Business Studies Qantas Case Study

CHAPTER 4

2. Situational Analysis
Swot Analysis of Qantas

Strengths:
Extensive network / part of the One world alliance
Excellent airport locations and facilities
Globally recognised brand name and logo
Excellent safety record probably the best in the world (not one death
on a Qantas flight)
Operational excellence: Qantas has twice won the Cumberbatch trophy
for engineering excellence.

Weaknesses:
Speculation that British airways will quit its $1.3 billion stake in
Qantas.
Higher labour and other operating costs than its competitors
An ongoing disputes between Qantas management and militant
unions

Opportunities:
For its new international budget brand, Australian Airlines
Taking advantage from the Ansett collapse by hiring new staff,
expanding routes and purchasing / leasing more aircraft
Developing further E-commerce operations

Threats:
Strategies of its main competitors especially Singapore Airlines and Air
New Zealand (international) and Virgin Blue (domestic)
Increase in government regulations to protect its smaller rivals
Rising fuel costs
Further fall in Australian dollar
Further weakening in the international market / economy

As a result of Ansetts collapse, Qantas is currently in the growth stage

domestically (with increased sales, revenue and market share) but in the
decline stage internationally. In response Qantas has planned to hire more
staff and increase the Qantas fleet by 15% by long-term leases and purchasing
new aircraft. Also by establishing a discount airline called Australian Airlines.
3. Marketing Objectives

Being a public company listed on the ASX, Qantass main marketing objective
is profit, both in the current and long-term periods. Its goal is to provide a
satisfactory return to shareholders and to generate enough profit in reserve to
fund growth and the gaining of new aircraft.

Qantass other marketing objectives include the following:

Increased sales of passenger tickets

Increased market share in the airline industry

Growth / new routes, and corporate size as there are cost advantages
in being bigger

Decreased operating costs, especially labour costs.

4. Marketing Strategies
Market Segmentation and Selection of the Target Market

Market segmentation is the process is the process of dividing up the total

range of potential or current into smaller discrete groups to facilitate analysis
and planning. This enables Qantas to:

Better meet the needs of all its customers, to compete more effectively
and to attain financial goals more readily
Better tune the marketing mix to particular groups in the market, so
the product can be refined, prices set, place of sale determined and
promotion better focused for each market segment. EG: Economy,
Business and First Class travellers.

Qantass market segmentation is complex because each segment has

distinctive and different needs and expectations, such as the desire for
stopovers, the ability to pay fare levels and expectations in terms of in-flight
service and comfort.

Qantas mainly uses behavioural segmentation to select its target markets.

Buyers are distinguished according to trip purpose, for example: business and
leisure / non-business travellers.

However, there are many reasons for travelling either business or leisure.

The business segment is broken down even further into routine business
(normal point to point business travel), conferences / seminars and
emergency business which reflects passenger needs and benefits sought.
The leisure segment is broken down into holiday (inclusive of tour segment,
multi-destination touring segment and weekender segment) and visiting
friends a relatives.

Formulating the Marketing Mix: The 4 Ps

(i) Product

As the airline industry has become much more competitive, airlines like
Qantas have focussed on product planning. Qantas designs products to
attract and hold customers from a particular market segment and to do so
profitably.
The generic products of Qantas are the provisions of a seat (passenger) or
a container (freight).

The passenger side of the product:

Schedulings basic features: time of departure or arrival, number of

stops or direct flights and the aircraft type. In November 2000
announced that it would spend $4.6 billion on new planes over a 10
year period including the purchase of Airbus 380

Qantas enhances its basic product by having the best connecting airline
on a preferred basis with its One World alliance.

Comfort based features include lounges, in-flight meals and drinks,

in-flight entertainment and seat width.

A $300million Total Entertainment in-flight system is currently being

installed on the Qantas international fleet. On 14th February 2002, Qantas
announced q $50 million lounge upgrade. Qantas is also installing self serve
kiosks from mid 2002 which will allow customers to cheek in and choose a
seat in less than one minute.

The Qantas Frequent Flyer Scheme (FFS) with more than 2.6 million
members and over 100 programme partners is used by Qantas to
retain customers, increase market share and fill otherwise empty
seats. The Qantas FFS also provides a large database of specific
customer information thereby providing additional valuable direct
marketing opportunities.

