Overview/ mission and objectives
The transformation of Dubai from a sleepy tiny coastal village into the current multibillion cities is an amazing story. Dubai is well known for its ambitious and economic drive that has proven to be a benchmark for the world to emulate (Mayo et al., 2010). The greatest drive in Dubai’s economy is in its promise for sustainable financial systems. All the credit for this gigantic growth is however given to the sheikh Mohammed bin Rashid Al Maktoum. Sheikh Mohammed is the founder and co-owner of the greatest companies in Dubai including Emirates Airlines, Nahkeel, and DP. Mohammed’s mission and objective is to make Dubai number one in the world in every field. This includes health, higher education, housing, and provision of the highest living standards (Mayo et al., 2010).
Sheik Mohammed began his journey to leadership while he was only 19 years after becoming the chief of police and public security in Dubai (Mayo et al., 2010). This was after his successful training in London at the Officer Cadet School where he passed very well and received the “Sword of Honor” (Mayo et al., 2010). He later became the Minister of defense in 1971 when Dubai signed the provisional constitution that founded the United Arab Emirates (Mayo et al., 2010).
Under his leadership in the defense department, Sheikh Mohammed was involved in many military activities including providing troops for the Lebanese in the wake of their civil war (Mayo et al., 2010). Sheik Mohammed was in addition the leader of the Oil sector as directed by his father. Oil in Dubai was discovered in 1966 and by then it was the main source of income for the young economy.
Cost leadership strategy
The Emirates Airlines’ ability to cushion itself against a negative global economic impact led to great debates on the competence of the company. Many argued that the Airline was receiving preferential treatment since it was a government owned entity. The CEO of Qantas was quoted saying that the airline was very profitable due to its place in government (Worth, 2009). He argued that running an airline and at the same time controlling government policy gave it an upper hand hence the financial success (Mayo et al., 2010). Nonetheless, the success of the Emirates airline can be attributed to its business model rather than its relationship with the government.
A very clear evidence of success is its operational hours. While all other airports at that time where operating only during the night, Emirates Airlines was operating on a 24 hour bases under the directive of sheikh Mohammed’s uncle.
Notably, the Emirates Airlines did not receive any direct funding from the government as some critics presumed. Its high profits were directly influenced by very normal factors that worked to its advantage. First in the list, the Emirate airlines did not pay income tax hence saving close to $250 million per annum (Mayo et al., 2010). Dubai’s proximity to Indian was another factor that really worked to its advantage. Cheap labor imported from India, and Pakistani reduced the Dubai’s operating expenditure hence increasing the airlines profit margins. This was not the case in other competing airlines, which had to put up with relatively high operating expenditure (Mayo et al., 2010).
Therefore, the advantages enjoyed by the Emirates Airlines are not equal to government subsidies rather they are efficient industrial policies. Sheikh Mohammed has therefore demonstrated that his main strategy is based on creating business friendly policies.
The key strategic challenges facing Dubai include, government led growth and fast decision making in development. Others include a very flexible labor force, market position through branding, merging local corporations with international partners among others (Mayo et al., 2010). Dubai Inc. is a conglomerate owned largely by sheikh Mohamed who is also the leader of the government. Distinguishing public funds from private fund is therefore a difficult task.
The government has however led a rapid development campaign that has lifted Dubai into the highest international economic scales. This is partly driven by the flexible labor force drawn from all over the world. The country has also positioned its self as a world business hub through commercials and marketing strategies as well as branding. Most of the local corporations in Dubai have international partners thus enhancing Dubai’s Global presence.
A number of external factors that can affect an organization include technology, demographical changes, cultural disparities, global economic trends, legal and political parameters and international events (Mayo et al., 2010). Dubai as a conglomerate has proved itself as a technologically alert organization. The organization has incorporate latest technology in terms of service deliver. New technologies have affected the Emirates positively and negative.
This however is the common effect of technology in every other country. The Emirates Airlines prides in providing excellent flight services. The Airline currently has an average aircraft age of six years, which makes its fleet one of the youngest in the industry. The Airline has engaged a number of ways to ensure low consumption of fuel hence reducing environmental impacts of its operations.
To reduce the noise pollution caused by its aircrafts, the company has heavily invested in noise efficiency factors (Mayo et al., 2010). This is a great step in utilizing the current technology to improve its services as well as meeting its social responsibility of guarding the environment. The airline has also invested in new aircraft hence utilizing the recent and updated versions that have incorporated new technology and security measure. Other than security, other external factors that have a direct impact on Dubai, service delivery are the demographic changes. As the global demographic setting is increasing, the pressure on service delivery is increasingly as well.
Dubai as a world business hub is realizing the challenges of serving the millions of people who are interested in dealing with the East in business. The growing number of immigrants is flocking in to set up businesses locally.
