Competitive Position of Qatar Airways free essay sample

1. Introduction Facilitating international trade, economic relations between countries as well as stimulating exchange of people and ideas, the airline industry has proven to be a vibrant and dynamic industry, playing a key role in the development of world economy. Increasing demands for mobility, globalization of society and the constant change of consumer needs lead to growth in traffic flow and segmentation of the airline industry. In recent years, increasing consumer awareness of service quality has added to the competitive nature in the air travel market. Apart from establishing more convenient routes, airlines have introduced promotional incentives such as mileage rewards, frequent flyer membership programmes and other benefits to attract more customers and retain them. However, the attractiveness of these marketing strategies decreases over time because most airlines offer similar benefits. Recognizing this, Qatar Airways have positioned themselves based on a commitment to fur ther improve the quality of customer service instead. 2. Literature review 2. 1 PESTEL Analysis Figure 1: PESTEL Analysis PESTEL analysis is an acronym for Political, Economic, Social, Technological, Environmental and Legal analysis. It is a strategic tool which describes a framework of different macro-environmental factors that affects the marketing strategies of a company. The outcome of PESTEL analysis is an understanding of the overall picture surrounding a company in its respective market. 2.1.1 Political Factors Political factors are about how and to what degree the government intervenes in the economy. It includes areas such as government policy, government stability, taxation policy and foreign trade regulations. 2.1.2 Economic factors Economic factors have a major impact on how a company operates its business, makes decision and also how profitable they are. It includes areas such as economic growth, interest rates, exchange rates, disposable income and inflation. 2.1.3 Social Factors Social factors affects how a company operates depending on which country it is in since the cultural aspects of a population varies by country to country. It includes areas such as population demographics, educational level, ethnic issues, career attitudes and lifestyle changes. 2.1.4 Technological Factors Technological factors affect the way a company provides services and communicates with a target audience. It includes areas such as internet usage, computer usage, rate of technological innovations and rate of obsolescence. 2.1.5 Environmental Factors Environmental factors affect the way a company operates ecologically and environmentally. It includes areas such as environmental protection laws, waste disposal, energy consumption, pollution (carbon footprint) and scarcity of raw materials. 2.1.6 Legal Factors Legal factors affect a company’s operations through various regulations. It includes areas such as monopolies legislation, employment law, health and safety law, product safety and consumer rights. 2.2 Porters Five Forces Figure 2: Porters Five Forces Porter’s five forces is an analytical tool which describes a framework for industry analysis. The five forces help to determine the competitive intensity and profitability in the respective industry and shape a company’s marketing strategy. 2.2.1 Threat of Entry A market that yields high profits will attract new entrants. Over time, the profits will start to fall. Thus, threat of entry is dependent on barriers to entry which acts as obstacles for new entrants to gain a foothold in the respective industry. Some of the common forms of barriers to entry are economies of scale, capital requirements of entry, access to supply or distribution channels and customer or supplier loyalty. 2.2.2 Threat of Substitutes Threat of substitutes exists when buyers find a substitute product with cheaper price or better quality (price/performance tradeoffs) or when the cost of switching one product to another is little. 2.2.3 Power of Buyers Size and concentration of buyers determine the power of buyers. It becomes prominent when buyers are able to put the sellers under pressure with strong bargaining leverage. When power of buyers is high, they tend to be more sensitive to price changes, force down prices while demanding better quality and may threaten to integrate backwards. 2.2.4 Power of Suppliers With strong bargaining leverage, the power of suppliers becomes prominent, allowing the sellers to raise prices or reduce quality. This occurs in situations whereby there are no substitute products or when the switching costs to another seller is high. Forward integration is also a credible threat when power of suppliers is high. 2.2.5 Competitive Rivalry Evaluating competitive rivalry helps to determine the competitiveness and profitability of an industry. This rivalry intensifies when there are many competitors in the industry, competitors are of equal size, industry growth is slow, exit barriers are high and product differentiation is low (products are direct substitutes). 