Strategic Management: Emirates Airlines
1. Introduction and Company Background
This study includes the external and internal analysis of Emirates Airline like PESTEL, Porter’s five forces, VIRO, Value chain model, SWOT analysis, etc. In order to find out the different challenges and opportunities, these analyses have important role for gaining the competitive advantages. The corporate and business strategy of Emirates airline is also introduced in this study. Moreover, this study also focuses on the current issues and challenges that are facing by the organization. After this, some strategy and methods are also applied by the organization to identify and evaluate the options for growth of the company.
Emirates Airlines is one of the largest airline which is founded in 25 March 1985. The CEO of the firm is Ahmed bin Saeed Al Maktoum who supported the firm for success. Now this firm is the largest airline firm of Middle-East and a leading firm of UAE market. The company is providing their airline service from several years to the customers with effective quality. The organization has their business approx in 82 countries and more than 140 cities by using more than 3600 flights in overall world. The cost effectiveness and timely delivery of the service is the main reason behind the success of this firm.
An organization needs to analysis the external environment of the organization in order to find out the potential challenges of the organization. In this external analysis, the firm collects different kind of information to gain competitive advantages (Barros and Wanke, 2015). The external analysis of the airline industry can be possible by PESTEL analysis and Porter’s five force model.
In the PESTEL analysis, a firm collects the different kind of information about the external environment. The PESTEL include six factors of the external environment such as Political, Economic, Social, technological, environmental, and legal factors.
Political factors– During the business operation, an organization can face different issue due to some political reasons. These political factors can affect the daily business activates and can create several problem (Dhaheri and Bilal, 2013). The government created different regulation for the airline industry in the UAE and Dubai but also provides financial support to encourage the business. This financial support of the government can be helpful for the business to operate the business in an effective manner. In the return of this financial support, the government has different economic benefits by airline industry for the country such as infrastructural development, increase market share, etc.
Economic factors– The business of Emirates Airlines at UAE market was impacted by the economic factor also (Dobbs, 2014). In this, the globalization played an important role because it highly influenced on the economic situation of the UAE market. This market needs a number of workers for implementing the different development strategy and the need of the worker is fulfilled by the globalization. The market of UAE also allows FDI that is helpful to improve the economic condition of this market. Additionally, this market also includes high level of competition which creates different problems and issues in the success of the firm.
Socio cultural factors– This factor also plays significant role to influence the business of Emirates Airline (Stephenson, 2014). The culture of the UAE people prefers the new and advanced technological products and service, so the firm can take the advantage of this. The firm can provide new services to attract customer to sustain in this competitive market. At the same time, the need changing behaviour of the customer can also be negative for the firm if another competitor provides better services.
Technological factors– The change in technology is the major problem for the firm because the consumers prefers the advanced technology (Taylor, 2012). It is also determined that if organization changes their technology time to time then it needs a high investment for these kinds of changes. But at the same time, the adoption of the new technology is also essential to take competitive advantage. So, it can be said that the technology creates different issues in the success of the business.
Legal factors– The external analysis of Emirates Airlines also includes different legal factors that affects business of the firm. UAE has different laws, rule and regulation for legally operate a business (Dobruszkes and Van Hamme, 2011). Some taxes have to pay at UAE by an organization and follow different laws like employment law, consumer protection law, contract law, discrimination law, etc.
Environmental factors– This factor also creates different challenges and issues for the business. The environmental factors impacts on the infrastructure, availably of energy, materials etc. to operate the business in the UAE market (Redpath et al., 2016). The time or cost of the business is affected by the different environmental issues and each firm of the market is affected by this factor. An Airline firm is also affected by weather of the country and restricts the firm to provide service timely.
The five force model is used in the external analysis to analyze the competition of the firm. This model include five main models to analyze the competition level of the firm in the market such as bargaining power of suppliers, bargaining power of buyers, competitive rivalry, threat of substitutes, and the threat of new entrance.
