1. Perform a five forces analysis for the traditional airlines. How would you assess Qantas’ ability to address the limiting (or detrimental) factors in the industry?
Five Forces Analysis
Threat of New Entrants
The airline industry has moderate threat in terms of new carriers entering the industry, especially from the Asian sector. Even then, the knowledge and costs of entering the market are significantly higher. Any new airline attempting to enter the airline industry would need significant investment of building its customer base and infrastructure.
Buyer Power
In terms of buying power, the airline industry grew to $564 billion in 2008 displaying the high power held by the customers (Pangarkar, Bapuji & Loader, 2011, p. 236). The market is highly price sensitive as the majority of the customers always look for the cheapest airfare. Finally, buyer’s can always shift to competitors, something that has Qantas has witnessed in the past few years (Pangarkar, Bapuji & Loader, 2011, p.235).
Threat of Substitutes
There are several substitutes of Qantas available in the airline industry, which varies in the type of carrier. Qantas and its LCC operators already face significant threat from regional, national and international carriers; all of them act as their alternatives. Therefore, Qantas is operating in an industry with high threat of substitutes (Pangarkar, Bapuji, Loader, 2011, p. 237-38).
Supplier power
The suppliers (airlines) have significantly low power in the industry as customers have several alternatives to choose from in regional, national and international market. With several competitors in the industry, Qantas has to provide the best possible services and cannot increase their prices without changes made industry wide. An increasing number of alternatives means customers can easily switch to other airlines.
Industry Rivalry
The industry has several competitors in regional, national and international market. Also, there are increasing numbers of LCC (low cost carriers) who offer great discounts to customers, making Qantas’ LCC (Jetstar) face high industry rivalry. Customer loyalty is moderate as they are always looking for the best deals and lowest prices.
Qantas’ Ability
Qantas already has a well developed operation in national, international and cargo market of the airline industry and it has a strong historical repute as the flag carrying Airline of Australia. Qantas also has several internal weaknesses that have been hurting their potential to address current issues in the industry. They have a bad reputation among customers, have failed to adapt to the changing market and only serve major centers outside Australia. But, the future can be positive if they make few changes and take advantage of deregulation. Their first class service has been in continuous decline, but emerging markets focus on the middle class and budget airlines. Qantas can also form an alliance with Air Asia on the load sharing basis and take advantage of their continuous growth. In terms of threats, there are several threats from LCCs such as Thai airlines, Tiger airlines, Virgin Australia, etc. In addition, the presence of major players such as Lufthansa and Star Alliance is also hurting their business. Finally, history of union strikes has also been a major threat for the Qantas as they have experienced the perils of worker’s despair (Pangarkar, Bapuji, Loader, 2011, p. 239-58).
In order to address the challenges they face in the industry, Qantas needs to make serious changes in their current operation. First of all, they need to change customer perception about the company, add more service hubs internationally and upgrade their first class service. They also need to overcome their weaknesses by sending threat from the worker’s strike and form alliance with Air Asia to compete with other airlines. They also need to take advantage of deregulation that has weakened their business potential for years and by entering emerging markets. Overall, in terms of the current scenario, Qantas needs to make large scale changes to start competing and sustain their market presence.
References
Hill, C. W., & Jones, G. R. (2009). Theory of strategic management with cases. San Louis, MO: South-Western Cengage learning.
Pangarkar, N., Bapuji, H., & Loader, B. (2011, October 5). Qantas: Which Route Out of the Turbulence? Ivey Publishing, 9B11M068, 235-258.
