Business Studies Notes

Qantas

Chapter 4: Marketing
The Marketing Plan
Role of Marketing:

Achieve its business goals, especially profitability

Identify and satisfy customer needs
The marketing plan gives the business direction and helps manage a changing
environment
Encourage newly developed products
Create more distribution outlets
Focus on market research

Situational Analysis SWOT Analysis:

Strengths

General network/part of the Oneworld

alliance.

67% of domestic market share with about

90% of the corporate market

The launch of Jetstar was strong and

profits are rising.

Recent lowering of costs and efficiency

gains.

Recent purchases of new aircrafts, lounge

upgrades and expansion of routes.

Excellent airport locations and facilities

Largest Australian based airline loyalty

programme

Ranked in the top 5 global airlines in 2007

Skytrax awards
Opportunities
Expanding Jetstar to the international
network.
Developing further E-commerce operations.
Pursuing growth opportunities in travel,
catering and shipment areas of the business.
Continually evolving aircraft technology
Taking advantage of aviation growth in the
Asian Pacific region.
Evaluating other joint venture opportunities
in Asia
Merging with other international airlines

Weaknesses
High risk nature of airlines
Relatively complex team of aircraft
Higher labour and other operating costs than
some competitors
Ongoing disputes between Qantas
management and rebellious unions.
ACCC denial of approval for Qantas and Air
New Zealand alliance.
Airbus postponing delivery of A380s to August
2008.
Failure of Australian Airlines and the failure to
date of Jetstar Asia

Threats
Competitive challenges mainly from the
domestic Virgin Blue and Tiger airways.
Further increases in fuel costs
Threat of further competition in the domestic
and international market.
Increases in government regulation to protect
smaller rivals.
Falls in the Australian dollar.
Weakening in the domestic and international
market/economy
Threat of further competition

Competitor Analysis:
Virgin Blue:
Was launched in 2000 and currently claims 33% of the domestic aviation market.
They recently launched and joint venture flyer scheme with Emirates to make
inroads into the business segment and has ordered regional jets to compete with
Qantass dominated thinner routes.

They are very competitive with Qantas in regards to the budget travel niche which
they assisted in establishing.
They recently launched a joint frequent flyer scheme with Emirates (a Middle
Eastern carrier) to make inroads into the business segment and they have ordered
regional jets to compete with Qantas dominant thinner routes.
Tiger Airways:
Since December 2007, they are the third domestic airline for Australia.
They currently fly out of Melbourne to 9 destinations and have offered initial flights
as low as $10.
They have extremely low prices (some even as low as $10) which is highly
competitive for Qantas. Although Qantas have retaliated towards this by
undercutting their fares.

Product Life Cycle (PLC):

Stage in PLC
Introduction

Airline
Jetstar
international
(2006)

Characteristic
New product. Very small
operating profit in first
year

Growth

Jetstar
(domestic)

Maturity

Qantas

Increased sales, profit

grew by 34% last financial
year
Sales levelling off

Decline

Jetstar Asia

Falling sales, increased

losses, flights cancelled

Marketing Strategies Employed

Promote heavily. Qantas has
launched this airline with a
$20million advertising blitz.
Penetration pricing strategy.
Encouraging brand loyalty through
a linked FFS, expansion of routes,
purchasing of more aircrafts.
Redesigning packaging, such as
online check-in, upgrading lounges
and in-flight entertainment
systems.
Scale back team, seeking new
finance

Marketing Objectives
As Qantas is a public company and is listed on the ASX the main objective is to provide a
profit for growth and acquisition of new aircrafts. Although the overall goal is to provide a
satisfactory return to the shareholders, so they can generate enough profit.
Other minor objectives include:
Increased sales of passenger tickets
Maintenance of Qantas/Jetstars combined domestic share at 67%
Continue to grow its routes, especially in Asia
Aggressive growth of Jetstar to take on new aircrafts
Increases internet sales
Increased customer service/service standards
Improve efficiency

Market Segmentation and Selection of the Target Market

Market segmentation is the process of dividing up the total range of potential or current
customers into smaller discrete groups to facilitate analysis and planning. This enables
Qantas to:
Better meet customer needs
To compete for more efficiency
To attain financial goals more efficiently

 Better tune of the marketing mix for particular groups

Market segmentation is complex because each segment has distinctive and different needs
and expectations. Qantas mainly uses the behavioural segmentation (separating in
relation to where they are going) to select its target markets. Buyers are distinguished
according to their trip purpose.
There are many different customer requirements and as they are changing Qantas has
established new airlines to suit them, such as; Jetstar Asia and Pacific Airways target the
growing intra Asia target market.

