QANTAS Contemporary Economic Analysis

1. Two most important macroeconomic issues

  • High costs:

Qantas was struggling with high costs of operating that were affecting the pricing strategy. The company was facing stiff completion from the company that was enjoying a low cost of operations where they could offer lower prices for their services. For instance, some companies such as Emirates were enjoying low prices making them competitive due to their competitive pricing strategy.

  • Competition

In the year 2013, Qantas partnered with Emirates to avoid increased competition. Partnering with Emirates made the company able to access more passengers as through the partnership the passengers going Europe could connect through Dubai instead of Asia. This strategy assisted the company in ensuring that it could gain access to a large number of customers in the market.

2. Theoretical concepts

Cost leadership theory

Qantas used cost leadership in the process of cutting down its high costs aiming at realizing profits. The company was operating in the loss for a long duration where the losses could be associated with the high costs of operations. Due to the high costs, Qantas experienced an increase in losses as it was trying to offer low fares in the market to be in a position to compete in the market as foreign carriers were offering low fares. However, under the management of Alan Joyce the company managed to cut down the costs making ii experience increase in profits. The company recorded profits of around $1.1 billion making it able to pay divided for the time in the last seven years. In the process of cutting the costs, the company was forced to reduce the number of the employees as a cost cutting strategy. Besides, the company saved in the fuel costs and bought more planes that were efficient aiming at ensuring that it could achieve cost advantages in the industry (Amit, 290).

The new chief executive of the company come up with the costs cutting strategies that enabled the company to realize increase profits. Cost leadership an important strategy especially when an organization is working in a competitive industry. Considering the competition level of airline industry ability to achieve efficiency in the operations is crucial in managing the prices. Ensuring that an organization is efficient is important in ensuring that it can be in a position to adopt a competitive pricing strategy. Considering the law of demand, low price increase demand while the increase in price do lower the quantity demanded (Reitsperger, 15). As a result, low costs can assist in ensuring low pricing that does help in increasing the demand of products. Organizations that are in a position to manage their costs properly can be able to achieve competitive advantages.

Business partnership theory

A business partnership is considered crucial especially where the organization is operating in competitive business environment. Business does partner to ease service delivery and gain access to a larger pool of resources as combining efforts can assist in achieving the t gals. For instance, the business entering into a partnership can be in a better position to share some costs related to marketing hence assists in achieving economies of scale. In the case of Qantas, partnering with Emirates gave the company a chance of accessing a larger pool of customers due to the elimination of competition. This is based on the fact that Emirates was a direct competitor of Qantas and was enjoying some advantages in the industry that Qantas automatically enjoyed upon entering into a partnership. Therefore, entering into a partnership with Emirates, Joy who was the new executive was aiming at eliminating competition in the market that was posed by Emirates.

Partnering with Emirates made the company able to enjoy a large number of customers and ensuring that it eliminated the intense competition. Emirates was the major competitor of Qantas hence entering into a partnership could mean that the price wars were eliminated. Besides, entering into a partnership was an important strategy of ensuring that the Qantas could gain access to some of the strategies that being used by Emirates airline. Qantas benefited from the good reputation of Emirates in the market as Emirates was known for offering low fares. Besides, through the partnership, the two airlines could be in a position to compete better in the market through combining their efforts to achieve some competitive advantages over the other players in the industry (Mohr, 150).

3. Related policy issues

Policy issues governing partnership

There are regulations that do government business partnership where all the details concerning the partnership agreement need to be documented. This includes business terms aimed at controlling the operations of the business forming the partnership. The terms are important in the process of controlling the conduct of each business where the business is expected to operate as per the agreement. For instance, as it is in the case of Qantas and Emirates, defining the areas of operations can be important ways of ensuring that the two airlines are not in conflict while operating in the airline industry.

Besides, the partnership is controlled by certain policies that are geared towards ensuring that there is fair competition in the market. The business entering into partnership need to ensure that they do not partner with the aim of eliminating the other market players, but they need to form a partnership with the aim of achieving efficiency in the process of offering their services to the market. Besides, the partnership needs not to be geared towards exploiting the customers by charging high prices by forming monopoly where no other company offers similar services hence able to offer high prices.

Policy issue governing cost leadership

The cost leadership strategy in any organization is governed by some policies that are geared towards ensuring that the quality issues of the products are not compromised in the process of eliminating costs. The management of organizations is expected to ensure that the balance the quality of products with the objective of minimizing costs. This is because focusing more on the process of cutting costs can lead to exploitation of the customers by offering products of low quality (Hill, 410). Besides, some organizations can exploit the employees by increasing the workload due to the reduction in the number of employees in the process of reducing the labor costs leading to overworking the employees.

Works cited

Amit, Raphael. «Cost leadership strategy and experience curves.» Strategic Management Journal 7.3 (2006): 281-292.

Hill, Charles WL. «Differentiation versus low cost or differentiation and low cost: A contingency framework.» Academy of Management Review 13.3 (2008): 401-412. Retrieved from: http://www.ccsenet.org/journal/index.php/ass/article/viewFile/36499/20509

Mohr, Jakki, and Robert Spekman. «Characteristics of partnership success: partnership attributes, communication behavior, and conflict resolution techniques.» Strategic management journal 15.2 (2014): 135-152. Retrieved from: https://www.partnership.com/Downloads/PartnerShip_Terms_And_Conditions.pdf

Reitsperger, Wolf D., et al. «Product quality and cost leadership: compatible strategies?.» MIR: Management International Review (2013): 7-21. Retrieved from:
http://arc.hhs.se/download.aspx?MediumId=315

http://www.economist.com/blogs/gulliver/2016/08/bonzer