Case Study: Qantas

Role of Operations Management

• Contributes most directly to business revenue

• Consumes majority of the business expenditure

• Employs normally the majority of the labour resources

• Interfaces most directly with the business customer/client

• Utilises and is responsible for the largest proportion of the business assets Strategic Role of Operations Management The operations allow Qantas to achieve long-term survival.

• The scheduling, cancellation or rescheduling of flights

• The monitoring and response to an industrial dispute

• The reallocation of labour to cover absences in key areas Cost Leadership The aim is to use the least amount of inputs to deliver one unit of output. Some methods are:

• Economies of Scale - strategic alliance with Emirates 2013

• Standardisation - the more variations to Qantas' services = higher cost

• Technology - eliminating the need for Qantas staff to be available to interface the customer

• Waste Minimisation- deliver the lowest production cost Differentiation of Product/Service This approach does not mean competing on cost but by adding features to differentiate its product/service from competitors. Key elements of differentiation at Qantas are:

• Offering the most comprehensive domestic and international coverage (flights every 30 minutes in peak periods)

• Jetstar is aimed at price conscious customers whereas Qantas is a full service airline

• Qantas includes comfort based features such as sky beds, special menus, lounges, online check-in and self-service kiosks

Interdependence with Other Key Business Functions Operations use human capital (people) as its major input

• Human resource managers deliver – recruitment, training and development (for Boeing 787 pilots and crew need to be trained and effectively integrated), and retaining staff (motivation benefits and negotiated monetary rewards)

• Finance – monitors, records, and analyses the financial transactions, provides regular and periodic reports on financial performance (purchasing and leasing new planes rely on funds)

• Marketing – connects operations with the customer by providing market requirements, operations determines the capabilities and constraints in pricing, product design, promotion etc.

Globalisation

• Launching new airlines in Asia, cost minimisation needed to be more internationally competitive

• Jetstar Hong Kong low cost airline – take advantage of that regions growth Technology

• Newer planes, newer operational processes, more training required

• Qantas spends about $300 million a year on training – when they switched their reservation system onto Amadeus some 10,000 staff had to be retrained

Quality Expectations

• Pressure to ensure customer expectations are met and/or exceeded – ‘Customer loyalty’

• Arriving and departing on time, new generation check-in, new Q Bag Tags, newer planes, specially designed menus

Cost-based Competition

• Outsourcing, reform to HR practices, employing more labour saving techniques, online bookings

• Qantas has been under some criticism with the quality of its services with increased safety incidents and the shut down in the battle of the unions in 2011

Government policies

• Deregulation and the carbon tax has placed pressure to minimise costs

• The Fair Work Act is a lot more pro worker which has increased Qantas' operating costs

• Under the new emissions trading scheme Qantas will be charged $20 more per tonne of carbon dioxide produced

Legal Regulation

• Subject to the regulatory control of the Civil Aviation Authority, economic regulation of the ACCC

• Required to hold operating licences

• New federal security regulations in response to terrorism

• State Government regulations on labour (workers compensation, anti-discrimination) Environmental Sustainability

• Purchasing new, environmentally sensitive aircraft, recycling

• Fuel conservation - a tri-generation energy system reduces power usage

• Boeing 787 and Airbus A380 are more fuel efficient

• Commercial flights powered by sustainable bio fuel – 60% reduction in carbon footprint

Ethical and Social Responsibility Modern society expects more of a business like Qantas than just profitability. There is an overriding public expectation as to how the business behaves within society in making that profit.

• Quality of working life – Qantas has a health surveillance program which continually monitors workplace conditions and fosters a balance through flexible work practices

• Cultural diversity – focus on employing Indigenous Australians

• Donate millions to charitable causes across the community, environment, education and the arts

• Energy and water conservation, recycling, reduced carbon emissions

Inputs

Transformed Resources Transforming Resources

The resources which are changed by the operations processes Materials

• Raw (fossil fuels, timber, oil, water)

• Intermediate (food, stationary, computers)

Information

• External (statistics, market/industry reports)

• Internal (data on previous performance)

• Customer bookings/transactions

Customers

• Customers are moved from one place to another

Resources which effect the changes in the operations process Human Resources (Labour)

• Assemble the inputs, operate and maintain the machinery and equipment, fulfil the sales function, distribute the output and deal with customers

