The QANTAS Industrial Dispute: A Case of Lose – Lose Bargaining

The QANTAS lockdown has grounded 108 planes and cancelled thousands of flights

The recent case of QANTAS suspending all flight operations over the weekend, and issuing a lockout order against staff engaged in a long running industrial dispute is an example of poor leadership and crisis management.  If we remove the political rhetoric that will inevitably flow through this debate and look at the impact of the union led industrial actions of the past few months, and the management response that resulted in the lockout over the weekend, we can see quite clearly the failure of leadership to navigate a clear path through the bargaining process.  There are a couple of issues that I would like to tease out of this industrial dispute, and I am going to attempt to do so without taking a strong perspective on either side of who is right or wrong. I will look at the consequences of the approach to this dispute and perhaps look at what can be learned for the future.

An industrial dispute is in essence a negotiation, and in any negotiation there are always and inevitably issues of conflict that need to be resolved using the issues of cooperation.  Politically this can be framed as a battle between the workers and management, but another way to view this industrial dispute is instead to look at all the actors involved as stakeholders. Everyone involved in this dispute is a stakeholder with a vested interest in the successful resolution of this dispute. The key stakeholders as I see it are; the Management (lead by Alan Joyce), the Board (lead by Leigh Clifford), the shareholders, the workers (represented by a variety of unions), and the flying public, who just want to use their consumer rights to get the service for which they have paid. All of these stakeholders have an interest in this dispute, and yet there really have been only three parties engaged in the discourse of negotiation and bargaining, while the remainder have been collateral damage. The shareholders and the public have been penalised by this event and I will demonstrate how.

Industrial disputes involve a variety of negotiation tactics aimed at achieving a softening of a position to reach a compromise. Traditionally, this has been through claim and counter claim, then strike and sometimes lockout. Most industrial bargaining avoids the highly antagonistic stage of strike and lockout, but it can reach this point, and has done in the case of QANTAS. In today’s society, there is an added challenge of managing the news feed through traditional and instant (Twitter, facebook etc) media, to effect public opinion and community support for either the workers or management. Invariably as in all disputes such as these there will be those in favour of management and those in favour of workers.  The problem for QANTAS in this case is that the public is also the consumer.

Is QANTAS about to fly into the Storm?

In the recent past, since the demise of Ansett, QANTAS has held in most cases around 60-70% of the air traffic in Australia, with Virgin, and the otherfeed in international airlines taking the rest. Most polls demonstrate public opinion of this strike and counter action by QANTAS show that the public is split fairly evenly around 50-50, give or take a few percentage points. Joe Public is angry and many have emphasised their loss of trust in the QANTAS brand, management, and strategy. If these people take up their threat to not use QANTAS again, then QANTAS will see a direct impact of their lockout in perhaps a 10-20% drop in market share.  This is directly due to damage of the brand……this is not however only attributed to the management lockout. It is also attributable to the union strike action.

This industrial dispute is being conducted along the lines normally seen in non-mass consumer industries such as the Patrick Waterfront dispute, heavy industry or mining. In these disputes, the public is not the direct consumer, and so the total damage to the brand is minimal as it relates to the bottom line over time. The difference for QANTAS is that IT IS A MASS CONSUMER BRAND, and so its actions directly affect all of its consumers. Consequently this is a lose-lose bargaining approach from both management and unions which will ultimately result in lower market share, increased competition, lower revenue, increased costs and less jobs. Lose- lose…..and of course lower share price.

QANTAS CEO Alan Joyce

The other key stakeholders that have been abandoned in this argument are the shareholders, due to the cynical actions of the board and management. At the end of last week, the board and management went to the AGM asking for a large pay increase for the CEO; Alan Joyce, and set out the perspective of management on the dispute. I have not read all the transcripts, nor was I present at the meeting, but I have not seen anything to suggest that the Board detailed the likelihood of a lockout.  In terms of corporate governance, I believe this to be appalling. If shareholders had known this action was going to take place, which went from $15million loss a week to $20 million loss a day, would they have granted a pay increase to Joyce? Would they have re-indorsed the board?

