PESTEL and Porter’s Five Force Analysis of QANTAS Essay

August 21, 2017 Commerce

Executive Summary

The undermentioned paper provides an analysis and rating of the current market place of Qantas and the air hose industry. By measuring the company both internally and externally by using PESTLE and Porter’s Five Force model. this study will measure Qantas’ chances and strengths within the air power industry. In add-on to this. the study will concentrate on the specific resources and capablenesss that enable Qantas to obtain a competitory advantage over its rivals through the usage of the VRIO model. A concluding analysis will be conducted to place issues Qantas face and recommendations of how they can rectify these issues.

1. Background

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Qantas began in the Queensland outback during 1920. It was foremost registered as the Queensland and Northern Territory Aerial Services ( QANTAS ) and has since grown to be Australia’s largest domestic and international air hose. every bit good as one of the strongest trade names in Australia. using close to 35. 000 forces worldwide ( Qantas. 2010 ) .

Based out of Sydney. Qantas presently operates near to 5000 hebdomadal flights across Australia. New Zealand. Africa. North America. South America. Europe and Asia. winging near to 50 planetary finishs ( Qantas. 2010 ) .

There a four major domestic airliners that have the bulk of the market portion in Australia ; Qantas. Virgin Blue. Tiger Airways and Jetstar ( Dixon. 2006 ) . Nicknamed ‘The winging Kangaroo’ . Qantas is the largest Australian planetary air hoses and is a charter member of the “One universe Alliance” . Qantas operates domestically under ‘QantasLink’ . which carries out 2000 regional flights hebdomadally. They besides operate their low menu air hose ‘Jetstar’ . and Qantas Freight ( Qantas Airways. 2012 ) .

2. Pestle ANALYSIS

Using the PESTLE analysis on the air power industry will assist to place the environmental influences by set uping them into six classs ; Political. Economic. Social. Technological. Legal and Environmental ( Issa. 2010 ) . Future tendencies and demands for alteration based on these tendencies can be identified through this analytical tool ( Johnson. et Al. 2008 ) .

2. 1 Political

Terrorism has had a major affect the air power industry. It is still a really existent possibility of aeroplanes being hijacked or blown up in mid air and this has put a negative impact upon the industry. The recent Malaysia Airlines calamities are grounds of this. as is September 11.

2. 2 Economic

Oil monetary values have a important impact on the air hose industry. Due to recent developments in the oil markets. air hoses have to use non-monetary methods ; techniques include fudging or air hose confederations. in order to increase fuel-buying power. This will let air hoses to purchase fuel in larger measures and make contractual understandings with oil providers ( Thompson and Gamble. 2012 ) .

The most recent and economically disabling factor that has influenced the air hose industry is the Global Financial Crisis ( GFC ) ( Nuguid. 2011 ) . This presents a possible failing or menace for Qantas who may come to experience that their premium monetary value for quality service is non plenty to acquire the clients to wing with them.

2. 3 Social

The figure of people utilizing air hoses to wing to holiday finishs has increased due to economic growing. Therefore. the market has expanded and new chances for touristry have opened in antecedently frequented states.

How society is observed as it transmits to air travel has a great trade to make with September 11. 2001. As a consequence of this tragic event. the judgements of the universe have become progressively profound to the background of riders going on planes. It has shaped something of a unwanted perceptual experience for peculiar civilizations and beliefs. This discourages people to go with other riders or air hose. straight affects the air hose industry ( Reilly. N. J. 2010 )

2. 4 Technological

Technological developments have both created new chances every bit good as menaces for the air power industry. Development in information and communicating engineerings has enabled strong communicating and has accordingly provided clients with an option for frequent traveling. for illustration ; Qantas Frequent Flyer plans. Airlines are now able to spread out their outreach straight to consumers through e-commerce. For illustration. air hoses like Qantas are able to present ticketless travel through the usage of engineering ( Thompson and Gamble. 2012 ) .

2. 5 Legal

The execution of the C revenue enhancement had a negative affect on the air power industry. as the air hoses could non absorb the higher cost of fuel. This meant to countervail costs travellers would pay excess in ticket monetary values ( Herald. 2011 ) .

Some authoritiess provide subsidies that provide an unjust advantage and monetary values lower than market conditions which affects the operation of air hose industries straight and Global environmental policies sing emanations and international path deregulating may impact air hose operations in nowadays every bit good as in future ( Fulton. J. 2010 ) .

2. 6 Environmental

The aircraft’s emanations have a significantly high impact to the environment as they travel several kilometres above the surface of the Earth. Aircraft emanations cause important harm to the ambiance ( Penner et al. 2001 ) . Noise polution is another major environmental concern ( “Aircraft Noise is Unhealthy” . 2008 ) .