Marketing Strategies
Positioning:
This is the image that Qantas projects in relation to its competitors. Qantas positions in
relation to its competition/target market.

Product:
- Scheduling Features:
The route frequency, time of departure, number of stops or direct flights has increased.
Qantas city flyer express service ensures that there is a plane leaving every half an hour in
peak periods between Sydney, Melb, Bris, Adelaide, Canberra and Perth. They also have
flights leaving from both Sydney and Melbourne every 15 minutes, due to increased
passenger demands.
- Comfort Based Features:
Qantas has hired Neil Perry to extend their on-flight menu
Qantas has reviled their new first suite and new premium economy suite for the new
A380. This includes extra width, more leg room and an in-arm digital widescreen TV as well
as laptop connection.
Flight Update enables customers to use their phone messengers to receive departure
times. Jetstar also offers SMS ticket booking.
The new economy seats offer extra width, more leg room and in-arm digital widescreen
TV as well as laptop connection
A $300million Total Entertainment in-flight system has been upgraded and installed to
international flights
They have spent millions upgrading its domestic and international lounges
Recently installed self service kiosks called Quick Check at Sydney, Melbourne, Brisbane
and Canberra airports, where customers can check-in and choose a seat in a minute.
Qantas Club business customers can enjoy private rooms, workstations, photocopying
and local faxing systems, postal services, personal message service, specially trained flight
attendants, new food and wine, premium quality noise cancellation headsets and a self
serve bar for drinks and snacks.
- The Qantas Frequent Flyer Scheme (FFS):
2.6million members and 198 programme partners, Qantas use this system to retain and
guarantee customers, increase market share and fill otherwise empty seats. The FFS also
provide a large data base which includes hotels and car rental companies assisting in the
scheme.
- Intangible Benefits:
Qantas history and safety record as well as the benefit and experience of flying.
- Brand Name:
Qantas is Australias leading brand name and has a very powerful marketing tool. They have
the brand name, kangaroo symbol and logo, Spirit of Australia. The new design is more
contemporary and comes with a new Qantas typeface with thinner, steep-grey letters.

Price:
- Pricing Methods include:
Cost plus margin: Qantas determines the cost of production and then adds a margin
for profit
Market: most fares at Qantas are determined by the market, where demand is
matched with supply
Competition based: watching what other airlines such as Virgin Blue are doing with
their prices.
- Pricing Strategies include:
Price Penetration: Qantas uses this strategy (lowest possible price) for Jetstar
Full Fares: for those wanting flexibility as full fare can be refunded and changed.
In 2003 Qantas introduced a new domestic fare structure. This new ticketing structure is
simpler and increases flexibility by collapsing 11 fares to 5 (repayments).

Promotion:
Qantas supports and sponsors environmental causes such as Clean up Australia and so on
- Advertising:
Qantas use advertising agencies to create media (blanket) advertisements on TV, radio,
magazines, newspapers, brochures, postures in travel agencies and billboards. In 2004 they
re-shot their most famous I Still Call Australia Home which costed them $10million. Jetstar
use Magda Szubanski to attract customers on the TV. Qantas is trying to use fewer blanket
advertising and more direct marketing, which is cheaper and more efficient. The
disadvantage of blanket advertisement is that many people receive the message to who are
not being targeted, although it is good to be recognized by the general public.
- Publicity:
To enhance the image of Qantas, they include news releases, feature articles, press
conferences and interviews. In 2002 John Travolta was hired as a brand ambassador (opinion
leader). Qantas also sponsors and supports environmental causes and charities to show
they have sympathy.

Place:
- Direct:
- Direct sales via its own retail outlets which means they have more control.
- Telephone call centres
- Airport ticket sales
- The internet online booking system is growing, which saves Qantas $30 each seat.
- Indirect:
Qantas has a strong relationship with a number of retail agencies. Qantas is selective
about who resells the product and looks for intermediaries that have a good reputation,
financial strength and expertise.

