The Services Marketing in Emirates Airlines in Dubai - Term Paper Example

?International Services Marketing: Emirates Airlines Table of Contents International Services Marketing: Emirates Airlines Table of Contents 2 Introduction- About the Company 4 SWOT Analysis 4 Value Chain Model 5 Value Drivers 6 Porter’s Five Forces Model 10 Porter’s Diamond Model 11 Factor Input Conditions 12 Demand Conditions 12 Firm Strategy and Rivalry 12 Related and Supporting Industries 13 Analytical tools of Emirates 13 8 S Framework 13 Product 13 Price 14 Place 14 Promotions 14 People 14 Process 14 Physical Evidence 15 Productivity & Control 15 GAP Model 15 SERVQUAL Model 16 Reliability 16 Tangibility 17 Responsiveness 17 Assurance 17 Empathy 17 Conclusion & Recommendations 17 References 19 Introduction- About the Company The project aims to evaluate the services marketing in Emirates Airlines in Dubai. It requires making an analysis and comparison of the drivers of value oriented services marketing of the company in the present global financial climate. It also tries to bring forth the challenges that it has been confronting in the global environment. In order to do this, it is particularly important to analyze the main aspects of the organisation pertaining to the services it offers. Emirates Airlines is one of the fastest growing international airlines in the world. Emirates is one of the major corporations in Emirates Group, the other being Dnata which happens to be a large travel organisation in Middle East. ‘Emirates’ is particularly committed to provide the best possible level of services to its customers and clients (Emirates-a, 2011). The company has evolved as the globally influential tourism and travel conglomerate which is known to the world as the provider of the highest standards of services in all aspects of their businesses. Although owned by the Dubai Government, The company has grown in stature and scale through competition with the other international carriers. The company aims to maintain its identity through competitiveness and maintaining its quality standards (Emirates-b, 2011). SWOT Analysis Strengths: The Company has the advantage of its size. In the aviation history, Emirates is considered to be the most consistent and profitable carriers which has also been growing at an extremely fast rate. It operates the largest “A380 and B777 fleets” which makes it the single and the most important customer of Boeing’s and Airbus (Aerlines Magazine, 2007, p.1). Another strong point about the company is its strong brand image due to its quality services. It was named as the “official carrier of the 2006 FIFA World Cup hosted by Germany” (Aerlines Magazine, 2007, p.1). It also draws its strengths from the time of its launch when it resulted in the flat hierarchies without any legacy costs. Weaknesses: although it is difficult to find weaknesses some complaints have been heard of regarding inconsistent in the services quality. The company has also not been very successful in winning the Skytraxx awards or other awards (Aerlines Magazine, 2007, p.3). Opportunities: Dubai’s favourable geographical location accounts for a huge opportunity that has contributed towards the company’s success. Moreover it is also placed at the crossroad of the major cargo and passenger flows. The government has also been successful in the negotiations for free trade agreements with USA and the other Asian emerging economies (Aerlines Magazine, 2007, p.3). Threats: The political instability in the Middle East accounts for one of the most important threats retarding growth of the company. The development plans of the company may get affected by such threats. Moreover, similarities have been notices with regards to the approaches taken by Emirates and the Singapore Airlines (Aerlines Magazine, 2007, p.4). Value Chain Model The following provides the value chain analysis for Emirates. It includes the primary activities, like inbound logistics, outbound logistics, operations, marketing and services. The support activities are human resource management, administrative infrastructure management, research and development and procurement. Primary Activities: Since Emirates is completely owned by the Government and forms a subsidiary of the Emirates Group, the cargo activities are taken up by the Emirates Group. It operates through fleets of airbuses and also wide body aircrafts. The company’s inbound activities include leasing of aircrafts, airport management and planning, maintenance and consulting. The outbound logistics include building infrastructure, removing bottlenecks and expansion of airports (Aerlines Magazine, 2007, p.2). Sponsorships is seen as a vital strategy in the case of Emirates. It is considered to be the best possible way of remaining connected with the passengers and building relationships with them (Emirates-d, 2011). Secondary Activities: The Government has plans to upgrade the infrastructure of Emirates which in turn would contribute to the economic development. UAE is already blessed with modern infrastructural facilities which make it the