Abstract
The purpose of this business report is to analyze and evaluate Jetstar’s marketing strategy by using several technical business models. The analysis and evaluation should explain how the business has achieved its phenomenal growth and outline whether the current strategies used are appropriate to help the organization continue with its future strategy. It’s essential to understand the current intentional position of the company before appropriate strategies can be recommended and implemented.
Thus, a professional investigation should reveal the following; the internal environment (strengths and weakness) and the external environment (threats, opportunities, and external forces such as political and economic). Through understanding this breakdown, the current strategic position and management can be explained and understood thoroughly.
Company Profile
Jetstar is an airway company that is based in Australia. It is one of the low-cost companies with its headquarters in Melbourne, Victoria. Jetstar is an auxiliary of Qantas which was created to respond to the threats of competition from other low-cost airways. It operates in the domestic and international market and uses a variety of wide-bodied aircraft. The Jetstar was established in 2003 as a low-cost subsidiary company to meet domestic needs and help Qantas maintain its market share in the local market.
It started operating in the domestic market in 2004 and launched its international operations in December 2005. Jetstar provides reserved seating where customers are allowed to book their seats in advance, a service that was launched in 2006 as the first service of its kind in Australia. It also provides online booking for customers who may not make to their offices due to various reasons.
Jetstar international markets include New Zealand, and Europe among others, and it is in the process of establishing other routes in Rome, Hamilton, Brussels, and Palmerstone North. It is also in the process of extending its low-cost services into the European market. Jetstar has over fifty aircraft that operates in both the domestic and international market. The following table shows the fleet at Jetstar Airways as of 2008.
On the domestic routes, Jetstars offer drinks and food for purchase by the customers, while on all international routes, especially on A330; it offers its services in two classes.
Marketing
Jetstar is among the private airways in Australia that occupies a big market share. It started its operations in 2004 and has been recognized as one of the fastest-growing airlines in the world. It operates both domestic and international markets. Jetstar’s major marketing strategy is Low Cost Carriers (LCC) services, which was launched by its parent company (Quantas). Jetstar provides low-cost services for both domestic and international passengers.
By offering low-cost services, the company is able to attract a bigger market share as compared to the high cost. The bigger the market, the higher the revenue collected, resulting in an increase in its profits. This had led to an increase in its annual profit, especially from 2004 to 2008, when the service was in its initial stages. In 2007, Jetstar won the world Airline rewards for low cost services and this gave it a competitive advantage over its rival firms.
The Low cost service targets the low income earners and middle business men who rely on other means of transport due to the high charges of flight. Initially, these low cost services led to increased business which forced Jetstar to look for other aircrafts to cater for the increased demand for its services. Jetstar’s cost strategy has been differentiated over its rivalry firms’ strategies through:
- technological innovations;
- utilization of its capacity;
- geographical diversification;
- interrelated strategic business units;
- acquisition of other firms;
- introduction of booking services (including online booking).
In 2008, Jetstar was recognized as the official Airline for the Australia league team and its aircrafts were decorated with advertisement to mark the relationship with the national league team.
Management
Management is crucial for the success of every business. This encompasses, human resources, operations, financial, marketing strategies, among other activities. At Jetstar, management stems from the board of directors who are responsible for electing managers to represent all the departments. More emphasise is put on the marketing, and human resources department because they are crucial is determining the growth of the company. The marketing department is headed by several managers located in the respective branches and their duties include market research for the most effective strategy and the implementation of the same after being reviewed by the board members and the management team.
Managing a proficient workforce enables the firm to exceed objectives. Jetstar delegates control & management to subordinates and monitors their progress through appraisals & regular visits. These control systems reflect acceptable HRM. Training & development investment benefits the business as employees drive the firm to future success. Outsourcing HR from developing countries is also a cost saving strategy. Besides the effective HRM of the business, there appears to be a lack of a succession plan.
As at august 2010, Qantas made significant changes in the management of Jetstar. New roles have been introduced for the purpose of facilitating efficient services. The new Chief Executive Officer (CEO) in Australia, David Hall has been assigned the role of supervising its core market in Australia and New Zealand as a way of ensuring success. He has been vested with the responsibility of overseeing the airports, cabin crew, technical programs, and pilots. His appointment is expected to bring many changes in the management of Jetstar. Among these changes is the introduction of Boeing 787 Aircraft for serving the international and domestic market.
