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Qantas Airline Australia International Markets Entry Research Project

Qantas Airline Australia International Markets Entry Research Project

Executive Summary

Qantas is a group of airline that operQantas Airline Australia International Markets Entry Research Projectates in the international market, with headquarters in Australia. Although the company has been one of the leading players in the global aviation industry for a long time, its market share in the global has been reducing steadily during the recent years. In order to survive in the industry, the company should establish more flight destinations in countries with good growth prospects. The company can give consideration to the UK and Chinese markets. An analysis of the Chinese and UK markets indicates that the macro-environmental and geopolitical factors in the two industries, with regard to the aviation industry, are almost comparable. Firms operating in the two industries are exposed to almost similar risks and dangers. However, the Chinese market is a better option for Qantas than the UK market since the former presents more opportunities for growth of Qantas than the UK.

Introduction

Qantas Airways is a group of airlines with headquarters in Australia. The company is currently ranked the largest in the global aviation industry in terms of international destinations and flights and international size. Qantas is the third-oldest airline after Aviance and KLM, having been established in 1920 (Qantas, 2016). The main hub of Qantas is Sydney airport in Sydney, Australia. Currently, Qantas has a share of 65 percent in the local market and around 14 percent of the international market. Qantas has three main subsidiaries that operate in different parts of the world (Qantas, 2016). Jetconnect and QantasLink are subsidiaries of the company that operate to New Zeeland and within Australia. Jetstar is a low cost brand of the company that operates in most international markets, including Asia, Africa, Europe and America. A remarkable aspect of the performance of Qantas is that its market share in the international market has been declining at a constant rate over the last one decade (Creedy, 2016). In 2004, the company had a market share of 30 percent in the international market. By in 2015, the market share had fallen to around 14 percent. The main cause of the decline in the market share is the fact that numerous airlines have been established that compete with Qantas in the international market (Creedy, 2016). The emerging airlines are adopting strategies that enable them to take away market share from the old companies such as Qantas. In order to survive in the international market, Qantas needs to come up with strategies for enhancing its competitiveness. One of the best options for Qantas is establish airline operations in new markets with good growth prospects in Asia and Europe.

The Target Markets

Two of the countries that Qantas can focus on to expand its market share are China and the UK. Although Qantas already operates in the two countries, there is a need to establish whether there are opportunities that the company can utilize in order to enhance its market share through adding number of destinations. China is a developing country located in Asia while the UK is a developed country located in Western Europe (Brinkman, Navarro & Harper, 2014).

Also Study: Qantas Group Pricing Strategies

Analysis of China

  • Macro-Environmental and Geo-Political Forces

Technological development is one of the macro-environmental factors that influence the ability of Qantas to operate and enhance its competitiveness in the Chinese market. Information technology is advancing at a rapid rate in China. As well, Chinese government has been investing heavily in infrastructural facilities such as airports that are vital for the operation of airlines (Elmers, 2013). Thus, technology in China is conducive to the operations of Qantas in China. Second, economic factors such as currency stability, economic growth and interest rates affect the operations of Qantas in China. The economy of China has been is growing at a rapid rate and it is supportive to the operations of Qantas. The government of China is directly involved in stabilizing the country’s currency and interest rates (Elmers, 2013).

Social factors such as the preferences and attitudes of customers and demographic variables influence the operations of Qantas. A remarkable trend in the Asian aviation industry is that consumers are increasingly preferring low-cost airline services to high cost services. Qantas has already been offering low-cost airline services in China. China is very populous, with a population of more than 1.3 billion people (Doganis, 2013). The presence of high population in China implies that the number of users of airline services is also high. The operations of Qantas are also influenced by legal factors, such as the laws and regulations established by the Chinese government, and regional and international authorities. Further, Qantas needs to give consideration to environmental factors, such as the effects of its operations. Contribution to pollution and how the local and international authorities are likely to respond is an important factor that influences the operations of Qantas (Doganis, 2013).

