Emirates Airline

Emirates Airline

1. Introduction of Emirates Airline

In today’s competitive world, it is very challenging task for the company to sustain in competitive market with its existing product and services. For this report, Emirates Airline Group is selected as international Airline that provides its service in country Singapore also.

Emirate Airline Group is a highly profitable business and one of the leading airline companies in the market of UAE. The airline company was founded in year 1985 by government of Dubai and the key perform responsible behind the great success of the business is Ahmed bin Saeed Al Maktoum. This airline company is operating its business in more than 140 cities and approx. 82 countries with 3600 flights. Emirates Airline is wholly owned by the government of Dubai but at the same time, company returns its business on commercial basis without any support from government in monetary form (Annual Report, 2017). There are different subsidiaries companies of Emirates Airline Group such as Emirates Tours, Arabian Adventures Congress Solutions International, etc. The aircraft fleet of emirate airline is very youngest in the skies and it takes approx. 158 deliveries of aircrafts. In addition, the airline is also focuses on providing the customer with a great experience with its unique feature such as providing eco friendly environment and soft fleece blanket facility to business class and selected flights only. The target customer of Emirates Airline is Middle East countries where company is providing effective customer service in order to develop a strong customer base. The growth rate of Emirates Airline is very effective because continuously company is targeting its customer with its existing and innovative services leading to achievement of success in the competitive market. Better strategies of Emirates are crucial for its growth and success in the international market.  The below graph shows the revenue trend and profit margin rate of Emirates over past five years:

(Annual Report, 2017)

(Annual Report, 2017)

2. Reasons and benefits to internationalize

Emirates Airlines decided to internationalize its business due to increasing competition in the UAE airline industry. With the starting of Gulf war, Emirates increased its business because other airlines were kept out of the market. But after this conflict, it became difficult for Emirates Airline to retain its market position and market share as 92 air carriers started to operate their business internationally that caused intensive competition for Emirates at its home base. It show that the home market matured at a significant level due to increasing competition from the local and foreign fleets. Apart from this, the government of foreign countries like Singapore also provided incentives to make foreign investment due to impact of globalization. It also enabled the firm to expand its business internationally. The government incentives in form of FDI investments, favorable tax reforms and export-import policies and low interest rates to access finance encouraged the firm to adopt internationalization.

Apart from this, another reason for internationalization of Emirates was to global advantages in its respective environment. This decision can be supported with the Network approach mentioned in Belobabaet al. (2015) that raises the need of developing networks of business relationships in other countries to remain competitive in the market due to global advantages. Due to global advantages like access to large number of customers, increase in economies of scale, access to required resources including finance, workforce and technologies, the company also opted to the internationalization.

Each company wants to target more customers and increase potential for growth. To access the large number of customers was a motive of internationalization by Emirates Airline. Global expansion enabled it to access customers in 75 countries across six continents that helped to increase revenues and profits of the company. Emirates Airline was intended to increase its market share in terms of sales and profits as it was required for the firm to penetrate other market worldwide to increase its financial performance through global advantages (Grünig & Morschett, 2016).

Internalization enabled the firm to become one of the leading airlines of the world. It is the largest airline in Dubai, UAE and Middle East with over 3600 flights per week in 81 countries across the world. It is ranked at 4th position in perspective of international passengers carried. (Annual Report, 2017). It is because it enabled the firm to access different markets that helped to improve the market share. Company adopted internationalization to achieve greater economies of scales to exploit unique and differentiating advantage (Redpath et al., 2016). Internationalization benefitted the firm to achieve the economies of scale because through this, firm got strategic and physical assets like technologies to improve its operational performance and reduce the cost of operations. It enabled the firm to provide the best services to its customers and increase financial performance largely. Furthermore, internationalization also benefitted the firm to diversify the risks as it enabled to access other markets while it was facing high competition at domestic level (Button, 2017). It helped to diversify risks related to dependence on single market and increase its competitive position in the international market.

