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Strategic Group Report

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Strategic Group Report



1. Introduction

The industry, which will be the focus during this research report, will be Australian airline industry, and the company selected from the industry is Qantas Group. Australian airlines have faced both good and bad times over the period of time. It faced a market decline in global tourism in the outcome of terrorist attacks in the US that took place in 2001 and in recent times, due to Iraq war that cause traffic loss. However, apart from these disorders, the airline industry of Australia has also experiences significant structural change after the late 90s. The 'domestic trunk routes' in Australia are now dominated by two major airlines Qantas Airways and Virgin Blue, which is still struggling for high market share. Qantas Airways is the largest airline in Australia in terms of fleet volume, international destinations and flights (Parliament of Australia, 2016).

Qantas was founded in the year 1920 in Queensland and since then the company has grown to be largest domestic and international airline in Australia. It has also now become one of the profound brands based on Australia and is also considered as the foremost long distance airline in the world. The company has gained a status for brilliance in safety, customer service, operations and reliability. The two corresponding airline brands of the Qantas group are; Qantas and Jetstar and it also has business in expert markets, like Q Catering. The company employs more than 30,000 employees and about 93% of them are of Australian nationality. The company functions with the vision to the biggest premium airline in the world (The Qantas Story, 2013).  

2. The Micro and Macro Environment

2.1 Macro Environment Analysis 

The macro environment analysis of the company has been performed using the PESTEL analysis model that will help in identifying the key macro factors that affect the company:

Political: The key political decision that affects the operations of Qantas airline is that the Australian government has deregulated the domestic airline industry; due to this new airline companies can perform their business operations in Australia. Also, there are no boundaries on freedom of entry by domestic airlines, to domestic trunk ways. Nonetheless, limitations by federal are still in force, which makes sure that Australian airlines can take domestic passengers and freight, but foreign airlines cannot carry local passengers on local sectors of their global amenities (Parliament of Australia, 2016).  As a result, Qantas has got an opportunity to distinguish itself from the rest of the airlines, but it is also threatening for the company as it has to face competition from new players(Australian Government, 2016).

Economic: The prominent economic factor that has affected Australian airlines fundamentally is the Global Financial Crisis as the tourism sector in Australia has hard hit by this compared to the rest of the economy. This determined the personal income of people and their expenses. However, the pertinent rise in the real average earnings of people in Australian in the past decade together with the decrease in air fares implies that affordability of air fare has enhanced noticeably in Australia (Vu, 2015). Now, more of the Australian people can manage to take flights. On the other hand, this does not essentially imply that competitiveness of air travelling has enhanced in comparison to other modes of transport mode. This is because constant growth of inter-regional road connection and regional rail facilities has made the competition more rigorous. Moreover, decrease of the Australian dollar in last two-three years has enhanced expenses of the aviation industry because it is highly dependent on imports for aircraft, fuel, and spare parts (Freed, 2016).

Social: Social factors are considerable for Qantas Airways considering that air travel has now become synonymous to reputation and high status. Also, people have now become more aware of different airlines and can make easy comparison between their services due to the presence of social media and internet (Freed, 2016). Notable, consumers are also preferring low cost airlines as compared to premium airlines as it has now become reasonable than ever to fly out from Australia to distant South Pacific areas. Moreover, demographic factors, like age and income prominently affect the desire to travel by airlines (Attitude Travel, 2013).

Technological: Technological factor has a prominent impact on Qantas, in light of the recent technological developments that have affected the aviation industry. These technological developments are not related to operations of aircrafts, but also booking and access of airline services. Companies in the industry are now required to become technologically sound related to the services they offer inside and outside the flight, such as online marketing, e-ticket booking, wifi in flights, access to Netflix and all (Benson, 2012).               

Environmental: Airline industry is facing high concern related to environmental pollution and emission of carbon in environment. In Australia, a carbon pricing system, commonly known as the "carbon tax", was commenced in 2011 and came into action 2012, but it cancelled on July 2014. However, the government is constantly working to control the carbon emissions and making airline industry an environmentally responsible one. Qantas is indeed constantly working to reduce its environmental impact by controlling emission of polluting gases (Australian Government, 2016).  

Legal: Different legislations control the airline companies in Australia, few of them are; Aircraft Noise Regulations, Air Navigation Regulations 2016, Air Navigation Act 1920, International Air Services Commission Act 1992 and so on. Airline companies of Australia are bound by different regulations or legislations based on fair pricing, fair competition, customer safety, environmental growth, and employee welfare. It is necessary for all airline companies to effectively comply with these legislations for a clean and legal functioning (Australian Government, 2016).

2.2 Micro Environmental Analysis

In order to assess the micro environment of the company, the Five Forces Model provided by Porter will be used. This will help in assessing how micro factors affect the airline industry as well as in analysing the attractiveness of the Australian airline industry.  

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Figure: Porter’s Five Competitive Forces


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