3. Porter’s five forces

In order to analyze the industrial environment of Qantas Airlines and measure the nature of the competition faced by the company. the undermentioned analysis was carried out utilizing Porter’s Five Force model ( Porter. 2008 ) .

3. 1 Competitive Competition

The competitory competition in air hose industry has been increasing. particularly through amalgamations. acquisitions and subordinates. Qantas established it’s low-priced air hose Jetstar in 2003 making a two-brand scheme. By holding these “two brands” the Qantas Group is able to measure different market chances and deploy the best merchandise to accommodate the chance and specific market conditions this besides creates a competitory advantage. New challengers have emerged following the footfalls of Qantas. such as Singapore Airlines and British Airways. and are endangering Qantas’ market portion in the no-frill. low-price trade by offering lower costs and go toing client service ( Mouawad. 2010 ) .

3. 2 Entry Barriers

There are high barriers to come in this industry. as it requires a big initial capital investing. In concurrence with the monetary value wars and low net income borders. it has become hard to do significant net income. It is really common for air hoses to project losingss in their fiscal statements. Therefore a new entrant must be able to manage losingss at the beginning. Another barrier to entry is the limited handiness of set downing slots in Australian airdromes. The slots are already reserved by established air hoses and are hard to obtain particularly in airdromes with high rider demand ( Czemy 2008 ) .

3. 3 Menace of Substitutes

There are many replacements in footings of long distance travel such as ; autos. trains and sail boats and these are by and large cheaper. However. air travel has the absolute advantage in footings of clip. Therefore. the menace of replacement is comparatively low.

3. 4 Dickering power of providers

Boeing and Airbus are the chief aircraft providers for big air hoses like Qantas. Qantas plans to pass capital investing worth around US $ 17 billion in more fuel efficient. following coevals aircraft. such as the Airbus A380. Boeing 787 Dreamliner and Airbus A320 neo ( Qantas. 2014 ) . Qantas is to a great extent dependent on the monetary value of oil for its net income borders. which implies high dickering power of oil providers. Price hedge is limited and high rises in monetary values can pull strings Qantas’ fuel costs. Due to the limited figure of aircraft providers. and the uninterrupted demand for fuel. it can be said that the bargaining power of providers is rather high. ( Thompson and Gamble. 2012 ) .

3. 5 Dickering power of purchasers

Consumers have high bargaining power with Qantas. which is chiefly attributed to their monetary value based penchant. Receiving the same service. the consumers will choose the air hose that offers them best value for their money. Due to the widely available information engineering tools. such as Flight Center and SkyScanner. consumers have the ability to compare flight services and monetary values before doing their concluding choice. Since the shift costs for client is really low. the dickering power of purchasers is high.

3. 6 Analysis

Qantas additions its competitory advantage through its strategic capablenesss that are gained from its resources and capablenesss. It is through these. that the company can react to its external environment and win. The air hose industry is really competitory and as a consequence. net income borders are normally low. Besides. the bargaining of the provider is really high which undermines companies in the air hose industry to exert control over their provider. With high entry cost. new competition into the international air hose market is really low. Qantas can go on to rule this market while still viing with domestic market utilizing the Frequent Flyer plan to increase loyal clients.

4. Opportunities and Menaces

By carry oning both the PESTLE and Five Force analyses for the macro-environment we are able to find a figure of chances and menaces that the air power industry possess.


Offers continual enlargement chances for both leisure and concern finishs Technology progresss can ensue in cost nest eggs. from more fuel efficient aircraft to more machine-controlled procedures on the land Technology can besides ensue in increased gross due to customer-friendly service sweetenings like inflight cyberspace entree and other value-added merchandises for which a client will pay extra A planetary economic downswing negatively affects leisure. optional travel. and concern travel The monetary value of fuel is non the greatest cost for many air hoses. An upward spike can destabilize the concern theoretical account Terrorist onslaughts anyplace in the universe could negatively impact air travel Government intercession could ensue in new dearly-won regulations or new international competition

5. Resources and Capabilities

The followers is an rating of Qantas internal resources and capablenesss. Resources
Airport locations/hangers
Engineering installations
Trained forces
In-flight nutrient ( Neil Perry’s engagement )
Qantas lounges/restaurants

Storage installations for stock list. runing from machinery to uniforms Training installations for flight attenders and pilots

New IT systems to advance more efficient operations including the development of e-tickets New development in cost effectual service ( e. g. with nutrient. cutting costs on ingredients ) New developments for the ‘frequent flyer’ strategy to accommodate to competitors’ similar constructs including the Chairman’s Lounge Fleet development: “The air hose has been invariably turning since its origin as a consequence of increasing fleets. Qantas has been buying Boeing aircraft makes like the 747-400. The handiness of more aircrafts meant that the company can keep agendas and run into care demands of the old aircrafts ( Qantas. 2014 ) .

