Monday, March 16, 2020
Qantas Airways Limited Analysis Executive Summary Market analysis is a vital concept for any business organisations to be able to assess the market needs and based on what is at hand, respond to the needs. Before making a market analysis, it is good to look at a companyÃ¢â¬â¢s background in order to ascertain how current operations were motivated by past records. Three main tools have been used to analyse the airline industry using the case of Qantas.Advertising We will write a custom essay sample on Qantas Airways Limited Analysis specifically for you for only $16.05 $11/page Learn More These are Strength, Weakness, Opportunities, and Threats, (SWOT), PorterÃ¢â¬â¢s Five Forces, and Political, Economic, Socio-cultural, Technological, Legal, and Environmental (PESTLE) factors. At the end of the discussion, it can be noted that Qantas remains a major player in the airline industry at local and international levels amid the stiff competition from other carriers. Introduction Qantas Airway s Ltd. is an Australian firm that operates in the airline industry at local and international capacities. The ideal to start the organisation was hatched by two individuals back in 1922. Fergus McMaster was convinced to look for interested investors after McGinness and Fysh sold the idea to him. The history of Australian civil aviation is mainly about the history of Qantas that started from a humble beginning to what defines the future of Australian airspace. The corporation began with a two-passenger plane to the recent Airbus A380 series with carriage capacity of 450 passengers to far destinations. The Queensland and Northern Territory Aerial Services Ltd, (QANTAS) hard to pass through hurdles to develop its market share with a pull of dedicated staff members backed by very loyal customers. The key pillars of Qantas development are the stakeholders who created it, the workforce, and the customers. The vertical rise in the companyÃ¢â¬â¢s growth has made Qantas one of the worldÃ¢â ¬â¢s best long distance international brands and one of the best service providers in Australia. The outstanding growth of Qantas defines the course of international aviation industry (Qantas, 2012a). In order to critically analyse a firmÃ¢â¬â¢s business operations, there are tools that are employed to ascertain the strength and position of a firm. SWOT, PESTLE, and use of PorterÃ¢â¬â¢s Five Forces are recommended tools that can achieve this feat. The tools involve evaluation of a firmÃ¢â¬â¢s strength by looking at a number of factors that overly defines a successful business organisation.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More By taking the case study of Qantas Airways Ltd, this paper vividly explores market parameters that make Qantas outstanding among other world airline brands. From review of the companyÃ¢â¬â¢s business activities, one concludes whether the firm stands strong and whether sustainability of business activities will be achieved in both short and long terms. Quantas Airways Background Description of the Organization Fergus McMaster was convinced to look for interested investors after McGinness and Fysh gave him a detailed plan for setting up an air service. Fysh and McGinness with the help of flight sergeant Arthur Baird took a trip to Mascot Aerodrome in Sydney to inquire for delivery of 2 Avro planes. An agreement was reached and the Western Queensland Auto Aero Service Ltd was registered. A rebranding took place later to form the abbreviation, (Qantas, 2012b). The formal establishment of Qantas was in 1920 following registration with chairmanship of Fergus McMaster. There were then a series of air test and joy rides by the founders who experienced technical and physical difficulties while airborne. The machines were remodelled to suit the needs at that time and the aircrafts could make 54,000km carrying a total of 871 p assengers by the biplanes without damage (Qantas, 2012a). As time passed by, more planes were required in airmail services between Cloncury and Charleville in 1922. Two years later, the first Australian Prime Minister flies Qantas on an official government duty. The marched achievement seemed to bring new hope for the company and in 1926, Qantas started building its own machines at the Longreach base. The following chronology of events summarises the succeeding history of Qantas: 1927: The firm recruits the first traineeAdvertising We will write a custom essay sample on Qantas Airways Limited Analysis specifically for you for only $16.05 $11/page Learn More 1928: The launch of the Flying Doctors Service with Qantas offering the air travel services. 1929: Outback network arrives in Brisbane 1931: Trial airmail delivery is made from Brisbane to Darwin 1934: The firm changes its name to Qantas Empire Airways Ltd. 1935: The Qantas DH86 flies overseas, Darwin to Singapore. The flight is to deliver airmail to the UK in liaison with Imperial Airways that was later named BOAC. 1938: The airline to the United Kingdom receives Short C Class airplanes to make trips to Singapore. Imperial Airline obtains the responsibility of the route. 1939-1945: A fully set base takes operation of mechanical works at mascot base known today as Sydney Airport. Qantas gets involved in the WWII as its planes are used to transfer the foot soldiers from the threat of advancing Japanese fighters to New Guinea.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More They airplanes also supply foodstuff to soldiers at the battle fields. Qantas also makes history for being the first to make more than 30-hours flight over Perch and Sri Lanka airs to make important links with Allied Forces. The kangaroo logo becomes symbol of Qantas in 1944. 1946: air transport in Australia-UK route recommence and this time the British Airways in a partnership programme. DC3 service is initiated to New Guinea as the flight network reaches new Indian and Pacific Islands destinations. In the same year, Australian regime launches new airline known as Trans-Australia Airlines, TAA in the domestic market with Lester Brain (formerly of Qantas) as the general manager 1947: Government of Australia buys all shares in Qantas, Constellation aircraft sets in, and the first flight is made to Japan 1949: TAA replaces Qantas in the Flying Doctors Service and the Queensland and Northern Territory routes 1953: Along the Kangaroo route to UK, a tourist economy class is introduced 19 54: The Super Constellations flies to San Francisco, USA and Vancouver, Canada for the first time 1956: For the Olympic Games in Melbourne, Qantas carries the Olympic flame from Athens to Melbourne 1958: The QantasÃ¢â¬â¢s Super Constellations make a round the world flight 1959: Qantas introduces Boeing 707 series as the first non-American airline. This gain reduces flight times by half for trans-Pacific flights 1960: TAA in charge of operations in the Papua New Guinea from Qantas 1964: TAA launches its first jet by purchasing Boeing 727 series; high performing machines that stimulate the Australian airline industry with their mechanical superiority, speed, and comfort. This results to massive growth of the industry. 1966: The retirement of Qantas Co-founder and Chairperson, Sir Hudson Fysh 1967: Qantas rebrands to Qantas Airways Ltd. TAA launches DC9 that proves to be mechanically sound for going 495 different revenue flights without delay on mechanical breakdown 1971: The introdu ction of the Jumbo jet; Boeing 747 1974: Qantas evacuates 673 survivors on one flight from the devastation of Cyclone Tracy from Darwin to set new world record 1979: Phasing out of the 707 series and venturing into an all-747 airline. In the same year, the firm rolls out the first Business Class travel experience to customers. 1985: The launch of Boeing 767s. James Strong goes to TAA in order to revitalise the TAA when the government was advancing to stronger deregulation and competition 1986: TAA becomes Australian Airline 1988: Australian airline is incorporated to a public company 1989: Australian Airline in trouble due to pilotÃ¢â¬â¢s strike followed by resignation. The government agrees to a deal to make a proposal that would bring together the Australian Airline and Qantas. 1989: Qantas Airways Ltd buys the Boeing 747-400 that the first nonstop flight of 18,001km in accompany jet. The first experience take place in the London-Sydney route. 1990: One John Schaap quits the fir m as an executive member to join Australian Airways as its general manager. The departure took only ten months before deregulation of local airline industry in Australia. 1992: Government agrees to sell the stakes of Australian Airline to Qantas valued at $400 million. 1993: The government regime offloads 25% stake to make British Airways have ownership of Qantas Airline in a privatisation strategy. Australian Airline merges with Qantas to form Qantas Airways Ltd. with James Strong as the CEO 1994: A new cabin design launches to update service provision 1995: Qantas offloads the remaining 75% shares to the public in the ASX. Qantas becomes one of the world leading service providers in the aviation industry with an operation capability of airlifting 14 million passengers per annum using over 130 aircrafts 1997: Qantas marks the year of the golden jubilee along the Kangaroo network from Australia to the United Kingdom and Japan 2002: The launch of subsidiary airline to operate at inte rnational level. The name of the firm is Australian Airlines 2004: Introduction of a new and cheap carrier in the domestic flight known as Jetstar 2006: Australian Airlines stops its services 2008: The A380 series are added to Qantas fleet while second biggest order to be done by any airline corporation is in the pipeline. A380 aircraft is inaugurated to fly from Melbourne to Los Angeles, the technology is of high standards as the Required Navigation Performance finds usage in managing flight. This makes the firm to reduce its carbon emission by significant figures. Installation of Qantas General Electric CF6-80C2 engine to enhance the performance of the B747-400 aircrafts 2010: new check-in system 2012: The arrival of B787 aircraft considered as next generation fleet 2020: Centenary of Qantas, Qantas (2012a). Location of Organization The initial location of the Qantas operations was in Longreach, Queensland to Brisbane In 1930, the companyÃ¢â¬â¢s headquarter was moved from Longr each, Queensland to Brisbane In 1938, the companyÃ¢â¬â¢s headquarters was moved from Brisbane to Sydney as operation base. In 1957, a new corporate headquarter was set up along Hunter Street, Sydney Stakeholders of the Organization From the chronology of events that have shaped Qantas Group, the company was a private entity when it was founded back in 1922. The growth track led to instant recognition and at some point the government of Australia took over the firm. Afterwards the government privatised the firm. In a bid to make the firm have an international appeal, British Airways was took a 25% stake at Qantas after the government agreed terms with British Airways in 1993. In 1995, Qantas offloaded the remaining 75% shares to the public in the ASX (Qantas (2012a). Today Qantas is a public owned company and it is listed in the ASX as QAN. This gives opportunity to anyone who would wish to own the firm a chance by simply buying the stock. Any individual who owns the QAN is a Qant as owner; hence, stakeholder . The management team spearheaded by the Nominations Committee is free to nominate a new member to the Board of Directors and every stakeholder has the right to approve such nominations during the companyÃ¢â¬â¢s AGM. Just like other listed companies, only a stakeholder with 51% ownership