Emirates Airlines Global Strategy - Case Study Example

Global Company Name: University: Date: Global Company Introduction These days, the airline industry is amongst the most crucial industries, for the reason that it is supporting the globalisation as well as internationalisation goals for scores of businesses all around the world. As stated by Rothkopf (2009), this need has generated big pressure for the airline companies, creating the need for global strategy. Besides that, globalisation has forced business to increase their innovations, inventions and investments so as to satisfy the expectations of their customers. The core of the global strategy is an extensive global vision that takes into account the prospects of all locations as a market as well as a basis of competitive advantage. In essence, global enterprises have to formulate strategies for global integration, diversification, and expansion so as to exploit, protect, and develop their capabilities as well as resources. In this case, determining geographical coordination degree and scope has to be considered in regard to a competitive global environment. As it will be evidenced in the essay, concerns for strategic objectives and goals as well as strategy processes are extended when operating in a global setting. In Middle East, the airline industry is very competitive, volatile as well as bound by cyclical fluctuations. However, Emirates Airline has ascended beyond this environment and managed to endure economic recession to become recognisable and grow to be a global airline (Namaki, 2007). In view of this, the paper seeks to explain how Emirates Airline’s global strategy operates, highlights the nature in addition to drivers of the company global strategies, as well as identifies and explains the challenges facing the company’s global strategy for achieving higher performance levels. Emirates Airline Overview In a nutshell, Emirates airline is a Dubai-based global company that was founded in1985, and mainly focuses on providing commercial air transportation services (The Emirates Group, 2009). The airline has a fleet of more than 200 aircraft, flying to more than 140 destinations in over 80 nations across the globe. Importantly, the network of Emirates Airline is expanding continuously thanks to its growth strategy. This can be evidenced by the fact that the airline makes more than 1,500 weekly to its various destinations across the globe. Recently, Emirates Airline has made several noteworthy announcements concerning its already high-tech fleet future. Underlining its far-fetched growth, Emirates Airline is presently the largest Boeing 777 and Airbus A380 operator in the world and as of November 2014 the company has over 280 aircraft worth USD 138 billion. The airline future commitment signifies its goal to transform Dubai into an all-inclusive, long-haul, international aviation hub. As evidenced by the 2013/2014 financial report, Emirates Airline transported almost 45 million passengers as well as over two million tonnes of cargo (Emirates, 2015). As highlighted in its global growth strategy, the airline expects a bright future wherein they will carry many millions more customers through its growing international destinations’ network. Emirates Airline Global Strategy The global strategies of Emirates Airline are an environmental function where it operates as well as an inherent strategic thinking product. Emirates Airlines global strategies entail strategies for penetrating a new market, for market and product development strategies and for diversifying. In 2013, the airline invested heavily in its workers, services and products, as well as in strategic acquisitions with the intention of helping the airline overcome its challenges as well as capitalises on opportunities of within the global marketplace. In 2013, during the Dubai Air Show, Emirates Airline ordered 50 Airbus A380 aircraft as well as 150 Boeing 777X, worth 90.57 billion Euros. Scores of the ordered aircraft will be delivered from 2018 onwards and are expected to substitute the older aircrafts amongst its fleet (The Emirates Group, 2014). According to Emirates, this strengthens its global strategy of operating the most efficient as well as contemporary wide-body aircraft, not just for operational and environmental reasons, but as well for their desire to offer the customers an exceptional flight experience. Currently, Emirates Airline operates the biggest steadfast engineering facility, and in 2014 they constructed a maintenance hangar as well as concluded its Dubai-based engine shop with the help of General Electric. Such multi-million dollar investments have enabled the airline realise its long-term quality control, flexibility, as well as rapid response speeds while they continue benefiting from the immediate cost savings related to shipping their engines for repair. In the financial year of 2013-2014, the airline ordered numerous Airbus A380 as well as eight Boeing 777 aircraft, which are intended to help the company fortify its route network as well as in introducing new services to various cities such as Stockholm, Haneda, Kiev, Conakry, Boston, Kabul, Sialkot, Taipei, as well as a new service between New York and Milan (The Emirates Group, 2014). Additionally, the airline believes all the new destinations included in its global network opens up not just new customers points, but as well generates new city-pair consolidations for valuable traffic flows of both passengers and trade. For instance, in their Boston-Dubai route, the airline expects to benefit Boston as well as its neighbouring areas to an amount of US$ 132 million. In 2013, Emirates SkyCargo was the first to put Electronic-Air Waybill shipments into practice based on the latest industry standard, and in consequence it is working with over 120 recognised freight clients as well as industry stakeholders towards a successful transition. The airline global strategy seeks to improve the company’s capability to fly pharmaceutical products as well as perishable goods more cheaply; therefore, the