The importance of environmental analysis for business strategies
An environmental analysis helps the managing department of a company to determine and implement business strategies for the betterment of the entire company in future. Having known all the constituents that are responsible for a company’s rise and development, a company can design suitable methods by which it can grow and sustain in the highly competitive market satisfying all the needs and expectations of the customers. Porters’ five force model is tool that helps to analyze the external environment of a company. In the present essay I will throw light in the competitive environment of Qantas Airlines with the help of porters’ five force model. It will also examine the limitations and usefulness of the tool and will conclude by giving an overview of the entire paper.
In the year 1979, M. Porter had created certain tools or models to determine the various external factors that define the industry a company deals in. Among the many tools, Porters’ five force model has been considered as the most effective tool which contains the bargaining power of the buyers, bargaining power of the suppliers, threat of new entrants, threat of substitutes and threat of industry rivals (Rothaermel, 2015). This model determines the competition in the industry and recognizes the profitability. The industry structure can evaluate how much a company can flourish in the market. The threat of new entrants in a particular industry enables a particular company to try out different innovative strategies so that the new entrants cannot snatch the market advantage. Similarly, the threat of substitute can identify other similar products or services in the market provided by other companies. The bargaining power of the suppliers and the customers must be analyzed in order to know the profitability and pricing potentiality of the company in the market. The analysis of the existing market giants, a company can find out the competitive advantage and work on the gap to attract the target market and potential customers.
Qantas airlines is a famous airlines company based in Australia. It is recognized for providing air travelling services to the people of Australia and also beyond Australia. It operates in both the national as well as in the international market. It occupies a significant market share in the airlines industry of Australia that is almost 65%. However, through the past years the performance of the company has been reported to go not so well due to the rising competitive pressure that the company is experiencing (qantas.com, 2018). The Porters’ Five Force analysis of the industry of Qantas airlines is as follows:
It is inevitable that the customers prefer to avail premium service at reasonable price. Hence, if they do not get satisfied with one company, they move on for the other. The consumers have high bargaining power with the Qantas airlines because the switching cost is low. The customers tend to choose that company which values their money in the best possible way giving the same service. The customers compare the services before choosing using the IT tools such as the SkyScanner and Flight Center (Alexander & Merkert, 2017).
The large airlines like the Qantas get the supply of gods from the suppliers like Airbus and Boeing. The Qantas airlines invests more than US $ 17 on high technology, fuel efficient aircrafts. In order to avail the fuel efficiency, the Qantas airlines is highly dependent on the quality and costs of oil to maintain its profit margins. Due to the handful of fuel suppliers present in the market, the bargaining power of the suppliers is high.
The threat of substitutes for the Qantas airlines is high because there are many transport options available such as cars, trains, cruiser ships which are also cheaper in terms of price.
The threat of new entrants in the airlines industry is relatively low because it is difficult to beat the existing industry goliaths and make substantia profit fast. The limitation of landing slots in the Australian airports prevents the new entrants to enter the industry.
The competitive rivalry in the airline industry is constantly increasing. For example, the Singapore Airlines, British airways are the potential rival of the Qantas airlines because they focus in the low price strategy (Arjomandi & Seufert, 2014). The Qantas airlines can develop their unique low price best service strategy to defeat the existing rivals in the industry.
According to the examination I conducted on the Qantas airlines, the company can adopt potential strategies to improve on its present business. It can also conduct partnership strategies so that the company can sustain in the present market. The Porters ‘five force model supports to develop ways to deal with even the contrary situations. The threats which have come to the fore after my evaluation, I can assert that the Qantas airlines have the potential and core competencies to stand up on its own and survive in the global market. Apart from the tool like Porters’ five force mode, there are other tools too which can scrutinize and analyze the environment such as the diamond model, Pestle analysis and many others as suggested by Goeters, 2017. The porter’s five force model is limited within few basic factors but pestle analysis analyses the political, technological, social factors too. The diamond model on the other hand analyses the government policies and economic factors that affect the structure.
Conclusion
Therefore, from the above discussion, we can say that a company always needs to evaluate the environmental factors in order to determine its potential in the industry and the potential based on the potential of the customers, competitors and the suppliers. My observations suggest that the Qantas airlines have many rivals and various threats, but it has the resource and competencies that can be used to deal with the threats and establish itself strongly in the Australian airlines industry.
Reference
Alexander, D. W., & Merkert, R. (2017). Challenges to domestic air freight in Australia: Evaluating air traffic markets with gravity modelling. Journal of Air Transport Management, 61, 41-5 Doi – https://dx.doi.org/10.1016/j.jairtraman.2016.11.008
Arjomandi, A., & Seufert, J. H. (2014). An evaluation of the world’s major airlines’ technical and environmental performance. Economic Modelling, 41, 133-144. Retrieved from -https://ro.uow.edu.au/cgi/viewcontent.cgi?referer=https://scholar.google.co.in/&httpsredir=1&article=1384&context=buspapers
Goeters, K. M. (2017). Aviation psychology: practice and research. Routledge. ISBN – 9781351956277
qantas.com (2018). Flights to Australia, New Zealand and Singapore | Qantas UK. [online] Qantas.com. Available at: https://www.qantas.com [Accessed 21 Oct. 2018].
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education. ISBN- 978-0-07-764506-9
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