Implementing, Monitoring and Controlling the Marketing Plan

1. Developing a financial forecast of revenue using statistical models, past sales data,
executive judgement and surveys of consumer buying intentions.
2. Comparing actual and planned results using a number of performance criteria:
- Sales Analysis: breaking down different products, segments and territories.
- Market Share Analysis: comparing business sales with the performance of its
competitors.

3. Revising marketing strategies and taking corrective action where appropriate.

- Introducing its own budget domestic carrier Jetstar May 2004 to counter Virgin
Blues increasing share of the aviation market.
- introducing new domestic fare structure which was simpler and more flexible
Implementing Marketing Plan
Establish Control System
Evaluate Marketing Performance
Is there deviation from plan?

NO

Continue implementing plan

and evaluating performance

YES
Take Corrective Action

Implementing, maintaining and controlling the marketing plan.

Market Research - Identifying Customer Needs

Qantas gathers and analyses information to help them make appropriate marketing
decisions. Marketing strategies work best when they are based on accurate, up to date
information which is detailed and relevant.
Step 1: is identifying information needs, e.g. customer needs, attitudes, brand preferences,
buying intentions and characteristics.
Step 2: is to identify and select the data source. Qantas uses both primary and secondary
sources of data collection.
Primary: ongoing surveys of passengers in flight, mail based surveys, complain
monitoring and discussion with customer contact staff
Secondary: government statistics, airline magazines and reported interviews with
competitors executives.
Step 3: is to analyse and interpret the data.

Ethical and Legal Aspects

Qantas has an ethical responsibility to its customers and an even broader responsibility to
society as a whole in the marketing of its products. All material is reviewed by the Qantas
Legal Department before publication to help ensure compliance. Qantas has been
threatened in many different ways, here are some examples:
Qantas now publishes the true costs of fares including previously hidden extra
charges and levies following a warning from the ACCC
Qantas boosted the number of frequent flyer seats and was forced to improve its
website to satisfy the ACC that its customers were adequately informed about
restrictions on award redemptions
Qantas logo for its new Australian Airlines has been labelled a flying rip off for its
resemblance of Aboriginal Art.
The ACCC accused Qantas as having anti-competitive behaviour under the Trade
Practices Act by increasing the total number of seats well beyond passenger demand.
Qantas was accused of Ambush Marketing during the Sydney 2000 Olympics when it
linked itself to the Olympics in advertising campaigns.

Chapter 5: Employment Relations

Employment Relations at Qantas
Qantas employs around 37000 people. The employment relations function is to manage
effectively the relationship between employers and to achieve its goals, minimise costs,
improve quality in working life and ensure legal compliance. Qantas has sought to reform its
employment relations practices and industrial conflict between employer and employee has
been a feature.

Effective Employment Relations Strategies Employed by Qantas

Community Systems:
Qantas is seeking to improve its communication systems to make them more flexible and
adaptable to change by:
Reorganising its organisational structure
Encouraging more workers to participate, by involving employees in more
management processes.
Including the grievance procedures which will provide a formal process in resolving
industrial conflicts.

Rewards:
Qantas uses its rewards management scheme to attract, retain and motivate its employees.
The reward system seeks to be equitable, clearly communicated, defensible, consistent,
relevant, cost effective, and integrated with Qantas corporate strategy.
- Financial Rewards: Competitive wages and salaries, they also use performance based pay
for some employees; this means that direct salary is tied to the individual, team and
company performance. Qantas also includes
- Non-Financial Rewards: These include challenging and interesting work, job recognition,
job feedback, promotion, and independence in the job, good relationships with co-workers
and a safe and healthy environment.

Training and Development:

Qantas has invested more than $300 million in training and development over the past 5
years. Qantas training programme is planned and is integral to its business strategy and to
maintaining or developing a sustainable competitive advantage. Ongoing training is critical
due to the airlines industrys rapid technological change and global competition. Qantas has
implemented training programs in new security procedures, international business class,
engineering and maintenance and informational technology procedures; these benefits
include:
Enhanced organisational productivity
Improved quality of outputs
Enhances ability to cope with change
A more committed workforce.

