Organizational Structure of Emirates Airline - Case Study Example

Emirates Airline Contents Contents 2 Background of Emirates Airline 3 Organizational structure of Emirates Airline 4 Emirates business objectives 6 Key business strategies of Emirates 6 Stakeholders of Emirates Airline 6 Relationship between Emirates Airline and its environment 8 Emirates risk management framework 9 Emirates Airline conduction of risk assessment 13 Value and benefit expected from risk management of Emirates Airline 14 Emirates Airline criteria for risks 14 Identification of Emirates Airline Risk 14 Risks for Emirates Airline 15 References 19 Background of Emirates Airline In the year 1985, the Emirate Airline was founded with the support coming from the royal family of Dubai using a total of ten million dollars as a start-up capital. The first two aircrafts of Emirates airlines were wet-leased from Pakistan international airline. In 1985, the first Emirates flight departed from Dubai International Airport to Pakistan. The first three destinations of Emirates airlines were New Delhi, Mumbai, and Karachi. In the following year, the airline network grew and spread its tentacles to Amman, Cairo, Colombo, and Dhaka. More investment by the airline company vested in infrastructure and its expansions further saw the company experiencing loss for the first and the last time. From that year onwards, Emirates saw profits rising from one year to the other and addition of more destinations to the airline network1. Emirates Airlines are one of the leading leaders in airline transport industry in the Middle East. It operates approximately two thousand two hundred flights in a single week across the globe with Dubai in United Arabs Emirates becoming its central hub. Emirates airline engages in offering services of commercial air transport both internationally and in the regions of United Arabs Emirates. Moreover, the airline company engages in offering wholesale consumer goods and offering retail products, in-flight and institutional catering, and operations of hotels. Today, Emirates airline is among the most successful airline service companies in the world. It has effectively established itself in the market for the past twenty-five years. Its business model has been successful in achieving its overall advantage competitively in the global international market. The company’s strategic capabilities, strengths, competencies, and sustainable model of business strengthen its strategic management that leads to fulfillment of its strategic objectives. The airline organizational culture and its working environment motivate its employees to perform effectively. However, some of the behavioral theories of the organization and its models suggested are useful in the management and modification of the individual, organization, and group behavior in the Emirates Airlines. The goal of the airline during its foundation and today are provision of quality and not quantity. Emirates airline is striving to provide the highest level of air transport services to its customers and tis forms part of the secret of the success of the Emirates Company. Over the years, Emirates Airline Company has grown in full stature and scale throughout the years not through protectionism but stiff competition. Emirates airlines follow and encourage the policies of open-skies. Organizational structure of Emirates Airline The organization structure of Emirates airlines has helped the company reap several benefits from its services. The supporting groups include finance, support services, information & technology and corporate affairs reports to the chief executive officer of the company. Strategic business groups form the lowest in the ranks and make up the majority of the working population in the airline service e company. The support groups supervise them. Some of the benefits of the structure include; fewer overhead costs s only a few managers exist, communication became faster, and faster, productivity of the airline became better because the subordinates became free from strict and close supervision. In addition to the benefits, it results to fewer the airline company is headed by the board of directors who are followed by the chief executive officer in the second command. Mission of the Emirates Airline The company’s mission is existing to deliver excellent services in-flight experience with a sense of warmth, friendliness, overall organizational spirit, and individual pride to compete effectively in the airline market. Emirates Airline Company with its exceptional expertise positions itself well for continuing future growth and successes in making headways against from a history of great achievements to a promising future. Through high standards of professionalism, the company will continue on its excellence and prosperity path for a long time. In addition, the company pays greater emphasis over the citizenship corporate and social responsibility to bring changes in its future. Emirates business objectives The main objective of Emirates airline is to continue becoming the leading airline service company in the world. To achieving this, the airline company has to constantly improve the quality of its service to its customers throughout the globe and expand its services to areas that were not initially on operation. Key business strategies of Emirates The Emirates airline company operates on four major strategies including; Positioning Emirates as a global airline and the carrier of choice to the Gulf and the Middle East and points beyond Promoting Dubai s pone of the most current, progressive, safe and technologically advanced