Emirates Airline is a fast growing airline company located in Dubai. The company is entirely a property of the administration of Dubai. Its growth is associated with its strategic position and the rapidly growing economy of the region. The management of the company also attempts to work towards enhancing and creating an environment in which various employee and the client diversities are harnessed to produce success.
The company is the biggest in the Middle East and the seventh largest airline around the globe with respect to revenue base and passenger carriage. It ranks in the fourth position in terms of international passenger carriage capacity and in the third position with regard to kilometers travelled by clients. Ahmed bin Saeed Al Maktoum became the first head of the company. After its initiation, the company has been expanding rapidly in terms of the number of planes, fleet size, revenue base, and the scheduled destinations.
Statement of the Problem
Emirates Airline has been experiencing tremendous success and growth. While some airline companies have been experiencing negative profitability that was witnessed in 2004, 2005, 2008, and 2009 as illustrated graphically in Appendix 1, Emirates Airline was able to sustain positive profitability. However, the company faces challenges that threaten its capacity to make optimal profits. It faces competition from Gulf Airlines and Turkish Airlines, despite Alcacer and Clayton’s claim that the company explores anti-competitive strategies (15).
To survive in a highly competitive business environment, Emirates Airline has to deal with the problem of product innovation and continuous improvement of services and their delivery. Since services are delivered through people, the company struggles continuously with the problem of how to manage its people to guarantee clientele satisfaction. Another major problem entails Emirates Airline’s marketing in terms of maintaining its first-time customers while at the same time attracting others, including those who have developed service loyalties to other airlines.
Purpose of the Report
This report purposes to conduct an intensive analysis of the environment in which Emirates Airline does its business. Business environment comprises various elements, which require well-calculated balancing for an organization not to be outdone by its competitors. To this extent, the report will compare and contrast different aspects that make Emirates Airline’s business environment with the objective of establishing or proposing possible strategies for dealing with the challenges that the business environment is facing. The paper is divided into various segments that are broadly classified as problem areas and success areas.
The problem areas lead to success areas. The goal is to set out alternatives, which Emirates Airline can adopt to attain profitability and competitive advantage. Hence, the report will discuss the past, present, and future situations that Emirates Airline is facing.
Political and Legal Environment
Emirates Airline faces political and legal environment that influences its operations. For example, the company is not exempted from taxing policies since it must pay charges while landing in various nations. The management must comply with environmental regulations, tariffs, and employment laws. In the airline industry, an organization’s business faces different political and legal factors that are inconsistent with those in which it is incorporated.
These different and sometimes inconsistent forces shape the manner in which Emirates Airline executes its business activities. At the domestic and national level, the organization faces fewer challenges since it can develop policies that homogeneously comply with the established legal guidelines for doing business. In the international arena, different nations may have different policies, rules, and regulations. Therefore, an organization cannot guarantee uniformity in its policies due to the different compliance requirements.
Currently, Emirates Airline operational routes include Arab nations, for instance, Yemen, which faces political instabilities. Such instabilities influence the company’s scheduling of flights. An intensive analysis of the security situation of the destination is required to guarantee safety of both the planes and people onboard. This situation leads to the delaying of flights. Hence, operating in a region with political instabilities may increase the cost of doing business. Business continuity is only possible in case an organization breaks even.
A major political issue entails opening new routes. While the UAE has some open skies, implying that any carrier can fly in its skies, this situation is not always the case for other nations in which Emirates Airline seeks to establish destination in its quest to increase its global market reach. For example, in 2010, the UAE engaged the government of Canada in negotiation to reach an agreement that would lead to the opening of a route between the two regions (Alcacer and Clayton 6).
The negotiations broke down due to worries that Emirates Airline and Etihad would have negative business effects on the nation flagship carrier. This situation led to many other issues that made it almost impossible to secure the route beyond 1999. For example, the UAE expressed displeasure from the Canadian government refusal to open the route by denying support to the Canadian bid in the UN Security Council. It also imposed fees on UAE Visas (Alcacer and Clayton 6).
