Emirates

Case Study: Managing the strategy of Emirates Airlines

Introduction

The growing competition in the global market creates various difficulties for the companies to survive at the longer duration. In addition to this, the major issues occur in the form of cultural barrier, ineffective political and social environment, entry & exit of the company and employees handling disputes etc. such issue and challenges influence the company effectiveness to achieve high profits. However, it is important for the firm to develop the effective strategy which manages such issues and problems in a reliable manner. The company which develops right strategy then it tends to survive long time in the market. In a similar manner, Emirates airline group issues and challenges will be studied with the help of internal and external analysis of the environment (Helfat and Peteraf, 2015). At the same time, business and growth strategy of the Emirates is also discussed in order to address the issues and challenges. So, basically, the report provides the issues and challenges of Emirates and based on that various suggestions will be offered and presented.

Moreover, Emirates faces issues related to pricing points, seat utilization and customer services etc. in regards to such issues, it implemented various strategies which proves to be useful for the company in terms to reposition itself and make customer highly satisfied with the service offerings. Therefore, this reports analysis the internal (company) and external environment (UAE) with the defining of company strategy, resources capability and competence level (Freeman, 2010).

Brief Description of Emirates Airlines

Emirates airline is the popular aeronautic in the UAE and it also has spread its presences in the global market. It is operated by national airlines of Dubai and UAE. It also has a capacity to carry approx. 2400 passenger flights per week (Beik and Galbraith, 2016). In short, it is considered as top most airlines which not only provide excellence service but it also include ethics and professional code of conduct in each function.

Section 1: External analysis

External analysis helps in collecting the facts of outside environment so that company could develop its strategy accordingly and sustain in market longer duration. Furthermore, the external analysis includes PESTEL and Porter 5 forces model in order to successfully managing the organization operations (Zamberi Ahmad et al., 2016).

PESTEL

A PESTEL analysis is the tool which contributes to the marketers in regards to analyze and evaluate macro-environment. Furthermore, such factor guides the marketer to take the effective decision and manage their operations in a proper manner.

It is considered as a riskiest factor in regards to its impact. It is identified that the aviation regulations in UAE impact highly to the success of Emirates (Belwal, 2017). However, Dubai market is the quite unprotected market in which certain issues like high tariffs and taxes are involved. But UAE also provides open policy that helps the emirates to grow and the rest of global market assist greatly to Emirates for surviving in the global market.   

 

 

 

Political Factors:

 

 

 

 

Economical factors:

 

UAE has a strong economy which supports the emirates to grow and develop its business operations. But with the recent economic downturn, it affects adversely to the Emirates and creates certain issues such as less availability of resources, high inflation rate and less flow of money etc.

 

It is an important factor to consider as it influences the development strategies of companies. The emirates gain large benefits with the operating in UAE and global market in regards to interact with different values, attitudes and education group. This encourages the company to generate more revenues. But, with the frequent change of customers needs makes difficult for it to cope up.  

 

Social-cultural factors

 

 

 

 

Technological factors

 

 

Due to having the strong economy of UAE, the Emirates get high chance to explore new technology and innovation. Such practices assist it to bring continuous development and change. Similarly, the upgrading of technology by the side of competitors creates difficulty for Emirates to response frequently.
It is identified that legal factor has significant influences over the company. Likewise, different taxes, contract law, strict aviation regulations on foreign carriers to operate foreign carriers etc. Such impact the Emirates airlines to perform its operations effectively.  

 

Legal factors

 

 

 

 

Environmental factors:

 

The increasing environmental issues create great pressure on the companies to adopt sustainability practices. Similarly, UAE government also support such practices and Due to that, emirates implement such practice and it contributes toward the increase in the price of the service.

Porter 5 forces

Porter’s five forces framework is the vital tool which helps to analyze the competition of a business. This tool arises from the industrial organization that identifies the competitive intensity. Based on this tool, the company could judge the competition and accordingly develop the strategy.

 

 

Threat of New Entrants

 

The threat of new entrant is quite low because of dominance of certain airlines such as Boeing and Airbus. Due to this, Emirates successfully operate its business. At the same time, complex aviation regulation also restricts the new entrants towards the airline’s industry at UAE (Zhao et al., 2016).
There is a moderate substitute of the product because airline offer substitute features in service quality, products of low price and innovative services etc. Based on this, it is stated that threat of substitute is moderate. Because of this, emirates experiences issues when it tries to launch the new product in UAE and at the global level.   

