COMPARATIVE AND STRATEGIC ANALYSIS OF QUANTAS AND VIRGIN BLUE AIRWAYS

QUESTION
write
 2500 words
 report

deadline: 26th oct  10 pm sharp

following format

1. title
2. exec summary
3. toc
4,intro
5. 2 companies in aviation industry
5 (a) SWOT and PESTEL analysis ( withlil definition of concept – swot and pestel)  of  company 1
5 (b) SWOT and PESTEL analysis  of company 2

6. differences in them and their startegies
7. recommendation to each
8. Conclusion
9.ref list

SOLUTION

Exec Summary:

In this assignment we are going to know about the two major airlines of Australia: Virgin Blue and Qantas. Then after comparing their strategies we will do the SWOT analysis of both the airlines. Then after judging the advantages and disadvantages of operating in the country like Australia through PESTLE analysis we will find out what policies can be used to gain competitive edge by Qantas and Virgin Blue in the Australian Aviation market.

Table of Contents

Introduction

Two Major Airlines in Australia: Qantas and Virgin Blue

SWOT and Pestle Analysis in General

SWOT analysis of Qantas and Virgin Blue

Differences between Qantas and Virgin Blue and their strategies

Recommendations to Qantas and Virgin Blue

Conclusion

Introduction:

Qantas Airlines

Qantas the major airline company also known as “The Flying Kangaroo” has a wide base in Australia with large number of flights all across the country.It has the honour of being the largest operating Airline in Australia and being the second oldest one all across the world. With its first aircraft Avro504K it was established in 1920 in Queensland. The company provides air transport services both in international as well as domestic markets. It has a low cost segment of airlines which operates separately and is known as Jetstar. The slogan is “Spirit of Australia”.

The key Priorities of Qantas in 2010 are:

• To make Qantas world’s best premium airlines and to make Jet star world’s best low fare air line.
• Maximise the domestic share profit to 65%
• Capitalise the Power of Two Brand Strategy
• Portfolio optimisation and investments too.
• Providing bets time-bound freight services to its customers.( Evans, G. 2010)

There are a whole gamut of services being provided by Qantas like it gives lucrative 9international and domestic Holiday Tours, catering, maintenance, ground handling and engineering services. In order to enhance its operational competency for training it offers group flight training which gives a boost to its infrastructure and makes it more competent. Defence sector also avails it services in the engineering maintenance and aircraft maintenance too. (BusinessReview, Qantas Airways Limited: SWOT ANALYSIS & Company Profile 2010, Business Review, United Kingdom)

Unique Diversification of Qantas:

• Low and Premium Fares
• Business and Leisure
• International and Domestic Flights
• Short and Long Haul

Virgin Blue

Virgin Blue is just a smaller diversion of the huge and giganticVirgin Group which is very dynamic and versatile.  It is one of the smaller concerns of the Virgin Group owned by Sir RichardBranson and has a prominence in the airlines sector all over the world by different names under the flagship of Virgin only. The main group deals into various other sectors too unlikeQantas which are major airliners only. The brand name of Virgin is globally recognized and they have the ownership of diverse range of businesses which are unrelated to airlines and are running successfully.

Unique Diversification of Virgin Blue:

• Smaller and contained population of travellers
• Low cost corporate carrier
• Caters to both backpackers and business travellers
• Frequent business travellers are the most important clientele

Their main mission and value is to provide quality for money, excellent customerservice, be innovative and be competitively challenging and fun. The slogan “Get what you want” clearly indicates that Virgin blue is the major caterer to the corporate frequent travellers or who want to fly at low budget without feeling ashamed. It is operational in the New Zealand, Australia and Australia to south Asia routes with low air fares.

SWOT and PESTEL Analysis

SWOT Analysis:  SWOT analysis defines the “organizational micro” perspective to analyse the organization. It usually starts with defining an objective for the organization and is used while strategic planning for any organization:

Strengths: The unique characteristics of an organization, which are helpful in giving a competitive advantage over its opponents.

Weaknesses:  The definite characteristics of an organization which prove to be disadvantageous for the organization compared to its opponents.

Opportunities:  These are the external likelihoods that an organization has which helps it to make greater sales and earn more profits in the operating environment.

Threats:  These are the external risk which pose a threat and can cause difficulties for the organization. (Jones, R. 2010)

PESTEL Analysis: It isan important tool for analysing the general environment available for the organization in which it has to operate and can be the macro perspective of any organisation. It says that companies can never be separated rather they are always influenced by the external environment. It is mainly used while taking major evaluations or verdicts in case of key risks in front of any organization like while planning a new market or new product or investment projects or possible partnerships. :

Political:  The political environment is the stability of the government of that country, the support government provides to the airlines industry and the trading agreements of that country.

