Political Factors
Determination of the external environment is having much importance for the contemporary business organizations. This is due to the reason that current business scenario is posing different and diversified challenges for the organizations. In addition, current business organizations are having different elements to be considered by the business organizations that includes the external environmental factors (Chen et al. 2014). It should also be noted that current business scenario is rapidly changing along with the change in trend and requirements of the customers. Thus it is becoming more important for the business organizations to cope up with these changes and stay ahead in the competition.
Qantas airways are one of the leading airliners in the current international air transport scenario. They are the oldest and largest airline in Australia and having their market presence in good number of countries around the world (Qantas.com 2018). Therefore, being a global organization, the external business environment is much more vulnerable to change and it is a major challenge for them to cope up with these changes. This essay will discuss about the external business factors for Qantas airways with the help of PESTLE analysis and competitive scenario will also be determined with the help of Porter five forces analysis.
As discussed earlier, Qantas airways are having their market presence in different countries around the world and they are already serving with their flights to more than 100 destinations across the world. Thus, they have to adhere to the different political scenarios in different countries. Qantas airways are having their presence in different politically disturbed countries also such as few countries in the Middle Eastern region and in the African region. Thus, it is a major challenge for Qantas airways to deal with these issues. It is stated by Stewart and Muelller (2013) that another major challenge for Qantas airways is terrorism due to the reason that terrorism is one of the major negative factors being emerged in the recent time and airlines are most vulnerable to the terrorist attack. Thus, the more will be political disturbances in the global scenario, the more will be the risks for Qantas airways. In the recent tine, there are different countries, which are having disturbances among themselves. These political disturbances led to banning of free sky boundaries and causing Qantas airways to face challenges in their international route.
However, on the other hand it should also be noted that Qantas airways is the flag carrier of Australia and thus they are having the support of Australian government. According to Homsombat, Lei and Fu (2014), this is helping them in lobbying with the foreign governments about the new business opportunities and access to more financial resources. Favorable political relationships of the Australian government with that of the major economies around the world are also helping Qantas airways to get the early access to new markets.
Economic Factors
Airline industry is most vulnerable to economic slowdowns due to the reason that airline services are associated with huge fare and cost for the flyers. According to Wang (2013), this is one of the major risks for Qantas airways in their business operation and emergence of economic showdowns cannot get controlled or mitigated. In addition, Qantas airways are not a budget carriers and thus fare level is higher, which is further increasing their vulnerability towards the economic slowdown. Another major economic challenge for Qantas airways is the increase of popularity of the budget airliners. These airliners are affecting the market share and profitability of Qantas airways. Thus, the revenue for Qantas airways is highly influenced by the range of competitors. Oil price is another determining factor for airliners due to the fact that the major chunk of the revenue for the goes in to the fuel bills. In the recent time, the price of jet fuel is increasing continuously and is affecting the profitability of Qantas airways (McConnachie, Wollersheim and Hansman 2013). On the other hand, the fare price cannot get increased by them due to the huge competition in the market. Thus, it is another important factor that is determining the profitability of Qantas airways.
Being a premium carrier, Qantas airways cater mainly to the upper customer segments and offer services accordingly. However, the taste and preference pattern of the customers is changing rapidly and it is becoming difficult for them to cope up with these changes. Pabedinskaite and Akstinaite (2014) stated that one of the major changes of the preference pattern of the customers is expecting more of hospitality services over just commuting from point A to point B. Thus, Qantas airways should also have to focus on providing the quality auxiliary services including the food and accommodation to the customers. In the current time, customer is also more concern about the safety of the airline services. Thus, safety is another area that is getting major concentration from Qantas airways in gaining the social preferences.
On the other hand, being the oldest carrier in Australia, Qantas airways are having the advantage of public trust and goodwill in the Australian market. However, in order to gain this level of brand value and identity in the foreign markets, Qantas airways have to initiate newer schemes and promotional activities.
