Discuss about the Business Analysis and Valuation of Qantas limited.
Qantas limited is an Australian company which is running its business in aviation industry. In 920, company has been established at Queensland. It is one of the largest aviation companies in Australian market. The company has launched two new brands to manage the effectiveness and the efficiency of the business. The name of the brands is Jetstar and Qantas. The company has also diversified its business and market. The Qantas is offering its services at many destinations in Australia as well as at international level. The company has entered into various new countries and market to grab the opportunities. The services of the company are quite competitive and it is the oldest airline comapny in Australian market which has developed the base of loyal customers. Though, the last few decades were not that much good for the company. Various up and down has been faced by the company in last few decades. The case study also evaluate about the Qantas case study (Qantas Limited, 2018).
Michael porter has invented the technique and explained that the competitive position and the industry position of the company could be evaluated on the basis of five forces. Five forces includes bargaining power of suppliers, bargaining power of buyers, threats of new entry, threat of substitute, competition among the existing players (Chung, 2018). The five forces model analysis of Qantas limited is as follows:
Bargaining power of supplier explains about the conditions and the policies which are imposed by the industry’s suppliers on the industry while selling the products (raw material) to the industry. It measures that how much price of the raw material could be affected due to the suppliers of the company. In case of Qantas limited, it has been recognized that in the aviation industry, only few suppliers are there and thus the suppliers of the company are in a position to dominate the stock price of the company (Deegan, 2013). It has been found through the case study and evaluation that the suppliers of the industry are manipulating and the bargaining power of suppliers in the industry is quite higher.
Bargaining power of buyer explains about the conditions and the policies which are imposed by the industry’s customers on the industry while buying the products (raw material) and services from the industry. It measures that how much price of the finished products and the services could be affected due to the customers of the company. In case of Qantas limited, it has been recognized that in the aviation industry, huge customers are there and thus the customers of the company are not in a position to dominate the product and service of the company. It has been found through the case study and evaluation that the customers of the industry are not manipulating and thus the bargaining power of customers in the industry is quite lower.
Threat of new entry explains about the organizations which are trying and planning to enter into the new market and the industry. The new firm’s entry has huge affect on the old businesses which are already operating in the industry. In the case of Qantas limited, it has been found that in local market, the threat of entrants of the company is lower. However, there are various firms from worldwide which are trying to enter into the airline market. It explains that the local threat of the comapny is quite lower from the new entries but on the other hand, level threat is quite higher at international level (Deegan, 2013).
Threat of substitute explains about the products and the services which are used by the competitors as the substitute product of the company. The substitute product has huge affect on the businesses which are operating in the industry. In the case of Qantas limited, it has been found that the threat from substitute products are quite average. As the substitute products of the company are taxies, local transport etc which could be used by the customers for local travelling only (Glajnaric, 2016). It explains that the local threat of the comapny is quite higher from the substitute products but on the other hand, the threat at international level is lower.
Threat of competition explains about the companies which are operating in the same industry and offering the same products and the qualities to the customers of the company. The competition has huge affect on the businesses and the turnover of the company. In the case of Qantas limited, it has been found that the threat from competition are quite average. As the Qantas are oldest company and largest company in Australia. It explains that the local threat of the comapny is quite lower from the competition but on the other hand, the threat at international level is quite higher.
Few changes are required to be done by the management of the company to manage the business of the company and set the competitive advantage in the industry and in the market.
SWOT analysis in an internal assessment tool. It evaluates the strength, weakness, opportunity and threat position. The SWOT analysis makes it easier for an organization to identify the performance and the market opportunities of the company. SWOT analysis study has been done on Qantas limited to recognize the performance of the company. The below table describe about the SWOT of Qantas limited:
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Strength:
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Weakness:
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Opportunity:
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Threat:
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On the basis of the study, it has been recognized that the strength and the opportunities of the company are quite huge. Company could make the new strategies to grab the opportunities through using the strength of the company.
The Qantas case study and the evaluation study on the strategies and the policy of the company explain that the strategies of the company has been altered and modify by the management of the company in current time from 1992. In 1992, Australia flagship airlines were using by the company to serve the customers to travel at international destinations. However, the domestic policy of the company briefs that no changes have occurred into the corporate strategy from 1992. Till now, company is offering its services in lower cost along with the help of its subsidiary company “Jetstar” to its customers (Ross, Westerfield and Jordan, 2008).
However, the company has launched various new segments in which the high cost services are also provided by the company to its customers. For enhancing the market share and for grabbing the new opportunities, the company has launched new low cost and high cost services at international level as well. Though, it has been found that the few changes into the corporate strategy have helped the comapny of manage and enhance the market share at international level.
An accountant and auditor are required to evaluate all the accounting policies according to IFRS and AASB. These accounting policies must be used by the companies while preparing the annual reports of the company. Following are few policies which should be evaluated by the auditor:
Aviation industry evaluates that explains that airline industry and its equipment are quite costly so the owners of the company does not evaluate to purchase the equipments. They take the equipment on lease so that with the changes into the technology, the equipment could be changed. Occasionally, the businesses who are operating their activities into the industry find the option of leasing more valuable than the option of purchase Thus, an auditor should be evaluated on the equipment of the company and must analyze that which option has been chosen by the company and how the company has recorded the equipment into the balance sheet of the company (Schroeder, Clark and Cathey, 2001). It explains that it is crucial for an auditor to investigate the recording process and system of the organization and evaluate the balance sheet’s lease amount on the basis of accounting standards and the international financial recording system.
