Strategic Modelling and Business Dynamics

Question: Discuss about the Strategic Modelling and Business Dynamics. Answer: Introduction Jetstar Airways is one of the low cost airlines in Australia, which has its headquarters in Melbourne (Jetstar.com 2017). It is one of the wholly owned subsidiaries of Qantas, which is aimed for the low-cost market segment in Australia (Jetstar.com 2017). The Airline uses combined fleet of Airbus A320 family as well as Boeing 787 Dreamliner (Jetstar.com 2017). The main competitor of the Airlines is Virgin Australia, which is a low-cost subsidiary of Tigerair Australia. This report would analyze the eight factors of external environment including PESTEL analysis. The current life cycle stage of the organization would also be defined. An external SWOT analysis would be conducted by focusing mainly on the opportunities and the threats which are faced by the organization. The implications of these external factors on the survival of the organization, growth prospects and the competitive advantage would also be defined. The external environment of a firm is concerned with all the entities which exist outside the boundary of the particular organization (Josefy et al. 2015). They need to be taken into consideration while building the company policies as they have significant impact on the growth as well as survival of the organization. It is true that the organization has little control on the external environment; however, the organization needs to monitor this external scenario regularly (Josefy et al. 2015). PESTEL Analysis The PESTEL analysis is an important framework which analyses the external environment of an organization. It focuses on six important external environment factors that affect the overall functioning of Jetstar Airways. It is important to design organizational strategies based on these external factors. The six external factors are described below- There is deregulation of the aviation industry in Australia and Australia has implemented the open door policy in the country. Since, the airline has operating hub in Singapore, it is affected greatly by the political scenario of Singapore (Bhasin Venkataramany and Ng 2015). Singapore is considered as a prosperous nation which has widespread trading links (Bhasin Venkataramany and Ng 2015). The high stability of the country has led to high economic growth of the nation. However, with the global increase in the terrorism, the tourism sector has been affected as it has witnessed low levels of air travel (Bhasin Venkataramany and Ng 2015). The passengers have an inherent belief that their airplanes would be hijacked mid- air and this has negatively impacted the sector. The changing prices of the oil significantly affect the airline industry. The airlines need to employ different non-monetary methods for ensuring their smooth functioning (Bhasin Venkataramany and Ng 2015). The airlines organizations ensure that they increase the fuel-buying capacity by introducing several techniques such as hedging (Berghfer and Lucey 2014). This would allow the airlines to make purchases of fuel in larger quantities as well as enter into contractual agreements with the different oil suppliers. The Global Financial Crisis also has a major role to play in deciding the organizational metrics (Bhasin Venkataramany and Ng 2015). This factor determines the number of people who use the airlines for flying to different holiday destinations. The purchasing power parity of the people has increased due to increased economic growth (McDonald 2015). There is subsequent growth of the working holiday visa as well as increase in the number of international students (McDonald 2015). The students coming for education purposes from foreign countries need affordable airline services so that they can avail them easily. There have been considerable changes in the job market, which have increased the travelling of the executives from one country to other for work related purposes. Technological factors The technology plays an important role in shaping up of the organizational policies. Internet plays an important role in the airlines industry (Pearson 2016). The technological developments have provided the customers a better platform for doing their travelling transactions. The airlines organizations are able to reach their customers directly who are frequent flyers (Pearson 2016). The technology has also influenced the customers through the process of e-commerce. Jestar Airlines should consider the different environmental aspects, which would result in the formulation of effective strategies (Timmis et al. 2015). It is the duty of the organization to check if it is damaging the natural environment. The emissions of the aircraft have great impact on the external environment and these emissions cause significant damage to the earths atmosphere (Timmis et al. 2015). The noise pollution is also one of the prime environmental concerns. The laws of the country and the international laws affect the functioning of the organization (Fukui and Miyoshi 2017). The carbon tax implementation has a negative impact on the aviation sector as it becomes an operational issue for the airlines to handle the higher fuel costs (Fukui and Miyoshi 2017). The government subsidiaries may have international route deregulation and other regulations regarding airline emissions, which affect the organizational policies. The customers are one of the most important components that exist in the external environment of an organization. The passengers are the end-users of the airline services and they are considered as the most critical aspect (Shaw 2016). There are considerable changes in the needs as well as preferences of the customers, which need to be taken care of by the airline organizations (Shaw 2016). There can be demographic changes in the customer profile such as ethnicity, age, economic class and education level. The competition is one of the most important aspects of an organization, which determines the market position of a company. The competition can be assessed at both the local level and also at the international level (Hubbard Rice and Galvin 2014). Jetstar Airlines needs to consider the related industries in the country and understand the marketing strategy, offshore development and the competitive advantages (Hubbard Rice and Galvin 