In terms of economic factors, the operational economic environment of the Emirates Airline is characterized by rapidly fluctuating prices. For instance, the increasing cost of fuel puts barriers to the margin of profits that the company can reinvest in its growth and/or CSR. Although the UAE has a relatively stable economy and that the company is highly funded by the government, economic instabilities in some of its destinations pose financial challenge to the airlines.
For example, economic downturns in the European markets have an effect on the number of people travelling for dealings aboard business class. This situation is the case for Greece, which has heavy financial debts, and Spain, Portugal, and Italy, which have encountered the challenge of financial slump. Indeed, the main current economic factor that is influencing operations of the company is having operational routes with stable economies to attract many bookings by people aboard to search or conduct business activities.
Price differential among competitors in some of the routes operated by Emirates Airline constitutes an important economic factor that has a negative effect on the organization’s operations. For example, due to lackluster demand, Emirates Airline operated about three to four routes. One of such routes was Dubai-Nagoya (Alcacer and Clayton 9). Emirates Airline’s planning team predicted that the route would attract high demand. However, travelers were not willing to connect flights directly through Dubai. They would rather travel to Tokyo where they would obtain fare cuts. Although multiple reductions were witnessed for seat supplies, the company finally closed the routes in 2009 since higher prices of fuel did not prove to be cost-effective (Alcacer and Clayton 9).
Social factors function to influence consumer behavior. They act as an immense success factor for Emirates Airline because passengers and staff members at Emirates Airline are promised compliance with safety standards. Enhancing the security of all flights helps in retaining and attracting new clients. People who have first-time experience with the company always send an impressive message to other potential clients. Social factors shape market trends for Emirates Airline. The factors influence the target market’s buying options.
In the airline industry, internet and mobile phone applications have been instrumental in enhancing customer purchasing processes. Hence, Emirates Airline has an opportunity for deploying mobile and internet applications to portray air travel as a social activity that does not require tiresome and bureaucratic processes to make bookings. Resolution of customer conflicts, including service complaint experiences, needs to be addressed in the easiest way possible. This strategy creates room for intensive use of the internet and mobile phones in reaching customer care desks in a manner that interaction with the company to build customer experience becomes a social activity.
In the airline industry, technology is an important factor, which functions as service delivery enabler and a solution to other challenges that lead to high operational costs. Emirates Airline deploys the internet to accomplish tasks such as booking and checking services. Fluctuation of oil prices is a major challenge, which leads to disparities in variable costs. Technology provides an important platform for addressing this challenge. For example, Emirates Airline can paint its planes with a nano-technology polymer coating to reduce frictional drag. This strategy has the effect of reducing the amount of fuel consumed. It is also an attempt to keep at par with technology.
The airline industry faces the need for adopting innovative technologies that ensure operational efficiency in terms of environmental sustainability and human resource management. While technological factors are important in increasing the organization’s competitive advantage by way of cost reductions, it is detrimental to Emirates Airline when it falls in the realm of competitors. They can acquire higher cost-saving outcomes. Thus, they can reduce fares to outdo Emirates Airline in terms of passenger attraction and retention. This move has the effect of making some routes unattractive to the extent of prompting their closure as witnessed in the case of Dubai-Nagoya (Alcacer and Clayton 9).
Emirates Airline forms part of the Dubai administration. However, its growth has occurred in an environment of competition. Protectionism has not influenced the growth of the company into an international brand. Indeed, Alcacer and Clayton assert that Emirates Airline faces competition from Gulf carriers and other international strategic alliance airlines (13). Indeed, the number of couriers flying the Dubai open skylines is rising, thanks to the government policy of maintaining an open skyline. The company not only supports this policy but also views it as an important facet for supporting its competitiveness.
