Strategic management is all about the strategies and plans as devised by organisations in order to successfully accomplish their desired goals. In performing the development of strategies, the strategic managers are required to consider various internal as well as external environment factors because these factors have a direct impact on the performance of the organisation. In this strategic management assignment, the organisation selected in performing its strategic analysis is Qantas Airline. The airline is known as the flag line carrier of Australia and has been known as the most premium airline providing air travel services internationally. The major areas that will be covered within the analysis of Qantas Airline would be its external and internal environment and the ways in which they impact the operational performance of the airline. The analysis will mainly based on important strategic tools such as PEST analysis, strategic review of existing business practices of Qantas through resource based view analytical tools, value chain analysis etc. Finally, the challenges faced in implementing these strategic tools will be analysed to conclude this strategic management task.
External Environmental Analysis of Qantas
The external environment as faced by most of the firms is highly turbulent, complex and global and to effectively deal with such difficult environmental situations, most of them engage in external environmental analysis (Hoskisson, Hitt and Ireland, 2008). However, an effective understanding of external environment can become possible through undertaking PEST analysis which stands for political, economical, social and technological factors. The external environmental factors have direct bearing on the performance of the firm and the strategies and tactics as adopted by them are highly influenced by the external environmental conditions (Henry, 2008). In respect to Qantas Airline, an evaluation of the relevant external environmental factors affecting its strategic choices and performance through PEST analysis is performed as follows:
Political Factors: Political factors are the most crucial factors in terms of affect the performance of an industry. The political factor implies the interventions created by government in the form of policies and procedures mandated for a particular industry. In respect to airline industry, the role of political factor is significant as the government performed intervention through deregulating the industry. The deregulation of the airline industry during 1990s has resulted into higher level of competition among the existing players which in turn has affected the performance of airlines across the world. The political factors have significantly affected the performance of Qantas airline also, as the political unrest in Bangkok in 2010 has adversely affected the international yields of Qantas.
An assessment of the 2011 annual report of Qantas further revealed that new political and regulatory factors have direct bearings on the performance of the company. The political instability within the Middle East regions has also adversely affected the performance of entire airline industry. In order to cope up with the regulatory changes as imposed by the government, Qantas has included resilience and crisis management strategies into its strategic planning. This is mainly to ensure that the company can effectively respond to the crisis situation as a result of political intervention performed by the government (Qantas Annual Report, 2011).
Economic Factor: The economic factors also have a direct relevance on the performance of a company within the industry. The revenue as well as the growth possibilities of companies are directly affected by the economic performance of an economy in terms of its GDP growth rates, inflationary conditions and the unemployment and poverty rates. The airline industry in Australia is also highly affected by the swings and roundabouts in the global and national economic systems (Uwagwuna, 2011). The performance of Qantas is adversely affected by the recent global financial crisis and it not only affected the performance of Qantas, but the airline industry across the world is affected by it. The major impact identified on the airline industry includes lower airline load factors, higher losses and because of this, there are various airlines that are no longer within business.
The financial crisis has also affected Qantas and in order to effectively cope up with such adverse financial market conditions, Qantas has performed announcement of its plans to cut down around 1750 jobs (Moore, 2009). Apart from this, the financial crisis has also given rise to the fuel prices and the airlines have to increase the travelling fares to cope up with the rising fuel prices. The rise in the fuel prices has necessitated airlines to indulge into hedging practices in order to negate the impact of rising fuel prices. This suggests that the operational strategic choices of Qantas airline are highly affected by the performance of the economy (CDP6 Greenhouse Gas Emissions Questionnaire-Qantas Airways Ltd, 2009).
Social Factor: The environmental performance of an industry is also highly affected by the social factors. The societal trends mainly affects the performance of an industry and with respect to airline industry, the role of social factor is significant. The environmental performance of the airline industry is a major social concern because airlines are popularly known for leaving carbon footprint because of jet fuel consumed in performing their operations (Hierling, 2007). The rising level of awareness among the people or society at large regarding the environmental performance has posed significant challenges to entire airline industry.
