g._palepupaul_m._healysue_wrightmichael_bradburyjeff_coultonBusiness Analysis and Valuation: Using Financial Statements – Asia Pacific Edition, 3e
Solutions: Part 4 Further case studies
Case 1 Qantas
Student responses wi
...
g._palepupaul_m._healysue_wrightmichael_bradburyjeff_coultonBusiness Analysis and Valuation: Using Financial Statements – Asia Pacific Edition, 3e
Solutions: Part 4 Further case studies
Case 1 Qantas
Student responses will vary. Accordingly, certain answers provide guiding principles and/or a
sample of potential responses.
Solution.
PART A
1. Analyse the competitive forces facing Qantas, using the ‘five forces’ framework from
the strategy literature. Evaluate Qantas’ prospects for profitability and growth in the
next five years.
Threat of new entrants
• Hard for new entrants due to airline industry being capital intensive (i.e., excessive costs to
enter industry).
• New entrants may bring in more innovation to add new value propositions.
• Qantas needs to continually invest in innovation to tackle this threat. For example, new
lounges and modern technology.
• Aviation regulations may impact new entrants ability to successfully enter the industry.
Threat of substitutes
• Exceptionally low given planes are the fastest way to travel long distances
• Pricing of airlines is comparable to that of alternatives (e.g., coach or train)
• Airlines offer add-ons such as meals and Wi-Fi which appeal to customers when deciding
how to travel
Bargaining power of customers
• High given service offerings differ between low-cost airlines and premium offerings.
• Price cuts and discounts are common in this industry
• Qantas relies on customer loyalty and its brand to improve its competitive positioning.
Bargaining power of suppliers
• Low in the airline industry as there are various suppliers from which to procure raw
materials.
• Suppliers in a dominant market position with a quality product may be able to dictate
prices, which may impact Qantas’ margins.
Competitive rivalry
• Qantas rivals include:
o Domestic: Virgin Australia
o International: Singapore Airlines, Emirates, Etihad, Qatar
• Price wars are common in this industry as consumers seek lower cost alternatives
• Qantas introduced Jetstar as its low-cost carrier to serve the Asian tourist market.
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• Domestically, Qantas relies on its strong brand to maintain its competitive advantage. For
example, it sponsors various Australian sporting teams, positioning itself as the ‘Australian’
airline.
Prospects for profitability and growth
Qantas needs to revise its cost structure to maintain profitability. It should invest in its low-cost
carrier (Jetstar) for future growth as consumers have become more price sensitive following the
COVID pandemic and rising levels of inflation
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