2014). It is also important to take care of the competition in the global domain and launch competitive services. It is also important to understand the unique selling proposition of the rival companies so that similar services can be incorporated in the company policies of Jetstar. Current Life Cycle Stage The current life cycle model for Jetstar Airways belongs to the saturated stage. The market for short haul travel is considered to be saturated one; however, there are still plenty of growth opportunities for the aviation organization (De Poret O'Connell and Warnock-Smith 2015). It is true that the low-cost carriers do witness full occupancy, especially during peak season, however, there are tight profit margins. There is limited scope in the long-haul flights since the passengers demand comfort on the long journeys (De Poret O'Connell and Warnock-Smith 2015). The airline company is looking for growth in the market conditions, which would imply additional revenue for them. There are common instances of cancelled orders and the grounding of the planes (De Poret O'Connell and Warnock-Smith 2015). The airlines concentrate on the cost cutting aspect in order to increase their profit generation. Analysis of opportunity and threats- Jetstar Airways There are several opportunities as well as threats which is faced by the organization. There are more opportunities to expand their market share in the international market. There is a considerable increase in the short-haul travel option in the Asian tourists and this can be tapped by the company (Joe 2014). In Singapore, there are a growing number of tourist attractions, which is attracting tourists from all over the world. This has increased the chances of airline booking, which should be tapped well by Jetstar Airways (Joe 2014). The travel companies are giving frequent flying rewards and giving the customers an opportunity to earn points with the help of various activities such as hotel staying booking, credit card usage, car rental services, dining offers and others (Joe 2014). There are various leases which are announced by different regulators which have proposed new fleet of aircrafts for the purpose of carrying more number of passengers, service efficiencies, employment opportunities and implement attractive promotional strategies (Whyte and Lohmann 2015). This should be adopted by the Jetstar Airways. There are also several expansions of international air routes, in which the airline should start its business operations. There are many threats that exist in the external environment. There is an intense competition from several low-cost airlines which operates in the market (Homsombat Lei and Fu 2014). There are several changes in the Australian regulations concerning aviation industry which has led to severe losses for Qantas. There has been negative impression of the airline sector due to increased terrorism and this has affected the overall reputation of the sector. This may lead to loss of passengers in the busy routes, which implies a loss in the airlines revenue (Homsombat Lei and Fu 2014). There are an increasing number of business class travelers, which means that there would be loss of revenues for the low-cost carriers. There is a greater threat from the increasing fuel prices. Implication of external issues on organization The opportunities have great impact on the organizations survival, competitive advantage and growth prospects (Morecroft 2015). The organization should make more number of short-haul flights in order to cater to the growing number of customers (Morecroft 2015). This can be done by implementing additional flight routes to busy areas, which would increase the revenues of the company. Jetstar can introduce more number of flights to Singapore as there are several tourist destinations across the country. This would increase the popularity of the airlines. It should also engage in giving promotional offers to the customers (Morecroft 2015). This would not only give competitive edge for the company but it would only make easy for the organization to survive in the highly competitive environment (Wagner III and Hollenbeck 2014). The addition of the value-added services of the company would definitely make the customers avail the services of the company. This would increase the revenue genera tion of the company and this would increase the growth prospects of the company (Morecroft 2015). The increase in the revenues would help the company to expand its business in a more profitable manner. The organization should focus on increasing the number of international air routes and increase the number of aircrafts so that they can cater to the increasing needs of the customers. The threats have significant impact on the organizations survival, competitive advantage and growth prospects. The increased growth of the low-cost carriers may pose severe threat for Jetstar Airways (Christensen 2013). The rivals may attract the customers of the brand and hence Jetstar may slowly start to lose its potential customers, until and unless they give unique services to the customers (Christensen 2013). It is important to offer innovative services to the customers so that they can keep the existing customers as well as attract new potential customers (Christensen 2013). The growing instances of terrorism may make decrease the sales of the airlines, which would pose a threat for the survival of the organization. If the threats that are not managed by implementing strategic planning, then it would hamper the growth and prosperity of the organization (Hunger and Wheelen 2014). It would lead to stagnant conditions, which is not good for the organizational wellbeing. The organi zation may not be able to survive a long time under such external threats. Conclusion The modern-day organizations operate in a wide range of the external factors and they should formulate their policies accordingly. The organizational policies should correspond to the threats faced in the external environment. The selected organization for this report is Jetstar Airways. This report has discussed the eight important factors of external environment namely political, economic, social, technological, environmental, legal, customers and competition. The current life cycle stage of the organization is discussed. 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