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Table of Content!
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1.0 Executive Summary! ! 2.0 Business Description!! 2.1 Industry Background! ! 2.2 New Proposed Venture! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1! 2! 2! 3! 3! 4! 4! 5! 6! 6! 7! 7! 10! 10! 11! 11! 12! 13

2.3 Advantages of New Venture! 3.0 Operations!! ! ! !

3.1 Identification of location: advantages ! 3.2 Specific Operational Procedures! 3.3 Personnel needs and uses! 3.4 Proximity to supplies! ! 4.0 Management!
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5.0 Financial Forecast! 6.0 Critical Risks! !

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6.1 Potential Problems! ! 6.2 Obstacles and Risks! !

6.3 Alternative Courses of Action! 7.0 Evaluation! ! 8.0 References ! ! ! ! ! ! !

! 1.0 Executive Summary !
Qantas is Australia’s largest domestic and international airline. It provides more than 750 international services a week to Asia, the Pacific, North and South America, Europe and South Africa. In 2008 Qantas recorded a net profit of $970 million. Its unit costs are down 2.3% mainly as a result of increased use of technology, outsourcing, relocation staff overseas, casualisation of the workforce and taking advantage of new flexibilities (AWA’s) in certain parts of the workforce. Experiences in international markets demonstrates the intricacies for Qantas operating as a global business, however Qantas has managed to deal with these complexities particularly well. Nevertheless, despite its well sustained management and business profitability, Qantas is hardly immune to the global financial crisis, and has announced capacity reductions, profit downgrades and job cuts, including 90 senior executive jobs, 500 managerial jobs, and an addition 1500 jobs, which are expected to save Qantas about $24 million a year. Qantas has to adapt new Financial Strategies in order to obtain economies of scale, and insure that they sustain a reasonable amount of profitability market share, and competitive edge. (King 2009)

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2.0 Business Description

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Qantas is classified as a large company because it is the largest airline in Australia. They employ well over 200 people which is another criterion for a ‘large business’. Qantas is also comprised of business stakeholders (shareholders) and the main goal is to make a profit.
 
 Qantas can also be categorized as a public company because it is listed on the Australian Stock Exchange. Public companies must have a minimum of 5 shareholders which Qantas possesses. (Noack 2003)

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Qantas is tertiary when it comes to the classification of its industry sector because they involve transportation, distribution and sale of goods from producer to a consumer, and provision of a service, including tourism or entertainment. 
 
 The prime function for Qantas is tourism, taking people across to different countries all over the world with comfort. Their function also closely entails hospitality as well as the highest amount of safety as possible to keep the customers satisfied. Their prime function is to meet the needs of customers while they are on the journey with domestic or world-wide flights. (Qantas 2010)

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2.1 Industry Background (current and future trends)

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Some recent developments for Qantas include: ▪ Purchasing of 31 new air crafts as a part of it’s long term fleet plan (13 airbus A330-200 and A330-300 for growth on domestic routes, 6 Boeing Longer Range 747-400 aircraft to handle growth on international long haul routes and 12 Airbus A380 to meet passenger growth. ▪ Gradually installing a new $300million total in-flight entertainment system. Which propose 12 different channels, the screening of new release movies and TV Programs, video games, and 16 audio channels. ▪ Introduction of Australian Domestic Economy meals made by a chef, stressing the importance of fresher, modern and enjoyable meals

▪ New Qantas City Flyer service which offers flights every half hour. ▪ A new chauffers service called ‘Qantas Drive’ ▪ Enhanced ‘Qantas Valet’ giving valet customers, access to a variety of services intended as being a time saver. (Qantas 2010)

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2.2 New Proposed Venture

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One of the main disadvantages of almost all flights these days is a lack of comfort when travelling in economy class. Qantas has over 191 planes around the world, and replacing every seat would be expensive and time consuming for Qantas at this age and time. However, additions can be made to the aircrafts to try and minimise customer dissatisfaction when it comes down to comfort during travel. (Badbacks 2001)