Flexible Work Conditions

Qantas has recently implemented a number of flexible working initiatives to assist staff to
balance their work and family life. These include:

More flexible working hours

Increased paid maternity leave from 6 to 10 weeks
Up to 10 days carers leave per annum
A keep in touch programme for staff on maternity leave
Building a new child care facilities in Sydney, Melbourne and Brisbane.

Chapter 3: Financial Management

Competitive Ratio Analysis
Comparative ratios can be used to compare financial performance against previous years or
against other businesses in the same industry.

Profitability Ratios:
Profitability in the airline industry is relatively poor on average. Qantas operates on very
low margins, in an industry which is highly capital (profit) intensive and highly
competitive. While Qantas performed better than most in relation to the 9/11 attacks and
the SARS epidemic, the profitability of Qantas decreased in 2002 and 2003. Qantas
marked improvement in 2004 and 2005 which was due to gradual recovery of the
international aviation and cost savings. Qantas profitability ratios mainly fell in 2006 due
to the cost of fuel.
Qantas Net Profit ratio increased from 3.5% in 2005 to 4.7% in 2007.
Qantas Rate of Return on Owners Equity increased from 7.9% in 2006 to 11.6% in
2007.
Current profitability management strategies employed by Qantas include:
Cost Centres: Qantas achieves its 3 year cost reduction target of $1.5billion in
June 2006 and is on track to achieve an additional 2 year target of $1.5billion by
June 2008.
Revenue Costs: total revenue increases by 11% in 2006/07

Liquidity Ratio:
On the surface Qantas low rate indicates an inability to meet its short term debts.
However like most other airlines, it operates on a negative working capital position. Qantas
holds very little cash and uses cash received to pay for long term debt, which reduces
interest. Qantas has facilities in place to draw cash out to pay creditor, and dividends to
shareholders.
Their liquidity ratio fell slightly from 0.87:1 in 2007 to 0.91:1 in 2006.
Current liquidity strategies employed by Qantas include:
Controlling current assets
Controlling current liabilities
Leasing more aircraft, buildings, plants and equipment

Gearing Ratio:
The gearing ratio measures Qantas ability to continue its operations in the long term and
is a measure of its financial stability. Rather than using the traditional debt to equity
ratio, airlines use a more complex ratio to show a clearer position of gearing. Qantas are

typically highly geared. Qantas relatively high gearing ratio is principally a result of team
expansion, deposits for future aircraft deliveries, upgraded lounges, international sleeper
beds and the updated in-flight entertainment system. Qantas sources of funds include a
mixture of cash, equity, debt and lease finance. Much of Qantas debt is sourced from
overseas.
If the takeover of Qantas by Macquarie Banks Airline Partners grouping had been
successful Qantas gearing would have been increased dramatically as two thirds
would be from equity.

Efficiency Ratio:
Efficiency ratios measure the ability to manage assets in order to generate profits at
minimum cost to the business.
Efficiency decreases from 95% in 2006 to 93% in 2007.
Efficiency strategies used by Qantas include:
Introduction of new and more efficient aircrafts
New crews and new training bases
Investment in new IT systems
A lower cost of sales
Restructuring of catering and engineering

Chapter 2: Business Management and Change

Management Theories
Classical Scientific (1947-1995):
Hierarchical, with various levels of power and authority within organisation
Full of rules, regulations and is highly centred over decision making
Multi-layered with numerous levels of management
A long chain of command n regards to authority
Division of tasks through specialisation and departmentalisation
Little contact between workers and top management because of autocratic
management
The domestic airline industry was deregulated in 1991 with the removal of regulations over
entry and price controls in the airline industry. In 1995 Qantas was privatised. These events
changed Qantas as:
They became more competitive, effective and profitable
They had to pay all taxes and levies paid by other businesses in Australia
They had to make a profit and pay a dividend to its shareholders

Behavioural (1995-present):

Greater emphasis on human resource what the customer wants and what the
employees want
More effective channels of communication
More flexible working initiatives to assist staff to balance their home and work life
Flatter organisational structure reducing the levels of management, this gives more
responsibility to the employees
Introduction of practices to motivate employees
A more democratic style of management where employees have more input in
decision making
Development of work teams and an emphasis on multi-skilled workers

Political:

Focus on management using power to achieve goals

Recognising the importance of management to have the skill of negotiation and
bargaining skills
Balancing the interest of competing shareholder groups

Systems:
Qantas recognises the importance of each and every part of the business as if there are
changes in one part of the business the whole business is influenced by these changes.

