Strategic Management and Business Policy in the Emirates Airline Company - Case Study Example

Strategic Management and Business Policy Student’s Name: Course Code: Tutor’s Name: Date of Submission: Executive Summary The report is documented to assess and provide strategic analysis of the Emirates Airline Company. The report will also analyze some of the strategic factors the company uses to achieve competitive advantages, including mission and objectives, Organization Strategies (in marketing, finance, accounting, R&D, CIS and strategic Audit. The aims of the paper are to formulate appropriate strategy, develop a comprehensive action plan for the strategy implementation, and evaluate the Emirates strategy. The Emirates Airline Company is a strong brand that has been in the industry for 29 years serving both domestic and international routes. Contents Executive Summary 2 Contents 3 1.0 Introduction 4 2.0 Overview 4 3.0 Mission and Objectives 5 3.1 Emirates Airline Strategies 7 3.1.1 Management, marketing and accounting strategies 7 4.0 Strategy Audit 8 4.1 PESTLE analysis 9 4.1.1 Political 9 4.1.2 Economic Factors 9 4.1.3 Technological Analysis 10 4.1.4 Social Factors 10 4.1.5 Legal Analysis 10 4.2 SWOT analysis 11 5.0 Strategy Formulation 12 5.1 Corporate strategy 12 5.2 Competitive (Business Level) Strategy 13 6.0 Implementation strategies 13 7.0 Strategy evaluation 14 8.0 Conclusion 14 9.0 Works Cited 15 1.0 Introduction With the increase of business and leisure activities has seen the growth of Emirates Airline Company Airline a great deal over the years (Namukasa, 522). Billions of people travel each year through means of airline to different destinations using this company’s aircrafts. However, many airline companies have joined the industry, making it very competitive. The company has sustained the situation by its innovativeness nature, providing quality and effective services to its customers. Despite management fighting spirit to sustain change, Emirates Airline has been faced with concerns of slow economic expansion, making them to rethink their strategies quite often. According to Clarke, Lamoreaux & Usselman posits that other case of economic turbulence that has been witnessed in the recent also includes the ever increasing fuel prices worldwide (34). In light of the situation, this report will critically assess key strategic issues surrounding the operations of Emirates Company and their implications. 2.0 Overview Emirates Airline Company is a subsidiary of Emirates Group with headquarters in Dubai, UAE. In 2014, Emirates Group website claimed that the company was established in 1985 and has since grown and operates in other countries. Emirates in regarded as the biggest airline Company in the Middle East by revenue and operates almost 3,400 aircrafts every week from their headquarters Dubai International Airport. The company serves 143 cities in 78 nations in six continents with its passengers and cargo business. According to its website in 2014, Emirates airline was positioned amongst the top ten airlines globally with regards to passenger service and the biggest airline company based on the size of the fleet, passengers carried and revenue in 2007. The company is recognized for operating quality products in the Airline industry. Emirates run a mixed-fleet of the largest aircraft makers, Airbus and Boeing. It’s also recognized for operating all-wide-body fleet, i.e. Boeing 777. Over the years, Emirates has created a strong brand as a business leader in airline industry, mainly in reference to quality and excellent services, a situation which has spackled rapid growth in the company which has been coupled with constant profitability. Emirates Group in 2014 stated that in 2011/12, Emirates Airline produced profits of nearly AED 62 billion, representing an increase of roughly 15 percent in the past year which registered AED 54 billion Profit. In 2013, the company posted half-year profits of AED 42.3 billion, representing 13% increase in spite high global economic difficulties and high fuel prices. The company has also several numerous awards, which has improved its brand image. In 2012, the Emirate was among the top ten in the "Airline of the Year” and being number eight in that award by the Air Transport World. The award was based on quality customer service, operational excellence and commitment to safety. 3.0 Mission and Objectives The increase of stiff competition in the airline industry has driven the company to look for unique and SMART objectives which can steer the company forward and increase its market share. According to the company website, the objective of the company is quality and not quantity. This is explained by the number of awards it has won in the past years based on its influence in travel and tourism industry and its commitment to quality in each aspect of its business. Emirates Airline objectives are aligned on its mission and tailored in its key strengths and opportunities, and are specific, measurable, attainable, relevant and timely. In 2014, Emirates Group Website claimed that the mission of the company states that the company “exists to deliver the