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A critical analysis of Qantas Airways Limited

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Introduction

A critical analysis of Qantas Airways Limited Due date: 31st May, 2004 Contents TOPIC PAGE Section 1.1 Executive Summary_________________________________ 2 Section 1.2 Introduction_______________________________________ 3 Section 1.3 The Structure of Qantas Airways Limited________________ 3 Figure 1.1 Qantas's Organisational Chart_________________________ 4 Section 1.4 Qantas's Strategy & its Influence on Structure____________ 5 Section 1.5 The Organisational Effectiveness of Qantas______________ 8 Figure 1.2 Balanced Scorecard of Qantas Airways Limited___________ 9 Section 1.6 Critical Analysis of Current Issues & Possible Solutions_____ 10 Section 1.7 Recommendations__________________________________ 11 Section 1.8 Conclusion________________________________________ 12 Section 1.9 References________________________________________ 13 1.1 Executive Summary The purpose of this report is to analyse the organisational characteristics of Qantas Airways Limited. The divisional structure of Qantas is assessed and compared to relevant theories. Qantas has a constantly-changing, dynamic environment, and its divisional structure helps the company to respond to this environment effectively. Qantas's strategy is also defined and theoretically analysed. According to Miles and Snow (1978), Qantas has adopted a defender strategy, striving to produce a quality, differentiated product to prevent competitors from stealing their market. Porter believes that Qantas has a differentiation strategy. Because they have the necessary skills and resources, this strategy will allow them to succeed. Qantas uses a balanced scorecard approach to assess its organisational effectiveness. This balanced scorecard is outlined in the report, and shows that there is a tendency towards financial goals and objectives. Nevertheless, Qantas's balanced scorecard is fairy strong and accounts for development of all areas of the business. Qantas's goals are reasonable and are clearly defined. Structural issues are identified and discussed, including the need for better integration of resources, and the need for lower formalisation and lower complexity in the departments that are responsible for innovation and product development. Recommendations are made to Qantas, including the creation of a shared resources unit, and the structuring of the research and design, product development and marketing section of this shared resource unit in a way which encourages creativity. ...read more.

Middle

Added international flights from Sydney to Mumbai, and Sydney to Shanghai will be operating by the end of the year (Bray 2004). Qantas is also in the process of setting up a new intra-Asia low-cost airline, which will commence operation at the end of the year. Qantas will own just under 50% of the new Singapore-based airline (Australian Qantas may move some ops offshore- CEO 2004; Harcourt 2004a; Qantas in low-cost launch 2004). Part of Qantas's broader strategy is to simplify its operations. Measures are being taken to implement this strategy. In April 2003, Qantas simplified their fare structure, reducing the available fare types from 11 to just 5, and the reorganisation of Qantas in August 2003 simplified many staff procedures and passages of communication (Boyle 2003). Lastly, in response to the increasing need of their customers for flexibility, all Qantas tickets are now transferable to another date for a $27.50 fee, including even the deeply reduced tickets (Harcourt 2004b). In response to other changing demands, Qantas also plans to move to all-economy seating on some routes, and a fleet of new aircraft is scheduled to be completed by the end of 2005 (Qantas builds up domestic fleet 2004). Michael Porter argues that for an organisation to successfully perform, it must select a strategy that will give its organisation a competitive advantage. Porter states that three business strategies exist - cost leadership, differentiation and focus - and organisations should choose the strategy that best facilitates their strengths (Robbins & Barnwell 2002). When a company sets out to be the low-cost producer in its industry, it assumes a cost leadership strategy. Success with this strategy usually requires the efficiency of operations, economies of scale, technological innovation, low-cost labour and preferential supplier agreements. Virgin Blue used a cost leadership strategy to break into the Australian market and is now seen as the low-cost provider in the industry (Harcourt 2004b). ...read more.

Conclusion

The on-time results from January 2003 show that Qantas have the ability to perform extremely well, so they should focus on this and work it into their marketing ideas. 1.8 Conclusion Qantas Airways Limited has a divisional structure, which helps the company to respond to its rapidly-changing environment. As a large company with over 34,000 employees, it has a complex structure with 11 horizontal divisions and vertical differentiation. Safety requirements and the risks involved with the airline industry force Qantas to have a high level of formalisation throughout the company. Decision-making is decentralised to allow the company to respond quickly to changes and challenges. However, the divisional structure of Qantas leads to duplication of activities. It is recommended that Qantas establish a shared resource departments to minimise this inefficiency. Qantas has a defender strategy and fights against its competitor, Virgin Blue, to gain market share. Qantas has recently introduced Jetstar to assist in this battle. Qantas uses differentiation to place its services as more superior than its competitors, and has established a cost leadership strategy for Jetstar to attract the low-cost market. Qantas's long-term strategy is to improve its profitability to create substantial shareholder value, to maintain its position as Australia's leading domestic carrier, and to continue to grow and diversify the business into new markets nationally and internationally. A current focus is on reducing operating costs, recognised as an attribute of the defender strategy. Qantas uses a balanced scorecard approach to assess its organisational effectiveness, which weighs up the demands on the organisation against their capabilities. Qantas's balanced scorecard is fairly strong and takes all areas of the business into account, with a focus on profitability. To improve their effectiveness, Qantas should arrange the structure of their shared research and design, product development and marketing department to enable for creativity and innovative ideas, and should analyse the market to identify places of positioning for each Qantas subsidiary, to eliminate competing for the same market where possible. Lastly, Qantas should also focus on improving and maintaining their on-time performance as a way to threaten Virgin Blue. 1. ...read more.

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