Contingency:
Management practices at Qantas are more flexible and adapted to suit changing
circumstances. Such as; the war on terrorism or the price of fuel.

Sources of Change
External influences:
Economic Influence:
Qantas has benefited recently from the strong Australian economy combined with the
growth in real average incomes and appreciation of the Australian dollar and also the
increasing demand for travel services. However, recent low levels of economic growth
experienced by American and Japanese (two of Qantas biggest markets) economies have
significantly reduced levels of business and tourist travel. The rapid growth in fuel prices
from 2004 has a big impact on Qantas profitability.
The Changing Nature of Markets:
The largest affect on the market was the 9/11 attacks and the SARS epidemic in 2003.
These changes, many traditional airlines have found it necessary to review their business
models, find greater efficiencies and look at opportunities for consolidation. As the trend
for governments to liberalise the skies (deregulation) continues, Qantas will face more
competition on its international routes.
Singapore Airlines and Emirates are constantly fighting the Australian government
to gain access to Qantas protected Trans Pacific routes.
Since the fall of Ansett in 2001 domestic competition between Qantas/Jetstar and
Virgin Blue is more restrained because Qantas is the only provider of nationwide
scheduled services.
Furthermore, a number of factors now favour the entry of new domestic competitors
like Tiger Airways.
Legal and Political Influences:
Changes in legislation have major impact on the conduct of Qantas. In seeking to achieve
its goals, the Australian government has a major impact on Qantas through the laws it
passes and enforced. For example:
The Federal Government (Feds) imposes taxes on air fares
Each country Qantas operates in has different laws which will affect its contracts,
dispute resolution procedures and protection of its intellectual property
The Feds is introducing random alcohol and drug testing for all safety sensitive
roles in the aviation industry
The Feds have recently implemented new security measures such as the closure of
access gates and security
Technological Influences:
There have been newer planes that have greater capacity and are more efficient.

Developments in the in-flight entertainment system and seating arrangements make

the flight more comfortable
Personal Computer power outlets allow lap tops to be operated during flights
Geographical Influences:
The climate and natural heritage areas of Australia attract customers from overseas as it is
one of the most attractive tourist destinations in the world. The number of international
tourist visiting Australia has jumped 4% in 2007. Qantas is heavily tied to the Asian Pacific
region. This region now accounts for 20% of the world tourism.
Social Influences:
Qantas operates in 37 different countries and provides services that come into direct
contact with people from a multitude of different backgrounds. Qantas employs host
country national and flight attendants who speak other languages to accommodate for other
countries.

Internal Influences:
E-Commerce, New Systems and Procedures:
Qantas has continued to develop its web site to ensure faster booking, customer access to
alternate fares and so on. Qantas plans to increasingly apply e-commerce to its internal
corporate programmes. Qantas has also upgraded their security systems and introduced a
new rule of which no liquids or gels can be taken to the US and all passenger footwear has
to be screened.

Structural Responses to Change

Outsourcing:
Qantas established an outsourcing system to become more cost effective and to simplify
the business.
Qantas has outsourced many of its IT operations.
- The entire technology and telecommunications infrastructure.
- Its main frame and mid-range computing operations such as; Telstra operates the
telephones
Qantas low cost carrier Jetstar has outsourced its entire call centre operations to
Melbourne operator Sales Force
Qantas have contracted some maintenance jobs overseas in Singapore and New
Zealand
Qantas has established a base in London for 400 of its international flight attendants
in June 2005.