• Qantas must attract and retain high quality staff

Facilities (Capital)

• Terminal buildings and their contents, maintenance facilities, spare parts holdings, aircraft, computers and motor vehicles

• Can co-share with other airlines for mutual benefit

Volume (how much output is produced)

• Qantas processes millions of people worldwide, must be able to adapt to inevitable changes

Variety (the mix of outputs produced)

• Qantas provides a variety of services, national and international services so must be flexible

Variation in demand (how demand changes over time)

• Qantas’ experiences a predictable major increase in demand for school holidays and special events

• Events such as 9/11 and the Christchurch earthquake resulted in sharp falls in airline bookings Visibility (how much of the process directly involves the customer)

• High in visibility as there is customer contact throughout the whole process Sequencing (order) and Scheduling (time/duration)

• The aim to have products out as fast as possible

• Planes must be cleaned and checked before they can take off

• Qantas uses complex scheduling software to automate its flight scheduling – helps schedule the time between flights, repairs and down time (time savings)

Technology, Task Design and Process Layout

• Technology – increased productivity by replacing human capital and automation, e.g. online checking

• Task Design – breakdown of individual tasks, analysis and assessment is undertaken by human resources

• Processes occur in the terminal, hangar and maintenance area (major business expense). Optimum process layout is where machines and equipment are grouped together by function (utilises space and labour efficiently, eliminates bottlenecks and saves time)

Monitoring, Controlling and Improvement

Having created a plan for the operations through sequencing and scheduling, each part of Qantas; operations has to be monitored and controlled to ensure that the plan is adhered to. Monitoring and controlling at Qantas involve detecting any discrepancy between planned and actual activity, taking corrective action and intervening to impose new plans is necessary.

Outputs

• Customer service refers to how well Qantas meets the needs of its customers. It provides feedback, expectations and supports continuous improvements

• Qantas has adopted the ‘Net Promoter Score’ as a key measure of customer service

• Qantas Closed Loop Feedback Program enables direct feedback from its 11,000 frequent flyers

Performance Objectives

Quality (being right) – Transactions must be accurate, aircraft is clean and tidy, staff are courteous, helpful and friendly Speed (being fast) – Customers must be processed swiftly (reduce waiting time), online bookings etc. Dependability (being on time) – The service must be reliable and consistent, measure by on-time departures and arrivals Flexibility (being able to change) – Qantas must respond to market changes, Jetstar demonstrates flexibility in product and product mix, Jetstar is a response to the competition of low cost carriers Customisation (Being able to provide more options) – Oneworld Alliance membership offers services worldwide, Jetstar’s low costs and offering different classes of seating Cost (being productive) – Processes must be efficient, measures costs through productivity

New Product/Service Design and Development

The strategic decision to develop a new product or service entails commitment in cost, time and resource either diverted from existing operations or financed as an additional expense.

• Qantas has launched 4 new airlines in the Asia pacific region to take advantage of the growth

• Qantas constantly updates services or processes in order to main competitive and profitable

Supply Chain Management This is the controlling of the flow of supplies through Qantas’s operations, to the final customer. Raw materials such as fuel is sourced, purchased, stored and moved.

• Sourcing (purchasing function) – Qantas must forecast its quantity and quality requirement of every input and suppliers must be assessed

• Global sourcing – Qantas sources some pilots from New Zealand, and cabin staff at Asia at lower wages, and engine maintenance carried out in Malaysia is on a cost benefit basis

• E-commerce – Qantas has reduced time consuming and manual processes, real time information can be provided to customers

• Logistics – ensuring Qantas has all the physical inputs in the right places and at the right times

Outsourcing

• Qantas currently outsources nearly all of its IT operations and some call centre operations, flight attendants and maintenance functions

Advantages Disadvantages

• Saving in capital outlay

• Saving in labour

• Increased dependability, ensuring security of supply

• Saving in cost

• Access to higher level skills

• Increased flexibility, variations in demand are managed by the other business

• Saving in management

• Dependency, failures in supply can cause major disruptions and expenses

• Loss of control and security

• Quality

• Cost

• Industrial problems can arise from downsizing

• Damage to public image as a result of publicity about jobs going offshore

Technology Qantas relies heavily on technology, but airline technology is complex and continually being advanced and updated. Attempting to provide this special input in-house can be very expensive both in cost, specialist skillsets and development time.