centers of commerce in the Middle East Showcasing the airlines global outstanding and award winning service levels, in experience of flight, profitability, safety record, fleet and good reputation globally Focusing on the airline highly professional and senior management in creating leadership positions in the airline industry Stakeholders of Emirates Airline A stakeholder is an individual who possesses an interest in a business. Stakeholders comprise of individuals, organizations or groups that directly or indirectly creates effects on any decision or activity that the airline decides to make. Internal stakeholders in any company include those groups or individuals who are within the company and contribute directly to the achievement of the airline main objectives. On the other hand, the airlines external stakeholders are those individuals and groups who are outside the company and either directly or indirectly contributes to achieving the objectives of the group. According to the definition of the term, Emirates airline internal stakeholders compose of its employees and investors. These groups of people are the pillars of the airline company. They help in branding the company to all corners of the word through provision of high-quality services and expansion of the company to major areas of the world. Its external stakeholders consist of its customers, government, government agencies, and society. For the company to be achieving such a high glory in the airline service industry Emirates Company keeps a constant and close touch with its stakeholder’s strategic framework considers those. That is why the internal survey of the company is held annually to assess the views of the employees on environmental, social, and economic responsibility of the Emirates Company. Emirates Company has been inspiring its employees and other stakeholders to have its vision of corporate social responsibility through the provision of high-quality services to the clients. In the process of gathering the employees’ views, the company asks them to answer questionnaires in order to answer their personal side of environmental and social performance in the company. Emirates Airline Company holds several meetings with its stakeholders both internal and external many times in a year. The main reason the company engages in several meetings is the presentation of its overall annual strategy, and its regular updates on its extra-financial analysts on the latest investment and developments in the airline market2. At Emirates Airline Company, the stakeholders are an integral part to its efforts that have resulted in it generating superior satisfaction of its customers, ratings, and great financial performance in a highly competitive airline industry. The management of the Emirates Company ensures that its employees have an enjoyable environment of work while providing similar warmth, care and experience that s unforgettable for its customers. The managers put in very impressive efforts in order to strengthen the relationship of the company with the community that in turn will help in yielding a long-term reward for the airline company. Emirates airline strives the best to improving the relations existing with the operating suppliers to maintaining the competitive edge in its suppliers market. Relationship between Emirates Airline and its environment Emirates Airline Company acts as a major player in the world’s economy. The company is responsive for its high standard of service provision in the environment. Because of this, the company works hard in controlling its environmental impacts both directly and indirectly. In conjunction with the Emirates attitude in the global climate, Emirates Company is in support scientifically for research on climate change. The environment of the company plays a huge role in the success of the Emirates airline. Because of this, the company is investing a considerable amount in its environment to maintain a healthy relationship for the long-term benefit. Environment of the Emirates Company is vital to its success. With its presence in nearly one hundred and twenty-eight countries, Emirates Company works hand in hand and full agreement with universal principles and rights. Emirates airline is an active participant and investors group of climate change. Emirates airlines have adopted a strong commitment to bringing satisfactory changes in the environment. The company has been encouraging its stakeholders to help in financing projects responsible for the protection of the environment as well as playing roles in preventing global climate change. Since its foundation, the company has spearheaded a wide range of products and services in support of those clients who are concerned with the impact of the company to their environment. Emirates is now working handy with other environmental agencies to help reduce the amount of greenhouse gasses released into the atmosphere and effective management of environmental wastes through the initiation of recycling projects. Its support for research aimed at combating climate change is enormous. Emirates Airlines are now seeking to monitor the impact of its airline industry on the environment and offering support on how it can help in protecting environmental damage. Emirates risk management framework In any Emirates Airline, context must be developed and put into account. Through the process, the identified airline risks can be combated and managed, thus helping in identification of the company’s opportunities. In Emirates Airline, establishment of context is done through two major types: internal and external contexts3. Internal