Mba 692 International Marketing: Case Assessment Answers

Read the Case Study and Answer the following questions

Qantas is the world's second oldest airline, having been founded in the Australian outback in 1920. It is Australia's largest domestic and international airline. The name comes from the initial letters of the words in the original registered title—Queensland and Northern Territory Aerial Services Limited. The Qantas Group employs approximately 32,500 people and operates a fleet of over 250 aircraft,comprising Boeing, Airbus and Bombardier aircraft from full-size long-haul aircraft to smaller short haul aircraft. The Group offers services across a network spanning 182 destinations in 44 countries (including those covered by code share partners). International Air Transport Association (IATA) data for 2009 shows Qantas was the world's 11th largest airline in terms of Revenue Passenger Kilometers (RPKs).

Its brands include Qantas, Jet star and Qantas Link (as well as several Jet star brands in East Asia). Qantas is the Group's standard fares airline, based in Sydney, while Jet star is the Group's budget fares airline that also manages the  Jet star Asia operations, based in Singapore. Both offer Australian domestic and international services, and are intended as complementary, rather than competitor, brands to each other.

 In recent years the Qantas Group has been one of the few airline groups in the world still making a profit. Many airlines have been making substantial losses, and there have been some mergers (such as KLM–Air France), takeovers and bankruptcies (such as Northwest and American Airlines). 

Despite the apparent rosy initial impression, the actual profitability picture across the Group is mixed, with Jet star's domestic and international operations generally doing well, while the Qantas division of the business has been doing less well. Qantas's international market share has fallen sharply in the past decade. While the airline was in a dominant market position in 2000–2001 with 34.4 per cent of the traffic to and from Australia, by 2010–2011 its market share had dropped to 18.7 per cent. Part of the response to this was the launch of Jet star, which has absorbed 8 per cent of international traffic into and out of Australia leaving the overall Qantas Group with a 26.5 per cent market share by late 2011.

The economic viability of the Qantas international operations is, however, central to the Qantas Group business mission and objectives. Reflecting this, the need to cut costs is a central tenant of the Group's strategy for Qantas. According to the airline, the cost base is around 20 per cent higher than key competitors. It simply does not have the low cost structure of many of the competitors, especially

the Asian competitors. Neither does Qantas have the well positioned hubs of the competitor Asian and Middle Eastern carriers. Accordingly Qantas is having to undertake its marketing in an environment where competitors, such as Emirates, Etihad, and Singapore Airlines (with great hubs) are tackling them head-on. Given the above, a large number of Qantas routes, primarily to Asia and Europe, are loss-making.

In contrast, a central tenant of the Jet Star strategy is to grow the brand in Asian markets through stand alone operations, joint ventures and strategic alliances, as much as possible and as rapidly as possible. Jet star is one of the world's fastest growing and most profitable low-fares airlines, set for significant future growth.

Management perceives that part of the solution for the Qantas division of the international business is offshore maintenance of aircraft, employment of overseas flight crew, and pilots on much lower salaries. All of this is part of the perceived need to pair down costs, just as the Group was able to when it established Jet Star as the low cost brand in the Qantas Group.

This assignment is focused on the international side of the Qantas Group business, specifically the Qantas and Jet star international passenger operations. Their domestic Australian operations are not the principal focus of this assignment. Commentary on them should either be very limited, or excluded.

1. Consider the basic tools for conducting a marketing audit, like the SWOT and the PEST. How might Qantas use specific business tools to assist it to undertake formal marketing auditing and planning? Provide four examples. Note: do not describe the business tools at length, rather explainhow they might be used.

1. Thinking specifically of the airline market, what are the most important factors in Qantas macro environment? Briefly describe them and explain the reasons for their importance. Note: there is not a right or wrong answer – explain the reasons for choosing these as the most important factors.

1. Thinking specifically of the airline market, what are the most important factors    in Qantas microenvironment? Briefly describe them and explain the reasons for their importance. Note: there is not a right or wrong answer – explain the reasons for choosing these as the most important factors.

1. How would Qantas position itself differently for its consumer and business markets? How could Qantas use marketing research and marketing intelligence to assist it to undertake marketing planning and implement marketing strategy for each of these two markets?.

5. How could Qantas use segmentation and specific segmentation variables like demographics, psychographics, buyer-graphics and geographic? Provide a specific example.

6. How could an understanding of market positioning be of assistance to Qantas for targeting its target segments?

7. How could an understanding of buyer behavior be of assistance to Qantas? Provide a specific example of how Qantas could tailor its promotions based on buyer behaviour.

8. Why would Qantas undertake formal marketing auditing and marketing planning? What is the link between auditing, planning and corporate strategy? Note - do not simply discuss these broadly—apply the concepts directly to the Qantas case.