Technology plays the main part of the business for Qantas airways due to the reason that technological advancement is leading to more development in the flight services. Qantas airways are known for their use of latest and updated technologies and this helped them in becoming an airliner with least number of accidents. However, technology is an area, which is witnessing huge development in the recent time and air transport technology is also growing rapidly (Baker, Merkert and Kamruzzaman 2015). Thus, it is important for Qantas airways to have the continuous mechanism of developing newer technologies in order to stay ahead in the competition. In addition, development of newer technologies can also help Qantas airways to gain competitive advantages in the market. On the other hand, not having the access to the newer and latest technology will lead Qantas airways to trail in the competition.
Social Factors
Legal factors
Legal factors also determine the profitability of the airliners to a great extent due to the reason that there are certain standards that should be maintained by Qantas airways and other airliners. Nusraningrum and Waluyaningsih (2013) stated that one of the major legal obligations for Qantas airways is the carbon tax, which they have to pay in accordance to the emission. On the other hand, there are certain other rules and regulations being set by different countries regarding the air transport and these all should be adhered by Qantas airways. They are also entitled to adhere to the regulations and standards related to the customer service quality.
Airliners are one of the major polluters of the environment and thus they are also being more affected by the environmental standards and regulations. As per Lee et al. (2013), Qantas airways are accepting more fuel efficient and new generation aircrafts for reducing the fuel consumption and emission. This will help them to adhere to the environmental standards. However, becoming a sustainable organization involves good cost and it has to be incurred by Qantas airways in their business operation. This may have long term impact in their profitability in both positive and negative way.
Bargaining power of the buyer is high due to the reason that number of airliners is available in the market and switching cost is also low. Fare is determined by market force and to attract more customers (Porter and Heppelmann 2014). Services are also designed in accordance to the trend of the buyers.
Bargaining power of the suppliers is moderate due to the fact that oil companies can determine the flight fare by means of changing the price of fuels. In addition, aircraft manufacturers can influence the airliners by supplying the aircrafts according to the criteria. However, aircraft manufacturers are only having handful of customers to sell their aircrafts.
Threat of substitute is high due to the presence of number of airliners offering similar set of services. More competitors are coming up with different added services to attract new customers (Schwenger, Straub and Borzillo 2014). Core service offering of all the airliners is same, which is transportation.
Threat of new entrants is low due to huge investment associated with this industry. In addition, it is also difficult for the new entrants to put up the infrastructure required. Brand value of the existing players also cannot be achieved by the new entrants.
Technological Factors
Competitive rivalry is high with all the airliners are trying to have the larger market share among the same customer bases (E. Dobbs 2014). Market saturation is high and thus promotions and activities are being done to poach customers from the competitors.
Conclusion
This essay concludes that there are number of external business factors that will have negative as well as positive influence on the business operation of Qantas Airways. PESTLE analysis identified these major factors. In addition, Porter five forces analysis is being done to identify the industry competitiveness. It is identified that Qantas Airways are facing high degree of competition with having less access to bargaining power. It is also concluded in this essay that operations in different countries are posing difficulties for Qantas Airways in adhering to diverse external factors.
Reference
Baker, D., Merkert, R. and Kamruzzaman, M., 2015. Regional aviation and economic growth: cointegration and causality analysis in Australia. Journal of Transport Geography, 43, pp.140-150.
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Qantas.com 2018. Fly With One of Australia’s Most Popular Airlines | Qantas US. [online] Qantas.com. Available at: https://www.qantas.com/us/en.html [Accessed 13 Oct. 2018].
Schwenger, D., Straub, T. and Borzillo, S., 2014. Non-governmental organizations: strategic management for a competitive world. Journal of Business Strategy, 35(4), pp.11-19.
Stewart, M.G. and Mueller, J., 2013. Terrorism risks and cost?benefit analysis of aviation security. Risk Analysis, 33(5), pp.893-908.
Wang, Y.S., 2013. The impact of crisis events on the stock returns volatility of international airlines. The Service Industries Journal, 33(12), pp.1206-1217.
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