context entails employees work omissions and system management. On the other hand, External context has three major subdivisions of risks. That is legal risks, reputational risks, and market risks. These three key risks are important to the company to establish its context depending on the specific issue. As Emirates keep on growing steadily in its network capacity to handling passengers, there is an increasing bill for its fuel at the same time. Its jet fuel consumption in the last three financial years is estimated to be seven, six, and five million tons. In terms of dollars, Emirates airline was estimated to have been seven point five, six point six and five point seven for the same period. Risk assessment. Jet fuel hedging exposure. Emirates Airline The fuel exposure of Emirates is ever increasing. While assumption is made on seasonality in the consumption of fuel, data available is not adequate to give an accurate disclosure. However, the prices of fuels, data distribution, and rolling volatility for jet fuel on a monthly basis are available. Risk assessment. Jet fuel hedging price trend. Emirates Airline Fuel expenses today represent approximately forty percent of the total operational expenses for emirates Airline Company. Fuel is a volatile commodity and most cases difficult to perfectly hedge. Risk assessment: Risk Exposure cascade. Emirates Airline The major concern of emirate airline is the rapid increase in the prices of jet fuels, which are at their historical high price currently. In the opinion of the company’s management, the likelihood of price going up at this level is low. There is likelihood that the prices are likely to decrease with time. If the airline company can hedge its jet fuel exposure at the current prices, the price of fuels will be locked in at the levels that would be painful if the fuel prices were to completely collapse. Risk assessment. Jet fuel hedging price change distribution. Emirates Airline In addition, the Emirates Company has its concern too on the volatility. While the prices are high to a record, the volatility is at its historical lows. What is concerning Emirates Airline most is what will happen to the prices of jet fuel in case volatility increases. The company believes that in the above context, until the picture on the jet fuel clears up; they would be partially better off by passing the cost increase to its customers through fuel adjustments and surcharges. Such move is flexible, works for the company given the current context, and allows the company to have options of hedging its exposure when the fuel prices can be locked at lower levels4. Risk assessment. Jet fuel hedging price volatility. Emirates Airline Emirates Airline conduction of risk assessment Risks have a potential impact on events and cause consequences. The risks found in Emirates airline industry cover several aspects including legal risks, reputational risks, and market risks. In challenging economic contexts, these risks may become obvious to Emirates Company in regard to customer satisfaction. The success of the Emirates airline depends on how the management has devoted itself to tackling and managing such risks whenever they arise. Therefore, the process of detecting, managing and scoring of the risks are going to be one of the major priorities of Emirates airline if it is to maintain its global superiority in the airline industry. This approach taken will not only serve to guarantee the company that it will be able to meet its customers’ needs and satisfaction in terms of service deliverance, but also, ensure that the company meets its airline regulatory requirements5. Value and benefit expected from risk management of Emirates Airline Emirates Airline Company has spent a lot in trying to manage its emerging risks, so s to maintain its global position. The potential benefits Emirates airline get from risk management include: Effective and efficient utilization of resources Decrease in uncertainties and risks Improvement of services on a continuous basis planning and strategic support in the airline industry Stakeholders getting convinced in the strategic plan of the airline company Improved communication between the airline company and its stakeholder and customers Emirates Airline criteria for risks Emirates Airline has the obligation to formulating its criteria used in the evaluation of the risk significance. The criteria used by Emirates are reflecting the company’s objectives, values, and resources. Emirates airline identifies the process of setting risks to be vital in assessing its risks, analyzing, and evaluating them to prevent its reputation from being affected. In the company, criteria for risks act as the basis for an argument in managing risks and considered key. Therefore, Emirates airline has identified three key risks in attempt to combat the emerging risks in its company. They include legal risks, market risks, and reputational risks. Identification of Emirates Airline Risk Identification of risks is the initial step in the assessment of the Emirates airline. This is because; several risks of the company will be based on those events that might create, destroy, and improve or break the achievement of the objectives set. Therefore, it is paramount for Emirates Company to put several tools and techniques into application in the identification of the company’s risks. This is to ensure that all the company’s objectives and goals are met in due time. For the Emirate airline, it would be sufficient if it were provided with updated information so that it can establish its level of risks. Emirate airline follows various methods