Prior to attending your tutorial, you are expected to do the following: 1. Read the case study on Qantas given below. 2. Read lecture 7 notes and relevant information from the textbook Chapters 9 & 10 and Chapter 7 (pp.119-125). 3. Individually, select the statement you agree most strongly with and provide the reasons why you state so. Write down or type out your individual responses on a post-it-note or on one of the boxes given in the worksheet (3 by 3 inch). If you wrote it down on paper, print & cut it out and bring that copy to class. Paste it on the team's worksheet provided by your tutor for each team. 4. Be ready to discuss and contribute to the team's selected statement for this case (20 minutes discussion). 5. Each team is to select a representative to share with the class their chosen answers (3 minutes sharing by each team) How to go about doing the case statements: - Read the statements given. Highlight the key concepts/principles that the statement is trying to justify. Outline these concepts/principles. - Skim through the case briefly once. - Read the case again thoroughly to look for evidence that will fit into these concepts/principles. Put down the examples under each of the concept/principle. - Elaborate on these examples and the concept/principle. Write them in one paragraph. - Make sure at the end of it all, you are answering the question. I.e. does the question ask you to agree or disagree?? And be able to provide a few evidence or examples in the case to substantiate against the principles or concepts listed. Show analysis and understanding of the statement. Team-based activity in class Your group must select the statement you agree most strongly with and justify this selection by applying theory from the lecture and textbook to the case study. Your group can choose one statement only (either A or B) and you must be able to defend your choice to other groups. A. The success of Qantas is based on top management having the ability to align their structure in relation to strategy & environment. Discuss and support your answer by applying theoretical understanding to the evidence given in the case. B. The success of Qantas is based on top management having the ability to manage change. Discuss and support your answer by applying theoretical understanding to the evidence given in the case. Qantas Case Study On 17 April 1935, Qantas' first international passenger flight took off from Brisbane for Singapore. Fast forward to 2015 and Qantas is a global airline with 30,000 employees and 300 aircraft, flying 50 million passengers a year. The flying kangaroo has become an iconic Australian brand, loved at home and respected around the world. Qantas expanded rapidly after the Second World War, becoming the first airline to fly round the world via both hemispheres and the first to offer a commercial jet service over the Pacific. In the 1980s, 90s and 2000s, as globalization gathered pace, Qantas helped open up the Australian economy and build new ties with fast-growing Asia. The world has changed, markets are more open and competition is tougher. The changing environmental conditions and the increasing popularity of Virgin Blue were Qantas' catalysts for change. To stay ahead in the game, Qantas has to strengthen its position and outperform its rivals. 2 Qantas was spurred to be more market oriented and leveraged on its core competencies to provide premium and value-added customer services across a variety of platforms to numerous customers segments. The hostility of the global environment has led to a collective of collaborative strategies among airlines. Qantas has been forming strategic alliances and developing network to enhance its resilience to external shocks and leverage on its partners' strengths. Being part of the OneWorld™ Alliance allowed Qantas to expand its networks through code sharing with other members and realise savings from optimisation of capacity utilisation and domestic hub traffic. The transition from a government-run to a high-performing strategic corporate organisation required aggressive structural changes. Under the leadership of Qantas CEO James Strong in 1993, the company sought to forge partnership between staff and management with a common understanding to contribute to Qantas profitability, and implemented profit driven business strategies through reducing costs and building up a customer-service focus. Qantas communicated this vision effectively to the staff through internal marketing; such as having 'road shows' to reinforce the importance of satisfying customers with a greater travel experience. Human Resource (HR) interventions were used to institutionalise the new organisation paradigm and boost performance. The key initiatives included the development of work teams, having extensive training programs, a share ownership scheme to involve employees. Qantas today reported an underlying profit before tax of $367 million for the six months to December 2014, and a statutory profit after tax of $206 million. This is a $619 million improvement over the same period last year at the underlying level. The decisive factor in this result – our best half-year performance for four years – is our transformation program, which delivered $374 million in benefits in the first half. Without the impact of transformation, Qantas would not be profitable today. This result confirms that we are executing the right plan with discipline and speed. We are meeting, or exceeding, all our targets as we build a strong, sustainable future for Qantas and grow long-term shareholder value. Since we announced our transformation program in December 2013 we have: lowered our cost base; grown free cash flow and revenue; improved fleet, product and service; strengthened customer satisfaction; reduced debt and strengthened the balance sheet; improved our return on invested capital; achieved our youngest fleet age in more than 20 years; and simplified the fleet from eleven to nine aircraft types, on the way down to seven. What sets this program apart is that we are reducing costs permanently, while at the same time delivering Qantas' best ever fleet, product and service. We now have a strong foundation for sustainable growth. I want to express my deep appreciation to the people of Qantas who have worked so hard to make this transformation succeed. We have come together to protect this great Australian company and give it a sustainable future. I also want to thank our customers. We are delighted to repay their loyalty with even better Qantas experiences today, and more rewards to come in the future. All parts of our business have contributed to this good result. Qantas International was profitable for the first time since the GFC with underlying earnings of $59 million, a turnaround of $321 million over the same period last year. Over the period it cut unit costs by almost 4 per cent while revenue increased by nearly 5 per cent. The partnership with Emirates is now more than two years old and it continues to deliver. We've seen exceptional customer satisfaction with our Dubai hub and increased range of destinations, which in turn has given us a significant competitive advantage. With smarter fleet utilization, Qantas has been able to offer new or additional capacity, including seasonal flights to Vancouver and additional services to LA, Santiago and Japan. Our new A330 product and lounges in Singapore, Hong Kong, and Los Angeles have been met with acclaim. In 2011 we set ourselves the task of getting Qantas International back into profits. We expect to