The major material inputs into the airline industry are aircraft manufacturing, the makers of engines as well as the actual shells and interiors of the aircraft, air space and terminal space as well as fuel. As the material inputs are not of commodity nature, that is they can be differentiated, suppliers have great bargaining power. For example, the increase in the price of fuel cannot be dealt with by the airlines. Similarly, as the Boeing run solely on Rolls Roys engines, the companies cannot discriminate their choice of suppliers.In recent years, there has been intense rivalry among the existing competitors, in the Australian airline industry, especially since the entrance of two new domestic carriers. There has been much media coverage of the current level of intense competition and the apparent price discounting in the domestic market. Qantas views itself as “.
.. always being competitive in its pricing and in offering value for money’.
Furthermore…for any new entrant to match us on price or product, they will need to offer much better prices than they have announced so far’ (Qantas, 2000, p.
4) In addition, players in the industry are also regularly introducing new products and services to the market to increase or even maintain their market share, at their competitors’ expense. An example of such tactic was the introduction of the ‘e-ticket’, which was first purchased by Ansett from United Airlines and Air Canada, with Qantas immediately following suit (IBIS report 2000).Due to the large number of barriers to entry into the industry, the high bargaining power of suppliers, the intense rivalry and the growing power of buyers present within the industry, firms contemplating entering the industry, hypothetically, will be discouraged from doing so. However, the low availability of substitutes and currently moderate buyer bargaining power (domestic tourists, business sector and inbound tourism), as well as the deregulation of the industry, are factors that would encourage new entrants into the industry.Although we have seen the entrance of new domestic carriers, such as Virgin and Impulse airlines, into the market, the risk of them doing so is very high.
The generally undesirable industry conditions, in particular the significant number of barriers to entry, and the ‘muscle’ the two main players hold over the industry as well the intensity of rivalry and the enormous power of suppliers, would deter most firms from attempting to enter the market.There are a number of other factors outside the control of individual firms operating in the industry, which influence their performance. With regards to Qantas, whilst the quality of the products and services they provide is important, it is evident that the company’s success is largely attributable to its ability to successfully engage in marketing and promotional campaigns aimed at firmly implanting a favourable/distinct image of the company’s brand in consumers’ minds.The company has been so successful at brand building, that through its range of the ‘Spirit of Australia’ advertising campaign, using some of the world’s spectacular landmarks as backdrops, and featuring more than 200 members of the Australian Girls Choir singing the company’s signature song ‘I still Call Australia Home’, it has almost turned Qantas into a generally accepted term for Australia itself. Internationally, when referring to Australia, Qantas usually the equitable term (Qantas Commercial Operations, 2000). Hence, Qantas’s core competence lies in its branding.
This is supported by applying the four above mentioned characteristics of a core competence to Qantas’ branding activities. The first mentioned characteristic is particularly relevant to Qantas, because the company’s excellent branding ability has been the main mechanism through which it has penetrated new markets. Qantas chairman Margaret Jackson, indicates the importance of branding to the company by stating that although “… Qantas is already a leading brand in Australia and we are now devoting more effort to enhancing our image internationally.Our international marketing focuses on our distinct personality while at the same time recognizing the need for cultural sensitivity”(Qantas Annual Meeting, 2000).
The promotional campaigns used by Qantas, have focused on portraying Qantas as ‘Australian Airline’ or ‘Spirit of Australia’, and have, at large been successful. “At the heart of much of the brand’s success has been a resolutely simple, appealing positioning that has enabled it to spin off abundant promotional ideas… “(Khermouch, 1999, p. 26).
Applying the second characteristic of a core competence, it appears that Qantas’ branding does elicit value to consumers.According to James Strong, the president of the company, “..
. Qantas has a successful history of enhancing brand value by extending new offers to customers” Applying the third and fourth characteristics, success in branding is something that takes many years to develop. And hence, cannot in itself, be easily copied by competitors. When world class branding skills are eventually developed, a company can continue to use it to its advantage well into the future (providing adequate funds are provided to support the necessary marketing/promotional campaigns), and as a result, branding is sustainable.