STRATEGIC APPRAISAL OF EMIRATES AIRLINES

Introduction

Strategic appraisal is very important for a company as it enables the identification of the current strategic position, hence providing an opportunity for improvements. This paper features a strategic analysis of a company. It will consider the internal and external analysis of the business environment. These are important as it helps to identify the strengths, weaknesses and even various opportunities for the company. The company’s corporate and business strategy is also analyzed to determine what efforts the company is already taking, and whether or not it is effective. After this, the issues and challenges facing the company are also considered to assess the level of risk it is exposed to and what has been done to keep these at bay. This gives room for the identification of strategic options for growth which can be employed to help the company improve. After this, the best option is recommended before a conclusion is drawn on all the analysis.

Company Background

This paper will feature a strategic appraisal of the Emirates Company. The Emirates is an airline company which offers flight services to consumers both locally and internationally. Back in 1984, his highness Sheikh Mohammed Bin Rashid Al Maktoum and Mr. Flanagan made the decision to launch an airline that was worth 10 billion dollars (Melly 2013, p. 18). By leasing the first jets from Pakistan, Emirates airline was launched. In 2005, a largest order ever placed was requested in the form of 42 Boeing-777. From here on, Emirates airlines experienced significant growth which saw it souring to greater heights. A factor that has encouraged this growth is that Emirates airline is treated as a separate business entity, despite it being a government owned entity. This has enabled it to be unique and to engage in competition in the fiercest ways.

It has expanded to obtaining over 140 destinations across the world. This is an advantage as consumers can depend on it for direct flights. It has also expanded its operations to include a cargo division, leisure division, and even an airline IT developer. Feedback from satisfied consumers has also played a role in encouraging its continued fame. Although this company offers many types of services, it tends to target its consumers based on their purchasing power. There are those who are willing to pay for the corporate level and those who are willing to pay for the middle class. These two, therefore, are the market segments. It is the reason why there are three categories of international flights; the first class which has very high prices, the business class which has slightly reduced prices, and the economy class which is affordable to many.

The vision statement of Emirates Airline is to always have competitive advantage in relation to aviation innovation, to be an active contributor to environment protection, and to achieve a global network of coverage as a result of offering safe flights, being responsible and reliable, and offering quality services while still ensuring that it offers travel services without borders to ensure changing the lives of its consumers for the better. The mission that this company will use to achieve its set goals is to grow and become the most envied flight service provider, to always deliver high quality services, improve the comfort of its passengers for pleasure, to avoid any accidents, to invest in new technologies constantly, to invest in competitive employees, and to become eco-efficient (Salisbury 2012, p. 30). This company has major key values; it seeks to achieve customer satisfaction, to be the industry’s leader, to encourage emotional attachments with customer, to be a reliable flight service provider, to gain community engagement, responsibility and even professionalism and team work. The generic strategy it follows to achieve growth constantly is differentiation. This is noted from the fact that it has chosen to offer different products and services to its customers. It has varying airline products with unique prices to suit the different needs of its target customers. The key stakeholders are the governments and the investors.

External Analysis

PESTEL Analysis

To have a better understanding of the macro environment of Emirates Airline, the PESTEL model will be employed.

Political

The industry in which this company functions in is quite sensitive. Since the airline has international flights, it is exposed to the changing political situations in countries, as well as political developments. Any political changes can easily interfere with its operations in that given country. It is affected by the growing security concerns, and the demand for services could reduce due to the rise of terror attacks in various regions (Baker 2017, p. 22). For instance, Trump administration ban on travel to certain Muslim countries is also expected to reduce the load factors of Middle East Airlines to the US.

Economical

As it is an international company, the revenue is collected in various currencies. Therefore, it is at risk of being affected by any sudden change in exchange rate and even the conditions of the international macroeconomics. For instance if it operates in a company that ends up experiencing depreciation, then it will also experience losses as the value of cash collected from the sale of flight tickets will also be reduced (Flottau 2013, p. 76).

Social

Rapid increase in the total human population has impacted demand positively. The millennial have an insatiable urge to travel. The middle class, on the other hand, are experiencing a disposable income which means that they can easily spend on flights (‘Dubai Aviation’ 2013, p. 22).

Technological

The use of digital technology has greatly affected the extent of what Emirates airlines can do. Digital technology improves performance, increases efficiency of operations and enables accurate forecasting of customer expectations (‘Emirates goes digital for its crew’ 2011, p. 10).

Environmental

The airline industry in general is seen to contribute to the carbon emission by 12%. This is due to the airline fuels which are then burnt during operations. It is, therefore, at risk of facing challenges from environmental activists who may view it as a threat to the environment. Also, harsh weather conditions are expected to impact its operations. This is because it becomes impossible to fly when the weather is unstable.

Legal

The Gulf careers have experienced significant growth which has triggered the European and American competing airlines to consider different ways of limiting these careers from accessing their home markets (‘Dubai Aviation’ 2013, p. 22). This is often through protectionist policies. Also, through the many agreements meant to liberalize the airline market, the travel routes for this company have grown significantly (‘To woo shoppers” 2014, p. 17).

Porter’s Five Forces

In relation to the industry analysis, the porter’s five forces of competition model will be employed.

The threat of the entry of new competitors

Emirates airline enjoys the benefit of less competition as the industry has barriers of entries in the form of patents and rights. Emirates airline has already acquired a major market share, making it quite challenging for others to successful enter this industry. Also, the fact that it is a national career gives it more advantages. Emirates has already established itself, mostly from its heavy marketing activities (‘Goat Or Gloat’ 2004, p. 34). Being the first company in the industry, it becomes quite difficult for the other companies to overtake it. Since the company has a very high supplier base, it is not costly at all for it to switch from one to the other. All suppliers will willingly offer it with preferable costs as they know that they have high competition (‘Setback for superjumbo’ 2006, p. 6).

Another benefit that this company has is that it has never had an issue with obtaining capital. This is because it is government owned and also a part of the emirates group. The airline is also highly accessible, thanks to the fact that it has its own terminal and a direct metro and bus that shifts customers to and from the airline base (Wafik, Abou-Shouk & Hewedi 2017, p. 6). Customers tend to showcase loyalty to companies that they have already become accustomed to. With the use of programs like skywards and frequent flyer miles, this company has managed to gain the trust of many (‘Emirates One&OnlyWolgan Valley’ 2015, p. 2). In relation to fuel and flight caterings, Emirates has managed to have a cost advantage, therefore other companies find it hard to match what they use (‘Emirates suffers 1bn blow’ 2011, p. 12). As it is a government run airline, the governmental policies relating to it are quite flexible due to the national carriers and monarchy.

The intensity of competitive rivalry

Currently, there are approximately 37 airlines which fly from and to Dubai. The Middle East region has showcased significant growth of around 11% in the last decade. The diversity of competitors is also a factor that presents competition to Emirates (Babić, Tatalović & Bajić 2017, 147). There are international flyers, domestic flyers, and the global flyers. Fortunately, sustainable competitive advantage has been achieved through improvisation of products by installing fully reclining seats and even offering live TV (Buyck 2014, p.46).

The bargaining power of customers

Customers have a bargaining leverage as they can choose which package they want to use to reach the same destination. When there are more people travelling to a specific destination, they have the power to bargain as the airline will lose a lot if they decide to use a competitor airline. There is also a high risk of losing customers if they are lured by a competitor’s cheaper tickets or better services.

The bargaining power of suppliers

The bargaining power for suppliers is very high as there are only 2 of them in the market. Therefore, since there are also many airlines to serve, they have the advantage of controlling prices of materials as they can easily substitute which company they work with (Flottau 2014, p. 37). Also, the fact that many airlines are still considering an expansion works in their favor (Mowat 2016, p. 2).

The threat of substitute products

There is a high threat of substitute as the industry only has two types of options that consumers seek. These are; budget and luxury. The result of this is the offering of very high product prices.

Internal Analysis

The value chain model

A value chain analysis mainly features the analysis of inbound logistics, operational activities, outbound logistics, marketing and sales, and company services. Emirates airlines has reasonable benefit in inbound logistics period as it has established strong relationships with its suppliers, and also has advanced systems for stock control and specialized training for employees (Siddique 2004, p. 220). Therefore, it has highly qualified engineers, flight deck crew, cabin crew and other professionals (‘More Singapore flights for Emirates’ 2014, p. 14). It also has a sufficient amount of airlines and an equivalent number of pilots and their assistants. Therefore, flights are always maintained in a timely manner.

In relation to operations, the Emirates Airlines offers outstanding services as it has quite a variety of airline products. Therefore, it can offer any type of services that it feels its customers need. Also, the airline offers cheap long haul flight services which gives it improved competitive advantage (Mules 2013, p.3). In relation to outbound logistics, it is clear that Emirates is able to acquire any necessary equipment in the fastest timeframe possible. This gives it the capability of offering emergency client services. It always keeps flight schedules and picks customers as desired. Its business supervision is handled by reporting and audit among many others.

The marketing and sales of this airline has seen to it that vertical integration into main business arrangement has been achieved. It has employed various strategies such as constantly improving its infrastructure to incorporate the changing customer needs.

Lastly, services offered varying greatly. Aside from the different flight classes, the specific advantages of each class is noted by the difference in seats, availability of lounge services, service desks and even luggage weights.

All the above operations are responsible for ensuring the airline is successful. However, other necessary factors include; human resource management, technology development, and procurement (Walker 2017, p. 13). The company has over 60,000 employees, all of whom must go through the Emirates Aviation College to ensure they polish their skills and offer quality service to the organization and its employees. Once employed, a reward package is offered to ensure they are always motivated to work hard.

This company has put in place a team of experts who work in their research center to ensure the company benefits from the identification and employment of the most modern form of technology (Pinkham 2003, p. 30). Lastly, this company obtains its properties from various locations. It features sources from inside and outside the emirates group.

VRIO framework

Resource/Capability Valuable Rare Imitable Non-Substitutable
Exceptional customer service Yes yes Occasionally Yes
Use of Advanced Technology yes yes yes yes
Trained Personnel yes yes yes yes
Large and innovative fleet yes yes Very hard yes
Advertisements yes yes Very hard no
Advance Infrastructure yes yes no no
Special Aviation Training yes yes no No
Widespread network yes yes no no

 

The Main Strengths and Weaknesses of the Company

            This company has strength in the sense that it is among the leading airlines worldwide. It has showcased the capability of still carrying on with operations even in the midst of crises (‘The Emirates Group SWOT Analysis’ 2017, p. 6). It always offers high service quality by ensuring that customers are always the priority. The fact that it offers training and even has its own college is also a strength as it shows that it develops its staff. In addition, the employees are chosen from various regions, leading to a diversified set of employees.

Unfortunately, it also has weaknesses in the sense that it has no succession plan in place for its top leaders (‘Good leadership matters!’ 2015, p. 57). There are no corporate governance practices in place. Also, despite being an Emirates airline, it has no Emirati staff as there are no skilled individuals of this race (Randeree 2009, p. 4). Therefore, it can easily be viewed as a discriminative brand. Lastly, there is the diseconomy of scale when the airline gets more complex as it expands and costs also increase.

This airline enjoys several opportunities that are at its disposal. For instance, it has the opportunity of developing more advanced airlines that will be more appealing to consumers, hence improving loyalty. Also, it can leverage its infrastructure business to help it achieve competitive advantage in the industry. Lastly, since it is part of the Emirates group, it can enjoy the establishment of low cost airlines that will be attractive to many passengers who simply cannot afford the more expensive flights.

Lastly, there are threats that may prevent the success of this company. First, there is high rivalry both locally and internationally as more airlines are being established to meet the growing demand of individuals to travel from one country to the next. The economic crises disturbed the airline business by impacting the willingness and capability of customers to afford the flight tickets. Also, it triggered price fluctuations of oil and currency exchange rates, which can greatly impact the profits made by the company.

Company’s Corporate and Business Strategy

One of the strategies employed by Emirates Airlines is that it seeks to expand by using strategic partnerships (”Qantas is most punctual airline” 2014, p. 23). For instance, when it entered into a partnership with Qantas, which is also a leading airline, it was able to achieve the goal of expanding its flights to various destinations and even offering service to over two million customers (Xiaowen, Tae Hoon & Anming 2010, p.39).

Another strategy is that it contributes by FDI in the specific country it operates. It offers employment opportunities to the individuals of that given country, a factor which earns it favor from many of them. For example, it created over 85,000 job opportunities in Europe with a FDI of approximately € 6.8 billion to the GDP in 2014.

Lastly, another main strategy is building a strong brand equity. It has managed to establish itself as the most competitive airline that offers high quality services to consumers at fair prices.

Identifying Issues and Challenges facing the Company

            There have been anti-competitive claims against Emirates which state that its ownership structure enables it an unfair advantage such as the government writing off any debts it has acquired (‘Market Wrap’ 2013, p. 6). Such claims reflect negatively on the company which is viewed as exploiting the nation and misusing its resources. Another challenge is that, despite it being the only airline in Dubai, there are other airlines which transport passengers to and from Dubai (Walker 2014, p. 11). This caused a congestion of the runway and airport facility. Also, by expanding into new markets Emirates encountered more competitors who threaten its growth (Rothman 2016, p. 17).

The Main Strategic options for Growth

Ansoff Matrix

The first option to consider here is the market penetration. Emirates can decide to retain its market share and instead seek alternatives to boost its market share growth. It should encourage the already available users to fly more often. Second, the company can try to pursue new routes so that the present customers will not have to leave the company’s services in search of more satisfactory ones (Thomas 2009, p. 62). Third, it should engage in new product development by creating a section of private suites where luxury customers can pay extra for. Lastly, there is a need to consider the low cost carrier as there are many individuals who need the flight services but cannot afford the current costs.

SFA Framework

Of the selected options, all are suitable except for the third option which features the development of private suits. This would lead to highly expensive charges which may cause prospective customers to prefer other luxury seats. In addition, the company has already released a private jet service which covers for this need (‘Emirates Launches Private Jet Service’ 2013, p.10). In relation to feasibility, all remaining options qualify. This is because the company is in a position to retain its current market share and work on making it more active. It is also able to pursue new routes through partnerships that will enable it to function as required (Winters 2010, p. 11). Finally, low cost carriers can also be considered as it is intended to bring about more profits for the company (Terrero 2008, p. 55). Lastly, in relation to acceptability, all options are not complicated. Therefore, no resistance is expected in relation to these options as they are all low cost strategic considerations that are meant to bring about profit for the company.

Implementation

To implement these strategic options, important steps must be considered. First, they should not be implemented all at once. Second, all required resources must be readily available before any step is taken. Therefore, the company should set aside extra funds for marketing the brand as it is to achieve the first option. Second, the next two options will require the presence of more fleets to ensure no shortage or delays are experienced after implementation.

Recommendation and Conclusion

From the analysis conducted, it is evident that Emirates has been showcasing outstanding performance. It has experienced increased revenues over the years despite the presence of a series of competitors and other challenges in its environment (Shearman 2011, p. 3). To achieve this, Emirates had to establish itself as an industry leader, not only in its region but internationally too (Rothman 2016, p. 16). This is why, even with new entrants into the market, its position has remained unturned for far too long. This company has managed to fully satisfy the needs of its consumers over the years by constantly differentiating its products to ensure that all its prospective consumers will find a product that they need.

This is not to imply that the company has not had its fair share of challenges. For instance, with very many airlines, it has lost its bargaining power to suppliers who are much less in number and are therefore in high demand (‘UAE Aviation’ 2012, p. 46). Also, in an attempt to serve its ever growing customer base, the company had to give its customers the bargaining power simply because losing them would be catastrophic for the performance of Emirates. Other challenges relate to its brand image whereby several incidents, such as being favored because it is government owned, have served to taint it. This can lead to the loss of a few customers who may view the airline as a way for the government to exploit their finances.

Therefore, to revive this company’s financial deteriorating health, the best approach at the moment is to take the risk and purchase more airlines which will be used to tap into the previously untapped market, while also offering second class seats to middle class citizens who cannot afford expensive tickets. This is the best approach as the first option would mean not taking the risk, hence experiencing little income. There is a need to always research more and look for best ways to employ this strategy without experiencing a lot of risk and uncertainty.

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