Analyzing Competitive Forces And Corporate Strategies Of Qantas Airways

Threats of new entrants

Competitive forces in the environment that can influence an organization can be analysed with the help of Porter’s five forces tool. This analysis plays an important role in examining the external environment and industry in a detailed manner. The industry in which Qantas operates can be analysed in the following way,

Threats of the new entrants – The threats based on entry of new organizations in the airlines industry are low. The requirement of huge levels of investment is considered to be a major factor that is able to affect the entry of new organizations. The development of infrastructure by the organization requires huge levels of investment and is able to affect the ways by which the operations can be developed in the airlines industry (Assets.kpmg. 2019).

Bargaining power of the suppliers – The bargaining based power of the suppliers in airlines industry is lower due to the availability of huge number of suppliers who are able to offer similar services to the organizations. The suppliers are thereby not able to affect the prices of services that are offered by Qantas Airways. The presence of major organizations in the same industry can be considered to be another major reason behind the lack of power of the suppliers of Qantas Airways (Barros, Hernangómez and Martin-Cruz 2016).

Bargaining power of the buyers – The bargaining based power of the buyers in the airlines industry is high due to the availability of huge number of options related to services that are offered to them. The customers in the industry are provided with options related to premium services and low cost based air travelling services as well. The service providers are thereby able to offer the services which have been able to increase purchasing power of the buyers (Business Insider Australia. 2017).

Threats of the substitutes – The threats based on substitutes in the airlines industry are low as airlines can be considered to be the fastest method of travelling between destinations. The levels of convenience that are offered by this mode of travelling are able to reduce the threats that are related to substitutes. Other modes of transport are not able to provide the levels of convenience to the customers like that of the airlines based organizations. Long distances can be travelled by the customers within lesser time by availing the services that are offered by airlines based organizations (Daspit et al. 2017).

Bargaining power of suppliers, buyers

Rivalry among existing companies – The rivalry levels among the existing organizations in the airlines industry of Australia has been able to pose a major threat to the operations and profitability of Qantas Airways. The direct competitor of Qantas Airways in the industry is Virgin Airlines which provides tough the competition to the organization in the domestic areas. The competition has started becoming so severe in the industry, that the organizations have started facing huge losses (Demir, Wennberg and McKelvie 2017).

Strengths – The growth that has been shown by Qantas Airways in the airlines consistent and steady and this has been able to act as a major strength of the organization. Quality of the services that are offered to the customers is also quite high in comparison to the competitors. The programs based on cost cutting that have been organized by Qantas Airways have become highly successful and have been able to increase domestic business related revenues. The leadership position that has been developed by Qantas Airways in the industry is considered to be a major strength of the organization (Durand, Grant and Madsen 2017).

Weaknesses – The decline that has been depicted in the performance levels of the company is a major weakness of Qantas Airways. The leadership position of Qantas Airways in the industry has not been able to stop the decline in performance levels of the organization. The profitability levels of the organization in international flight operations are low. Qantas Airways has also faced major issues that are related to the presence and operations of the union groups. This has been able to affect the reputation of the organization and the profitability levels of Qantas Airways as well (Dyer et al. 2015).

Opportunities – The growth in business travel is a major factor which provides opportunities to Qantas Airways. The organization needs to tap growth based opportunities which are offered with the proper alternation of the strategies. The reduction of fuel prices is also considered to be a major opportunity that is provided to Qantas Airways in order to increase the levels of profitability in an effective manner (Engert, Rauter and Baumgartner 2016). Qantas Airways can thereby increase its revenues and profitability in the industry by reduction in the costs of services that are offered to the customers.

Threats – The high levels of competition in airlines industry of Australia are able to pose major threats to Qantas Airways. Qantas Airways faces fierce competition from other organizations in the industry. Virgin Airlines is able to provide toughest levels of competition to Qantas Airways based on the prices at which services are offered to the customers. High levels of competition are provided to Qantas Airways in the domestic airlines industry (Ethiraj, Gambardella and Helfat 2018). The prices of services are affected by the competition levels that are faced by the organization in the airlines based industry of Australia.

Threats of substitutes

Corporate strategies implemented by Qantas Airways in the international and domestic market since the 1992 have played a key role in the successful operations of the organization in the competitive industry. The most significant corporate strategy of Qantas Airways is based on the development of effective competitive advantage in the industry. The long term based values which have been gained by the organization are also maximized by Qantas Airways with the help of different brands and businesses that are a part of the integrated portfolio of the company (Frynas and Mellahi 2015). The emphasis that is provided by Qantas Airways to the growth of the levels of earnings from the international as well as the domestic business operations as well. The growth of different brands of the organization are pursued with the help of huge levels of investment. Another vital strategy that has been implemented by Qantas Airways from the year 1992 is based on the shift of cost base with the help of effective transformation of the organization (Hill, Jones and Schilling 2014).

Qantas Airways has implemented many changes in the corporate strategies of the organization based on different aspects and the conditions in the market. The levels of competition in the industry have increased and has been able to affect the corporate strategies that was implemented by the organization. The major change that was implemented in the corporate strategy of Qantas Airways based on the development of new services including, Qantas Loyalty and Qantas Jetstar (Michael, Storey and Thomas 2017). The organization has changed the corporate strategy by expanding its operations in international market for the purpose of grabbing the opportunity based on increasing the international base of customers. On the other hand, the sustainability based aspects of the business can be improved with the help of different factors including, talent and leadership, diversity and impact of the business on the environment and on others as well. The changes in corporate strategy are considered to be important for the ways by which Qantas Airways can maintain its sustainable operations for a longer time in the airlines industry (Qantas.com.au. 2019).

