Growth Path Of Qantas Airline

Introduction

Qantas Airline is the oldest Airline in Australia and comes in second in the world. It was started in the year 1920 by some pilots from Australia; these were Paul McGinness and Hudson Fysh. The Company was registered as Queensland and Northern Territory Services Limited. This was on the sixth day of the month of November. Initially, the Company started by giving joyrides and two years it began scheduling its passengers. (Davies, 1964)

More than eighty years later, the Company has gone global and operates more than fifty flights daily to various destinations throughout the world. It has a total of five hundred and sixty flights daily. (Jackson 2000) the Airline has about fifty five destinations regionally. And in the year 2000, the Company transported thirteen million passengers on routes based regionally and about seven million passengers for its international routes.

a) Internal and external triggers that led Qantas Airline to develop markets internationally at various stages of their development

There are four stages that the Airline Company had to undergo before and during entry into international markets. These stages are as follows;

  1. Market entry
  2. Product specialization and value chain aggregation
  3. Value chain reengineering
  4. Generating new markets

(Robert & Minnow, 1995)

1. Market entry stage

This stage is characterized y introduction of services to a new international market. During market entry stage, there were a number of factors that prompted the Company to enter into some countries. These shall be examined below

Competitors in the Industry

The Company had to consider who were the competitors in the respective countries of choice and what advantages did this potential competitors have over them. For example in entry in the American market, Qantas had to consider other Airline Companies that offered low budget tickets and in this regard, charges in the country of entry had to be readjusted to deal with that competition in the market. (Smith, 2002)

Economic climate

One major reason that prompted the Airline to enter into other countries was because of the introduction of the General agreement on trade and tariffs by the World Trade Organization. This agreement ensured that the Airline was protected against barriers to trade. Before Qantas could enter certain countries, it had to examine the economic conditions prevailing in those respective countries. It scrutinized the stability of their currency in relation to the Australian dollar. Besides this, Qantas had to make sure that the countries it targeted were feasible for trade.

Political/legal factors

Some countries had passed rules and regulations that encouraged foreign investment. These countries prompted Qantas to consider them first. The Airline had to choose politically stable countries like the USA and Japan. Besides, it also examined employment regulations in those countries and realized that they were conducive for the operation of business.

Geographical factors

Initially, the Company had to choose destinations that were frequently visited most air passengers. Examples of such destinations include Britain and the USA. This was because operation in countries of choice had to make business sense and they had to ensure that those countries were geographically accessible.

Cultural factors

The brand image presented by the Airline in those respective countries had to coincide with the culture of the country of choice. This was the reason why Qantas first started with areas that were similar in culture to Australia in order to ease its entry. This was enforced when the Airline chose most of its European destinations. Marketing strategies did not have to differ to large extent. But when it entered Asian countries like Japan, it had to adjust its marketing approach because the Japanese are generally known as a conservative lot.

2. Product differentiation and specialization and aggregation stage

This stage is characterized by focusing products in locations that are most favorable to the Company. This means that a Company should not spread its services equally in all the areas it has invested in. Instead, it should put most of its activities in areas that are favorable for business.

Focusing international flights in certain regions

This was the main reason why the Airline has majority of its international flights located in the USA, UK and Japan. The decision to concentrate most flights on these areas was because there were larger market segments in these areas and it was easier to conduct airline business in these areas than other countries in the world. (Morrison and Winston, 1997)

3. Value chain reengineering

This stage of development involves changing strategies in service or product processes to suit a given market because international market present different challenges from mother Companies.

Partnerships

At this stage of its development, the Company started engaging in partnerships and had to consider going into other parts of the world that it had not previously entered. An example was in the year 1995; Qantas formed an alliance with British Airways called One World. This was to synchronize flights between the three continents of Europe, Asia and Australia. The Alliance prompted Qantas to expand its market into other countries to facilitate services between the two Companies. (Doganis, 2002)

Fleet development

The airline has been constantly growing since its inception as a result of increasing fleets. Qantas has been purchasing Boeing aircraft makes like the 747-400. The availability of more aircrafts meant that the company can maintain schedules and meet maintenance needs of the old aircrafts. This implies that it had the capability of expanding its operations into other countries and still maintains service delivery. (Directory, 2007)

4. Generating new markets

This stage is characterized by new strategies that expand the current market of the Airline in a given international market segment. (United Nations, 2001)

Improving operating procedures

For example purchase of engines in case they need modification, upgrades in interior parts of aircrafts and also in purchase of the actual product.

