Case study: Crumpler

Topic 1- operations

• Product offered
o heavy duty bags for bike couriers

Role of operations management

Aim
o to differentiate the business’s products from its competitors rather than using a cost leadership strategy.

Crumpler’s aim has been achieved through:

o a better quality product
o a vast variety of products in its range
o incorporation of new technology
o Clever design

Influences on Crumpler’s operations

Globalisation
• Globalization has allowed crumpler to sell to more countries and markets. The expansion has allowed them to open stores in New
York, Toronto and Singapore.
• Crumpler bags are not available in Greece, Japan, and Hong Kong, China.
• Its exports are at 6 million or 50% of total sales.
• Recently, they negotiated with Apple, allowing them to provide their bags to more consumers.
• Crumpler can outsource its manufacturing and now has a global supply chain. Operations costs have reduced as the other
countries had lower costing inputs and labour.

Economic
• There have been many changes recently,
o the cost of oil has raised highly-due to the fact that crumpler’s bags using lots of nylon in its productions, its costs have
risen highly.
o the economy of Europe and Asia have fluctuated-due to the economic slowdown and the global financial crises, sales
globally have dropped immensely.
o cost of labour in Asia has risen-Asia’s labour

Technology
• There have been recent developments in the production of clothing and communication. Computer aided manufacturing and
designing was introduced allowing efficiency to be increased.
• Headquarters started using email in its communication to allow faster transmission of messages within the company.
• Three dimensional designing software allowed them to create new products virtually and, it could be viewed from a few
perspectives.

Design and manufacturing process

• All products are designed in Melbourne.
• Where does Crumpler purchase its materials from? Leather from Melbourne, Nylon from Taiwan and South Korea, canvas from
china, clips from Japan, webbing from China, Luggage handles from Taiwan
 • Crumpler’s first and foremost criterion for their design team is strength and practicality. They use only the strongest materials,
e.g. the shoulder straps are made from webbings used in cranes which can lift cars. The zippers are of high quality and will not
break.

Quality expectations

• Crumpler knew that consumers would use the bags to hold precious technology so, the highest quality was needed.
• Crumpler bags are water resistant due to the nylon shell and the inner padding.
• Customers expect quality from such a higher price.

Competition

• Many of Crumpler’s competition cannot match their quality as they are made using lower cost inputs and materials. They are
made from lower quality nylon.
• Their closest competition is Lowepro and North face.

Social and environmental sustainability

• Crumpler’s bags are built so that they last longer and can be repaired. This means that not as much resources need to be used to
make as much bags for replacement.
• Crumpler does not run their factories directly, it is subcontracted when labour standards are low. In their factories, they try to
improve conditions where workers work, and have an independent monitor.

Operations process
Inputs
Materials
• The key material inputs are heavy-duty rip stop nylon and thread to construct the bags. Crumplers’ bags have a water-
resistant 900 denier shell.

• A nylon ripstop nylon, which is super strong, lightweight, durable and resistant to fraying, tearing and ripping.

Information
• Information from a parachute manufacturer enabled the business to start new stitching methods that added strength to
the bags.
• Extensive data for the design specifications for every model of bag ever produced by Crumpler is kept in accessible files.
This allows models to be edited and changed quickly without delay, saving time and mistakes.

Human resource
• The creative talents of the design team are the key inputs. In the future, they aim to attract international designers for
future expansions.

customers
• Crumpler encourages feedback from its customers. They monitor blogs and message boards to see demands for new
products and to improve existing ones.

Facilities
• Crumpler started as a small shed in the rural suburbs. It then moved to a warehouse. Now they have a designing studio in
Ballarat and the major warehouse in Melbourne.
Transformation processes
Of the 4V’s which V is the most significant for Crumpler? Variety. Crumpler uses the batch type for its production. They are required to
produce a variety of models, styles and sizes. Each model of bag will need to be made in different sizes and colours. The batch method
allows them to produce a huge variety of many products. It also allows them to add different styles or models when they want to.

Sequencing and scheduling

The aim to have products out as fast as possible. Clear scheduling allows them to have its new products available to consumers. Each task
needs to be analysed to determine the fastest way of getting things done.

Outputs

Customer service
• Crumpler provides a high level of service that allows any questions about issues after the sale. This is done online or at retailer
stores.
• Store managers are well informed of all their ranges and thus it allows them to provide quick customer service to consumers.

Warranties
• Crumpler provides a lifetime warranty on zippers, buckles, fabrics and bindings.
• Their warranty is called “Til death do us apart”

Operations strategies
Performance objectives
• Quality is the most important to Crumpler. Their products last long and are of high quality.
• Speed is an objective of Crumpler. Recently CAD and CAM has increased the speed of operations and the time it takes to get bags
from the warehouse to retailers. This reduces delay and costs.
• Dependability is the reliability of the product or service. The company has a reputation for having long lasting products. They will
not break down and products will always be available in their stores. There is also dependability in supply and delivery. Crumpler
always fills orders and distribute to retailers on time and web orders.

