Qatar Airways is a great example of a premium and upper middle class air carrier whose success on the market is remarkable. The airline was established in 1993 with a fleet leased from Kuwait Airlines. The company adopted a new growth strategy in 1997 and since then it has been expanding at a steady rate that averaged out at a two-digit number. The company had to face considerable competition from other airlines that offered similar services at similar prices. Thus, it was necessary to generate a competitive advantage that came both in the shape of prices and differentiated advantages.
Doha Airport is entirely owned by Qatar Airways. It is also a bit of a strategic advantage for the airline as it lies on the crossroads of South-East Asia, Europe, Far East, Middle East, and Africa. The company has shown a brilliant ability to turn their location into their great advantage. From 1997 until 2016 their fleet has grown from 40 to 140 airplanes of different types and capacities. It owns multiple subsidiaries in the sphere of engineering, maintenance, and catering. Besides, the company offers unparalleled travel conditions to its customers and was granted such world-famous awards as World's Best Business Class, Best Business Class Airline Lounge, and Best Airline Staff Service in the Middle East during Farnborough 2016, and was named the Best Airline in the World according to the reputable organization Skytrax. Taking great pride in far more than the aforementioned awards, Qatar Airways has a few specific features that contributed to its rapid growth and exemplary success. Among them is the young fleet, the new brand campaign, emphasis on safety, and focus on business-class flights and commodities associated with this market segment. These factors have contributed to the success of Qatar Airways in a very competitive market where numerous forces prevent companies from entering the industry as well as developing as quickly as Qatar Airways.
Analysis of the Air Transport Market
Porters theory about five market forces has been used to analyze Qatar Airways successful business strategy. According to Porter, companys success in the long run is predetermined by crucial external factors: power of suppliers, power of customers, barriers to entry, threat of substitutes, and rivalry between the similar companies. These driving forces serve as criteria for assessing markets penetrability and challenge its external and internal growth strategies. Offensive and defensive strategies are also both applicable to the five forces as they do explain business strategies of companies, but from a different angle.
The air transport market is extremely competitive and it is characterized by great barriers to entry and considerable rivalry between the air carriers. The competition is exacerbated by low-cost companies entering the market. The industry has high entry barriers due to considerable capital costs and other companies that have high consumer loyalty. Threat of substitutes is also notable because of the presence of other carriers that offer similar services for similar prices and exist longer. Consumer power can be characterized as significant since customers have a lot of choices with the abundance of existing airlines. Furthermore, rivalry can be classified as high because multiple destinations can be reached by means of different airlines that offer a number of services such as improved menus and increased on-board comfort. Finally, the power of suppliers in this market is substantial - two major suppliers of the existing companies on the market are Airbus and Boeing. Their influence on the market is virtually unlimited. That is due to the absence of choice for the airlines who obey the rules set by large manufacturers.
It is evident that the air carrier market is increasingly competitive. Yet, Qatar Airways occupies a very confident position on the market and shows the ability to curb the rivalry.
Analysis of Strategies
Strategic management of Qatar Airlines is analyzed from the point of view of the offensiveness versus defensiveness as well as their orientation towards external or internal growth. While offensive strategies are effective for entering the market, defensive ones are suitable for holding a firms strong positions there. Qatar Airways strategies have been characterized by the domination of defensive strategies to hold its premises against strong rivals. The airline has been awarded many prizes and it never fails to notify the public about its achievements. This may preempt the potential competitors from entering the market. Expansion is also one of the companys defensive strategies that contribute to the difficulties with which new firms enter the market. Airlines rapid growth scares the competitors away from the market, creating a feeling of increased supply that does not meet demand.
The offensive methods of Qatar Airlines included generous investments from the government back in 1997. It still owns about 50% of all the airlines shares. The company also practices offering customers of other airlines improved services at a better price. They are known to compete with Air Asia, Emirates, British Airways, and Etihad. This, however, gives an incentive to the higher customer power as they receive more choices which eventually trigger more rivalry and competition.
Internal growth strategies are characterized by steps taken within the company in order to develop from within. Such growth strategies may take a form of expansion, diversification, and modernization. For Qatar Airways all three serve as a source of their competitive advantage. Firstly, the famous safety qualifications, as it was mentioned before, are a part of modernization and create a differentiated advantage over the competitors. The young fleet also belongs to the domain of modernization, and helps to oust other rivals out of the market as well as set high standards for safety, preventing new rivals from entering it. It can be classified as a defensive strategy.
Secondly, Doha airport is the airlines property and its every unit - from business class lounges to multiple stores - bears an emblem of the company to serve as a great example of specifically concentric diversification. It is an important strategy in an already existing business of a highly competitive market. The air carriers attention to its on-board and booking services also shows an exemplary product diversification strategy that is aligned with the high power of customers in the market as well as the rivalry with other premium service airlines. By focusing on the business class segment and particularly caring for the customers of this very profile, the company creates a reputation of being one-of-a-kind, which proves to be effective in the given market conditions.
Moreover, the new brand campaign contributed greatly to the companys image that promotes fulfilling passengers ambition through travelling. The campaigns name is Going Places Together and it aligns with the latest business trend that claims that good companies do not feel satisfied with merely providing customers with goods or services. Through this marketing campaign, the company shows the importance of travelling goals of every client and encourages them to choose Qatar Airways to achieve their purposes either on business or on leisure trips. It is in the first place appealing to the people of business who find affiliation with such slogans.
Concerning external strategies, they often involve foreign collaboration, mergers, strategic alliances, joint ventures, and acquisitions. The airline is a member of the famous Oneworld international alliance. Qatar Airways customers are able to enjoy special discounts and other perks due to this fact. The company is presently investing into its strategic alliances by providing maintenance, catering, engineering, and other services to less developed and more remote areas of Africa and Asia through its subsidiaries. Unlike many other airlines, however, Qatar Airways is not presently the owner of any low-cost subsidiaries which is a general tendency in the market. Through its external and internal strategies Qatar Airways has achieved a great competitive advantage that is characterized simultaneously by cost efficiency and differentiation.
The success of Qatar Airways is currently so overwhelming that it is difficult to devise universally applicable recommendations for the nearest future. Without a doubt, the company should remain faithful to developing alliances with businesses of emerging countries of Africa and Asia as it has the privilege of being strategically based in the Airport of Doha. It should not be deceived by its rapid rate of fleet growth as excessive concentration on quantity could be detrimental to quality and, in particular, safety which is presently a great competitive advantage. Apparition of new low-cost air carriers could be one of the threats that has been already plaguing the airline market of the Southeastern Asia and could yet expand further to the Middle East. Therefore, it would be wise to adopt an aggressive defensive strategy to ensure that no one challenges the companys status. To conclude, Qatar Airways should stay vigilant and adapt its strategies depending on the power shifts of the forces suggested by Porter.