The present case study was prepared for Etihad Airways, a major airline company based in Abu-Dhabi, UAE. Etihad is a national airline company in the UAE, and it is one of the fastest-growing airline companies in the region. Etihad is known for serving the frequent business trips that are performed as part of the partnership between Western and Eastern business centers. Etihad currently serves around a thousand flights per week, using a fleet of over 100 aircraft and transporting not only passengers but also cargo. The company has its own alliance that includes 15 other airline companies from various countries of the world as members (Sandilands par. 1).
In this work, the company is characterized by its vision, mission, objectives, and strategies. An analysis of the external opportunities and threats, as well as of the internal strengths and weaknesses of the company is performed, and such matrices as CPM, EFE, SWOT, BCG, and QPSM are composed based on this analysis. Two strategies were proposed to Etihad, and the advantages and disadvantages of each strategy are discussed with consideration of the conditions of the internal and external environments of the company.
In this case study, Etihad is also given several recommendations related to market share acquisition, the increase in employee motivation and satisfaction, distribution strategy, and customer service. Also, it was recommended to perform annual assessment procedures to maintain a stable increase in quality. The guidelines for the implementation of these recommendations are also presented.
Vision, Mission, Objectives, and Strategies
The vision of Etihad Airlines is to become the symbol of Arabian hospitality and to serve as a bridge between East and West; such a vision is supported and promoted by the status of the company as a national airline of the UAE. The company also strives to keep pace with time, be global, and accept the challenges of the 21st century (“Corporate profile” par. 1-3).
Etihad Airways considers it their mission to serve VIP customers and offer them unique conditions of air transportation, answering their needs, and fulfilling their most extensive expectations in flight. The company does its best to make air travels a positive and enchanting experience rather than mere transportation or stress. Etihad Airways also ensures safety and comfort and strives to minimize the harm to the environment (“Corporate profile” par. 1-3).
The primary goal of the organization is to meet the requirements of their distinguished clients and to make the international community learn that the airlines of the United Arab Emirates are a synonym for quality and reliability. Another objective of Etihad airlines is to prevail in their market share and dominate over the competitors, both the UAE-based ones and the international airline companies. Among the principal objectives of the organization is to serve the clients that perform business operations between Eastern and Western countries (El Namaki 1-12).
To achieve the established objectives, the company has worked out a comprehensive strategy that involves short and long-term goals. The strategy includes keeping flight costs relatively low to ensure a stable or increasing number of customers. It was reported by the company that decreasing costs have led to a substantial increase in demand in the year 2010. The company has its tickets distributed through offices, agents, and online selling services, which makes acquisition more convenient for customers. 24-hour customer support is also available. Such an effective pricing strategy has also made Etihad superior to its rivals (El Namaki 13).
The company has made a strategic decision to make the capital, Abu Dhabi, it’s base. It is a well-working strategy element since Abu Dhabi is a strong business center with a high rate of economic development. Besides, Etihad has decided to develop lounges for minor customers, which gave it an advantage over the competitors who never made such a decision (El Namaki 14).
Etihad has also developed a workable product strategy that contributes to its success. An integral part of its product strategy is providing transportation not only to people but also to cargo. This decision has given the company one more advantage over its competitors.
The HR strategy of the company is rather strong as well. Both land and air personnel are well-educated and receive substantial training before they start fulfilling their job responsibilities. A well-developed reward system serves as a tool to increase employee motivation.
External Opportunities and Threats
The analysis of the external environment of Etihad Airways allows identifying the following major opportunities available to the company and threats that can undermine its positions in the market.
Among the opportunities for Etihad is the possibility for it to increase its market share and perform a significant market expansion, using new contracts to penetrate foreign markets. Opening new roots are also useful for the achievement of such an objective. The already strong reputation of the company along with its popularity will help to use this opportunity if combined with a well-developed promotion strategy. Another opportunity is connected to the location of the company. The fact that this region is attractive for businesses is promising for Etihad and can help increase the number of its customers. Finally, the company’s position as superior to its competitors in technology (such as online payment system) can serve as an opportunity to attract more customers.
As for threats, several ones can have a negative impact on the positions of Etihad. First of all, the region, where the company is located, is developed and wealthy, which makes it attractive for making airline business, thus creating opportunities for new entrants. This fact makes the competition even more heated. Next, this kind of business depends on fuel; prices on this item are known to fluctuate, which makes airline business risky. If the price jumps up, selling low-cost tickets will become impossible. Finally, the environmental problems that affect the airline industry, such as ash clouds, can pose a threat to Etihad.