New product design and development

• Crumpler is always improving its products and developing new bags. With the release of the Apple iPad, there was the making of
the Herbus and Fur Bags.
• Recently, they upgraded their zippers. The “Vislon zipper” was covered with water repellent. This made an irritating sound to
customers, so a silent option was made.
• The Velcro fasteners were updated so that the bag can be closed using two closures and the cover was under the Velco. This
meant that it was more efficient and there were less chances of ripping.

Supply chain management

How has crumpler improve its supply chain management? The supply chain management has been outsourced to two German partners.
This has allowed the supply chain management to improve by speeding up the delivery of products from warehouse to consumers,
planning current inventory levels and managing damaged goods returned by customers and distributors. The operations has been more
global, warehouses have been based overseas.

Outsourcing
Where and why does Crumpler outsource its manufacturing? Crumpler outsources its manufacturing to Korea and Vietnam. Recently,
this it was in Melbourne. This was done as Vietnam provided cheap labour, made good quality products and had a reliable supply.

Technology
• Is crumpler’s technology new and cutting edge or tried and tested. Crumpler’s technology is tried and tested. The core inputs like
the nylon and zippers were developed in the 1930’s.
• Explain how CAD is used by Crumpler to develop new products. Computer programs are used to develop the design patterns on
the bags. In the program, they can set the material inputs, size, shape and even colour. They can be inputted into the program
and the robots will cut the sizes and padding just as they like it. This saves materials and increases efficiency.
Inventory management system
• Which inventory management system does Crumpler use and why? FIFO is used at Crumpler. There is the assumption that the
first stock that has been purchased and is the oldest will be sold first. This prevents old stock becoming obsolete and building
up. More importantly, stock has to be available as promoted.

Quality management
• Crumpler has a performance objective of the highest quality- explain how crumple achieves this objective. Bags are regularly
checked and inspected to check for any defects. However quality assurance is heavily relied on, their factories are certified with
an ISO 9002 which means quality is assured. Also, zero defects is the aim for them.

Change at crumple
• Explain the restraining forces and driving forces at crumple and how it moved towards change. The driving force is to be debt
free, but the restraining forces are job losses. Many jobs were lost when they outsourced overseas and reduce manufacturing
locally. When the design technology was updated, local jobs were lost.

Global factors
Summarise and explain how global factors (global sourcing, economies of scale and scanning and learning) have helped Crumpler to
achieve the success it enjoys.

• Crumpler has begun obtaining its inputs from countries that specialise in it. Zippers and buckles were manufactured in Vietnam
while, Nylon was made in china. Sheets were imported from Taiwan. By doing this, costs can be reduced as there is a large supply
of those inputs overseas.
• Crumpler has increased its capacity through expanding globally. The Vietnamese manufacturers had produced bags for similar
businesses under the same roof, but increasing its production. This has allowed them to reduce costs, and this reduces costs and
increasing profits for Crumple. By doing this, they have been able to increase production from 300 bags to 1,000,000 units.
• To scan and learn about what competitors are doing, Crumpler keeps up to date about travel goods trade events in Europe and
USA. Unfortunately, other companies have begun to copy them.
Topic 2- marketing
Interdependence of marketing and other key business functions
• The marketing strategies are dependent upon the developments in operations which allows it to make new and innovative
products.
• The operations department must give information to the marketing department on what is being produced before it can be
marketed.

Types of market
• Crumpler originally produced messenger bags in the mass market.
• Crumpler has begun market segmentation (demographic) to produce other type of bags such as camera and laptop bags.
• The ranges of bags are targeted at 18–35-year-olds, through the use of giving their bags names, e.g. The seedy One, The old
Banger.

Competition
• Crumpler has competitors in their different ranges of bags, e.g. camera and luggage bags.
• They have been able to combat competition through superior design and quality, giving them a competitive advantage over the
competitors. For example Crumpler’s high quality and design in the bags allow them to continually keep and expand their
customer base.
• Crumpler’s success has meant that copycat and counterfeit goods are beginning to appear. Crumpler is setting up special
arrangements with customs offices around the world that monitor ports for counterfeit goods.

Sales outlets and pricing

• Crumpler’s products are exclusive to their stores, so they can set their own pricing.

In America, there are many dealer networks. Crumpler has set an manufacturer’s suggested retail price in their contracts to which retailers
agree to stick to the price allowing them to maintain prices.

Marketing strategies
• Crumpler’s marketing strategies are informal and because their approach to business to have fun and laugh
• Crumpler has always been known for its innovative, individual approach to marketing, leading to consumer perception of unique
and well-made bags made by a company that doesn’t take itself too seriously.

Early days- guerrilla marketing

• In the early days, they would driving around and stencilling their logo on any surface. This generated much mouth to mouth
publicity, it was cheap and adventurous.