Ultimately, this case is an example of poor leadership and management, which may cripple the brand in both the short term and the long term…..the risk now for QANTAS management, is that the arbitration at Fair Work Australia could award greater rights to the workers than QANTAS management would have accepted had they pursued a more conciliatory approach to bargaining. If that occurs, then QANTAS, will have increased their cost burden, and successfully lowered their revenue, and brand value. Whatever the result, QANTAS has seemingly lost the spirit of Australia, and may have lost the consumers of Australia.

Advertisements

Should we look to China for Product Innovation?

Manufacturing in China is a risky game, as I have discussed in previous articles about outsourcing manufacturing services in Asia (Protect your manufacturing heritage by moving to an advanced manufacturing model- http://wp.me/pS6DN-4J). One of the major challenges with manufacturing in China is the risk of imitation or Intellectual property theft, in fact even if you don’t manufacture in China due to these concerns, you may find that an imitation product is being produced and sold in the Chinese market. The problem with intellectual property theft, identity (of brand) theft, or product imitation is that it can lead to a bad consumer experience and subsequent brand erosion. At the end of the day manufacturers don’t want their brands appearing on shelves or online, that purport to be the genuine article, when in fact they are copies. Despite these risks, it doesn’t stop global consumers from searching out and buying counterfeit products, whether it is when they are travelling abroad, or buying over the internet, we seem to like cheap stuff. If it works then it’s a bonus. The thing is though that the counterfeit products are just poor imitations of the genuine article, and don’t work as well, or have major shortcomings. There is definitely no product innovation…or is there?

On a trip to China in early 2010 I discovered some high technology products that I thought were innovative. In particular I came across a variety of Apple copies. I was most interested in the Iphone copies that were available for sale. Features were much the same as a genuine Iphone, although the quality of the touch screen and useability of the applications depended upon the quality of the copy. More importantly there were some unique features that were being added to the Apple catalogue of products that were fairly interesting. One such feature was the dual sim card facility, which meant if you were travelling across borders you could keep your home sim card, and then get a local number as well without needing to change phones. I can see the advantages of that innovation. Another innovation I found was the mini-Iphone. This Iphone was about half the size of the normal Iphone, and the market sellers of these products were suggesting that they were for “women”. This is a brand new product that has developed in China to meet a demand that Apple has not been meeting. I find this interesting.

The Dual Sim Iphone Chinese copy, another innovation?

The reason this experience in China was brought back to mind, was that I have just read that Apple are going to launch mini-Iphones later in 2011.  So perhaps Apple are going to start tapping into this market that was being provided for by the Chinese knock off manufacturers. So does this mean that Apple is following the Chinese innovation? Or is the mini-Iphone a product in development for a few years, and stolen by the Chinese? Irrespective of the answer to that question, examples like these could be an indication of the emerging innovation capacity of Chinese manufacturers.  I have heard it said that the biggest problem with Chinese manufacturers are that they lack innovation, and are only good at copying, well I would suggest this is about to change. China is a manufacturing powerhouse and in the future we are likely to see more of these innovative products emerge. So next time you are in China, check out the latest technology on offer, as it could be a signal to the latest branded products to come a couple of years down the track. But the biggest question is: will it then be a case of large multi-nationals searching for the latest product innovations from China?

Is Indonesia Suffering an Identity Crisis?

Java is underpinned by some of the worlds most important Buddhist and Hindu Cultural Treasures

Indonesia is a potential tourism powerhouse in South East Asia, and yet it does not tell this story successfully to the broader world. A country of contrast, and a “paradise” which has captured the imagination of many foreign visitor in the past 400 years, Indonesia is however not just a land of beaches, palm trees, batik and bintang, it is much, much more. Guide book to Indonesia will tell you of the glorious beaches in Bali, and some of the cultural treasures that exist in small villages in far flung places. Travel Agents will tell you of the fantastic resort accommodation and luxury that can be experienced in Bali and possibly Lombok. Newspapers in the western world will tell you of the imminent threat of terrorism and the extreme fundamentalist Islamic views that are a threat to your safety. The marketing of Indonesia doesn’t add to this impression, with images of Bali beaches, batik shirts and cultural trinkets often at the forefront of the advertising and marketing sales pitch for Indonesia. Indonesia has much more to sell, and in broader locations than the traditional tourist hub of Bali.

