To manage and overcome the level of completion in the Asian aviation industry, Quanta Airlines formed its subsidiary company called Jetstar to offer Low Cost Carrier (LCC) services. Over the years, Jetstar has maintained the LCC business strategy in the market. The organization provides both local and international flights targeting customers who are price sensitive. Jetstar uses this approach to position its brand in the sector to attract and increase the number of flights. The technique has proven effective for the corporation following the act of price wars common in the aviation industry. Firms such as Virgin pose a threat to Jetstar, facilitating their decision to lead the market through the LCC tactic. Jetstar has merged the company’s vision with the strategy-making it easier for stakeholders to work in the same direction leading to proper administration. To remain competitive in the industry, it is essential to formulate business approaches that support its goals.
Background of the Company
Jetstar Airways Pty Limited is an Australian airline brand that operates as a low-cost business organization. The company is based in Melbourne, and it is a wholly-owned subsidiary of Qantas Airlines. The corporation offers domestic, regional and international flight services from its airport located in Melbourne. In the country, the main competitor of Jetstar is Virgin Airlines, which provides its services extensively in the local market and foreign markets. The firm uses different aircraft, such as the Boeing 787 and Airbus A320. In a competitive market, proper business strategy grants a business organization an opportunity to remain effective and competitive.
Jetstar Airways Porter’s Five Forces Analysis
The Power of Suppliers
Generally, the key inputs that Jetstar use are aircraft and aviation fuels. Considering fuel supply, the commodity’s price is influenced by geopolitical factors and trending market forces. This makes it difficult for the company’s petroleum suppliers to control the charges the firm incurs during the purchase of the commodity. Similarly, in procuring aeroplanes, Jetstar has two main manufacturers: Airbus and Boeing. The corporation deals with both suppliers, thus giving it high bargaining power.
The level of competitive rivalry in the aviation sector is high. Several airline organizations such as Virgin, Air China, Tigerair, Spirits Airlines, and Cathay Pacific Airlines offer the same services to the available customers. Price wars and brand recognition facilitate competition amongst the service providers (Porter, 2008). The performance of the Australian economy promotes the ability of corporations to engage in the aviation business effectively.
The Threat of New Entrants
The threat of new firms entering the sector is high in the aviation industry. This is due to limited barriers that may prevent other organizations from venturing into the business. Despite the large capital required to invest in the market, crucial assets such as airplanes can be easily leased, reducing the cost needed for the new companies. These aspects make it challenging for Jetstar Airways since the likelihood of having more competitors in the industry is escalating.
Threat of Substitution
In the current generation, the aviation industry faces a significant threat of substitution from other forms of transportation. For instance, the development of the electric train has made many people opt for railway transport since it offers faster and more reliable services over long distances. However, the firm provides a better experience to customers and therefore remains dominant in the market.
Customers’ Bargaining Power
The presence of many airlines in the aviation industry makes the bargaining power of passengers to be high. The service providers offer similar services, thus enabling consumers to choose from an array of options. Most competitors in the industry, such as Virgin Airlines, are offering value-added services to attract more clients the fact. That the cost involved in switching from one organization to another is insignificant, and travelers can use any company.
Jetstar PESTEL Analysis
PESTEL framework is essential in evaluating external factors that contribute to a company’s growth. In Australia, the political atmosphere is conducive, and most of the regulations favor business operations of the aviation industry. Similarly, the economic performance of the Asian countries is growing; therefore, the demand for air transport is increasing, providing a good market for Jetstar corporation to explore. These two aspects facilitate the operational activities of Jetstar, making it perform effectively in the market.
Jetstar Core Competencies
Jetstar Corporation has established a good image in the aviation industry due to its core competencies. The airline provides safe travel, and the crew members portray a high level of responsibility (Heiets et al., 2021). The leadership is well-organized, and they value teamwork which makes it easier to perform towards customers’ satisfaction (Jacobides, 2010). Furthermore, they provide entertainment to the passengers, thus luring most customers and leading to a significant market share.
Porter’s Value Chain Analysis
The value chain strategic management that keeps Jetstar active is the nature of the services they offer to its customers. For instance, the airways provide quality hospitality and entertainment, making passengers value it over other aviators. Furthermore, the firm promotes a good relationship with travellers, enhancing their travel experience. This aspect enables the company to have a competitive advantage in the market over its close competitors.
Analysis of Jetstar Competitive Advantage
To understand the source of Jetstar competitive advantage, SWOT analysis provides key insights into the strengths. For instance, the brand reputation of its parent company made the corporation to be considered safest carrier in the region. Its price and customer guarantee programs contributed to its growth and attaining large market share. Furthermore, the present opportunities, such as ability to expand routes, enhance its capability of having significant number of customers. These forces are essential in enabling the Airline to remain competitive in the aviation industry.
