individual assignment

Introduction

Air New Zealand has been the New Zealand national carrier since 1940 and boasts about 105 fleets

now1. Industry and competitor environments are important in establishing a company's position.

Industry environment refers to factors such as Porter’s five forces which establishes an

organization’s competitive response and profit potential. Competitor analysis, on the other hand,

studies and interprets competitors' positions and reactions to establish competitors' ability to

respond to actions like price change. This analysis focuses on industry and competitor

environments affecting Air New Zealand.

Industry Environment Analysis

Both PESTEL and Porter’s Five Forces analysis refer (Appendix) show that Air New Zealand has

the potential to grow and develop in the transportation industry despite the presence of competitors.

Air New Zealand exposes itself to different political climates since it operates in several countries;

hence the stability of such countries’ government is key. However, it enjoys government support

in its host country, which gives it a competitive advantage. Air New Zealand operates domestically

and internationally, creating a scale of economies that helps it against competitors. Socially, the

airline should focus on decisions that promote the health and wellbeing of its customers.

Technologically, Air New Zealand has the infrastructure and exploits technology tools such as

websites, blogs, and social media sites to improve customer experience. Air New Zealand also

soars above its competitors through sustainable waste management programs and strategies such

1 2022.https://www.bitre.gov.au/sites/default/files/documents/international_airline_activity_0222.pdf.

as ‘project green’ that has seen reduced waste in landfills2. Lastly, legally, Air New Zealand takes

care of its employees and observes anti-discrimination laws.

The threat of new entrants into the Australia-New Zealand market is considered low due to the

large capital required. Air New Zealand continues to diversify its economy to curb any possibility

of new competitors.3. Supplier bargaining power has a moderate to high significance due to the

volatility of fuel prices and the limited availability of aircraft supply. Air New Zealand should

create a supply of multiple suppliers to avoid high operational costs. Buyer bargaining power has

a moderate significance; it depends on the kind of service offered to the customers. Air New

Zealand emphasizes customers' loyalty and gives the best experience regardless of culture. The

threat of substitutes has a moderate significance. Roads and railways can substitute domestic travel

though the time factor is affected. Rivalry among competitors has moderate significance; Air New

Zealand's domestic competitors are Jet Star. Internationally, its competitors are Qantas, Jet Star,

Virgin Australia for Australia, Asiana Airlines, Singapore Airlines, and Qantas for Indonesia,

among others.

2 Baxter, Glenn. "SUSTAINABLE AIRLINE WASTE MANAGEMENT: A CASE STUDY OF AIR NEW ZEALAND'S WASTE

MANAGEMENT PROGRAMS AND STRATEGIES." International Journal for Traffic & Transport Engineering 10, no. 3 (2020)

3 Tham, Aaron, and Benjamin Evers-Swindell. "Stand up and be counted—A diverse economy perspective of air New Zealand." Tourism Planning

& Development 15, no. 5 (2018): 567-583.

Competitor Analysis

Air New Zealand faces competition from other major airlines, including Qantas, Emirates, and

Pacific Blue internationally.4. As shown by the pie chart extracted from Australia's Bureau of

Infrastructure and Transport Research Economics (BITRE) report released May 20215, Air New

Zealand has the largest market share rendering it dominant in the Australian airline. Some of Air

New Zealand's close competitors are Qatar Airways, Singapore Airlines, Emirates, and Qantas.

4 Simple Flying. 2022. Hello Air New Zealand - Australia's New No 1 International Airline. [online] Available at: <https://simpleflying.com/air-

new-zealand-australia-may-market-share/> [Accessed 30 April 2022].

52022.https://www.bitre.gov.au/sites/default/files/documents/international_airline_activity_0521.pdf.

The two pie charts compare market share by May 2021 and as of February 2022. Even though Air

New Zealand remains dominant in the market, its market is gradually reducing, and intense

competition is evident in the transportation industry. Air New Zealand uses its strengths to soar

against this competition. The carrier has high seat capacity and frequency of operation, unlike its

competitors as per the below pie charts6.

6 "ANALYSIS: Air NZ Plays To Its Strengths As Competition Rises". 2022. Flight Global. https://www.flightglobal.com/analysis-air-nz-plays-to-its-strengths-as-competition-rises/119859.article

Being aware of its competitors, Air New Zealand uses a marketing strategy that keeps it ahead of

them. For instance, Air New Zealand focuses on the experience of its customers rather than the

product. Air New Zealand understands its target market well and differentiates in accordance to

diversity by tailor-making the content to suit their customers and give them a reason to use their

airline7.

Conclusion

Air New Zealand has adopted a competitive strategy to limit new entrants even. Cultural visible

elements, pricing, resource capabilities, and integration of marketing principles have helped Air

New Zealand grow amidst high competition.