of the firm can have a direct say on how the firm should run with regard to management and who should be in the Board. Organizational Structure The QantasÃ¢â¬â¢ Board is dominated by independent Non-executive Directors who work hand in hand with Executive Directors to carry out Qantas capital intensive programmes. The Board has responsibility of upholding accountability and freedom in a bid to maximise the profit for goodwill of all stakeholders. The Board of Directors Source: Qantas (2012b) The Executive Arm of Qantas Other than the Board of Directors, Qantas also has the Executive Team that comprises of the following personalities: Alan Joyce; The firmÃ¢â¬â¢s CEO Gareth Evans; CFO Lesley Grant; CEO of Qantas Loyalty Simon Hickey; CEO of Qantas International Jayne Hrdlicka; the CEO of Jetstar Group Brett Johnson; the firmÃ¢â¬â¢s General Counsel Jon Scriven; Group Executive People Lyell Strambi; CEO of Qantas Domestic Board Committees Audit Committee Nominations Committee Remuneration Committee Safety, Health, Environment and Security Committee Board Committee Charters The Board Charter was adopted by the Board in September 1, 2003. The Committees have the duty of giving comprehensive analysis of all issues affecting the company to the Board for approval. In addition, the Board approved charters for its Committees as: Audit Committee Charter Nominations Committee Charter Remuneration Committee Charter Safety, Health, Environment and Security Charter, Qantas (2012b). Service Analysis The main QantasÃ¢â¬â¢ service line is passenger transportation and air freight services. These are the services that have seen the company grow in th e last decades. The fleet size has increased, the planes have been modernised, and expectations are still high is the fleet renewal plans. This means that customers will continue to experience superior services at least in the near future. Other than the main services, Qantas owns a number of subsidiary firms as it takes service experiences a notch higher. QantasLink This subsidiary, firm has more than 2000 flights per week in 56 destinations spread in metropolis, regions, and across borders (Papua New Guinea). Q Catering This is the firmÃ¢â¬â¢s group that offers catering services to the travellers and is fully owned by Qantas. It has two main branches: the Q Catering spread across QantasÃ¢â¬â¢ 6 ports in Australia and Snap Fresh that is a modern facility in Queensland specialised in meal production. The meals are supplied to non-aviation destinations. Qantas Freight This is QantasÃ¢â¬â¢ subsidiary that manages all the freight issues in the international level for Jetstar, Jes tar Asia, and Qantas. In addition, it handles freight in domestic market that is marketed by Australian air Express. Qantas Freight Enterprise runs specialised logistics businesses across the borders done by: Express Freighters Australia (EFA), Jets Transport Express, and Qantas Courier employing 800 workers. Express Ground Handling This is QantasÃ¢â¬â¢ subsidiary is fully owned by Qantas Airways and works in liaison with Qantas Airports and Qantas Catering Group. It provides ground handling facilities regional airlines and Jetstar. Qantas Holidays This is QantasÃ¢â¬â¢ subsidiary forming union with the Jetset Travelworld Group to offer travel wholesale services. The services cover all the Qantas destinations outreach not only by Qantas itself but also in alliance with other airlines. There have been mergers of Qantas Holidays with other firms to offer a range of travel agency at retail prices. Qantas Jetstar This is a low cost airline working in Singapore and Australia since 200 4. Whereas the Jetstar Australia is wholly owned by Qantas, Ã¢â¬Å"Jetstar Asia is a Singapore-based partnership between Qantas (49%) and Singapore company Westbrook Investments (51%) with the hub based in SingaporeÃ¢â¬ (Qantas 2012c). Qantas Defence Services Qantas Defence Services offers flight services to the defence force of Australia in at both local and international levels. This began in the WWII and since then, the government of Australia is in liaison with Qantas to offer air flights. There are warplanes in the Qantas Defence Service docket to suit these needs. Technology The DreamlinerÃ¢â¬â¢s arrival Qantas has, since its inception tried to remain one of the best performing airlines not only in Australia but also in the international airline industry. This has been made possible given the firmÃ¢â¬â¢s drive to purchase high performing machines in the airline industry. Backed by sound financial background, Qantas embraces any technology that can add value to the passe nger transportation and freight services. Technology must improve if the world is to attain global climatic challenges resulting from the emission of carbon into the atmosphere. In the airline industry, one way of using technology to cut on carbon emission is the adoption of efficient cars. Qantas has made the Boeing 787 as the foundation of its fleet renewal programme at both the domestic and international services. The firm has placed an order of 50 Boeing 787 cars and the Dreamliner would be delivered around June 2013. The Boeing 787 series are a high technology machines that will make Qantas to be able to fly to far destinations without flight connection. This will boost point-point travels across the globe. The aircraftÃ¢â¬â¢s body is made if composite and light materials and due to light weight, the aircraft travels faster than ordinary aircraft of similar size. It is fuel efficient and able to reach further destinations on full load and is easy and cheap to maintain. The in vestment in Boeing 787 series is in line with Qantas belief of providing air transport safely, high quality services, and innovative business ideas that have been the companyÃ¢â¬â¢s ethos since 1922 (Qantas, 2012k). To maintain the high level of technology of the Boeing 787 series, Qantas has chosen GE GEnx Engines to maintain the fleet. GEnx meets the requirements to maintain the cars at low cost while paying keen attention to environmental safety standards. Boeing 787 has the ability to increase fuel efficiency by 20%, make a 20% carbon emission cut, 40% nitrous oxide emission cut, and reduce noise footprint by 50% at airports. This table below shows the technical specifications of Boeing 787: B787-8 B787-9 Seating 210 250* 250 Ã¢â¬â 290* Configuration Twin Aisle Twin Aisle Length 57 metres (186 ft) 63 metres (206 ft) Height 17 metres (56 ft) 17 metres (56 ft) External Fuselage width 574 centimetres (226 inches) 574 centimetres (226 inches) Wind Span 60 metres (197 ft) 60 metres (197 ft) Cruise Speed Mach 0.85 Mach 0.85 Maximum Take-off Weight 228 tonnes 247 tonnes Source: Qantas, (2012d) WorldÃ¢â¬â¢s first technology entertainment The QantasÃ¢â¬â¢ Q Streaming pilot and its passenger were among the first in the world to experience WIFI entertainment technology. In addition, passengers using the technology entertainment car within the airlines of Australia are first to practically try the In-Flight Entertainment technique, (IFE). Travellers will also be allowed to use WIFI enabled gadgets like laptops. As of February this year, Qantas passengers travelling can now download Q Streaming app available from the iTunes database while passengers who own laptops can easily download the MS Silverlight before plane takes off. The new technology entertainments are making customers to really appreciate services at Qantas. Great choice is offered for to the customers and their feedback so far has been amazing. As a result, the company will continue to develop its Q Streaming utilities by taking advantage of the new emerging edge wireless technology. According to Qantas (2012e) Ã¢â¬Å"Qantas will continue to enable customers access the Q Streaming content via their own WIFI enabled devices on the dedicated B767-300 whilst finalising plans to extend its application to wider fleet.Ã¢â¬ Internal Economic Environment International corporations like Qantas should undertake SWOT analysis to establish its internal position as an organisation against the external environment. This is critical as it makes it possible to adjust to environment needs of business; for instance, opportunity created through open borders that make it easy to access overseas market, (Hitt, Ireland, Hoskisson 2008). It allows managers to review the internal and external business environment with the aim of setting up obligatory roles of a company geared towards companyÃ¢â¬â¢s mission and vision statements. SWOT analysis helps to restore the glory of an underperforming business to new economic heights. A firmÃ¢â¬â¢s strength is fundamental in maintaining competitiveness, which consumers value most. Competitiveness makes products imitation by other industrial players difficult. Belk and Sherry (2007) note that value is creation is motivated by the satisfying the needs of both producers and consumers according to co-production assessment. Leveraging in short refers to the harmonisation of internal strength against external opportunities. Planning in management should expect operation constraints when internal weaknesses prevail as it is likely to limit a companyÃ¢â¬â¢s competitive advantages and opportunities. On the other hand, internal weaknesses are a threat to organizational strengths as they make a firm susceptible to the external economic environment. Strengths A business organisation can have a number of possible strengths to boost performance these may include: a pull of skilled manpower, sound book values or finan cial health, brand name like Qantas that is popular across the globe and adjustment in equipment purchase or installation, inadequate competition, and own premises among. A pull of a skilled manpower helps in the cutting training cost; hence, reduced annual overheads. A good financial position means that an organisation can service its financial commitment and access more funds like loans. Own premises reduces the amount of recurrent costs. All these strengths can lead to cost reduction that may be needed to adjust to a short term market need; for instance, sudden rise in jet fuel prices that will automatically affect normal running of the business. Strength therefore can be used to sustain competitiveness. Product diversity The core business line of Qantas Airline Ltd is passenger transport and air freight. To this effect, the firm has delivered top quality even in the most trying economic times. Product diversity is equally important to boost critical operations when the main busi ness is faced with fiscal challenges or any other challenges. As such, Qantas runs a series of subsidiaries listed below: QantasLink Q Catering Qantas Freight Express Ground Handling Qantas Holidays JetStar Qantas Defence Services The Qantas Freight operates the freight services with its own fleet that of cars of the Boeing 747-400F and B767-300F. The subsidiary also carries ground handling services in 7 locations in Australia and abroad for its own airlines and other carriers. The Qantas Defence Service supports the Australian and this began in the WWII era. The subsidiary offers services to the defence forces in Australia and due to the superiority of Qantas the expected level of services needed can be met by the firmÃ¢â¬â¢s strength (Qantas 2012c). By operating subsidiary firms Qantas is in a position to strengthen its asset and revenue base to meet its fleet expansion and renewal programmes. In addition, this strategy is helpful in reducing the dependence level of Qantas pas sengersÃ¢â¬â¢ services that can be affected by political tensions when diplomatic hitches or sanctions occur. The ground handling services that Qantas Freight offers to even other carriers in