Five Forces Model Of Qantas Essay

Questions:

1.Analyse the competitive forces facing Qantas, using the ‘five forces’ framework.
2.Conduct a SWOT (Strengths, Weaknesses, Opportunities and Threats) evaluation of Qantas’s competitive strategy.
3.What has been Qantas’s corporate strategy across its domestic and international divisions since 1992?
4.Identify any two (2) accounting policy choices that you think should be closely watched by auditors and analysts for a company in the airline industry. Discuss in details for each of the two accounting policy choices above and explain why you have chosen each of them.
5.Evaluate Qantas’s financial performance (Revenues and Expenses) and financial position (Assets, Liabilities, and Owner’s Equities) at the end of 2013.
6.Evaluate Qantas’s financial performance (Revenues and Expenses) and financial position (Assets, Liabilities, and Owner’s Equities) at the end of latest financial year that you can find (Example: Qantas annual report 2015 or 2016).

Answers:

1.Porter’s Five Forces Model of Qantas Airways Limited

  • Rivalry from competitors- From the case study of Qantas Airways Limited, it is noted that there is fewer firms in the Australian aviation industry and none of them can equalize Qantas Airways Limited in terms of performance, profitability as well as market share (Qantas.com 2017).
  • Threats from new entrants- From the case study of Qantas Airways Limited, it is noted that different firms are trying to enter in the market to give a high level of competition to the airline industry. Furthermore, threat from new entrants is quite less for Qantas Airways Limited (Trugman 2016).
  • Threats of substitute products- From the case study of Qantas Airways Limited, it is noted that different substitutes are available in the current marketplace. Threat from substitute products is quite less to Qantas Airways Limited.
  • Bargaining power of suppliers- From the case study of Qantas Airways Limited, it is noted that different war materials are needed, where fuel and aircrafts is the essential element. Qantas Airways Limited is taking the product from one of the biggest supplier in the marketplace that act as main strength of the company.
  • Bargaining power of buyers- The bargaining power of buyers shows about the buyer power for influencing the price as well as other factors. From the case study of Qantas Airways Limited, clients are available in the market and firms for serving them so that buyers have the power to influence the price as well as operations of the company.
2. SWOT Analysis of Qantas Airways Limited

Strengths

Weakness

Oldest airline in Australia

High market share in Australia

20 domestic and global destinations

Monopoly in airline sector

Huge Sponsorship

Advertising campaign

Strong backing of Australian Government

Issue with employee or human resources

Too much concentration around Australasia

Opportunities

Threats

Investors attractiveness

Advancement of technology

Asian different tourist destination

Joint venture with international brands

High fuel prices

Intense competition in the market because of new entrants

High labor cost

3.Corporate strategy of Qantas Airways Limited

From the case study of Qantas Airways Limited, it is noted that the company need to investigate over the corporate strategy of the business. There are different factors that relates to the corporate strategy of Qantas Airways Limited. Qantas Airways Limited has come into existence in the year 1920 and plans for opting strategies for managing the business as well as enhancing the growth (Sheth and Sisodia 2015).

After 1992, Qantas Airways Limited has made many changes into its strategy, functioning, operations as well as technology and sources for managing and enhancing the performance and profitability of the business. It is noted that the company has adopted two strategies for managing the performance as well as profitability of the business. The company has used international expansion strategy as well as diversification strategy for the business enterprise (Armstrong et al. 2015).


Till now, Qantas Airways Limited had already operated its business into 42 countries with 173 offices and 35000 employees. Most of the business operations had started to management the performance like budget airlines, Jetstar, Qantas holidays and Qantas catering for evaluating the situation of the business firm (Sekaran and Bougie 2016).

4.Accounting Policy

From the case study of Qantas Airways Limited, it had been analyzed that the company is peppering the final financial data at the time of analyzing the different point of view in relation to the company for managing the reports based on accounting policies.

Revenue and expenses recognition

The rules of IFRS and US GAAP explain that an association needs to be identified in the income and expenses based on market value in the income statement. In addition, revenue is identified of an association that could be understood by the Business Corporation of trading of products or services such as sales, interest income, long-term gains and short-term profits where expense is calculated as loss of an association that can be paid by the Business Corporation at the time of trading products and services such as labor, operational expenses and cost of goods sold (Pe?aloza, Toulouse and Visconti 2013). Therefore, the accounting rules show that the expenses should be recorded in the debit column and income needs to be recorded in the credit column in the income statement.

Asset and liability recording

The rule of IFRS and US GAAP show that an association should identify overall asset as well as liabilities based on market value in the balance sheet, where assets is recognized as economical profit of business that need to be converted by the Business Corporation based on nature of assets (Meffert 2013). The short-term asset is that asset that can be converted in a year and long-term asset need some time like plants and debtors. On the other hand, liability is recorded as debt of an association can be converted by the Business Corporation based on the nature of liability. Therefore, double entry accounting system is helpful where total asset equals liability and capital of business enterprise.