• Leading Edge - at the forefront of research, usually high reward attracts high risk

• Established – already well established, services and used in the market place

• Qantas was one of a number of airlines who placed advanced orders for the new Airbus A380, but they opted to make sure they were not the airline to receive the very first ones

Inventory Management Inventory refers to the raw materials, unfinished goods undergoing transformation and finished goods held by the business at a point in time. Inventory management is the system that manages the ordering, storage and recovery of the material inputs used in production. This is not a major issue for Qantas as they do not store products to meet customer demands Quality management For many years Qantas has marketed as a high quality, perfect safety record, full service airline and commanded premium fares, whereas Jetstar has traded quality for price.

• Quality control – Inspections are carried out periodically at key stages to make sure the process is meeting specified standards, management intervenes and takes corrective action to uphold quality

• Quality assurance – Qantas monitors the level of quality at all stages by measurement against standards

• Quality improvement – Qantas invites staff to participate in brainstorming ideas and suggestions to improve quality, attempts to make quality both central and strategic within Qantas

Overcoming resistance to change Qantas must respond to change in respond to external factors, e.g. terrorist attacks and the GFC. There are significant restraints and restrictions to implementing change at Qantas, which fall into the two categories below:

Financial restrictions Human restrictions

• Cost of new equipment - billions have been spent

• New/more efficient aircraft (US $22 billion)

• New passenger and screening – over 1 billion dollars since 2001

• New/upgraded engineering ($300m since 2006)

• Redundancy costs ($260m in 2012)

• Retraining costs

• Plant layout costs (Airbus A380)

• Inertia – unenthusiastic managers

• Change in skillset - Engineering staff have started strikes due to arguments over the changes

Global factors

Factor Explanation

Global sourcing

• This is sourcing tasks or components for operations at cost advantages.

• Asian cabin pilots and NZ pilots have been employed to reduce costs.

Economies of scale

• These are cost advantages due to global expansion.

• Maintenance of A380 in Asia

• Serious trade union disputes in 2011 as jobs were being exported

Scanning and learning

• Increased globalisation = increased competition + new technology

• Qantas finds, learns from and tests huge volumes of data so that the systems will suit future customer bases.

Research and development

• Qantas researches and develops new methods of improving processes at the airport.

• Boeing and Airbus develop the new aircrafts

Role of Financial Management

• To manage the financial resources effectively and efficiently so that Qantas may achieve its financial objectives such as liquidity, solvency, profitability, growth, efficiency and return on capital.

• Interdependence with other key business functions

• Marketing - marketing is needed in order for funds to be generated

• Human resources - funds are required to remunerate staff and train/develop staff (spends $275m/year)

• Operations - funds are required for the daily running of the business Influences on Financial Management Qantas’ Sources of Funds

Debt Finance Equity Finance Lease Finance

Advantages

• No change to the ownership structure of Qantas

• Interest payments are tax deductible for Qantas

• Debt can be flexible/varied to suit Qantas’ changing circumstances

• Involves less risk as it doesn’t add to Qantas’ debt levels

• No interest payments

• Frees up Qantas’ funds which can be used elsewhere

• Giver Qantas greater flexibility with its aircraft fleet

• Lease payments are tax deductible

Disadvantages

• Involves a greater risk

• Qantas must pay interest on its borrow money

• Dividends are not tax deductible

• Shareholders have voting rights

• Qantas never owns the assets

• Over a long period of time it may work our more expensive for Qantas

• Qantas is still responsible for the fleets maintenance and repair

Global Market Influences Global market influences have a big impact on Qantas and its profitability.

• Prior to 2009 Qantas benefited from a strong global economy which increased demand for its travel services – record net profit in 2008 of $970m

• 2009 GFC lead to an 88% fall in net profit

• Qantas responded quickly by cutting flying capacity, deferring and cancelling orders for new planes, restructuring, raising $500m from investors and replacing Qantas with Jetstar on some international routes

• Recent improvement in economic outlook since 2009 but still uncertainty

• Global uncertainty will affect Qantas by: lowering its equity valuation, increasing its cost of borrowing and lowering economic growth in most developed economies

Processes of Financial Management

Financial Statements

• KPMG audits Qantas’ financial statements to ensure they give a true and fair indication of the company’s finances and comply with accounting standards and corporate law

