Jet Star: Quantas’ Business Level Strategy

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Written Case Report
Case “Jet Star: Quantas’ Business Level Strategy”

Abstract
Qantas is the largest Australian airline company. The industry in which Qantas exists seems to be attractive as it brings enormous profits for the company, however, new entrants would face many difficulties in the entering this industry. Qantas uses two-brand growth strategy while offering two types of service: premium and low-price. The premium service is being delivered by the company itself and the low-price service is delivered by subsidiary of Qantas named Jet Star that was established in order to avoid price wars with big competitor Virgin Blue and maintain the Qantas image of being premium services offering company. Qantas uses differentiation business-level strategy while Jet Star uses cost advantage business-level strategy. Jet Star achieved many functional efficiencies that helped the company to reduce its costs and maintain low prices offered. In the future Jet Star is likely to face some major operational challenges.

Table of contents
Introduction4
The main driving forces of competition for Qantas as per Porter’s five forces model4
The Reason of why Jet Star was created. Did it serve the purpose?5
Business level strategies in operation. the possible duration of these6
The key functional efficencies that Jet Star achieved7
Possible major operational challenges in the near future8
Conclusion8
References10

Introduction
Qantas is the largest Australian airline. It uses two-brand strategy by offering premium services delivered by Qantas and low-price services offered by company’s subsidiary Jet Star. The aim of the report is to do an analysis of Qantas company’s business strategy. In the report the definition of driving forces of competition for Qantas will be provided, the reason why Jet Star was created will be defined, the business level strategies and key functional efficiencies of the company will be described, and, finally, the possible future challenges for Jet Star will be identified. In order to do this, various theories of strategic management will be used. The main driving forces of competition for Qantas as per Porter’s five forces model Porter’s five forces model shows the attractiveness of an industry (Oster, 1999). These are the current intensity of competition, the presence of substitute services, the bargaining power of buyers, the bargaining power of suppliers and the threat of new entrants. These forces refer to micro environment factors that “most organizations understand the best” (Grant, Butler, Hung, & Orr, 2011, p. 106). In the situation of Qantas the current intensity of competition is high. As Qantas is offering two types of service, low-price travel and premium-price travel service, it has to deal with two types of competitors: the ones that are concentrated on quality offered and the ones that are more focused on low pricing. Qantas competes in premium and business market which means that they have to deal with competitors that also offer premium flights. The Qantas’ subsidiary Jet Star has different sort of competitors. Although Jet Star is a leading air travel company in Australia it faces a very strong competition with another airlines Virgin Blue and Air New Zealand that also offer low prices flights for its customers. The presence of substitute services is low to medium. Substitutes for Qantas company can be the same as for any other airline company. Alternatives include trains, ships, and cars. However, when it comes to a situation where customer, for instance, needs to appear from Melbourne to Darwin where the distance between is around 4000 kilometers, it is in almost all probability that the customer would rather choose travelling by air than ground. And when it comes to a situation of travelling to another country from Australia it is also most likely that people will choose travelling by plane. However, when someone needs to travel not very long distance or,...
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