airline has developed a new coating technology wherein the inflight freight temperature is moderated. Contrary to the overriding industry trend, Emirates SkyCargo in 2013 realised a 9 per cent increase in profits to 3.08 billion USD; thus, contributing 15 per cent to the total transport returns of the Emirates Airline. In comparison to the global air cargo industry which is experiencing slow recovery the 2008 economic recession, the performance of Emirates Airline echoes the increasing demand for its product, as well as the success of its investments in infrastructure as well as innovation. The airline has strategically continued investing in its brand all through 2013 and 2014, and this has helped it to move towards its global objective of becoming a top international brand. Through its brand platform, the company understands that global connectivity can result in not only ideas, but also s opportunities (The Emirates Group, 2014). Therefore, Emirates Airline has aligned its training processes in order to meet the needs of its growth as stipulated in its growth strategy. For this reason, the airline established satellite training centres in the United Kingdom, Australia, America, as well as India; thus, allowing new recruits to be equipped with the skills required so as to become successful in their career. Besides that, the airline plans to establish a training centre in South Africa was as well concluded. This proves that achieving sustainable, lasting profitability is the driving factor at Emirates Airline (The Emirates Group, 2014). In 2013, in spite of introducing three new freighter routes as well as ten new passenger routes and significantly increasing its belly hold cargo and seat capacity, the airline was able to maintain its seat factors at almost 80 per cent, which is a significant achievement attributed to its global strategy. Nature and Drivers of the Airline Global Strategies Global concentration has been a key driver to Emirates Airline strategies considering that the airline has found itself in an industry that is characterised by a few players confronting one another in various different national markets across the world. That is to say, the global airline industry has turned out to be exceedingly concentrated, and so, oligopolistic interdependence conditions have spilled to other countries generating a high competitive interdependence level amongst the key players. As mentioned by Li et al. (2013), when there is global competitive interdependence, the strategy pursued by the global company in one market normally impacts other markets. Another driver is global strategic motivations: when Emirates Airline is operating in foreign markets, particularly in the home markets of their global contender, they may experience strategic motivations that surpass the normal technique of selecting the effective mode if entry. So, by having global strategic motivations, Emirates Airline has stretched beyond the limits so as to achieve the desired competitive advantage. The motivations of Emirates Airline to establish a global strategy was mainly for global expansion and achieving a global compatible advantage. Therefore, global strategic motivation, as defined by Li et al. (2013), is the motivation to realise the strategic goals set by the company for corporate efficiency maximisation. Another driver behind the Emirates Airline global strategy is the demand uncertainty; such that, the airline is willing to invest in countries such as Afghanistan, Iraq, and Pakistan wherein its competitors are not willing to invest considerable resources so as to successfully gear to oscillating circumstances as well as to improve its capability to exit the market devoid of experiencing significant costs in case the demand fails to reach the targeted level. Therefore, in countries where demand uncertainty is high, particularly in Iraq and Afghanistan Emirates Airline has made a substantial investment and is already reaping some benefits. The last notable driver is the intensity of Competition, given that competition is exceedingly is high in Middle East, so the company through its growth strategy is expanding into new markets tend that appear to be profitable. With regard to nature of the global strategy, Emirates Airline introduced new service between Chicago O’Hare and Boston in August 2014, and this extensive expansion into the United States is also carried out by its main competitors, Etihad and Qatar Airways. Competition for U.S market is very intense bearing in mind that Chicago was the ninth U.S. market for Emirates Airline, but still it was competing with Etihad and Qatar Airways for services in that region. In comparison with other Gulf carriers, Emirates Airline has a strong North American network, and this has been attributed to its growth strategy. However, with the intensification of competition, connectivity has become imperative, and for this reason, Emirates has established a stronger partnership with JetBlue for a number of domestic connections in United States (CAPA, 2014). Still, Qatar Airways will swiftly strengthen its presence in Latin America through accessing the vast American network upon launching its flights to Miami and Philadelphia. As the Gulf carriers continue refining their partnership strategies, their global strategy will continue helping them to expand into new markets (CAPA, 2014). Challenges Facing the Global Strategy The Emirates airline global strategy is facing a number of challenges; for instance, low-cost carriers are threatening its growth strategy bearing in mind that the economic situation has made people become price conscious. As mentioned by Lopez (2013), people are increasingly shifting to low-cost carriers, and this in consequence has enormously impacted the standard carriers such as Emirates Airline. For instance, Arabian Airline based in Sharjah is charging almost half of what Emirates Airline charges. Besides that, other airlines in the Gulf region are as well expanding and competing for bigger market share. For this reason, Emirates