Furthermore, the adoption and application of the LCC business strategy allow Jetstar to capture a large market share in the industry, leading to high revenue. The approach increases the demand for the company’s services, making it the most preferred airline by the people who cannot travel due to high charges (Wang et al., 2020). Furthermore, based on the brand reputation of its parent company, Jetstar is preferred by several travellers who are loyal to Quanta services. Its domestic flights and international operations give it broader market coverage, thus enlarging its access to more clients. Lastly, a large fleet of aircraft enables it to cover more routes than some of its rivalries in the industry.
Strategy Formulation and Choice
Generally, in the competitive market, the success of a business organization is influenced by the nature and type of operating strategies formulated and implemented by the management towards attaining the company’s objectives. In most cases, the approaches align with the company’s vision and goals to ensure the stakeholders involved work in the same direction. Jetstar organization has been using its key strategy to provide an excellent customer experience in the aviation industry.
The primary operating strategy of Jetstar is the LCC approach that enables it to capture a large population of customers, especially low and middle-class individuals. According to its vision statement, “Our vision is to make the world more accessible”, the company is known for its low fares and excellent services. Over the years, Jetstar has relied upon the technique which enables it to compete with competitors that offer the same services to customers at a higher cost. The choice of the LLC approach aimed to facilitate the achievement of the organization’s vision. The technique is effective, and Jetstar currently dominates the marketplace through its management design (Grant et al., 2013). The firm’s strategy and vision are framed to enable the organization to remain committed to its objectives.
Some of the goals of Jetstar airline is to maintain offering LCC to facilitate easy movement of people across the globe. The company’s management team works closely with all the stakeholders to identify and execute its business strategies to enhance its position in the aviation industry (Hitt et al., 2016). To enable travelling for people with less income, the LCC approach is critical in enabling the business organization to provide the services. The goal of facilitating passengers’ flights from one place to another has made Jetstar Corporation attract more customers, thus increasing its overall market share.
The need to gain a competitive advantage in the sector prompted Jetstar corporation to implement the LCC approach. The strategy gave the firm ability to charge relatively low prices than most of its well-established competitors. The adoption of the cost leadership technique is in line to facilitate more fly.
In the aviation sector, the approach is essential because it enables the airline to increase the number of customers (Kasahara, 2015). This aspect gives the organization a large market share which is significant for becoming the leading business organization in the industry. Moreover, the tactic and the Jetstar vision are easy to integrate hence possible to maintain. The availability of resources enables Jetstar to implement the system more than most of its opponents with limited financial support.
Apart from the cost leadership strategy, Jetstar Company is known for its differentiation approach in its service provision. Aviation offers its customers quality hospitality services than most competitors in the industry. When clients are served during the journey, the likelihood of using the same airline and recommending a friend is high. This technique has improved the corporation’s image and reputation, hence making it known in the airline industry. Furthermore, the firm provides entrainment services to both domestic and international travelers. This practice makes the company outstanding amongst its opponents, enhancing its brand loyalty in the market. The differentiation approach plays a vital role in ensuring the organization’s services are unique and cannot be easily compared with other providers in the market hence promoting the ability of the firm to attain a competitive advantage.
To remain effective and enable its LCC strategy to provide a competitive advantage, I would recommend the firm establish collaboration with leading suppliers of fuels in the industry. Generally, the cost of jet fuel consumes more expenditure; hence might force the business organization to slightly raise its prices to recover the expenses incurred (Barney, 2012). However, when the corporation has a source of energy, it will be easier to lower and overcome market fluctuations that can make it realize increased spending. If the approach is incorporated, the company will have healthy financial status and hence would be able to maintain the LLC tactic over time.
In addition, I would recommend the company to fully divert into the digital transformation to lower employees’ expenses. Generally, to maintain the LCC strategy, the firm should reduce some of its operational expenditures to remain with more profit. Assuming the company adopts technology such as at checkpoints, entry terminals and other essential locations, the money required to pay the workers in charge of those places will be retained. Therefore, whether Jetstar lowers its prices will remain operative due to the reduced cost of operations.
Similarly, instead of relying on the LCC business strategy, I would recommend the airline company to their flight routes to cover other continents such as Africa, North America, South America and Europe. When there are many destinations, it will be easier for the corporation following its parent brand to attract more customers hence increasing its market share. This practice would lower the level of competition it faces in Australia and the Asian market. Having more regions to operate will enable the company to sell many tickets, thus increasing its revenue. This approach will not necessitate the business organization to lower its charges to inconveniencing other activities.
Moreover, to attract more travellers, especially long-distance passengers, I would recommend the company to modify its planes that take international flights. They should furnish their interior with modern technology to entertain customers during the tiresome journey. In addition, the firm should ensure there is enough legroom in the planes to allow clients to feel comfortable throughout the flight. Most people prefer experience and comfort over fare; therefore, they will be willing to pay higher to receive the welcoming services provided by the corporation.
In summary, the aviation industry is currently experiencing a high level of competition. It is necessary for the management team to formulate an effective strategy to overcome the challenge. Jetstar airline has been using the LCC technique that matches its company vision to capture a large market share. To understand how the company operate, it is essential to perform PESTEL and porter’s five analysis to evaluate the impact of the external environment on the industry.
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