centre for regional transportation (Emirates News Agency, 2011). Emirates put particular emphasis on its human resource management. The management practices are designed to reduce costs enable flexible development and learning. It provides facilities for employee’s growth and also provides the relevant training for employees (HR.com, 2007). ‘Emirates’ uses the latest technologies in its services which aim to provide the best services at the minimum costs to its customers. Value Drivers The present age of business markets is characterised by intense levels of competition among the business organizations. Hence it has become considerably important for firms to strive towards delivering greater value to the customers. Customer values are said to be created when the total profit generated from a particular supplier or vendor is greater than the sum total of all the ownership based costs of the product or service (Gelei, 2005, p.44). Value creation has become the ultimate goal of every organization as it forms the distinctive feature of an organization with its competitors in the market. There can be numerous value drivers for different organizations based on their nature of business. In the context of Emirates Airlines four main divers create a value proposition for the customers. These four values serve as the template for the value creation of the service offering of the firm. These four values are Relationship drivers, Interaction drivers, Service value drivers and Resource value drivers. Relationship drivers involve value creation through relationships with the suppliers and customer of a firm (Daum, 2002, p.1-2). Loyalty programs are one such strategy adopted by service providers that seeks to provide better value by virtue of increased interaction which is achieved by repeat purchases. The figure below depicts the relationship between loyalty and customer value. It is very clear from the model shown above that customer loyalty is a function of the various tools of marketing as well as the nature and duration of interaction with the firm and its customers. Figure 1: Loyalty and Relationship based Value Drivers (Source: Arantola, 2002, p.4) In case of Emirates airlines the Emirates Loyalty service is a loyalty program that rewards frequent flying customers and has attractive offers for both business as well as individual passengers. In addition it also maintains a good relationship with the travel agents who constitute the suppliers of the firm (Emirates, 2011). Interaction drivers also propose to create a value proposition by inducing better and quality interaction with the customers of the firm. Interaction is a broad term and it also includes the interaction between the employees of the organization as well as between the employees and their managers. Emirates airline offers a god interaction platform between the managers and their subordinates by following a flat organizational structure that facilitates smooth inter organizational communication. Service value drivers propose to enhance the value proposition of a product or service delivery by providing quality services. An efficient service mix is one which can be used provide greater value proposition. In case of Emirates it includes a good product mix comprised of new and modern fleet of aircraft as well as an efficient on-board service. Figure 2: Triangle of Services Marketing (Source: Zeithaml et al, 2008, p.366) Resource value drivers create value by making optimum and efficient utilisation of the resources of an organization. Human resources form the most important resource base for an organization. Emirates Airlines uses its financial muscle to generate greater value proposition by using a modern fleet of aircraft. Presence of an efficient leader also induces motivation among the employees. The figure below highlights a roadmap for the organization to create value through resources. Figure 3: Value creation using Resource drivers (Source: Marr, 2009, p.78) The analysis of the value based drivers indicates that in order to create a good value proposition Emirates must focus on the above stated building blocks of value creation so as to create a good value proposition. Porter’s Five Forces Model It looks as if the airlines industry has low entry barriers. Finance, which is considered to be the most important barrier, is already present in the market in huge amounts. Ample expertise, technology and finance are present in the Middle East. Airbus and Boeing are two of its primary suppliers and it is probable that the two of them may enter into competition with each other. Also there is least probability of integration of the suppliers (Namaki, 2007, p.3). The bargaining power of the buyers in Middle East is also considered to be extremely low. Substitutes provide minimum threat in the region because of the distances prevailing in Middle East. Also, the pace with which the region seems to be growing provides lest likelihood of threat in the region. The airlines industry is extremely competitive. This is the reason why they earn very low returns because usually the