Competitive Profile Matrix
|Emirates Airlines||Etihad Airways||Malaysian Airlines|
|Critical Success Factors||Weight||Rating||Score||Rating||Score||Rating||Score|
|Acquisition of market share||0.04||4||0.15||3||0.10||3||0.10|
|Key External Factors||Weight||Rating||Weighted Score|
|A worldwide expansion (the company is represented in many countries and can acquire new markets)||0.20||1||0.20|
|The online payments system is superior to that of the competitors||0.15||3||0.30|
|The company has recently opened several new routes||0.10||2||0.20|
|Etihad is becoming more popular||0.05||4||0.20|
|The sphere of air transportation is growing more competitive||0.20||3||0.60|
|The price of fuel is increasing, which can make a low-cost strategy impossible||0.15||2||0.30|
|Environmental problems can harm airline business||0.10||4||0.40|
|In the Middle East, the risk of new entrants in the airline industry is high||0.05||1||0.05|
Internal Strengths and Weaknesses
The advantages and disadvantages that originate from the internal environment of the company also have a great impact on its position and development. The following strength and weaknesses were identified in the course of the case study.
The strong financial position of the company is surely among its main strengths: for instance, in 2014, its total income was the US $73 million (“Fourth Consecutive Year of Net Profit” par. 2). The service quality standards established by Etihad are known to be high and, more importantly, higher than those of the competitors. The status of the national airline yields governmental support, which is certainly an advantage. Etihad has a developed HR strategy and disposes of a diverse workforce (Etihad Media Centre 14). The company has chosen a wealthy business region as the location of its base. Etihad is technologically advantageous, especially in the sphere of customer service. The company is demonstrating the process of stable growth, which is yet another strength. It also has a pool of loyal customers.
However, weaknesses were also identified in the internal environment of Etihad. First, Etihad has a lower number of destinations than its major competitors such as Qatar Airlines. Second, technical errors and delays often occur in customer service and processing complaints and compensation, which may have a negative effect on customer satisfaction (Vespermann, Wald, and Gleich 390). Third, the employees are recruited from countries where wages are lower than in the UAE, which allows the company to save costs on wages, but a threat exists that the employees would demand a salary equal to the UAE’s usual salaries. In addition, low mages may have a negative impact on employee work motivation and job satisfaction.
|Location in Abu-Dhabi||0.05||4||0.15|
|Generally a good HR strategy||0.075||3||0.225|
|Popularity among customers||0.075||3||0.025|
|Higher standards of quality than those of the rivals||0.01||4||0.4|
|High-quality machines and equipment||0.1||4||0.4|
|Good financial situation||0.1||4||0.4|
|Low expenses on HR||0.2||4||0.48|
|The position of national airlines||0.05||3||0.15|
|Well-developed distribution strategy||0.05||4||0.2|
|Shortage of destinations||0.08||3||0.24|
|Recurring technical errors and customer service delays||0.03||2||0.06|
|Low employee salary||0.07||2||0.06|
|Internal origin||Strengths: ||Weaknesses: |
|External origin||Opportunities: ||Threats: |
|High||Star: Pearl Business Class||Question mark: Holidays, Etihad Express|
|Low||Cow: Diamond First Class, Coral Economy Class||Dog: Crystal Cargo|
|Perform international expansion||Renew the fleet|
|Etihad has the fastest growth rate among the airline companies in the region||0.09||3||0.27||0.06||2||0.12|
|Etihad is the most profitable of such companies||0.10||2||0.20||0.12||3||0.36|
|The company is known for its strong customer service||0.11||3||0.33||0.10||2||0.20|
|The strong point of the company is adopting new ideas and starting a new trend in this sphere of industry||0.12||1||0.12||0.13||2||0.26|
|The distribution strategy is well-developed and advantageous||0.15||4||0.60||0.17||3||0.51|
|Relies heavily on one producer||0.10||3||0.30||0.12||2||0.24|
|Complaints regarding service quality were made about some flights||0.15||4||0.60||0.12||3||0.36|
|Low employee salary leads to a risk that employees would demand higher wages||0.08||3||0.24||0.06||2||0.12|
|Etihad is not sponsored by the government even though it is a national company||0.10||2||0.20||0.12||3||0.36|
|The countries with high flight frequency and high population rates are situated not far from Abu-Dhabi||0.08||4||0.32||0.06||3||0.18|
|Asian countries are becoming more economically developed and attractive for businesses, which is promising for the airline industry||0.10||4||0.40||0.08||3||0.24|
|Asian cities are becoming more and more populated, which is beneficial for the airline industry||0.18||3||0.54||0.20||2||0.40|
|The development of business leads to the necessity to provide more business-class trips||0.10||2||0.20||0.11||4||0.44|
|Boeing and Airbus are loyal to Etihad more than to its competitors||0.16||2||0.32||0.15||3||0.45|
|Higher taxes for a foreign company||0.09||3||0.27||0.08||2||0.24|
|Hiring new employees would require to pay them salaries consistent with the wages of their countries (maybe too expensive)||0.08||2||0.16||0.11||1||0.11|
|Competitors are becoming stronger||0.10||4||0.40||0.06||3||0.18|
Discussion of Alternative Strategies
Two strategies can be proposed to Etihad Airways. Each of these strategies has its advantages and disadvantages.
