A critical analysis of Qantas Airways Limited

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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. It is also recommended that Qantas places emphasis on the achievement of impressive on-time performance to compete with its rival, Virgin Blue.

1.2         Introduction

        Qantas was founded in the Queensland outback in 1920. Originally registered as Queensland and Northern Territory Aerial Services Limited, Qantas today is the leading airline in Australia, operating in both the domestic and international sectors. Qantas has proven to be extremely resilient this year, despite the risk of terrorism, increased competition and other threats, but it is imperative for the organisation to focus on efficiency and competitiveness if Qantas is to succeed in the long term (Hunter 2004).

        Organisational structure and strategy are paramount in the facilitation of the success of any business, as choosing an organisational structure and design type which complements an organisation’s environment and strategic direction, will ultimately determine their survival (Ferguson 2004).

1.3         The Structure of Qantas Airways Limited

        As a large organisation with 34,000 full-time staff, Qantas has a complex structure, with several self-managed departments. In August 2003, Qantas underwent a structural reorganisation to enable the company to better manage constant change, and drive current and future initiatives (Qantas Airways Limited 2004). There are now 11 divisions in the Qantas structure, which demonstrate horizontal differentiation, and the hierarchy of staff working within these divisions show the vertical differentiation of the organisation. As following strictly enforced procedures helps to manage the many risks involved with air travel, formalisation is high within divisions. Extensive rules, policies and procedures are established and must be adhered to by all staff, which retains Qantas’s high quality of safety, and assists the organisation in operating efficiently.

The highly uncertain environment of the airline industry leads to the decentralisation of decision-making, as there is a heightened need to respond rapidly to changing conditions (Kohler 2002). It is not possible for one person to grasp the full nature of the challenges facing Qantas, so each department is responsible for responding to their challenges individually, and this allows for speedy and informed decisions to be made by those who understand the issue. Decentralisation also acts as a motivator for employees by allowing them to actively participate in decision-making, and helps lower-level staff improve their decision-making skills (Hunt 1992).

        Qantas has an organic, divisional structure, which has an emphasis on lateral rather than vertical communication, and is most appropriate for their turbulent environment (Daft 1998). The divisional structure leads to high accountability for end results, as each internal department operates like a separate business, with its own performance goals and targets. Also, departmental performance is not based on management’s subjective assessment of staff and criteria-related measures, but instead is based on financial performance, a much more clear and objective measure.

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As each division is autonomous, it can be sold off or outsourced with minimal effect to the entire organisation if it is not meeting targets. Having self-managed divisions also frees the top management at Qantas from being involved with the day-to-day operations, and allows them to concentrate on long-term planning and strategic decision-making, which is imperative in their dynamic environment (Robbins & Barnwell 2002).

The six wholly-owned Qantas subsidiaries share a support centre, which reduces the duplication of resources. The support centre provides IT, human resources and financial services to the six companies owned by Qantas, namely Qantas ...

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