Strategic Analysis of Emirates Airlines - Case Study Example

Strategic Analysis of Emirates Airlines Name: Course: Institution: Date: Strategic Analysis of Emirates Airlines Introduction Organizational overview Emirates Airlines is an airline company established in 1985 and is based in the United Arab Emirates. The main area of service delivery is in the provision of commercial air transport services in the UAE and on the international platform (Emirates Group 2013). The company operates as part of the Emirates Group. The company offers passenger, cargo, and postal carriage services, furthermore, the company also engages in the provsionof wholesale and retail customer products, institutional catering services, and hotel operations. Emirates Airlines focuses m6st of its operation on destination and leisure management through the operation of more than 145 Boeing and Airbus jets. The company also operates 8 cargo freighters (Sales, 2016). Through its market and customer focused strategy, Emirates Airlines has continued to experience growth as demonstrated by the recent addition of 18 routes without compromising passenger load factor (Sales, 2016). The company has been able to experience this success due to the benefits generated by UAE status as transport hub. The strategies positioning of the UAE enables easy connection of the East and West on long routes with stopovers at Dubai International Airport. Despite the perceived benefits arising from the strength and strategic positioning in the UAE, Emirates Airlines continues to experience criticisms and hospital polices by other competitors in Europe and in the United States (Sales, 2016). This has hindered the implementation of the international growth strategy of the company in these regions. Furthermore, the company is also facing strong competition from other airline companies in the Gulf regions hence necessitating the need to develop additional strategies on improvement of service, increase in market share and customer base (Hill et al, 2012). External Analysis PESTEL Analysis Political Emirates Airline has Dubai government as the majority shareholder and this means that company is under complete government ownership. The company operates in accordance with the existing laws and regulations defined by the government. The government of Dubai provides a relatively stable political environment for the company to conduct business (Abdallah & Albadri 2011). Despite the relative political peace in the UAE, the airline company has however been affected by unstable political conditions internationally. Terrorism and wars in Qatar, US, UK, Syria, and Lebanon made these regions unattractive for business and tourism travels hence reducing investor traffic. Political instability in the Middle East affected airlines business and made it relatively difficult to form international alliance with leading Airline companies such as the American Airlines and the British Airways (Wam 2015). Through reputable governance systems, the company has been able to ensure the establishment of a competitive advantage within the UAE. The company has also signed agreements with other governments within the Asian pacific on trade affairs. These agreements have been essential for emirates to identify and conquer opportunities on the international market (Wam 2015). Economic factors One of the success economic factors for Emirates Airlines is the existence of modern airports supported with the latest technological innovations. This is because these airports provide customers with effective and reliable services hence improving on customer satisfaction (Betz 2013). The company plans to invest on the development of airports in Abu Dhabi and Dubai with the objective of improving on the ability of the company to attract and retain more customers (Betz 2013). Furthermore, the development of airports will also enhance the economy of the country while at same time reducing the country’s decency on oil revenues. This is because an expansion of the airports wills increase passenger arrival and departure in and out of Dubai agency improving on tourism sector. The company also envisions collaborating with international airline companies as a way of reducing its cost of operations (OECD 2013). Social factors From a sociological perspective, Emirates Airline engages in the transportation of passengers to different designations, a gradual increase in world’s population provides the company with an expanded market to facilitate its operations. As the number of expatriates increase, Emirates Airlines is bound to experience an increase in its profit levels considering that the need among expatriate to travel to their homelands (OECD 2013). Despite increased profits arising from an increase in population, communicable diseases such as Bird Flu, Yellow Fever and the threat of Ebola among other Killer diseases have affected Emirates Airlines considering that they reduce the population interested in travelling hence creating some fluctuations in the ability of the company to ensure profits (Sales, 2016). Emirates Airlines is considered as one of the prestigious airlines companies in the world. The prestige arises from the ability of the company to provide its customers with the latest and sophisticated airlines services. This improves on the status of the company in different markets around the world hence making it a preferred choice for customers (Hill et al, 2012). Technological factors Technological innovations have had both negative and positive effects on Emirates Airlines. Teleconferencing for instance has reduces the need for constant business travels considering that organizations and companies have the ability to hold meetings through a virtual platform. Teleconferencing has reduced the number of business travels and sale of business tickets. Despite the disadvantage, the company has been able to improve on service delivery through technological innovation of electronic booking system, which has made the reservation of tickets easier hence saving expenses of printed tickets (Betz 2013). Environmental factors The airline company, as major consumer of fossil fuel energy is in the process of developing strategies on the reducing of greenhouse gas emissions. This is through embracing green technology through