• Some financial statements include balance sheets, revenue statements and cash flow statements

Profitability ratios

• These ratios indicate the profits and the performance of the business

• Qantas’ profitability was hit hard by terrorist attacks (2002), SARS (2004) and the rising cost of fuel (2006)

• Increasing profits in 2007 and 2008 was due to the success of Jetstar, the robust economic environment and cost savings

• In 2009, due to the GFC, there was an 88% fall in net profits Liquidity ratios

• This measures the ability for Qantas to meet short-term obligations and debts

• In recent years, the liquidity ratio decreased in 2012 to 0.77:1 from 0.90:1 in 2011 meaning that their ability to pay debts lowered

• In 2012 – Singapore Airlines was 1.4:1 and Air New Zealand was 0.01:1 Gearing

• This is the ability to continue operations in the long term and is a measure of financial stability

• The increase in gearing between 2010 and 2012 is due to an increase in borrowings for new aircraft

• Qantas’ decision to defer and cancel some orders for new planes is designed to ease the pressure on its gearing ratio

The current financial position is assessed by

collecting data

The information is utilised to frame a

business plan

The financial reports are prepared

The financial reports are interpreted by comparing actual to forecast results

Financial controls are adjusted to minimise

ricks and losses

Efficiency

• This measures Qantas’ ability to manage its assets in order to generate profits at minimum cost

• In recent years, Qantas’s efficiency has been around 80% (80% of the money was used to generate profits)

Comparative Ratio Analysis

• Comparative ratio analysis allows Qantas to determine their financial performance against previous years and competitors, such as Singapore airlines and Air New Zealand

Limitations of financial reports Qantas’s reports are very useful, however they should be used with some caution.

• Qantas attaches comprehensive notes to help stakeholders understand better and provide clarity

• Can be distorted due to special circumstances (QLD Cyclone, Christchurch earthquake, Japan tsunami)

• Can employ a variety of different accounting procedures

• Does not disclose when their debts need to be repaid (misleading)

• It is difficult to value their assets as they change over time Ethical and legal aspects of financial planning and management Qantas must abide by ethical and legal responsibilities in financial management. They have done this by:

• Having accounts that are certified by professional accounting bodies

• Abiding by the Corporations Act

• Having financial reports independently audited In 2007, Qantas agreed to a takeover by Macquarie bank for $11.1 billion, but this was not discussed with shareholders. As a result, the takeover did not occur. Financial Management Strategies

• Working Capital Management (Liquidity)

• Controlling current assets – cash, accounts receivables and inventories

• Controlling current liabilities – payables, interest bearing liabilities and trade creditors

• Leasing more aircraft, buildings and plant and equipment (non current assets)

• Qantas is considering selling and leasing back some of its own terminals Profitability management Cost controls: Qantas has uts its costs by over $5 billion in the last 9 years reducing its overall cost base by between 20-25%.

• Cutting flying capacity by halting growth and cutting back services

• Replacing Qantas with Jetstar on some international routes

• Cancelling orders for new planes and deferring orders for others during the GFC

Restructuring management/redundancies

• Freezing executive pay

• Reforming employment relations practices

• Aligning their businesses into separate segments (cost centres) – domestic, international, frequent flyers

• Fuel conservation and fuel hedging

• Outsourcing

• Cutting commissions to travel agents

• Entering into strategic alliance e.g. Emirates

• Encouraging more sales over the internet Revenue controls: total revenue in 2012 grew by 6%

• Setting clear sales objectives and breaking them down into business segments

• Discounting airfares to maintain loads in a shrinking market

• Reconfiguring planes with more economy class seats

• Targeting new and different markets

• Fuel surcharges in response to the rapid increase in the fuel price

• Investing in a new premium, full service airline based in Asia under a new brand in 2012

• Increasing revenue from other services such as travel, catering and freight to protect it from the peaks and troughs of Qantas’ core airline business

• Improved marketing strategies Global Financial Management Exchange rates (the value of one currency against the other) Qantas is financially exposed to changes in exchange rates because purchases of jet fuel, operational expenditure (lease payments and interest payment) and capital expenditure (purchase of new planes) are predominantly dominated in foreign currency, mostly the $US

• Qantas estimates that it generates about 38% of its revenue in other currencies

APPRECIATION → reduces price of fuel, lease payments, loan repayments and overseas capital expenditure - Australians are more likely to travel overseas but overseas tourists are less likely to visit Australia

DEPRECIATION → increases payments mentioned above – more overseas tourists travelling to Australia

Interest rates (the rate charged for the use or paid for the use of money)

• An increase in interest rates increases the interest payments Qantas pays on its borrowings Hedging/Derivatives – (strategies utilised to minimise the effect of changes in the global market) Qantas utilises derivatives such as future interest payments, forward cover and future capital expenditure payments. This allows them to protect its capital base, exploit its financials, minimise capital costs and to reduce financial distress.