The first strategy is to expand to other countries of the world, thus acquiring new market shares. The advantage of this alternative is that Etihad would be able to penetrate the nearby heavily populated countries, which would lead to a dramatic increase in customers and revenue. However, a major disadvantage is that new countries mean new competitors, as well as the need to conform to different laws, regulations, tax systems, cultural traditions, and safety requirements.
The other strategy is to renew the fleet. The strong advantage of this strategy is the increase in safety and customer satisfaction, as well as a plus to reputation. However, this strategy is rather costly. Renewing the feet will also require a significant expense of organizational and time resources, and it would probably require hiring new staff or re-training the current one to make employees able to work with new equipment.
Recommendations and Implementation
The following set of recommendations was prepared for Etihad Airways after a careful analysis of the external and internal conditions of the company. First, the company should perform market penetration and expand to other countries. To implement this recommendation, it is necessary to analyze the market of each country, assess the requirements of the market, laws, and costs of doing business, then establish contracts and prepare a detailed plan of market penetration. It is also necessary to examine the competitors that work in these markets and especially their prices and pricing strategies. Etihad is also recommended to establish lower costs to attract customers in new markets and combat the initial reluctance to use the services of a new company. Even though this step requires a lot of planning and spending much of the company’s resources, it will bring serious benefits as was indicated in the analysis.
Next, more attention should be paid to customer service. It would be wise to hire new, more competent technical staff to ensure that no errors or delays occur while processing complaints and compensations. Etihad should also reward its loyal customers. For instance, giving discounts to returning corporate customers would increase the company’s popularity.
In addition to this, the company needs to review its wage and reward strategy since the low motivation and work satisfaction of employees leads to a lower quality of customer service. Expanding the firm and penetrating foreign markets will definitely require such a step since in other countries the standard wages may be higher, and reward strategies may be different from those adopted by Etihad. To balance costs and benefits, the company could offer higher wages for those employees who have better results in serving customers or a lower number of complaints.
Etihad is also recommended to preserve the main features of its current distribution strategy. However, the fact that the company would expand would definitely cause a need to update the distribution strategy according to the new list of offices and branches. Also, the new distribution strategy should be consistent with the standards and customs of the countries, in which Etihad is planning to operate.
It is also recommended that the company perform an annual reassessment of the quality of its customer service to provide an increase in quality and prevent the lowering of the quality level. By 2017, the company should strive to minimize the number of customer complaints. The regular procedures of a strategy review and evaluation are also recommended. These procedures should be fulfilled by specially trained staff. The checks should be based on such performance measures as customer retention, overall satisfaction, resolution time, unsolved issues, average response time, complaint rate, and cash flow.
The present case study contains a thorough and detailed analysis of the conditions of the internal and external environments of Etihad Airlines, as well as several matrices composed on the basis of this analysis. Having performed the examination of the opportunities, threats, strengths, and weaknesses of the company, the author of the case study have worked out a set of recommendations that would help Etihad maintain its strong position and ensure further development. The recommendations include performing the international expansion, altering the distribution strategy according to the requirements of the foreign countries, whose markets Etihad is planning to penetrate, amending the approach to customer service, changing the salary and reward strategy, and perform a regular evaluation of strategy and performance. The researcher has also provided guidelines for the implementation of the provided recommendations.
Corporate Profile 2016. Web.
El Namaki, M. 2007, Emirates Airlines In a League of its Own: Is this the Right Strategy? PDF file. Web.
Etihad Media Centre 2008, Facts and Strategies. PDF file. Web.
Fourth Consecutive Year of Net Profit 2015. Web.
Sandilands, Ben. “Etihad Targets Star, Oneworld with New Partners Brand.” Crikey, 2014. Crikey. Web.
Vespermann, Jan, Andreas Wald and Ronald Gleich. “Aviation Growth in the Middle East – Impacts on Incumbent Players and Potential Strategic Reactions.” Journal of Transport Geography 16.6 (2008): 388-394.