its multibillion-dollar investments in the most modern, eco-efficient technology available in the market. The main areas of focus for these investments have been on ground equipment, engines, and aircrafts (Hanlon 2012). Emirate Airlines is also committed to the operationalization of its assets in the most environmentally efficient and friendly manner. This is often by ensuring that its activities are in accordance with the existing environmental regulations and standards (OECD 2013). Legal factors Emirates Airlines operates in accordance with the legal parameters governed by IATA. These legal parameters play the role of the defining feature of the company’s operations (OECD 2013). There are other factors, which affect the operations of the company, and they include agreements on parking slots, time restrictions that define landing and taking off. Furthermore, other legal factors include agreements with other airports within Dubai and on the international platform for standby landing (Ethos Consultancy 2010). SWOT analysis Opportunities Emirates Company has a growth opportunity by embracing the latest technology while acquiring new aircrafts and in the provision of aviation services as a way of boosting customer confidence. To boost its international presence, the company has the ability of penetrating into new Growth markets in Europe and in the United States. The company can ensure this expansion by leveraging its infrastructure business. Through economic corporation and free trade agreements with governments on the international platform, it will be possible for the company to improve on its presence on the international scene hence improving on its market share (Ethos Consultancy 2010). An abundance of human capital in the Asian pacific region provides the company with sufficient personnel to assist in the development of it growth and development strategies. The development of a marketing strategy targeting brand development can be essential in improving the image of the company on the domestic and international market. Brand promotion promotes the possibility of developing brad loyalty among company customers hence improving on the company’s profit margins (OECD 2013). Threats An increase in competition levels in the Middle East market threatens the dominance of Emirates Airlines. Established airline companies such as the British Airways and American Airlines provide high-level competition against the company on the international market. An increased in global fuel prices affect the ability of the company to ensure effective operations. This si because it raises the operational price which affects the operations cost for the company The company is relatively incapable of keeping up with innovation due to the expenses involved. The recognition of demand is a threat to the position of the company on the international market because other major companies may probably displace its position in the market as a market leader (Ethos Consultancy 2010). The unstable political environment and the unpredictable legal environment in the Middle East potentially affect the ability of the airline company to ensure effective operationalization of its activities. Porter’s five forces Threat of entry of new competitors Within the airline industry, there are numerous barriers, which limit new entrants into the market. These barriers include rights and patent. Being a national carrier, Emirates Airlines enjoys numerous benefits from the government. The government uses this restriction as a regulation strategy to ensure that competition within the country is limited. This has helped the airline company in establishing a competitive advantage within the UAE (OECD 2013). Emirates airlines is considered as a high brand value that cannot be copied considering that the company has been in the market since 1985 and the market depends on its services. Emirates Airlines is part of the Emirates Group and this is considers as an essential competitive advantage for the company considering that it has the ability of accessing a large pool of resources compared to new entrants into the airline market (Abdallah & Albadri 2011). Within the domestic market, Emirates Airline Emirates Company has been able to establish its position as a national carrier that is accessible to the target customers. This has been facilitated by the ability of the company to establish customer loyalty programs as a way of maintaining its customer base. The bargaining power of customers Emirates Company has a higher buyer volume especially those accessing the Indian market. The company however has a bargaining advantage due to its ability to introduce varieties of tickets that are in accordance with the customer budget and the luxurious nature of their flights for the same destination (Graham et al 2014). Furthermore, the company has a differential advantage, which exists in its ability to ensure the introduction of unique industry products such as latest Boeing passenger aircrafts, attractive menu choices for customers on board, direct flight services to various parts of the world. This has been considered appealing to the customers (Abdallah & Albadri 2011). Inasmuch as other airline companies may provide relatively lower prices in terms of price of their tickets to different destination, Emirates Airlines has an edge over these companies because of its ability to offer additional services such as comfort and high quality services such as entertainment and food. Emirates Airlines operates on the advantage of providing substitute products that other competitors cannot offer. These include direct flights from Dubai to San Francisco (Hanlon 2012). Threat of substitute products Within the airline, industry there is a major difference in the price performance of substitutes. However, Emirates Airlines has been able to ensure the cooperation of this threat through the provision of high quality service sin the market. This is through the provision of highly differentiated products to its customers through its new fleet of aircrafts. The company provides state of the art private terminal, unparalleled menu for the business class and high quality customer services (OECD 2013). Emirates Airlines has a higher has a higher buyer propensity which often changes because of the luxuries