Demographic targeting
• Crumpler targets their products at the 18–35-year-olds who enjoy the casual and mocking approach.
• They have advertised via street magazines and free music magazines. They reach students via sponsoring university and college
events, parties and competitions and magazines. Their logo was shown at the Melbourne Fringe Festival guide.
• They made a 60 second cinema ad that ran in an art house in Melbourne.
• Other methods of advertising include:
o short videos on YouTube
o paying apple growers to put the Crumpler logo on the stickers
o sponsorship of the SBS program Rockwiz
o sponsorship of a nude footrace
“Beer for bags”
• Each year, across all of its markets (excluding Adelaide and Brisbane), Crumpler encourages its customers to pay for their products
through beer.
• This creates controversy on television shows which brings world-wide publicity in Australia and overseas.

Trade shows
• In 2005 Crumpler decided to exhibit at the 2005 International Consumer Electronics Show – the largest electronic and technology
show in the USA. It costed 30,000 dollars.
• They hired a University of Melbourne architecture student to design a low-tech environment consisting of 55-gallon oil drums and
plywood walls and floors painted with green chalkboard paint. There was lots of space for people to write on the walls, it was
interactive.
• It was so impressive that Crumpler signed 3 companies for projects.

Ethical influences on marketing

• the ‘beer for bags’ campaign is encouraging the illegal trade of alcohol and promotes drinking amongst the 18–35 demographic.
• They were not promoting drinking among their customers: ‘we’re taking beer off the streets and giving you the bags’. In Brisbane
and Adelaide, police closed down the sale, arguing that Crumpler were in breach of liquor licensing laws.

Market research
• Stuart Crumpler bag designer and co-founder working as a bicycle courier designed the bag for his own use. Other couriers saw it
and started using the bags. He received feedback on what did and didn’t work.
• Today, the development of Crumpler bags is often determined in-house through its team of designers, who are encouraged by
management to bring ideas on board.
• Consumer input into the process is encouraged through forms available online and in-store.

Consumer laws
• Crumpler’s warranty service is testament to the quality of their products. The business believes that their warranty should reflect
the quality of the product and customer confidence in the product.
• If the crumpler bags fail while they are in the bag’s owner, it will be replaced or repaired.
Topic 3- finance
Role of financial management
Strategic role of financial management
• Roper and Miller had identified a niche in the communications market that was not being addressed by existing businesses in this
market.
• They had not undertaken enough research or planning to establish its viability.
• The new business offered mail delivery for 35 cents, which cut 3 cents off the price of Australia Post deliveries. Mail sorting was
completed in the back of Miller’s car, a Mazda 808 wagon.
• Using only internal sources of finance, Roper and Miller reinvested surplus funds and expanded their business by moving to a
small shared office.
• This minimised expenses by subletting floor space and sharing one premises with other small businesses. This was taken on a
month to- month basis, making the arrangement very flexible and requiring only a month’s notice to move out of this office.

Influence of government
• Unfortunately, this business breached the Australia Postal Corporation Act 1989 (Cth) amended 1995, which protected Australia
Post from competition (this was a government-established monopoly) and City Mail was forced to close its present style
operations.

• They could only legally compete with Australia Post if their delivery charge was a least 10 times the cost of a standard letter, so
they changed the operations to parcels and a courier service. They also changed the legal structure to a private company which
gave them protection.

Objectives of financial management

Growth
• Miller and Roper distinguished themselves from other businesses by wearing pink lycra outfits and used bicycles. Within a year
they had grown to a full-time staff of 40 couriers.
• The goal was to be able to provide employees with a suitable wage and to cover business expenses.

Profitability
• Operations expanded to include Sydney, with an annual turnover of 3 million.

Liquidity
• The courier business provided monthly invoices to their clients and paid wages to their employees each week.
• With a monthly invoice they had a poor control over accounts receivable and clients took 60 days to pay. This meant it took them
2 months to pay their accounts. This presented a huge a problem as they were not able to gain a loan.

The processes of financial management- planning and implementing

Financial controls
• Roper and Miller started a new courier service called Minuteman Messengers with an partner who managed the accounting and
administration through an initial bank loan of $30 000. This resulted in a greater understanding of the amount of cash available for
expenses and a more solid basis for determining the timing of cash inflow.
• This was the only debt finance secured by them.
 Financial management strategies
Working capital management, liquidity
• The initial loan allowed them a buffer(shield) between payment of wages and the receipt of funds from the payment of accounts
by clients.
• Slow paying accounts were quickly followed up.
• There was no stock or inventory as the service was performed daily.

Profitability management
Cost controls
• Fixed expenses such as the payments for office space and uniform costs were limited.
• The couriers provided their own bicycles. Wages depended on the hours.
• Crumpler attempted to increase efficiency of the bag itself.

Expense minimisation
• Costs were kept to a minimum, the bags were made in their parents garage.
• The Minutemen Messenger couriers were used to test the bags and each new batch incorporated the courier’s suggestions for
improvement.
• In 1995, when Crumpler registered it as a private company, under the name of Crumpler Proprietar Limited, demand increased.
Their operation moved to a small factory in Victoria where they sold bags to people who ventured in off the street and small
bicycle shops. With the sales, they bought better equipment and improved materials.

Global financial management

• In 1998, they took the bags to a trade centre in Germany and were given orders. Consequently, they began selling the bags in
batches to outdoor, street wear, bicycle shops.
• Roper and Miller sold Minutemen Messengers. The money was used as startup capital. This was well timed as email was just
introduced.

