Analyzing The Competitive Forces Facing Qantas – Industry Position And Financial Performance Evaluation

Analysis of the Competitive Forces Facing Qantas

Analyzing the financial position and corporate position of an organization is crucial as it offers the information about the profitability position and changes in the company to management and the stakeholders. Further, the analysis over the Qantas limited has been analyzed through conducting various methods. Firstly, porter’s 5 forces model has been analyzed to evaluate the industry position. Further, SWOT analysis has been done and the corporate strategy of the company has been evaluated. And lastly, the financial performance and the position of the company have been evaluated. The financial performance of 2013 and 2016 has also been analyzed.

The Qantas’s case study has been evaluated and through the study, it has been found that Qantas limited is the biggest aviation industry in Australian market and it is recognized as the second biggest aviation firm in international market. The market share of the company has also been enhanced on a huge level. The operations and the functions of the company are to offer longest route airways to its clients. In 1920, this company has come into existence. Qantas limited is offering its services into 42 countries and currently 35000 people are employed by Qantas limited (Home, 2017). The symbol of Qantas limited is Red Kangaroo. This company is currently planning to diversify and enhance its market into Australian market.

Porter’s 5 forces model is a framework for evaluating the competition of the business into the industry and the economy (Pearson, 2008). This framework is evaluated to derive the attractiveness and competitive intensity of the company. Following is the porter’s 5 forces model:

For most of the firms and the industries, the industry rivalry is the most important element. It is good for every company to analyze and evaluate the position in the industry. According to the industry competition evaluation over Qantas limited, it has been found that the industry competition of Qantas limited is quite lesser in the local market is Tiger Plc and Virgin Blue Airways (Gillen and Gados, 2008). Though, in international market, British airways could offer a great competition to the Qantas Limited.  

New entrance affects the already existing firms in the industry. New entrants eventually affect the position and profitability of firms. It is good for every company to analyze and evaluate the position of new entrants in the industry. According to the threat of new entrant’s evaluation over Qantas limited, it has been found that the threat from new entrants of Qantas limited is quite lower as huge investment is required to enter into the aviation industry due to very costly machineries and the policies.  

Qantas’s Corporate Strategy

A substitute product express about the diverse products which could be used as a substitute. It express that if 2 or similar products are available in the market than the existing product could be impacted. According to the substitute products evaluation over Qantas limited, it has been found that the substitute products of Qantas limited is quite lesser as it is mostly used by the companies for longer route and no other industry offers travelling for such a long route (Gaughan, 2010). Though, in local market, trains could offer competition to the aviation industry.  

Bargaining power of suppliers is directly related with the suppliers of the company. It makes an impact over the price and the quality of the product. According to the bargaining power of supplier evaluation over Qantas limited, it has been found that the bargaining power of suppliers of Qantas limited is quite higher as very few suppliers are available in the industry and the companies are quite more. Company should focus over the healthy relationship with suppliers (Frazer, 2015).

` Bargaining power of buyers is directly related with the customers of the company. It makes an impact over the position of the company in the market. According to the bargaining power of buyer evaluation over Qantas limited, it has been found that the bargaining power of buyers of Qantas limited is quite lower as few firms are there in the market and so as the customers. Still, company is suggested to maintain the good position in the market.

Further, SWOT stands for strength, weakness, opportunity and threat. This study has been done over Qantas limited to analyze the internal and external position of the company. Following is the evaluation over strength, weakness, opportunity and threat of the company:

(Fu, Oum and Zhang, 2010)

Qantas’s corporate strategy:

Corporate strategy is the overall direction and scope of an organization and the way in which the functions and the team of the business work together to get the specific goals. The corporate strategy of Qantas limited has been evaluated to measure the performance of the company and the position of the company into the market. The case study briefs that various changes have taken place into the position of the company from 1992 (Elmuti and Kathawala, 2001). The changes into the strategies and policies have been done by the company to meet the expectations and make it more competitive in the market. It has been found that the policies and the strategies of the Australian air flagship have also been changed from 1992. The new strategies have been adopted by the company to manage the business and the performance of the company (Barney, 1992).

Evaluation of Qantas’s Financial Performance and Accounting Policies

According to the case, it has been found that the technologies, strategies, functioning, operations, sources etc of the company has been changed to manage the position of the company in the Australian market. Qantas limited has adopted the diversification strategies and thus this company has launched various subsidiaries in catering industry and aviation industry itself. Jetstar has been launched by the company to offer the services to the low income profile people. This segment has been launched by the company to enhance the market share (Coughlin et. Al, 2002).

Further, the international expansion strategies have also been adopted by the company and it has diversified its business into various new markets. Currently, it is offering its services into 42 countries and it is also planning to tie up with international brands to enhance its market and the opportunities for the business have also been enhanced (Datamonitor, 2009).

Further, various other segments have also been started by the company such as Qantas holidays, budget airlines, Qantas catering, Jetstar etc. to manage the same position in the market and make the business of the company, more competitive (Campbell, Goold and Alexander, 1995). Further, the various other changes have also taken into its policies, pricing etc. the evaluation over the changes into company’s business express that these changes have made the position of the company better.  