7 2022. https://impressive.com.au/why-air-nzs-marketing-strategy-soars-above-competitors/.

Appendix

Qantas Airways, Pacific Blue, and Emirates are the major strategic groups competing with Air

New Zealand. Strategic groups are the relevant firms in the industry competing with Air New

Zealand. These strategic groups form competitors as they offer the same services and target the

same customers. It is evident that Air New Zealand reacts to the threat of entrance and observes

the AMC framework of competitor analysis. A stands for awareness of competitor presence, M is

the motivation to respond to competitor presence, and C is capabilities or resources to counter the

presence of the competitor. This framework is evidenced in Air New Zealand's reaction to

Emirates, Kiwi International, and Pacific Blue's entry into the market. Awareness resulted in the

introduction of low-cost carriers, predatory pricing, and agitation for policy change to catalyze the

Trans-Tasman route. The speed at which Air New Zealand reacted to Kiwi International's entry

into the market pushed the firm out of the market within 13 months.

Industry Environment Analysis

A general environment refers to the various factors that affect an organization’s scope of operation

and performance, which is beyond its control. Such factors create opportunities as well as

drawbacks for a firm. Tapping opportunities can be realized through creating strong strategies.

Factors in the general environment affect what happens in the industry environment. On the other

hand, the industry environment refers to the scope set by a group of firms producing the same

products for similar customers using similar resources. Doing a PESTEL analysis for Air New

Zealand can help understand the Political, Economic, Social, Technological, Environmental &

Legal (PESTEL) factors that affect the organization to develop realistic strategies to react and

adapt to the general environment.

PESTEL Analysis

PESTEL Explanation

Political The availability of strong political structures promotes the growth and development of Air New

Zealand8. A stable government, in conjunction with good trade relations of New Zealand with other

countries, creates a good environment for growth and attracts investors who can help the organization

through the availability of numerous resources. Desirable tax policies support organization growth and

development since they can easily expand into the international market. Competition regulation

ensures a fair industry while protecting local growth. Air New Zealand can take advantage of the trade

blocks and treaties signed by its country of origin with other countries regarding borders to expand its

market share.

Economic

(Significance:

High)

Economic factors: inflation and interest rate, consumer spending, and unemployment trends can affect

business growth9. A moderate inflation rate favors Air New Zealand, promoting consumer confidence

and spending trends. Low and moderate interest rates encourage taking loans; consequently, high

consumer purchasing power and consumption rates create penetration opportunities for firms like Air

New Zealand.

8 "Air New Zealand Limited PESTEL Analysis". 2022. Case48. https://www.case48.com/pestel-analysis/2167-Air-

New-Zealand-Limited.

9 "Air New Zealand Limited PESTEL / PEST & Environment Analysis[Strategy]". 2022. Fern Fort University.

http://fernfortuniversity.com/term-papers/pestel/nyse4/6356-air-new-zealand-limited.php.

Social Social factors in the general environment include demographics, education, family size, structure, and

health consciousness. A high youth population and moderate to high middle-class population is

essential for business growth as it helps create a large customer base. These groups help Air New

Zealand to have brand ambassadors and promote consumer loyalty. The availability of high education

is key as Air New Zealand can readily get skilled and talented personnel, knowledgeable consumers

who have brand awareness and stand for quality. Family size helps understand consumer patterns,

whereas heath consciousness has recently been a very important factor. Many people have shifted their

focus to decisions that promote their wellness. Hence, Air New Zealand can take advantage of this,

incorporate health aspects in their products, and take Corporate Social Responsibility initiatives.

Technological Air New Zealand's country of origin has a strong technological infrastructure that influences the

organization to embrace technology in its operations for efficiency and affectivity purposes.

Additionally, technological infrastructure attracts direct and foreign investment, giving Air New

Zealand a competitive advantage. Air New Zealand enjoys a competitive advantage through high

internet penetration amongst the population. It can reach consumers widely via the internet and use

social media for connectivity and gathering feedback and consumer data. Lastly, investing in research

and development helps the industry gain new insights into doing business.

Environmental Environmental factors include sustainability and recycling to protect the planet. Therefore, an

organization's decision regarding its operation concerning the environment affects its success in the

market globally. Consumers nowadays are aware of recycling products rather than disposing them off.

Air New Zealand has established recycling sites at the centers where its products are disposed.

Moreover, as per the country's regulations on waste management and control, the organization has

launched a process for managing its waste in an environment-friendly way. Air New Zealand embraces

the green lifestyle by engaging in Corporate Social Responsibility (CSR) activities. Air New Zealand

also embraces the country's renewable energy investments by using solar energy and hydro poles in

its business operations.