far destination like Los Angeles helps the firm in building inter-organisational relations and diplomatic relationship with Australia and America and others. Number of fleet and types of fleet The airline since its inception in 1922 has seemed tremendous growth in the domestic and international level. To boost the upward trend, Qantas has been in the forefront to set a number of world records in the airline industry due to its preference for high performance machines. Qantas is the largest airline operator in Australia and this is achieved by fleet development to carry passengers to various destinations across the world. In the next decade, Qantas has a short term plan of capital investment in the tune of US$23 billion to buy more and high performing aircrafts of the next generation. The flee t capital investment would see the firm buy the more of the Airbus A380s and the most talked about Airbus A320 neo and Boeing 787 Dreamliner (Qantas, 2012f). The significant point about fleet renewal at Qantas is to facilitate efficient use of fuel in the long run as fuel is a global problem when supply dwindles. Renewal replaces older and more energy intensive machines with low fuel consuming ones. The current fleet of aircrafts at Qantas is AustraliaÃ¢â¬â¢s biggest in domestic aviation industry and one of the worldÃ¢â¬â¢s best in international airlines. Qantas won the World Airline Awards for the Best Premium Economy Class. The Trans-Tasman line has a new B737-800 series, superior services of new 747 series that delivers the best Business Class worldwide, among other superior services offered by Qantas. The much talked about Dreamliner is expected to be delivered to Qantas in 2013 and other brand new 50 B787-900 series to arrive by 2016 (Qantas, 2012f). This kind of fleet supe riority in the domestic and global airline industries places Qantas in a strategic position to continue dominating the industry even in the years to come. The companyÃ¢â¬â¢s prospectus runs for the next 4 years in terms of new airline arrivals only. These kinds of realignments and strategies will ensure that the Qantas remains a strong brand. Strong corporate governance structure Corporate governance may be a great strength if properly structured in an organization in order to improve accountability in running activities of the firm. Corporate governance builds formidable relationship between shareholders and business managers. Turner, 2009 observes thatÃ¢â¬â¢ corporate governance Ã¢â¬Å"is used to describe a range of issues relating to the ways in which companies may be directed and controlledÃ¢â¬ (p. 5). A broader definition of good governance takes cognizance of the social and business environment, to enhance social functions of a firm in the society. StakeholdersÃ¢â¬â¢ roles are critical in the maintenance of competitiveness and long term sustainability of an organisationÃ¢â¬â¢s activities (Calder, 2008). Corporate governance should outline operations with respect to policy structure, its implementation, and other amicable strategies to withhold stakeholdersÃ¢â¬â¢ preferences. Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure for its full functionality. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholdersÃ¢â¬â¢ value. The Board follows the provisions of Australian Securities Exchange Corporate Governance CouncilÃ¢â¬â¢s principles. Qantas publicly discloses all their policies relating the corporate governance, which builds stakeholdersÃ¢â¬â¢ trust. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issu es that affect the structure. To help in this regard, the Board works on corporate governance structure directed by the following sub-sections: The Qantas Constitution Corporate Governance Statement QantasÃ¢â¬â¢ Executive Remuneration Philosophy The Qantas Board Board Committee members Board Committee Charters Qantas Group Business Practices Document Qantas Diversity Statement (Qantas, 2012b). The elaborate nature of Qantas corporate governance and its transparency conforms to all the requirements of corporate governance outlined above. Therefore, the firmÃ¢â¬â¢s shareholders and all other stakeholders see accountability of the highest level. They in turn trust the companyÃ¢â¬â¢s ideals, which is an endorsement to its operations for the sustainability of Qantas. Weaknesses It is important to recognise a companyÃ¢â¬â¢s weaknesses in order to minimise them in future. Weaknesses can be; rented premises, unskilled or semi-skilled workforce, heavy debts, stock imbalance, and un productive or inefficient machines. Even though Qantas owns a number of subsidiaries, the subsidiary firms depend on mainstream Qantas services (passenger transportation) and freight. This means that if the mainstream services are affected, there will be a ripple effect that will trickle down to the subsidiary firms. Therefore the firms should invest in different lines and industries. According to Reuters (2012) Qantas still faces the challenge of fuel costs and the immediate response at times of high fuel costs is to hike fares. This is a weakness because it can lead to lose of customers. External Economic Environment Threats Existence of strikes Industrial strike poses a great threat to the company performance. During strikes the airline operations are grounded and that leads to reduction of revenue and subsequently gaining by the companyÃ¢â¬â¢s rivals such as Virgin Australia. For instance, Qantas first quarter profit of the year 2012 reduced by 52% (CAPA Centre for Aviation, 2 012). The main contributing factor to the reduction of the mentioned profit margin is industrial strikes. The company estimate of the revenue loss as result of strike is AUD 95 million. Competition from other airways companies The existence of the competition from other airline also is a great threat to Qantas airways market share. Virgin Australia offers stiff competition to destinations which were earlier seen as Qantas airways natural markets. The completion has made Qantas airways to cut off some of the international routes so as concentrate to the domestic market. Global economic crises The effects of global economic crisis in 2008 challenged many global business organizations. The aviation industry was also hard hit because the number of tours reduced as travelling became a lesser priority. Currently, the Euro zone crisis continues to affect member countries in Europe. The global economic crises are a threat to the airline and frantic efforts must be made to minimize their eff ects. The end result of global economic crisis is that it increases operation cost, reduces business opportunities which in turn leads to loss of revenue to a company. Fuel prices The stability of fuel prices in the global market directly affects the operations of airlines. The stability depends on a number of issues; one being political standoff between one or more countries. To stabilize the fuel prices, Qantas ahs a well developed hedging strategy that intends to cushion the effect of unstable fuel prices. Under the Capital Management and Treasury, Qantas reserves cash revenue of $3.3 billion to facilitate debt problems. Fuel costs, operating foreign exchange, and aircraft capital expenditure are all hedged to respond the incoming challenges. Of the three hedged funds, fuels cost takes 86% with an effective hedge price of US$116.05/barrel. According to Qantas (2012g), Ã¢â¬Å"Hedging approach mitigates risk whilst maintaining upside potential,Ã¢â¬ (p. 13). Opportunities Product diversity Needs extension to non-airline services The Oneworld Alliance Oneworld Alliance offers great opportunity for Qantas to extend its services to further destinations. Through the alliance, it is possible to integrate critical airline operations with the QantasÃ¢â¬â¢ operations. Porters Five Forces PorterÃ¢â¬â¢s Five Forces model was initiated by the renowned economic and business strategist Michael E. Porter. Porter identified five pillars that mainly influence organisation and planning of businesses. This model is relevant in modern day given the phase of internet use in business processes that has led to globalization. The five forces are illustrated below: Source: Porter, (1985) Bargaining power of Buyers Customers with substantial bargaining are likely to have a massive take on what should inform a business strategy. The advances in technology and the use of internet ahs significantly increased such of information and for customers. As a result, customers can make f are comparison for the various airlines before booking. The information is available online; for instance, Qantas has its own page for online booking. Choice is made depending on the desired pack and price for a flight. High bargaining power of customers increases rivalry in the airline industry. Qantas has specialised in the delivery of quality economy and business classes that serve the interest of various categories of customers. In fact, Qantas has won awards in the provision of superb services. As mentioned earlier, Qantas won the World Airline Awards for the Best Premium Economy Class. Bargaining power of Suppliers The number of suppliers who are able to deliver a companyÃ¢â¬â¢s fleets or any other equipment needed affect suppliersÃ¢â¬â¢ bargaining power. In case of supply dominance by one or few entities, the bargaining power of the supplier(s) will be increased as increase in demand for equipment increases. On the other hand, if there are many suppliers are in an industr y, their bargaining power will be diminished leading to low costs of machinery and other equipment. In the fleet development industry, there are limited manufacturers that can deliver state of the art aircrafts to meet Qantas market needs. For instance, Boeing 787 Dreamliner is s superior kind of aircraft that not every manufacturer has the ability to make in the short run. To this effect, the manufacturer enjoys the bargaining power and Qantas has to give in to any demands given by Boeing. Threat of New Entrants New entrants are firms that are not currently in market completion in a given industry; but they have the ability to do so if they decide. In international airline industry, it is absolutely unavoidable to eliminate the threat of a new entrant and alleviate any threat of their market share. Many corporations invest in Research and Development, (RD) to improve services. However, threat of a new market entrant relies on a number of factors. First, economies of scale enjoyed b y a leading company may act as a barrier to a new entrant that is yet to start service delivery in a given market. According to Hill and Jones, (2009), Ã¢â¬Å"Economies of scale arise when unit costs fall as a firm expands its output. Sources of economies of scale include, cost of reductions gained through mass-producing a standardized output and discounts on purchase of raw materials in bulk.