Accounting policies are considered to be important for the ways by which the profitability levels and the revenues of Qantas Airways can be analysed by the auditors. The two major accounting policies that can be implemented by the organization in order to analyse the revenues are as follows,

Rivalry among existing companies

Introduction of IFRS 16 Leases: The auditors in airline industry have to watch the new lease accounting based policy that is also known as IFRS 16 Leases, as this policy will be able to change the accounting based transaction for leases in a fundamental way. The process of introduction of the IFRS 16 Leases is able to provide the obligation on different airline organizations in order to put the leases in balance sheet of Qantas Airways. This will be able to add trillions of the dollars of the additional lease based agreements in balance sheet of the airline organizations (Investor.qantas.com. 2019).

IFRS 15 Revenue from Contracts with Customers – Introduction of the IFRS 15 Revenue from Contracts with Customers is able to bring significant levels of changes in the airline company based on the deal that is made with the cargo airways related bills, air tickets, loyalty points and various other contracts. The existing revenue based standards from the tickets is considered to be non-refundable in nature. The likelihood of requirements of the customers is based on the fulfilling performance based obligation. According to new standards that are related to IFRS are able to recognize revenues that are earned from the tickets on an early basis (Investor.qantas.com. 2019). The organizations in airlines industry will also be able to recognize the levels of revenue before expiry of tickets.

The above two accounting standards can be used by the auditors of Qantas Airways in order to analyse the profitability of organizational operations. The accounting standards have been implemented by the organization in an effective manner in order to examine the changes that have taken place in the market policies (Pwc.com. 2019). The management of the organizational operations is dependent on the accounting based methods that are implemented and used by the auditors.

The analysis of revenues and expenses levels of Qantas Airways is able to depict that the organization has been able to improve its revenues from the year 2013 to 2017. The improvement of revenues is considered to be a positive factor for the future sustainable operations of Qantas Airways in the airlines industry of Australia. The expenses on the other hand have decreased which is considered to be positive for the operations of Qantas Airways. The assets, liabilities and equity based levels of the organization have decreased from 2013 to the year 2017 (Investor.qantas.com. 2019).

The findings that have been shown in the analysis of financial performance of Qantas Airways is based on 0.97% enhancement in the revenues of the organization. On the other hand, percentage of decrease in the expenses is 6.44%. The total assets of the company have reduced by 14.75% and the decrease in the levels of liabilities is 3.97%. The total equity levels of Qantas Airways have decreased by 40.54% from the year 2013 to the year 2017 (Investor.qantas.com. 2019).

The major recommendations can be provided to the existing and potential investors of Qantas Airways are to purchase the shares of the company based on reasons that are mentioned below,

• The revenues of Qantas Airways have increased between the year 2013 to 2017 which is considered to be a positive sign.
• The decrease in expenses in the operations of Qantas Airways is also considered to be effective for the investors.
• The organization has been successful in reducing the total amounts of liabilities in current year of operations of Qantas Airways.
• The levels of total equity of Qantas Airways has been able to indicate that the organization has been able to distribute major parts of the dividend in the current environment.
• The shareholders can be recommended to buy the shares of Qantas Airways based on current performance which is shown by the organization or the future growth based prospects as well.

References 

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Barros, I., Hernangómez, J. and Martin-Cruz, N., 2016. A theoretical model of strategic management of family firms. A dynamic capabilities approach. Journal of Family Business Strategy, 7(3), pp.149-159.

Business Insider Australia. 2017. The Qantas turnaround is complete. [online] Available at: https://www.businessinsider.com.au/the-qantas-turnaround-is-complete-2017-8 [Accessed 6 Jan. 2019].

Daspit, J.J., Chrisman, J.J., Sharma, P., Pearson, A.W. and Long, R.G., 2017. A strategic management perspective of the family firm: Past trends, new insights, and future directions. Journal of Managerial Issues, 29(1), p.6.

Demir, R., Wennberg, K. and McKelvie, A., 2017. The strategic management of high-growth firms: a review and theoretical conceptualization. Long Range Planning, 50(4), pp.431-456.

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Dyer, J.H., Godfrey, P., Jensen, R. and Bryce, D., 2015. Strategic Management: Concepts and Cases. Wiley Global Education.

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Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2018. Theory in strategic management. Strategic Management Journal, 39(6), pp.1529-1529.

Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Investor.qantas.com. 2019. Annual Report 2017. [online] Available at: https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2017AnnualReport.pdf [Accessed 6 Jan. 2019].

Investor.qantas.com. 2019. Qantas Investors | About the Qantas Group. [online] Available at: https://investor.qantas.com/home/?page=about-the-qantas-group [Accessed 6 Jan. 2019].

Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset, pp.45-65.

Pwc.com. 2019. [online] Available at: https://www.pwc.com/gx/en/audit-services/ifrs/publications/ifrs-16/ifrs-16-implications-for-the-airlines-industry.pdf [Accessed 6 Jan. 2019].

Qantas.com.au. 2019. Annual Report 2013. [online] Available at: https://www.qantas.com.au/infodetail/about/investors/2013AnnualReport.pdf [Accessed 6 Jan. 2019].

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