costs of competition remain extremely high. However, situation in the Middle East is different. The Government also provides support readily in the times of shocks and economic turbulences. Thus the environment poses threat with regards to competitive rivalry and new entrants, but there are no real threats from substitutes, or even buyers and suppliers for that matter (Namaki, 2007, p.3). Porter’s Diamond Model The competitive environment of a firm can be analysed by using the Diamond Model proposed by Porter. In this model the four corners of the diamond reflect factors that have an effect on the competitive sustainability of a firm. These four factors are “Factor Input conditions, Context for firm strategy and rivalry, demand conditions and related and supporting industries” (Vandenbrink, Kenkyujo & Institute of South East Asian Studies, 2003, p.264). Figure 4: Porter’s Diamond Model (Source: Vandenbrink, Kenkyujo & Institute of South East Asian Studies, 2003, p.265) Factor Input Conditions Globalisation has turned the entire world into a global village. This has enhanced the need to ensure faster modes of travel for tourists as well as business customers. However the increased competition has also ensured the need to provide better quality services. Emirates Airlines has its hub located in Dubai which is one of the tourism as well as business hubs of the Middle East. The availability of both financial and human resources depict a rosy scenario for Emirates Airlines. Demand Conditions The economic crisis has led to a severe crisis for the participants of the global aviation industry. A dip n demand coupled with skyrocketing fuel costs generated a loss of approximately 9.9 billion dollars in 2009 with passenger demand dipping by almost 2.1 percent. The total revenues of the industry witnessed a dip of about 14 percent amounting to almost 479 billion dollars in 2009. However with economic revival on the cards the industry is expected to witness good demand in the following years (IATA, 2010, p.8). Firm Strategy and Rivalry The aviation industry is characterised by intense competition among the market players. Frequent price reductions accompanied by the advent of low cost airlines have squeezed the revenue and profit margins of the beleaguered industry segment. Emirates uses it formidable brand image to generate competitive advantages. In addition the firm has an efficient service quality backed by strong financials as well as innovative means of financing such as US bonds. Operational efficiencies include use of smart landing and runway facilities that have helped the firm to generate a profit margin of 964 million US dollars even in time of global market turbulence and dip in demand (Emirates-c, 2010, p.17). Related and Supporting Industries The airline industry is largely dependent upon the support of other industry segments like travel and tourism and more importantly oil. The dip in disposable income led to a dip in the number of tourists. Economic uncertainties led to high prices of fuels which reduced the operational margins of firms. Lending activities also got negatively affected as a result of the economic crisis. Emirates however were able to register a profit by using innovative and a quality based customer centric approach (Emirates-c, 2010, p.17-18). Analytical tools of Emirates 8 S Framework The framework of services marketing can be analysed by using the framework of the 8P’s of service marketing. The intangible nature of services has made it necessary to include the last four aspects of People, Process, Physical Evidence and Productivity & Control in addition to the elements of Product, Price, Place and Promotion of the product mix (Lovelock, Wirtz & Chatterjee, 2010, p.399). Product The product strategy of Emirates Airlines includes the following aspects. Use of an ultra modern fleet of aircraft Wide range of destinations Attractive offers including reward and loyalty programs Efficient on board facilities Hub and spoke model of connectivity Price Emirates Airlines has a pricing strategy that takes care of both the business class and economy segment passengers. Attractive pricing options are also available for early bookings. Place Dubai is the main hub of the airline from where it operates a hub and spoke model. The airline also covers 52 international destinations covering three continents. Promotions The promotional strategy of Emirates airlines is stated as follows: Sponsorships of major sporting and cultural events across the globe Television and print media as well as hoardings Sponsorships of shopping festivals People Emirates Airlines has a dedicated pool of approximately 36652 employees who are well trained and motivated to serve the needs of the growing demands of the customers (Emirates-c. 2010, p.4). An efficient cabin crew adds to the popularity of the airline as a choice of travel for both business as well as individual passengers. Process Emirates Airlines has a large fleet of ultra modern aircrafts including the long haul B747 and Airbus A380. In addition online passenger check ins and