All international airlines are competitors of Emirates Airline. For example, Europe and Australian network of carriers, mainly Air France, Qantas, BA, and Lufthansa, have been in constant competition with the company. Indeed, the carriers regard the company’s strategic decision for positioning itself as a worldwide carrier as a major threat to their operations. This approach leads to the bypassing of various historical airline hubs, including London-Heathrow and Frankfurt, through changing flights in Dubai. Other companies encounter many challenges that arise from Emirates’ business operation model. They are more expensive than the Emirates Airline.
Qantas and Air France accuse Emirates Airline for directly benefiting from government subsidies in darkness and/or retaining and supporting cozy dealings with the Dubai Airport Authority. Indeed, as Alcacer and Clayton assert, “Air France, Lufthansa, and Air Canada claimed that government policies such as subsidized fuel, no income tax, and strategic synergies with the government at its principle hub were major sources of success for Emirates that disadvantaged other airlines” (13). However, the president of Emirates Airline did not accept this criticism.
Emirates Airline’s president argues that the United States’ strategic initiatives to protect its airlines from bankruptcy encompass an important mechanism for assisting independent business entities, yet Qantas’ chairperson does not criticize the government. These arguments emerge as each company strategically aims at increasing its competitive advantage to withstand forces of competition in an open market. Air France, Qantas, BA, and Lufthansa are some of the closest competitors to Emirates Airline. Although the list is not exhaustive, other competitors include Air Arabia, Qatar Airways, and Etihad Airways, which are all based in the Middle East.
Strengths are the traits that enable an organization to have an advantage in comparison with other organizations. As depicted graphically by Appendix 2, Emirates Airline sustains growth in a dynamic business environment. In the recent past, it added 18 routes without prejudicing its travelers’ load factor. It enjoys its location in Dubai as a transit hub. It has benefited for long from the strong visionary leadership of its chairperson and Tim Clark among other leaders. It has an effective business policy, which has helped it to overcome global rivalry threats. It has excellent entertainment facilities that have made it earn major awards.
Weakness or limitations are the traits of an organization that place it at a disadvantage in comparison with other organizations in the same industry. Emirates Airline faces the weakness of airport congestion. Although the airline has the largest operation base in Dubai Airport, other rival organizations operate from the airport. Alcacer and Clayton assert that an excess of 150 airlines carry more than 60 million people with Dubai as the destination or point of lifting passengers (15).
The reputation that the company explores uncompetitive strategies poses an immense weakness in its operations. Having been established in the UAE devoid of unionization, the company does not provide mechanisms through employees can express their displeasure through affirmative action. This case may have an implication on their satisfaction, organizational commitment, and productivity. The company has the weakness of charging higher prices compared to other low-cost carriage airlines. This situation reveals why some passengers prefer connecting through Tokyo.
Opportunities are existing external chances, which while utilized make an organization improve its performance. To reduce the degree of competition, many airlines that have global operations are forming strategic partnerships. Consistent with this trend, Emirates Airline has an opportunity to build a competitive advantage by taking lead of economies of scale arising from forming such strategic alliances. Disneyland is an important attraction landmark where people can chose Emirates Airline as their first choice airline to visit. Incentives can be given to frequent customers. Another important opportunity is intensive market establishment in Asia pacific.
Threats are the external chances that impair the performance of an organization. Emirates Airline has been successful in terms of its operations. Amid the company’s good performance without reporting its negative side when the airline industry reports negative profitability, competition from Gulf airlines is a real threat to the company’s sustained performance. Competitors such as Thai Airways and Cathy Pacific expand their operations above regional bases (Alcacer and Clayton 15).
Through this initiative, they are offering non-stop air travel services to Major American and European gateways, which are profitable routes for Emirates Airlines. Considering that the company is entirely a property of the Dubai management, it remains susceptible to alteration of government policies. In case it relaxes in developing success strategies, it risks losing its market share to other airline organizations.
