Emirates Airlines’ Successful Strategic Management

Abstract

In this strategic management paper, the focus was to determine the strategic management techniques that Emirates Airlines has been using to achieve its current success levels and what it may need to do further to maintain such high levels of success. The study shows that the firm has embraced innovation and customer-centric strategies to achieve market success. The study also shows that the firm will need to embrace a strategic partnership with its rivals to expand its operations.

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Introduction

Background

The Emirates is an airline company wholly owned by The Emirates Group and has its headquarters in Dubai, United Arab Emirates (Konara, 2015). The Dubai royal family founded the company on March 25, 1985, when Gulf Air started cutting back its flights to Dubai. When this company was founded, the region largely relied on Gulf Air, which was one of the leading airline companies in the region at that time. The rulers of Dubai were concerned that the Gulf Air’s decision to reduce the number of its flights to the city was a major blow to the country’s growth. It came at a time when the leadership of the country had decided to develop an economy that is less reliant on the oil and gas industry. The company received massive government support, and by 1996, it had become a major regional player.

The management decided to invest in modern airplanes to expand its operation to the global level. Emirates is currently the world’s fourth-largest company in terms of the number of passengers carried and revenue generated per year. It is also the second-largest cargo carrier in the world. Emirates Airline is currently implementing a strategic plan that would see it purchase more planes for its growing market. A study by Lim (2012) shows that if Emirates continues with its aggressive expansion strategies, it might become the second-largest airline company in the world by 2020. The management of this firm understands the market forces and has been keen on responding to them most appropriately. That is why it has registered impressive performance in the recent past despite the market challenges, such as the 2008 global economic recession and the fluctuating oil prices. In this paper, the researcher will look at the strategic management techniques that Emirates has embraced to succeed in the aviation industry.

Business Operations

When it started its operations in 1985, Emirates faced operational challenges as it struggled to define its position in the market. It was playing the regional routes in the Middle East and North African region. However, as its business operations continued to increase, the company started playing other routes, especially the European market. According to Konara (2015), Emirates gained breath through when Dubai started growing as a global business hub and tourist destination. The management quickly redefined its market strategies in line with the globally growing demand. It was able to surpass other regional airlines in terms of the number of flights, the fleet’s size, and the number of passengers flown. The Dubai government continued to invest more resources into the company that helped in boosting its growth. The growing regional tourism and international business activities in the United Arab Emirates propelled this company’s growth to become the largest in the MENA region and fourth-largest in the world. To expand its market share, the company started cargo flights to various parts of the world. With Dubai’s growing relevance as a global business hub in the region, the cargo services were an instant success. Currently, this company operates the second largest air cargo freight in the world. The company has invested heavily in purchasing new planes and training its employees to match world-class standards.

Mission and Vision of Emirates Airline

The airline industry is one of the most competitive and very delicate industries in the world because it is affected by several forces. To be on top of the industry, a firm must have a clear plan of what should be done and how it should be done to achieve success. The stakeholders must understand the firm’s strategic goals and objectives and how the company intends to achieve them over a given period. As such, vision and mission statements are very important. The vision statement shows where a firm seeks to be within a given period. At Emirates Airline, the following is the vision statement.

To be the leader in aviation innovation, environment protection as well as the best airline in the world with a global network of coverage” (Kim & Mauborgne, 2015, p. 28).

This is an ambitious vision for this firm because it focuses not just on becoming the best airline in the world but also on leading innovation and protecting the environment. Innovation and environmental conservation are very important issues in the aviation sector. The players have been struggling to find ways in which their operations can less impact the environment. The solution lies with innovation. By integrating both innovation and environmental conservation into its vision statement, the firm has come out strongly as one that understands the emerging market forces and is capable of managing them. This company’s vision statement also emphasizes flight safety, reliability, product and service quality, responsibility, and competitiveness as a way of offering its clients unique experience every time they use the services of this company. The mission statement helps the stakeholders to understand how the firm is going to achieve its vision. The mission of the firm is embedded in its values, as shown in the statement below.

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Anticipating the exact needs of customers, thoroughly evaluating and meeting them and operating as a customer-focused company at all times” (Kim & Mauborgne, 2015, p. 28).