 

Threat of Substituent’s

 

 

Competitive Rivalry

 

The threat of competitive rivalry is moderate because airlines are providing a similar type of services and competition rate is also moderate.
 

 

Bargaining power of Suppliers

There is high bargaining power of suppliers in the UAE market due to the dominance of Boeing and Airbus airlines. That’s why Emirates face lots of threat of paying high prices even delivery delays. Besides that, emirates largely depend upon the suppliers for the raw material in order to create differentiation in their services.
There is quite intense competition exists in aviation market under UAE which allows the buyers to switch the airlines as per their suitability (Eskandari et al., 2015). This affects the airline’s ability to earn profits as emirates reduce its cost and invest more in innovation.  

Bargaining power of Buyers

 

 

 

Hence, both the tools have specific importance in their respective area. Likewise, PESTEL supports the marketers mainly in the area of external environment in the way to analyze different factors for taking an effective future decision. In addition to this, porter five forces model contribute for the emirates in form of analyzing the competition of a business in the local market. Thus, based on above study, it can be stated that external analyses assist the emirates to judge the competition level and external factors that could affect the business operations and functions.

Section 2: Internal analysis

This section explores the emirate key resources, capabilities through VRIO analysis and SWOT analysis. Similarly, it also covers the business value chain structure, strategies, and competitors through value chain analysis.

Value Chain Model

(Vassallo et al., 2017)

Value chain model includes Primary and supporting activities. The primary activities include outbound logistics, marketing & sales, operations and services etc. while Supporting activities involves purchasing, technology, human resources department and organization.

In context to emirate airlines, it pursues towards the right quality while selecting the raw material in the operation of product so that appropriate services would be delivered to customers. In case of outbound logistics, emirate hires the multiple distributors for managing the logistics process and performs all the delivery system in an organized way (Barros and Wanke, 2015). Moreover, it also promotes its service through online sites and print media so that target audiences could attract. The emirates offer its services mainly in UAE market like Dubai, Iran etc. other than that, it also provides services at global market in approx. 82 countries such USA, UK, and Uran etc. At the same time, the company also spends a lot on the innovation through adopting the right technology. It is quite impossible for the emirates to achieve such Excellency without having a human resource department. In concern to HR, emirates select right talent for the position and this help the company to perform multiple activities in a unique and professional way. From the value chain analysis, it is depicted that emirates possess such organized infrastructure which manages each function whether it is sales & marketing, human resource management, technology and operations etc.

Emirates Competencies & Resources Framework

Threshold Resources

·       Staff members

·       Passengers

·       Suppliers (Delmas and Pekovic, 2015)

·       Innovative  products & services

Threshold Competencies

·       Strong backing from Dubai government in the area of finances.

·       Emirates airlines provide quality service at low price

Distinctive Resources

·       Skilled employees and workers in the working environment.

·       High services quality at affordable price

·       Offer services in the global market.

·       Respond to different cultural group

·       Using the innovative technology.

Distinctive Competencies

·       Talent & Skilled staff.

·       Quick response to the passenger needs and demands of the product.

·       Innovative products and services.

·       The loyalty of customers towards the brand products (Hussain et al.,  2015).

 VRIO Analysis

Resources / Competencies Valuable? Rare? Difficult to Imitate? Exploitable by the Organization? Competitive Implications?
High-Quality services Yes Yes No  Yes Sustainable Competitive  advantage
Low price offering to customers Yes No No Yes High Competitive Advantage
High customer loyalty Yes Yes No No Sustained  Competitive Advantage
Strong network in UAE, UK, USA and many more countries Yes Yes Yes No High Competitive Advantage

 

From the above VRIO analysis, it is interpreted that emirates possess distinct resources and competencies in the form of high-quality services which company offers an affordable price. Such practice makes the customer loyal towards the brand. At the same time, the strong network in the areas like Dubai, UK, USA etc provides the competitive advantage to airlines. Thus, the aspect of VRIO analysis reveals that Emirates airlines sustaining its position longer time by giving tough competition to its key competitors.