and high quality nature of the services provided. The company may be gaining from long distance flying customers but losses customers flying shorter distances who prefer cheaper flights to their destinations (Hill et al, 2012). The company loses business on this front. Bargaining power of suppliers The supplier switching cost compared to Emirates Airlines switching cost is very high. This is because the market if characterized by only two suppliers and this makes the bargaining power of the suppliers to be relatively high. The presence of substitute inputs for suppliers provides them with an edge over Emirates Airlines. There are more than one hundred airline companies operating within the UAE and on the international markets and most of these companies are targeting expanding as a competitive advantage strategy (Ethos Consultancy 2010). Supplier concentration compared to firm concentration is very high considering that there are only two suppliers and millions of airline companies. This gives power and authority to the supplier companies to define the market by controlling the supply of essential material such as aircrafts. The UAE does not allow for the formation of labour unions for employee solidarity. This makes relatively easier for the company to exercise power and authority over its workforce. The supplier bargaining power on this from is therefore relatively low (OECD 2013). Rivalry among competitors The intensity of the rivalry among competitors is relatively high. This is because the UAE market attracts more than 100 airlines flying to and from Dubai (OECD 2013). This has been facilitated by the attractive nature of the UAE market as a destination for business and tourism activities. The competitors are diverse since they operate as domestic, regional, and international flyers hence making it relatively difficult for Emirates Airlines to establish itself as the major player in the market. Emirates Airlines has been able to ensure that it reduces the increase the intensity of this rivalry by introducing improvisations such as new services on-board such as live TV and on-board spa services (Emirates Group 2015). Internal analysis SWOT Analysis Strengths The UAE government owns an Emirate Airlines. This provides the company with a competitive advantage over companies because it is protected from restrictive policies through government policies and laws (Emirates Group 2015). The used of technological innovations in the provision of services provides customer with an easier and effective way of accessing the services of the company. By embracing technology, the company uses the latest aircraft technology hence booting the quality of its services (Wam 2015). The company provides self-entertainment service for customers and high quality menu and on board spa. This is considered as a competitive advantage for the company considering that it is one of the most airline companies to provide these services on commercial flights (Hanlon 2012). The company offers direct flights to different destination hence improving on customer preference. Weaknesses The company focuses on diversification and high end achievements despite the impending risks of such decisions The luxurious nature of the services offered by the company increases the price of its tickets and this eliminates middle class and budget travellers who prefer low cost flights. Value chain analysis The popularity of Emirates Airlines emanates from its ability to provide a range property, diversified business that contributes to its operationalization. The airline company runs and operates most of its operations. Dubai International Airport has an exclusive Emirates terminal. The ability of the company to ensure self-reliance can attributed to the decision to adopt vertical integration as part of its main business structure which necessities the incorporation of diverse properties (OECD 2013). This has been replicated in its ability to engage in manufacturing, marketing, and technology. The company directly operates its check-in, airport pushbacks, boarding and lounge services, baggage handling and service desks. Furthermore through the Emirates Hotel and resorts, Emirates catering, Emirates Sky cargo, Emirates College for pilot and staff training, emirates engineering centre for training, repair and maintenance. The company has been able to ensure the incorporation of business support (Emirates Group 2013). These activities comprise strategic position of the company in Dubai. Furthermore, Emirates Airlines has a potential in ensuring the creation of benefit through vertical integration in its value chain. This is because of the existence of many Emirates branded subsidiaries and businesses that operates in collaboration with the company. Through its established value chain, Emirates Airlines outweigh competitive advantages over its rivals in the market with regard to entrepreneurial management, productivity and cost efficacy in operations (Emirates Group 2015). Core competence of the company For Emirates Airlines, the core competence is in its ability to leverage their cornerstone product differentiation strategies by offering a luxurious and quality customer care services to its customers. The company’s brand equity is built on its ability to embrace technology in service provision hence providing each customer with a unique Emirates experience (Graham et al 2014). This experience is derived from the company’s excellent customer service in a clean and protected environment. This is perceived as an essential element in building customer loyalty. Other core competencies are in human resource management value based approach essential in building relationships with its suppliers hence driving a successful deployment of the company’s business strategy of being one of the most successful airline brads on the global platform (Wam 2015). Stakeholder analysis The following are the stakeholders of Emirates Company Customers The government of the UAE Employees Society Suppliers Shareholders Board of directors Management There role of the stakeholders with regard to the growth of the company is often dependent on their mandate to their company. The management and the board of directors have the responsbility of developing and implementing polices aimed at driving