The Australian Airline Qantas: VRIO Analysis

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Introduction

The company’s capabilities and resources are a critical element to be analyzed when preparing an outline for a new marketing strategy. They form the business’s internal capacity, its skeleton, which carries the main body of the operational, external sphere of the company’s business activity. Company resources and capabilities may include built, cultural, financial, human, and natural domains. This paper aims to analyze the resources and capabilities of the Australian airline Qantas using the VRIO framework.

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Organizational Info

Qantas Airways Limited has an outstanding 65% share of the Australian domestic market and a 31% share in international air travel. The most common international destinations are the US, UK, and Oceania (Xian, 2018). Qantas also connects the Chinese and Thai markets with the US market providing air freight services operated by its subsidiary, Qantas Freights (Baxter et al., 2018).

Qantas is one of the world’s oldest airlines and was founded in 1920. Its name is an abbreviation for Queensland and Northern Territory Aerial Services since, initially, air transportation was carried out in these country’s directions. Notably, Qantas has been operating international passenger air travel since 1935. Today, Qantas owns subsidiaries founded in response to changing market conditions to maintain a competitive edge. The state actively cooperates with the company, helping it remain number one in the Australian domestic market.

Theoretical Framework

An analysis of the internal organizational environment, specifically its resources and capabilities, is best accomplished using the VRIO assessment model. In this model, V stands for the value, R – for the rarity, I – for the inimitability, and O – for the organizational quality of the businesses’ resources and capabilities (Smith, n.d.). Experts suggest that companies should use the VRIO framework to analyze the internal environment because it helps to acquire a broader and deeper vision and understanding of the relevant issues the business is currently facing. In general, the VRIO model is applied to ensure that company has a sustained competitive advantage when all four measures have satisfactory results.

Companies are free to decide on measures to be analyzed through the VRIO model. Resources and capabilities that will determine competitive sustainability may belong to various domains: built, cultural, financial, human, and natural. The built domain includes physical assets, including material infrastructure and assets. The cultural domain includes how people understand the world and interact with it, their history, and traditions; it can be evaluated by differences in how the business operates in various places.

The financial domain includes the money or wealth that facilitates productivity and is measured by profits, stock gains, and capital gains. The human domain is the skills and capacities of people (employees, customers, and partners) that make them feel and act in a particular way; it should be assessed through intellectual capital, management capacity, educational qualification, and knowledge. Finally, the natural domain reflects resources like water, land, organisms, which provide the social benefits in ecosystem services or bring aesthetic pleasure; this is the environment where the business operates.

The first question in the VRIO framework is, “Does the organization’s resources and capabilities create value for customers?” The answer is yes: Qantas has developed a sound built resources network, including three airports, huge plain parks, partnership with the catering services, and incentive programs for customers, like discounts for staying in hotels and using Uber services, Airbnb, and the point accumulation program.

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Then, the second question is, “Does the company control scarce resources and capabilities? Does it own something hard to find, yet in demand?” (Smith, n.d.). The answer is no: Qantas is the number one airline on the domestic Australian market with a 65% market share, and it does everything possible to keep this market share. However, it constantly faces fierce competition from other market players both in domestic and international markets. Qantas has lost its position in the Asian market after it had to close its subsidiaries Australia Asia Airlines, in 1996 and, recently, Jetstar in Vietnam in 2020. Hence, the company should pay more attention to the international market regarding diverse customer services and create a rare, unique market proposition.

The next question is, “Is it expensive to duplicate your organization’s resource or capability? Is it difficult to find an equivalent substitute to compete with the organization’s offerings?” (Smith, n.d.). The answer is yes: Qantas owns a business that is hard to replicate due to the high costs of the airplanes and hard to substitute due to the unique qualities of the planes that fly in the air at the highest possible speed. Australia has a relatively weak road infrastructure and considerable distances between the main cities to cover. Hence, the domestic market creates a unique demand for air travel and remains Qantas’ priority.

Finally, the last question is, “Does the company have organized management systems, processes, structures, and culture to capitalize on resources and capabilities?” (Smith, n.d.). The answer is yes: Qantas proved to have a sound organizational basis and effective management systems, which empower its whole business. However, due to the COVID-19 restrictions, Qantas reportedly lost $1.08 billion and had to fire 6000 of its 29000 employees, which was a tough decision (Brown, 2021). Therefore, there is a threat to organizational capacity, as large-scale layoffs reduced the current employees’ level of trust. In general, since Qantas does not meet the standard of having rare market resources and capabilities, it cannot provide a sustained competitive advantage but only has competitive parity.

