Firm Resources And Sustained Competitive Advantage: A Case Study Analysis Of Qantas Airways

Porters Five Forces Analysis

The financial statement of the business must be evaluated by the business and the investors to identify the changes and their impact on the overall position of the company. An investor is also required to evaluate the non financial performance of the business through conducting the internal and external measurement tools on the business. These measurements make it easier for the business and the investors to take a better decision about the overall performance and investment into the company (Pearson, 2008). In the report, corporate strategy, SWOT analysis, five forces analysis and financial statement analysis has been done on Qantas to measure the investment position of the company.

Qantas is an Australian aviation company which has diversified its market at international level in order to meet the objectives of the business, grab more market share and improve the overall financial statement of the business. It is one of the largest aviation companies at the Australian market. It offers its services at various destinations and currently, the company has expanded at 42 countries. The company has come into existence in 1920. The strategy of the company is to focus on more destinations and improve the route of the company. Various subsidiaries are running by the business to offer different services and products to the client. 

Porter has offered 5 forces in the market to identify the position of a company in the market. It evaluates the position, competition level, bargaining power, threat level etc of a company in the industry. It makes it easier for the business and the investors to identify the position (Gillen  and Gados, 2008). The porter’s five forced model are as follows:

The competition level is continuously improving in the airline industry because of various acquisitions, merger and the subsidiaries. In 2003, “low cost airline” “Jetstar” has been launched by the business in order to make the competitive level. Because of the different brands and the services the threat from the competitors are lower. However, at the international level, huge competition is there and the company has to plan new strategies to reduce the level (Gaughan, 2010). The main competition of the company is from Singapore airlines and British airways.

It is not easier to enter into the aviation industry because of the huge investment and licences. It would also tough for a new company to enter into the market and generate higher profits because of lower cost and lower product margin as well as in the aviation industry, limited slots are there. Thus, the Qantas limited is not required to threat from the new entries and the company is also leading in the industry so new entries would not impact much on the profit share and market share of the business.

SWOT Analysis

In the industry, many substitutes are available in terms of travel at longs distance such as trains, cruise and cars. These sources are cheaper than the airlines. Though, the time consumption is lower in the aviation industry and thus the threat from the substitute product is relatively lower in the industry (Fu, Oum and Zhang, 2010).

In the industry, the bargaining power of the suppliers of the industry is quite huge because of the less availability for raw material such as fuel etc. Qantas is heavily dependent on few of the suppliers for the raw material and the process of the business. Though, the changes into the new air crafts have helped the business because of their fuel efficiency. Still, the barraging power of suppliers is huge in the market.

In the industry, the bargaining power of the buyer of the industry is quite huge because of the huge availability of the firms who are offering the same services and products to the customers. Qantas is offering the different services to different customers in order to manage the performance and the bargaining level in the industry. Though, the changes into the operations and subsidiaries have helped the business to maintain the bargaining power of buyers. Still, the barraging power of buyers is huge.

On the basis of the porter’s five forces model, it has been evaluated that the Qantas is managing the strategies and better position in the industry. However, few new strategies are required in order to manage the bargaining power of buyers and suppliers in the industry.

SWOT analysis has been conducted on Qantas airways further to identify the internal position of the business. The SWOT analysis is as follows:

(Elmuti and Kathawala, 2001)

The SWOT analysis of the company briefs better position of the company in the industry.

Corporate strategies are the rules and policies which has been planned and implemented by the business in order to achieve the specific goal of the business. The corporate strategies are set by the top level management of the business and it is conveyed to the employees of the business in order to meet the goals of the business. The Qantas case study explains that huge changes have occurred into the strategies and policies of the company since 1992 (Elmuti and Kathawala, 2001). The changes have been made by the company in order to become more competitive in the market and achieve the goals. Along with the changes into the Australian airline flagship, the policies of Qantas airways have also been changed. The new strategies have been implemented by the business in order to improve the performance of the business.

Qantas Corporate Strategy

The case study of Qantas airway briefs the new technologies, strategies, functioning, sources, activities, and operations etc of the company which has been changed a lot from 1992 (Dean and Yunus, 2001). The company has launched Jetstar in the industry to offer the low cost pricing to the clients and more market share. This segment of the business has helped to grab more market share. The company has also diversified its market at international market which has helped the company to become the “long distance root airline” (Barney, 1992).   

The company has signed contract with various international companies of joint venture in order to enter into the foreign market and become the leader in the international aviation industry. The opportunities of the company have been improved and the new strategies have been planned by the business to grab those opportunities and become the leader. The company has also launched new segment such as Qantas catering, Qantas holidays, budget airlines, Jetstar etc to become more competitive in the industry (Datamonitor, 2009). The changes explain that the company has made continuous changes into the strategies which have helped the business to improve the position in the market.

Accounting policies stand for the rules and regulations which are set by the Australian accounting standards and other accounting regulatory to help the business in collecting, recording and present the financial transaction of the business. Each of the company is required to prepare the financial statement and it could be prepared with the help of the accounting policies and the accounting standards which has been set by the accounting regulatory body of the country (D’Aveni, Dagnino and Smith, 2010).