2.3 SWOT Analysis Figure 3: SWOT Analysis SWOT analysis is an acronym for Strength, Weakness, Opportunity and Threat analysis. It is a framework that analyses the internal strategic capabilities of a company (Strengths and Weakness) and the external opportunities and threats from the industry. Strengths (characteristics that gives a company an advantage over other companies) and weaknesses (characteristics that places a company at a disadvantage relative to other companies) can be directly managed by the company while opportunities (favourable situations that a company could exploit to their advantage) and threats (unfavourable circumstances that could spell trouble for the company) can only be anticipated and react to accordingly. 3. Company Background Qatar Airways is a relatively new regional airline that has set its sight on being a global and recognized brand and is one of the fastest growing airlines in the world. The airline has grown to over 120 destinations worldwide, fulfilling its growth strategic objectives. Increasing brand recognition and awareness and offering the highest level of service excellence has helped the airline to become part of an elite group of airlines to have been awarded a 5-star rating by Skytrax. The image that it portrays is that of a young, progressive and high quality airline with ever increasing efficiency that offers first class customer service. Having its image directly associated with the image of the country, the employees of Qatar Airways, who have come from various backgrounds, have presented themselves as goodwill ambassadors to the country, adding a touch of the traditional Qatari hospitality while embracing modern society and promoting service quality of the airlin e itself. Figure 4: Qatar Airways Logo 4. Data Analysis and Inferences 4.1 PESTEL Analysis 4.1.1 Political Factor Qatar Airways is the state-owned flag carrier of Qatar with the government holding 50% stake in the airline. Politically, Qatar is a stable country. This guarantees airlines that their company can operate successfully without any conflicts with the government. The impact this has is that it provides opportunities for airlines to operate their business in a large and favourable market, which in turn leads to competition amongst the airlines. Other political issue that has affected Qatar Airways is the deal conflict with European airlines where indirect taxes have been imposed by the European airlines and political barricades that deny the taxation procedure. 4.1.2 Economic Factor According to the current economic crisis, factors such as GDP (Gross Domestic Product), globalization and increase in international trade would affect the airline. Qatar GDP growth reaches 7% by current statistics and rise in passenger traffic points at 5.5%. Therefore, price policy fluctuations would not affect the airline drastically. However, in light of the current economic crisis in the rest of the world, most passengers tend to look for cheaper alternatives for travel. Stiff competition from the more favourable LCC (Low Cost Carrier) airlines on the international stage would lead to a reduction in passengers for Qatar Airways. 4.1.3 Social Factor Social factors such as demographics, consumerism and attitude of the passengers affect the performance of Qatar Airways. In light of the recent wars in the Middle Eastern region, passengers have become reluctant to fly to Middle Eastern region or fly with Middle Eastern airlines. The airline has addressed this issue by showing a positive response to the community with the campaign of their products and services in an effort to rebuild confidence in travelling with Qatar Airways. 4.1.4 Technological Factor The partnership between Qatar Airways and Ooredoo, an exclusive telecommunications provider promotes technological advancement in the business, in areas such as routing and service delivery where passengers can book flights from the comfort of their homes. This technological alliance reduces costs of infrastructure, leading to overhead savings. 4.1.5 Environmental Factor As one of the fastest growing airlines in the world, Qatar Airways ensures that their carbon footprint remains minimal. As the airline continually invest heavily on newer and cleaner aircrafts, efforts have been made to maintain minimal carbon emissions to reduce the impact on the environment. OSyS has provides Qatar Airways with analytical tools to advance their fuel efficiency and achieve carbon-neutral growth. This enables the airline to have more control over fuel usage and improves their emission compliance. This solution reduces operational expenditure and emissions while promoting new saving opportunities, improving the airline’s competitive advantage. 4.1.6 Legal Factor Qatar Airways follows a discretionary system of law since it is state-owned by the government. The employment law requires women to obtain permission from the airline if they choose to marry. Female employees must also notify the airline immediately if they are pregnant, allowing the airline to dismiss these employees. This result in the inability to reach an agreement that regulates favourable working conditions and denies the right for an individual to leave according to her own choosing.