The company has embraced a culture of trying to understand the changing customer needs in the market through research and redefining its products to meet customers’ emerging needs in the market. Having a customer-centric approach is very important in highly competitive markets such as the airline industry. Customers have several choices to make, and they are likely to choose companies that meet their needs in the best way possible. Emirates happens to be a firm that understands this market concept, and that is why it has captured it in its mission statement and company values. These are the values that have transformed the airline into one of the top companies in the aviation sector. This company’s mission and vision statements align with the long-term goals and strategic direction of this company.

Environmental and Industry Analysis

External Environment

PESTEL analysis. The external environment of a firm has a significant impact on its operations in many ways. According to Grosse (2016), a firm’s external environment determines its ability to succeed in the market. The external environment of this company will be analyzed using the PESTEL analysis model. In this model, the political climate comes first as one of the most important forces that determine a company’s ability to achieve success in a given market. A country that lacks political stability cannot support business operations. For instance, Syria and Yemen are countries that cannot assure the business class of their safety. Since it gained its independence in 1971, the country has experienced a long period of political stability, creating an Emirates Airline environment to thrive. The company has also been receiving massive political support from the rulers of Dubai, which has contributed to its success.

The economic environment is also very important. The United Arab Emirates, just like many other countries in the MENA region, rely on oil and gas export to support its economy. The country has experienced impressive economic growth, especially after the government decided to diversify it by investing in the tourism and service industry. The growth has had an overall positive impact on the company. The economic growth in other countries around the world has also been of benefit to Emirates. The social environment has also acted in favor of the firm. The world now considers the Middle East as a recreational and religious destination in the world. Tourists fly to Dubai to see the beautiful sceneries such as the tallest building on earth or the biggest human-made island in the world. Others regularly fly to the cities of Mecca or Medina for prayers. Emirates Airlines has benefited a lot from such flights.

Technology has been a major force in this industry. Companies such as Emirates are forced to embrace the emerging technologies to enhance the safety, security, and comfort of their customers. The firm has to invest in emerging technologies to enable it to compete favorably with other market rivals. The management of this company has invested in some of the state-of-the-art technologies to enhance the customer experience. The ecological environment, especially the need for airlines to cut down on their greenhouse gas emissions, is also an issue. This company has invested in research to find ways of reducing its carbon emissions. Some of these research projects are very expensive, and they affect the profitability of the company. The legal environment is another critical external factor that strongly affects the operations of the firm. As Goyal (2014) notes, no firm can operate in a lawless country. Emirates Airline is affected by the legal structures in all the countries where it operates. It has to adhere to the IATA rules and regulations and other legal structures both in the United Arab Emirates and other countries.

Industry Analysis

Porter’s Five Forces analysis. The industry within which this company operates can best be analyzed using Porter’s Five Forces model. The model identifies specific areas within the industry where threats may emerge. Understanding these specific areas of threat makes it easy to plan effectively and develop ways of managing them in the most effective manner possible. Figure 1 below shows the model.

Porters Five Forces.
Figure 1: Porters Five Forces. Source (Belobaba, Odoni, & Barnhart, 2016, p. 21).

As shown in the figure above, competitive rivalry is one of the main areas of industry threats. The competitive rivalry in this industry, both at regional and global levels, is very stiff. Companies in this industry are keen on protecting their market share as they try to expand. The potential of entrants is low as it requires heavy investment to start operating in this industry. The power of buyers (travelers) is high because they have several options to make when planning their flights. The threat of substitute products (other alternative means of transport) is also low because long-distance travelers have no option but to use airplanes. The suppliers’ power is relatively high because there are only two airline manufacturers in the world (Kim & Mauborgne, 2015). The two (Boeing and Airbus) have monopolized the supply of planes.

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Internal Capabilities

SWOT analysis. The internal capabilities of this company can be determined using the SWOT model. This company’s strength lies in its massive investment in purchasing modern airplanes, which enhance passengers’ comfort and safety when traveling. The firm also has a team of highly talented and dedicated workforce keen on ensuring that this firm achieves its strategic goals and objectives. However, there are several weaknesses that the management may need to address. The employees’ constant complaints about exploitation are a major issue of concern that may influence their competitive position within the industry. The market has a massive opportunity for this firm in terms of the growing size of the middle class and the rich who regularly use airline companies’ services. Technology is also enhancing security. However, the firm must be ready to deal with the market threats, especially competition, to protect its competitive position in the market.