In respect to Qantas, it is also faced with significant level of environmental issues, as 95% of the carbon footprint of Qantas is mainly from its flying operations. In order to deal with this environmental issue, Qantas has undertaken initiatives to reduce its net emissions by 50% till 2050 (Qantas Airline, 2013]. This implies that strategic selection of choices by Qantas is directly affected by the external social factors, as company has to develop strategies that could reduce its carbon emissions from its operations in future.
Technological Factor: Technology has a significant role to play in almost all kinds of industry and its role is significant in respect to airline industry as well. Technology is quite effective to the airline industry in terms of allowing the airline operators to keep the cost of their services distribution at lower level. This is mainly because the ticket booking in case of airline is performed online and airlines are taking proactive measures in allowing the customers to directly purchase the ticket from the airline itself, rather than involving any middle man. This is only possible for them through the application of technology.
In respect to Qantas, it believes in forward thinking and this thinking is quite possible because of higher level of dependence of the airline on technology. The forward thinking ability of the airline has allowed it in pursuing innovation by way of encouraging its employees to apply new and positive ideas in their work. The airline has been first airline to perform the landing of its aircrafts by the application of satellite technology based global landing system in 2006. This shows the significance level of technology in performing the operational activities at Qantas (Qantas Annual Report, 2011).
Discussion on the Impact of External Environmental Factors on Strategic Choice Selection: A brief analysis of the external environment of airline industry in Australia has revealed that all the major factors including political, economic, social and technological have impact on the operational selection of strategies by Qantas. The government regulation has made it essential for the airline to include resilience and crisis management plans within its existing strategies whereas economic changes in the form of financial crisis and rising fuel prices has made it compulsory for the airline to include the provision for hedging strategy. Further, the social factor requires changes in its policy towards environment management and advancements in technological environment has made it essential for Qantas to make use of advanced technology in delivering its services.
Overall, the external environmental analysis revealed that the external environment has significant level of impact over the internal strategic choices and performance of Qantas.
Internal Environmental Analysis
This section of the report is aimed at performing an assessment of the internal environment of Qantas. This is mainly through undertaking a brief analysis of the current business strategy of the airline followed by an analysis of its strategic resources through applying resource based view model. The SWOT analysis will also be performed including the value chain analysis to identify the activities that contributes towards achieving value in delivering the air travel services at Qantas. The internal environmental analysis of Qantas through applying all these tools is performed as follows:
Business Strategic Analysis: An analysis of the business strategy of Qantas revealed that there are various strategies as pursued by the airline to achieve from its operation. The main goal of the airline of the business strategy of the airline is to become the world’s best premium airline. In order to accomplish the strategic goal, the airline has certain objectives as indicated below:
These business strategic objectives of Qantas airline indicates that the primary goal of the airline is to grow its airline to a premium level so that it can be regarded as the most premium airline in deliver air travel services. Further, an in-depth analysis of Qantas suggests that the core goal of Qantas is to enhance its domestic business by paying higher attention to its customers, strengthening the presence of its low cost airline Jetstar so as to provide its customers with the opportunity to select from low cost travel to highly premium services. At the same time, the company is highly committed towards its environmental performance (Qantas Annual Report, 2013).
Resource Based View Model Analysis for Qantas: The resource based view is another important model that is concerned with the resources of an organisation. The resources based model assumes firms to have bundle of resources that allows for them in carrying out their operational activities and goals in a most effective manner. The resources of an organisation can be tangible or intangible such as highly skilled employees, advanced technological equipments etc. (Kirsch, 2007). In respect to Qantas, an analysis of the major resources of the company indicates that airline posses numerous resources in providing air travel services to its customers. The most significant and the intangible resource of the organisation is its brand name, as Qantas is known as the flag line career of Australia and it has significant brand value as the most longest route premium airline in the world. This brand image of the airline can be regarded as one of its major intangible resources.