Bargaining power of suppliers– There are several suppliers that provides good services for the firm so there is moderate bargaining power of supplier (Oster, et al., 2013). Although, some suppliers in the airline industry provide unique services for the firm which need a huge amount of money to complete the customer facilities.
Bargaining power of buyers– There are many firms in the airline industry that provides services to the customers so the bargaining power of buyer is quite high. But, Emirates provides low price service with batter quality which creates the competitive advantage for the firm. The low price strategy helps the firm to reduce different competitive problem for the firm.
Competitive rivalry– The Airline industry is has good growth rate and only countable competitors so the threat of competitive rivalry is moderate (O’Connell, 2011). But, the available firms are increasing the level of competition in the industry by providing advanced technological services. All the firms are trying to provide better services then competitor in this industry which increases the competition level.
Threats of new entrance– The airline industry need a huge amount to enter a firm in this industry, so there a high restriction on the new entrance (Ho, 2014). At the same time, the successful establishment of the business in the airline industry needs to face the high completion with high quality and price competition.
Threat of substitution– The consumers of the airline has no any substitute service so the need cannot be fulfilled by another service (Nataraja and Al-Aali, 2011). So, there are low threats in the substitution in the airline service for Emirates.
Internal analysis allows Emirates airlines to identify organisational strength and weakness including the core competencies, capabilities and threat for the organisation. In order to analyse the internal environment of the organisation, Emirates airlines is used value chain, VRIO, and SWOT analysis that are below:
In the views of Snelling (2012), it is an opportunity for an organisation to create value in the context of performing well. The value chain analysis helps the company to measure the performance in the two contexts such the primary activity and suportive activity. The primary activity includes inbound logistic, out bound logistic, operation, marketing and sales and service. On the other hand, supportive activity concerns on firm infrastructure, human resource management, technology development and procurement (Ward and Peppard, 2016). In this way, below are the findings of the value chain analysis for Emirates airlines
[Source: Proctor, 2014]
Inbound logistics: Emirates Airlines focus on the training and development of the employees that enables the employee to improve the skills and performance. Therefore, company is able to provide the effective service in the context of the quality and time.
Operations: Emirates Airlines is a large company that has operating in the each area of airlines. Its operations are in Airbus and Boeing airplanes as well in long-haul flight services that helps to maintain the customer based.
Outbound logistics: It is also good relationship with its supplier and it purchases all essential things on time by using the reporting, EDI, settlement, and audits.
Marketing & Sales: Emirates Airlines is maintained it marketing and sales activities with the purpose of providing the satisfied service to the customer in the respect of the quality and price. For this, company spend sufficient amount on the marketing and technology to create competitive position of the company.
Services: In the context of the customer support service, company has effective and skilled customer service that solves the each query of the customer in the minimum time.
Human resources management: It provides the employment to more than 62000 people in the different field. In order to hire a person or employee, there is complex section process that enables the company to select a skilled person.
Technology Development: Emirates Airlines has adopted the advance and essential technology and it spend a sufficient amount on the R&D.
Procurement: Emirates Airlines procures material and resource from the outside. In this, company focus on the essential things and legal formalities. It mainly focuses on the technical support to the system to minimise the error in the service (Watson, 2013).
|Resources / Competencies||Valuable?||Rare?||Difficult to Imitate?||Exploitable by the Organization?||Competitive Implications?|
|Effective work force||Yes,
The company has the skilled and quilted employees that provide the completive benefit to company
It is rare in the nature because there is a string competition
If the company invest good then it can be imitate
If company retain the staff then it cannot be exploit
It is valuable
It is rare
This industry based on the technology
It cannot affect the company
|Innovative product and service||Yes,
It provide the competitive advantage to the company
It is really rare because other companies have not this kind of skills
It is difficult to copy
It cannot exploit Emirates Airlines
it allows the company to offer the service at different places
It has adopted the international route map
It is hard to copy for other companies
It can influence the emirates
· Loyal Customers
· Strong Network
· Effective competitive strategy
· Effective customer service
· Strong network in the international route (Wheelen et al., 2014).
· Skilled and talented workforce
· Advanced service and product
· Well network in Arab countries
· Well support of Dubai government
3.4 Strength & Weakness of Emirates Group
|· Competitive service
· Global network
· Skilled staff and advance technology
· Brand loyalty and high brand awareness
|· Lack of awareness out of Arab country
· Lack of effective marketing strategy
· The percentage of the profit is low due to high operation cost
By the help of the above analysis, it can be analysed that Emirates Airlines is maintained the strong position in the market that credits goes to its technology and quality. Therefore, it is able to provide the satisfaction to the customers in the reference of the quality and time. The company also has a well support by the government of Dubai. Due to this, Emirates is able to retain the large customer base and brand loyalty. But, at the same time, some financial decision, lack of the effective marketing strategy and minimum efforts in the global business environment affect the profitability of the company. Hence, the company has to need to concern on these areas to increase revenue and market share.
The business strategy of the firm is very attractive and easily defined by Porter’s generic competitive strategies that include cost leadership, differentiation, and cost focus.
Cost leadership– The cost leadership strategy of the company is helpful to provide the competitive advantage by reduction in the cost. The organization finds the different suppliers who provide good service at lower cost (Hussain et al., 2013). The Emirates Airlines also increasing their market share by charging low price for the service and earn reasonable profit. At the same time, the company also invests in the technology to reduce the service cost.
Differentiation strategy– This strategy differentiates the service from competitors by investing in research, innovation and development programs. Emirates Airlines delivers batter quality services to the consumers at lower cost (Nair et al., 2011). This better quality and price differentiation are the major part for marketing of the service in the airline industry. It is because the organization reduces their profit by choosing this strategy for business.
Cost focus strategy– The focus strategy concentrates on the market demand to provide this service and product to the consumers. According to this strategy, Emirates Airlines understands the need of the customers and accomplish the demand at lower price to attract them (Heracleous and Wirtz, 2012). The cost focus strategy of company concentrates on the reduction on the organizational cost by use of different technology and low cost labor, material, and service provides.
Differentiation focus– It provides that Emirates Airlines highly focus on the cost and less price competition to sustain in the competitive market. The company is highly focuses on the differentiation to improve customer of the organization and take competitive advantages for a high growth.
Figure- Porter’s Generic Competitive Strategies
Internal and external business environment helps to identify the business challenges and opportunities (Lawton, et al., 2011). From external business environment through PESTEL, it can be identified that government restrictions in terms of approvals to operate flights in the countries and non-availability of bilateral trade agreements between Dubai and other countries may be a significant challenges for the airline to do business. Apart from this, the changing economic conditions and uncertainty may also cause challenges for the business internationally. Middle income people and price sensitive customers may prefer the airlines with low costs that may cause challenge for the airlines with premium services (Duval, 2013). Apart from this, the changing needs and preferences of the customers may cause challenges for the airlines to make changes in their services to attract new customers and retain the existing customers regularly. In addition, it may also increase the cost of operations. In addition to this, it may also challenging for the airline to maintain technology upgrading and maintenance as there is need to make regular change in the technologies. Apart from this, training and maintenance costs for new and updated technologies may increase the financial burden on the firm. In addition to this, environmental challenges are the big concern for the company to maintain sustainability in its operations. Furthermore, the firm needs to comply with the laws and regulations of different countries like anti-competitive law, protectionism and other labour laws to smoothly operate the business in the global environment (Loney et al., 2012). Through Porter’s 5 forces, it can be determined that there are some challenges related to bargaining power of customers and suppliers and moderate threats of substitutes and high rivalry.
On the other hand, it can be determined from internal analysis that the firm majorly concentrates on Dubai market that reduces its competitiveness in international market (Low and Lee, 2014). HR resources are not competitive to handle the global operations due to focus of the firm on only domestic market that may be challenging for the firm to expand its business internationally. In addition, it does not consider its high investments as sunk cost that also reduces the opportunities for the business to increase profits and market share in the industry. In addition, ineffectiveness of marketing strategies also reduces the competitiveness of the firm in business expansion that is due to lack of awareness of the company’s services for the customers (Gregoric, 2014). Additionally, Emirates also invests more in deployment of new crafts that also causes financial burden and reduces the overall profits for the company. The lack of distribution channels is a considerable issue for the company to provide its services across the world that adversely affect its competitiveness against the competitors. Furthermore, the dependence on few airports like Dubai airport also reduces the firm’s competiveness in expanding its business globally.
In order to identify and evaluate the strategic options an organization can use different models like Ansoff matrix, TOWS matrix, SFA framework, etc.
Emirates Airlines includes different strength, weakness, opportunity and threats but TOWS analysis provides comparative strategic options by this matrix.
Ø Good image of brand
Ø Effective work environment
Ø Better services than competitor
Ø Innovative research and development
Ø There is no economies in scale
Ø Need of high budget
Ø Increasing level of competition
Ø Flexible demand
Ø Quality change in services
Ø Instability in the price of oil
Ø Reduce operation cost due to e-commerce investments
Ø Increment in cyber threats
Ø Timely payment of fuel
6.2 Ansoff Matrix-
The Ansoff matrix includes four strategies to develop the growth options for the organization like market penetration, product development, market development and diversification (Mansour, 2017).
Figure- Ansoff Matrix
Emirates Airlines can choose one of the effective strategies of Ansoff matrix for the growth of the business (Grimme, 2011). The market penetration strategy is helpful to develop the business in the existing market with existing product. If the organization want to introduce new product in the existing market then product development strategy is used. The market development strategy chooses by the organization to spread out the business in the new market. As well as, the diversification strategy is selected by firm if the new market and different product is selected for the business development (Min and Joo, 2016). According to the current scenario, Emirates Airlines should be selected the market development strategy to spread the business in overall world and increase the profit of the business.
|Criteria||ST strategy||Product development strategy||WO strategy||Market development strategy|
There are three criteria in the SFA Framework such as Suitability, Feasibility, and Acceptability to achieve the organizational objectives (Nair, et al., 2013). This framework shows that the product development strategy is more effective for the business of Emirates Airlines. This strategy has more score then other strategy that is 66.
From the above study, it can be recommended that the company should offer proper budget for effectively implement the different development strategies. In order to effectively implement the business strategy, Emirate Airline needs a high investment on the organizational strategies that can only be possible by appropriate budget. This appropriate budget will be helpful to impalement business strategy for effectively complete the business practices. In addition to this, it is also recommended that the organization should focus on the use of advanced technology for provide best customer service. In order to booking the flight tickets, the organization should provide mobile app and other advanced technology. Emirates Airline is using the effective technology in the current scenario but the use of advanced technology will be helpful for the company to provide a competitive advantage. On the other hand, it is also recommended that the company should develop the market area and also cover the remaining countries to provide service. The business development is very necessary for the firm because the other competitors are spreading their business in remaining countries also. If the organization will not solve different issues and problems of market then the competitors will cover overall area of the world and the problems will be increased for the firm.
From the above discussion, it is concluded that Emirates is a large airline firm which is providing their services in overall world. This organization has selected the strategy in which the customer service is at lower price than other competitor to attract customer for the success of the company. Additionally, it is also concluded that both internal and external analysis are very useful to find out the different issues and challenges for the organization. These analyses are helpful to develop the understanding about the current and potential strategies for the success of the business. At the same time, this study also concluded the corporate and business strategy of the Emirates Airlines by the use of Porter’s generic strategies. It is also concluded that the organization is facing many issues and challenges in the international market. There is a need of mitigating the issues by effectively implement the corporate strategy and removing the problems by effective communication with governments of the different countries. This study also concluded the different option for the growth of the business and the organization should evaluate them and prepare the strategy for them.
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