1:

Use of SWOT in marketing auditing and planning

SWOT analysis finds out that Qantas have strong work force, which is very important factor in meeting customer expectation in airline industry. An airline company has several dimensions of the business. Large number of employees indicates that the company is able to retain the talents and skilled labour in the company, who contributes positively towards the growth (Shaw 2016). Employee retention may be one of the factor that Qantas has been able to retain profit while other competitors making loss. Employees can be good ambassador for the company while marketing is taking into account. Low cost brand value helps Qantas to enhance brand value in order to achieve competitive advantage.

Qantas has increasing competitors in both Australian and Asian market such as Emirates, Etihad and Singapore Airlines. Although Qantas is successful to operate in Australia, it fails to make significant profit in the Asia and European market. Therefore, Qantas needs to revise its business model in these markets. In order to break the barriers in Asian market, the company is needs to change corporate strategy and cost structure (Bamber 2015).

PEST analysis

External market environment affects the business level and corporate strategy of Qantas. The company needs to know the political and economic environment before expanding business in the international market. Business laws, regulations, labour laws, work place environment, and safety laws are needed to abide by (Maitland and Sammartino 2012). As customer satisfaction is important concern, making decision regarding fare and other amenities depend on the per capita income, preference and culture of the target country. Employment of labour from target country also affects the cost of the providing service. Technological and social factors also affect the business strategy.

2: Macro environment of Qantas

Competitive factor: Porter’s five forces

Pricing factor:

Among four types of pricing policy such as economy pricing, penetration price, skimming and premium pricing, Qantas uses penetration pricing. Penetration pricing is a low price compared to the price level set by the competitors. In the view of N. Bolton et al. (2014), penetration pricing creates entry barrier and reduces competition. However, Qantas has not been able to create such barrier in both domestic and international market. As agued by Pearson and Merkert (2014), penetration price may bring some problem such as loss of customer. Customer may shift to the companies having higher brand value than Qantas even it uses penetration pricing. Reduction in price too much by not taking other strategy may be one reason of making loss in Asian market.

3: Micro environmental factors

Figure 1: Microenvironment of Qantas

(Source: Iatrou and Oretti 2016)

Microenvironment focuses on specific factors that affect the revenue and profitability of the company. Technological improvement enhances the service quality and reliability of the service to the customers. Strong culture and brand equity helps to build strong relationship company culture, corporate values and customer needs. In the view of Lee and Worthington (2014), strong relationship with the stakeholders improve supply chain of Qantas in the domestic market. However, in order to be successful in the international market, Qantas needs to improve relationship with international suppliers and customers.

Qantas uses social media as a tool of marketing and creates awareness among the consumers. Development of service through assistance of cabin crew and improvement of in-flight service are done through technological up gradation, supply chain management, effective marketing, and human resource management. As stated by Solomon (2014), analysis of microenvironment is required for the business to remain competitive and to bring rapid change in the company to maintain sustainability. Analysis of customer needs and choices is crucial as customers acquire central position in the market.

4: Positioning

As opined by Maitland and Sammartino (2012), positioning is the placement of the product and service in the mind of customer differently from the competitors. Company emphasises features that distinguishes speciality of service that from the domestic and international competitors. Service differentiation is the base of the promotional strategy used by Qantas. Different types of flying arrangements are first class, international business class, international economy, and premium economy. Online availability of information, offering best connecting flights around the world make the service different from other existing customers. Direct marketing is used by Qantas to create customer awareness. Personal selling through travel agents is a method used by the customer. Direct sales are done through Qantas travel centres

Customer oriented business policy is practiced by Qantas. The company has created its low fare brand Jet star to get back the share from its competitors. Flexibility in premium payment is price oriented promotional strategy of the company. Reward programmes such as Frequent Flyer scheme, Qantas club services increases the preferences for this company to the customer (qantas.com 2017).

Qantas uses different strategy for business customers. This type of customers needs flexible flights that can meet business needs. In order to meet the demand for the customers this company has positioned itself as a Pioneer airlines and on-time flights. Flexible booking service is another positioning strategy for business level customers. Flexible booing and refund service is helpful for the international business customers (Pearson and Merkert 2014).

As a market research tools, Qantas uses customer survey and market survey to gather data on ongoing trends in the domestic and international market. Primary survey is more fruitful in assessing customer preference. Qantas uses market research and does forecast as the tool of market intelligence.

5:

Demographic segmentation

Demographic segmentation is based on age, income, education, ethnicity of the customer. However, Qantas does not use demographic segmentation, as this is not feasible for airlines industry. Qantas prefer to segment target market according to the buying nature of the customer irrespective of gender, income and other mentioned demographic figure.

Psychographics segmentation

As stated by Iatrou and Oretti (2016), psychographics segmentation is similar to the behavioural segmentation. Lifestyle of the consumer, buying behaviour, social status of the consumer is included in the psychographics market segmentation. Qantas mostly uses this kind of segmentation. Habits of tourism, desire for studying abroad, frequency of business meeting all influences this kind of market segmentation in the airlines industry. Social class determines the demand for different types of flying arrangement.