Ã¢â¬ Another barrier to entry is absolute cost advantages. When initial resource investment is high for an existing company compared to a potential entrant, there would be very hard scenario for a new entrant to get into market. Government policies may also favour market dominance for some companies; for example, if incentives are given to new entrants, barrier to entry would be significantly reduced for a business organisation. The forth factor that influences this force paradigm is the cost of consumer switching from one service or product to another. If the cost of switching is relatively low, a new entrant captures some part of the market share whereas if the costs are high, dominant firm would are the beneficiaries. Consumer loyalty on a given brand can be a hurdle for a new firm to enter market. Threats of substitutes If market situation allows for substitutability of goods and services from other competitor, then the management needs to find alternative measures to limit the threat. This can be done through finding new markets, adopting competitive fares and low cost product, among other measures that will make the company maintain its market share. If the degree of substitutability of goods and services is low, threat of market share will be low. Qantas prides itself as a trend setter with the new fleet of cars expected in the future. The firm has the financial ground to support all the ambitious plans in the offing. In May 2012, Qantas withdrew services in the Auckland-Los Angeles and Singapore-Mumbai routes in a aircraft renewal plan. The plan was to set free 4 of the A330 cars that were in turn taken to the Sydney-Bangkok route. The A330s were to replace the 2 Boeing 747-400 series. This was a reduction in international flight in favour of domestic trunk network. According the CEO of Qantas the strategy is to ensure that Qantas maintains a minimum of 65% of the domestic market (CAPA Centre for Aviation, 2012). The plan meant that the trans-continental market was limited in service. As such, Virgin Australia saw an opportunity and planned for a three to four year strategy to roll into the market with A330. Virgin Australia followed the launch into the route with yet another target of the Sydney-Perth route with A330s and A330 flights from Melbourne-Perth twice in a day. These market entries by Virgin Australia offers substitute services to customers in the aforementioned routes, which is a threat to Qantas. Rivalry among competitors All the other forces lead to increased rivalry among firms in a given industry. The airline industry has a number of established airline operators that and new entrants who create stiff competition and rivalry. Depending on the type of brand that an organisation creates to the consumers, popularity will come from product pricing, design, and dedicated funds for advertising. There is a relationship between price of a commodity and costs involved in production and when prices are low and costs are high, the profit margins are decreased. On the other hand, when competition is low profit margins shoot up. Cost is lowered, prices rise, and profit increases. In a nutshell, Hill and Jones (2009) point out at four factors that affect level of rivalry, Ã¢â¬Å"The intensity of rivalry among established companies within an industry is largely a function of four factors: industry competitive structure; demand conditions; cost conditions; the height of exit barriers in the industry.Ã¢â¬ Industry analysts carry out research to determine the number of firms in a given industry. Industrial struct ures vary and each segment ought to determine the rivalry levels at its own capacity. For instance, in a progressive industry would behave in a particular manner. According to McGahan, (2004), Ã¢â¬Å"Under progressive change, the industryÃ¢â¬â¢s stability arises from the links between activities rather than from any single proprietary activity.Ã¢â¬ The demands of a given industry also influence the intensity of rivalry and for an increase in demand for services and products there will be reduced rivalry between firms. Alternatively, when there is low demand the rivalry between firms increase and the profit margins reduce. This is due to the cost factor. Reduced demand implies that firms must review prices to have competitive fares. While this happens, there are costs that must be met, for instance, recurrent costs must be taken care of despite the gains made in the sales department. Qantas has responded to alleviate insignificant rivalry within the airline industry by forming t he Oneworld Alliance. The alliance brings together top 12 most successful airlines at the international level to coordinate the running of more than 700 destinations in over 130 countries. The other airlines in the alliance are: Air Berlin, American Airline, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LAN, Royal Jordian, and S7 Airlines. The intent of the alliance is to bring on board airline firms and make them share the resources they have to boost customer experience; for instance, the 500 airport departure lounges that the alliance members can access across the world (Qantas, 2012h). Pestle Analysis Political The Qantas Group enjoys cordial relationship with the government of Australia since its assistance in the government engagement in the WWII. The firm assisted in airlifting soldiers from the threat of advancing Japanese forces while at the same time dropping foodstuff in tree-tops. Since then, the Qantas firm continues to serve the defence force by for ming the subsidiary, Qantas Defence Service that airlifts soldiers to their destinations with defence jets. Fleet development in the Qantas Defence Services is convincing and hopefully, the relationship with the government will continue to build in the future. In addition, Qantas is the biggest airline firm in Australia in both domestic and international flights. As such, it is a source of revenue for the government through taxation as a fully tax complaint firm. The government must therefore build policies that favour the firms for the good relationship to continue. Political engagements between government and Qantas employees are guided by policies. It promotes collaborative relationship with the Australian regime and complies with all legislations that promote corporate ethical standards. For instance, Qantas does not allow its employees to make political donations in money value or in-kind to any political officer, political parties or officials. When any worker attends a politi cal party meeting, then the firm states that such activities should be seen as personal and not sponsored. Economic Qantas group economic performance between 2010 and 2011 are as indicated below: Qantas Group Segment Performance Summary: 2010-2011 Source: CAPA Centre for Aviation, (2012) Economic indicators of Qantas financial position are mainly positive. For instance, there has been a steady growth of ancillary revenue since 2010 for Jetstar. In addition, the unit cost performance show that Qantas has succeed in reducing the cost as from 2010 to 2012 going by the first quarter results. These two scenarios are shown in the charts below: Jetstar Ancillary Revenue and Unit Cost Performance: 1H2011-1H2012 Source: Qantas, (2012g) Qantas had to retrench 500 engineers at Victoria base in response to economic needs of the firm. After the announcement of the job cuts, it again announced that it would separate its international operations from domestic ones. Moreover, each business is to have its own CEO and report its own financial results. This move can be interpreted that Qantas wants to streamline individual sectors by reducing losses and increasing profits where necessary. According to Bamber (2011), Ã¢â¬Å"QantasÃ¢â¬â¢ domestic airline made an underlying profit before tax of $552 million in 2010/2011FY, while the international business lost $216 million.Ã¢â¬ By separating the two, each sector can concentrate on addressing its own issues. In addition, bureaucracy will be made easy as they work as separate entities. Socio-cultural Factors CSR policies are important in building the socio-cultural relationship between a firm and the community around it. A good CSR structure addresses both the external and internal affairs of a business organization. External CSR policies focus on the social contract between an organization and the society. Qantas has programmes that enhance harmony between its operations and the community. For instance, the high technology pl anes will reduce noise level to people living around airports. Customer reward schemes also build social relationship with customers. Qantas has sponsorship programmes for qualified students who want to pursue further education. There are other socio-cultural programmes that are outlined under the firmÃ¢â¬â¢s CSR port. Technological The use of technology has been elaborated in the paper before. The main technologies that Qantas has adopted of late are the use of technology in entertainment and flight renewal plans that will bring modern planes to its fleet. The Boeing 787 Dreamliner is a high technology car that has significant impacts on economic, environment, and customer experience. Legal As said earlier, Qantas in line with the requirements of corporate governance has an elaborate corporate governance structure operations. The Board of Directors is given the responsibility of ensuring Qantas corporate governance is created or updated, protected, to enhance shareholdersÃ¢â¬â¢ value. The company complies with all guidelines that are provided by the ASX Corporate Governance CouncilÃ¢â¬â¢s principles. Qantas publicly discloses all their policies relating the corporate governance. Qantas Board of Directors maintains high level corporate governance ethics that are constantly being reviewed to comply with the latest issues. Most importantly, the Board has its own Constitution that directs all ethics issues and governance structure. Environmental Qantas is committed to environmental sustainability other than the economic and social commitments. The firmÃ¢â¬â¢s objective is to be top in environmental performance through the implementation of required environment policies geared towards the protection of the current and future generations. Environmental engagements Qantas engage all stakeholders in ensuring the community has a variety of environmental programmes that run year in year out. Some of the plans include the firmÃ¢â¬â¢s Green Team, which is a gro up of volunteers who raise environmental awareness campaigns. In addition, through the Great Barrier Reef Foundation ZooX Ambassadors, Qantas informs its employees on the relationship between climatic changes, the coral reefs, and how these two have an impact in the sustainability of the firmÃ¢â¬â¢s operations. The other engagement is eXcel Environment Ward, which awards the most focused employee in the implementation of environmental projects in the Qantas businesses. The climate challenge Since global climatic changes are a concern to the whole global community, Qantas prides itself in the development of programmes that cut down on emissions address climate issues. Qantas has set its own emission targets in a bid to reduce the effects of climatic challenges. As the company core business is airline transport, 95% of Qantas global carbon emissions are due to jet fuel use. A possible avenue of reducing the emission is through use of efficient machines that will cut on the consumpti on. The figure below illustrates the set goals in reducing emissions at Qantas: Source: Qantas (2012i) Reducing aircraft noise Qantas has the plan of reducing aircraft noise among the communities that live close to the airport by considering the purchase of aircrafts with that ability. The fleets on order including the Boeing 787 Dreamliner have the ability to reduce the noise. This is why Qantas (2012j) makes firm statement, Ã¢â¬Å"Seeking better ways of managing aircraft noise is one of the many ways we continue to develop strong relationships with our communities. We believe that the best solutions emerge through collaboration.