Strength and Weakness of Emirates

Strength

·       Strong network gives large market share to the Emirates

·       High customer loyalty

·       Quality services at affordable prices

·       Talent & Qualified workforces

·       Emirates invest in the diversified portfolio such as catering, maintenance, ground handling etc.

·       Provide convenient transportation solution

Weakness

·       Focusing more on international market

·       Inappropriate marketing strategies

·       Less emphasis on sustainability practices (Vij and Verma, 2016)

·       Profit margin is quite less due to having a limited target market.

 

 

 

Based on the above study, it is analyzed that Emirates airline has various strength in the form of strong network, quality product & service at affordable rates, qualified workforces for managing different business operations and lastly various portfolio investment etc. Such strength gives more opportunity for reaching towards the uncovered market. On the other side, there is certain weakness that limits the emirates in regards to enhance its growth and development (Redpath et al., 2016). These are the ineffective marketing strategy which makes the target market unaware of the product & service quality. Moreover, restricted target market and less focused on sustainable practices do not contribute advantage to the company in regards to explore new markets and develop more customer base.

Section 3: Company Corporate and Business Strategies

Emirates use the unique strategy to make a position in the market. In addition to this, there are various competitive strategies which companies generally follow. It is Porter’s generic competitive strategy which helps the firm’s to determine the current profitability. It consists of low cost or differentiation.

(Mungai and Ogot, 2017)

Under the Cost leadership, the company becomes the low-cost producer in its industry which gives the cost advantage to the firm.

Differentiation Strategy allows the company to adopt unique attributes in the product which is different from the rivalries of same industry. Generally, the company is emphasized more on this strategy in order to sustain in the market for a longer duration (Wicker et al., 2015).

Focus Strategy allows the company to concentrate on particular segment and offer differentiates to that target market.

In regards to Emirates airlines, it uses the business-level strategies where it focused on differentiation technique to bring the high attention of customers. Emirates adopt the differentiation strategy by design the product and services in a unique way. It involves in the form of luxury, excellent quality and service. Thus, such corporate and business strategy proves to be effective for the business in relation to exploring the target market with generating high profits and revenue.

Emirates through consider its capability, resources and competency, it moves towards the expansion of business operation in the global market. For some areas, it also uses joint venture or alliances strategy to easily enter the new market. Such practices company achieve because of incorporate advanced technology, skilled human and physical resources etc. With the help of differentiation and alliances strategy, Emirates grow up at 25% annual rate. At the same time, alliances also give benefits of cost reduction and efficient operation of work. Thus, it is illustrated that emirates corporate strategy contribute excellences in each aspect of company operations whether it is internal (the process of Product & Service) or external functions (distribution).

Section 4: Issues and Challenges of Emirates Airlines

However, the performance of the firm is good and firm is managing the business effectively but at the same time, due to increasing level of the competition and the change in the market, there are different issues and the challenges that are also faced by the firm and affect the business of Emirates. In this, one of the major issues that firms face is the increasing competition level. The reason in this is that due to change in the need of the customers and due to the globalization, there are different firms that are working in the same field and providing their services for the customers. It increases the level of the competition and creates the business challenges for Emirates. This level of the competition also affects the market base and the growth of the firm as well. Because of this, it can be determined increasing competition level is one of the major issues for the firm to manage the business and perform well in the competitive market.

In like manner, it can also be determined that despite increasing level of the competition, having skilled staff is also one of the major issue and the challenge that firm also face in the business. It is because firm operates its business across the world and for managing the business across the world, it is needed for the firm to have the skilled staff but the level of the competition creates the issues for the firm to have the skilled staff and the employees. So, it creates the business issue for the firm and affects the market base of the firm as well. Along with this, change in the technology is also one of the serious issues that are faced by the firm and affect the business of the firm (Hari et al., 2015). The reason for this is that in the competitive market, there are different changes are occurring in the technology for getting the more competitive advantage and to provide the best and effective service for the customers. Because of this, change in the technology creates the issue for Emirates as Emirates has to the technology that creates the financial issue for the firm. Because of this, it can be stated that technology is the major issue that affects the business of the firm and creates the business hurdle for the firm as well. Eventually, it can be determined that there are different challenges including increased level of the competition and the skilled staff that affect the business of Emirates.  In a similar manner, increasing fuel cost is also a critical point for the company in regards to function their operating cost because high investment always affects the company ability to generate high profits. Besides that, there is increasing competition in Middle East market also becomes an issue for Emirates airlines as it put pressure on the company to adopt the continuous innovation. At the same time, the company also focuses more on the high resources availability, advanced technology. Such all practices increase the total expenses of the Emirates. Thus, emirates develop certain strategies to address such issues and challenges so that company works smoothly without any barriers.