Analysis for Emirates Airline customers helps in determining the clientele segments that the organization attracts or intends to attract in the future. Emirates Airline focuses on customers who look for premium services. Instead of primarily focusing on low prices, it emphasizes the quality of travel experience. Alcacer and Clayton assert, “differentiating itself through service not only enabled Emirates to build passengers loyalty and reap subsequent value, but also allowed the airline to avoid direct competition with low cost competitors” (10). This move initiated in Dubai where the company provided duty-free shopping experiences.
The company has also made substantive investments in enhancing in-flight experience for its clients. For example, it has increased its number of seats to cater for premium customers, diversified its luxury amenities, and added new aircrafts that have in-built luxury amenities such as shower spas (Alcacer and Clayton 10). The objective is to attract and keep first-class and business-class air travelers.
Market Segmentation and Positioning
Emirates Airline serves customers in global platforms across the six continents in which it operates. One of the approaches to segmenting the large number of customers is by geographical regions in which it operates diffident routes. For every geographical segment, Emirates Airline has different categories of customers who it segments according to classes based on luxury attributes of each group. The company positions itself as the best in delivering air travel experiences.
Market Mix Strategies
The pricing of Emirates Airline ensures that the company can serve different needs for different people depending on their preferences. For example, it deploys premium guidelines when valuing its commodities and services for clients who require special and lavish experiences. For ordinary travelers, Emirates Airline has managed to use the services of cheap labor to cut costs. Different pricing that is done based on class or luxury requirement for each passenger enables Emirates Airline to take advantage of the possible highest price for every seat.
Emirates Airline has adopted a competitive promotional strategy tagged Fly Emirates. Keep Discovering. The organization provides exemplary discounts for its customers. It deploys traditional and modern best-in-class marketing tactics aimed at attracting different segments of it clients. It uses radio, TV, websites, billboards, and even social media in promoting its products and services. Place is another important aspect of marketing mix. Emirates Airline executes all its operation from Dubai to reach its global network of more than 130 cities located in 78 different nations and 6 continents. This plan has the capacity to infiltrate untapped markets, thanks to its growing taskforce.
In terms of product in the marketing mix, the company offers mixed product portfolios, which include Airbus travel services and Boeing travel services. Indeed, the company possesses the largest aircrafts that are currently available in the market. It ensures that it offers quality services. To accomplish this goal, the company emphasizes offering proficient and tailored mechanisms for managing clients’ affairs. For example, the airline pioneered the provision of tailored videos. It also pioneered the provision of classified outfits and showers. Hence, Emirates Airline’s products are designed to deliver the best-in-class experiences to its clients.
Investment in Customer Relationships and Market Research
All organizations that seek to build their competitive advantage around people focus on initiatives for managing customer relationships. For example, Emirates Airline ensures customers access all price breakdowns in a user-friendly website. The company should provide efficient and fast services with a turnaround of about 30 minutes or even less. This plan provides an opportunity for service seekers to acquire full utility of the services in a hassle-free manner.
Consumer markets are highly volatile and subject to change customer behavior when mistakes are made to the extent of leading to customer dissatisfaction. Consumers purchase services, including air travels, because they need to satisfy certain needs. Consequently, it is important for an organization to guarantee adequate utility of the service delivered in practice just as it promotes its services. Hence, Emirates Airline needs to invest in studying and research on its consumers.
Marketing research can help in determining why consumers would consider buying air tickets from competing airlines, yet Emirates Airlines offers travel services to its competitors’ destinations. Based on market research findings, to maintain good customer relationships, it is important to ensure that strategies developed from the research findings are not copied by competitors, for instance, the case where competitors copy aircraft innovations such as in-flight bars (Alcacer and Clayton 15). This situation reveals the weakness of the above alternative. For instance, Qatar Airways has copied Emirates Airline’s business model that enhances customer experience through the provision of luxury travel service to first-class and premium luxury customers.
