Emirates Airline Business Strategy

Introduction

Various environmental, social, political, and economic factors influence the growth and development of the global aviation sector due to the fact that such factors have adverse impacts on the operational costs of airlines. Therefore, the success of any airline amidst such factors depends on the business strategies adopted. This paper evaluates the business strategy of Emirates Airline.

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Factors for the Success of Dubai’s Aviation Sector

Factors that account for the success of Dubai’s Aviation Sector

The aviation sector in Dubai is considered to be successful. There are several factors that account for its success. First, the government of Dubai has been instrumental in raising awareness of the significance of the aviation industry in the growth of the country’s economy (Lohmann et al. 2009). Secondly, in Dubai, there is an open policy regarding competition among all airlines, as evident in the numerous airlines that have their operation in the region. The open policy ensures that all carriers are autonomous, which gives them the chance to operate free from any restrictions, as well as be competitive in terms of the charges. In addition, Dubai has a consensus-based strategy as far as the investment within the region is concerned. Such an approach has been significant for the growth and development of airports in Dubai (He, Wang & Lai 2010). On the other hand, there has been a lot of emphasis on the underserved markets, which has enhanced the growth of Dubai airport and, subsequently, increased the number of passengers that the airport can handle.

PESTLE Analysis of Emirates

Political

The UAE is stable politically, and hence, such a state of affairs has been significant for the region’s growth and development. According to Akoum et al. (2012), the political stability of the UAE has attracted people from various parts of the world alongside major financial institutions. Such a scenario has led to a significant increase in the number of passengers in the region (Squalli 2014). As such, Emirates Airline capitalizes on this case to ensure that it increases its profit margins by targeting to grow a large customer base (He, Wang & Lai 2010). Nevertheless, the UAE suffers from changes in the prices of oil, which has the potential to bring about political conflicts hence, affecting the smooth operations of businesses in the region.

Economic

Over recent years, the UAE has been experiencing tremendous growth in its economy due to the growth of the region into a regional and global business hub. With such growth, employment opportunities in the area are many. In addition, the growth and development in the region have led to a high level of Foreign Domestic Investment (Squalli 2014). For this reason, the amount of money in circulation in the UAE is high, which gives Emirates Airline an opportunity to improve its productivity since the demand for freight services is high. However, considering the region’s overreliance on oil, a fall in the global prices of oil would have adverse impacts on the economy of the UAE, as well as on the operations of Emirates Airline.

Social

The population of the United Arab Emirates has significantly increased following the high economic growth in the region. Such a situation has led to the development of the open policy as well as the establishment of various recreational activities, including tourism and sports (He, Wang & Lai 2010). Being a multicultural region, UAE hosts people from different parts of the world who are comfortable working as well as living in the country (Squalli 2014). With respect to the current social state in UAE, any negative impacts on the economy would significantly reduce the attractiveness of the region among business people and, subsequently, affect the operations of Emirates Airline.

Technological

In contemporary society, technology has become a key issue in the running of the business. It has been pointed out that a company that assumes or relegates technology from its key operations is likely to fail (Squalli 2014). The UAE has a large population that consists of mostly young individuals who are technologically knowledgeable. The Information and Technology industry in the region contributes greatly to the growth of the IT service sector, hotel, and tourism industries. Technology can be used to enhance the passenger’s experience (Ringbeck, Gautam & Pietsch 2009). In the UAE and other parts of the world, there are many people who use the internet.

Legal Factors

Legal external factors are common within the aviation industry due to the fact that airlines have to fly over the airspace of various countries. For this reason, without effective air space agreements, the operations of Emirates Airline can be thwarted. In spite of this, the airline benefits from the fact that Dubai has been experiencing significant growth over recent years, a move that has been accompanied by appropriate international business links.

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Environmental Factors

Nowadays, there are concerns over the need to protect and conserve the environment. The aviation industry has not been left unaffected by such needs, and hence, all airlines are required to ensure that they are environmentally-conscious. This entails the use of aircraft with no impact on the environment. In the case of Emirates Airline, its Airbus 380 aircraft is environment-friendly as it has low consumption of fuel and emissions. In spite of this, the operations of Emirates Airline are threatened by natural phenomena such as volcanic eruptions and earthquakes.

Detailed Porter’s 5 Forces Analysis of Emirates Airline

The section below provides a detailed Porter’s five forces analysis of Emirates Airline.

Threats of New Entrants

In most of the cases, new players in any market are faced with threats from the existing businesses due to the fact that the new entrants tend to be extremely attractive and charge low prices. However, in the case of Emirates Airline, the threat of new entrants is low due to the comparatively high barriers associated with the huge capital requirement. Emirates Airline has a strong brand image and excellent customer loyalty, which makes it easy for the company to deal with the threats of new entrants.