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When travelling, many people have sought out to get themselves a travel pillow so they could have a better more comforting flight experience. However, many people also don’t purchase a pillow because they don’t have the space to carry one around or the money to waste on one. For example: ▪ Business man – Will probably not want to buy a travel pillow and then have to carry it around in their hands. ▪ Mother with children – a mother with children might not have the money to waste purchasing a few travel pillows, nor will she purchase one for herself as she is too busy taking care of the kids, she won’t even worry about herself at this point. ▪ Elderly – some elderly people especially from different backgrounds wont even know a comfortable travel pillow exists. This is why Qantas has invested in adding a travel pillow for all their economy seats, allowing better comfort for their passengers. (Shaanxi Longstar 1999)


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2.3 Advantages of New Venture

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When travelling short or long distances, one of the main things that passengers are interested in is comfort. Most people are very aware how likely the chances are for their necks to get sore, and that that they have a hard time falling asleep because

they’re trying to get comfortable sitting up. That is why Qantas has chosen to invest in the Travel pillow which will be placed on all their economy seats. The advantages that the travel pillow will offer include:

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▪ Offer good orthopaedic neck support - the passenger doesn’t have hold their neck in awkward and uncomfortable positions ▪ Hygiene – Every passenger will be handed a new disposable pillow sleeve at the beginning of their flight to ensure hygiene and make sure that there aren’t microbes that could invade their body. ▪ Sleep - As well as protecting your neck for pain, and your whole body from invasion by germs, a good travel pillow will be one that offers the passengers the best chance of sleep so that the person is rested as much as possible before arriving to their destination. (Shaanxi Longstar 1999)

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By having these advantages that will make in-flight a better experience for passengers, it will in return help boost ticket sales over other flights, therefore helping to increase:

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▪ Customer base ▪ Profit ▪ Social Standing ▪ Market Share (Jeff 2009)

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3.0 Operations

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3.1 Identification of location: advantages

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Low cost and high productivity mean that sourcing from China isn't a choice: it's a requirement. The advantages that China possesses over other countries (both Asian and European) include: (Shaanxi Longstar 1999) ▪ Chinas experience and education in delivering products that follow the standards required by both western legislation and consumers.

▪ Chinese labor is significantly cheaper than Indian markets. E.g. where rapid inflation is making it harder for Indian companies to compete on price alone. Therefore, China is better for the reduction in direct labor, material, and overhead Cost • • • • Reduction in Indirect engineering, marketing, financial labor. Fast-turnaround of low cost tooling & fixtures Currency transaction flexibility between multi-national countries Qantas owns Air Asia and so if needed can make arrangements for material transport through their aircrafts or Qantas ones. (Rocker 2007)

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3.2 Specific Operational Procedures

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1. Product information is given to the manufacturer such as; specifications, drawings of the logo, material requirements, target price, quantity and when the product is needed by. 2. A thorough analysis is made by the manufacturer where they make sure that they can make the exact product depending on the specifications. The company may also send out a sample of the finished product so Qantas can see if they are satisfied with the product before producing a mass amount. 3. A final quotation is then sent out to Qantas for the approval and agreement on quantity and purchase orders for future statements. 4. Mass production is begun, shipping method is discussed / organised. 5. Production is completed, packaged according to specifications and the order is loaded into packaged boxes and shipped through Qantas (via Qantas Airways) 6. On arrival into Sydney, items get assessed for OHS purposes to ensure the product is ready for use 7. The staff places the pillows on the planes while the disposable sleeves get handed to the passengers as they come on board the flight 8. The pillow sleeves have a plastic wrap around them to ensure OH&S is being applied at all times 9. After the flight, the sleeves can be kept by the passengers. However, the pillows must be kept on board

10. If the pillow is damaged in any way, it gets replaced by a brand new pillow to ensure professionalism and OH&S at all times.

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3.3 Personnel needs and uses

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There will be a campaign to promote the travel pillows before they are released to the public for use. The campaign will be held in the Qantas lounge and will help promote staff bonding along with the new product that Qantas has to offer.