3. Porter’s Diamond Model:

In context of Singapore, Emirates Airline has got advantages of favorable factor conditions (Factor endowments) like availability of physical resources, skilled workforce including technicians, aircraft engineers, etc. airspace resources, and sound infrastructure and capital availability to bring innovation and uniqueness in its services. Singapore based engineers and technicians helped the firm to develop mixed fleet of Airbus and Boeing wide-body aircraft and all-wide-body aircraft fleet. As airline industry is technology intensive, so the organization requires professional and technical personnel. In Singapore, the firm accessed to multi-cultural Singaporean workforce, who is highly educated, motivated and productive to offer unique services to the customers. In addition, support from advanced navigation technology enabled the firm to shorten the distance of the aircraft flight and improve operational efficiency. Demand conditions in Singapore also provided national advantages to Emirates Airline because there is high demand of airline services in Singapore due to high population and increasing number of tourists by 7.7% to 16.4 million in 2016 (Lim, 2017). Singapore airline industry has large number of buyers who take airline services from the airline and other intermediaries. Singapore is one the most popular tourist places across the world that also raise the demand of airline services to increasing number of tourists. Apart from this, the increasing living standard of the Singaporeans has increased the demand on convenient, fast and comfortable transportation (Vij and Verma, 2016).  Apart from this, due to having strong trade link internationally, there are several businessmen in Singapore, who visit different countries for doing business. The businessmen are likely to travel through airline to reach fast to the desired destination due to business reasons.

Furthermore, increasing population in Singapore also enabled the firm to achieve the potential demand for air travel showing from the below graph:

(Source: Trading Economics, 2018)

4. External environment

From the below graph, it is obvious that there is a declining trend of inflation rate that increased the purchasing power of people and enabled them to spend on activities like entertainment, airline, tourism, etc. (Trading Economics, 2018).

(Source: Trading Economics, 2018)

In addition, reduction in inflation rate also enabled the firm to reduce cost of its operations and improve the profitability. At the same time, exchange rate of Singapore shows a fluctuation during 2010 to 2015 (Focus Economics, 2015) but declining exchange rate affected the reporting of profits and expenses of the firm in the country and financing costs. It also influenced the export and import of materials for aircraft manufacturing and affected the price of services of the firm (Zamberi et al., 2016).

(Source: Focus Economics, 2015)

The below graph shows decline trend in unemployment rate in Singapore resulting in increasing availability of skilled and talented workforce for the firm to get advantages from their experiences and skills:

(Source: Trading Economics, 2018)

At the same time, the following graph indicates the increasing number of tourist arrivals in Singapore generating demand of airline services in this market:

(Source: Trading Economics, 2018)

There are advanced technologies that enabled the firm to introduce advanced and automated features in its services like navigation technology to reach the destination faster and make better decisions during winter weather conditions (Annual Report, 2017). Skilled processes available in Singapore due to availability of advanced technologies also helped the firm to improve operational efficiency and effectiveness (Whyte and Lohmann, 2015). For instance, the firm developed a new maintenance base at Singapore Changi Airport for improving capability and scale of services (Annual Report, 2017).

5. Staffing strategies

Emirates Airline uses ethnocentric (parent country nationals) or home country approach and geocentic or global approach as staffing strategies to recruit people in Singapore. In ethnocentric approach, the firm follows the staffing strategy by recruiting people of parent country i.e. UAE to work in Singapore. For example, through this approach, company fulfills only higher level positions. For this, the firm appoints expatriate employees from UAE. This staffing strategy is effective for the firm to have significant control on the management decisions and maintain the organizational culture lie parent company. Through this approach, the company follows four stages: self-selection, creation of a candidate pool, technical skills assessment, and formation of a mutual decision. But at the same time, this staffing approach requires for conducting cross cultural programs for developing cultural understanding of expatriates to work in foreign countries efficiently.  Such training programs are effective for the firm to avoid any cultural gap and serve the customers in foreign countries in effective way. But it is time consuming and costly approach due to expenses and time consumption in adopting cultural aspects of the overseas markets.

On the other hand, Emirates also adopts geocentric approach by recruiting the most suitable people for the positions without considering their nationalities. It allows the firm to integrate global business strategy (Annual Report, 2017). It is easier for the firm to implement this approach as the firm appoints people from Singapore and UAE or other nationals to the vacant positions. It is also helpful for the company to achieve economies of scale and cost related advantages. Under this, the firm uses manpower agencies and consultants which provide international manpower (Lakshman et al., 2017). It is significant for the firm to introduce and maintain highly skilled and knowledgeable employees and achieve high growth in the foreign countries.