Bargaining Power of Supplier

The bargaining power of suppliers is high within the aviation industry and specifically for Emirates. This is attributable to the fact that the suppliers have the authority to alter the market trend considering that there are no many suppliers within the aviation industry of the world and particularly, in the UAE (Squalli 2014). For example, Emirates Airline relies on Boeing and Airbus. As such, if these suppliers change the prices as well as the quality of their products and services, there would be significant impacts on the performance and productivity of the airline.

Bargaining Power of Buyers

The impacts of the bargaining power of buyers in the case of Emirates Airline are high. This is attributable to the fact that the buyers have the capacity to change the industry trend following a change in their need for low fares, as well as quality services. Such high bargaining power of buyers, in this case, is attributable to the high number of passengers in the market (Squalli 2014). In spite of this, Emirates Airline provides quality services and considerably low fares for the purpose of countering the impacts associated with a change in the needs and demands of its passengers.

Threat of Substitutes

Substitutes refer to products and services that can be used in the place of others. In the case of Emirates Airline, its services can be substituted by other modes of transport, offering better products and services (Ramcharran 2012). As such, the company faces a high threat from substitutes to air transport, such as the use of land and water modes of transport. However, the airline maintains considerable fares and quality products and services as a way to remain competitive over other forms of transport.

Rivalry among Existing Firms

The availability of numerous large airlines in the industry has increased their rivalry instigated by the need to dominate the market. Such rivalry has increased the level of competition in the industry based on various aspects such as the prices, quality, as well as the ability to provide services over short distances (Ramcharran 2012). Nevertheless, the airline overcomes such challenges by capitalizing on its brand image, customer loyalty, as well as charging low fares.

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Assessment of Emirates Airline: Marketing mix

Product

Emirates airline offers its customers intangible in-flight and on-ground services. There are various classes available for customers to choose from, including the first class, business class, and economy class. Various strategies, such as product development, are adopted to ensure a competitive advantage in the industry.

Place

Its principal operations are in Dubai, and it makes more than 3500 flights weekly to different destinations (Ramcharran 2012). Various channels are used to avail the company’s information to potential customers. Such channels include telephone, travel agents, and the company’s website.

Price

The season of travel, destinations, as well as the type of class, determine the pricing strategy. Nevertheless, the company charges low airfares, which has increased its competitive advantage, especially over short distances.

Promotion

Emirates airline has invested extensively in promoting itself, which has helped to grow its customer base. This is done through ad campaigns such as the famous “Hello Tomorrow” campaign.

Assessment of Emirates Airline: brand, UVP, and growth opportunities

Emirates airline relies on a strong brand as a focal point for its marketing strategies. The availability of a mixed fleet that includes the Airbuses and Boeing wide-body aircraft enhances the competitiveness of the company’s brand.

In addition, Emirates airline’s Unique Value Preposition is its brand positioning, which ensures the commitment to satisfy customers’ needs as far as best-in-class products as well services are concerned. In addition, the adoption of technology-based customer initiatives helps in the differentiation of the company’s brand.

On the other hand, Emirates has the potential of the growth attributed to the significant development of Dubai airport. Secondly, there is an increase in the use of the internet in the UAE, which ensures that the company’s online campaigns reach numerous potential customers. In addition, the growth in the world’s population increases the potential customers of the airline. Lastly, the government of Dubai has been active in raising awareness of the aviation industry, which gives Emirates airline significant growth advantage since it is one of the largest carriers in the world.

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Emirates Airline Competitive Analysis and Business Strategy

Emirates’ short/long term marketing strategy vis-a-vis its competition and pricing structure

Emirates Airline faces stiff competition from other carriers. In spite of this, its low-cost pricing strategy has been useful in ensuring that the company remains relevant in the market (Ramcharran 2012). For example, the airline has managed to gain a considerable share of the world market by focusing its marketing strategy in areas involving short distances. Secondly, Emirates’ use of the Boeing and Airbus has earned it respect among other carriers and increased its competitive advantage.

Emirates’ market segmentation

Emirates market segmentation focuses on the age of its customers, income, as well as their geography. The geographic segmentation is based on the fact that different destinations may present the airline with different needs and demands, and so is the case of customers of different age brackets and income distribution (He, Wang & Lai 2010). Such an approach ensures that all the needs of its customers are catered for.

Emirates stage of product life cycle

Emirates Airline can be considered to be at the maturity stage of the product lifecycle. This is attributable to the fact that it faces stiff competition and has the potential to deal with such competition.

Emirates success at marketing its products

Emirates airline is successful as far as marketing its products is concerned. This can be inferred from its large customer base and current high rate of expansion. Secondly, the company uses a number of effective distribution channels that ensure that many potential customers are reached. Thirdly, Emirates airline invests in a strong corporate social responsibility, which has been instrumental in increasing the company’s brand value. Lastly, the company has efficient promotion strategies, including ad campaigns that help to create awareness of its products among potential customers through.