Capital expenditure is also required for incorporation of other services that come with the airline industry. This mostly refers to hospitality services like Porsche seats, video watching and recruitment of members of staff like pilots, aeronautical engineers, cabin crew members and others. All these are issues that have to be re examined by Qantas so that the Company can expand its market base by attracting new clients (Doganis, 2001)

Keeping up with technological advancements

The Company has appealed to some customers through introduction of compartments where laptops can be placed in its business class section thus appealing to a new IT- conscious clientele. The Company has also kept up with technological advancement through introduction of the Qantas Telstra visa card. Besides this, the Company has provisions for online booking and has conducted a number of marketing activities online. All these are geared towards attracting new consumers to the market. (Travel and Tourism home page, 2007)

b) Benefits of internationalization to Qantas in various stages of development

Internalization has mostly been beneficial to the Airline. These are the reasons why;

Utilization of capital at ‘market entry’ stage

Qantas as an airline company is in serious need of capital for its products. The main resource in the aviation industry is aircrafts. Entry o the Airline into certain countries have helped the Company to minimize costs on capital due to the fact that the Company can be able to acquire fleets locally I those countries it has entered. This mean expenditure is greatly reduced and consequently profits are consequently increased. (Butler and Keller, 2000)

Increased sales in the ‘value chain engineering’ stage

Changes in strategies during the value chain engineering stage have brought about increased sales. This was especially witnessed in the year 2000 when the Company saw an increase in international sales by twenty six percent. It gained revenues of 374.8 million Australian dollars in the international flights sector as compared to the local flights that generation income of 272 million Australian dollars. These increased sales were due to improves safety measures, adequate maintenance of aircrafts and reliability from the Airline

Cheap labor costs in ‘product specialization’ stage

Operation of the Companies services in some countries is cost effective because the Company has recruited staff members from those respective countries and these members require low amounts during their enumeration. This has been applicable in some Asian countries like India, where the Australian economy is stronger and is therefore at an advantage compared to the Indian economies.

c) Key limitations of internalization to Qantas at every stage of development

Some limitations have arisen from this business endeavor mostly because internationalization is a business risk in itself and might not always bring favorable results.

International disasters in the ‘generating new market’ stage

The Airline industry is susceptible to disasters and these can generate negative publicity for he affected Company in other countries that may be utilizing services offered by the Company. This scenario was observed in the year 1999 when a Qantas Airplane was involved in an accident at Bangkok and serious doubts arose as to the credibility of the Airline Company in other parts of the world especially in its core business area-Australia. (Jackson, 2000) The Company had to spend numerous resources to investigate the cause of the accidents and to remold its image.

Capital costs during ‘market entry’ stage

Qantas had to set aside numerous amounts of capital because the purchase of aircrafts is no easy task. This meant that initially all the profits generated form those markets that had just been penetrated were used to offset initial capital costs.  (Robert & Minnow, 1995)

Conclusion

Qantas has undergone numerous changes during its development into the international market. The Company has had to study foreign environments before it could enter them. While it has been trying to establish itself in these new environments, it has had to come up with different strategies that will ensure survival in those markets. Overly, the Company has benefited from the venture despite minor limitations here and there. (Richard, 1995)

Reference:

Jackson, M. (2000): Qantas Airways Limited: narration section of Chairman’s Address; Report on the Annual General Meeting of 2000

Travel and Tourism home page (2007): Qantas Airways Ltd; retrieved from http://www.euromonitor.com/Qantas_Airways_Ltd_(Travel_And_Tourism)?print=true accessed on 5th January

Butler, G.F., Keller, M.R. (2000): Handbook of Airline Operations. Aviation Week;

McGraw-Hill Companies

Davies, R.E.G.  (1964): A history of the world’s airlines, Oxford U.P

Directory: (2007): World Airlines”, Flight International, 2007-04-03, p. 77.

Doganis, R. (2002): Flying off Course: The Economics of International Airlines, 3rd edition. Routledge, New York.

Doganis, R. (2001): The Airline Business in the 21st Century. Routledge, New York,

Morrison S. and Winston C. (1997): The fare skies: air transportation and Middle America, Brookings Fall, 1997;

Smith, M. J.  (2002): The airline encyclopedia, 1909-2000. Scarecrow Press

Richard T. (1995): International Business Ethics and culture, New Jersey: Prentice-Hall, Inc

Robert A.G. & Minnow, N (1995): Emerging Global Business marketing

Oxford: Blackwell Business

United Nations (2001); Global impact: corporate leadership in the world economy. United Nations office, New York