Regarding geopolitics, the location of China is strategic for international trade and it does not lead to significant limitations to access of the country. China is an influential country in terms of politics and trade in both Asia and the world. This is one of the reasons why China is a major country of focus in the world. A significant aspect of China is that there is political stability that is essential in facilitating the operations of foreign countries (Doganis, 2013). The government of China also ensures that there is security for the locals as well as the foreign firms. Also, the government of China encourages foreign firms to invest in the local market. China has also established bilateral trade relations with many countries, including Australia, which are supportive to the operations of Qantas (Doganis, 2013).

  • Development of Trade and Business

China is one of the countries in which trade and business activities have been growing rapidly. Since the implementation of the labour reforms establish by Chinese government in 1978, the government has been supporting establishment of private companies within the country. At the same time, the government of China has been supporting local business enterprises to invest in the foreign markets (Goetz & Budd, 2014). As mentioned earlier, the government of China has been encouraging foreign organizations to invest in the local market. Due to the high rate of economic growth of China achieved during the recent years, many firms in foreign countries have been targeting China as a suitable destination for investment or market expansion. Consequently, China is currently highly developed in terms of business and trade. There are still growth prospects for trade and business in China since foreign organizations are still trying to exploit the emerging opportunities in the growing market (Goetz & Budd, 2014).

  • Potential Dangers, Risks and Opportunities in the Current or Short Term Policies

The current trade policies of China support opening up of Chinese market to foreign investors or organizations. Also, China’s policy supports establishment of trade relations with other countries within the Asian region and other regions. This presents an ample opportunity for Qantas to operate in the Chinese market (Brinkman et al., 2014). However, the current policies require the Chinese government to give support to the local enterprises at the expense of the foreign organizations. Local enterprises, for instance, are provided with subsidies, which makes it difficult for the foreign organizations to operate within China. As such, Qantas faces a risk of failure in case most of its competitors will be local companies. Also, the current policies require foreign organizations to hire a high percentage of workers from China. This poses a risk of providing low quality services to customers in case Qantas will not be able to source quality workers from China (Brinkman et al., 2014). Further, the current policies stipulate the minimum compensation that foreign organizations should provide to Chinese workers. A foreign firm which is unable to meet the minimum wage and other requirements faces the risk of being disallowed from operating in China (Bamber et al., 2013).

Analysis of UK

  • Macro-Environmental and Geo-Political Force

Just like in China, the operations of Qantas in the UK are affected by economic factors. For instance, the profit margin of Qantas is eroded when the fuel prices rise beyond $155 a barrel. The increase in the prices of Airbus aircrafts in 2013 had a negative impact on the operations of Qantas (Schimmel, 2013). The rapid advancement in technology in the UK during the recent years has been opening numerous opportunities for Qantas. For instance, the internet technology has opened an opportunity for Qantas to interact with customers closely, to understand their tastes and preferences and to give them about information regarding the services and prices of airline services (Goetz & Budd, 2014). Aircraft manufacturers such as Platt & Whitney and CFM International are developing new engine technology that will enhance fuel usage efficiency by airbus aircrafts (Schimmel, 2013).

Similar to the case of China, Qantas’ operations in the UK will be influenced by social factors. For instance, the customer’s lifestyle determines whether he/she will choose to use airplane, a train or a car. A remarkable aspect of the UK market is that the number of people engaging in tourism activities keeps on fluctuating, which can have an adverse impact on the operations of Qantas (Schimmel, 2013).

Qantas’s operations are influenced by the expectations of the society, impact of the operations on the environment, ecological issues and environmental regulations. For instance, the government of the UK has introduced environmental regulations that would facilitate a reduction of carbon emissions of 20 percent by 2010 (Katie, 2013). At the same time, the society has become more sensitive about the environment and it is concerned about organizations’ corporate social responsibility initiatives (Katie, 2013).

Qantas is required to adhere to different laws established by the UK government, including employment laws, trade union regulations, competition laws and laws regulating mergers. As well, the company is required to adhere to international law and trade agreements between countries and regions where it operates. For instance, Qantas will have to maintain good working relations with the employees, in recognition of trade union regulations (Albaum & Strandskov, 2008).