world’s best in-flight experience”. Marketing objectives Virgin Atlantic has corporate objectives that will enable the organization to evaluate if the goals are achieved within the stipulated time. The SMART Objectives are outlined as follows: The organization aims at maintaining stable growth of 20 percent in the next five years, from 2014 through to 2018. The company intends to reduce their debt ratio by 5 percent annually within a period of the next five years so as to stabilize the growth. Increase services in the business class segment and its market share by 30 percent. Increase the company’s general market shares both in UAE by 12% and 7 percent internationally by 2015. To increase its brand awareness and differentiated positioningin the carribean by 2018. To market Dubai Tourism International Gate across continent Position To raise the number of distribution channels in Dubai by 15 percent by 2015. Emirates aim at increasing sales revenue by 25 from available products by in Dubai by 2016. Generate 14 percent sales increase from from Europan markets in the next five years 3.1 Emirates Airline Strategies 3.1.1 Management, marketing and accounting strategies Emirates human resource is one of its strength which it uses to achieve competitive advantage. The company has qualified and experienced directors who have been its forefront in making strategic and unique decision to make it competitive (Kapferer 32). It employs nine directors. The company also employs skilled and experienced workforce who understand different markets and can steer the company into new heights. Today, Emirate employees 38,797 staff, with 10,785 cabin crew, 2,237 flight deck crew, 1,904 in the engineering department. According to group website, at the helm of leadership is the able, His Highness Sheikh Ahmed Bin Saeed Al Maktoum who has 25 years of experience in the development of Dubai and growth of aviation industry. He serves as the company Chief Executive Officer for both Emirates Airline and Group, and also as the chairman. Tim Clark is the president of the company. He has been in the aviation industry for quite sometime. Clark has worked for SriLankan Airlines as a managing director, Gulf Air and British Caledonian Airways (Kapferer 23). Its workforce is motivated through various incentives and rewards to make them deliver customer excellence. Emirates offers its staff with benefits like comprehensive health incentive and paid sick and maternity leave. Another management strategy used by Emirates Airline is the application of merit pay and profit sharing to boost their competency oriented strategy to performance management. The company sometimes recruits internally, as a way of promotion to motivate its staff and to make them feel competent and valued. Emirates Airline has a tall organizational structure because it has ventured into other related sectors including airport services, hospitality services, engineering and catering services. Its organization chart takes in the position of the CEO, president, vice president and other middle level managers. Kapferer claims that some experts argue that tall organization is complex to run, but this concept has worked well for Emirates (27). With a tall structure, the management is able to maintain a close supervisory role from the middle level managers. This is well undertaken and also the responsibilities and roles are clearly stated. Also, decisions are made from a wide range of opinions from several multicultural middle level managers (Drummond & Ensor 67). In its marketing, the company is known for quality branding and differentiation. Through the strategy, the company has won awards for quality customer service. Emirates Group website claims that the company also sponsors a number of football clubs around that world, including Arsenal, Real Madrid and Paris Saint-Germain. In return, the company markets a lot products. The company also has an elaborate accounting strategy. The company announces its financial performance to the public from pretax profits to its financial year revenue. The management also allows external auditors to check its financial and ethical performances. 4.0 Strategy Audit Emirates Airline’s capability to continue staying as one of the strongest brands in Airline industry can be attributed to its competence and quality status which comes from the internal environment (Morris & Lancaster 210). This involves the company’s strategic objectives and goals which can be associated with its competency. According to Doganis Emirates Airline, Airline’s management team has an unquenchable passion to increase the efficiency of its operations (33). Therefore, to completely put the Strategic Audit of Emirates Airline Company, PESTLE analysis, SWOT analysis, and ethical issues of marketing is analyzed. 