Cost controls
• 6 staff was working at the factory with some work outsourced.
• To increase efficiency and to be cost effective, the manufacturing section was moved offshore to Vietnam. This allowed the
Crumpler team to use their skills and expertise in design, marketing and sales. Crumpler consequently had an arrangement with
the Vietnam factory, where crumpler puts in five major orders per year.
• The Ballarat factory had financial troubles so it was closed down.

Growth- vertical integration

• Crumpler went through forward vertical integration and starting setting up their own retail stores. This controlled the distribution
of their products.
• They went global and opened stores in New York, Singapore, Brisbane, Adelaide and Kuala Lumpur.
• Later on they entered a joint venture with a standing distributor to set up stores in asia.
 Private equity
• 2 German investors, joined the private company on an equal share basis. They both then combined and expanded to become the
European distributors.
• Crumpler supplied the design, brand and marketing skills while the germans supplied the distribution, sales and manufacturing.

Growth strategy
• In 2005, crumpler exhibited at the International Consumer Electronics show with $56 500 to introduce major US retailers of
electronic equipment to its products.
• They eventually signed 3 companies for $1.2 million in revenue.
• The trade show also allowed them to meet retailers, agents, importers and distributors.

Methods of international payment

• Payments in advance are used by Crumpler for international suppliers. Thus their financial manager can negotiate deals that
benefit Crumpler’s financial position.
• Crumpler’s sales, purchasing of materials and in USD.
• Payments are made by wire transfers (online) from their bank accounts to Crumpler’s.

Record systems

• Crumpler has hired the business “Reactive” to design an online system that will be able to be used for sales processing and
inventory management for a dozen different regional offices. This integrated payment systems to inventory systems in several
languages.
• This made record keeping much more efficient and fast.

Conclusion
• The majority of business activity is financed directly from cash flow
• Thorough and continuing market research enables Crumpler to be aware of all competitors, relevant suppliers and market prices.
• Each department has regular meetings and constant reviews of design, cost controls
• Specialist staff are employed in design, retail and marketing. They focus on the product improvements, development of new
products and plans for new stores.
Topic 4- Human resources
The strategic role of human resources
• Crumpler a small business with 20 full-time employees, around 45 casual sales and a warehouse. Human resource management is
conducted by senior management within the business. The company/business is not large enough for a human resource
department.

Management
• Recruitment, training and development and separation of staff is the responsibility of Crumpler’s General Manager and Will Miller,
Dave Roper.
• They liaise with each other regarding the human resource needs of the business.

Position design
• Crumpler management conceives and design positions to fill within the business based on its developing needs.
• Change in trends brings a demand for new skilled staff, while marketing and retail staff are hired to meet market demand.

Outsourcing
• Crumpler bags are manufactured in China.
• It is the responsibility of these foreign contractors to deal with their own human resource issues.

Key influences
Stakeholders
• Crumpler is a member of the Australian Retailers Association. The ARA provides members with a number of services, such as
business consulting, policy development, advocacy to government bodies.
• Crumpler agrees to make honest and accurate environmental claims in its advertising and marketing, follow the ARA’s Code of Fair
Trading when dealing with customers.
• Complying with these policies allows Crumpler to remain stakeholders in the ARA and benefit from its services.

Economic influences
• Due to the global economic slowdown, they have heavily into resources at their headquarters and employed additional staff.
• It will pay handsome dividends into the future as we concentrate on developing new products and opening stores.

Technological influences
• Crumpler invests in the latest software and technological advances.
• Staff benefits >> improve the productivity, efficiency and effectiveness. E.g. Improved computer designs through improved
computer software.

Processes of human resource management

Acquisition
• Acquisition for Crumpler occurs through the traditional means of print media recruitment and, more recently, the use of online
position advertising.
• Senior management shortlist and interview all full time staff. Casual retail staff are recruited by the national retail manager.
Training and development
• Crumpler has no formal training program in place.
• Staff are encouraged to seek training relevant to their day-to-day roles.

Maintenance
• Each staff member is valued at Crumpler.
• Flexible working conditions are in place so that every employee has the chance to adjust their hours and conditions to their needs.
• All full-time staff are entitled to bonus payments, subject to performance results.
• Full-time and casual staff come together each year for a national Christmas party, as well as smaller events and get-togethers in
individual stores and offices.

Separation
• The business has disgruntled or unhappy employees.
• Casual staff members most often leave to pursue other opportunities.

Strategies in human resource management

Leadership style
• The participative approach to leadership is utilized.
• The employees are encouraged to contribute their ideas and thoughts and take creative ownership of the business, the emphasis
is on letting employees do their job with minimal interference.

Disputes
• Workplace disputes are rare at Crumpler due to the positive working environment.
• Disputes are settled within the company, rather than through external arbitration, through largely informal discussion with senior
management, who seek to address all issues as soon as possible without resulting in more tensions.
• the close working environment makes it clear as to whether disputes are settled and staff are satisfied.
 Case study: Quantas

Topic 1- operations

Role of operations management

• contributes most directly to business revenue

• employs normally the majority of the labour resources
• interfaces most directly with the business customer/client;

• Strategic Role of Operations Management

The operations allow quantas to achieve long term survival.