Economic: The economic factors involved are the percentage of unemployment in that country, consumption level and the interest and exchange rates of Australia and the seasonal issues which affect the organization.

Socio Cultural: The social cultural factors are the ethnic and religious issues along with the dynamics of the population of Australia. Education, role of men and women and living standards of people in Australia play major role.

Technological: The technological factors are the usage of latest technology and computer etc. by organization in that country, the connectivity and the change rate of that country which influences the airlines industry in Australia.

Environmental and: Environmental issues which influence the airlines industry in Australia are like emission legislations, green companies, pollution, and consumer perception.

Legal Influences: The legal influences cover the health regulations, price regulationnorms, employment regulation and product standards of the country. (Alviso, R. 2011)

PESTLE ANALYSIS of Australia for Airlines industry

Political Environment

• The trading policies in Australia are diverse as well as internationally good too. It maintains good relationship with its neighbouring countries. It plans to breakdown the trade barriers by following multilateral, regional and bilateral trade policies.Thus both Virgin Blue and Qantas get an opportunity of tapping large amounts of frequent business travellers from all across the globe.
• Since committed Pressure groups are allowed to operate in Australia so the organizations like Qantas and Virgin Blue have to deal with Corporate Social Responsibility factors with great care.The open political system allows them to practice creating awareness amongst public and consumer about the social responsibility and follow ethnic’s rules. Thus they should follow strategies which are beneficial for environment people and discourage unethical activities.
• Australia has prominence of high pressure groups, so it is the responsibility of airlines to consider international issues so that their everyday functionality does not damage their culture, or break international laws.
• Since Australia is not exercisingstrained relations like war with any country or within the country so the environment is good for airlines to operate.That is why Australia has huge bulk of travellers which are both business class travellers as wellas leisure trip travellers.Thiswill give Airlines to earn big revenuesform the frequent travellers to the country.
• Since the government is not changing frequently andlasts longer, airlines have medium impact because of this stability. Airlines industry gets time of three long years to change when the new government will come in power. Restrictions on Capital ownership in Australia will have negative effect on the working policies and the investors will turn negative.

Economic Environment

• The unemployment is growing at rate of 5.7% and the economic growth has decreased by less than 1%, this will have negative effect on the frequent fliers of Australia. Thus the situation is not favourable inside or within Australia where the lifestyle is deteriorating along with the economic activities of the people.
• There is wide range of taxes levied in Australia :

Sales tax-10%

Corporate rate Tax- 30% competitive

Progressive Income Tax

Pay as you earn tax

All these taxes levied are quite competitive just like New Zealand and Thailand economies so the airlines get a beneficial operational environment to operate in Australia.

• Seasonal play vital role in affecting airlines industry, but Australian Climate is quite favourable in thatsense with just very few weather related problems in Southern Australia.
• The market and Trade Cycle follows the global trend, sob the airlines can match their global trends while operating in domestic market too.
• Free Trade Agreements with Asia and Pacific countries give sit wide range of frequenttravels from this part of globe.
•  They can fund their daily operations and get loans at lower rate of interest in Australia because the rate of interest is as low as 3% in Australia.
• The disposable income out here as per 20097-2008 is

Upper level: $811 per week

Middle level- $699 per week

Lower level- $ 44 per week

Thus the airlines have the opportunity to tap these lower disposable income people which p[refer to travel with low cost airlines rather than high disposable income one who want all the luxuries on flight while travelling although they are willing to pay more.

• Since the unemployment rate is very low so there is problem for Qantas and Virgin Blue to get skilled, trained and high experienced employees, they need to use other sources to get better and skilled manpower.
• The stable exchange rate of Australian Dollar gives long term stability and favourable environment financially for Virgin Blue and Qantas to work in.
• The exports are higher which gives more opportunity to airlines to get frequent travellersfro business purpose as well as freight transfer will be more.

Social environment

• Qantas and Virgin Blue can use higher impacting Mass media in Australia for tapping future new consumers and exploit the higher reach of this media.
• The diversity of religion has very less effect on airline travellers so airlines  can go for slight modifications in them
• The market structure is quite favourable for the both the airlines due to larger and homogeneous race of people and nuclear families staying in the country.
• The highlyeducated people in Australia demand extensive and detailed information about the services and products.
• Airlines can capitalize by capturing new markets and fresh customers with increasing number of immigrants.
• Less prone to disease and good health conditions guarantee lesser leaves of absence from work thus good productivity of employees working for airlines
• The higher purchasing power parity of Australians makes them buy Full Flight services which are easily available with Qantas and Virgin Blue and the low cost carrier like jet star will not be able to tap this market.

