Profitability And Growth Of Qantas Industry-Myassignmethelp.Com

Question: Analysis Of The Profitability And Growth Of The Qantas Industry With The Help Of The Porter Five Forces Theory? Answer: The rivalry among the present firms. In the international air transport industry, there are many rivals of the Qantas Company, like the Air Asia, Emirates and Virgin Australia. The overall rate of the industry growth is 6.3% per annum.The market is saturated with international and national airlines. When it comes to Qantas, it is not very different from its competitors. The switching cost, between these major airlines, is not much; it majorly depends on the travel routes. For example, when it comes to one-way routes like to Bali and Indonesia, the overall price of the tickets vary just in thousands. Air Asia has an advantage of its low costing strategy in comparison with Qantas. The only way Qantas can overcome it is by increasing its coverage area, by using its subsidiary company Jet star. When it comes to international airline market, the economy does not have a steep learning curve. It is very difficult for the companies to compete for the market share. Thus, it is difficult for Qantas also to take advantage of the fixed and the variable costs ratio. (Belton, 2017) Most of the companies find it difficult to cut the prices to satisfy the demands of the customer and fulfil the desired capacity because the currency cutting is very stagnant in the international market. It is also not easy to exit the market because exiting the market will not be of great advantage. The aircraft operating lease rentals are only accumulated to three percent of the total expenses for the company. Thus we see that the companies in the international market of aircraft and airlines have very less of options to cut the cost and make changes in the present strategy. When it comes to the domestic market aircraft, the company have rivals in the form of the Virginia Blue. 5 % is the annual growth rate of the company. There are very few competitors but the cost cutting is still not easy, thus there are very fewer prospects. In the domestic market, the company can take advantage of the fixed and variable cost ratio, because the economy is not that steep, and switching between the costs is possible (Ancell, 2016) The threat of new entrants In the international market, there is a threat of new airlines entering the market. The existing companies have the advantage of being the first mover, with better safety standards in place. It is very easy for the companies to enter this sector because there are plenty of aircraft and fuel suppliers. If the new companies match the standard that is proclaimed by the airports, the companies can easily enter. Few legal barriers are needed to be taken care of. In the domestic market of Australia, it is difficult for the new companies to enter, because they have to compete in matters of price and brand with the already existing companies. Qantas has the big advantage of being the first mover and is known as the legacy airline. When it comes to access to the channel of distribution, the new companies have less difficulty because the Australian market is very price sensitive. There are legal rules to be followed, and adherence to few traffic regulations (Kew Stredwick, 2017). Threat of Substitute Products The airline faces a very little threat from the other forms of travel, like the air and the water travel. In any case, air travel is more convenient and faster than other forms of travel. (Tannock Bourlakis, 2017) Buyers bargaining power Price sensitivity affects the movement of the airlines a lot. Most of the buyers, expect those who travel in the business class, are sensitive to price. They will always choose those airlines that offer them low fares. Thus in this competitive industry, every airline wants to keep the prices at bay, to attract more and more customers. The relative bargaining power of the customers is also very high, as they all want to switch to low-cost travel. Thus in this way, the bargaining power of the customers affects the functioning of the companies in this sector (Holloway, 2016). bargaining power of the Suppliers The main suppliers of the aircraft in the world are Boeing and Airbus. Since they have a dominant position in this field, the bargaining power of the suppliers is very strong. Thus, they seldom decrease the prices. The other major supply is of fuel, the fuel suppliers are more in number than the aircraft supplier. However, fuel is an important commodity, and the airlines cannot bargain in that. (Rao, 2017). Thus, it can be said, after the entire analysis that the company has the huge potential of growth in the coming five years. The company has to face a lot of competition and may lose some of its market shares when it comes to the international airline industry. However, if the company will focus more on its sister concern, the Jet star airline, the company will have the advantage of low costs and more savings. It will help in establishing a stand of the company in the domestic and the international market (Aithal, 2017). The company needs to make changes in the overall cost cutting strategy so that the company earns more revenue than its competitors do. It should also try to focus more on marketing.It is important to have a good analysis of the overall market scenario to take important decisions in relation to the five year plan of the company References Aithal, P. (2017). Industry Analysis the First Step in Business Management Scholarly Research. International Journal of Case Studies in Business, IT and Education , 1 (1), 1-13. Ancell, D. (2016). The paradox of competition for airline passengers with reduced mobility (PRM). Journal of Air Transport Studies , 7 (1), 111-129. Belton, P. (2017). Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd. Holloway, S. (2016). Airlines: Managing to Make Money. New York: Ashgate Publishing. Kew, J., Stredwick, J. (2017). Business Environment: Managing in a Strategic Context (second ed.). London: Chartered Institute of Personnel and Development. Rao, C. (2017). Competitive Strategy. Chennai: Notion Press. Tannock, J., Bourlakis, M. (2017). Strategic and operational considerations for the Extended Enterprise: insights from the aerospace industry. Production Planning Control-The Management of Operations , 28 (4), 267-280.