the objectives of the company in the competitive airline industry. The employees, while engaging in the implementation of the objectives of the company, operate with the expectation that the company will provide a work-life balance strategy, which will ensure the provision of a safe working conditions and schedules. In addition, the employees expect the company to provide effective remuneration packages as compensation for their efforts. Customers of the company of the company demonstrate loyalty to the brand through the quality of services provided by the company. Emirates Airlines has been able to demonstrate its commitment to customer satisfaction through the provision of world customer services. This has however, eliminated budget and low class customer who prefer cheaper flights to their destinations The UAE government is a major stakeholder of the Emirates Airlines. Through the policies, that it develops towards the company the governed operates with the expectations that it will realize high revenue from the operations. The development of more restrictive policies against competitor companies provides Emirates with a competitive advantage of establishing a dominant position in the market (OECD 2013). Major strategic issues and challenges that the Emirates Airlines should address Increased competition especially from Gulf based airlines is one of the strategic challenges that Emirates Airlines must address. The popularity of Gulf-based airlines arises from their ability to provide flexible and cost effective airline services compared to the luxurious but highly expensive services provided by Emirates Airlines (Graham et al 2014). The Gulf based airlines have been able to improve on their position in the highly competitive airline market because of effective targeting and attract budget and low cost customers neglected by the Emirates Airlines (Emirates Group 2013). Emirates Airlines operation cost is relatively high. This is attributable to massive investments in the purchase of state of the art aircrafts to accommodate the divergent needs of its customers. In addition, Emirates Airlines also experiences high operations cost from its investment in the latest technology, which necessitates the huge financial resources to ensure that the company is up-to-date with the existing technological trends. This has been considered as a technique of improving on its position as a leader in the airline industry. For the company to experience extensive growth on the international platform there is need to expand its routes into established markets. This is because such an expansion strategy would ensure that the company improves on its presence on the international platform while at the same time improving customer base. Investing in technology is a strategic issue that the company is currently addressing. This is based on the realization that through technological innovations it becomes possible to ensure automation of services. Service automation has been considered as an effective competitive advantage strategy considering that it improves on the quality of customer care services provided through a relatively faster self-service. Conclusion and recommendations In response to the provision of low cost airlines, Emirates Airlines should not four on the introduction of lower fares after years of providing advanced airlines services. Instead, the company should develop new low cost brands as a subsidiary of the company providing services to budget and economic travellers who are currently customers of low cost companies, hence an expansion to the company’s market share In terms of expanding routes, the company should consider regions such as Canada, which are attractive for international growth of the business. In addition, the company should consider joining a global alliance as this would increase its destinations while at the same time offering additional operations for customers hence helping in the provision of lasting solutions to the problem of new low cost airlines (Spraggon & Bodolica 2014). In terms of technological investments, the company needs to identify appropriate technology that would enhance customer service. The realization that the population of internet users is increasing should provide the company with a platform that enables the management of long-term relationships with its customers. In terms of cost reduction strategies, Emirates Airlines should consider the introduction of cost reduction strategies such as improving on the maintained processes, maintenance of high aircraft utilization and effective scheduling of flights. Conclusion Since its establishment in 1985, Emirates Airlines has been successful in the provision of commercial air transport services in the UAE and on the international platform. The company operates as part of the Emirates Group. The core competence of the company lies in its ability to leverage its cornerstone product differentiation strategies by offering a luxurious and quality customer care services to its customers. The company’s brand equity is built on its ability to embrace technology in service provision hence providing each customer with a unique Emirates experience. The company faces competition from international airlines and Gulf based competitors. There is need for the company to embrace cost-cutting measures, while at the same time integrating relevant technology with innovation to ensure it increase on its market share and customer base. References Abdallah, S., & Albadri, F. 2011. 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Milton Qld OECD. 2013. State-owned enterprises in the Middle East and North Africa: Engines of development and competitiveness?. Oxford University Press: Oxford Spraggon, M., & Bodolica, V. 2014. Managing organizations in the United Arab Emirates: Dynamic characteristics and key economic developments. New York : Palgrave Macmillan Sales, M. (2016). Aviation logistics: The dynamic partnership of air freight and supply chain. London ; Philadelphia : Kogan Page Taneja, N. K. 2014. Designing future-oriented airline businesses. Burlington, VT: Ashgate Wam, B. 2015. UAE is World’s No. ! in Aviation Safety Compliance. http://www.emirates247.com/news/emirates/uae-is-world-s-no-1-in-aviation-safety-compliance-2015-02-18-1.581354 Read More