Technological Environment

• To be more competitive and increase productivity in internationalenvironment the airlines can make use of research and technology developed in Australia.
• Airlines like Qantas and Virgin Blue should try to become more efficient and effective by using efficient energy saving fuels instead of oil or electricity. Australia has good resourcesof energy so they would not face any problem in future too regarding energy availability.
• The better information and communication system of Australia gives good access and easy ways of reaching customers like sales through SMS or internet.

Environmental Factors

The bio diversity, national parks,balanced eco system and several ecological prospects make it a very lovable tourist destination which will directly help airlines like Qantas and virgin Blue.They can tap big base of foreign tourists as well as domestic travellers. They should design policies which do not have negative impact on the environment al issues of Australia.They should design usage of recycled thing in the airlines ;like recycled paper, plastics and bio fuels etc., which will helpful in befitting the key environmental issues of Australia.( iamkushal, 2010)

SWOT Analysis for Qantas

SWOT Analysis for Virgin Blue

Strategies followed by Virgin Blue

• In order to make it low cost airlines they:
• Eradicated in-flight meals
• Eradicated printed tickets
• For Flight booking use telephones and internet
• Food is sold on board in the flight
• The number of airports which are serviced have been limited
• Just one type of aircraft that isBoeing 737 are operated thushelpingin reducing maintenance cost.
• Employees are paid lesser as compared to other airlines, but are rewarded with good incentives on sales on board flight and performance.
• Targeting towards establishing Virgin Blue as the lowest air fare airline
• The frequency of point to point short haul flights is numerous
• The operating cost is reduced
• They follow internet booking facility
• Trained pilots to offer safest and quality maintenance

Strategies followed by Qantas

However Qantas follows the strategy of product differentiation

It provides in flightmeals

It works as full service airline

They have the strategy of assigning seats

They offer premium level of services

The baggage checks in can be done online too so no need to wait for check in and reach airport earlier

Since it is owned by native Australiancompany it gets competitive advantage over other airlines like Virgin Blue.

The financial position is also very strong as it is owned by Australian company only.

It is working on renovating its business class services as it wants to target the business class exclusively also.

Recommendations

For Virgin Blue:

They should think about introducing Frequent Flyer programs for its repeat customers.

They should work upon better services too, not just targeting lower cost

Since they have strong financial backup from Virgin Atlantic they are becoming more dependent on the profits of Virgin Atlantic which should not be the case, they should try to create their own profit identity.

They need to improve theircustomer service on flight as there have been many complaints about them.

They should inculcate somestrategies which are related to corporate social responsibility.

For Qantas:

They should develop better communication standards to give r4egular updates about the flights

The social media response should be more engaging

The relationship between the employees and the unions should be interactive and considerate one.

The business plans before execution should involve everyone’s input from all the departments.

They should work on strategy of deriving greater sharing of the wallet schemes.

They should make themselves more technologically advanced.

They should give some free miles for people who travel and make their flights carbon emission reduction.

Loyaltycards can be made for their customers who travel frequently

Conclusion

After going through the political, economic, socio cultural,technological, environmental and legal factors of Australia,the conclusion can be drawn that for the airlines industry itahs very cooperative environment. The lower tariffs and the duty free policies make it easier for the foreign airlines also to operate very easily in Australia. The competition is healthier and thegovernment makes it sure that the all the airlines follow proper legal aspects which are applicable in the country while protecting the rights of the employees working in the airlines.

SWOT analysis here suggests that Qantas is more viable and heads the competition by being the local operator, but Virgin Blue enjoys strong financial backing from Virgin Atlantic, but lags behind in competition.Both of them should do a value chain analysis and work on theirthreats and utilise the opportunities to get ahead in the market and earn greater profits in the business friendly environment of Australia.

References

• Alviso, R. 2011, Pestle analysis, slideshare.net)
• Evans, G. 2010, Qantas Group Strengthening the business, Australia)

• iamkushal, 2010, PESTE Analysis on Australia for Air Asia Airline, Scribd.com viewed form http://www.scribd.com/doc/35280009/Pest-Analysis-for-Australia
• Jones, R. 2010, Week 10 SWOT & PESTEL, slideshare.net
• Salama, A , Competitive Strategy, Strategic Pr0ject management,Scribd.com

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