Ã¢â¬ There are also many other strategies put in place to reduce the environmental impact of the firmÃ¢â¬â¢s operations. Impact Of External Environment On Qantas A firmÃ¢â¬â¢s external environment is a three-piece component: the industry, the business and operation environment, and its remote. The three components of external environment can change and affect the operations at international and local levels. The PESTLE analysis above helps in the definition of remote environment. The industry on the other hand is defined by the PorterÃ¢â¬â¢s five forces. The two models of analysis therefore help in the identification of the external business environment and its impact on Qantas. International travels are characterised by regulatory impediments, which prevent carriers from inflowing to a new destination. Barrier to entry into a new destination is an obstacle to expansion programmes of a carrier. Network alliances open avenues for expansion and gives right to enter into a restricted territory. Network alliance also opens base for resource sharing. Limited runways for take offs and landings may be a challenge to individual carriers. Finally, network alliances eases competition pressures, leading to a reduction in pricing and can earn supernormal profits. Alliance members should be weary of threat of new entrants and formulate s tringent measures to counter the threats. One way of achieving this is through imposition of regulatory restrictions and initiating frequent flyer programmes. External business environment is also defined by the entry of other airlines into the market. Incumbency in the airline industry is a great barrier to entry into the industry. However, disruptive technology is a threat to this barrier and an opportunity for a new entrant. Foster supported by Christensen as quoted by Vlaar et al., (2005) assert that, Ã¢â¬Å"disruptive technological change brings about new value propositions and strategic options that may have a devastating effect on established firms and industry structure.Ã¢â¬ (p. 155). Incumbents are unable to establish radical technological inventions due to protocol issues and conventional organisation structures that take long time to make critical decisions. Since new entrants face operation difficulties through service imitation and high investment costs in RD, disrup tive technology is a scope towards market breakthrough. Emirates Airline is a new entrant into the market that defied the odds to break into airline industry with great success after short period of time. According to Shikoh (2005), research by Skytrax in 2005, Emirates was third after Cathay Pacific and Qantas Airways and in front of global brands like British Airways and Singapore Airlines. As mentioned, Emirates instilled a sense of Ã¢â¬Ëbusiness unusualÃ¢â¬â¢ in the industry with more operation strategies that appealed to majority. The airline industry is a multi billion investment venture that is mainly funded by national governments. Due to this, there is expansion rigidity brought about by legal restriction on routes usage. Network alliances, therefore, involve both liberal bilateral agreements between two government and agreement between partners. The geopolitics of airline industry is main source of barrier to entry by a new firm and the cause of incumbency by national carriers. This paper has established that other than privatisation, network alliance is one of the ways, through which industry players can expand their operations to new destination. However, the case of Emirates Airline is unique as the firm defied the barriers to enter into the industry and become a global brand. Disruptive technologies and organisational rigidity are a challenge to the incumbent but give rare opportunities to new entrants. Structural rigidity can also be eliminated by privatisation. In the airline industry, customer service is important as there is a direct relationship between customers and the employees. Before the management thinks of any effort to improve customer services, there is need of focussing on employee issues for them to respond with exemplary services to customers. In an airline where staffs are discontented, they are likely to replicate poor services to the customers. Eventually there could be lost business as customers will seek better services elsewhere because there are options. Southwest Airline is among the world leaders in customer service at relatively low price. The firm considers its staff as the selling point. Southwest airline pays remunerates its workforce well and but remains a profit making organisation that has never retrenched its staffs (Bamber, 2011). Virgin too is following in the footsteps of Southwest airline and in the same line; Qantas should take some strategies from Southwest airline to rejuvenate its economic hitches and the 500 retrenchment of workers in its Victoria base. According to Bamber (2011) lesson from Southwest airline should be favoured instead of the bid to resorting to private equity funds to purchase Stakes at Qantas. Since the attempt, the share price has steadily fallen. Impact Of Qantas On External Economic Environment Qantas being one of the Oneworld Alliance means that the firm is a major player in Australian domestic and international airline industries. Its operations affect t hose of other carriers. The interrelationship among the world carriers tells the nature of the airline industry. The airline industry is very dynamic and sources of economic rent are diversified. Due to heavy investment needed in the airline industry, the industry operates either as government owned ventures or by a particular entity. However, global wave of privatization and private business entities entered the industry in the mid 1990s, revolutionising the sector. There are limited cases of merger of firms in the airline industry due to rigid international air agreements that domestic firms adhere to. Strategic alliances; and alliances between carriers is now the norm in the industry. Alliances between big network carriers are common if compared with those between low cost carrier (LLC), and charter airlines. According to Forsyth et al., (2011), Ã¢â¬Å"This type of airline differ in that the first operate integrated route networks centred around one or multiple hubs, offering pas sengers a dense network of flight connections, while low cost and charter airlines typically focus on point-to-point networks.Ã¢â¬ (p. 49). This paper discusses how various airline operations and activities affect economic rent of firms, engaged in the industry at the global, regional, and domestic level. Consolidation of the industry is a major source of economic rent as it presents rationales, upon which networks integration would yield benefits. To begin with, working together brings in economies of scale for individual firms to improve technical efficiency. This is because firms in an alliance can share codes, which increases passenger flight rates. According to risk diversification theory, creating many routes manages adverse effects of depending on a single airline destination. Another reason to form network alliance is that it reduces transaction costs that are passed on to customers. Forsyth et al., (2011) pose that, Ã¢â¬Å"Airlines that offer connecting services to passe ngers and flight forwarders may increase profits by joint marketing of their services on the basis of one stop shopping.Ã¢â¬ Shopping at one point saves on transaction costs as passengers donÃ¢â¬â¢t need to connect flights but instead buy products and services from a partner in an alliance. In order to make this a reality, firms in an alliance should carry out joint branding and tender seamless travel plans to passengers. Network alliances is the commonest practice in the world and as RamÃ ³n-Rodriguez et al., (2010) posit, Ã¢â¬Å"The success of this strategy has led to the creation of one world, Sky-Team and Star Alliance that are now responsible for about 75% of global passengers and 90% of long-haul flights.Ã¢â¬ (p. 111). Network alliances eliminate market imperfections, which majorly affect airline operations. Airlines do serve a particular route, and when there is an alliance, interests of passengers who demand flight connection and complementary services will be serve d. Individual carriers face market imperfection due to uncoordinated price-setting mechanism because of numerous price mark-ups, set by individual carriers. This reduces marginal costs (MC), leading to decrease in profit margins. Network alliance minimises price mark-ups due to coordination of a joint pricing model that offers complementary services to travellers. Customer also benefit from low prices, set by network alliances. Reference List Bamber, G 2011, Saving Qantas in a matter of trust. National Times, Viewed on smh.com.au/opinion/politics/saving-qantas-is-a-matter-of-trust-20111107-1n3rx.html Belk, R. W. Sherry, J. F., 2007, Consumer culture theory: volume 11 of research in consumer behaviour, Emerald Group Publishing, Melbourne. Calder, A., 2008, corporate governance: a practical guide to the legal frameworks and international codes of practice, Kogan Page Publishers, London. CAPA Centre for Aviation, 2012, Qantas cuts international services to grow profitable domestic ma rket as Jetstar grows all around, viewed on http://centreforaviation.com/analysis/qantas-cuts-international-services-to-grow-profitable-domestic-market-as-jetstar-grows-all-around-68423 Forsyth, P. Niemeier, H. Wolf, H., 2011, Airport alliances and mergers Ã¢â¬â Structural change in the airport industry? Journal of Air Transport Management, vol.17, no.1, pp. 49-56. Hitt, M., Ireland, R. Hoskisson, R., 2008, Strategic management: competitiveness and globalization: concepts cases. 8th ed, Cengage Learning, London. Jones, H. Jones, G., 2009, Strategic management theory: An integrated approach, 9th ed, Cengage Learning, Melbourne. McGahan, A. M., 2004, How industries evolve: principles for achieving and sustaining superior performance. London: Harvard Business Press. Porter, M. E., 1985, Competitive Advantage: Techniques for analyzing industries and competitors, The Free Press, New York. Qantas, 2012a. The Qantas story. Viewed on qantas.com.au/travel/airlines/history/global/en. Q antas, 2012b. Corporate governance, Viewed on qantas.com.au/travel/airlines/governance-structure/global/en Qantas, 2012c. Subsidiary companies, Viewed on qantas.com.au/travel/airlines/subsidiaries/global/en Qantas, 2012d, Boeing 787 Dreamliner: Flying into the future, Viewed on qantas.com.au/travel/airlines/aircraft-boeing-787/global/en Qantas, 2012e, Qantas customers experience world first entertainment technology. Viewed on qantas.com.au/travel/airlines/media-releases/feb-2012/5358/global/en Qantas, 2012f, Fleet developments Viewed on qantas.com.au/fleet-developments/global/en Qantas, 2012g, Qantas Airways Limited: 1H12 Results Viewed onqantas.com.au/infodetail/about/investors/2011InvestorPresentation.pdf Qantas, 2012h, One World Alliance, Viewed on qantas.com.au/travel/airlines/oneworld/global/en Qantas, 2012i. Climate change, Viewed on qantas.com.au/travel/airlines/climate-change/global/en Qantas, 2012j, Noise Management, our commitment, Viewed on qantas.com.au/travel/airlines/ community-commitment/global/en Qantas, 2012k, Small beginnings Viewed on qantas.com.au/travel/airlines/history-beginning/global/en RamÃ ³n-RodrÃ guez, A. B., Moreno-Izquierdo, L. Perles-Ribes, J. F., 2011, Ã¢â¬ËGrowth and internationalisation strategies in the airline industryÃ¢â¬â¢, Journal of Air Transport Management. 17(2) pp. 110-115. Reuters, 2012, Qantas raising fares to tackle high fuel cost, Viewed on reuters.com/article/2012/03/30/uk-qantas-fares-idUSLNE82T00Q20120330 Shikoh, R., 2005. Global branding the Emirates way. Viewed on http://dinarstandard.com/marketing/global-branding-the-emirates-way/ Turner, C., 2009, corporate governance: A practical guide for accountants, Butterworth-Heinemann, New York. Vlaar, P., Vries, P. D. Willenborg, M., 2005. Ã¢â¬ËWhy incumbents struggle to extract value from new strategic options: Case of the European airline industryÃ¢â¬â¢, European Management Journal, 23(2), pp. 154-169.