Qantas re-launched its programme globally in September 2001 offering a

minimum of 1000 points for any flight, the removal of the five-year expiry
period and other benefits. On 12th November Qantas launched Qantas flight
Upgrade that sends the departure times to frequent flyer customers using
mobile phone short text messages.
The freight product is enhanced by Qantass handling efficiency, routing and
frequency.

Qantas freight has recently launched two new Internet tracking facilities:
follow me tracking that enables customers to receive regular status updates
on their freight shipments. Secondly City to City tracking Which enables
customers to receive automatic status updates on a pre-defined group of
airway bills nominated by the user.

Other aspects of the product for Qantas include:

- Intangible benefits such as its history and safety record; and

- Brand name: Qantas is one of Australias leading brand
names and it is a powerful marketing tool. The brand name,
kangaroo symbol and logo, Spirit of Australia, clearly
identifying and distinguishes it from its competitors.

Qantas is increasingly developing the whole airline as a corporate brand

along with a corporate personality.

(ii) Price

Price is the crucial element in any marketing plan. Price is the variable, which
can be changed quickly and as often as required. In the past prices were
regulated by the International Air Transport Association (IATA) and two
Airlines Agreement which had a formula for all fares based on flag fall and
distance.

Price methods used by Qantas include a combination of:

Cost plus margin: Qantas determines the cost of production and

then adds a margin for profit.

Market: the market, where the demand is matched with supply,

determines most fares at Qantas.

Competition based: watch what other airlines such as Virgin Blue

are doing.

Since the Ansett collapse, Qantas domestic flights have been

influenced by a lack of competition. They are not forced to be
competitive as earlier in 2001 when Ansett was the second carrier
along with Impulse. Qantas will face more competition now that
 Virgin Blue and Patrick Corporation have merged. Qantas still face
serious competition on its international routes. Pricing strategies
employed by Qantas include:

Price penetration: Qantas will use such a strategy for its new
low cost Asian Airline to be launched this year as Australian
Airlines. Qantas will initially charge the lowest possible price
for this service.

Full Fares: for those waiting flexibility (important for business

travellers) as full fares can be refunded and changed.

Promotional Fares: these are not advertised as a discount on the

full fare i.e. 20% off, but are quoted as a price. They are usually
offered in the economy cabin at times of subdued demand of to
match competitors.

Other promotional fares can be conditional such as:

Minimum stay away: minimum stay of seven days and the

Saturday night away rule. These are unattractive to business
travellers who want to stay away during the weekdays only

Departure time limitations: defines the period of departure,

which allows Qantas to offer low cost fares outside peak
demand periods.

Packages are sold as part of an inclusive holiday, which

includes hotels, meals and transfers.

Loss leading: Qantas in the past has entered new routes and
introduced low fares to gain initial market share.

(iii) Promotion

Promotion is the means by which an organization communicates its products

and its image to the customer.

Promotional strategies include:

a) Advertising: Qantas uses advertising agencies to create media

advertisements in television, radio, magazines, newspapers, brochures,
posters in travel agencies and billboards. Qantas is using less blanket
 advertising and more direct marketing, which is cheaper and very
targeted especially to corporations. The disadvantage of media
(blanket) advertisements is that many people receiving the message are
not the target market unless that advertising is purely for image or
brand recognition.
b) Sales promotions particularly in periods of subdued demand
c) Personal selling based on sales representatives who sell directly to
travel agents, businesses and government departments.
d) Publicity to enhance the image of Qantas includes new releases, feature
articles, press conferences and interviews. They also sponsor a number
of sports such as rugby union and swimming and netball. They also
sponsor environmental causes such as clean up Australia day, and
charities such as CARE Australia, Star Light Childrens Fund and
World vision, and cultural activities like the Art Gallery of NSW.

(iv) Place

The product must be easy to border the purchase, no matter how good the
product, the selling will be controlled. Distribution to end customers is
achieved by Qantas in two main ways, direct and indirect:

a) Direct (sale of products direct to the customer)

Direct sales via its own retail outlets. Qantas has a

network of wholly owned Qantas Travel Centres called Qantas
Holidays (the largest travel wholesaler in Australia).

Telephone sales centres;

Airport ticket sales; and

The Internet is emerging as a significant (LOW COST)

channel for promotional fares.

b) Indirect (using intermediaries)