Strategic Analysis And Recommendations For Innovating Qantas Airlines Business

Internal Analysis

The innovative organizations tend to pursue their discoveries in a timely fashion. Successful organizations tend to create value for their customers. They focus on knowledge development by bring the outside ideas in-house. They focus on the current and potential customer needs to be able to fulfill them (Chesbrough 2003). The critical mass happens when a minimum number of users adopt an innovation, then the rate of adoption increases and the innovation expands and becomes beneficial to the existing and potential adopters (Lee & Tyrrell 2013).

Qantas airlines is among the largest aviation companies in the world, it is devoted to innovation adoption to satisfy the customer needs. The company has been awarded several times for its customer service, care and continues offering of more comfortable services. This report discusses the company internal and external analysis by using different strategic analytical tools as the SWOT and PESTLE analysis. Then it analyses the competitors and the customers. Finally, it provides recommendations for two ways to innovate the business.

Qantas airlines was founded in Queensland in 1920, since then it has witnessed a continuous growth till it became the largest domestic and international airline in Australia. Qantas is considered widely as one of the strongest brands in Australia. Its main business is to offer transportation service to customers through its two brands. Qantas operates a number of subsidiaries as Jetstar and subsidiary business of other airlines and business in specialist markets. It could build an excellence in safety measures, the reliability of operations, engineering and maintenance and customer service. The company employs more than 30 thousand people, more than 90% of them are based in Australia (Qantas Group 2018).?These capabilities have enabled the company to create its core competencies and sustain its competitive advantages as shown in Figure (1).

The SWOT analysis is conducted to show the strengths, weaknesses, opportunities and threats of Qantas airlines. It is considered a strategic tool of analysis, it is represented according to Qantas Group (2017c), Qantas Group (2013), Qantas Super (2017)) and Zhang, Sampaio & Fu (2016), as follows:

Strengths:

• Classified as the world’s safest airline for four years.
• Focuses continuously on improving people’s safety and wellbeing.
• An industry leader in business resilience and crisis management.
• High commitment not only to customer safety, but to the employees’ safety through encouraging them to report any safety hazards openly.
• High investments in the cyber security systems.

Weaknesses:

• Higher labor costs compared to its competitors.
• The separation between the operations of Qantas and Jetstar.
• Qantas commitment to transform its legacy cost base to enable for greater competitiveness.

Opportunities:

• Creation of strong relationships with the key industrial bodies through the commitment to safety regulations.
• Enjoys a high level of trust among its competitors, it has a well-known and respected brand.
• Customer satisfaction is prioritized to profit creation.
• The increasing governmental regulations to protect the domestic market
• The continuous fall in the crude oil prices.
• Delivery of high-quality service.

Threats:

• Further fall in the Australian dollar value.
• The Virgin price leadership policy that obligates Qantas to reduce its prices.
• The price volatility of the domestic aviation market.

Qantas innovation has witnessed several developments in its business life. In 1965, the company has introduced the inflatable escape slide that considered mandatory for safety nowadays. In 1979, the company launched the business class to respond to the needs of the customers. In 2004, Jetstar was launched to provide a full-service carrier to enable the geographic expansion (Qantas Group 2017a). Qantas opportunity maximization and risk mitigation are clarified in figure (2).

External Analysis

Qantas is an award-winning of the first lounges in Melbourne and Sydney with the new Los Angeles First lounge in 2014 this brand enjoys new standards of luxury. Also, it is an award-winning for the exceptional comfort of the fully-flat beds in Business and premium service in the economy (Qantas Alliances 2014).

PESTLE Analysis

The PESTLE analysis will be used to evaluate the external business environment of the company as follows:

• Political: Qantas enjoys a collaborative relationshipwith the Australian government. It follows the highest ethical standards and complies with the law. The year 2016/17 had witnessed important political events represented in electing Donald Trump as a US president and the UK withdrawal decision from the EU. These events had a short-lived impact on investment markets (Qantas Super 2017).
• Economic: The central bank’spolicies had short-term negative effects on the company performance. The listed equities in the local and global markets have yielded high returns. Also, the S&P/ASX 300 has increased by about 13.8% in 2017. The global economy is witnessing a cycling improvement represented in the high corporate earnings and the low-interest rates (Qantas Super 2017).
• Social:Qantas believes that the social and governance factors directly affect its investment, returns, risks and reputation. It shares the ownership rights (Qantas Super 2017). The company is highly committed to the social community. It responds to the right of the society through its continuous efforts to reduce the level of noise (Qantas Group 2013).
• Technological: The technological advances have affected the way Qantas does its operations. The process of booking the flight tickets is fully automated. The company invests in product and service innovation to match the customer expectations (Qantas Group 2013).
• Environmental: Qantas is committed to the environmental regulations. The green team within the company is devoted to the environmental sustainability, they are a group of one thousand volunteers. The team works hard in order to increase the awareness of the environmental sustainability (Qantas Group 2013).
• Legal:The company complies with the legal aspects through its 10 policies that reflect its principles in response to the legal factor. These policies are represented in its code of conduct and ethics, safety and health standards, legal matters, financial policy, review and execution of contracts, environment policy, information technology, security, risk management and business resilience policy (Qantas Group 2013).

The Australian aviation industry is highly developed despite the relatively small size population. The aviation industry annual contribution to the national economic accounts for $30 billion, representing 2% of the GDP. More than 250 thousand people are employed in the aviation industry directly in the airports or indirectly in the industry value chain. The industry has recorded a healthy growth as shown in figure (3). The revenue passengers has increased from 28 Mn. in 1995 to 85 Mn. in 2015 (Zhang, Sampaio & Fu, 2016).

Before 1990 the aviation domestic market was mainly governed by two companies, Trans Australia airlines, Qantas and Ansett. The deregulation of the market has resulted in more competition, reduction in the service prices, increased number of flights and better services. The two major companies did not face a real competition until the Virgin Blue started its operations in 2000. Virgin is the second largest aviation company in Australia after Qantas. The market currently witnessing duopoly between Qantas and Virgin. Qantas had to create a lower cost subsidiary to compete with Virgin. But Virgin has gradually developed its processes by introducing the priority check-in, meals and beverages for premium customers and in-flight entertainment market to extract the corporate and governmental markets. The aviation market in Australia is open and foreign investment could compete in the domestic market through local subsidiaries. The Australian government maintains a sufficient competition in the market. The market is not in a complete competition. Moreover, it is important to consider that the Asian market is influenced by the dynamics of the Australian aviation market. Qantas and Jetstar are the dominants of the market share, but they do not command a price leadership. Virgin offers moderate price and Qantas adjusts its prices accordingly (Zhang, Sampaio & Fu 2016; Fu et al. 2015).

Traditionally, value creation used to occur inside the firm through its activities and in the outside market. The customer has different needs out of the scope of the company. The market is considered as an aggregation of customers and not involved in the value creation process. This analysis represents the traditional concept of the market. This means that the market is company-centric. Customers today are enjoying more choices among the variety of services and products offered to them. Organizations invest in innovation to create a greater variety of products and services to satisfy the diverse needs of customers. Customers are subject to the company value creation of analysis, security and evaluation. Consumers interact and communicate to offer each other alternative source of information and insights. They are allowed to choose the firm they want to build a relationship with based on their choice of how the value would be created to them. The interaction between firms and customers have resulted in value co-creation experience. The relationship between the firm and customers have changed from ‘one way’ to ‘two ways’, and switched from a customer to the firm to a ‘consumer to consumer’, consumers can hunt and they can express their views of choice (Prahalad & Ramaswamy 2004). The flyer attitudes and perceptions are clarified in figure (4).

Competitors Analysis

Accordingly, organizations ask people to come up with new ideas. They seek to attract crowds. The internet has led to a widespread adoption of crowdsourcing. Many organizations could achieve its potential through crowdsourcing. Successful organizations do not wait for ideas to be converted into products and services, instead, they propose the ideas by themselves and then ask people to express their opinion in these ideas. Through this process, the organization creates trust as they grant the contributors the chance to be involved in their innovation (Dahlander & Piezunka 2017).

Regarding Qantas efforts in offering innovative transportation service to its customers, we find that it could develop its innovativeness to stay the most safety flying for over 90 years. It is dedicated the first host in Sydney, Melbourne, Los Angeles, London and Dubai, as it provides an extra level of service to its premium customers. Moreover, it offers many advantages to passengers in case of rebooking misconnect, Fast track immigration clearance and exceptional care for customers in case of flight disruption (Qantas Alliances 2014). The company co-creates value with its customers.