Human Resource management
The success of every business depends on its personnel. Jetstar has strong personnel who ensure growth and development of the company through innovation and creativity. The human resources are appointed by the human resource manager appointed by the board of directors. The HR is responsible for the day to day activities and is usually motivated through incentive schemes and trainings. It is composed of talented personnel who go through a period of training before being assigned any responsibility. Selection and recruitment of staff normally take place during the peak season when there is a high demand for its services. Employees’ duties and responsibilities are stipulated by the organization structure and workers work in teams and they are empowered to nurture a culture of innovation.
SWOT analysis (Strengths, weaknesses, Opportunities, and Threats)
Strength
- Effective management– training, motivating & reviewing staff. Also outsourcing;
- Marketing power & growth- strong brand creation through cross-promotion;
- Strong balance sheet- stable liquidity & average debtor/creditor days reduced;
- Tax advantage in different countries- lower corporate taxes;
- Strong capital base;
- Strategic expansion through customer-focused innovations;
- High turnover growth;
- A well developed industry;
- A strong market strategy;
- strategically placed to fight competition;
- A strong brand name and good reputation among customers.
Weaknesses
- low profit margins;
- lack of a well thought future market strategy;
- dependency on the domestic aviation industry;
- disloyalty in mergers;
- high cost structure;
- lack of a succession plan.
Opportunities
- Emerging international markets;
- Rise in leisure activities;
- increased economy development;
- Rise in per capital income;
- Increasing technology advancements;
- increased industrial development;
- an unfulfilled customer need.
Threats
- industry rivalry;
- cut threat competition;
- Entry of new firms;
- Strong government regulations;
- Emergence of substitute products.
Jetstar parent company is a strong company that has withstood the test of time. It has a strong brand name that is preferred by many customers for both domestic and international air travel. Having introduced a low cost carrier service (LCC) (Jetstar) has increased its market share and is able to fight the cut throat competition. However, the future of this marketing strategy is not certain and the company has to look for other services to compliment the LCC. Such services include diversifying its services to other domestic areas that have no airlines, expansion into the international market, and development of the human resources.
PEST (Political, Economic, Socio-cultural, and Technological) analysis
Political factors
Political factors put a restriction on the development of the industry by putting tough taxes and regulation requirements. Australia has been experiencing low tariffs barriers which have led to an expansion in the international trade thereby resulting in increased demand for the airline service. These factors include:
- government regulation of the airline services;
- taxation policies;
- regulation on excess capacity.
Economic
Australia’s economic growth potential is facilitated by its demographic advantage and could therefore open up opportunities for industry development. Although the Australian economy has been doing well and the future is promising, Jetstar has to overcome some obstacles before it realizes its full potential. First there is the government requirement which it has to adhere to before being allowed to expand its services, increased capital costs, requirement of skilled labour force, and rivalry from other firms. These factors can be summarised as:
- Factors affecting GDP – employment, inflation, government spending;
- More disposable income –profitable countries amplify service demand;
- High investment from foreign shareholders;
- Competition on LCC;
- Seasonality issues;
- developed Australian economy.
Socio-cultural
The demand for Jetstar’s services also depends on the social and cultural values held by different categories of people and their way of life. These include:
- lifestyle trends and consumer preferences;
- demographic changes;
- leisure activities;
- increased spending.
Technological
The company’s technological developments have helped the environment through the efficient use of energy. This has also had an impact on the sociological & cultural differences since consumers want firms to be more socially responsible.
- Innovation capacity;
- Changes in aircraft technology;
- improved infrastructure.
The external forces described above can help in the determination of the Jetstar market growth (or decline) and the implication of its strategic business unit. If an economic recession occurs, the economic forces would have a considerable bearing on the future market strategies through ripple effects on the political and socio-cultural factors. To add to these risks, the company is not guaranteed of a ready market in these rural areas making it a risky undertaking.
Bibliography
Asian Traveltips.com. Qantas makes changes to Jetstar management. Web.
O’Sullivan, M. “Qantas to Receive First Boeing 787 in 2012”, Sydney. 2010. Qantas. Web.
Rochfort, S. “Qantas revs up Jetstar expansion“. The Sydney Morning Herald, 2009. Web.