Discussion: Implications for Sustainability

Given the performed analysis, Qantas should pay attention to the “R” measure of rarity and “O” measure of organizational capability. For now, the rarity is ensured by implementing the low-cost Jetstar and other subsidiaries like Qantas Freight, QantasLink, and Jetconnect, allowing for a variety of services. The rarity is also created through the Frequent Flyer program and Qantas Holiday business. The company also participates in campaigns to protect the rights of the LGBTQ community.

It implements the Qantas Project Sunrise, which launched the two longest nonstop flights, Sydney-London and Melbourne-New York, lasting 17 and 19 hours (Curran, 2020). The organizational capability should be supported by creating programs for employees who were fired during the COVID-19 pandemics and the previous periods of unfavorable economic turbulences. If Qantas considers itself a socially responsible business, it must provide severance pay for the 6,000 employees it has laid off in recent years (Brown, 2021). Such a move will improve Qantas’ image among its current employees and create a safer internal environment.

There are also some additional recommendations from experts regarding the Qantas competitive strategy. Firstly, experts determined the customers’ bargaining power as one of the most critical competitive forces. Noteworthy, Qantas’ strategy of aligning the internal environment is already focused on satisfying the customers’ needs and demands by applying the Frequent Flyer and accumulating points programs (Xian, 2018). Supplier’s bargaining power, which is the oil prices, was also identified as an important competitive factor (Xian, 2018). There were times when Qantas found itself racing with the Virgin Blue low-cost, which inspired the company to create its own low-cost rival Jetstar (Xian, 2018).

Scholars admit that, although Qantas fought back its market positions, the race provoked the longstanding price war, which could be bad for business (Ma et al., 2019). Other experts also admit the importance of maintaining the competitive advantage among the low-cost air carriers (Raynes et al., 2019). Therefore, Qantas is already implementing two essential marketing strategies – in the field of customer attraction, retaining and satisfaction, and in the area of the low-cost competitive market.

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Conclusion

Thus, the analysis of the Australian airline Qantas’ resources and capabilities was provided using the VRIO framework. The company meets V, I, and O standards but should pay more attention to overcome the rarity barriers. Qantas should seek ways to create a unique market proposition and suggest even more new programs. The Jetstar low-cost, Frequent Flyer program and Qantas Project Sunrise are examples of how the company is tackling the challenges of a reasonably homogeneous air travel market. Qantas should also pay more attention to employee loyalty, and it was advised to pay social benefits for 6,000 employees laid off in recent years due to unfavorable economic conditions.

References

Baxter, G., Srisaeng, P., & Wild, G. (2018). The role of freighter aircraft in a full-service network airline air freight services: the case of Qantas Freight. MAD-Magazine of Aviation Development, 6(4), 28-51.

Brown, V. (2021). Qantas reveals a staggering $1 billion six-month loss. News. Web.

Curran, A. (2020). Qantas Project Sunrise: everything you need to know. Simple Flying. Web.

Ma, W., Wang, Q., Yang, H., & Zhang, Y. (2019). An analysis of price competition and price wars in Australia’s domestic airline market. Transport Policy, 81, 163-172.

Raynes, C., & Tsui, K. W. H. (2019). Review of Airline-within-Airline strategy: case studies of the Singapore Airlines Group and Qantas Group. Case Studies on Transport Policy, 7(1), 150-165.

Smith, R. (n.d.). Explaining the VRIO framework (with a real-life example). Web.

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Xian, W. (2018). Case study on Qantas of ITS strategic management: the high flyer of the airline industry.

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BusinessEssay. 2022. "The Australian Airline Qantas: VRIO Analysis." November 30, 2022. https://business-essay.com/the-australian-airline-qantas-vrio-analysis/.

1. BusinessEssay. "The Australian Airline Qantas: VRIO Analysis." November 30, 2022. https://business-essay.com/the-australian-airline-qantas-vrio-analysis/.


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BusinessEssay. "The Australian Airline Qantas: VRIO Analysis." November 30, 2022. https://business-essay.com/the-australian-airline-qantas-vrio-analysis/.