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3.4 Proximity to supplies

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Manufacturing in China is also an advantage as the flight time from China to Sydney is only 10 hours. When supplies are low/needed, it would take roughly 1-2 days maximum to load and transport the goods to Sydney. (Shaanxi Longstar 1999)

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However, during the first ordering of the product, Qantas has made sure that they order enough in case damage occurs to the pillows. The first order of pillows will be enough to accommodate the 63,412 economy seats on all Qantas aircrafts as well as an extra 10,000 in case damage occurs to any of them. So all up the first order will contain 73,412 pillows. Ten extra pillows will be placed on each aircraft in case there is any fault with them during the flight. The rest of the pillows (8090 in exact number) will be stored in Sydney as it is the main Qantas base making it close and inexpensive to store and reach if needed. (Qantas 2010)

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4.0 Management EXHIBIT 1 – Hierarchy of Management (Quantas 2010)

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5.0 Financial Forecast

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EXIBIT 2 — ESTIMATED ACCOUNTS RECEIVABLE Past history shows that accounts receivable runs around 30% of sales. We have estimated that next year's sales will be $ 160,000,000. Therefore, our estimated accounts receivable is $ 48,000,000 ($ 160,000,000 x .30).

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EXHIBIT 3 — PRODUCTION BUDGET Planned Sales (Pillow Sleeves) Desired Ending Inventory Total Units 2,000,000 73,412 2,073,412

Less Beginning Inventory Planned Production

(63,412) 2,000,000

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EXHIBIT 4 — MATERIALS BUDGET

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Pillow sleeves/ Pillows require .25 square yards of cotton and cotton is estimated to costs $ 0.05 per yard next year. Materials required = 2,000,000 (Pillow Sleeves) x 2,000,000 = $100,000. Materials Required for Production Desired Ending Inventory Total Materials Less Beginning Inventory Total Materials Required Unit Cost for Materials Total Materials Purchased 2,000,000 2,000,000 400,000 (50000) 350000 x $ 0,05 $ 100,000

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EXHIBIT 5 — LABOR BUDGET Pillows/ Pillow sleeves require .50 hours to produce one unit. 2,000,000 units x .50 = 1,000,000 hours. The expected hourly labor rate next year is $ 12.00.

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Estimated Production Hours Hourly Labor Rate Total Labor Costs 1,000,000 x 12.00 $ 12,000,000

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EXHIBIT 6 — OVERHEAD BUDGET (Based on Unique Drivers)

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Estimated for each line item as follows: Indirect Labor Costs * Utilities $ 12,000,000 5,000,000

Depreciation Maintenance Insurance and Taxes Total Overhead Costs

3,000,000 1,000,000 4,000,000 $ 25,000,000

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*Production Supervision and Inspection

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EXHIBIT 7 — COST OF GOODS SOLD BUDGET Direct Materials Inventory Beginning Inventory Purchases (Exhibit 3) Less Ending Inventory Materials Required Direct Labor (Exhibit 4) Overhead (Exhibit 5) Total Manufacturing Costs Total Work In Progress Less Ending Inventory Cost of Goods Manufactured Cost of Goods Available for Sale Less Ending Inventory (360,000) Cost of Goods Sold $1,440,125 $2,000,000 $160,000 63412 (18750) 18,125 870,000 250,000 $ 1,300,125 1,030,125 1,046,125 (120,000) $ 1,340,125 134,125 180,125 $ 2,160,000 Work In Progress Finished

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EXHIBIT 8 — MARKETING BUDGET Estimated for each line item per the Marketing Department: Marketing Personnel Advertising & Promotion Marketing Research $ 750,000 420,000 120,000

Travel & Personal Expenses Total Marketing Expenses

65000 $ 1,350,500

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EXHIBIT 9 — GENERAL & ADMINISTRATIVE BUDGET Estimated for each line item per Department Managers: Management Personnel Accounting Personnel Legal Personnel Technology Personnel Rent & Utilities Supplies Miscellaneous Total G & A Expenses $1,100,000 550,000 400,000 450,000 250,000 150,000 75000 $ 2,970,500

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EXHIBIT 10 — PROFIT MARGAIN Pillow Price Sleeve Price Labor 570,708 1,000,000 12,000,000 /100 x 30 Estimated Yearly Profit = $ 4,071,212.40

(Qantas 2010) 6.0 Critical Risks

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6.1 Potential Problems

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▪ Wreckage of pillows. E.g: If people don’t place the disposable sleeve over properly. The actual sleeves are waterproof. However, if people don’t place the sleeve on properly or at all, there could be damage to the actual pillow through spillages, vomiting, use of pens, food, saliva etc. ▪ People taking the pillows with them instead of handing them back at the end of the flight: Even though people are asked to hand the equipment to the flight

attendants such as headphones and in this case the pillows, there is still a highly likely chance that at least 5/332 people on the flight will take the pillow with them and store it in their bags. ▪ OH&S Safety. Complaints could be made from passengers that think the pillows might be unhygienic and that the sleeves won’t help anything.