Buyer graphics segmentation

Buyer graphic segment includes economic, functional, social and psychological needs of the customer. Benefits of the service also influence this kind of segmentation. As stated by Solomon (2014), attitude towards product or services such as positive or negative determines the demand for service. Quality of service influences customer satisfaction and thus customer loyalty, which in turn affect the market segmentation.

Geographic segmentation

While comparing market segmentation strategy, Qantas distinguishes geographic location as developed and developing countries. Geographic location is important while joining domestic airline with international airlines for the convenience of the customers (Wedel and Kamakura 2012). In the view of geographic market segmentation is based on nations, cities, regions and neighbourhood.

Qantas uses behavioural segmentation and social status of target customers in segmentation of market. However, this company also uses buyer graphic segmentation as Qantas has customer centric business.

6:

Qantas uses the 4P’s of market positioning such as product, promotion, price and place effectively for the domestic market. However, these strategies have not been successful in doing business in Asian and European market. Effective use of these tools can make strong customer base in the international market (Shaw 2016). Qantas uses penetration price. However, this pricing is not only tool in the competitive market. Continuous product differentiation, bringing special features in the services, value added product can help to build up customer loyalty.

Analysis of consumer behaviour helps the company to position its product effectively so that it can attract the attention of customers from its competitors. Choice of right partner is essential for company like Qantas; otherwise, supply chain may not be effective. Qantas needs to compare its positioning strategy with its competitors to make its own strategy effective and find out uniqueness of the product.  

7:

Buying behaviour of the consumer can be evaluated through market survey. Direct survey on customer to the target market can be a tool to assess the behaviour of the customer. Taking feedback through social media can be another medium. Another method is sampling. Sampling of new product to consumers is a way of judging the nature of the consumer. Personal interview is a third process. In the view of N. Bolton et al. (2014), this process is effective but time consuming. As stated by Pearson and Merkert (2014), the objective of promotion is to motivate customers regarding products and services. This tool can be effectively used by Qantas for encourage end users. As Qantas is lose making firm in Asian and European market, the company needs to use sales promotion strategically. This is the tool for communicating the features and speciality of the services to the target customers. Initially rebate on airfare can be strategy for promotion of the service of Qantas in the market. Moreover, this company needs to enhance brand value in the Asian and European market.

8:

Formal marketing auditing and planning is required for Qantas to acquire market share in the target market and break the barrier to entry. Market strategy planning is done through customer analysis, marketing strategy formulation. Formal auditing of the marketing is required for Qantas to find out its strength and weakness. As opined by Maitland and Sammartino (2012), planning is a necessary part of the marketing strategy. As planning involves with the budget part, every steps of marketing, required cost for every tool needs to be measured initially. As concluded by Lee and Worthington (2014), marketing audit includes both internal and external influences in the airline industry. Internal cost for Qantas includes employee cost, finance, equipment, time and other factors required for providing services. Customer relationship management is needed to consider while making marketing planning and auditing.

External market planning for Qantas involves buyer decision-making process, market segmentation, positioning of brand, achieving target level of profit in the international market, acquiring market share at the target market. Qantas needs to review the planning before implementation in comparison with its competitors. The main relation between auditing, planning and corporate strategy is that planning and auditing are required to implement corporate level strategy (Wedel and Kamakura 2012). Expansion of business in the international market, gaining cost leadership, increasing brand value is corporate strategy for Qantas. These objectives cannot be fulfilled without proper planning and auditing.

References

Bamber, G.J., 2015. Low-cost airlines’ product and labor market strategic choices: Australian perspectives. Members-only Library.

Iatrou, K. and Oretti, M., 2016. Airline choices for the future: from alliances to mergers. Routledge.

Lee, B.L. and Worthington, A.C., 2014. Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression. Journal of Air Transport Management, 38, pp.15-20.

Maitland, E. and Sammartino, A., 2012. Flexible Footprints. California Management Review, 54(2), pp.92-117.

Bolton, R., Gustafsson, A., McColl-Kennedy, J., J. Sirianni, N. and K. Tse, D., 2014. Small details that make big differences: a radical approach to consumption experience as a firm's differentiating strategy.Journal of Service Management,25(2), pp.253-274.

Pearson, J. and Merkert, R., 2014. Airlines-within-airlines: a business model moving East. Journal of Air Transport Management, 38, pp.21-26.

Shaw, S., 2016. Airline marketing and management. Routledge.

Solomon, M.R., 2014. Consumer behavior: Buying, having, and being (Vol. 10). Engelwood Cliffs, NJ: Prentice Hall.

Wedel, M. and Kamakura, W.A., 2012. Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.