Financial Performance of Qantas Airways Limited at the end of 2013

Liquidity ratio

2013

Current ratio

0.823390895

Quick ratio

0.709105181

Working capital

-1,125.0

Profitability Ratios

2013

Operating Profit Margin

0.002182705

Net Profit Margin

0.000320986

Return on Capital Employed

0.0

Return on Equity

0.000841184

Return on Total assets

0.000247525

Capital structure ratio

2013

Debt- equity

2.398384926

Interest coverage ratio

0.057432432

Efficiency ratio

2013

Receivable turnover ratio

Creditor turnover ratio

Inventory turnover ratio

Assets turnover ratio

Particular

2013

ROCI

-100.3846154

The financial data of the company for the year 2013 depict ways for identifying the level of performance of the company based on finance. Most of the ratio had been calculated for identifying liquidity, efficiency, profitability and solvency position of Qantas Airways Limited.

On analysis, it is noted that current ratio of Qantas Airways Limited depict a bad liquidity position for the company that reveals the fact where company cannot repay their short-term debt obligations for specified time. In addition, the quick ratio of Qantas Airways Limited shows a bad position in the year 2013. Overall, the working capital of Qantas Airways Limited is negative that show that company need to make some changes so that they can sustain in the long-run (Keller and Kotler 2016).


Profitability ratio help in predicting the profitability position of any business enterprise. On analysis, it is noted that Qantas Airways Limited is earning very less profit from the market that restrict the company to work smoothly in the near future.

Capital structure ratio reveals that debts of Qantas Airways Limited are quite higher than the assets of the company that need changes. Efficiency ratio of Qantas Airways Limited shows bad efficiency and it is suggested that the company should make some changes during the recovery days for maintaining the working capital at accepted level (Hollensen 2015).

5.Financial Performance of Qantas Airways Limited for 2015 and 2016

Current ratio

0.492031873

0.675903614

Quick ratio

0.396414343

0.589692102

Working capital

-3,570.0

-2,421.0

Profitability Ratios

2016

2015

Operating Profit Margin

0.180435884

0.101596704

Net Profit Margin

0.0651926

0.035861447

Return on Capital Employed

0.3

0.2

Return on Equity

0.316615385

0.162059936

Return on Total assets

0.061598324

0.031774102

Capital structure ratio

2016

2015

Debt- equity

4.14

4.100378237

Interest coverage ratio

5.014084507

2.260744986

Efficiency ratio

2016

2015

Receivable turnover ratio

17.9977195

14.41484919

Creditor turnover ratio

5.214511041

12.28374893

Inventory turnover ratio

20.09726444

22.35680751

Assets turnover ratio

0.922097269

0.891414141

Computation of return on capital invested

Particular

2016

2015

ROCI

-268.0327869

-47.05372617

The financial data of Qantas Airways Limited for the year 2015 and 2016 had been analyzed for identifying the performance of the company based on finance (Foxall 2014).

6.Analysis the data of 2013, 2015 and 2016

By conducting the study of Qantas Airways Limited for the three years (2013, 2015 and 2016), it is noted that Qantas Airways Limited faced many issues in the last two years because of internal and external factors. In addition, it is analyzed that different strategies have been adopted by Qantas Airways Limited for enhancing the level of performance. The study shows that the performance of Qantas Airways Limited is similar to that for year 2013 and 2015, 2016. It is noted that the liquidity position of Qantas Airways Limited is even similar over the years. The company is facing issue in meeting the short-term debt obligations. It is noted that Qantas Airways Limited is still not able to enjoy high profits (Goworek and McGoldrick 2015).

Conclusion

At the end of the case study, it is concluded that Qantas Airways Limited is required to make some changes into the financial as well as non-financial figures for enhancing the level of performance. Qantas Airways Limited operates in aviation industry but faces external and internal issue that reveals that the performance of the company has been lowered. It is suggested to Qantas Airways Limited to make some changes into the operations for enhancing the level of performance.

Reference List

Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.

Foxall, G., 2014. Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.

Goworek, H. and McGoldrick, P., 2015. Retail marketing management: Principles and practice. Pearson Higher Ed.

Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education

Keller, K.L. and Kotler, P., 2016. Marketing management. Pearson.

Meffert, H., 2013. Marketing-Management: Analyse—Strategie—Implementierung. Springer-Verlag.

Pe?aloza, L., Toulouse, N. and Visconti, L.M. eds., 2013. Marketing management: A cultural perspective. Routledge.

Qantas.com. 2017. Flights to Australia, New Zealand and Dubai | Qantas UK. [online] Available at: [Accessed 25 Aug. 2017].

Sekaran, U. and Bougie, R., 2016. Research methods for business: A skill building approach. John Wiley & Sons.

Sheth, J.N. and Sisodia, R.S., 2015. Does marketing need reform?: Fresh perspectives on the future. Routledge.

Trugman, 2016. Understanding business valuation: A practical guide to valuing small to medium sized businesses. John Wiley & Sons

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