achieve that goal this year, on target. Our domestic airline businesses performed well over the half – with total domestic profitability of just under $300 million. The Qantas Group strengthened its position substantially in the domestic market. Qantas Domestic reported an improvement of $170 million compared with the same period last year, with underlying earnings of $227 million. With its unrivalled network, frequencies, lounges, and Loyalty program, Qantas Domestic retained an overwhelming 80 per cent revenue share of the Australian corporate market. Looking at large corporate accounts, we recorded 113 renewals, 42 new 3 accounts – with 16 of those won back from the competition – and just four lost. Customer satisfaction with Qantas Domestic was at record levels in the December quarter. The Jetstar Group continues to build scale and brand presence, flying to 66 destinations across 16 countries in the Asia-Pacific. It reported underlying earnings of $81 million, an improvement of $97 million on the same period last year. Domestically, Jetstar achieved earnings of $63 million, driven by improved yields and loads and a continued focus on managing costs and capacity. Strong Jetstar International earnings of $51 million reflected the benefits of a network restructure and the roll-out of the Boeing 787 Dreamliner. Qantas' investments in the Jetstar-branded airlines in Asia will generate long-term returns in the world's most important emerging markets. These airlines improved their performance in the first half, relative to the prior period, with a $13 million reduction in Qantas' share of losses. Jetstar Asia in Singapore was profitable in the December quarter. Both Qantas and Jetstar have won a string of awards and recognition for product, service and safety. Qantas Loyalty continued its outstanding performance. With 10 per cent earnings growth, Loyalty achieved underlying earnings of $160 million. It attracted more than 400,000 new members in the half, to reach a new high of 10.5 million. Continued innovation and investment in programs like the online mall, Aquire, and Qantas Cash card, have helped grow, diversify and maximize the customer base. They have brought in a younger demographic, with 60 per cent of new members aged 36 or younger. Qantas Freight delivered underlying earnings of $54 million, a strong improvement which was driven by significant recovery in the international freight market – outweighing a challenging domestic market. Overall, this result demonstrates the continuing strength in our portfolio of integrated Qantas Group businesses. The Group's financial position improved significantly with more than a billion dollars in cash generated from operations for the half, up nearly 45% on the prior year. The outlook for the Group's operating environment in the second half of this financial year has improved after a turbulent period. Demand is mixed in the domestic market and steady in the international market. Importantly, market capacity – both domestic and international – is moderating and aligning more closely to demand. Lower fuel and Australian dollar values have, overall, improved our competitive position. While fuel prices produced a modest benefit in the first half, we expect fuel costs for the full year to be no more than $4 billion at current prices – which will be a significant boost to the bottom line in the second half. And we expect all operating segments to be profitable in the full year. Today's results are good and we take pride in our progress so far. Transformation has been central to our recovery and we will drive it forward with all our energy. It is about making ourselves strong and resilient through the ups and downs of economic cycles. Over the next two years we will further strengthen the Qantas position. We will be a company able to withstand tough times, capitalize on the good times, and deliver sustainable and attractive long term returns to our shareholders. We will be a stronger integrated Group portfolio where each business complements the others, generating sustainable returns through the cycle. We will always be the airline that represents the best of the Australian way of life. And today we can see a bright future for this great Australian company. Qantas has made the biggest reshuffle of its senior executive team in several years that will result in the departure of the chief executives of its international and domestic operations. As part of the rejig, Simon Hickey, the chief executive of Qantas' loss-making international operations, and Lyell Strambi, the boss of domestic, will both leave the airline by February. Andrew David, a former Tigerair Australia boss and Virgin executive, has continued his rapid rise at the airline, taking over from Mr Strambi as Qantas Domestic chief executive. The domestic operations of Qantas and its budget offshoot make the lion's share of the company's earnings. Qantas chief financial officer Gareth Evans will take the reins as chief executive of the international division and freight. Mr Evans will be replaced in the position by his deputy, Tino La Spina. The big reshuffle follows Qantas this week forecasting a first-half underlying pre-tax profit of up to $350 million, which it has attributed largely to its so-called transformation plan. A plunge in oil prices and a truce in the capacity war with Virgin Australia in the domestic market has also helped the airline's fortunes. Qantas copped criticism from its workforce earlier this year when the executive team 4 remained intact while it embarked on the axing of 5000 jobs. Deutsche Bank analyst Cameron McDonald said the appointment of internal candidates to the heads of both Qantas' domestic and international operations signaled that the airline would remain focused on its present strategy. "They are in the middle of a significant transformation project, which cuts across all aspects of the business ... and I would not expect these changes to have a significant impact of the strategic direction of the group or the individual divisions," he said on Friday. The airline said the latest changes would result in a flatter management structure for the airline because the positions of deputy CFO, QantasLink CEO and Qantas Airways chief operating officer would be not be replaced. As part of the changes, QantasLink boss John Gissing will take over as group executive of associated airlines and services, and report directly to Mr Joyce. The Qantas CEO's direct reports will increase from nine to 11. Robert Marcolina, the head of strategy, will take on an expanded role as group executive of strategy, transformation and information technology. It is the biggest reshuffle since 2012. The latest changes will be finalised by March. Mr Joyce said in a statement that the new executive team would "deliver for our customers, shareholders and employees according to the strategy we have laid out". He also recognised the contribution Mr Strambi and Mr Hickey, a 10-year veteran of Qantas, had made to the airline. "In the 12 months since we announced our accelerated transformation program, we have made excellent progress," Mr Joyce said. "But there is still a lot of work to build the foundation for a stronger, moresustainable and more-successful Qantas." The airline's shares have soared almost 87 per cent mid-October on the back of more-benign competition on domestic and international routes, a fall in fuel prices and its cost-cutting plan. As part of its efforts to return to profitability, Qantas is in the midst of removing $2 billion in costs over three yea