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6.2 Obstacles and Risks

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OH&S is one of the main obstacles to come across. No one wants to be sleeping and using a pillow that someone else has previously used. Even though disposable, waterproof, sleeves will be handed to every passenger before the flight; it is up to their discretion to place the sleeve on top of the pillow (flight attendants will help and make sure that everyone has them on when they are seated). However, even though the sleeves are placed, some people might take them off during the flight because they might find the material of the actual pillow more comfortable and in this case the flight attendants have other things to attend to rather than just worrying about pillow sleeves the whole flight. The risk is that if the person chooses to use the pillow without the sleeve and they contract any microbes that could be on the pillow, they could try suing or blaming Qantas. Even though Qantas is insured for actions like that, it still creates unnecessary drama and maybe loss of customers due to complaints. (Travel and Tourism 2009)

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6.3 Alternative Courses of Action

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The alternative courses of action to help prevent the stated obstacle could be: 1. The pillows get replaced with new dry cleaned pillows every time. This will help ensure one of the highest hygiene practices possible but will be time consuming and extra organization of dry cleaning every time will have to be put into place. 2. The sleeves get put on permanently before the flight and then re packaged with a new sleeve every time. – This will help prevent people taking the

sleeves off during the flight and there will be less to no chance of them contracting any microbes from anyone else.

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7.0 Evaluation

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The main objective of introducing this new product to economy Qantas flights is to help attain and increase a certain passenger in flight comfort, and in return gain a better social standing as well as profit. The release date for the product is mid year; this is because a lot of the flight bookings are made around this time as it is summer in Europe. Therefore, it is a good time to introduce a new product as more people will get to experience the use of travel pillows and in return make future bookings with Qantas. Another reason for the particular release during the months of July – September is that, the Christmas holidays are coming up and it is peak season for travelling. Once again, it helps show off the product to a greater extent and boost sales because everyone wants a well rested arrival especially during special holiday seasons.

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8.0 References

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1. Badbacks – Get Your Life Back. (2001). Squidgy Travel Neck Pillow. Available: http://www.badbacks.com.au/shop/product/873/stripy-squidgy-travel-neck-pillow. Last accessed 25th March 2011.

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2. Jeff, N. (2009). Advantages of a Travel Pillow. Available: http://e-articles.info/e/a/ title/Advantages-of-a-Travel-Pillow/. Last accessed 27th March 2010.

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3. King, M. (2009). Qantas Airways Limited(Qantas) - Financial and Strategic Analysis Review. Available: http://www.pr-inside.com/qantas-airways-limitedqantas-financial-r1079044.htm. Last accessed 25th March 2011.

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4. Noack, T. (2003). Qantas - Details and Fleet History. Available: http:// www.planespotters.net/Airline/Qantas. Last accessed 4th April

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5. Roker, J. (2007). The Advantages of Direct Manufacturing Outsourcing in China. Available: http://ezinearticles.com/?The-Advantages-of-Direct-ManufacturingOutsourcing-in-China&id=546309. Last accessed 4th April 2011.

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6. Shaanxi Longstar New Material Techonlogy Co., Ltd. (1999). Disposable Airplane Pillow Cover. Available: http://www.alibaba.com/productgs/426745889/ Disposable_Airplane_Pillow_Cover.html. Last accessed 25th March 2011.

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7. Travel and Tourism. (2009). Qantas Airways Ltd in Travel and Tourism . Available: http://www.euromonitor.com/qantas-airways-ltd-in-travel-and-tourism/ report. Last accessed 2nd April 2011.

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8. Qantas Airways (2010). Qantas: the international airline company. Sydney: Qantas 198. p1-11.

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9. Qantas. (2010). Qantas Board of Directors. Available: http://www.qantas.com.au/ travel/airlines/board-of-directors/global/en. Last accessed 23rd March 2010.

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10. Qantas. (2010). Economy class seating. Available: http://www.qantas.com.au/ travel/airlines/a380/global/en. Last accessed 20th March 2011.

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