Regarding geopolitics, the operations of Qantas are affected by political factors such as the aviation policies, taxation policy, political stability/instability, elections and policies influenced by terrorist threats. For instance, the EU has policies that require Qantas and other airlines to enhance their security in order to prevent cases of terrorist attacks (Katie, 2013). The political goodwill to enhance the capacity of airports also affects the operations of Qantas. The labour and conservative political parties may have different views regarding corporation tax. There is political stability in the UK that is vital in facilitating smooth operation of Qantas.  The UK is influential in the politics and economic policies of the Europe (Katie, 2013).

  • Development of Trade and Business

UK is one of the well developed countries in the world in terms of trade and business. There are numerous UK organizations that have established subsidiaries in the foreign markets. UK was among the first targets for the renowned multinational organizations such as Coca-Cola and Apple. Foreign organizations from China and other countries have also been venturing in the UK market recently (Brinkman et al., 2014). However, most industries in the UK, including the aviation industry, are saturated. As such, there is low possibility of growth of the overall trade and business activities in the UK in the future. This implies that the possibility of growth of demand for the airline services is also low (Brinkman et al., 2014).

  • Potential Dangers, Risks and Opportunities in the Current or Short Term Policies

Just like China, the UK has established policies meant to encourage foreign organizations to invest in the local market and to develop bilateral trade relations with countries and regions. Such policies are supportive to the operations of Qantas in the UK. However, Qantas faces the risk of closure if it violates the policies and laws established by the UK government. For instance, all foreign firms are required to adhere to laws preventing unfair competition or trade practices, such as the Restrictive Trade Practices Act 1976, the Competition Act 1980 and the Fair Trading Act 1973 (Katie, 2013). In addition to adhering to the policies established by the government of UK, all firms operating in the UK market are required to adhere to the policies established by various bodies of the European Union. For instance, EU has a Social Policy that requires firms operating in the European nations to maintain safety and health of the workers and to ensure that they work in good conditions (Van Geenhuizen et al., 2012). Also, such firms are required to adhere to the EU Working Time Directive and the Working Time Regulations 1998.

Conclusion

Qantas needs to establish a way of enhancing its competitiveness in the international market, given that its market share has been declining constantly over the last one decade. The company can achieve this through establishing new destinations in markets with good growth prospects. An analysis of the US and the UK market indicates that the two markets have many factors macro-environmental and geopolitical factors that are similar. As well, both markets have similar risks. However, the Chinese market is a better option than the UK market for Qantas. The Chinese market has better growth prospects than the UK market since the former is growing rapidly and it is expected to continue in the future. The UK aviation and other industries are stagnant and with low prospects for growth. As such, there are fewer opportunities for growth in the UK market than in the Chinese market. In this regard, Qantas should opt to open more destinations in China instead of the UK.

Also Study: Contemporary Issues Affecting Aviation Industry

References;
  • Albaum, G. D., & Strandskov, J. (2008). International Marketing and Export management, 5th Edition. London, UK: Prentice Hall.
  • Bamber, G. J., Gittell, H. J., Kochan, T. A. & von Nordenflycht, A. (2013). Up In the Air: How Airlines Can Improve Performance by Engaging Their Employees. New York, NY: Cornell University Press
  • Brinkman, J., Navarro, I., & Harper, D. (2014). Unlocking the business environment. New York, NY: Routledge.
  • Creedy, S. (2016). Qantas market share of international flights dips sharply. Retrieved from http://www.theaustralian.com.au/business/news/qantas-market-share-of-international-flights-dips-sharply/news-story/732c7db838014411600fd8cf58aba6cf
  • Elmers, S. (2013). Assignment in Business Deconstructed – Financial Analysis and Proposing Strategy. Norderstedt: GRIN Verlag.
  • Doganis, R. (2013). Flying off course: The economics of international airlines. New York, NY: Routledge.
  • Goetz, A. R. & Budd, L. (2014). The Geographies of Air Transport. Birmingham: Ashgate Publishing, Ltd.
  • Qantas (2016). The Qantas Story. Retrieved from http://www.qantas.com/travel/airlines/history/global/en
  • Schimmel. M. (2013). Communication in the U.K. Budget Airline Industry: How PR Affects Corporate Success. London: Anchor Academic Publishing
  • Van Geenhuizen, M., Reggiani, A. & Rietveld, P. (2012). Policy Analysis of Transport Networks. Birmingham: Ashgate Publishing, Ltd.

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