Flat Business Structure:

In 2003 Qantas restructured the company into eight separate business units to help meet
its cost reduction target and respond to the unpredictable international airline market

Strategic Alliances and Networks:

The benefits from these alliances include the expansion of route networks and streamline
processes and this improves customer services, increases passenger volumes and reduces
costs through economic scale. They have such alliances as:
The Oneworld alliance which features 10 of the worlds leading airlines
Qantas established Jet Turbine services, a joint venture engine maintenance with
Patrick corporation in 2003 to improve maintenance and reduce costs
Qantas launched Jetstar Asia, in 2004, which bases its flights in Singapore in a joint
venture with Singapore investors. In 2005 Jetstar Asia merged with a Singapore

carrier Valuair. In 2007 Qantas acquired 30% of Pacific Airlines to further tap into
Asias booming low cost aviation market

Reasons for Resistance to Change

Financial Costs:
Purchasing New Equipment:
In order to maintain its position as Australias leading domestic and international airline
Qantas spends billions of dollars purchasing new equipment. Examples include:
New and more efficient aircrafts which cost - $2billion/year
Security measures such as new passenger screening equipment and surveillance
equipment throughout baggage areas which cost - $1billion since 2001
In-flight entertainment systems
Information technology and systems
Redundancy Payments:
Qantas has downsized its staff because of compulsory redundancy payments. They would
like to rely on natural retirement and the increasing numbers of casual employees to
ensure a minimal payment. They have been 1245 retrenchments in 2005/06 which cost
them - $20million.
In 2007 Qantas cut down management and administration down by 20% which resulted in
another 1000 redundancies this cost them - $200million.
Qantas has recently announced they will be making another 340 employees redundant
which was because of the new IT opportunities.

Re-Training:
More than $280million was spent on retraining staff in 2006/07. This is because with any
significant change in Qantas the staff affected need to be retrained in order to work the
equipment. For example:
10,000 staff were recently retrained as a result of shifting the airlines reservation
system to Amadeus
Qantas has just retrained its cabin crew in order to learn the new business class
system
Qantas has recently developed and implemented additional security training for
all flight and cabin crew
Re-Organising Plant Layout:
As Qantas acquires new aircraft to have to continually reorganise the layout of its
maintenance operations to try increase capacity and efficiency. Qantas has also
reorganised the layout of its passenger handling facilities at many airports to increase
services to passengers and to speed up their processing. Qantas has also recently leased
six gates in the former Ansett terminals from the Sydney Airports Corporation, opened and
refurbished new lounges and installed the self-serve Quick Check kiosk.

Cultural Incompatibility in Mergers and Takeovers:

Mergers and takeovers may fail because the two businesses have very different cultures and
cannot bind together. When British Airways bought 25% share in Qantas it brought with it
a different business culture based on strict commercial criteria. This resulted in a culture
clash which was a reason for some employees resisting change. In 1997 Qantas sold 19.9%
stake in Air New Zealand out of frustration at its inability to gain operational benefits from
the stake and over the hostile attitude of the ANZ board of directors.

Staffing
The proposed outsourcing of information technology and maintenance, the recent
reduction in the size of permanent workforce and the hiring of more part time and
casual staff to increase workforce flexibility has made employees fearful of change
because they think it will threaten their job security. Employees have also resisted
changing because:
Their skills are no longer required sure to changing work methods
They have to learn new skills because of information technology
There is a large disruption of work methods and patterns of behaviour
They are resentful over not being consulted about the proposed changes

Managing Change Effectively at Qantas

Identifying the Need for Change:
Geoff Dixon is a strong and determined leader who meets the challenges as they come. He
has clearly identified the need for change at Qantas, highlighting the changing market
circumstances, changing customer requirements, competition from low cost airlines,
deregulation of international routes and Qantas higher cost base than its competitors.

Setting Achievable Goals:

Qantas has clearly set out achievable goals and objectives, devised after consultation with
staff and communicated clearly by management. These goals include:
Developing the right flying models to generate strong returns in order to grow in
the future
Establishing competitive cost structures

Creating a Culture of Change:

Qantas has created a supportive business culture to promote change and reduce the
natural resistance to change. Geoff Dixon and other managers have adapted the role of
change agents to help:
Energise the problem solving process (catalyst)
Apply their ideas about what the business should change (solution givers)
To show how the organisation can diagnose problems, set objectives and create,
adapt and evaluate solutions (process helpers)
Bring people and other resources together to solve the problem (resource thinkers)

Use of Change Models:

