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Emirates Airline 1 - Higher Colleges of Technology

By Jennifer Wagner,2014-05-17 01:49
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SWOT analysis. Strengths. Member of the Arab alliance, known as Arab Air Carriers Organization promoting cooperation, safety standards among Arab airlines

Abu Dhabi Women’s College

    E-Business Management

    Strategic Management at Emirates

    Airlines

    Submitted for: Iman Finaish

1 Abstract

    This conducted report discusses a strategic study about the global airline industry, particularly Emirates Airlines. The first part of the report provides a brief overview about Emirates Airlines Company followed by a situation analysis that includes the internal and external analysis. The last section will be concluded with the current situation along with suggesting major issues that Emirates Airlines should address.

2 Table of Content

    3 INTRODUCTION ........................................................................................... 4 4 EXTERNAL ENVIRONMENT ........................................................................ 5 4.1 INDUSTRY ANALYSIS .......................................................................... 5

    4.1.1 Airline industry General Profile ........................................................ 5

    4.1.2 Life Cycle ........................................................................................ 6

    4.1.3 Porter’s 5 Forces ............................................................................. 7

    4.1.4 Key Competitors.............................................................................. 9

    4.1.5 Key Success Factors .................................................................... 10

    4.1.6 PEST Analysis .............................................................................. 11

    4.1.7 Summary of External Environment ................................................ 13

    5 INTERNAL ENVIRONMENT ....................................................................... 14 5.1 SWOT ANALYSIS ................................................................................ 14

    5.2 SUMMARY OF INTERNAL ENVIRONMENT ....................................... 16

    6 CONCLUSION AND RECOMMENDATION ................................................ 17 7 REFERENCES ............................................................................................ 21

3 Introduction

    “Emirates Airlines goals for the immediate future and long term are,

    to be the best in every venture it undertakes; to meet its customers'

    expectations profitably, to contribute to the success of Dubai Inc.,

    and to make the city the new global aviation hub for the 21st

    century.”

     Emirates Chairman, Sheikh Ahmed Al

    Maktoom

In 1985 Emirates Airlines was established by Dubai Government with just two

    aircrafts. Today Emirates has 83 aircrafts files to 78 destinations in 55 countries

    worldwide. It has a large number of cabin crews from 95 nationalities. It recently

    made an aircraft orders worth more than $ 26 billion for 45 Airbus A380, which

    makes the company the world’s largest purchaser of Airbus’s super-jumbo.

    (About Emirates)

Emirates Airlines recently becomes one of the fastest growing airlines and the

    fifth-most-profitable airline in the world. It has been growing by more than 20% a

    year since the last 17 years making a profit of $637 million in 2004-05. (BBC

    News)

Emirates Airlines is committed to achieve its mission, namely “offering

    consistently high-quality value-for-money service and to be the best airline on all

    of its routes”. Accordingly, it is known as an innovative and customer-oriented

    provider of advanced services, such as offering personal entertainment system in

    all classes, 18 TV channels, 22 audio channels and online booking service which

    enables customers to book, search for flights and choose seats. (About Emirates)

Because of that excellence, it gained over 280 international awards, such as the

    prestigious CAPA airline of the year award 2005 by the Centre for Asia Pacific

    Aviation.

    (Internet travel news)

4 External Environment

4.1 Industry Analysis

    The aim of the industry analysis is to identify the external environment that affects the airline industry. The first part gives an idea about the airline industry profile.

    4.1.1 Airline industry General Profile

    Airline industry is one of the most competitive and growing industries in the world as it leads to economic growth, world trade, international investment and tourism. In the last decade, it has grown strongly by 7% per year for both business and leisure purposes. (Airline Industry)

    Airline industry is considered as one of the fastest expanding sectors of the world with growth rates 2.4 times above the GDP rates on average. It is also predicted to grow by an average of 5 % a year from 2000 to 2010 (IATA).

    Airline industry is affected by the economical growth, trade and political factors.

    thAs an example of the political factors, the 11 September attacks dropped the

    number of passengers, because people were afraid and tend to avoid studying and visiting countries that have been attacked by terrorism. As an economical factor, the increase in oil prices destroyed the profitability of the global airline industry, accordingly it losses around $6 billion in 2005 (IATA).

    Due to the unstable political and economical situation, many airlines companies started to modify their strategies and services to survive and succeed in the airline industry. For example, many companies invested heavily in the quality of

    services they provide by offering, e-booking system, new interactive entertainment systems, more comfortable seats, low cost carriers and many technological techniques. All of that was introduced to attract, return customers and gain a competitive advantage.

    As being in such a competitive market, many companies started setting agreements among each other to reduce costs and share resource which is called as alliance.

    Overall, the airline industry will recover as the number of passengers seems to be doubled by 2010 to exceed 2.3 billion due to the tourism, trade and economic development (IATA).Thus, Successful airlines will be those that continue reducing their costs and improving their services by differentiating from competitors to secure a strong position in the aviation market.