Accounting policies are the particular rules, principles and the process which is implemented by the organization and its management team to prepare the financial statement of the company. The accounting policies are decided by the company according to the accounting institute. The accounting policies which have been adopted by the Qantas limited has been evaluated and further, it has been found that which policies must be closely looked by the auditors and the financial analysts while evaluating the financial performance and the position of the company (Dean and Yunus, 2001). Auditors analyze the financial position and performance of an organization through evaluating over various bases so that a better decision could be made.

There are various rules which should be followed by the aviation industry and must be looked briefly by the financial analyst and the auditors of the company so that a better decision could be made by the related parties:

Depreciation policy is different of each accounting institute and it basically explains that each asset must be depreciated according to its nature. The depreciation is charged over an organization to manage the worth of the business but sometimes organization charge extra depreciation to save itself from extra taxation and sometimes they overvalue the organization to enhance the worth of the business. It is required for the auditors and the financial analyst to evaluate the depreciation amount briefly so that the best decision could be made (Dallas, 2011).

Further, the asset and liability recording is essential element of the preparation of financial statement process. Recording of assets and liabilities are quite crucial as various accounting standards and policies are kept in mind while recording these. The undervaluation and overvaluation of assets and liabilities are directly depends over the accounting policies. And thus, it is required for the auditors and the financial analyst to evaluate the depreciation amount briefly so that the best decision could be made (D’Aveni, Dagnino and Smith, 2010).

Further, the financial analysis of the company has been analyzed and the following data of the revenue, expenditure, assets and liabilities have been found:

The above table depicts about the income statement and balance sheet of Qantas limited. It depicts that the financial position of the company is quite competitive (Craigie and Bekiaris, 2010).

Further, the financial analysis of 2016 of the company has been analyzed and the following data of the revenue, expenditure, assets and liabilities have been found:

The above table depicts about the income statement and balance sheet of Qantas limited. It depicts that the financial position of the company is quite competitive.

Further, the similarities and differences among both the years has been evaluated to identify the performance of the company in both the years. Firstly, similarities in both the years are:

• Performance enhancement
• Revenue increment
• Domestic policies are quite similar (Brigden, 2009)

Further, the differences have also been analyzed among both the years and it has been found that the following are few differences:

• Liability level was not the same  
• Various changes in the asset performance
• The international policies have also been changed.

Recommendation and Conclusion:

Through the above evaluation over the company, it has been found that the position of the company is quite better in current year and according to the evaluation, it has been predicted that the position would be better in near future. Thus, it is recommended to the investors to invest more into the Qantas limited so that the return could be more.

References:

Barney, J. 1992. ‘Firm Resources and Sustained Competitive Advantage’. Journal of Management, vol. 17, no. 1, p. 99.

Brigden, Cathy. 2009. Journal of Industrial Relations. Unions and collective bargaining in 2008, 513, 365-378.

Campbell, A, Goold, M and Alexander, M. 1995. Corporate Strategy: The Quest for Parenting Advantage. Harvard Business Review, viewed 22 December 2017, <https://hbr.org/1995/03/corporate-strategy-the-quest-for-parenting-advantageandgt.

Coughlin, Cletus C. and et. Al. 2002. Review. Aviation Security and Terrorism: A Review of the Economic Issues, 845, 9-16.

Craigie, J. Bekiaris, M. 2010. Money. Qantas gets cosy with AirAsia, 2120, 16-16.

D’Aveni, R, Dagnino, G, and Smith, K. 2010. The age of temporary advantage. Strategic Management Journal, 31, 13, pp. 1371-1385, Business Source Complete, EBSCOhost, viewed 18 Jan 2017.

Dallas, H, 2011. “Strategic Management; competitiveness and globalization”. Strategic management, Asia-Pacific 4th ed, pp 434-440.

Datamonitor. 2009. Airline Industry Profile: Asia-Pacific. Airline Industry Profile: Asia-Pacific, 1-32.

Dean, E. and Yunus, K. 2001. ”An overview of strategic alliances”. Management Decision, Vol. 39 Iss 3 pp. 205 – 218.

Elmuti, D. and Kathawala, Y. 2001. “An overview of strategic alliances”. Management Decision, vol. 39, no. 3, pp. 205-217.

Frazer, S 2015. Jetstar expansion stalled by Hong Kong authorities, Text, ABC News, viewed 22 December 2017. https://www.abc.net.au/news/2015-06-26/jetstar-expansion-stalled-by-hong-kong-authorities/6576346andgt.

Fu, X., Oum, T.H. and Zhang, A. 2010. “Air Transport Liberalization and Its Impacts on Airline Competition and Air Passenger Traffic”. Transportation Journal, vol. 49, no. 4, pp. 24-41.

Gaughan, PA 2010. Mergers, Acquisitions, and Corporate Restructurings. John Wiley and Sons.

Gillen, D and Gados, A 2008. ‘Airlines within airlines: Assessing the vulnerabilities of mixing business models’. Research in Transportation Economics, vol. 24, The Economics of Low Cost Airlines, no. 1, pp. 25–35.

Pearson, David. 2008. Wall Street Journal-Eastern Edition. Airlines Face Shortage of Pilots, 25195, p. B11A.

Qantas. 2016. Qantas Fact file. [Online] Available from: https://www.qantas.com.au/infodetail/about/FactFiles.pdf [Accessed 22 December 2017].

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