4.1 PESTLE analysis 4.1.1 Political In the recent past, political environment of the UAE airline industry has been shaped by the alliances and political stability of Middle East with reference to terrorist attacks (Shaw 44). In the past, terrorism fears have deteriorated airline industry. The act increased fears among foreigners who had the intention of travelling to the Middle East and Asia. Currently, the political climate of the UAE is very stable. Emirates Airline has been able to increase its customers and profits due to such stability. Shaw contends that the company is also receiving political patronage in terms of grants and protection from competitors (32). The company has political connections due to the fact that the current CEO and the chairman of the Emirates Airlines is the son of the former. Also, the company influences Dubai airline industry because the company is wholly owned by the government of Dubai. 4.1.2 Economic Factors The increasing prices of crude oil have added more pressure on the Emirates Airlines to increase the budget in their operation (Doganis 24). To deal with high cost of fuel, company has been buying a new fuel-efficient aircrafts for both domestic and international routes to help cut the cost of operations. After the global economic crisis, Airline industry has struggled to get back to normal operation. However, the response has been great due to the fact that the Emirates Airlines has since adopted low-cost airlines more so in the economy class (Doganis 27). 4.1.3 Technological Analysis With the advancement in technology within the Airline industry, Emirates Airline has implemented the latest technologies to target and serve its customers. The company uses both the Website and the social media such as Facebook and Twitter to inform their existing customers about their routes and also to attract new customers. E-booking system facilitates easy reservation and reduces cost of operation such as funds used to print tickets. As such, the management of Emirates Airlines uses its online services to handle queries and make reservations. Other technologies that the company has adopted to manage traffic flow around terminal area include Departure Manager System and Arrivals Management System. 4.1.4 Social Factors The Airline industry is one of the industries which depend on the social lives of human beings. In a nutshell, it depends on the disposable income of people so as to improve its profits. The Global economic crisis of 2008 heavily affected people disposable income because of lay-offs and salary decrease in some instances. According to the Company website, emirates has also adopted environmentally-friendly engines and shale gas to run the airline with an aim of reducing greenhouse gases emission into the atmosphere. Business of Emirates has also been boosted by the increase in the number of population in Dubai. On ethical issues, the company has been praised and criticized on equal measures. Emirates have been active in environmental conservation by buying environmentally-friendly aircrafts. On the other hand, the company has been accused of not paying taxes. 4.1.5 Legal Analysis The UAE airline industry has been more and more regulated. According to Solis, the domestic airline companies like Emirates are not allowed to acquire authorization from the Foreign Investment Review Board so as to conduct operations in the UK (145). The government has set up the various bodies to manage the airline industry. In 2013, Civil Aviation Safety Authority is just one of them that decides who operates in the industry and air laws in terms of competition and environmental conservation (Solis 143). The company has depended on the support during financial loss. 4.2 SWOT analysis Figure 1: SWOT Analysis Strengths Weaknesses 1. Strong brand in the Dubai and worldwide 2. Modern fleets which are fuel-efficient and environmentally-friendly 3. Qualified and Able human resources 4. Large customer base both in Dubai and globally. 5. Inadequate financial resources 1. High cost of operation due to its large fleets of aircraft 2. High cost of travel compared with other low cost airlines Opportunities Threats 1. Improving disposable income in Asian emerging markets like UAE, China, Taiwan, India and Singapore. 2. Trans-pacific cargo marketplace which looks positive 3. Partnership with Companies in Europe 1. Rising cost of fuel 2. Security and terrorism 3. Arrivals of new airlines with low cost. 4. Deteriorating brand image due to accidents 5.0 Strategy Formulation 5.1 Corporate strategy Emirates Airline well defined business model which aligns with its corporate strategy. Under this approach, the company has formulated its growth strategy and portfolio diversification to help gain competitive advantage. The reduction in the oil deposits which has led to price instability has prompted Emirates Airline Company to create strategies which would successfully manage the challenge of dwindling jet fuel costs. Shaw posits that Emirates has partnered with many big oil corporations to sell jet fuel to other companies at a particular price now and in future (29). This form strategic partnership based on fuel has made Emirates to maintain profitability in the dynamic fuel market. This can be regarded as one of the company’s conglomerate diversification strategy to make it sustain competition. The company also employs concentric diversification to spread risks. For instance, Emirates is involved in different businesses including airport services, hospitality services, engineering and catering services so as to spread business risks (Solis 204). In doing this, the company understands that should profit in one portfolio fails; it will still bank on other remaining ones. The company has employed horizontal growth to improve its brand awareness in other regions. Emirates Airline is strongly raising the number of aircrafts to the US, including expansion to Europe through the implementation of the global strategy. With the improved state of security, Emirates Airline has the potential to make it in this industry, which had earlier been shaken by the terrorist attacks of September 11 2001. 