In order to provide an innovative product or service, the organization has a creative intelligence that involves more the cognitive skill of having the right-brain. It aims to create new ideas. Each entrepreneurship has its unique DNA that helps in creating new insights and generating breakthrough business ideas (Dyer, Gregersen & Christensen 2009). If the innovation is able to reach a potential customers, allows them to save more money or offer societal benefits it is considered creating value. It is important that the value is co-created (Porter & Kramer 2015).

The Qantas innovation strategy should specify how the different types of innovation could fit in the business strategy and the resource allocation process. The company could adopt the disruptive innovation strategy by creating technological breakthrough to differentiate itself from its major competitor Virgin. This strategy could take place in upgrading its information management system with continuous upgrades in the future to enable the company to forecast the future trends of the market and the customer preferences (IBM Australia 2014).

Also, it could adopt the architectural innovation strategy that combines the application of a new business model and the technology. This strategy will fulfill the company goals of sustaining its position as one of the largest groups in the world. The new business model and innovation will enable the company to reduce its costs and increase the net revenues (Qantas Group 2017 b).

Customers Analysis

Conclusions

Qantas is considered widely as one of the strongest brands in Australia. Its main business is to offer transportation service to customers through its two brands. Qantas innovation has witnessed several developments in its business life. It is an award-winning of the first lounges in Melbourne and Sydney with the new Los Angeles First lounge in 2014 this brand enjoys new standards of luxury. Also, it is an award-winning for the exceptional comfort of the fully-flat beds in Business and premium service in the economy. Virgin is the second largest aviation company in Australia after Qantas. The market currently witnessing duopoly between Qantas and Virgin. 

The interaction between firms and customers have resulted in value co-creation experience. Many organizations could achieve its potential through crowdsourcing. Qantas co-creates value with its customers.

The company could adopt the disruptive innovation strategy by creating technological breakthrough to differentiate itself from its major competitor Virgin. Also, it could adopt the architectural innovation strategy that combines the application of a new business model and the technology.

References

Chesbrough, G. 2003, ‘The era of open innovation’, MlT Slon Management Review, vol 44, no. 3, pp. 35-41.

Dahlander, L. & Piezunka, H. 2017, Why some crowdsourcing efforts work and others don’t, Harvard Business Review, USA.

Dyer, J., Gregersen, H. & Christensen, C. 2009, The Innovator’s DNA’, Harvard Business Review, USA.

Fu, X., Lei, Z., Wang, K. & Yan, J. 2015, ‘ Low-cost carrier competition and route entry in an emerging but regulated aviation market – The case of China’, Transportation Research – Part A, vol 79, pp. 3-16.

IBM Australia 2014, How Qantas freight transformed customer experience using mobile technologies, IBM , Australia.

Lee, W. & Tyrrell, T. 2013, ‘Exploring the behavioral aspects of adopting technology: Meeting planners’ use of social network media and the impact of perceived critical mass’, Journal of Hospitality and Tourism Technology, vol 4, no. 1, pp. 6-22.

Porter, M. & Kramer, M. 2015, ‘The big idea: You Need an innovation strategy’, Harvard Business Review, vol 89, no. 1-2, pp. 62- 77.

Prahalad, C. & Ramaswamy, V. 2004, ‘Co-creation experiences: The next practice in value creation ‘, Journal of interactive marketing, vol 18, no. 3, pp. 5-14.

Qantas Alliances 2014, Connecting Australia to the world, Qantas Alliances, Australia.

Qantas Group 2013, Qantas sustainability review, Qantas Group, Australia.

Qantas Group 2017a, Innovation at Qantas Group and Jetstar, Jetstar, Australia.

Qantas Group 2017 b, Qantas annual report: Positioning for sustainability and growth, Qantas Group, Australia.

Qantas Group 2017c, Qantas Investor Day Presentation, Qantas Group, Australia.

Qantas Group 2018, Our company, viewed 14 April 2018, <https://www.qantas.com/travel/airlines/company/global/en>.

Qantas Super 2017, ‘Annual report’, Qantas Super, Australia.

Zhang, Y., Sampaio, B. & Fu, X. 2016, Duopoly Competition between Airline Groups with Dual-brand Services – The case of the Australian domestic market, The University of Sydney, Australia.