• the scheduling, cancellation or rescheduling of flights

• the monitoring and response to an industrial dispute
• the reallocation of labour to cover absences in key areas

• Cost leadership
• To use the least amount of inputs to deliver one unit of output. Some ways are:
o Economies of Scale
o Standardisation- The more variations to Oantas' services = higher cost
o Technology- eliminating the need for Oantas staff to be available to interface the customer
o Waste Minimisation- deliver the lowest production cost

• Differentiation of Product/service
• the most comprehensive domestic and international coverage
• Qantas includes comfort based features such as skybeds, special menus, lounges, online check

• Interdependence with Other Key Business Functions

• Human resources- Training and development + Recruitment of staff
• Finance - monitors, records, and analyses the financial transactions
• Marketing- connects operations with the customer by providing market requirements

Influences on Quantas’s operations

• Globalisation
o Launching new airlines= cost minimisation needed

• ethical and social

o Health surveillance program- workplace conditions monitored
o water conservation,

• Technology
o Newer planes, newer operational processes = new training

• Government policies
o Deregulation and the carbox tax = higher costs
o the Fair Work Act = more pro worker which has increased Qantas' operating costs
• Environmental impacts
o Purchasing new, environmentally sensitive aircraft,
o Fuel conservation- a trigeneration energy system reduces power usage
Operations processes
a. Inputs

Transformed Resources Transforming Resources

• the resources which are changed by the operations • resources which effect the changes in the operations
processes process
o Materials- fuel + paper o Human Resources- employees and staff
o Information- statistics + transactions o Facilities- terminal buildings + holdings,
o Customers – customers are moved
b. OUTPUTS
• Customer service refers to how well quantas meets the needs of its customers. It provides feedback, expectations and
supports continuous improvements/
.
c. Transformation processes
a. Volume- Quantas processes millions of people worldwide
b. Variety – Quantas provides a variety of services, national and international services
c. Variation- Quantas’s demand may increase during school holidays and easter.
d. Visibility- the customer can see the workings during operating time and there is a high customer interaction

d. Sequencing and scheduling

• The aim to have products out as fast as possible.
• Quantas uses software to help schedule the time between flights, repairs and down time. In addition, this automates the whole
process so there are time savings.

Technology, task design and process layout

• Technology- increased productivity by replacing human capital and automation, e.g. online checking
• Processes occur in the terminal, hangar and maintenance area. The process layout is where machines and equipment are grouped.
(eliminates bottlenecks + saves time0

Operations strategies

Performance objectives
• Quality- transactions must be accurate
• Speed- Customers must be processed swiftly (reduce waiting time)
• Dependability- The service must be reliable
• Flexibility- Quantas must be able to change and react to market changes.
• Cost- Processes must be efficient,

New product design and development

• Quantas has launched 2 new airlines in the Asia pacific area to take advantage of the growth.
• QUantas constantly updates services or processes in order to main competitive and profitable.

Supply chain managements

• This is the controlling of the flow of supplies through Quantas’s operations, to the final customer. Fuel is purchased,
sourced and stored, and moved.
o Global sourcing- Quantas sources some pilots from New Zealand, and cabin staff at Asia. Plane maintenance is
done at Malaysia.
o E commerce- Quantas has reduced time consuming and manual processes. Real time information can be
provided to customers.
Inventory management system
• This is the raw materials, unfinished goods undergoing transformation and finished goods.
• Quantas does not store products to meet customer demands.

Quality management
• Quality control- Inspections are carried out periodically at key stages to make sure standards are met.
• Quality assurance – The level of quality at all stages are monitored at Quantas by measurement against standards.
• Quality improvement- Quantas invites staff to participate in brainstorming ideas and suggestions to improve quality,.

Overcoming resistance to change

• Quantas must respond to change in respond to external factors, e.g. terrorist attacks and the GFC. Though there are restrictions to
this:

Financial restrictions Human restrictions

• Cost of new equipment- Billions have been spent • Inertia- some managers have been unenthusiastic
• New passenger and screening- over 1 billion dollars from • Change in skillset- Engineering staff have started strikes
2001 due to arguments over the changes.
• New IT systems-

Global factors
Factor Explanation
Global sourcing • This is sourcing tasks or components for operations at a cost advantages.
• Asian cabin pilots have been employed to reduce costs.
Economies of scale • These are cost advantages due to global expansion.
• In Asia, working rates are lower thus Quantas has set up maintenance there.
Scanning and • Increased globalisation = increased competition + new technology
learning • Quantas finds, learns from and tests huge volumes of data so that the systems will suit future customer
bases.
Research and • Quantas researches and develops new methods of improving processes at the airport.
development
Topic 2- marketing

Role of marketing
• Marketing allows quantas to:
o Achieve its business goals
o Identify and satisfy customer needs
o Give the business a direction
o Focus on market research

