Qantas Case Study

Week 3 Qantas Case Study

1. Analyze the competitive forces facing Qantas,  using the ‘ five forces’ framework from the strategy literature. Evaluate Qantas’ prospects for profitability and growth in the next five years.  

Rivalry among Existing Firms: High

In domestic market, rivalries of Qantas are Virgin, Tiger Air, Jetstar and REX. Virgin has significantly expanded its operations both domestically and internationally, limiting growth for Qantas and creating downward pressure on prices and yield.

In International market, there are many airline companies from all over the world, such as Emirates, Virgin Australia and Air Asia. Airline based in these countries may be the airline of first choice for these passengers. Competitive pressures are building through an increase in capacity to Asian and European market, particularly from Singapore Airlines and Emirates.

Threat of New Entrants: Low

The barrier to enter in airline industry is very high.  It needs license and regulation to enter in.  The costs and technology to enter in airline are vey high. The economy of scale is massive.

Threat of Substitute Products: Low

In domestic, other types of transport are not connected to everywhere. Sometimes it takes a long time to travel without taking the airplanes.

Due to Australia’s geographical isolation, the overwhelming majority of international passenger traffic arrives and departs by air.

Bargaining Power of Buyers: Median

As there are an increasing number of airlines, individual customers have more choices. Qantas needs to sell discount tickets to appeal more clients.

Travel agencies have more bargain power than individual customers.

Bargaining Power of Suppliers: High

There are few airline manufactures all over the world. The manufactures take a advantage of high technology.  The labor suppliers like pilots are limited.

In summary, there is evidence of modest growth in the two major industry markets in which Qantas operates: international and domestic passenger transport. However, both segments are subject to volatility, dependent on economic conditions and major world events. The overall outlook for passenger numbers for Qantas is therefore limited by increased competition, both domestically and internationally, with likely increased pressure on prices. The prospects for profitability improving are low.

1. Identify the limitations of this analysis. What other factors do and could affect Qantas’ competitive environment?

• Travel regulations and relationships between Australia and other countries. For example, if 10-year travel visa will be approved between Australia and China, there will be increasing number of Chinese travel to Australia.
• Government regulations: If government restrict or regulate the airline industry, it may affect Qantas’ competitive environment.
• Currency: If Australia dollars goes up, people will consider about the cost to travel to Australia.

1. Discuss Qantas’ competitive strategy since 2000. Is it successful, and is it sustainable?

Qantas intends to increase its revenue by increasing its volume of passengers and associated passenger revenue over the period 2000-13. A key revenue strategy pursued by traditional airlines such as Qantas to maximize yield has been to segment the market on the basis of a client’s price elasticity of demand.

Qantas intends to continue a program of upgrading its fleet with the introduction of the Boeing 787 aircraft into service. It can target destinations beyond Los Angeles and appeal to more customers.