Apart from this, another important resource is the network of Qantas, as the travelling services are provided by the airline across all the major parts of the world. This is mainly possible to Qantas because of its alliances with other major air carrier in international countries. Apart from these intangible resources, the tangible resources as included within list of resources of the airline are its highly skilled and experienced ground and on-board staff. They are perfect enough in assisting customers and providing a comfortable journey across different destinations. Another major resource as available to Qantas is the aircrafts, as the airline has over 220 aircrafts that help it in providing air travel services to most part of the world. The airline has highly advanced technological infrastructure that provides it with the opportunity to ensure the delivery of world class air travel services to its customers. These are the most important resources as available to Qantas that allows it in delivering highly quality and safe travelling services to its customers (Qantas, 2013).
SWOT Analysis of Qantas: In respect to Qantas, the major strength point of the airline is that it has access to profitable domestic routes that contributes positively towards higher overall profitability of the airline. The well established reputation of being the flag line carrier of Australia and the longest route premium air travelling airline also enables it in attracting majority of travellers. The long distance airline is further expanding its services by forming alliances with other major airlines which provides a monopoly situation to the airline company (Coorey and O’Sullivan, 2012). With respect to weakness, the major weakness to Qantas is the rumours about its acquisition by Ethiad through acquiring certain stake within it have raised concern for it. The major opportunity to Qantas is that it can achieve higher level of growth in international markets by seeking permission for foreign direct investment. The threat to airline is mainly the higher level of competition within the airline industry, and in particular, the airline faces higher level of competition in the international markets (Coorey and O’Sullivan, 2012).
Value Chain Analysis: The value chain analysis is an important strategic tool that indicates about the activities carried out by an organisation in order to deliver valuable product or service to final consumers. The activities are mainly classified into primary activities and support activities. The primary activities are inbound logistics, operations, outbound logistics, marketing and sales and service, whereas the support activities include firm infrastructure, human resources, technology and procurement (Hansen, Mowen and Guan, 2009). In respect to Qantas, the airline provides air travel services and as such, the inbound logistics for the company is the passengers that prefer to travel with the airline. The operational activity mainly includes passenger security check, movement of luggage to aircraft and assisting passengers to aircraft. The outbound logistics is the movement of customers from one destination to their desired destination or the travelling services provided to their desired location. In performing these primary activities, the support activities have a crucial role to play, as technology enables the company in allowing its customer to book airline tickets whereas its highly skilled and talented ground and on-board staff accompanies travellers throughout their entire travelling process. The airline also makes investment in R&D activities with a view to provide innovative services to its customers.
Challenges in Applying Analytical Tools
The performance of strategic analysis of Qantas airline involves the application of various strategic and analytical tools. In performing the application of those strategic management tools, there are certain challenges that have been faced. These challenges are critically analysed as follows specific to each particular analytical tool:
A critical strategic analysis of Qantas Airline’s external and internal environment is performed in this report with a view to analyse the impact of such environment on the performance of the airline. On the basis of analysis as performed, it has been concluded that the operational activities including the strategic choices of Qantas are highly affected by the external environment. The management at Qantas perform the selection of strategies based on the situations in the external environment. The PEST analysis revealed about major environmental changes and the ways in which they affected the strategic selection choice of the airline. Apart from this, the internal analysis of Qantas has revealed about number of business strategies including cost efficiency, premium airline, become environmental friendly etc. The airline has significant resources in the form of brand image, technological infrastructure, number of aircrafts and highly skilled employees. These resources assist the airline in providing high class air travel services to its customers. The SWOT analysis has revealed about the important strengths and weaknesses including the opportunities and threats as suffered by the airline. Finally, the performance of value chain analysis has revealed about the various activities and processes that are carried out in order to provide air travel services to the customers.