Force Field Analysis:
Driving Forces:
Forces for Change
- The growth of the profitable share of the
market segment
- It reduces the risk of other low frill
airlines emerging
- The development of a low cost platform is
used to negotiate agreements with unions
- Success of Jetstar is stemming Virgin
Blues market share
- There are fewer restrictions for Jetstar
international

Unfreeze/Change/Refreeze Model:

Restraining Forces:
Forces against Change
- Start up costs in establishing Jetstar
international
- There have not been many full service
airline be able to manage a discount carrier
without damaging its core operations
- Cannibalisation of Qantas principal
routes and this will decrease its profitability
- Industrial conflict with unions

Stage 1: Unfreezing
Developing the awareness of the
need for change:
- The present organisational
structure at Qantas was flexible in
responding to change.
- Qantas also needed to reduce
costs

Stage 2: Change
Examining alternatives of new
organisational structures

Stage 3: Refreeze
Reinforcing the new
management structure:
- Each unit at Qantas would have
its own management,
leadership, budgets and profit
targets

Establish a good relationship with

the stakeholders involves:
- trade unions, employees and
managers

Choosing the most appropriate

organisational structure:
- Qantas decided to restructure
the company into eight
separate units

Evaluating the change:

- the new management structure
had the desired effect, making
management more adaptable to
change and helping Qantas
reduce costs by $500million in
the last 3 years

Taking action in implementing

the new structure

Change and Social Responsibility:

Qantas management is expected to take into account the consequences of their decisions
on stakeholders and to make decisions that are socially and ethically responsible for, these
include:
Ecological Sustainability: Qantas tries to reduce its carbon emissions; they have
launched a new scheme in 2007 that gives passengers the option of paying extra to
offset the carbon dioxide emitted from their flight.
Quality of life: Qantas is more flexible in relation to their work practices,
employees were rewarded with a cash and share bonus in 2007 of around $2000,
and this was used as a positive reinforcement.

Chapter 6: Global Business

Qantas as a Global Business
Qantas offers more than 700 international services a week to 85 destinations in 37 different
countries.
International services 31% of all flights departing from Australia/week
Qantass assets 75% are geared to the international market

Reasons for International Expansion

Deregulation of the domestic aviation industry and the privatisation of Qantas also helped
to trigger international expansion.
Other reasons include:
Limited domestic demand and growth
The domestic market is more competitive due to deregulation and the entry of
competitors
Gaining economies of scale in operation and marketing through alliances and code
sharing with other airlines.
Cushioning of economic cycles: allows Qantas to diversify its sources of earnings and
offset any downturn in revenue from domestic operations. E.g. the downturn in
international travel September 11

Methods of International Expansion

1. Foreign Direct Investment:
Acquisition: Qantas ha bought stakes in Malayan Airways, Fijis Air Pacific, Australia Asia
Airlines and Air New Zealand. Qantas is a major stakeholder (45%) in Orangestar which owns
and operates value based carriers Jetstar Asia and Valuair.
Strategic Alliances: Qantas entered into a comprehensive global alliance with partner
British Airways in 1993. In 1999 Oneworld 700 destinations and 150 countries. Qantas
gains marketing benefits from frequent flyer programmes, smoother transfers and access to
lounges. Qantas customer satisfaction may be significantly influenced by other airlines.
Establishing New Airlines: Qantas launched its New Zealand subsidiary Jet Connect in
September 2003 to replace some existing services. The lower labour costs in NZ and more
flexible enterprise bargaining agreements are estimated to give Jet Connect cost advantage
over the Qantas operation.

2. Franchising:
Qantas is considering franchising its Jetstar brand to airlines throughout Asia.

Influences on Qantas in the Global Market

Financial Influences:

Changes in foreign exchange rates fuel prices, operational expenditure and

capital expenditure.
Interests rates overseas loan payments, interest increases
Fuel prices in 2003 it cost $75000 to fill a B747-400, today it costs $180000.
Appreciation
An increase in the AUD reduces the price of fuel, leave payments, loan
repayments and capital expenditure.
It means Australians are more likely to travel overseas but overseas tourists are
not likely to travel to Australia.