Legal Air New Zealand considers health and safety laws and considers the safety and health of its employees.

In addition, it considers employment and anti-discrimination laws due to the presence of a diverse

population domestically and internationally.

Porter’s Five Forces Analysis

Force Explanation

The threat of new

entrants

(Significance: low)

Air New Zealand faces the threat of having new entrants venturing into the transportation

industry, bringing new innovative ways of doing business, which would pressure the

organization to lower its prices, reduce costs, and provide new customer value

propositions.10. Air New Zealand must overcome this challenge to remain a top competitor.

Air New Zealand should innovate its products and services. Additionally, the organization

should build its economy of scale, allowing it to raise and lower its prices appropriately

without affecting its profitability.

Bargaining Power of

Suppliers

(Significance:

moderate-high)

Powerful suppliers in the transportation industry can exploit firms in the industry. Higher

supplier bargaining power means low profits for the organizations in operation. Air New

Zealand should build an efficient supply chain by incorporating multiple suppliers to curb

such a force.

Bargaining power of

buyers

Buyers affect the firm's profitability in the end because they want to buy the best offerings

in the market at low prices. Having a smaller powerful customer base gives them higher

10 "Air New Zealand Limited Porter Five Forces Analysis". 2022. Essay48. https://www.essay48.com/term-

paper/2167-Air-New-Zealand-Limited-Porter-Five-Forces.

(Significance:

moderate)

bargaining power and low profits for the firm. Air New Zealand should keep coming up

with new products to reach a wide base of customers and lower their bargaining power

while ensuring their loyalty.

Threats of Substitute

Products or Services

(Significance:

moderate)

Availability of new products or services that satisfies similar customer needs in diverse

ways reduces industry profitability. Air New Zealand, therefore, should strive to understand

its customers’ needs as well as the services they need.

Rivalry among the

existing competitors

(Significance:

moderate)

Intense rivalry in an industry reduces prices lowering the profitability in the end. The

transportation industry where Air New Zealand operates is very competitive, affecting

overall profitability in the end. To tackle this, Air New Zealand should build a sustainable

product and service differentiation, scale its economy to compete better, and collaborate

with competitors to increase market size. Air New Zealand has put much effort into creating

its own diverse economy11, which enables it to compete better and maintain dominance in

the industry.

11 Tham, Aaron, and Benjamin Evers-Swindell. "Stand up and be counted—A diverse economy perspective of air

New Zealand." Tourism Planning & Development 15, no. 5 (2018): 567-583.

Reference

Ehambaranathan, Eswaranathan, Shagesheela Murugasu, and Kawtar Tani. "Marketing

Engineering: The Evaluation of Integrated Marketing Communications towards the

Growth of Air New Zealand." International Journal of Innovative Science, Engineering &

Technology 6, no. 5 (2019): 227-235.

Simple Flying. 2022. Hello Air New Zealand - Australia's New No 1 International Airline. [online]

Available at: <https://simpleflying.com/air-new-zealand-australia-may-market-share/>

[Accessed 30 April 2022].

"Air New Zealand Limited PESTEL Analysis". 2022. Case48. https://www.case48.com/pestel-

analysis/2167-Air-New-Zealand-Limited.

Tham, Aaron, and Benjamin Evers-Swindell. "Stand up and be counted—A diverse economy

perspective of air New Zealand." Tourism Planning & Development 15, no. 5 (2018): 567-

583.

"ANALYSIS: Air NZ Plays To Its Strengths As Competition Rises". 2022. Flight Global.

https://www.flightglobal.com/analysis-air-nz-plays-to-its-strengths-as-competition-

rises/119859.article.

2022. https://impressive.com.au/why-air-nzs-marketing-strategy-soars-above-competitors/.

"Air New Zealand Limited PESTEL / PEST & Environment Analysis [Strategy]". 2022. Fern Fort

University. http://fernfortuniversity.com/term-papers/pestel/nyse4/6356-air-new-zealand-

limited.php.

"Air New Zealand Limited Porter Five Forces Analysis". 2022. Essay48.

https://www.essay48.com/term-paper/2167-Air-New-Zealand-Limited-Porter-Five-

Forces.

2022.https://www.bitre.gov.au/sites/default/files/documents/international_airline_activity_0222.

pdf.

2022.https://www.bitre.gov.au/sites/default/files/documents/international_airline_activity_0521.

pdf.

Baxter, Glenn. "SUSTAINABLE AIRLINE WASTE MANAGEMENT: A CASE STUDY OF

AIR NEW ZEALAND'S WASTE MANAGEMENT PROGRAMS AND

STRATEGIES." International Journal for Traffic & Transport Engineering 10, no. 3

(2020)