Modifying Labor Relations Policies
Emirates Airline has managed to highlight strong civilization in terms of cultural differences of its human resources. While major airlines from other nations have made significant contributions to their earnings in settling employment labor disputes, including salary and wage increments, Emirates Airlines remains shielded from this challenge. Unionization is non-existent. The labor costs for the airline are less compared to other airlines and that they do not receive any pensions. However, employees benefit from “tax free-incomes, free residential housing, healthcare plans, and end of service benefits “(Alcacer and Clayton 12).
A weakness with this alternative is that although these paybacks are important to the employees, the current system is not the best. The company may have to consider improving pay packages of the employees to align with those of competitors. This move can help to increase their organizational commitment and satisfaction. The outcome is the realization of better results of people-focused strategy of the company for enhancing customer experience.
Emirates Airline has experienced HR-related failures, which may decrease its competitive advantage. One of such failures encompasses its poor recruitment policy. In case one signs a contract with the airline, he or she is stuck at the company for not less two years. The company has also made covenants with Fly Dubai, Qatar Airways, and Etihad not to employ any employee of the airlines if he or she has not completed a two years contract. This plan is a big failure since it violates the human right of choice of employer. A consideration of this policy is necessary to give employees the freedom to change their jobs. This appreciation can help to attract top talent to the Emirates Airline. Employees prefer organizations that have flexible and integrative employment policies.
Creating Platforms of Leadership Growth and Development
The key to the success of Emirates Airline is the contribution of strong leadership of his highness, Sheikh Ahmed. He is the chair and the chief executive of the airline. Through the past two and a half decades, he has proactively been involved in economic development of Dubai. Consequently, apart from being involved in creating appropriate environment for business to thrive in Dubai, he has also been resourceful in fostering expansion of the aviation industry in the United Emirates.
Effective visionary leadership has also been provided in the past by Sir Flanagan, and now by Tim Clark. As Clark now approaches retirement, no successor has risen to take over (Alcacer and Clayton 15). This situation raises the question about whether the organization will continue to sustain its growth without a charismatic captain and hence the need for the company to provide leadership mobility among its employees to ensure that it does not lack a visionary ad charismatic leader at any time.
Returning the Strategic Positioning Technique
Returning to strategic position demands Emirates Airline to reconsider its purpose and goals in the short and long run. When one task is accomplished, there is a need to address the next strategy. Considering that the airline industry is dynamic with every competitor attempting to imitate its service delivery strategies to woe more clients, Emirates Airline has to remain true and committed to its value proportions to its customers. Although this alternative faces the challenge of being copied by competitors, Emirates Airline needs to develop unique mechanisms for differentiating itself from the competitors. Such strategies need to be rooted and integrated into the company’s brand, rather than applying them generally in the airline industry.
Emirates Airline is ranked in the 7th position in a list of the best global air carriers around the globe based on revenue generated per kilometer of travel. In terms of carriage capacity, it falls in the 4th position. Hence, the organization has established an immense industry leadership not only in the Middle East but also in the global airline industry. Much of this success is built with the help of Emirates Airline’s employees. The human resources are in close contact with customers during the process of service delivery. The capacity of the Emirates Airline to retain its employees who have enabled it to build global leadership is critical for continued sustenance of the position.
The company should develop and implement employee-friendly policies to ensure that they deliver extraordinary and remarkable services to the clients to prompt repeated bookings. The company should not anticipate a reduction in competition since the UAE still advocates for open skyline. The secret to success rests on a company’s differentiation of its products and services in a manner that cannot be copied by the competitors. Business rivals have other companies’ models to achieve success. At the heart of future success is the need to have conscious effective leadership. As Clark retires, Emirates Airline should evaluate in details his successor to ensure selection of yet another visionary head who can build on the past successes to guarantee competitive advantage for the organization.
Alcacer, Juan, and John Clayton. Emirates Airline: Connecting the Unconnected, Havard: Havard Buisnes School, 2014. Print.