    4.1.2 Life Cycle

    The airline industry is in the maturity stage, therefore there is a strong competition in the market and the sales' rate grows fast and then begins to stabilize gradually. As the competition is more aggressive in this stage, the advertising and sales promotion can be obvious. Moreover many competitors increased their research and development (R&D) budgets to find best services to gain customers’ attention. (Product Life Cycle, 2005)

    Accordingly, many companies started to focus in differentiating their services and products from their competitors by increasing their customers’ brand loyalty. For

    instance many companies starts to concentrate on cutting the operating cost, thus in this stage the profit margin decreases and the least efficient companies leaves the market and only well-established companies are the ones that remain. Accordingly, many companies’ use offensive strategies rather than defensive

    strategies through modifying their market, product and marketing mix to survive and compete during this stage. (New product development)

For example, Kuwait airways implements the strategy of modifying the marketing

    mix by launching a low cost carriers in order to increase its customer base and

    loyalty and increase sales, which is considered as a competitive advantage

    amongst its competitors (Kuwait Airways).

Following section explains the porter’s 5 forces that impact airlines industry.

    4.1.3 Porter’s 5 Forces

    ? Threat of New Entrants The new entrants cause a threat to the existing company in any industry,

    because they might offer better services, products or costs. In the airline industry

    the threat is low as the level of entry barriers is high. There are many challenges

    that should be considered by the new entrants as follows:

    Capital Requirements. Huge budget is required for starting a new airline company to buy aircrafts and provide services to customers. Ex. Boeing costs

    around $ 2 billion. (Ashraf, Emirates Airline)

    Brand name & Customer loyalty: Airlines companies have built an excellent

    position in the market which helps them to compete against the threats of new

    entrants. The experience curve of the existing companies is high according to

    their long experiences in the market, Ex. American Airlines. Generally, alliances

    between key airlines companies make the entry on the industry hard for any new

    airline company.

    ? Bargaining Power of Suppliers

Suppliers can affect the industry through their abilities to raise prices or reduce

    the quality of purchased goods and services. The airline industry has few

    suppliers globally, namely Boeing and Airbus. Thus the power of the suppliers is

high, because those limited suppliers have a control on the market due to the

    huge demand of their manufactured products.

    ? Bargaining Power of Buyers

    Buyers affect the industry through their abilities to reduce prices, bargain for

    higher quality or more services. The power of the buyers in this industry is strong

    as there are lots of passengers (1.8 billion yearly), the switching costs are low

    and passengers have many choices in the market (ITAT).

The new technology of e-ticketing gives people the chance and flexibility to

    search for many airlines companies offering better or cheaper costs and services.

    Furthermore, it eases the operation of switching between different airlines

    companies. Therefore, many companies provide the air miles system to gain

    customers’ attention and to keep them as well.

    ? Threat of a Substitute Products or Services

The threat of substitutes differs from the regional and international airlines. In the

    regional airlines it can be higher as people can drive their cars or use trains as a

    way to travel within the same region, but on the international level people use

    airplanes to move faster and more comfortable. In the Europe they are using

    trains to travel from country to another for example, it’s easy to travel by train

    from the UK to France by “Eurostar train” in just 1 hour 40 minutes (London to

    France).

However, in many countries trains are not available ex UAE, accordingly such

    carries have a weak threaten in the airlines industry since they are not used for

    long distance journeys by many countries.

    ? Rivalry among existing firms

In airlines industry, the rivalry is very high between the companies, as there is

    variety of airline companies that provides best aircrafts and services to

    passengers. For instance, many companies try to expand their market shares by

    offering best prices, best customer services and exclusive promotions as well as

    by being creative in their advertising campaigns. (Ex: Air Arabia is low cost

    airline).

    (Thompson & Strickland, 1995)

    4.1.4 Key Competitors

    ? British Airways

British Airways is ranked # 2 in Europe and one of the biggest in the world. They

    have 300 planes and 216 destinations in 94 countries. The key success factors

    of British Airways are: it’s a member of the largest alliance and it is known of its

    technology projects in offering unique services, such as touch screens service

    and being the first in implementing full flat beds.

    ? Qatar Airways

Qatar Airways was established in 1994. It has 44 fleets linking 69 international

    destinations. Its services and events, gives the company special position

    amongst its competitors.

The success of Qatar Airways comes from its aggressive growth plan that

    includes the construction and development of the new Doha international airport,

    which will include the world’s largest aircrafts' hangers to be used for

    maintenance of Qatar Airways. Additionally, by 2009 Qatar Airways plans to get

36 aircrafts from Airbus, including two A380, for Qatar Airways. (Airline website,

    AmeInfo)

    ? Singapore Airlines

Singapore Airlines is one of the most respected travel brands founded in 1947. It

    has a fleet of 90 aircrafts and it flies to more than 60 cities in 30 countries. Many

    factors cause Singapore Airlines success, such as young and efficient fleets,

    educated staff, top ranked travel gateway and its low cost airlines known as

    “Tiger Airways”, plus it’s a member of star alliance airline networks. (Singapore

    Airlines Company Information)

    ? American Airlines

American Airlines was founded in 1930 and is positioned as the largest airline in

    the world in terms of the total passengers transported of 80 million yearly. It has

    the highest number of aircrafts that reach up to 991 and serve 172 cities with five

    main hubs. Also it is first to launch the loyalty program “frequent flyers”. All of

    theses are considered as the key success of this airline. (American Airlines)

4.1.5 Key Success Factors

To maintain airlines companies’ success, various key factors should be

    implemented for this purpose:

    ? Differentiation

Airline companies tend to differentiate by providing advanced services. For

    example, providing the aircraft with the latest technology, such as wide seats, e-

    ticketing (as mentioned in 5 porters section) will attract customers and distinguish

    the company among other companies. (ex: British Airways).

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