• The Strategic Role of Human Resources Qantas is one of Australia’s largest employers; employing over 33,000 people (93% based in Australia) across 200 separate job categories

• HR needs to effectively manage the relationship between employer and employee.

• HR helps organisations like Qantas to achieve its goals, minimise costs, improve quality in working life and ensure legal compliance

• Interdependence with other Key Business Functions

• Finance – funds are required to remunerate staff and provide effective training and development

• Marketing - the right staff must be employed and trained so that consumers are satisfied

• Operations – efficiency is affected by quality of HR, during the GFC many flights were cut changing the size and type of the workforce

• Outsourcing Qantas has outsourced business operations globally in order to become more simple and cost effective. Qantas uses domestic subcontractors to create cost savings, access greater expertise and to cope with the competitiveness.

• Jetstar call centre was outsourced to the Melbourne Operator Sales Force

• Domestic voice, data and domestic services are outsourced to Telstra Qantas also uses global subcontractors – this has been a particular sore spot for Qantas’ unions and a cause of industrial tension.

• Some maintenance jobs are contracted overseas to Singapore and New Zealand

• Established a base in London for about 400 of its international flight attendants

• IT applications support and maintenance are outsourced to 2 companies in India

• Its entire reservation system is outsourced to a Munich based company called Amadeus

Stakeholders

Stakeholder Explanation

Employees Employees are concerned with the maintenance of their existing levels of pay, working conditions and job security. Recently, employees have been angered by Qantas’ industrial relations tactics and the length of time it has taken to end some disputes. They have heavily supported union action and even rejected initial enterprise agreements.

Qantas management

These are the board members that are involved in the key decisions of Qantas’s future. In 2011- 2012, there was a restructuring of the organisation.

Unions Qantas has a highly unionised workforce. The employees are represented by 16 unions including the Australian Workers Union, Allied Services Union and the Australian Manufacturing Union. They are united in opposition to pay cuts, outsourcing, casualisation and job losses.

Government organisations

Qantas must abide by the key legislation governing employment relations including the Fair Work Act, Workplace Health and Safety Act and Workers Compensation.

Employer Associations

Qantas is a member of the Australian International Airlines Operation Group which operates on a national and international level making sure that the concerns of Qantas are represented to government at the federal level and to the community at large

Legal Qantas must abide by state, local and federal laws under HR which include:

• Obligations in the workplace such as employment conditions, awards and agreements.

• Obligations to provide a safe workplace (WH&S program - 80% reduction in employee injury since 2001)

• Obligations to take out insurance

• Obligations to promote equal opportunity (41% women employees, 25% women on Qantas Board – 2012)

Economic These are the fluctuations within the global and national economy that can affect demands for services and products.

• In 2009, the GFC caused a major reduction in Qantas’s workforce as well as in services. The workforce was reduced from 34400 to 32800.

• Executive pay was frozen

• The cuts involved mainly engineering, maintenance and catering

Technological

• New security systems had to be introduced in response to terrorism threats

• New technologies included new planes (Dreamliner and A380), new inflight entertainment systems, online check in and self-service kiosks

• Introduced to maintain competitiveness, but new skills had to be learnt and some jobs were lost

Social

• More part time and casual employees (19%) reduces costs and improves international competitiveness (cut costs by $4.5billion in the last 9 years)

• There is a higher proportion of woman in senior roles

• There is a more culturally and ethnically diverse workforce (due to migration and globalisation)

Process Explanation

Acquisition • Identifying staff needs involves conduction a job analysis

• Recruitment at Qantas deals with providing a pool of potentially qualified job candidates

• Internal and external sourcing of recruitment

• Selection error can cause a number of major costs

Development • Important part of enhancing its HR capabilities and strengthening its competitive edge

• Training is done on the job (internships and job rotation) and off the job (online courses)

• This reduces accidents and increases efficiency and the quality of services.