• Interdependence with Other Key Business Functions

o Finance- budgets need to be set out for marketing
o Human resources- staff need to be employed and trained
o Operations- The operations may physically limit the amount of staff for operations

Marketing process

Marketing develop Implementing,

Market Target markets
SWOT analysis objectives marketing monitoring and
research identified
established strategies controlling

• SWOT

Strengths Weaknesses
• Lowering of costs and increased efficiency • Relatively complex fleet
• Largest Australian based airline loyalty programme • High labour and operating costs
• Excellent safety record • Union disputes
• Globally recognised name and logo • Safety incidents
Opportunities Threats
• Creating a new airline in asia • Weakening in the domestic and international market
• Developing E commerce • Competition
• Evolving aircraft technology • Fuel costs increasing

• Product lifestyle

• Introduction- Quantas, started a new product and had promoted heavily. The brand awareness was built up.
• Growth- Profitability increased by 14% in 2010 and routes were expanded. Profitability was achieved for the first time.
• Maturity- Sales levelled off and competition increased. Many changes were done to the lounge, planes and checking.

• Market research
• Information about customer needs, brand preferences and characteristics were identified.
• The data source was selected. (Surveys, mail based surveys, complaint monitoring, government statistics, magazines and
interviews)

• Marketing objectives
• Quantas attempted to:
i. Maintain the combined domestic market share
ii. Grow Jetstar in asia
iii. Increase customer service standards
iv. Match demand with capacity
v. Reduces losses in international departments
• Market segmentation
• This is the processes of diving up the total market into small groups. It enables quantas to:
o Better meet the needs of the customers
o Better tune the marketing mix to certain groups in the market.

• The leisure segment is divide into holiday, visiting friends and relatives.

• Marketing strategies
• Positioning
i. This is the image that Quantas has in comparison to its competitors. There may be an image to competitors and
the target market.

• Marketing mix

Product
• This is the benefits and attributes designed to suit the
customers needs. They include scheduling features,
Frequent flyer schemes (points are earned towards
free tickets) , intangible benefits (safety and
reliability) and the brand name.
Price
• This is the cost of the service to the customer. Pricing
methods used are:
• Cost plus margin- Quantas adds a percentage on
top of the COGS
• Market- Quantas lowers costs if the market
demand is high
• Competition- Quantas may lower costs if the
competitors are decreasing prices
• Pricing strategies include:
i. Price penetration- reducing prices to gain
market share
ii. Loss leading- Quantas made a loss in the
short term in order to compete against
other competitors,

Promotion
• This is the methods that an organisation uses to
communicate its products for radio, newspapers and
posters. Some strategies are:
• Advertising – utilising agencies to create
media ads for tv, radio, and print media
i. Quantas had spent 44 million dollars
in 3 years in order to target
corporation.
ii. Quantas produced and displayed an
advertisement at the Athens
Olympics.
a. Publicity- utilising news releases, press
conferences and interviews
i. They supported clean up
Australia day, world vision and
cultural activities such as the
Sydney dance company.
Place
• This is how the service will reach and be distributed to the
consumer. It can be direct or indirect.
a. Direct (selling directly to the customer)
i. Sales via travel centres called “QUantas
holidays”
ii. Airport ticket sales
iii. Online – Quantas receives over 8.4 million
hits per month,
b. Indirect (using intermediaries)
i. Quantas has relationships with travel agents,
such as flight centre and American express.

b. Sales promotions- short term

inducements during times of huge
demand
i. Quantas released 10000 tickets
at 49 dollars to promote their
airline.

People Processes
• This is the appropriate use of the right staff and • This is the systems used to assist the organisation in
people. delivering the service.
a. Quantas customers have direct contact • The way the service is reflects on Quantas.
 with employees on the ground, and due to • Recently, Quantas introducted, “Q Bag Tag”
this, the staff must have the right personal where passenger can drop their bags and go.
attributes and training.
Physical evidence
• This is the environment which allows the consumer again to make judgments on the organisation.
o E.g. terminals and the website design.
• Global marketing
o This is an extension of marketing across national boundaries. Some global marketing strategies that have been utilised
are:
§ Global branding
• The same brand/logo (flying kangaroo) >> increases revenue and growth + recognition
• Packaging and designing costs are reduced.

§ Standardisation
• This is the standardising of the many elements of the marketing mix. >>> allows economies of scale to
be achieved.
• There is the “one world” name and logo on all planes + tickets >> improves corporate image + captures
greater share.

§ Customisation
• This is the ability to differentiate the marketing to target different markets.
• Quantas adjust/tailors its marketing based on the markets. Japanese markets will have Asian dishes and
Japanese fluent speakers.

• Implementing, monitoring and controlling the marketing plan

o Implementation- the process of turning the marketing plan into action. Quantas undergoes, monitoring, controlling and
adjusting marketing via:
§ Developing financial forecasts of revenue using past sales data and surveys. Estimations are then done after.
§ Comparing actual and planned results- done using (sales analysis + market share analysis + market profitability).
They reveal the current situation of the business.
§ Revising marketing strategies and taking action.
• Quantas revised its marketing by reducing prices to stimulate demand, reduced flight frequencies and
cancelled orders for new planes.
Topic 3- finance

Role of financial management

• To manage the financial resources effectively and efficiently so that Quantas may achieve its financial objectives such as growth,
efficiency and return on capital.