Is this the image that Indonesia wants to portray to the world?

The answer to this question is of course yes and no. The importance of tourism to Indonesia cannot be underestimated, but at present it is concentrated upon one area – Bali. In 2010 there will be more than 600,000 Australian Tourists travel to Bali for a holiday which will last for an average 10 days. The number of Australian tourists travelling to Bali are at an all-time high, and this is despite the Australian Government Travel Warnings , which I have discussed in a previous post (The Politics of Travel Warnings: http://wp.me/pS6DN-4h). But despite these huge numbers, Indonesia is missing a great tourism opportunity. Indonesian Culture is heavily influenced by Javanese Culture, and Javanese Culture is probably best exemplified by Yogyakarta. This is Central Javanese heartland and is surrounded by highly significant cultural and archaeological sites, palaces and temples. Yogyakarta is to Indonesia, what Siem Reap and Angkor is to Cambodia in a Cultural sense….but it does not have the same profile, nor does it have the substantial tourist infrastructure to bring in the substantial tourism investment. Yogyakarta has two World Heritage Sites within an hours’ drive from the centre of the city: Borobudur, which is an 8th Century Buddhist temple complex, and Prambanan an 8th Century Hindu and Buddhist temple complex. In addition to these temples are another 3-5 other important Hindu and Buddhist temples in various stages of disrepair, and rebuild. Beyond Yogyakarta to the east of Surakarta (Solo), are the last two Hindu temples of the Majahpit Kingdom in Java: Candi Ceto and Candi Sukuh. These two temples are an easy day trip from Yogyakarta. These temples are significant to the history of south east asia and Indonesia, yet there are relatively few tourists who visit these important sites. How many people outside of Indonesia are truly conscious of these important cultural sites?

Grand Indonesia is one of the many luxury shopping palaces in Jakarta

In addition to the tourism opportunities in Yogyakarta there are great opportunities for expanding eco-tourism in Indonesia, through jungle tours, or scuba diving tourist resorts. Scuba diving resorts in Egypt, Jordan, Malaysia and Thailand all successfully promote scuba diving resorts and subsequently bring in substantial tourist money which is spent in the local economies an especially in remote communities. When was the last time you saw an advertisement for Indonesia’s great coral reefs and the scuba diving opportunities? The final piece in this tourism puzzle is Jakarta. It has a relatively bad reputation compared to other cities in South East Asia, but this reputation is unfounded to a large extent. Jakarta is a happening city that is vibrant, and exclusive and a shopping paradise. Every time I see an advertisement for Malaysia : Truly Asia, It reminds me of Jakarta. Jakarta is a city full of upmarket shopping malls, exclusive hotels, and clean streets. At night the trendy people all come out and go to the best restaurants, people drive around in Mercedes, and wear the latest European designer clothes.

Indonesia is truly a modern emerging economy and Jakarta is the most advanced and modern city in its crown. The Key to Indonesia’s future success is for its identity to be clarified to allow the world to discover the tourism wonder of opportunities that exist beyond Bali, Batik and Bintang. Get the identity right and the economic advantages will flow.