Maintenance • Maintaining valuable staff and keeping them interested and motivated

• It can be achieved via remuneration (compensation) either by paying staff salaries or rates for their services, or providing intrinsic benefits e.g. flexible times and parental leave

• Paid maternity leave from 10 to 12 weeks, up to 10 days carer’s leave per annum, child care facilities, total period of parental leave (paid and unpaid) from 52 to 104 weeks

Separation • This is the leaving of an employee from a corporation.

• With the GFC, many employees involuntarily separated – this must be carefully managed and be in compliance with legislation

Leadership style

• The autocratic leadership style was utilized in the 1990s where management had the most power over decisions

• In recent years, it has been more democratic and employees have a larger input in decision-making

Job design The various components of Qantas are organised based on functions. The entire job from the baggage handling to the planes is set so that it is as efficient as possible.

• Job enlargement – giving employees more and varied tasks

• Job rotation – moves employees from one task to another

• Job enrichment – allows employees to assume more accountability, responsibility and interdependence

Recruitment

• Internal (filing vacancies) and external recruitment (from the outside) methods are utilised.

• Alan Joyce was an internal appointment, formally in charge of Jetstar

Internal Recruitment External Recruitment

Examples

Promotions, transfers

Advertisements (online), contractors, head hunters, competitors

Benefits

• Accurate job placement can be made

• Provides motivation of employees to perform well and develop skills

• Lowers overall training and induction costs

• Vacancies can be filled quicker

• Tends to increase selection accuracy

• Prevents the ripple effect

• Brings new ideas and innovations

Limitations

• Employees may not be prepared or qualified

• May cause a ripple effect

• May lower the influx of new ideas and innovation

• Increases the recruitment and selection costs

• Increases training and induction costs

• Takes longer to fill vacancies

• May lower employee motivation and morale

Training and development

• This is done to increase the performance of employees.

• Pilots undergo over 48,000 hours of annual training in state of the art aircraft simulators

• Qantas College Online is utilised to allow staff to learn online

• These activities have increased productivity, improved services, developed a more committed workforce and enhanced the ability to cope with change

Performance management

• Employees are assessed and measured against benchmarks (e.g. quality, number of output). This motivates poorer performers to do better. The objectives are to:

• To provide a rational basis for pay and promotion decisions

• To assess the training and development needs of employees

• To provide individual feedback to aid performance improvement

• To clarify strategic goals and performance expectations Rewards These are benefits to the employee for their service so that they may stay motivated and consistent.

• Monetary – these involve wages and salaries. Higher performers in Qantas gain a higher pay (as a bonus). Superannuation, company cars and maternity leave are provided.

• Non-monetary – these are intrinsic benefits, e.g. job recognition, promotion and good relationships

Employees are often willing to join Qantas for the non-financial rewards they offer like interesting and challenging work, job recognition, job performance feedback, promotion, autonomy in the job, good relationships with co-workers and a safe and healthy environment. Global Strategies The Qantas workforce is made up of 102 nationalities, speaking 51 different languages.

• Qantas uses a polycentric and ethnocentric approach to staffing

• It tries to hire host country nationals (HCNs) instead of transferring its domestic staff to work in foreign operations

• Advantages of HCNs: understand local laws, culture, state of the economy and language, and it avoids expenses with expatriate managers (relocation costs)

• Disadvantage: HCNs may need to be trained to become familiar with Qantas’ culture and practices

Workplace Dispute Resolution Qantas has methods of dispute resolution such as: grievance procedures, negotiation, mediation and court involvement.

• In 2011, the strikes from engineers, pilots and ground staff occurred due to the fact that Qantas would not agree to the terms of a 3% annual rise

• Industrial action occurred. Eventually, arbitration was needed and all the parties had to agree. This was ratified by Fair Work Australia.

The effectiveness of human resource management is important, as there is no point in implementing costly HRM strategies without measuring how successful it has been.