The Qantas airways are operating its business into the aviation industry and thus the accounting policies of the company are bit different than the other companies who are operating into different industry. In case of Qantas limited, following policies must be closely looked by the accountant and auditor to identify the position of the business:

Recording of the assets, liabilities and equity are significant for a business in order to identify the overall financial position of the business. The recording of assets and liabilities must be done by the business after identifying and focusing on the various accounting standards and policies (Dallas, 2011). The account and auditor must look that whether the assets and liabilities of the business are overvalued or undervalued. The depreciation and the provisions must be evaluated by the business briefly in order r to offer the exact information about the performance of the company.

Accounting Policies

Further, the depreciation policy for each of the asset is different and depends on the nature of the assets and business. The depreciation is the total amount which is charged on the business to manage the exact worth of the asset. Most of the times, businesses wither overcharge the depreciation to reduce the tax impact or undercharge the depreciation to improve the financial performance (Craigie and Bekiaris, 2010). An auditor is required to closely identify the depreciation amount and correct it on time in order r to offer the exact information about the performance of the company.

Further, in order to identify the investment position of the company, the financial statements of the business has been evaluated. Annual report (2013) of the company explains that the financial performance of the company was average. In the year of 2013, the company has generated $ 15,577 million revenue out of which $ -121 was the operating income of the business because of huge operating expenses. The other revenues have helped the business to manage the $ 5 million net income level in the business.

Further, the statement of financial performance of the business expresses that the financial performance of the company was enough strong. The company has managed the resources at great level to run the business smoothly. The total assets of the business were $ 20,200 million and the total liabilities of the business were $ 14,251 million. Further, equity was worth $ 5949 million. It explains that the company was highly dependent on the debt to raise the funds.

The current financial statements of the business have also been evaluated to identify the current changes and the performance of the business. Annual report (2018) of the company explains that the financial performance of the company has been improved at great extent. In the year of 2018, the company has generated $ 16,628 million revenue out of which $ 1777 was the operating income of the business and the business has generated the $ 980 million net income level in the business.

Further, the statement of financial performance of the business expresses that the financial performance of the company has been lower against the last years. The company has reduced the resources level to manage the business. The total assets of the business are $ 18,647 million and the total liabilities of the business were $ 14,691 million. Further, equity was worth $ 3956 million (Brigden, 2009). It explains that the company is still dependent on the debt to raise the funds at huge level.

The differences and seminaries have been discussed further in the financial performance and position of the business from 2013 to 2018. The main similarities of the business are that it is still dependent on the debt to raise the funds at huge level. And the main difference in the financial performance of the business is that the company has reduced the resources level to manage the business. Financial performance statement brief that company has managed the operating expenses which has helped the business to improve the net profit level.

To recommend, the financial performance of Qantas airways has been improved at great extant and currently, market position and strategies of the company are also better. The investors are suggested to hold the shares of the business to earn more return from the business. As the debt payout ratio of the company is higher and thus it would offer great return to the investors periodically and near future the stock price of the business would also be improved.

References:

Annual report. 2013. Qantas airways. [online]. Available at: https://www.qantas.com.au/infodetail/about/investors/qantas-data-book-2013.pdf [accessed 13/9/18].

Annual report. 2018. Qantas airways. [online]. Available at: https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2018-Annual-Report-ASX.pdf [accessed 13/9/18].

Barney, J. 1992. ‘Firm Resources and Sustained Competitive Advantage’. Journal of Management, 17 (1) 1, p. 99.

Brigden, C. 2009. Journal of Industrial Relations. Unions and collective bargaining in 2008, 513 (1), p. 365-378.

Craigie, J. Bekiaris, M. 2010. Money. Qantas gets cosy with AirAsia, 21 (20), 16-16.

D’Aveni, R, Dagnino, G, and Smith, K. 2010. The age of temporary advantage. Strategic Management Journal, 31 (13), pp. 1371-1385,

Dallas, H, 2011. “Strategic Management; competitiveness and globalization”. Strategic management, Asia-Pacific 4 (1), pp 434-440.

Datamonitor. 2009. Airline Industry Profile: Asia-Pacific. Airline Industry Profile: Asia-Pacific, 1-32.

Dean, E. and Yunus, K. 2001. ”An overview of strategic alliances”. Management Decision, 45 (3) pp. 205 – 218.

Elmuti, D. and Kathawala, Y. 2001. “An overview of strategic alliances”. Management Decision, 39 (3) pp. 205-217.

Frazer, S 2015. Jetstar expansion stalled by Hong Kong authorities. [online]. available at: https://www.abc.net.au/news/2015-06-26/jetstar-expansion-stalled-by-hong-kong-authorities/6576346andgt [accessed 13/9/18].

Fu, X., Oum, T.H. and Zhang, A. 2010. “Air Transport Liberalization and Its Impacts on Airline Competition and Air Passenger Traffic”. Transportation Journal, 49 (4), pp. 24-41.

Gaughan, PA 2010. Mergers, Acquisitions, and Corporate Restructurings. John Wiley and Sons.

Gillen, D and Gados, A 2008. ‘Airlines within airlines: Assessing the vulnerabilities of mixing business models’. Research in Transportation Economics, 3 (i), pp. 25–35.

Pearson, D. 2008. Wall Street Journal-Eastern Edition. Airlines Face Shortage of Pilots, 25 (5), p. B11A.

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