Friday, February 28, 2020
The United States Economic Development in the World War II - Essay Example This essay outlines the efficiency of the economic policies of American government in war and post-war period, that led to strongly improved performance of the economy in the world. There are several reasons that led to wage rise during the Second World War. One reason that led to the rise in wage rates during the Second World War was the increased efficiency in jobs. Millions of residents of the United States of America who worked in occupations that were less productive moved to more efficient occupations. By acquiring efficient jobs, they earned more from their occupations. During the Second World War, wages also increased because productivity was equally improved. The improvement in productivity was brought about by better technologies that were put in place. The United States of America got its resources using an array of methods. One of them was excessive use of taxation. High taxes were imposed on workers as a way of mobilizing resources. The Congress collaborated with Roosevelt to impose heavy taxes as a way of mobilizing resources. The rates of marginal taxes increased from 81 per cent to about 94 per cent during the entire duration of the Second World War. The income level that was subjected to tax was also lowered Following the World War II, the increase in the demand of consumers for commodities fueled a robust economic growth. One industry that benefited from the consumer demand was the motor vehicle industry. To add to that, electronic and aviation industries witnessed enormous growth. ... The army was well marshaled to a force that was feared in the battlefield during the entire season of the war. By the year 1945, the military of the United States of America comprised of at least 13 000 000 million men, in addition to women who were in unison. This jump started the successful tradition in battle fields the United States of America has enjoyed till today. The industrial strength of the United States was also a crucial factor that was observed not only during but also after the Second World War. As much as they imported most of the resources they used outside the nation, their Gross domestic product stood the highest across the entire world. This margin was very large compared to those of other parts of the world (Young, 2013). During the post war era, the industry was transformed into an economic powerhouse still being witnessed today in the United States of America. These are of the reasons that led to the success of the United States as far as economic growth was co ncerned. They were able to recognize some of the gaps by other countries which they filled well. The post war prosperity that was witnessed in the United States of America after the Second World War was such a golden chance to the capitalists. This was attributed to maturity in bonds of about 200 million dollars from the years between 1945 to 1973.These bonds were financed by their work force that was educated. The post war prosperity and economic growth was also brought about by the increased number of farm workers who secured jobs in cities and towns across the United States of America. Before the Second World War, the economics of the United States ditched into a great depression. This occurred in the period between 1929 to 1941.In 1932, the
Wednesday, February 12, 2020
Effects of ADHD Medication and Student Performance - Essay Example A baseline will be established for each student prior to the study based on the pretests. The study will be conducted for four months during the academic year. This experimental research design utilizes quantitative methodology with a randomized pretest-posttest control group and treatment group. The research will include 60 students from a fourth grade elementary school who will be randomly assigned to either an experimental treatment or control group, consisting of 30 students in each group. Table of Contents Main Body I. Problem to be investigated 4-5 A. Purpose of the study 4 a. Assumptions 4 B. Justification of the study 5 C. Research question and null hypothesis 5 D. Definition of Terms 6 a. Constitutive Definitions 6 b. Operational Definitions 6 E. Brief overview of the study 7 II. Background and review of related literature 8 A. Theory 9 B. Studies directly related 9-10 C. Studies tangentially related 10-11 References 12 Attention deficit hyperactivity disorder or ADHD is a d isorder characterized by lack of attention, hyperactivity, and impulsive behavior (PubMed Health, 2011). Due to these characteristics, children with ADHD have difficulty in school, possibly due to multiple factors. Children with ADHD may be unable to keep up with the lessons due to lack of concentration, or they may be seen as disruptive by their teachers. Consequently, they may be deemed unfit to progress in their schooling and be retained in their current grade, which is something that may have grave consequences on the childrenÃ¢â¬â¢s educational and global development. Parents and teachers must recognize that ADHD is not something to be taken against a child, but a disorder that can be overcome with proper and adequate pharmacologic and non-pharmacologic interventions. Teaching interventions that are more suitable for children with ADHD may help enormously with the childrenÃ¢â¬â¢s proper education and development. Poor outcomes may also be seen in children diagnosed with ADH D who do not receive medication. The goal of this research project is to determine the effectiveness of pharmacologic medication in improving academic outcomes of children diagnosed with ADHD. In the following sections, topics related to the issues discussed above will be addressed. The sections include: the purpose of the study and related assumptions, justification of the study, research question(s) and hypothesis, definition of terms, a brief overview of the study, and a conclusion. Problem to be Investigated The problem to be investigated is determining effective solutions to ensure students diagnosed with ADHD do not suffer academically. Stimulant medication has been suggested as one such solution. Purpose of the Study The purpose of the study is to determine the effectiveness of ADHD stimulant medication on improving the academic achievement of students diagnosed with ADHD. Assumptions The following assumptions will be made during the study: 1. This sample is representative of the population of elementary students. 2. The instrument used will measure the desired outcome of the research study. 3. The predictive information from this study will be used by counselors, teachers and parents. Justification of the Study Children who are diagnosed often exhibit problem behaviors in the classroom such as inattentiveness,
Friday, January 31, 2020
Knowledge Management in Supply Chain Management - Essay Example The research provided efficient solutions to the problems and including the integrating system and providing effective IT solutions in the supply chain management. It also provided some recommendations to the major problems of KM in the company. The implementation plan revealed the type of knowledge and resource required in the KM project. The conclusion provided a summary in brief the main discussion on the topic under study. Knowledge Management in Supply Chain Management in Dell Company Introduction Knowledge management has become an emerging key issue in many organizations. Dell Company, which is an American conglomerate computer technology, is among the industries that incorporate knowledge management in the supply chain management process. The corporation has more than 103,300 workers worldwide, and it is among the leading technology industries. The company engages in design, development, manufacturing and marketing or distributing of diverse computer services globally. The emp loy corporate responsibility and business model of culture, compliance and credibility in order to achieve effective performance. Increased technology advancement has forced many organizations to employ effective methods; thus, use of knowledge management in many organizations has become the significant aspect. Knowledge management (KM) is a strategic tool or framework employedÃ to design, represent and distribute as well as enable adoption of experiences in business process. KM in supply management has become the leading area of concern and managerial challenges. For instance, the supply chain management has become one of the key areas that utilize knowledge management in order to achieve a competitive advantage. KM is increasing as a significant business asset in the supply chain management. However, Dell Company face varied challenges of incorporating knowledge management in the supply chain management process. DellÃ¢â¬â¢s operates its business across the product line includi ng desktop computers, network services, computer notebooks and storage products. The company owner, Michael Dell established the business based on the sidestepping dealer concept. The company started sellingÃ personal computer products straight to clients; thus evading the issue of delay and outlays of supply chain issues. Better financial performance contributed to its successful implementation of using direct sales model. However, despite the recent industrial growth, the company faces varied challenges. The foremost problem is increased technology changes; thus holding inventories an immense liability. Therefore, the organization employs knowledge management in supply management in order to design, manufacture, market and delivers computer products effectively across the globe. The company manages KM through aligning the organizational strategies and employs logistics as well as provides IT solutions effective for managing knowledge. Problem Identification and Analysis Increase d technology changes have become the main concerning the issue in the companyÃ¢â¬â¢s supply chain management. Technology changes are significant because it enables the company to design or employ new business strategies that can enable them improve business performance (Dwivedi and Butcher (2009, p.123). Dell CompanyÃ is among
Thursday, January 23, 2020
Thesis: Edgar Allan Poe was one of the most influential, yet misunderstood writers in American Literature. I. His Early Life A. His Adoption B. His Education II. His Later Life A. Books Published B. Military Life III. The Conclusion of His Life A. His Marriage B. His Death IV. His Works V. What Others Thought Of Him Edgar Allan Poe was an American writer, known as a poet and critic but most famous as the first master of the short story form, especially tales of the mysterious and macabre. Since his early death, the literary qualities of Poe's writings have been disputed, but his works have remained popular and he influenced many major American and European writers. Born in Boston, Massachusetts, Poe was orphaned in his early childhood and was raised by John Allan, a successful businessman of Richmond, Virginia. Taken by the Allan family to England at the age of six, Poe was enrolled in a private school. Upon returning to the United States in 1820, he continued to study in private schools. He attended the University of Virginia for a year, but in 1827 his foster father, displeased by the young man's drinking and gambling, refused to pay his debts and forced Poe to work as a bookkeeper. (Anderson, 9-22). Poe quit this job, which infuriated John Allan. Poe then left and moved to Boston. There he published his first book, Tamerlane and Other Poems. After this, Poe enlisted in the U.S. Army and served a two-year term. Poe published his second book of poems, Al Araaf in 1829. Poe then reunited with Allan, who obtained him an appointment to the U.S. Military Academy. After only a few months at the academy, Poe was dismissed for neglect of duty, and John Allan disowned him permanently (Anderson, 23-34). P... ...nius." (Regan, 1) While some loved him, others despised him; almost all recognized the value of his works. WORKS CITED Anderson, Madelyn Klein. Edgar Allan Poe: A Mystery. New York: Justin Books, Ltd., 1993 Buranelli, Vincent. Edgar Allan Poe. New York: Twayne Publishers, Inc., 1961 The Collected Poems and Tales of Edgar Allan Poe. New York: The Modern Library, 1992. Complete Stories and Poems of Edgar Allan Poe. Garden City: Doubleday & Company, Inc, 1966. Fisher, Benjamin F. The Cambridge Introduction to Edgar Allan Poe. Cambridge: Cambridge University Press, 2008. Print. Kesterson, David B., ed. Critics on Poe. Coral Gables: University of Miami Press, 1973. Regan, Robert, ed. Poe. A Collection of Critical Essays. Englewood Cliffs: Prentice-Hall, Inc, 1967. Stoudt, Ashley, ed. "An Edgar Allan Poe Reader". State Street Press, 2000.
