Competitive Analysis Written Case Report 1. Submit a written evaluation of the case “Jet Star: Qantas’ Business Level Strategy”. The APA reference style with proper in-text citation should be adopted...

Jet Star: Qantas’ Business Level Strategy 1
Jet Star: Qantas’ Business Level Strategy
Executive Summary
The airline industry in Australia is dominated by two major players – Qantas and Virgin Blue.
Over the last few years, given the woeful financial conditions across the world, the airline market
has become segregated into two main types of offerings – no-frill or low cost airlines and
premium airlines. Understanding the need of the hour, Qantas introduced a low cost carrier
service – Jetstar. Jetstar has managed to do very well for itself in spite of the difficult economic
climate prevailing in the world. Most of this has been achieved by significant economies of scale
and functional efficiencies. Initially Jetstar was only a domestic carrier for Australia. With time,
it has expanded in the Asia-Pacific region and is now also setting its sights on the European
market.
Asian low cost airlines have been doing very well in the current market. Jetstar is in direct
competition with these airlines and to ensure that it can set itself apart from the others. Jetstar’s
strategy to enter a new market has been to offer unbelievable discounts to get a kick start in the
area. Jetstar’s parent company Qantas has to ensure that its brand image is not confused with that
of Jetstar’s. Qantas has worked to establish an image of luxury air travel, whereas Jetstar’s
approach is to offer the cheapest fare between any two points of travel. These two images are
strikingly different and to ensure user acceptance, they must be marketed careful.
The airline industry is a very tough business to be in. While Jetstar has made significant inroads
into the Australian market and neighboring Asian market, this still does not indicate its
profitability. With Virgin Blue being the more established player and backed by the large Virgin
Group, Qantas has to differentiate its offerings to appeal directly to its consumers.
Jet Star: Qantas’ Business Level Strategy 2
Contents
Jet Star: Qantas’ Business Level Strategy ...................................................................................... 1
Executive Summary .................................................................................................................... 1
Introduction ................................................................................................................................. 3
Porter’s Five Forces Analysis ..................................................................................................... 3
Bargaining Power of Suppliers ................................................................................................ 3
Bargaining Power of Customers .............................................................................................. 4
Threat of New Entrants ............................................................................................................ 4
Threat of Substitutes ................................................................................................................ 5
Industry Competitiveness ........................................................................................................ 5
Jetstar Profitability ...................................................................................................................... 6
Functional Efficiencies at Jetstar................................................................................................. 7
Future of Jetstar ........................................................................................................................... 8
Conclusion and Recommendations ............................................................................................. 9
References ................................................................................................................................. 11
Jet Star: Qantas’ Business Level Strategy 3
Introduction
Jetstar, is a wholly owned subsidiary of Qantas Group. It started operations in 2003 in the
domestic Australian market. It is a low cost airline that operates regional and international flights
to 35 destinations around the world from the Melbourne Airport. It is a part of the QantasLink
frequent flyer program.Its fleet consists of Airbus A320 and A330 aircrafts.
Jetstar is headed by CEO Jayne Hrdlicka. Jetstar does not release its financials every year as it is
a privately held company. Its last figures released in 2010 showed an operating income of A$131
on revenues of A$197. The Jetstar Group consists of Jetstar Asia, Jetstar Pacific, Jetstar Japan
and Jetstar Hong Kong. All these airlines operate in partnership with local regional airlines of the
particular country.
Jetstar is the fastest growing airline in Australia and among the largest long haul airlines around
the world. Jetstar’s key to growth and profitability has been its exceptionally low fares and
excellent operational efficiency. For their international flights, Jetstar offers both economy and
business class. They have a variety of in-flight services that are offered on a pay-per-use basis.
In a surprising move, Jetstar became the first airline to offer iPads for use in any of its flights for
over two hours. Jetstar is constantly on the lookout for new and innovative methods of promoting
and operating its fleet.
Porter’s Five Forces Analysis
Bargaining Power of Suppliers
The two main inputs for the airlines industry are – Fuel and Aircrafts. There are only two main
suppliers of large commercial aircrafts in the world – Boeing and Airbus. This gives them
Jet Star: Qantas’ Business Level Strategy ...