Other challenges include international laws that are being formulated because of the globalised world. These treaties are set with a number of limitations and signatories to such treaties are bound by international laws to uphold these regulations. With such agreements, most of Dubai’s policies governing business do not meet some globally acknowledged standards for instance the free skies policy. Dubai also runs an open market where traders are cushioned against taxation hence provided an unmatched competition to other regions in terms of investment attractiveness. This is not the case in most of the countries globally. Nonetheless, Dubai is strategically placed in a unique position that provides a great market contact (Mayo et al., 2010).
Culturally, although the Muslim culture has distinguished differences with the West, Sheikh Mohammed had a remedy for these disparities. He established a free zone in Dubai where trade is mainly governed by state laws (Mayo et al., 2010). This way he was able to mitigate the cultural differences especially concerning financial practices. The Muslim culture prohibits any financial activity that attracts interest such loaning services, savings accounts, and western practices like mortgages (Fattah, 2006). With such stringent laws, Sheikh Mohammed’s dream of making Dubai an excellent business destination could not have materialized. In the free zone, the number of companies has improved to more than 6,000 (Fattah, 2006). This is a remarkable success for the sheikh and Dubai at large.
In the 1980’s the Dry Docks project began and Sheikh Mohammed was given the responsibility to oversee this new project (Mayo et al., 2010). This was a shipyard and a repair facility that was of great significance to Europe and the Far East water trade. Water vessels from around the world would dock in for repair and trade a factor that made the facility one of the largest re-export centers (Mayo et al., 2010). As the projected developed into a success, Dubai under the leadership of Sheikh Mohammed’s father developed the Dubai International Airport. Sheikh Mohammed again was put in charge of the committee that was overseeing the development of this facility.
Again, the airport played a major role after its upgrading in 1963-1970 (Mayo et al., 2010). The airport became an important refueling destination for major international airlines flying in the Asian-Europe route (Mayo, Nohria, Mendhro, & Cromwell, 2010). This was a major boost to the economy of Dubai and the diversification strategy initiated by sheikh Mohamed was rapidly bearing fruits.
To further the growth of the airline business, the sheikh adopted an open skies policy, which invited international airlines hence influencing growth in the airline industry. By then the Gulf Air was the sole player in the UAE. It protested against the Open skies policy and even threatened to boycott its services in Dubai (Mayo et al., 2010). This pushed the sheikh to think of an alternative and a permanent solution to the threat that his country was facing.
Sheikh Mohammed leased a fleet of Boeing 737s to establish Dubai’s own Emirates Airlines (Mayo et al., 2010). In the early stages of forming the airline, the sheikh’s advisors had great concerns with regard to the open skies policy. They recommended to the sheikh that he should revoke the policy so that the airline investment would be protected from international competition. However, the sheikh remained adamant and upheld his decision to keep Dubai Airspace open.
Sheikh Mohammed believed in his decision and he was not easily moved or discouraged by criticism and negativity. The sheikh had a philosophy, which informed his decision. He believed that “A leader… is one with the clearest and most far-reaching vision… A leader must set out a clear vision, which he must trust absolutely. If he loses that trust, he will begin to hesitate and falter” (Mayo, Nohria, Mendhro, & Cromwell, 2010, p. 6).
The Emirates Airline had two flights daily from Dubai to Pakistan and it quickly began to make profits within a very short period (Mayo et al., 2010). The airline’s profitability has been consistent and since its formation, it has always registered enviable growth. To be precise, the Emirate Airlines has never registered a record below 20% of growth per year (Mayo et al., 2010). The only other Airline that matches its growth record in the world is the Singapore Airlines, which tops the industry. This is a remarkable performance based on the history of Dubai. Globally, every airline was affected by the 9/11 tragedy and the subsequent two years were difficult for all players. However, this was not the case with the Emirates airlines. On the contrary, the airline continued to register enviable growth.
Dubai is largely a cosmopolitan state with labor forces from varied countries and continents. The city has been rated one of the best cities in the world based on the quality of education, housing, infrastructure to mention but a few (Wheeler, 2004). However, labor conditions and other internal situations are undermining Dubai’s efforts to reach its goals. Many of the expatriates living in Dubai have abandoned their dream of going back to their home-countries after making a fortune (Worth, 2009). This has been due to the high cost of living in Dubai. Immigrants find it difficult to raise enough money for saving. The untold internal conflicts between employers and employees are of great concern. Considering the alleged 971 Indian nationals who died in a construction site in 2005, the situation might be dire and more tragic than what meets the eye.