Wednesday, January 15, 2020
As shown above, the business model is formulated as input Ã¯Æ' process Ã¯Æ' output. For a two wheeler industry, The inputs to the OEM constitutes of 1. Import of parts: the basic ingredients for model building are the parts such as drive chains, engines, components, transmissions etc. 2. Auto Component Manufacturer: There are 300+ players in the industry which manufacture auto parts components and perform tasks such as castings, forgings, tires etc 3. Raw material Supplier: This forms the initial requirement for the development of any vehicle. The raw material of which it is composed of consists of sheet metal, aluminium etc. The processing involves: 1. Manufacturer Original Equipment Manufacturer(OEM): The industry is highly concentrated with 3 players constituting 80% of the market share, namely Hero Moto, Bajaj Auto & Honda Motors. This industry has a turnover of 55K Cr by producing over 13.33mn units in the FY 2011. 2. Dealership Network Dealer: In the Indian domestic market, the dealer are numbered over 2000 Sub- Dealer: The sub dealers, also known as the touch points are over 12000. This dealership network forms the competitive advantage of a company in the market Service Centers: These provide after sales service for the two wheeler industry and form the part of maintenance and helps in building customer loyalty. The output part of the business model comprises of 1. Domestic Customers: There is a low penetration in the domestic market with coverage in rural market as low as 7%. 2. International Customers: The major markets for two wheelers are Africa, Latin America & South East Asia INDUSTRY ANALYSIS The industry is highly concentrated and there is a strong foothold by 3 major players in the industry namely Hero Moto constituting 39% of the market share, Bajaj Auto constituting 27% of the market share and finally Honda Motors with 14% market share. So, these 3 major players sum to 80% of the total industry market share. The Indian Auto sector had a volume growth of 13% CAGR over the last 5 years- Driven by two wheelers which account for 80% of the total volumes Two wheeler sales reached INR 55K Cr and volumes reached 13.3 mn units clocking a CAGR of 15% and 13% respectively over 2006-2011. This works to an average realization Ã¢â¬â Rs 42000 or 1.2x the real per capita GDP of India. Domestic volume growth has been strong over the past five years growing at 11% CAGR Exports have been a significant factor to contribute to overall volumes with a growth of 27% CAGR over the last 5 years. Year to date, the volume sales growth in two wheelers has surpassed all other automobile segments. FIVE FORCES ANALYSIS What is it? Five Forces Analysis is a tool that enables managers to study the key factors in an industry enviÃ ronment that shape that nature of competition: (1) rivalry among current competitors, (2) threat of new entrants, (3) substitutes and complements, (4) power of suppliers, and (5) power of buyers. When do we use it? In a strategic analysis, Five Forces Analysis is an excellent method to help you analyze how competiÃ tive forces shape an industry in order to adapt or influence the nature of competition. Collectively, the Five Forces determine the attractiveness of an industry, its profit potential, and the ease and attractiveness of mobility from one strategic position to another. BecauseÃ of this, the analysis is useful when firms are making decisions about entry or exit from an industry as well as to identify major threats and opportunities in an industry. Why do we use it? This analysis was originally developed by Michael Porter, a Harvard professor and a noted authorÃ ity on strategy. While all firms operate in a broad socioeconomic environment that includes legal, social, environmental, and economic factors, firms also operate in a more immediate competitive environment. The structure of this competitive environment determines both the overall attractiveÃ ness of an industry and helps identify opportunities to favorably position a firm within an industry. Porter identified five primary forces that determine the competitive environment: (1) rivalry among current competitors, (2) threat of new entrants, (3) substitutes and complements, (4) power of supÃ pliers, and (5) power of buyers. 1. Rivalry Among the direct and obvious forces in the industry, existing competitors must first deal with one another. When organizations compete for the same customers and try to win market share at the othersÃ¢â¬â¢ expense, all must react to and anticipate their competiÃ torsÃ¢â¬â¢ actions. 2. Threat of Entrants New entrants into an industry compete with established companies placing downward pressure on prices and ultimately profits. In the last century, Japanese automobile manufacturers Toyota, Honda, and Nissan represented formidable new entrants to the U.S. market, threatening the market position of established U.S. players GM, Ford, and Chrysler. The existence of substantial barriers to entry helps protect the profit potential of existing firms and makes an industry more attractive. 3. Substitutes and Complements Besides firms that directly compete, other firms can affect industry dynamics by providing substitute products or services that are functionally similar (i.e., accomplishing the same goal) but technically different. The existence of substitutes threatens demand in the industry and puts downward pressure on prices and margins. While substitutes are a potential threat, a complement is a potential opportunity because customers buy more of a givenÃ product if they also demand more of the complementary product. For example, iTunes was established as an important complement to AppleÃ¢â¬â¢s iPod, and now the firm has leveraged connections among its suite of products including iPhone, iPad, and the like. 4. Power of Suppliers Suppliers provide resources in the form of people, raw materials, comÃ ponents, information, and financing. Suppliers are important because they can dictate the nature of exchange and the potential value created farther up the chain toward buyers. Suppliers with greater power can negotiate better prices squeezing the margins of downÃ stream buyers. 5. Power of Buyers Buyers in an industry may include end consumers, but frequently the term refers to distributors, retailers, and other intermediaries. Like suppliers, buyers may have important bargaining powers that dictate the means of exchange in a transaction. According to Porter, successful managers do more than simply react to this environment; they act in ways that actually shape or Ã¢â¬Å"enactÃ¢â¬ the organizationÃ¢â¬â¢s competitive environment. For example, a firmÃ¢â¬â¢s introduction of substitute products or services can have a substantial influence over the competitive environment, and in turn this may have a direct impact on the attractiveness of an industry, its potential profitability, and competitive dynamics. I. Bargaining power of buyers: High Who are the buyers of this industry: Individual customers who purchase and use two wheelers for the purpose of transportation. This category of customers considers two wheelers as a necessity than a luxury. In a developing country like India, especially in tier 2 and tier 3 cities, two wheelers are extremely popular amongst families and students. Scooters are considered to be utility vehicles transporting a family of 2-3 at a time and providing good mileage. Bikes on the other hand come in a variety of segments. They can cost less, acting as utility vehicles. They can be costing very high, acting as luxury products for their owners. TheÃ following points can be aggregated to determine the relative bargaining power of buyers against the automobile manufacturing firms. The bargaining power in this case would mean to what extent the buyers can negotiate prices of the two wheelers. This buying power would determine the market price of the two wheelers in the long run. It also indicates the intensity of rivalry amongst the existing firms in the market. Product Differentiation: Low The features in two-wheelers produced by the Indian manufacturers like Bajaj, Honda, TVS etc. are very close to each other. These features include appearance, Price, Quality and other functional features. This implies that: The buyers can shift from one product to another, as they do not have affinity for any specific product Information Availability: High High availability of information over the internet, leads to higher bargaining power with the buyer to compare the various features and price of products thus leading to lower bargaining power with the manufacturing firms. Type of Economy: Developing India being a Developing economy, is a big hub for two wheeler manufacturers. A two wheeler is a necessity in small towns even today. The large number of customers lowers their bargaining power to some extent. However, this is offset by the large number of suppliers. This is good news for the automobile firms as their product is going to remain in demand for a while at least and they donÃ¢â¬â¢t have to worry about declining sales for some time in India. Number of Suppliers: High The number of companies manufacturing automobiles is high in India. With each major player opening showrooms in not only Tier I but II and III cities, the consumers have a wide variety of options to choose from. The number of buyers and sellers in market is high. These two effects offset each other. This implies that: The bargaining power of consumers is high because of this effect as the consumers have the option of going to another brand if they do not like the functional features or price of one brand. In case of utilityÃ vehicles manufacturing category, Rohtak alone has two showrooms of the major players in the market. This implies an empowered consumer. Switching Cost: Moderate The switching costs are higher than FMCG goods however are low compared to many other high involvement products. A basic two wheeler starts from about Rs 40,000. This cost maybe high for some people and not so significant for others. However as two wheelers hardly have any associated products, which would require compatibility with the product, the switching cost is low. Also due to a well-established second hand market in India, the vehicles can be easily resold these days. This also covers up for the switching costs to some extent. II. Bargaining Power of the Supplier : LOW Organizations would be at a disadvantage if their suppliers are powerful. They should preferably not be dependent on any supplier. Now suppliers can be powerful if the number of firms providing thie particular service or product are few in number( eg. A monopoly, oligopoly).The number of the firms determine their bargaining power. The power gets by the increase in existence of switching costs for the various firms. Moreover, firms in an industry have power if they have many alternative sources of supply or if they have a credible threat of integrating backward to provide their own sources of supply. So even supply chain management is particularly important in industries where the potential power of suppliers is high. Now, for a 2 wheeler Industry there would be various suppliers which can be broadly classified into 4 broad categories:- 1)Steel industry 2)Tyre industry 3)Auto components industry 4) Battery industry Steel Industry The 2 wheeler industry in India mostly imports all the automotive steel. Around 65% of the steel is imported for automobiles. The cheap import duty helps the 2 wheeler industry to import high quality steel. So the prices ofÃ steel is determined by mostly international markets, so the bargaining possibility is less for the steel suppliers. Demand for automotive steel such as inner components and outer body parts comprises just 7-8 million tonnes (mt) a year out of IndiaÃ¢â¬â¢s total production of about 78 mt, but is growing at 10-20% a year even as overall demand growth lags economic growth. The companies in India which develop automotive steel have now decided to expand in this area and many companies have entered into joint ventures with various international companies like Sumitomo + Bhushan Steels, Jfe+jsw, Tata+Nippon joint ventures. So the 2 wheeler industry has a lot of vendors both nationally and internationally to choose from. Thus, the bargaining power of the supplier is low. Auto components and Battery Industry Both the Auto Components industry and the Battery industry in India are highly fragmented .There suppliers highly outnumber the 2 wheeler companies. Examples of a few companies which provide auto components in the automobile industry are Rico Auto Industries Ltd, JBM Group, Sona Koyo Steering Systems and Lumax Industries, Indication Instruments Ltd Aisin Seiki Co.,BorgWarner,Continental, Delphi, Denso Corporation, Eaton, FAG, Faurecia, GKN,Honda Foundry Co. Ltd., Honeywell,Knorr Bremse, Koyo,Magna,Magneti Marelli, Mando Corporation, Meritor,Mitsuba Corporation, NHK Spring,Robert Bosch,Showa Corporation, Sumitomo Wiring Systems, Toyoda Gosei, USHIN, Valeo, Visteon,Yazaki and many more. Amaron ,exide,luminous,kaycee ,sumangal,action,tata batteries are just a few examples of the Battery Companies in India.Thus, since the number of suppliers is huge the bargaining power they enjoy is low. Tyre Industry It can be clearly seen in the pie chart below that for tyre industry in India, 53% of the tyre consumption is by the 2 wheeler industry. The benefits are given to them as they are buying in bulk and the relation gives the tyre firms a strong brand association. At present there are 40 listed companies in the tyre sector in India.Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 perÃ cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industriesand Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop,Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some of the other significant players in the industry. Thus , with so many players in the market and also with the power to give tyre companies brand association, the 2 wheeler industry is at a huge advantage and the bargaining power of the tyre suppliers is low. III. Threats of Substitutes : LOW Number of Substitutes: High Substitutes can be cars, electrical vehicles, public transport and rickshaw/taxi. There are many players in the market for four-wheelers. Also, in metros and some of the tier-II cities, public transport facility is quite good. Thus, this can be a negative factor for two-wheeler industry. But two-wheeler may be a better option for 2 people in the same price range. Flexibility is also high compared to public transport. These facts nullify the negative effect of this factor. Public Transport Infrastructure: Moderate As of today, public transport is not very well developed in India but its developing day by day. In tier-1 cities, people have started preferring public transportation for routine tasks but people in other regions donÃ¢â¬â¢t have an option. Scope of Differentiation: High There is a high scope of innovation in this industry as the technologies are ever changing. Customization according to the customer needs is important and attracts consumersÃ¢â¬â¢ attention towards one vehicle from another. Lifestyle in India: Changing Common ManÃ¢â¬â¢s lifestyle is changing in India and number of people working in a family are increasing. Most of them prefer one vehicle per head to commute. For a middle class family, two wheeler is the only feasible option in such cases looking at its flexibility and affordability. Thus, changing lifestyleÃ is a positive sign for this industry. Cost of Switching to Substitutes: High People switch to substitutes for a reason. Given below are some of the reasons why people switch to substitutes. Cars: Comfort, status Symbol, safety Public Vehicles : Affordability, Safety, Cost, Pollution, Time saving Electrical Vehicles: Environmental friendly, Maintenance cost Here is the negative side of switching to substitutes. Public transport vehicles are not readily available for transportation within the city/town/village except in a few cities in India. For the regions where public transports are not available, only four-wheeler or electrical vehicles remains the substitute to a two-wheeler. Electrical vehicles at present not competitive with respect to present petrol running vehicles. No established player is offering Electrical vehicles. Switching cost from a two-wheeler to a four-wheeler is quite high as investment will be needed to switch the product. Also running cost is more for a four wheeler. The above table shows the calculation of running cost of a two-wheeler and a four-wheeler per km. The numbers are rationally assumed for reaching to quantified figures. As we can see from above calculations, running cost of a four-wheeler is almost 3.5 times more than that of a two-wheeler. Thus, we conclude that the cost of switching to substitutes is LOW in the case of two-wheelers. Seeing all the five factors contributing to Threats of Substitutes, it can be safely concluded that this threat is LOW. Lower running costs, higher addressable market and lack of public transport make two wheeler industry attractive. IV. Threat of New Entrants : MODERATE-WEAK Capital requirements: Moderate High capital requirements mean a company must spend a lot of money in order to compete in the market. The investment made by the company depends upon the type of expansion. High capital requirements positively affect 2 Wheeler Industry India. Ã¢â¬Å"High Capital Requirements (2 Wheeler Industry India)Ã¢â¬ is an easy qualitative factor to overcome, so the investment will not have to spend much time trying to overcome this issue. Easy to overcome this disadvantage High sunk costs High sunk costs make it difficult for a competitor to enter a new market, because they have to commit money up front with no guarantee of returns in the end. High sunk costs positively affect 2 Wheeler Industry India. This statement will have a short-term positive impact on this entity, which adds to its value. Ã¢â¬Å"High Sunk Costs Limit Competition (2 Wheeler Industry India)Ã¢â¬ will have a long-term negative impact on this entity, which subtracts from the entityÃ¢â¬â¢s value. Ã¢â¬Å"High Sunk Costs Limit Competition (2 Wheeler IndustryÃ India)Ã¢â¬ is an easy qualitative factor to overcome, so the investment will not have to spend much time trying to overcome this issue. 5 Forces analysis: High negative impact in the long run High positive impact in the short run Easy to overcome this disadvantage Strong brands If strong brands are critical to compete, then new competitors will have to improve their brand value in order to effectively compete. Strong brands positively affect Two Wheeler Industry India. The 3 major players contribute to 80% of the market share Hero Moto, Bajaj Auto, Honda Motors. Advanced technologies Advanced technologies make it difficult for new competitors to enter the market because they have to develop those technologies before effectively competing. The requirement for advanced technologies positively affects Two Wheeler Industry India. Economies of scale Economies of scale help producers to lower their cost by producing the next unit of output at lower costs. When new competitors enter the market, they will have a higher cost of production, because they have smaller economies of scale. Economies of scale positively affect Two Wheeler Industry India.Ã¢â¬ Industry Requires Economies of Scale (Automobile Industry India)Ã¢â¬ has a significant impact, so an analyst should put more weight into it. Ã¢â¬Å"Industry Requires Economies of Scale (Two Wheeler Industry India)Ã¢â¬ will have a long-term negative impact on this entity, which subtracts from the entityÃ¢â¬â¢s value. This force has significant impact High negative impact in long run Patents Patents that cover vital technologies make it difficult for new competitors, because the best methods are patented. Patents positively affect Two Wheeler Industry India. Customer Loyalty It takes time and money to build a brand. When companies need to spend resources building a brand, they have fewer resources to compete in the marketplace. These costs positively affect Two Wheeler Industry India. High learning curves When the learning curve is high, new competitors must spend time and money studying the market before they can effectively compete. High learning curves positively affect profits for industry. High switching costs High switching costs make it difficult for customers to change which products they normally purchase, due to costs. High switching costs positively affect Two Wheeler Industry India. High Switching Costs for Customers has a significant impact, so an analyst should put more weight into it.Ã¢â¬ High Switching Costs for Customers will have a long-term positive impact on this entity, which adds to its value. This statement will have a short-term positive impact on this entity, which adds to its value. This force has significant impact High positive impact in long run High positive impact in short run Strong distribution networks Weak distribution networks mean goods are more expensive to move around and some goods donÃ¢â¬â¢t get to the end customer. The expense of building a strong distribution network positively affects Two Wheeler Industry India. Ã¢â¬Å"Strong Distribution Network Required Ã¢â¬ has a significant impact, so an analyst should put more weight into it. Ã¢â¬Å"Strong Distribution Network Required Ã¢â¬â Two Wheeler Industry IndiaÃ¢â¬ will have a long-term positive impact on this entity, which adds to its value. Ã¢â¬Å"Strong Distribution Network Required Ã¢â¬â Two Wheeler Industry IndiaÃ¢â¬ is a difficult qualitative factor to defend, so competing institutions will have an easy time overcoming it. This force has significant impact High positive impact in long run Difficult to defend advantage High entry barriers When barriers are high, it is more difficult for new competitors to enter the market. High entry barriers positively affect profits for Two Wheeler Industry India. So to sum it all, for the two wheeler industry the threat of new entrants is moderate to weak. INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS : MODERATE Among the direct and obvious forces in the automobile industry, existing competitors must first deal with one another. When organizations compete for the same customers and try to win market share at the othersÃ¢â¬â¢ expense, all must react to and anticipate their competitorsÃ¢â¬â¢ actions. There are 3 main factors along which the intensity of rivalry amongst existing players in the automobile industry have been identified 1. Number Of Competitors:- The number of competitors within an industry is a direct correlation to the intensity of competition, all else being equal. The industry concentration was studied using Hirschman-Herfindahl Index. The data for studying HHI was obtained from the Centre for Monitoring Indian Economy. Yearly sales volume data for various brands of two-wheelers in the three segments were obtained for the period 2008- 2012 and was computed. The above figure shows that the 2 Wheeler Industry is oligopolistic in nature and there is less competition even after deregulation of the Indian Economy. The Motorcycle segment is characterised by a few large players who have established their presence. The leading player is Honda Motorcycles with almost 50% market share. The Moped industry is a monopoly and TVS is the only player which has been able to capture the entire market. The scooter industry has crossed the shakeout phase post 2004 when the Activa type models were being imitated by all major players across the segments. This too has a HHI of .309 indicating less competition. 2. Incentive to Fight:- The incentive to fight is primarily related to finding out how competitorsÃ fix prices i.e whether they engage in price wars, or engage in aggressive activities with the aim of increasing market share. This shall further be explored among 3 other parameters. A. Growth In Automobile Industry There has been substantial growth in the automobile industry in India and it has already crossed the 25 Billion Rupee mark and has had a 13.7% CAGR over the past 5 years. Over the medium term, the 2W industry is expected to report a volume CAGR of 9-11% to reach a size of 24-26 million units by 2016-17. This will be due to the (a) favourable demographic profile, (b) increasing personal income as well as (c) moderate penetration in relation to other Emerging Markets. Therefore there is substantial opportunity for growth leading to less competition. B. Demand Ã¢â¬â Supply Gap Most two wheeler have idle capacity as the supply exceeds demand. Moreover as many players are planning to increase manufacturing operations, it is estimated that the total supply will exceed demand by almost 15 to 20%. This problem has been compounded by the fact that foreign entrants are planning to enter India as growth in European and American markets have stagnated. This will lead to more competition. C. Nature of Demand The nature of demand is highly cyclical in nature. In times of high growth in the Indian Economy there is corresponding revenue growth for all 2 wheeler companies. This can be seen more from the growth of the 2 Wheeler Industry during recession which slowed substantially. In fact the motorcycles segment had dipped to negative growth during that period. Our group believes that after evaluating the three factors, there will soon be a tendency for the firms to engage in fierce competition as the stakes are increased manifold. This will ultimately lead to more competition for existing players and international players who are thinking of venturing into the industry. 3. Coordination between competitors According to the Indian Constitution, Ã¢â¬Å"The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and Merger and Acquisition), which causes or likely to cause an appreciable adverse effect on competition within IndiaÃ¢â¬ which prevents firms from colluding implicitly or explicitly colluding. Till now there has been no tendency amongst firms of colluding, hence the market is still competitive in terms of the coordination between competitors. Considering all the factors, the competitive landscape within the industry is still not yet clearly defined. Even though firms are capacity constrained, there is still ample room for growth. Therefore our group believes that the competition is still low. The way ahead With consumers becoming increasingly aware about products and buyer power increasing, the manufacturers will have to differentiate their products. Then comes the era of green vehicles which will be powered by battery or green fuels and will provide mileage of 100 km/Rs 8. The relationship between suppliers and manufacturers is nasty at this point of time. It needs to be reworked. This will provide room for improved consumer feedback mechanism which will lead to improved product for consumers The projected sales of two wheelers in India in FY15 are 18MN. There is scope in the unisex category of scooters as already there are plenty of motorbike owners in the country. Companies could leverage on that. Another scope is there in rural areas and tier II, III cities. This market is relatively untouched by two wheeler marketers and hence this should be explored and custom made vehicles should be designed for people residing in these areas. Since the purchasing capacity of these people is low it should be kept in mind while making utility products for them.