and procedures for risk identification with the most common ways include; SWOT analysis and the use of historical6. Risks for Emirates Airline Emirates Company is placed in the focus quadrant in the focus strategy in the airline industry. It boasts of serving several markets globally. It serves its market perfectly with the help of quality service deliverance. With such a huge reputation in the airline industry, Emirates airline is facing setbacks from the risks it is facing in the current airline industry. Despite its global position, Emirates airline faces risks such as: Threats of a substitute service industry Emirates airline faces this big risk of service substitute due to availability of other airline companies in the industry. Availability of other cheaper means of transport possesses danger to the growth of Emirates airline globally. Initially this was not a big concern for Emirates airline, but as the global change in airline industry marked introduction of other competitive airline company such as the Virgin Atlantic, Emirates is now facing competitive risk. Bargaining power of customers Competition is becoming intense between several airline companies. Emirates Company is facing risks currently and in the future. Nowadays customers have the ability to dictate the kind of services they want to receive and the airline prices to be charged. The availability of other cheaper airline companies creates a threat to the charges of Emirates Airline. Therefore, Emirates airline is unlikely to exhibit such huge rate of turnover it had experience before due to price reducing. Rivalry amongst existing firms Airline industry rivalry is becoming famous and high due to the increasing number of airlines in the market, which offer best services and best costs. Competition from other airlines creates the biggest risk for Emirates. For it to maintain its position globally, Emirate airline has to maintain its high quality f services and reduce its charges in the market Terrorism Perhaps this is the cost significant threat facing all airline companies in aviation industry. Terrorism has become the modern threat since it leads to loss of revenues for the company. Therefore, the global position of emirates airline in the Middle East makes it a prime target of the terror organization and this is a huge risk that emirate airline has to address. Bargaining power of those supplying emirates Emirates airline is facing risks of paying higher prices to acquire new and modern airplanes. Boeing and airbus are the two main producers of aircrafts in the world. Emirates depend so much from these suppliers and when they change their markets emirates get affected in terms of prices. Changes in technology Technology is changing at a faster rate in airline industry. This means that the airline company must keep pace in acquiring modern airplanes and keep their crew with the modern technical expertise on handling the planes. This is costly to the Emirates Company as it strives to stump its authority in the global airline service industry. Hence, technological changes possess a great challenge and risk to the development of emirates airline. Ever-increasing jet fuels When the cost of fuel increases the airline charges also increases. This in turn lowers the turnover of the company. For emirates airline to maintain its position and win the customers, its charges are not increased hence the company runs losses in return. Accidents and crashes Accidents in aviation industry form the greatest risk of all. Emirates airline is pending lot of resources to ensure that this risk is not happening in its company because its reputation will be tainted hence affecting its profits. Decrease in quality of services Services are the key pillars of Emirate airline. When the qualities of its services are below par then the airline suffers risks of bad reputation in the industry. Employee strike Employees may put down their tools in the course of work if their terms are not met. This is disastrous to the Emirates since the services of the client will decrease. Poor promotion strategies Emirates airlines do promotions by means of open skies as well as ground advertisement. Poor strategies risk the airline company from losing customers. Decline of emirates culture Emirates airline has been able to show strong positive culture in terms of cultural differences. They are able to offer promotion of one single goal among its employees. When this culture declines then the airline is at risk of losing its position in the market. Risk response Risk register Risk rank Strategic objective Risk assessed Critical risks Trend Achieving the market growth of the airline company 4 1 Satisfy the customers’ expectations and needs 11 4 Improve the image of the Emirates airline company 13 1 Guarantee customer oriented innovations 4 2 Creating and managing robust volume of strategy in the airline company 5 2 References Daft, Jost, and Sascha Albers. 2013. “A Conceptual Framework for Measuring Airline Business Model Convergence.” Journal of Air Transport Management 28: 47–54. McKeever, Joe. 2008. “Emirates Orders Composite Trainers.” Reinforced Plastics 52: 42. Namaki, EL (Maastrincht School of Business). 2007. “Is This the Right Strategy? Emirates Airline in a League of Its Own.” Capital Magazine 9. O’Connell, John F. 2011. “The Rise of the Arabian Gulf Carriers: An Insight into the Business Model of Emirates Airline.” Journal of Air Transport Management 17: 339–346.. Squalli, Jay. 2014. “Airline Passenger Traffic Openness and the Performance of Emirates Airline.” Quarterly Review of Economics and Finance 54: 138–145.  Read More