Strategies of Emirates’ Leaders in Managing Culture

Emirates Airlines operates globally, which means that its clients and employees are from a diverse background. The issue of cultural difference often arises in its operations, and the leadership of this firm has been keen on finding ways of dealing with it. To manage the cultural difference issue, the management has developed new strategic initiatives that are customer-centric. The firm has been hiring the cabin crew based on its destinations. For example, its Indian customers are often served by Indian flight attendants who understand their social and cultural needs perfectly well. The strategy of ensuring that its customers are served by people who share their cultural background is meant to help this firm serve people from a diverse background without making them feel out of place. The strategy has proven very effective, especially when handling Islamic background customers who are very strict when it comes to issues relating to culture.

The Superiority of Emirates’ Organizational Competencies

Emirates’ organizational competencies’ superiority can be demonstrated in its entrepreneurial capabilities, organizational design capabilities, and strategic capabilities. For example, the ability of this firm to come up with new lines of products and expand the existing ones demonstrates its entrepreneurial capabilities. It has enabled it to become one of the dominant players in the industry. The organizational design, such as the manner in which the firm has aligned its employees’ culture with the culture of clients, is unique and rewarding. It makes customers feel comfortable. These are the simple strategies that have helped this firm become a major global player in this industry.

Appropriate New Bu

how management of Emirates Airlines should embrace strategic partnerships as the appropriate new business strategy in the current competitive market. This business strategy is recommended because of the need to improve the customer experience. The rationale of this strategy is to use market rivals as strategic business partners instead of considering them as threats. There are cases where some of the clients of this company want to travel to destinations not covered by this company. To improve their experience, this company can partner with other global airlines and ensure that such clients only get to pay for the air ticket once. They are guaranteed to reach their destination in the most convenient way possible. For instance, if the client wants to travel to Kigali, Rwanda, the airline can link up with regional airlines to ensure that once the client arrives in Nairobi, he or she is swiftly transferred to another plane that will reach the Kigali. Such strategic alliances are important in this industry.

Internal Leadership’s Strategies When Managing Unethical Behavior

The internal leadership of this company has a role to play in discouraging unethical behavior within the firm. The best strategy that it can use to manage unethical behavior is to make its employees fully responsible for what they do. They should work in specific areas so that it becomes easy to track unethical practices. For instance, employees working in the cargo department should have specific tasks so that if any unethical practice is detected, it can be traced to a specific individual. The employees should be empowered as they are held ethically responsible. They should be empowered to make informed decisions and be ready to defend them on ethical grounds if necessary.

Need for Organizational Change

It may be necessary for the Emirates Airline to embrace organizational change to enhance its operations. One way that this firm can change its functional strategies is to embrace emerging technologies. It can decide to automate most of its strategies to improve its efficiency. It can change its business and corporate strategies by introducing new leadership strategies, especially some aspects of transformational leadership, to make its employees more empowered than they are currently. The firm can also change its organizational structure and control by decentralizing power to regional offices to improve business performance and competitiveness in the industry. The decentralization rationale is to enable regional offices to localize their operations in line with local market forces.

Conclusion

Emirates Airline is currently one of the leading airlines in the global market, ranked as the fourth largest in terms of the number of passengers carried in every year and revenues generated. The company has its headquarters in Dubai, and it operates in the global market. The firm has achieved massive success because of the strategies embraced by the management. However, the management will need to embrace new strategies as new market forces continue to arise. The rationale is to ensure that the current strategies are in line with the existing and emerging market forces.

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References

Belobaba, P., Odoni, A. R., & Barnhart, C. (2016). The global airline industry. Chichester, UK: John Wiley & Sons Ltd.

Goyal, A. (2014). Innovations in services marketing and management: Strategies for emerging economies. Hershey, PA: Business Science Reference.

Grosse, R. E. (2016). Emerging markets: Strategies for competing in the global value chain. London, UK: Kogan Page

Kim, W. C., & Mauborgne, R. (2015). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Boston, MA: Harvard Business Review Press.

Konara, P. (2015). The rise of multinationals from emerging economies: Achieving a new balance. Houndmills, UK: Palgrave Macmillan.

Lim, W. M. (2012). Air Asia: Penetrating into the south African airline industry. New York, NY: Grin Verlag.

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