Section: 5 Emirates Strategic options for growth

According to Lages (2016), Ansoff matrix plays a significant role for the companies in regards to gain the understanding of different marketing strategies. Moreover, there are four strategies that business uses such as market penetration, product diversification, product development and market development. In context to Emirates, it follows all the strategies at different times. But, it focuses more on the product development strategy through selling innovative product and luxurious services to the customer. This practice helps in retaining the customer for a longer period of time. At the same time, market development is the strategy which emirates concentrate largely by expanding its business in the areas like Asia, Africa, USA, UK and Arab countries etc. It is identified that Emirates airlines are earning large growth and revenue because of global market compared to local like Dubai Arab countries.

(Shaw, 2016)

With the frequently changing environment, Emirates airlines focal point is the quality and cost because it is fact that customer before takes any action they always perceive quality and cost at first and then they move towards the buying decision. So in that case, company install the current version of IS system so that service could be delivered timely without any customer complaints.

TOWS Matrix

SO (Strength & Opportunity)

·       Strong financial support of Dubai Government would give opportunity of more tapping of uncovered market

·       High quality with fewer prices gives more opportunity to enhance customer base.

·       The strong network of suppliers provides more opportunity to bring improvement in the quality of service.

ST (Strength & Threat)

·       Frequently growing technology

·       Changing business environment with the rising competition in the aviation industry (Whyte and Lohmann, 2015).

·       Varying  government Policy and Regulation

WO (Weakness & Opportunity)

·       Heavily focused on the international market.

·       Intense competition in the Arab areas which gives more opportunity to move towards the untapped market which is not covered by any airline company.

WT (Weakness & Threat)

·       High investing in innovation, quality services result in low-profit margins.

·       Increasing cost of fuel would increase the company overall expenses.

·       Less marketing efforts give less awareness in the global market (Azarnivand and Malekian, 2016).

SFA Framework and implementation

Criteria ST Strategy Product Development Strategy WO Strategy Market Development Strategy
Suitability 7 5 5 4
Feasibility 4 7 3 3
Acceptability 3 5 8 2
Total 14 17 16 9

On the basis of the SFA analysis, it is stated that product development strategy is proving to be most effective for the emirates as this strategy allows the company to enhance customer base and grow their loyalty towards the brand. Thus, Emirates airlines need to incorporate such strategy into its business operations.

Section: 6 Conclusion and Recommendations

From the analyzing of the internal and external environment, emirates determine its competency and competitive advantage and with this, it can respond to the changing environment easily. It includes political, social, technological and economic changes. It is identified that management largely faces the issue of less profit margin due to high-cost involvement. So, it is recommended that Emirates should involve market penetration through cutting prices. This strategy also helps to widen or cover large target market. The chances of success of this strategy are high because customers are more prices sensitive. Similarly, Emirates should also focus on reducing the staff numbers and start concentrating on reallocating resources as it makes a worth and trustworthy solution for controlling expenses. Moreover, to survive from the current financial crisis, Emirates requires to pursue on the outsourcing strategy in the areas of engineering, maintenances, catering and ground handling etc. It will assist in efficiently handling each aspect and increase the expertise in these areas.

Furthermore, the evaluation of internal and external factor helps the emirates to identify the current market position and its capability whether it has such competences to implement the operation in that market. Thus, it is true that Emirates with such analysis identify its strength, weakness and the strategy will help it to attract more success in the future market.

Based on such discussion, it is concluded that emirate airlines are one of the leading and popular aviation in UAE market. In addition to this, it also achieved enough success in the global market like USA, UK and many more. The cause of such achievement is the continuous adaptation of change, innovation, and quality. At the same time, the company also used the differentiation strategy which proved to be worth full for the company in regards to achieving large market share. But, it also challenges the company profitability as such activities consume lots of investment and expenses. So, to reduce the company day to day heavy cost and expenses is the major issue. Otherwise, Emirates airlines perform its every portfolio efficiently in both local as well as global market.

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