Interdependence with other key business functions

• Marketing- marketing is needed in order for finance to be generated.
• Human resources- funds are required to renumerate staff and train staff.
• Operations- funds are required for the daily running of the business.

The current financial

position is assessed by
collecting data

The financial controls

The informatiion is
are adjusted to
utilised to frame the
minimise risks and
business
losses.

The reports are intepreted by The financial reports are

comparing them to forecasted prepared
results.

THe financial reports are

interpreted by comparing
it to forecasted results.

Processes of financial management

Financial statements
• Financial statements must comply with corporate, account standards and laws.
• Some financial statements include balance sheets, revenue statements and cash flow statements.

Comparative ratio analysis

• Comparative ratio analysis allow Quantas to determine whether they are doing better than the competitors, such as Singapore
airlines and air new Zealand.
• This comparison involves efficiency, gearing, profitability and return on owners equity.
o Profitability ratios- These ratios indicate the profits and the performance of the business. In 2009, due to the GFC, there
was an 89% drop in profits.

o Liquidity ratios- This measures the ability for quantas to meet short term debts. In recent years, the liquidity ratio
decreased to .93:1 meaning that their ability to pay debts lowered.

o Gearing- this is the ability to continues the operations, as well as to measure financial stability. Quantas’s gearing
increased meaning that there was a risk of not being able to run the operations.

o Efficiency- this is the ability to manage its assets to make a profit. In recent years, quantas’s efficiency has been around
80%. (80% of the money was used to generate profits).
 The processes of financial management- planning and implementing

Financial management strategies

Gearing control

• the gearing was controlled by:

o cancelling orders for planes
o deferring purchases of assets

Liquidity control

• The liquidity was controlled by:

o Controlling current assets
o Controlling current liabilities
o Leasing more non current assets, e.g. planes and buildings

Profitability management
Efficiency control

• new and more efficient planes were purchased

• New IT systems were implemented
• Catering and engineering were restructured.

Revenue controls

• The revenue was controlled via:

o Setting clear sales objectives and breaking them down
o Discounting airfares to maintain loads
o Reconfiguring its planes with more economy class seats

Cost controls
• Quantas reduced its costs by 20% by:
o Cutting flying capacity and cutting services back
o Cancelling orders for new planes
o Restructuring
o Fuel conservation

Limitations of financial reports

• Quantas’s reports:
o Attached comprehensive notes to its statements to help stakeholders
o Were distorted due to special circumstances (cyclone yasi and natural disasters)
o Different accounting procedures were utilised.
o Did not disclose when their debts needed to be paid

Ethical and legal aspects of financial planning and management

• Quantas must abide by ethical and legal responsibilities in financial management. They have done this by:
o Having accounts which are certified by professional accounting bodies .
o Abiding by the corporations act.
o Having the financial reports independently audited.
• In 2007, Quantas agreed to a takeover by Macquarie bank for 11.1 billion dollars, but this was not discussed with
shareholders. As a result, the takeover did not occur.
Global financial management
• Exchange rates- This is the value of one currency against the other.
o $Au >> OTHER = appreciation - fuel, payments and capital expense are cheaper. Australians are less likely to
travel overseas as its more expensive

o $Au <<OTHER = depreciation - fuel, payments and capital expense are expensive. There are more tourists for
Quantas as it is cheaper for them.

• Interest rates- The rate charged for the use or paid for the use of money.
o Increases in interest rates = increases the interest payments Qantas pays on its borrowings.

• Hedging- Strategies utilised to minimise the effect of changes in the global market.
o Quantas utilises derivatives such as future interest payments, forward cover and future capital expenditure
payments.
§ This thus allows, them to protect its capital base, exploit its financials, minimize capital costs and to
reduce financial distress.
Topic 4- Human resources

The strategic role of human resources

• To allow quantas:
o to manage effectively the relationship between employer and employee.
o help organisations like Oantas to achieve its goals, minimise costs, improve quality in working life and ensure
legal compliance.

Interdependence with other Key Business Functions

• Finance- Funds are required to remunerate staff, e.g. training and development.
• Marketing- the right staff must be employed and trained so that consumers are satisfied.
• Operations- many services were cut and the frequency of flights was reduced.