By using the VRIO model to Qantas we can detect that non all resources sustain a competitory advantage. Jetstar. QantasLink and the Qantas trade name in general are all strong resources that allow Qantas to prolong their competitory advantage. However. from the aforesaid resources this competitory advantage for the Qantas Group as a whole is unsustainable. From the analysis. Qantas’ nucleus competences can be identified as their two-brand scheme. their diverse services and their repute.

6. Issues

The followers is a list of weaknesses/ issues as identified by the SWOT model:

1. Rivals

2. Higher labour and other operating costs than its rivals

3. The current schemes Qantas include their low-priced bearer and the Frequent Flyer Program ( Jones. 2009 )

4. Ongoing differences between Qantas direction and hawkish brotherhoods

5. Guess that British air passages will discontinue its $ 1. 3 billion interest in Qantas ( Qantas. Working Towards Our Vision. 2013 )

6. Outdated IT systems.


To assist cut down the affect of the aforesaid failings Qantas could: Attract clients through improved client service
Advertise in societal media Engage employees and set up a better employee direction system Adopt a corporate degree scheme. which is the long-run way of an administration ( Porter. Smith. Fagg ) . for Qantas this will concentrate on cost decrease. Develop a concern degree scheme that focuses on the demand for distinction ( Michael A. Hitt. 2006 ) . Focus should besides be on the increased usage of IT. to increase operational efficiency Internet Explorer. Cloud Computing ( Harrison. 2005 ) .

7. Decision

The Qantas Group has adopted possible confederations and partnership schemes to spread out in the air power concern. However. there are some menaces that will ever impact them such as fuel costs. low cost air hoses and alternate transit. Qantas has remained strong by using their nucleus competences like their two-brand scheme and their service diverseness.

To last in both the planetary and domestic markets. the Qantas Group need to set up efficient schemes to keep the steadfast place in air power industry every bit good as fixing for the unexpected.

8. Mentions:
“Aircraft Noise is Unhealthy” . ( 2008 ) Health Hype. Com. Available from hypertext transfer protocol: //www. healthhype. com/aircraft-noise-is-unhealthy. hypertext markup language ( cited on 20th. March. 2013 ) Czemy. A ( 2008 ) . Airport Slots: International Experiences and Options for Reform. Ashgate Publishing. Ltd. Dixon. G. ( 2006. February 23 ) . Qantas non afraid of competition. The Age. G. G. Dess. G. T. Lumpkin. M. L. Taylor. A. A. Thompson. and A. J. Strickland III. Strategic Management ( Boston. McGraw Hill. 2004 ) pp. 141-148. Harrison. M. A. ( 2005 ) . The Blackwell Handbook of Strategic Management. Wiley-Blackwell. Herald. S. M. ( 2011. July ) . Airlines count the costs of C revenue enhancement. Business Day. 1-2. Issa. Tomayess and Chang. Vanessa and Issa. Theodora. 2010. Sustainable concern schemes and PESTEL model. GSTF International Journal on Computing. 1 ( 1 ) : pp. 73-79. Johnson G. Scholes K. Whittingham W. 2008. Researching Corporate Strategy. 8th edition. Prentice Hall Jones. C. H. ( 2009 ) . Strategic Management Theory: An Integrated Approach Strategic Management Series. Cengage Learning. Keith Porter. Paul Smith and Roger Fagg. “Leadership and Management for HR Professionals. ” Chapter 10. Third edition. Butterworth-Heinemann is an imprint of Elsevier. Page 381- 411 Michael A. Hitt. R. D. ( 2006 ) . Strategic Management Concepts ( Vol. 7 ) . Cengage Learning. Mouawad. J ( 2010 ) . Pushing 40. Southwest Is Still Playing the Rebel. New York Times. Available from hypertext transfer protocol: //www. nytimes. com/2010/11/21/business/21south. hypertext markup language? pagewanted=all & A ; _r=0 ( cited on 20th. March. 2013 ) Nuguid. A. ( 2011 ) . IBIS World Industry Report I6402 Domestic Airlines in Australia. IBIS World. Porter. M. ( 2008 ) . The Five Competitive Forces that Shape Strategy. Harvard Business Review. 78-91. Thompson. A. and Gamble. J. ( 2012 ) . South West Airlines in 2010: Culture. Valuess. and Operating Practices. Case 13. In Essential of Strategic Management. McGraw Hill. Qantas. ( 2010 ) . Qantas Fact file. [ Online ] Available from: hypertext transfer protocol: //www. qantas. com. au/infodetail/about/FactFiles. pdf Qantas. ( 2014. July 1 ) . Fleet Development. Retrieved September 1. 2014. from Qantas: hypertext transfer protocol: //www. qantas. com. au/travel/airlines/fleet-developments/global/en
Qantas. ( 2013 ) . Working Towards Our Vision. Sydney: Qantas Group.


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