Many cases of unpaid wages and laborers protesting against harsh working conditions have attracted the attention of several human rights activists (Thomas, 2009). In 2005, there was a demonstration by estimated 800 workers who broke into offices destroying computers and other office equipments (Thomas, 2009). This kind of internal labor-force confrontation is not healthy for business growth. This could crumple productivity since employees must be contented in order to provide competent services. Having unpaid salaries and wages is not only unfair but also inhuman. The government has responded positively on this issue since 2005 and employers found guilty of withholding employees’ salaries are subjected to strict and hefty penalties.
Sheikh Mohammed’s government has been keen on education and continuity of the country’s population. The latest technology in learning has been incorporated in the education system to keep the younger generation at par with the rest of the world. The older generation on the other hand has not been left behind in the effort to improve the population’s literacy. The government endorsed an adult literacy curriculum that improved the literacy echelon.
Dubai’s economic growth and its amazing potential have enabled the state to borrow huge loans from the World Bank confidently. International financiers were more than willing to loan Dubai’s development projects and this has helped the government to foster immense growth. Dubai’s international borrowing was so huge that during the global economic rescission the state was greatly affected.
Financial analysts were wary that the government would default on the loans repayments (Benham, 2009). Nonetheless, the government remained positive that these debts would be repaid and Sheikh Mohammed went ahead and requested for an extension of the repayment deadline. Dubai’s diversified economy is a powerhouse of financial stability. The country no longer depends on its oil reserves. Other industries such as tourism, banking, transport, and real estate have contributed greatly on its revenue. This makes the country one of the greatest financial performer in the regional and globally.
As part of its exemplary financial performance, Dubai has been secretly building a global empire through the purchase of DP World, Dubai Holding, Emaar Development (Slackman, 2008). Through its real estate remittances, Sheikh Mohammed was in a position to transform the country into the most coveted tourist destination. He engaged into very ambitious land reclamation programs and recreated 6,000 acres of land that are toady hosting some luxurious private villas, mansions, luxury apartments and hotels (Slackman, 2008). The government built the most expensive and tallest building in the world.
This is also the only seven-star hotel in the world, which has been a profitable investment for the government. Another amazing investment is the Dubailand that cost the government $ 6 billion (Slackman, 2008).
Sheikh Mohammed was brilliant with financial matters and this characteristic was seen in his late father. Being in control of the oil department gave him a huge responsibility as well as financial control over the country’s governance system. At this point, the sheikh had begun to establish and develop the economy, which was run almost as a private entity. Using the public funds remitted from oil revenues, sheikh began the exemplary work of expanding the city’s global orientation (Mayo et al., 2010). His greatest strategy that made Dubai to be the world’s greatest business hub was diversification. The Sheikh realized that by relying on Oil as the sole source of income for the economy was like trading in dangerous grounds. One of his first renowned achievements is the Dubai Dry Docks.
Dubai is involved in a number of strategic alliances especially in organization partnerships. As mentioned earlier, most of the companies in the emirate country are co-owned by foreigners. Sheikh Mohammed chose to engage vertical integration strategy to help reduce the cost of production and improve efficiency, which has worked very well. With the sheikh at the top of every management process in the state owned organizations, he hired specialized workforce to help in technical execution of the projects. The professionals were supposed to bring the sheikh’s visions and dreams into reality. Labor forces were drawn from neighboring countries where labor was cheap. The sheikh had the authority to allow or decline recommendations from his workers.
Dubai’s economic prowess has been the talk of the world for some years now and this is projected to go on for a long time. In order to remain at the top of the global economy, Dubai must employ deliberate measure to cushion possible lash backs on their hasty development projects. The development speed and increased investments globally may results to unmanageable profits. In terms of governance, it is important for the sheikh to involve other professionals other than family members to head some of the departments. Keeping the economy of an entire state within the confines of a family circle may be met with great opposition that may lead to a nationwide revolution.
This may consequently lead to a fall in governance. There is also a need for the Dubai government to distinguish between the private and public sector. For the government to run almost every industry is not healthy in business and it would prove disastrous if a leader without the same vigor comes into power.
Benham, J. (2009). Dubai contractors face bankruptcy as cash dries up. Reuters. Web.
Fattah, H. (2006). In Dubai, an Outcry from Asians for Workplace Rights. The New York Times. Web.
Mayo, A., Nohria, N., Mendhro, U., & Cromwell, J. (2010). “Sheikh Mohammed and the making of Dubai, Inc.” Web.
Slackman, M. (2008). Emirates See Fiscal Crisis as Chance to Save Culture. The New York Times. Web.
Thomas, L. (2009). A Dubai Investment Arm Struggles with Debt Load. The New York Times, 1(2), 12-15. Web.
Wheeler, J. (2004). Workers’ safety queried in Dubai. BBC News. Web.
Worth, R. (2009). Dubai corruption crackdown imperils economic recovery. The International Herald Tribune, 7(12), 34-67. Web.