Depreciation
A decrease in the AUD increases the price of fuel, leave payments, loan
repayments and capital expenditure.
It means Australians are less likely to travel overseas but overseas tourists are
likely to travel to Australia.

Social and Cultural Influences:

Employing host country nationals (HNC) as part of its human resource management
(HRM) policies
Employing flight attendants who can speak Asian languages and they undergo
training to learn about other cultures
Entertainment and announcements on flights are also bilingual to accommodate
different languages of customers
Differences in tastes and preferences are overcome by offering passengers choices
between Western style means, Japanese and Chinese meals complemented with
Australian wines and spirits.

Legal Influences:

Changes in labour laws in Australia could increase operating costs as a result of

higher wages disagreements may lead to strike action causing disruption to
services
Civil Aviation Safety Authority responsible for certification of aircraft, licensing of
operators, conduct of safety surveillance and enforcement of safety standards and
rules.
Local laws and regulations in other countries may change and differ

Political Influences:

Government permission is required to serve individual routes.

After September 11 the US reduced flying capacity by 11%
Government decisions can have a big impact on Qantas
Restrict foreign ownership of Qantas to 49% limiting the airlines access to capital

Global Business Management Strategies

Financial Management:
Reduce profitability of financial distress
Protect its capital base
Minimise the cost of capital
Provide a stable business and profit outlook
Exploit its financial strengths
Hedging: in 2005 Qantas had the second best fuel hedging of any airline in the world.
Foreward cover involves entering into a foreward foreign exchange contract to exchange
one currency for another at a date in the future at a pre-determined exchange rate. An
option contract gives the buyer the right but not obligation to buy or sell foreign currency
at some pre-determined date in the future.
- Qantas hedged 79% of its fuel needs in 2007/08
Credits risk: associated with travel agencies, industry settlement organisations and credit
provided to direct customers. Minimises this by restricting its dealing to parties who have
acceptable credit ratings application and undertaking transactions with a large number of
customers in various countries.
Insurance: Qantas takes out insurance to protect itself against various risks in operating a
global airline especially to cover liability to third parties for protecting damage or personal
injury.

Marketing:
Qantass marketing strategies are alliance based. Alliances create a larger range of global
products for existing customer, reducing the change that they will need to fly off-line, while
maintaining the perception that Qantas offers travellers a seamless travel experience.
These alliances allow Qantas to capture a greater share of the market and of the premium
customer segments in particular. It also gives instant recognition around the world
representing safety, reliability, engineering excellence and customer service.

Employment Relations:
Appropriate management of employment relations is important for ensuring that a skilled
and motivated workforce is attracted and retained. Employing a global workforce is
challenging because of differences in culture, levels of economic development and legal
systems.

Qantas uses polycentric and ethnocentric approach to staffing. It generally tries to hire host
country nationals (HCN) instead f transferring staff from Australia.
This approach gives two advantages:
1. HCNs already understand common laws, culture, the state of the economy and
language
2. It also avoids expenses with expatriate managers. i.e. relocation costs
The main disadvantage of HCN is that they need to become familiar with the Qantas
business culture and practices.

Operations:
Global operations are the set of activities used by a global business to transform resources
into finished goods and services.
This includes:
Making decisions concerning sourcing (acquiring resources) and vertical integration
(the extend to which a firm either provides its own resources or obtains theme
externally)
Qantas uses backward integration setting up its own subsidiaries to outsource inputs.
Qantas uses forward integration setting up its own subsidiaries to distribute its outputs
through Qantas Holidays and the Qantas internet site.
Qantas has an aggressive strategy to increase internet sales to bypass other travel agents.
These make strategies enable Qantas to gain greater control and help to lower costs.
Qantas has code sharing agreements with airlines like Vietnam Airlines, Polynesian Airlines,
South African Airways, because of insufficient traffic or restricted access. Qantas does this
through Oneworld Alliance. These partners provide short components of longer international
flights sold to Qantas customers.
Benefits from these alliances include:
expanded route networks
streamlined processes
improving customer service
increasing passenger volume
reducing costs through economies of scale

Qantas also buys other materials through outsourcing some of its functions such as
information technology, maintenance and call centre operations. By reducing levels of
vertical integration Qantas can lower risk and gain greater flexibility.