The Politics of Travel Warnings

The recent unfortunate shootings/terrorist attacks in New Delhi in the lead up to the 2010 Commonwealth Games have highlighted for me the problem with travel warnings, and in particular travel warnings from the Australian government.  As a business traveller or a tourist it is important to be abreast of the latest travel advice but how much faith do you put into the one liner warnings?

probably the safest place to be in India...inside the Taj Mahal complex

The travel warning for India has just been raised to “High Degree of Caution” which is one notch down from “Reconsider your need to Travel”. India is split into different regions in the travel advisory, with Jammu and Kashmir those politically disputed regions near Pakistan are classed as “Do not Travel”; which is probably fair enough.  The other major region that is discussed is the Northeast region of Assam, Nagaland, Tripura and Manipur, which has been classed as reconsider your need to travel. I had the good experience of travelling to India in December 2008 and January 2009, not long after the Mumbai Terrorist attacks.  Delhi was on high alert, with metal detectors in metro stations, hotels and tourist sites, however I must admit that I couldn’t work out how the machines were working…it appeared as though only those people who didn’t beep when they went through the metal detectors were frisked. Was this some sort of weird reverse psychology? Either way it didn’t fill me with that much confidence. The Gun pits outside the Taj Mahal with soldiers sporting colonial era Lee Enfield Rifles didn’t do much for confidence either! I am hoping that the commonwealth games have brought with it increased funding for Metal detector training and new automatic rifles……Exercising a High degree of caution is indeed good advice!

Inside the Forbidden City where security is very tight

Other countries such as China for example have their own regional tensions in “far away” provinces like Tibet and Xinjiang, where rioting and some “terrorist” attacks have occurred in the recent past.  But with the exception for these two provinces in China which are classed as “High Degree of Caution”, China is more broadly classed as “Exercise Caution” which I would say is fair. The United Kingdom is also a major trading partner with Australia and is destination to 100,000 of Australian tourists every year, and the threat level in the UK is the same as China: “Exercise Caution”.  I would also remind the reader that throughout the 1980’s and 90’s there were Irish terrorist attacks that occurred in the UK, while in the past 5 years there has been two attacks on the London Underground network, and an attack on an airport in Scotland. In addition to this there have been multiple “anti-terrorist” arrests to break up suspected Terror cells. 

Why is this terrorist attack information on China and the UK important?

Is Indonesia that much more dangerous than India and China?

Let’s look at the case of Indonesia. Indonesia which also includes Bali, and is one of the major travel destinations for Australian tourists each year and it is rated as “Reconsider your need to Travel”.  The reasons given for this is that there have been large scale terrorist attacks in the past that have killed westerners. There has also been the recent bombing of the Ritz-Carlton hotel in Jakarta in July 2009, which killed some Australian Business people, and a shooting of a mine contractor in West Papua. Now these events are all very important, and need to be taken into consideration. The report for Indonesia mentions intelligence suggesting likelihood of further attacks, but can we take these too seriously? The problem with Indonesia and the travel warning is that it has been stuck at “Reconsider the need to Travel” for the best part of a decade.  In the recent past there has been more chance of been arrested for drug smuggling in Indonesia then being involved in a terrorist action. So can we and should we take these Travel warning seriously?

Well, it is hard to argue that they should be ignored. Safety should always come first, but when we compare the travel advisories of the UK, China, India and Indonesia then it is hard to think that there is not some political motivation that is colouring the travel advisory.  The travel advisory for India is particularly confusing when compared to Indonesia, with Terrorist attacks more frequent and more recent than those that have occurred in Indonesia in the past 3 years. 

What impact do these travel advisories have on International Business?

Rightly or wrongly these advisories impact business quite a lot. Some business people will have risk mitigation processes that will forbid or provide restrictions on travel to countries with high travel warnings.  It will also naturally affect a business decision about the viability and safety of a given project in a country/market with a high warning. And additionally it appears to prove an impediment to State Governments in Australia providing useful advice to businesses wanting to invest in a High Warning market such as Indonesia.

So next time you need to travel abroad, remember to check the travel advisory, but consider all the information at your disposal before you decide whether it is safe to travel. Personally, I find it hard to see how Indonesia is rated as “reconsider your need to travel” and I hope that this rating will be reconsidered again; exercising a high degree of caution is where I believe Indonesia should really be rated on the travel advisory. Let’s encourage out government to institute a fair warning system that both tourists and business can rely upon for accurate and up to date travel advice.

%d bloggers like this: