Aviation Industry: Emirates Airlines, External Environment Analysis

Analysis of Emirates Airlines
Name
Institution
Table of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc502910962 \h 31Part I – External Analysis PAGEREF _Toc502910963 \h 51.1Macro-Environment Analysis PAGEREF _Toc502910964 \h 51.2Industry Analysis PAGEREF _Toc502910965 \h 71.3Opportunities and Threats PAGEREF _Toc502910966 \h 92Part II - Internal Analysis PAGEREF _Toc502910967 \h 112.1Analysis of Emirates’ resources and competencies PAGEREF _Toc502910968 \h 112.1.1Identification of the Resources and Competencies PAGEREF _Toc502910969 \h 112.1.2Distinction between Threshold and Distinctive Resources and Competencies PAGEREF _Toc502910970 \h 122.1.3Appraisal of the Resources and Competencies PAGEREF _Toc502910971 \h 142.2Strengths and Weaknesses PAGEREF _Toc502910972 \h 143Part III – Description of Emirates Current Corporate and Business Strategy PAGEREF _Toc502910973 \h 163.1Emirates Corporate Strategy PAGEREF _Toc502910974 \h 163.2Emirates Generic Strategy PAGEREF _Toc502910975 \h 164Part IV – Emirates Issues and Challenges PAGEREF _Toc502910976 \h 185Part V – The Selection of Strategic Options PAGEREF _Toc502910977 \h 205.1Generating Strategic Options PAGEREF _Toc502910978 \h 205.2Evaluation of the Strategic Options PAGEREF _Toc502910979 \h 205.3Implementation PAGEREF _Toc502910980 \h 216Conclusion PAGEREF _Toc502910981 \h 227Reference List PAGEREF _Toc502910982 \h 238Appendix PAGEREF _Toc502910983 \h 26
Analysis of Emirates Airlines
Introduction
Purpose of the report
This is an in-depth report discussing the Emirates Airline and partly the aviation industry. The purpose of this report is to mainly showcase an investigative piece of a company while also providing some recommendations on how it can improve some of its aspects.
The Emirates Airline is one of the most known brands in the world. The company managed to build a billion dollar organization with footprints all over the world and if the obvious indications are to be believed, the expansion strategy is still being implemented. 1985 is the year an idea was born and with it the trust and solid support of the Dubai government. According to Alcacer and Clayton (714, 2015), the idea only had “$10 million in seed capital provided by the Government of Dubai” as well as two planes. However, as both writers note, the dream was big and despite the humble start, the people behind the idea were dedicated and wanted to see it grow. “While the airline’s initial scope was modest, its ambitions were not” (Alcacer and Clayton, 715, 2014). The young company had its eyes set on the bigger airlines which had already been in the business for a long time. The above, apparently, was echoed by Tim Clark the president of Emirates Airline when he said that their goal was not any different to what other airlines were doing. However, he notes, “we were global in our aspiration, linking more global city pairs, and our scale was much broader” (Alcacer and Clayton, 715, 2014). From the above, it is indeed clear that the successful path the company has been on was forged years ago.
Currently, Emirates Airlines is one of the most preferred airline in the world. The company traverses the world and today its presence is in more than 100 destinations and in well over 60 countries. Additionally, as already stated, it has its footprints in all the world’s continents and has been instrumental in helping Dubai grow and be the commercial center of Middle East. From Africa to Asia to America and Europe, Emirates Airline has managed to share the spoils with some of the local airlines. Alcacer and Clayton (715, 2014) report that “it has also consistently managed to maintain operating profitability for 25 consecutive years.” This both authors agree it is “no small feat” especially “in an industry that had consistently failed to return the cost of capital.” In an industry as fragile as the aviation industry, the company has indeed done well for itself and one cannot wait for what is in store in the coming years.
Differentiation has been Emirates Airlines’ best strategy to separate itself from the competition. The company is indeed committed to its mission, vision, and core values. The Emirates Airline mission is, “offering consistently high-quality value-for-money service and to be the best airline on all of its routes.” Its vision is also indicative of its commitment in ensuring its clients get the best and nothing short. It reads, “To be the leader in aviation innovation, environment protection as well as the best airline in the world with a global network of coverage thanks to its strict compliance with flight safety, responsibility, reliability, product and service quality and competitiveness while making travel without borders to change the lives for the better.” Its key values include principles such as customer satisfaction, reliability, leadership, emotional attachment, innovation, responsibility, and high-quality of service and product. To the company, the clients will always take first place and hence the values highlighted above.
Part I – External Analysis
Macro-Environment Analysis
PESTEL
Political Factors
Every airline benefits from the treaties as well as agreements instigated by their government. Emirates airlines is not any different and it has been benefitting from certain moves and decisions its government made. For example, Dubai is considered an unprotected market and according to Stanik et al. (2007), this helped the airline to grow and to be able to compete with the biggest airlines in the world. Stanik continues to state that the above led to increased competition which fueled the airline. Additionally, agreements of full traffic rights between the Dubai government and countries like Australia, The U.S., and New Zealand also helped to enhance the growth of the airline.
Economic Factors
The truth is, every airline’s growth and expansion depends on the economic conditions of the home country as well as the economic conditions of its destination states. For Emirates Airlines, one of the major issues that helped it grow is the great economy of the UAE (World Fact Book, 2009). Even though the airline has expanded to other seemingly unstable economies, the majority of its destinations are great economies which further help to enhance its growth. However, with certain economies struggling especially in Africa, the company is set for an unpredictable future (Dzimwasha, 2016).
One economic issue that challenges and that affects the airline is the fluctuations of oil prices. Whenever oil prices fluctuate, the airline losses greatly. Kerr (2017) reported that “profits plunged 82 per cent to Dh1.3bn ($340m) for the 2016-2017 financial year as the Gulf carriers face serious economic and political headwinds after years of untrammeled growth.” Kerr continues to state that the above issues coupled with “a sluggish regional economy hit by a slump in oil prices” have indeed derailed the progress of the airline.
Sustainability
The truth is the world is fast depleting its natural resources and manufacturers are being forced to make certain significant eco-friendly changes. The environment is also something else which has continued to invoke debates especially ones to do with global warming and climate change. According to Rosenthal (2008), airlines have been working hard to counter pressure from environmentalists who consider them as one of the biggest polluters of the environment. The issue of the use of more eco-friendly fuel or bio fuel has taken center stage in recent years and airlines are deeply engrossed in research to determine whether they could come up with ways to curtail their contribution in degrading the environment.
Technological
When it comes to technology, none beats the Emirates Airlines. The company is known for its quick adoption of the recent technologies and even became the first company to incorporate e-ticketing. The management of Emirates Airlines are fully aware of the consequences of their differentiation strategy which forces it to always steer clear of its competition. This means they understand the advantage of ensuring the airline is technologically enhanced and ahead in all instances. Compared to the other major airlines, Emirates Airline is quite young but has managed to build for itself one of the most technologically advanced fleet.
Social and Cultural
All the destinations the Emirates Airlines operates in are culturally diverse and therefore, warrant different trends which can suite the values, education, tradition, religion, and lifestyles of the people. This means that it is indeed essential to ensure that one’s airline is tuned to the different social and cultural demands of the different clients.
Legal Factors
This mainly involves policies which are made to deter airline companies from expanding into new markets. Countries often want to protect their local airlines, therefore, it makes sense to institute certain protectionist policies against giants such as the Emirates Airlines. A good example according to Alcacer and Clayton is Canada which thought it best to protect its local airline industry instead of exposing it to the cruel competition.
Industry Analysis
Porters Five Forces Model
* Threat of New Entrants
The threat of new entrants is always one that organizations ought to be weary of. Everyone will always want a piece and therefore, different players will seek to enter the market to share in the spoils. However, it is also essential to acknowledge the high and complex barriers in the industry which makes it impossible for new entrants.
* Bargaining Power of Suppliers
The aviation industry is quite challenging to break into and competition is quite strong. However, the entire industry also boasts of only a few suppliers. Currently, there entire industry boasts of only two major suppliers: American Based Boeing and the Airbus Group. These two have been the chief suppliers for a long time and one would not be faulted when they say that they almost share exclusive control over the global airline supply business. The above also means they have unlimited power and their word is often taken with a lot of seriousness. Demand has always been high and this only works to elevate their power.
* Bargaining Power of Buyers
Aside from the suppliers, the buyers also have power over the airlines. According to Alcacer and Clayton (715, 2014), the Emirates airlines grew “from its humble roots, in just 28 short years” and during this period, it “had grown to service 39.4 million passengers, book $19.9 billion in sales, and employ 48,000 people.” The above shows how powerful the clients are and their role in helping to grow the company. Year after year, Emirates Airlines continues to show the world why it is among the best by attracting millions of customers all over the world. However, according to International Air Travel Association or IATA (2005), clients also have power over the airline companies. Buyers can affect the industry or an airline by exercising their ability to reduce or affect prices, and also demanding for high quality services. IATA reports that switching costs for buyers, especially in the Airline industry are low. Therefore, with the many choices in the market, airlines are forced to use different strategies to stay ahead of their competition.
* Competition and Rivalry in the Industry
The airline industry, as already stated is one of the most competitive industries in the world. Companies always seem to be on each other’s necks as they try to outdo each other. The Emirates Airlines is surrounded by its rivals including Singapore Airlines, American Airlines, British Airways, and Qatar Airways its arch nemesis especially because of control of the Middle East airspace.
* Threat of Substitutes
The truth is, the threat of new substitutes is indeed quite low especially in the developed countries where people would be seen to prefer flying over short and long distances (Pratap, 2017). However, trains do offer an alternative in both developed and developing countries. Therefore, this could present a problem and also lead to lower client turnout.
* Political Factors such as Terrorism and Broken Alliances
Political factors have also been a major factor in the airline industry. For example, on 24th December, 2017, Tunisia banned the Emirates Airlines from landing in Tunis a move which will indeed affect the company’s projected profits (BBC, 2017). It was alleged that a number of women from Tunisia were denied access into their flights. The Tunisian government, after pressure from rights groups, decided to ban the airline from landing in the country. Such news coupled with the many terrorist activities happening in the Middle East and around the world could affect the airline.
Opportunities and Threats
There are numerous threats and opportunities for the Emirates airlines. The threats are as discussed below:
* Threat of Substitute Products and Services
* Competition
* Protective policies in the expansion markets.
In spite of the above threats, there are several opportunities in the external environment which can be beneficial to the company. They include:
* The differentiation strategy.
* Solid alliances.
* Relationship with the suppliers.
Part II - Internal Analysis
Analysis of Emirates’ resources and competencies
Identification of the Resources and Competencies
Emirates’ Value Chain
The Emirates Group is not simply an airline company but boasts of owning several businesses in Dubai and around the world. The company has diversified its businesses and has managed to set up a number of structures which help to contribute to its full operations. The company directly operates almost all or some of its service desk operations, check-in, baggage and handling, boarding and lounge services. Additionally, the company also holds hotels and resorts which are often advertised to its customers especially the high-end ones. The chain, however, does not stop there and continues to include a pilot and staff training center where the company trains its employees to become the best in everything they do. As stated earlier, the company uses the differentiation strategy to set itself apart from its competition and therefore, aims to achieve perfection in everything it does. The engineering center is also another thoughtful addition in the chain and this typically deals with issues of repair and maintenance. Finally, Emirates also has its company owned catering section which helps to ensure the clients’ needs are well-catered for. This chain is quite extraordinary and helps to showcase the company’s stature and extensive plan to dominate the airline industry.
It would indeed be cruel to avoid mentioning the company’s management as one of its key resources. The truth is companies are as good as their management and the company’s management has always been making calculated decisions which are not always good or lead to profit-making ventures but ones which help to make it stand out and be a leader in the airline industry.
Distinction between Threshold and Dis...