial support. Also, development and acceptance of democracy in countries that were once communist has opened the travel market, one cannot fail to notice improved cross-border relations which have eased travel. The political field has also had some negative bearings on the industry such as privatization of airlines/airports which has increased costs to be borne by foreign airlines, increased insecurity resulting from terrorism threats or attacks has made air travel look riskier and this to some travellers is unacceptable and lastly boycotting of airlines due to association with global warming has led some people to opt for other means of travel.
- Socio cultural issues, there are multiple socio cultural factors which have both increased the prospect of the travel industry players as well as factors affecting the profitability and growth of the industry. Starting with factors positively impacting on the industry, one is expectation of service quality for as long as airlines adopt their services to meet the expectation of travelers then it is apparent that they are going to grow. The increasing age of people is also a factor ensuring growth of the industry, thus population travels more and seeks faster means of travel to reduce inconvenience. An increasing number of young people travelling either as a group for fun or for educational purpose, either way this increases the prospect of the industry given their large population. There is also a growing trend of family holidays to get away from hectic and monotonous environs. Socio cultural concerns for the industry include obesity issues, safety and security concerns as well as increasing concern for the environment.
- Environmental issues include shortage of land which has made it difficult to develop new airports and expand existing ones; this increases competition for existing ones which increases the gate prices, association with noise and air pollution. Most people associate planes with noise and are willing to avoid them as much as possible. Flight paths and airport curfews are being established as a result of increasing community complainants on noise levels caused by planes especially during the night. There are however environment factors which have or will increase the attractiveness of air travel among them is development of alternative fuel which will greatly reduce costs associated with fuel and carbon trading which is bound to greatly help in development of green plane which will improve conservation and will make it easy to market the industry.
Industry analysis
- The global airline industry has leaped from globalization and expansion of global trade and tourism. The potentiality of the industry remains high given, changing of trends and increased need for travel (Hanson 2010). For instance the increased need for travel by young people is particularly interesting given the high population of this group. Looking at these trends would convince one to get into the industry, but the fact remains that multiple other factors should be considered before a decision is reached most of which are considered in this analysis. Awareness of the industry is not only essential to potential entrants but also to existent players as it provides them with a chance to strategize.
- As the industry stands now, the success of a player will depend on how well they read the demographic backgrounds and the changing patterns in world population (Hanson 2010). Besides population these players must be in a position to look at other factors such as the economic prospects of their target markets as the population must be coupled with an increasing or stable economic growth which would ensure income growth for this population.
- Besides these signs indicating greater potential for the industry they must also look at factors threatening the industry. As communicated by the International Air Transport Association the industry stood to loose $9 billion in 2009 as a result of global recession. Besides these economic factors, the industry must also brace for increased competition as the number of airlines increases daily. By the year 2009 Skytrax had 620 airlines under it while IATA had 230 members. These numbers have increased to add to an already crowded market. All of these airlines offer competitive services and there is very little to differentiate their services. There is also very little sustainability for core competencies as these are easily duplicated by competitors.
- The other major concern for the industry is the suppliers, as the situation stands currently the world has two capable plane manufacturers, Boeing and Airbus and airlines have to depend on these to deliver planes which are in demand daily making it difficult to expand fast.
- The Industry is also affected by uncertain fuel prices. This is because the entire industry is dependent on the same sources of fuel sometimes affected by political unrests and economic downturns raising the cost. This is well illustrated by the fact that the industry lost more than US$10 following the unprecedented increase in oil prices in 2008.
- Another characteristic of the industry is the speed at which new planes are developed, the plane suppliers have to bear with operations on a fast cycle industry which has enormous R&D costs. The industry players have also to maintain relevant fleets with new aircrafts coming out continually from the two major manufacturers. One of the factors that necessitates pace in adoption of new aircrafts is that manufacturers are continually making improvements to ensure efficiency and respond to global concerns such as global warming. Failure to keep up in the industry may result to loss of market share as travelers avoid airlines which do not respond to calls of green technology.
Internal analysis
An internal analysis of Qantas will be divided in two categories tangible and intangible. Under tangible we will look at financial, physical, organizational, and technological aspects while intangible we have reputational human resources and innovation.
Tangible
- Financially Qantas airlines remains as one of the most profitable airlines globally, in the year ending 2008 the company recorded A$1 billion and even though the profits reduced in the following year to about A$100 million the company still retained its status as this was a general trend following the recession. Before this year the company profits had been increasing steadily. Its cash flow also remains steady boosted by other investments made by the company.
- Physical, Qantas depends on national airports both in Australia and international, though it has plants where it operates its other businesses such as its baggage handling business and passenger lounges. It has also established tourist destination in Europe which adds to its physical properties.
- Organizational, the company has a CEO at its helm and a Board. Qantas employees are organized dependent on their responsibility in the company; the company has also work teams divided into natural work teams, process operating groups, and plant leadership groups.
- Technological, the company has established technological systems which have enabled it compete successfully in technological businesses such as check in systems; it has also an established online booking system.
Intangible
- Reputational, Qantas has a strong brand presence in Australia and this is further promoted by its rankings under Skytrax survey which have favorably ranked the company as one of the best in the world. It has also continually met the needs and expectation of its clients as evidenced by its awards for in flight entertainment and catering.
- Human resources, the company has a reputation for best employee handling. Even though this came under criticism as a result of outgoing CEO Geoff Dixon attempt to save money by antagonizing Qantas engineers and baggage handlers, the current CEO Alan Joyce has done quite much to establish a cordial employee relationship and offer development opportunities for the workforce (Hanson 2010).
- Innovation, this one area that Qantas seem to be ragging behind with no recorded or instances of innovation activities.
- Strategic alliances, Qantas has established some beneficial alliances as evidenced by its attachment to the Oneworld frequent flyer organization. Another telling alliance is its merger with Jetset to form a vertically integrated travel business which has ensured former clients of Jeset travel with Qantas.
Capabilities
- Vision, the company has no stated vision but one can tell they have in place strategies that guide their operations as is demonstrated by their performance in the industry.
- In terms of product, Qantas lacks a distinguishable or unique product as their services are a reflection of similar services offered by competitors. Their major advantage is the established brand name and continuous investment in quality services.
- Customer service, Qantas has well build relationship with its clients which ensure they continually fly with the airline. They also have specialized services for clients who may require specific needs.
- Successful implementation of acquisition, the company has in the past completed acquisitions successfully the major one being that of acquiring Jetset travel world. This has improved its earnings and put it at a better position to compete.
Reference list
Hanson, D 2010, Qantas in the global airline industry, 2010, University of Tasmania, Newnham.
Jain, T, Trehan, M and Trehan, R. 2005. Business environment. FK Publications, New York.