operational innovations like automatic landing systems make its one of the most technological driven airline of the world. Physical Evidence Aircrafts operated by Emirates airline have unique interiors that are specially designed to provide a touch of excellence and innovation. Waiting lounges at international destinations also show the mark of innovation of the airline. Productivity & Control The efficiency levels of the organization are reflected both from its operational excellence and the successful implementation of the hub and spoke model. This has made the airline to create a sustainable competitive advantage in the market. An operating margin of 9.1 percent in 2010 reflects the strong operational abilities of the organization. Use of an ultra modern fleet of aircraft has enhanced the quality dimensions of the airline (Emirates-c. 2010, p.4). GAP Model The service quality gap model bears particular relevance in case of the airlines industry. The project makes an assessment of the quality of services provided by the Emirates Airlines in Dubai using the Gap Model. The model tries to highlight on the gaps present in the services in terms of information, feedback, design, implementation, communication as well as the expectation of customers and their perception about the quality of services provided by the company. It is seen that the management has been particularly cautious about the quality of services that the company provides. They primarily aim to focus on those things which are demanded by the customers. They are also found to be particularly careful about the use of technologies so that loopholes can be minimised between the expected services and the actual services provided. The management also pays particular emphasis on removing communication barriers between employees and the management. Every activity, functions and departments are collaborated and coordinated to remove bottlenecks and miscommunication. Identifying loopholes and then implementing training and development programs in the relevant areas is one of the measures to remove the gaps (Clement & Selvam, 2006). SERVQUAL Model The SERVQUAL model is based on five basic presumptions or perspectives namely “tangibility, reliability, responsiveness, assurance and empathy” (Huang, 2009, p.2). This model helps in determining the quality of service in a service based industry. Figure 5: The SERVQUAL Model in Airline Industry (Source: Huang, 2009, p.4) Reliability The service quality of Emirates could be analysed from the fact that it has set benchmarks in the industry. Use of modern technology coupled with innovations like ‘flextracks’ and ‘i-flex’ have generated the much needed quality assurance for the airlines (Emirates-c, 2011). Tangibility The use of an ultra modern fleet of aircrafts, efficient cabin crew, on time performance are some of the tangible aspects that make Emirates airline s a global leader in its category. Responsiveness Emirates airline has a dedicated cell towards customer service and promoting customer relationships. Efficient ground staffs takes care the ticketing related issues. Grievance handling has also been one of the strong points of the organization. Assurance Numerous quality certifications and innovations in the way of operations apart from other aspects like on time performance have generated the much needed assurance for the airline to survive in the tough competitive market. Empathy Emirates airline s has a dedicated cell for customer relationship management. The grievance handling department also takes care to see that all major issues have been resorted. Flexible options like online web check-ins, online reservations apart from reward programs and attractive pricing schemes have ensures the customer that the airline is devoted towards understanding their needs and wants. Conclusion & Recommendations The analysis of the service quality dimensions of the airline reveals considerable strengths and a formidable brand image of the organization. The airline also scores high on most of the aspects of service marketing. A unique mix of technology and innovation could be termed as the main reason behind the success of the airline at a time when many of its counterparts are on the verge of a severe financial crisis. Customer service remains at the heart of every strategy of the firm which has created a strong positioning of the firm in the minds of the customers. However certain aspects like pricing and entry of lox cost airlines emerge as areas of potential threats. External factors like oil prices also serve to hamper the business interests of the firm. However the key to success lies in creating an excellence in service quality so as to ensure sustainable competitive advantage in the long run. References Aerlines Magazine. 2007. How Sustainable is Emirates’ Business Model?. [Pdf. Available at: http://www.aerlines.nl/issue_38/38_Knorr_Eisenkopf_Emirates_Business_Model.pdf. [Accessed on March 12, 2011]. Arantola, H. 2002. Relationship Drivers in Provider-Consumer Relationships. [Pdf]. 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