Business Level Strategies
A key strategy that Qantas has in place, is that of differentiating its product offerings. The company attempts to improve its position by regularly updating its product range in order to meet its consumers’ tastes/preferences. The company does not attempt to gain an advantage by selling its products at discounted prices (Qantas, 2000). Due to the increase of competition in the domestic market, Qantas has began to offer additional products to boost its revenue in other ways, rather than squeeze out the remains of an already saturated domestic market.
Qantas’ product range now includes ‘Qantas Holidays’ a product offering customers, a full package, rather than just a ticket, as well as loyalty schemes such as the Frequent Flyer Program. It has even touched on the banking industry, forming alliances, to provide products such as the ‘ANZ Qantas Telstra Visa’. Furthermore, when flying, customers can expect to eat meals which are traditionally associated with the country or town, they are departing from or will be arriving at. Overall, this strategy has worked, Qantas customers are “… now more loyal than ever… “(Qantas, 2000).
‘ Qantas Holidays’ has recorded a profit of $28m, an increase of 118% from the previous year. Qantas Catering has
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Qantas has engaged in a number of such strategies. These strategies, and their effectiveness are discussed below. In the past decade, Qantas has attempted to move into new business areas in an attempt to both grow the company, and reinforce its position within the industry. According to James Strong “… our strategy to selectively grow the business and strengthen our position in key markets”. He has also said, “… Qantas had also embarked on a number of other initiatives that would create new opportunities and additional benefits in the future” (Qantas, 2000).
For example, Qantas has been seen to acquire its own catering company, namely Caterair Holdings, in three major Australian cities. Furthermore, to further expand on this particular venture, Qantas are looking at establishing a ‘Snap Fresh’ plant to centralise meal production. Another venture Qantas embarked upon this year was ‘e commerce’, an online website that enables customers to buy their tickets over the Internet, rather than having to go to a travel agent. In conjunction with Qantas Holidays, Qantas customers, are able to plan their holidays on the Internet are their leisure.
(Qantas, 2000). Effectively, Qantas has gained greatly by diversifying its product range. The company has successfully reduced the company’s risk, in light of the up coming competition, as it no longer relies solely on its ticket sales operations for its entire revenue, and may now obtain its income in many different currencies, reducing its foreign currency risk as well (Qantas, 2000). Overall, Qantas’ diversification strategy has been successful. Caterair is now the largest in Australia and should continue to provide the company with increasing returns (increase of 22% 1999-2000).
This brand has proved to be operationally efficient and seems ripe for market expansion opportunities (Qantas, 2000). Furthermore, although ‘e – commerce’ is the company’s baby, it is proving to be one of the most potentially profitable product lines. It already has reduced ticketing costs and will further allow for Qantas to reduce other costs associated with issuing ‘paper’ tickets (Qantas, 2000). In order to protect and develop Qantas’ position, the company is devoting extra efforts to enhancing its image internationally.
The international marketing team is focusing on the company’s distinct personality, while at the same time recognizing the need for cultural sensitivity. This strategy, in effect has proved to be very popular, as Qantas’ logo is recognized easily all over the world and is often associated with Australia itself. To further strengthen the brand overseas, the company needs to be recognized as a premium airline. Qantas has attempted to maintain its product competitiveness in all sections of the cabin, by installing a $300 million inflight entertainment system.
Further improvements have been made to the international lounges and an evaluation of the business class sleeper is underway. Likewise, this strategy has proved to have increased profitability. International EBIT rose by 21. 6% in the 1999/00 financial year. To profitably service the company’s international routes at the same time as meeting market requirements, the company has decided to direct its efforts in enhancing aircraft technology. Qantas has already acquired seven new jets in the last financial year, and is looking at adding Airbus and Boeing 300 to their fleet.
However, this may prove to be a dangerous ground. Although, it cannot be logically assessed if this strategy will prove profitable at this point in time, but the company should be aware of it dangerously high gearing ratio, and further discuss, if the company can afford in increase its already large borrowings. Furthermore, a strategy which although indirect, has become apparent and is part of the company’s dealings is, international acquisitions. For example, the purchase of Ansett NZ was made to increase the company’s overseas holdings.
Yet, although young in its existence, the newly renamed Qantas NZ is proving to be unprofitable. Again, it is difficult to decide if the operation will prove to be successful, due the little time involved. In the future, Qantas should look at selling off any unproductive assets, such as the Qantas NZ, and either use the money raised to pay off accumulated debt, or look at investing the money into an area yielding a higher return, such as the newly developed “e-commerce”. Qantas should also look at possibly expanding its catering operations, to take charge of this yet undeveloped market.
In addition, Qantas should continue to carefully diversify into new businesses in order to reduce the company’s reliance on its domestic ticket sales operations, and thus reduce its risk. A possible suggestion could be the establishment of a ‘cut rate’ domestic network to match the competitors’ offerings. Qantas should also gradually expand into additional overseas markets in order to achieve further economies of scale and increase sales. Although, it should be done carefully, it is a must, as the Australian market is saturated and, thus, on its own, does not give adequate opportunity to increase its income dramatically.
Due to the appearance of new competitors, Qantas should continuously research patterns in buyer behaviour, their changing preferences, and continuing to develop new products to meet those new needs. Qantas should also attempt to increase advertising internationally, so to implement the strategy of increasing brand awareness. It should use its links with oneworld and its networks to promote easy access and availability. The company could then increase its international strategy. Increased exposure of Qantas products will increase the chances that the firm will successfully penetrate foreign markets.