Outsourcing
• Quantas has outsourced business operations globally in order to become more simple and cost effective. Quantas uses domestic
subcontractors to create cost savings, access greater expertise and to cope with the competitiveness.
o The call centre was outsourced to the Melbourne operator sales force.
o Domestic voice and data are outsourced to Telstra.
o Maintenance jobs were outsourced to Singapore and newzealand

Key influences

• Stakeholder influence
Stakeholder explanation
Employees These are the people or staff that work for the organisation (quantas). These include the cabin
crew, ground and admin staff. In 2011-2012 there were many disputes between employees and
quantas over conditions and pay.
QUantas These are the board members that are involved in the key decisions of Quantas’s future. In 2011-
management 2012, there was a restructuring of the organisation.
unions Quantas has many employees under unions. These include the Australian workers union, Allied
services union and the Australian manufacturing union. They oppose outsourcing and job cuts,
Government Quantas must abide by policies through departments such as the courts, tribunals and agencies.
organisations

• Legal influence
o Quantas must abide by state, local and federal laws under HR which include:
§ Obligations in the workplace such as employment conditions, awards and agreements.
§ Obligations to provide a safe workplace
§ Obligations to take out insurance
§ Obligations to promote equal opportunity

• Economic influences
• These are the fluctuations within the global and national economy. These may affect demands for services and products.
o In 2009, the GFC caused a major reduction in Quantas’s workforce as well as in services. The workforce was reduced
from 34400 to 32800.
o Executive pay was frozen.

Technological influences
§ New security systems had to be introduced because of many terrorism acts in the decade.
§ New technologies, e.g. in built entertainment and online check ins were introduced to main competitiveness, but new
skills had to be learnt. Some jobs were lost.

Social influences
§ More part time and casual employees (casualization)>> reducing costs and improving competitiveness. In addition,
there is much more flexibility to cope with the peaks and troughs in demand.
 § There is a higher proportion of woman in senior roles.
§ There is a more culturally and ethnically diverse workforce. (due to migration and globalization).

Processes of human resource management

Process explanation
Acquisition § This is the identifying of staff needs in recruitment and selection. This involves a job
analysis so that the job description (defines the scope of activities) can be produced.
§ The possible candidates are tested and examined.
Development § This is the developing of the ability to adapt employees to the job.
§ Training is done on the job (internships and job rotation) and off the job (online
courses).
§ This reduces accidents and increases efficiency and the quality of services.
maintenance § This is the maintaining of the employee’s interest and motivation in the job. It can be
achieved via remuneration (compensation) via 2 ways or both:
o This is paying the employee salaries or rates for their services
o Providing intrinsic benefits e.g. flexible times and increasing parental leave.
separation § This is the leaving of an employee from an corporation.
o With the GFC, many employees involuntarily separated.

Strategies in human resource management

Leadership style
• The autocratic leadership style was utilized in the 1990s where management had the most power over decisions. In recent years,
it has been more democratic and employees have a larger say into decision making.

Job design
• The various components of Quantas are organized based on functions. The entire job from the baggage handling to the planes is
set so that it is as efficient as possible. Though, the strategies utilized are;
o Job enlargement – giving a more varied task list to employees
o Job rotation- allowing employees to move to different tasks
o Job enrichment- allowing employees to be more responsible and interdependent

Recruitment
§ Applicants are attracted for various jobs. Internal (filing vacancies) and external recruitment (from the outside)
methods are utilised.

Training and development

§ This is done to increased the performance of employees. Pilots undergo over 22000 hours in training and the “Quantas
college online” is utilised to allow staff to learn online.
§ These activities have increased productivity, improved services and enables them to have a more committed
workforce.

Performance management
§ Employees are assessed and measured against benchmarks. (e.g. quality, no. of output) . This motivates poorer
performers to do better. The objectives are to:
o To provide a basis for payments
o To assess the success of training and development
o To clarify performance expectations

Rewards
§ These are benefits to the employee for their service so that they may stay motivated and consistent. They may be:
o Monetary- These involve wages and salaries. Higher performers in Quantas gain a higher pay (as a bonus).
Superannuation, company cars and maternity leave are provided.
 o Non monetary- These are intrinsic benefits, e.g. job recognition, promotion and good relationships.

Dispute resolution
§ Quantas has methods of dispute resolution such as : grievance procedures, negotiation, mediation and court
involvement.
o In 2011, the strikes from engineers, pilots and ground staff occurred due to the fact that quantas would not
agree to the terms of a 3% annual rise.
o Industrial action occurred. Eventually, arbitration was needed and all the parties had to agree. This was
ratified by fair work Australia.

Effectiveness of human resource management

The effectiveness of human resource management is important as there is no point in implementing costly HRM strategies without
measuring how successful it has been. The indicators that are used are below
Indicator explanation
Staff turnover § This is how much of the staff leave annually.
§ The turnover rate has increased in 2012 from 4.7% to 5%. This means that HRM has
not been effective.
Absenteeism § This is the absence from the workforce due to illness. Quantas’s levels have stayed at
9.3% for 2 years.
Accidents § This is the amount of accidents that have been working as a result of the tasks.
§ In 2011, the injury rate was reduced from 41.5% to 35.3%. This means that those
employees are available for longer and no replacements are required.
Levels of disputation § This is the amount of tension between the corporation and the employees.
§ In recent years, there have been high amounts of strikes and industrial actions due to
the recent action to axe jobs, introduce part time employees and outsourcing.
Worker satisfaction § This is how happy workers are at the organisation. It is related to motivation and
productivity. It is hard to measure and quantas analyses it via surveys, invitations for
employee feedback.