5.2 Competitive (Business Level) Strategy The company uses a differentiation strategy to attract its customers. Its products are uniquely branded giving extra satisfaction better than its competitors (Shaw 41). As such, its customers are keen to pay the premium prices for quality service, prestige, convenience and superior technology. Emirates Airline has learnt how pricing influence their industry. Hence, during economic difficulties, the company uses price differentiation strategy to retain its customers. 6.0 Implementation strategies As stated earlier, Emirates is partnering with major jet fuel manufacturing companies to supply the fuel. The new venture is not the company original portfolio, but a diversification strategy. Therefore, implementing it through strategic partnership is advantageous because the company is reducing business risks associated with new business. Another unique corporate level strategy is successfully moving into the airport services, hospitality, and tourism and resort service sector (Solis 127). This implementation has been done through the acquisition of different hotels and resorts in Dubai and other countries such as Australia. For instance, Emirates acquired Healthy Habits Sandwich Bar to increase its profits. The company has placed a lot of focus on quality control which has attracted exemplary praise. Additionally, the group has built tourism services around his area of business, generating additional growth. In 2008, in a bid to increase its product and services to the US, the company first built Terminal 3 at Dubai International Airport exclusively for Emirates use costing $4.5 billion. In its price differentiation strategy, the company uses both premium and economy pricing in different markets. 7.0 Strategy evaluation The strategies have worked well for the company in the past. Such strategies are considered effective because today, Emirates Airline is regarded as the most successful and effective airline in UAE and the general Middle East. It has grown every time in the last 25 years sending a strong message to its competitors. Despite of embracing premium pricing, the company has lost a lot of customers to low-cost airline companies which otherwise would. The airline industry is yet to recover fully as effects of economic crisis 2008 is still being felt (Shaw 47). Therefore, its premium pricing could face challenges. However, its diversification to hospitality and tourism sector is promising because of increase tourism and business activities across the world. 8.0 Conclusion The discussion in this paper features the assessment of the Emirates Airline Company and the strategic audit to this company including mission and objectives. Emirates Airline is operating in an ever-changing external environment that needs constant review of those strategies. This ever-changing environment provides concerns to PESTLE factors based on the analysis above. As critically assessed, different strategic alternatives exist for Emirates Airline. To sustain change in the airline industry, the provided recommendations are appropriate and ought to be implemented so as to increase share market both locally and internationally. Change in the strategies will make Emirates Airline sustain its objectives of being successful airlines in the future. 9.0 Works Cited Clarke, SH., Lamoreaux, N.R., & Usselman, S. The Challenge of Remaining Innovative: Insights from Twentieth-Century American Business. Stanford University Press, 2009, Print Drummond, G & Ensor, J. Introduction to marketing concepts. Oxford, UK: Elsevier. 13 Dec. 2005. Web. 26 August. 2014 Doganis, R. The airline business. 2nd ed. New York: Routledge, 2006.Print Emirates Group. Emirates Group Official Website. 26 August 2014. Web. 26 August 2014. http://www.emirates.com/ Kapferer, J.N. Strategic Brand Management, 5th ed., Kogan Page, London, 2012, Print Kotler, P., & Armstrong, G . Principles of Marketing, 13th (Global) ed. Boston: Pearson Education, Inc. 2010 Morris, T., & Lancaster, Z. Translating management ideas. Organization Studies, 27(2005): 207-223 Namukasa, J. The influence of airline service quality on passenger satisfaction and loyalty: The case of Uganda airline industry, The TQM Journal, 25(2012): 520 – 532. Print Shaw, S. Airline marketing and management. 6th ed. Washington: Ashgate Publishing, Ltd, 2007. Print Solis, B. Engage! The Complete Guide for Brands and Businesses to Build, Cultivate, and Measure Success in the New Web. John Wiley & Sons, Inc, 2011. Print Read More