Moreover, it has been evaluated that it is a requirement for an accountant and the auditor to estimate the technique of depreciation of the organization and measure the depreciation amount of the company accordingly. Various depreciation techniques are there in the accounting which could be evaluated by the organizations to evaluate worth of the equipment and the machineries. For example, straight line method, declining units of production, double depreciation etc. (SKIFT, 2018). In airline industry, each depreciation technique could not be evaluated by the company and thus the accountant must evaluate that which depreciation is used by the companies to measure the true worth of the machineries. It explains that an auditor and accountant must look on the various depreciation tools of an organization and measure that whether the company is following the same depreciation technique or not. Auditor should examine that whether the true depreciation value has been calculated by the company or not.
Qantas financial position and financial performance of the year 2013 is as follows:
Annual report (2013) of Qantas limited explains about the better financial performance of the company. The sales of the company were $ 15,577 million and the cost of revenue was $ 7,220 m. thus, the gross profit was $ 8,357 million. $ 17 million is the net profit before tax expenses of the company in 2013 (Chung, 2018). It also explains that the net profit was $ 5 million. The annual report of the company explains that the position and the performance of the company is quite better.
Annual report (2013) of Qantas limited explains about the better financial position of the company. The total current assets of the company were $ 5,245 million and the total assets were $ 20,200 m. Further, the total liabilities of the company were $ 14,251 m and the stockholder equity was $ 5,949 m (The wall street journal, 2018). The annual report of the company explains that the position and the performance of the company have been better.
Qantas financial position and financial performance of the year 2017 is as follows:
Annual report (2013) of Qantas limited explains about the better financial performance of the company. The sales of the company were $ 15,680 million and the cost of revenue was $ 6,475 m. thus, the gross profit was $ 9,205 million. $ 1,181 million is the net profit before tax expenses of the company in 2013 (Chung, 2018). It also explains that the net profit was $ 852 million. The annual report of the company explains that the position and the performance of the company are quite better.
Annual report (2013) of Qantas limited explains about the better financial position of the company. The total current assets of the company were $ 3,119 million and the total assets were $ 17,221 m. Further, the total liabilities of the company were $ 13,684 m and the stockholder equity was $ 3,537 m. The annual report of the company explains that the position and the performance of the company have been better.
Similarities:
Further, it has been found that the financial position and financial performance of the company has been better in 2013 as well as in 2017. The net income and the gross profit of the company has been better in both the years as well as the financial performance of the company has been better as well.
Differences:
Further, the financial performance of the company has been lower and the statement of the financial performance of the company explains that the performance of the company has been lower.
The above financial statement and the study on the Qantas limited express that the position of the company has been better. The corporate strategy and the financial statement of the company explains that the various changes have helped the company to manage the performance and position in the Australian market as well as international market.
References:
Annual Report. 2013. Qantas Airline group. (Online). Available at: https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2013AnnualReport.pdf (Accessed as on 16th May 2018).
Annual Report. 2013. Qantas Airline group. (Online). Available at: https://www.qantasnewsroom.com.au/media-releases/qantas-201213-full-year-financial-results/ (Accessed as on 16th May 2018).
Annual Report. 2017. Qantas Airline group. (Online). Available at: https://investor.qantas.com/annual-report-2017/ (Accessed as on 16th May 2018).
Bui, S.B.D., Petersen, T., Poulsen, J.N. and Gazerani, P., 2016. Headaches attributed to airplane travel: a Danish survey. The journal of headache and pain, 17(1), p.33.
CAPA Centre for Aviation. 2018. Qantas Airline group. (Online). Available at: https://centreforaviation.com/data/profiles/airline-groups/qantas-group (Accessed as on 16th May 2018).
Chung, F. 2018. Qantas posts record $1.53 billion full-year profit. (Online). Available at: https://www.news.com.au/finance/business/travel/qantas-just-had-its-best-year-ever/news-story/f19ad5ddc1320591487eec0a5ffab7ab (Accessed as on 16th May 2018).
Deegan, C. 2013. Financial accounting theory. McGraw-Hill Education Australia.
Glajnaric, M., 2016. The importance of dividend paying stocks. Equity, 30(2), p.6.
Laux, C. and Leuz, C., 2009. The crisis of fair-value accounting: Making sense of the recent debate. Accounting, organizations and society, 34(6), pp.826-834.
Qantas limited. 2018. Home. (Online). Available at: https://www.qantaslimited.com/ (Accessed as on 16th May 2018).
Ross, S.A., Westerfield, R. and Jordan, B.D., 2008. Fundamentals of corporate finance. Tata McGraw-Hill Education.
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2001. Accounting theory and analysis. Chapel Hill: University of North Carolina.
SKIFT. 2018. Qantas Airline group. (Online). Available at: https://skift.com/2017/02/23/qantas-profit-dips-7-5-percent-amid-overseas-competition/ (Accessed as on 16th May 2018).
The wall street Journal. 2018. Qantas Airline group. (Online). Available at: https://quotes.wsj.com/AU/XASX/QAN/financials/annual/balance-sheet (Accessed as on 16th May 2018)
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