6. Organizational Structure

Emirates Airline adopts functional design structure that allows it to allocate the roles and responsibilities to the management and workers based on the functions like finance, marketing, HR, R&D, etc. This organizational structure allows the firm to make specialized decisions and perform the tasks quickly and efficiently. In addition, the firm also has hierarchical structure as it is a large global organization and has the levels of management that makes its organizational structure hierarchical (Annual Report, 2017). This structure allows the firm to observe a close supervisory control due to more authoritative structure and clearly defined roles and responsibilities. At the same time, the firm also follows multidivisional or area design that allows it to organize the organizational structure by division or geographic area, in which the services are sold. It organizes its organizational design structure based on 8 geographical areas named as USA, North America, Middle East, Australia, South America, Europe, West & East Asia, and Africa. In this structure, the firm allows the divisional head to take the operational decisions regarding their units. Apart from this, divisional heads are also allowed to formulate strategies, allocate resources to division and communicate with shareholders and others. Functional structure also supports the divisional structure as the divisional heads are supported by functional specialists in different fields like marketing, sales, accounting, etc. The adoption of multidivisional design enables Emirates to reduce the complexity of environment faced by any department of division. It is also effective to have control on the results of local operations and remain competitive by addressing changing consumer preferences (Annual Report, 2017). But it may cause the duplication of functions, such as sales or manufacturing, at each division, leading to increase in operating costs and lack of standardization and inefficiencies.

There is need of changing existing functional organizational structure in next three years because it caused unhealthy competition working with the other areas (Harper, 2015). In addition, this structure is not suitable for making changes due to grouping the structure in special set of skills and roles. In such situation, it can be beneficial for the company to adopt matrix organizational structure that includes characteristics of divisional and functional structure. Matrix structure may be useful to make changes easily and coordinate resources (Lakshman et al., 2017). It also brings specialization to make better decisions and also introduce flexibility to make changes easily. Apart from this, this structure is also crucial to develop better communication among the members of different functional areas to make informed decisions.

7. Standardized or Customized strategy:

Emirates adopts standardized strategy in Singapore as it focuses on reduced cost strategy in Singapore by reducing its operational costs. The people in Asian countries are more price-sensitive, so the company provides discount and offers to the customers in Singapore. Reduced cost strategy enables the firm to have competitive advantage over other Asian fly carriers which provide cost effective airline services (Hussain et al., 2015). With the help of this strategy, company enables to attract more customers, who are price sensitive, of this region and neighbor countries. This enables the firm to develop its customer base and increase revenues and profits significantly. Apart from this, reduced cost strategy of the firm enables it to develop competitiveness against the competitors in the Asian market including Singapore. It is significant for the firm to increase its market share and develop strong brand positioning in the market (Beik and Galbraith, 2016).

In addition to this, the firm also customized strategy like personalized strategy by providing the services as per the needs and requirements of specific customers (Freeman, 2010). For instance, the firm has developed maintenance base to create value to the customers and enhance their satisfaction level through improvement of scale of services. In addition, the firm has achieved the reward of digital innovation for a crew-meal ordering and customer awards in Singapore due to its innovation focus (Shaw, 2016). It focuses on the extended itinerary options to meet different requirements of the customers. For instance, it equipped its future Boeing 777X fleet with Thales AVANT inflight entertainment system. At the same time, it also complete makeover of its business class Lounge to offer a barista experience, a Health hub and an exclusive Moët & Chandon champagne lounge. In addition, it also introduced new sustainable blankets for Economy Class passengers (Annual Report, 2017).

Conclusion

This study evaluates the strategic performance of Emirates Airline, a UAE airline, which also operates its business in Singapore. From this, it can be summarized that it adopts effective strategies that enable it to get competitive advantage in this market and gain high financial performance. Company adopted internationalization due to intense competition at domestic level, stay competitive, increase its market share, achieve economies of scale and access to large number of customers. It helps it to improve its market position and market share and reduce operational costs and minimize the competition level. Singapore provides favorable factor conditions including advanced technologies, skilled workforce and physical resources and effective demand conditions due to increasing population and number of tourists. It is also concluded that environmental and technological factors provide opportunities and challenges for the company to operate business in Singapore. Emirates adopts functional organizational structure that needs to be changed into matrix structure to adopt flexibility and make better decisions. Company also adopts customized strategy including differentiation at low cost to attract more customers in Singapore market to achieve highs success.

References

Annual Report (2017) [Online] Available at: https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2017.pdf (Accessed: 9 March 2018)

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