Network and Markets Growth Plans Assessment

Assessment of current business model and network

The current business model of Emirates Airline revolves around the existence of a lean workforce that is comparable to a low-cost carrier, as well as the implementation of a flat organizational structure (Demil & Lecocq 2010; He, Wang & Lai 2010). Such a strategy is aimed at ensuring that the operational costs of the company are as low as possible for a chance to gain a competitive advantage over other players.

Capacity based environment and competition analysis

The Airline market requires a high capacity-based environment and competition analysis. This is attributable to the fact that companies are being introduced to the market. For example, Emirates has a large fleet implying that it has increased impacts on the environment. Such an analysis would be important to understand the state of the market in terms of airlines’ competition as well as their responsibility to the environment (He, Wang & Lai 2010).

The relevance of the Emirates A380 fleet

Emirates A380 fleet has been very effective in enhancing the competitive advantage of the company because of its low fuel consumption rate. This is attributed to its use of numerous lightweight materials (Ramcharran 2012). In addition, its engine is quite effective compared to other aircrafts.

Need to fully deploy the balance 90 A 380s into the present or future operations

To fully deploy the remaining A380s, Emirates airline would be required to make a lot of changes in its current and future network, including the identification of new destinations, improve customer satisfaction, as well as invest in thorough marketing to enlarge its customer base.

Markets Uncertainty and Future Plans Acceleration of European and U.S. Carriers

Threats and Pressures on Emirates

Emirates Airline faces threats from various sectors. For example, the fluctuation of the prices of oil has adverse impacts on the operational cost of the airline both in the short and long term. This is attributed to the fact that the prices of oil are not controlled (Ramcharran, 2012). Secondly, the market share of Emirates Airline is threatened by the entry of new players that charge considerably low prices (He, Wang & Lai 2010). Recently, the airline adopted an online ticketing system which is subject to technological problems as well as hack, leading to huge losses in the company.

Fierce competition and lobbying of European and American carriers against Emirates

Emirates Airline faces fierce competition within the global industry. This is attributed to the fact that the majority of the European and American carriers have lobbied against it. As such, the airline ought to adopt effective approaches to reduce the impact of such competition (He, Wang & Lai 2010). One of the significant approaches, in this case, is to implement a pricing strategy that focuses on charging low airfares.

Competitive advantage of Emirates’ business model

Emirates Airline relies on a business model that focuses on the availability of a lean workforce, flat organizational structure, as well as the adoption of low-cost carriers (Demil & Lecocq 2010). Such an approach ensures a competitive edge over the European and American Airlines in that the model ensures that Emirates maintains low overhead costs.

Recommendations

Based on the design and specifications of the A380 model, Emirates airline should establish enough market to ensure that the overhead costs remain low given that A380 has a large capacity. As such, the company ought to adopt quality control strategies. This is necessary due to the fact that there is a need for the airline to have control over its brand and quality given that its success as far as A380 model is concerned depends on the availability of large customer base. In addition, Emirates airline should engage in extensive aviation training especially with a lot of emphasis on the case of A380 for the purpose of maximizing the benefits of running an aircraft with a large passenger capacity as reduced overhead costs.

Conclusion

It was evident that the external and internal environments have a great impact on the performance of Emirates airline. Notably, negative changes in the social, economic, political, technological, legal, as well as the environmental factors would have adverse impacts on the airline’s success. Similarly, high bargaining power of buyers and suppliers, increase in the number of airlines, high rivalry among existing airlines, as well as new entrants would lower the competitiveness of Emirates airline. However, the airline has remained relevant in the market due to its strong brand, competitive pricing strategy, and the provision of quality services to its customers. Nevertheless, the Emirates Airline should adopt sound internal measures to exploit the existing opportunities.

References

Akoum, I et al. 2012, ‘Co-movement of oil and stock prices in the GCC region: A wavelet analysis’, The Quarterly Review of Economics and Finance, vol. 52, no. 4, pp. 385-394.

Demil, B & Lecocq, X 2010, ‘Business model evolution: In search of dynamic consistency’, Long range planning, vol. 43, no. 2, pp. 227-246.

He, Y, Wang, S & Lai, K 2010, ‘Global economic activity and crude oil prices: A co-integration analyses’, Energy Economics, vol. 32, no. 4, pp. 868-876.

Lohmann, G et al. 2009, ‘From hub to tourist destination–An explorative study of Singapore and Dubai’s aviation-based transformation’, Journal of Air Transport Management, vol. 15, no. 5, pp. 205-211.

Ramcharran, H 2012, ‘Oil production responses to price changes: an empirical application of the competitive model to OPEC and non-OPEC countries’, Energy economics, vol. 24, no. 2, pp. 97-106.

Ringbeck, J, Gautam, A & Pietsch, T 2009, ‘Endangered growth: How the price of oil challenges international travel & tourism growth’, In World Economic Forum, the Travel and Tourism Competitive Report, pp. 39-47.

Squalli, J 2014, ‘Airline Passenger traffic openness and the performance of Emirates Airline’, The Quarterly Review of Economics and Finance, vol. 54, no. 1, pp. 138-145.

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