Indicator Explanation

Staff turnover

• This is how much of the staff leave annually

• The turnover rate has increased in 2012 from 4.7% to 5%. This means that HRM has not been effective

Absenteeism • This is the absence from the workforce due to illness

• A high level is a strong indicator of dissatisfaction in the workplace

• Qantas’ levels have stayed at 9.3 for 2 years and increased to 9.6 days in 2012

Accidents • In 2011, the injury rate was reduced from 41.5% to 35.3%.

• Slight increases were recorded in 2012 which indicates a deterioration in Qantas’ injury prevention performance

Levels of disputation

• This is the amount of tension between the corporation and the employees.

• In recent years, there have been high amounts of strikes and industrial actions due to the recent action to axe jobs, introduce part time employees and outsourcing.

Worker satisfaction

• This is how happy workers are at the organisation

• It is related to motivation and productivity

• Qantas measures it via surveys, invitations for employee feedback and external consultants

Role of marketing The most important objective in any business is to identify and satisfy customers thus creating profitability for the firm. Marketing is important, as it is the major revenue generating activity. Qantas’ marketing plan and strategies are mostly effective because:

• They allow Qantas to achieve its business goals

• They are comprehensive

• They identify and satisfy customer needs (customer focused)

• Give the business a direction and helps manage a changing environment

• They encourage new product development

• Create more distribution outlets Interdependence with Other Key Business Functions

• Finance – depends on marketing to generate funds and budgets need to be set out for marketing

• Human resources – the right staff need to be employed and trained to create a satisfying service

• Operations - may constrain marketing by establishing physical limits (flight scheduling)

Situational Analysis

(SWOT)

Strengths

• Multi-brand strategy (Qantas, Jetstar)

• 65% domestic market share with about 90% of the corporate market

• Lowering of costs and efficiency gains

• Largest Australian based airline loyalty programme

• Excellent locations and facilities

• Successful fuel hedging program

• Excellent safety record

• Globally recognised brand name and logo

Weaknesses

• Significant profit falls in 2012

• High risk nature of airlines

• Relatively complex fleet of aircraft

• Higher labour and operating costs than some competitors

• Ongoing disputes between Qantas and unions

• Government refusal to lift foreign ownership restrictions have reduced access to funds to finance fleet expansion

• Safety incidents have tarnished their image

Opportunities

• Creating a new premium airline in Asia

• Evaluating other joint venture ops in Asia

• Developing further e-commerce operations

• Pursue growth in associated businesses

• Continually evolving aircraft technology

• Taking advantage of aviation growth in the Asia Pacific region

• Further development of alliance and code sharing relationships

Threats

• Weakening in the domestic and international market/economy

• Competitive challenges

• Threat that Jetstar will erode Qantas’ profits

• Increases in fuel costs

• Falls in the Australian dollar

• Possible takeover and the selling off of Qantas parts like Jetstar, Frequent Flyer program

Product Life Cycle

• Introduction - Qantas started a new product, Jetstar Japan 2012 and had promoted it heavily. Penetration pricing. The brand awareness was established

• Growth - Jetstar Asia profitable in 2009, with increasing sales. 38% capacity growth in 2012. New promotional campaigns aimed at sustaining interest and new destinations added.

• Maturity - (Qantas domestic) sales leveling off, lots of competition and consumer choice. Redesigning of packaging and modification of marketing strategies. Many changes were done to the lounge, planes and checking.

• Decline – (Qantas International) Lost $450m in the 2012 financial year. Cancelling orders for new planes and exit of loss making routes. Forming and restructuring an alliance with Emirates to arrest profit falls

SWOT analysis Market research

Establish

marketing

objectives

Identify target markets

Develop marketing strategies

Implement, monitor and control

marketing strategies

Market research

• Step one: identify information about customer needs, attitudes, brand preferences, buying intentions and characteristics

• Step two: identify and select the data source. Both primary and secondary sources - surveys, mail based surveys, complaint monitoring, government statistics, magazines and interviews

• Step three: analyse and interpret the data Establishing marketing objectives Qantas’ 2013 marketing objectives are to:

• Increase sales (revenue) and decrease costs (expenditure)

• Maintain Qantas/Jetstar combined domestic market share of 65%

• Match capacity with demand sustaining loads around 80%

• Continue to grow Jetstar in Asia

• Increase customer service standards

• Enhance complementary portfolio businesses like Freight

• Reduce losses of Qantas international

• Grow their frequent flyer program members and partners Market segmentation This is the process of dividing up the total range of potential or current customers into smaller discrete groups to facilitate analysis and planning. It enables Qantas to:

• Better meet the needs of the customers

• Better tune the marketing mix to certain groups in the market Implementing, monitoring and controlling the marketing plan Implementation is the process of turning the marketing plan into action. Because many unforseen events occur during implementation of the marketing plan, Qantas has a systematic base for continually monitoring, controlling and adjusting its marketing activities via:

• Developing financial forecasts of revenue using past sales data and surveys. Estimations are then made

• Comparing actual and planned results using (sales analysis + market share analysis + market profitability). They reveal the current situation of the business.