Airline may not succeed in its global growth strategy because other Gulf carriers such as Etihad are offering competitive price and good quality to customers in their global networks. Moreover, the fluctuating prices of fuel have seriously affected Emirates Airlines financial planning and in consequence, its global strategy. Fuel price is not just affecting Emirates Airline, but the entire airline industry in the contemporary world. As mentioned by Vivion (2015), the high fuel costs have resulted in numerous airlines imposing the surcharges of fuel on customers. Besides that, it is not only the environmental impact and biofuel development that are impacting the global strategy of Emirates Airline, but the airline has been coerced to contend with the new IATA legislation, whereby the company will be taxed based on its carbon emissions. Besides that, even though safety in the industry has improved drastically since 1960s, with merely 23 serious crashes in 2012 as well as the invention of predict weather conditions tools; the airline still faces concerns in its strategy to expand to new destination such as Africa, Latin America, and other developing regions which have higher rates of crashes. Besides that, the automation of cockpit, as well as increasingly overcrowded airports, has posed more challenges to Emirate’s growth strategy. The safety of the passengers both while flying and in the airport is very important, particularly following the recent Islamic State of Iraq and Syria (ISIS) and Al-Qaida terrorism threat. This has happened after Emirates Airline launched its new flight routes to Iraq, which places the passengers at the risk of missile attack. Recommendations In view of the above mentioned challenges, Emirates Airline should understand that cost reduction is crucial as a lasting requisite in case of demand uncertainty. Moreover, the airline should consider its organisation structure and internal resources as the drivers to global strategic options, and so, the success of its global strategies can be realised after the airline restructure its organisational resources, reduce bureaucratic costs through cost management and rationalise its fleet and networks. Additionally, Emirates Airline need must redirect its global strategy to focus on price competition, bearing in mind that the current economic situations have compelled people to become more price-sensitive and shift towards low-price carriers. In view of economies of scale as well as competitive advantages, Emirates Airline may as well expand or strengthen the Emirates cargo flights’ function to the current global markets so as to increase profitability. With regard to its global market penetration strategy, the airline needs to cut its prices in the current markets by redirecting its price competition strategy to broaden the market coverage. This will help it balance both the long-term needs as well as short-term objectives. Because of the increased security issues, Emirates Airline should go into code-share alliances, especially in markets affected by terrorism issues such as Iraq and Pakistan. Through the strategic alliances, the airline will manage to cut costs significantly, and apparently benefit from such markets, and still lessen competition on duopolistic destinations. As the airline strategise for the future, auditing will turn out to be an imperative safety tool; however, the safety improvements will be data-driven. Considering that large quantities of data is produced by all flights, and are crucial for reporting programs as well as safety audits. Conclusion In conclusion, it has been argued that through the global growth strategy, Emirates Airlines has generated a strong brand reputation across the globe and has managed to offer premium service to its customers. Thanks to its global strategy, Emirates Airline has managed to offer comfort to its passengers, and its flight schedules and entertainment are unrivalled in the Gulf airline industry. It has been argued that tight coordination is essential for the efficient as well as the effective execution of the global strategy, particularly since their implementation normally needs commitment from all business units within the company. As indicated in the essay, accomplishing the global strategy objectives is not easy in the wake of new IATA legislation on carbon emission, terrorism threat, and emergence of low-price carriers. References CAPA. (2014, March 5). Emirates increases competition with Etihad and Qatar as it adds Chicago to its US network. Retrieved from CAPA: http://centreforaviation.com/analysis/emirates-increases-competition-with-etihad-and-qatar-as-it-adds-chicago-to-its-us-network-155806 Emirates. (2015, February 27). The Emirates Story. Retrieved from Emirates: https://mobile.emirates.com/MobileAboutEmirates/global/english/emirates_story.xhtml Li, H., Jin, Z., Li, V., Liu, G., & Skitmore, R. M. (2013). An entry mode decision-making model for the international expansion of construction enterprises. Engineering, Construction and Architectural Management, 20(2), 160-180. Lopez, J. (2013, December 4). Airline alliances and the threat of low-cost carriers. Erasmus School of Economics. Rotterdam: Joyce Lopez. Retrieved from http://samthomasuae.hubpages.com/hub/EmiratesAirlines Namaki, P. D. (2007). Emirates Airlines In a League of its Own: Is this the Right Strategy? Capital Magazine, 9-16. Rothkopf, M. (2009). Innovation in Commoditized Service Industries: An Empirical Case Study Analysis in the Passenger Airline Industry. Münster: LIT Verlag Münster. The Emirates Group. (2009, August 5). Our History. Retrieved June 2, 2015, from The Emirates Group: http://www.theemiratesgroup.com/english/our-company/our-history.aspx The Emirates Group. (2014). Going further. Dubai: The Emirates Group. Vivion, N. (2015, March 13). Airlines explain why fuel charges remain so high when oil prices are so low. Retrieved from Road Warrior Voices: http://roadwarriorvoices.com/2015/03/13/airlines-explain-why-fuel-charges-remain-so-high-when-oil-prices-are-so-low/ Read More