• Revising marketing strategies and taking corrective action where appropriate. Qantas revised its marketing by reducing prices to stimulate demand, reduced flight frequencies and cancelled orders for new planes.

Positioning This is the image that Qantas projects in relation to its competitors. Qantas brings attention to its image by using a variety of positioning strategies:

• Positioning in relation to its competitors (Jetstar has stopped the erosion of Qantas’ market share to Virgin Blue)

• Positioning in relation to a target market (lounge upgrades, frequent flyer scheme, Qantas club services)

Marketing mix

Product

This is the benefits and attributes designed to satisfy customer needs. They include scheduling features, comfort based features (lounges, meals, entertainment), frequent flyer schemes (points are earned towards free tickets), intangible benefits (safety and reliability) and the brand name.

Price

This is the cost of the service to the customer. Pricing methods used are:

• Cost plus margin: Qantas adds a percentage on top of the cost of production

• Market: Qantas lowers costs if the market demand is high

• Competition: monitors what other airlines are charging (Virgin Blue)

• Pricing strategies include:

• Price penetration: lowest possible price to gain market share (Jetstar)

• Loss leading: Qantas made a loss in the short term in order to compete against other competitors

Place/Distribution

This is how the service will reach and be distributed to the consumer. Direct (selling directly to the customer)

• Sales via travel centres called “Qantas holidays”

• Telephone sales centres

• Airport ticket sales

• Online – Qantas receives over 8.4 million visits per month Indirect (using intermediaries)

• Qantas has relationships with travel agents, such as flight centre and American express.

Promotion

This is the method used to communicate products and image to the consumer. Some strategies are:

• Advertising: utilising agencies to create media ads for TV, radio, and print media. Qantas spent $44 million in 3 years on the Tourism Australia campaign. Qantas produced and displayed an advertisement at the Athens Olympics.

• Publicity: utilising news releases, press conferences and interviews. They supported clean up Australia day, world vision and cultural activities such as the Sydney dance company.

• Sales Promotions: short term inducements during times of subdued demand. Qantas released 100,000 tickets at $49 to promote their airline.

• Personal selling: sales reps directly sell to travel agents, businesses and government departments

People

This is the appropriate use of the right staff and people.

• Qantas customers have direct contact with employees on the ground, and due to this, the staff must have the right personal attributes and training

• All staff members wear a uniform to improve their professional appearance

Processes

This is the system used to assist the organisation in delivering the service.

• Customers judge an airline by how efficient and customer friendly its processes are

• Qantas introduced ‘Q Bag Tag’ where passengers can drop their bags and go

• Booking flights online, online check in, mobile check in and check in kiosk

Physical Evidence

Qantas’ customer decision are influenced by a whole range of physical aspects (the environment in which its services are delivered)

• These include Qantas’ signage, website, terminals and lounges

E-marketing This uses an electronic medium (internet) to perform marketing activities.

• Email

• Web site, where customers can book flights etc.

• Advantages: reduction in costs, faster response, increased interactivity, increased ability to collect and measure data

• Disadvantages: lack of personal approach, dependability on technology, security and privacy issues

Global marketing This is an extension of marketing activities across national boundaries. Some global marketing strategies that have been utilised are: Global branding

• The same brand/logo (flying kangaroo) globally, increasing revenue and growth, and recognition

• Packaging and designing costs are reduced

Standardisation

• This is the standardising of the many elements of the marketing mix - allows economies of scale to be achieved

• There is the “one world” name and logo on all planes and tickets, which improves corporate image and captures greater market share

Customisation

• This is the ability to differentiate the marketing to target different markets.

• Qantas adjust/tailors its marketing based on the markets. Japanese markets will have Asian dishes and Japanese fluent speakers.