Emirates Airline Connecting the Unconnected PDF

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Table of Contents 1.

Executive Summary

2

2.

Problem Identification

3

3.

Situation Analysis

4

3.1 Internal Analysis

5

3.2 Consumer Analysis

6

3.2 Market/Industry Analysis

6

3.4 Competitive Analysis

7

3.5 Macro-Environment Analysis

8

4.

Alternatives and key decision-making criteria:

9

5.

Recommendation:

9

5.1 Implementation Plan 6.

Exhibits

10 10

6.1 Exhibit 1: SWOT analysis

10

6.3 Exhibit 3: Alternative Analysis

11

6.4 Exhibit 4: Decision Matrix

12

7. References

13

1. Executive Summary

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

Emirates is among the most prominent and well-established airlines thriving excellently in the airline industry. Different marketing strategies have been employed by Emirates and these marketing strategies have helped Emirates to sustain, retain and expand their customer base over the period of time. The services offered by Emirates have established a distinctive and strong brand identity among its customers. The case effectively illustrates how Emirates has leveraged its geographical location and premium quality service to gain the consumer and revenue share, hitting excellent growth rate. The case focuses on analyzing how Emirates can strike balance between expanding internationally, positioning its services in new markets, continuing with mega-hub models, and turning profit in the price competitive market. This report describes the strategy, industry structure, marketing mix, and competitors of Emirates, along with the issues faced by Emirates with regard to anti-competitive claims. First, analysis of the problem statement followed by situational analysis (internal, consumer, market, competitors, and macroenvironmental) is performed which helped in discovering three alternatives to resolve the problem. The three alternatives include: Profitability opportunities in new market segments; Strategic partnerships with international airlines; and Strengthen customer value network by leveraging partnerships and technology. These three alternatives are analyzed basis five criteria (Customer loyalty, Superior Quality, Customer satisfaction, Future Growth vs Risk, and Scalability), which helped in generating a recommendation for Emirates. Considering the problem statement at hand, the recommendation devised is hybrid of two alternatives, and the recommendation would be effective and efficient in helping Emirates gain competitive advantage in this price competitive airlines industry. The hybrid recommendation devised for Emirates is to capture profitability opportunities in new market segments while strengthening strategic partnerships with other international airlines.

2. Problem Identification

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

Tim Clark is President of the Emirates Airline, and in 2013, at the Dubai Airshow, Emirates just officially launched the Boeing 777X, and Emirates set the record for purchasing 150 new aircraft for $ 76 billion, the largest aircraft deal ever recorded. The team imagined that Emirates could arrange its own aircraft in Dubai Airport and the firm was ready to carry passengers from Europe, Asia, Africa, and America to their respective destinations. In 28 years, Emirates has grown to become the 3rd largest global airline by capacity and the largest number of international passengers. Along with the development and growth of Emirates, the firm also faces some challenges and problems, such as: 1. How can Emirates deploy these new planes among the existing fleets and on new routes? 2. Has Emirates' push to enter new markets evoke similar reactions from other governments? 3. Will the firm’s “mega-hub” model continue to function with the new network (nodes)? 4. Can Emirates keep innovating and stay ahead of its competitors?

3. Situation Analysis Emirates has deployed different strategies for its continuous development and growth, and the below pointers reflects the same in brief: •

Business-Level strategy: Emirates leverage differentiation strategy at the business-level as the firm focuses on high-quality customer service and experience, and this superior quality vision of the brand distinguishes Emirates from their competitors.

•

Corporate-Level strategy: Emirates has a strong leader who focuses on customer needs and spreads brand awareness through sponsorships, care for employees/stakeholders, and unit communities. The mission of the brand is to be able to deliver the best in-flight experience in the world.

•

Cooperative-Level strategy: Cooperation between all departments at Emirates has lowered costs and improved performance. Emirates has recently had a successful

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

collaboration with Qantas, a fellow member of the One World Alliance, to promote tourism to Dubai.

3.1 Internal Analysis In recent years, the airline industry's earnings have been falling. Combined with increasing global rivalry, the rise in prices has forced airlines to search for ways to minimize costs and find new ways to remain competitive. When most airlines have transformed their business level approach to cost leadership, Emirates has been successful in implementing their differentiation strategy. The comfort of travel is among one of the factors diminishing with other airlines, while Emirates went the opposite direction by introducing luxury accommodations for customers. Another reason why Emirates has become such a successful business is that they have been able to tap into underdeveloped markets using their geographical location and favorable political environment, which in turn has increased their profits associated with the advantages of the first mover. While cost leadership is not their strategy at the business level, they have managed to reduce quite a few, such as labor costs. The hubs of other airlines are located in countries with high levels of government regulations requiring more employee benefits, such as retirement funds, health care, social security payments or unemployment contributions. On the other hand, accommodation has been provided by Emirates. Due to a combination of factors such as no income taxes due and the living accommodations offered by Emirate Airlines for this business to attract a large foreign crew, lower wages would have been sufficiently enticing for potential employees. In differentiating their airline from others with the latest longer-range routes and new direct links, the Emirates have also used new technologies. The collaboration with Boeing has contributed to the production of extended-range aircraft and has given Emirates the benefit of becoming the first long-range aircraft operator. This allowed Emirates to exploit undeveloped markets and provided customers with an unavailable nonstop flight service from any other airline.

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

3.2 Consumer Analysis From its inception, marketers played a vital role in attracting and retaining Emirates customers. In the early years, many potential customers in the target market were unfamiliar with Dubai, and some consider it a must-visit destination for tourists. To attract tourists, Emirates formed strategic partnership with local tourist organizations to promote the city of Dubai. Tour packages were offered which included events like desert safaris, and the airline structured their bookings to allow customers for short stops at little or no cost. Large projects such as the Burj Khalifa tower helped foster the global recognition of the city, resulting in an increase in the number of tourists. Dubai's attractiveness as a relatively liberal city in a region of many conservative countries, as well as its position as the representative of the Caribbean and Southern Europe for Europeans seeking warmth in winter, also helps in reducing Emirates' marketing burden. As the airline entered new markets, the firm saw sport as one of the most popular ways to introduce the brand to the general public and key markets. One of the major sponsors Emirates signed by Emirates was the 1999 Cricket World Cup, a deal that gave them exclusive access to brand marketing. Complementing the sport, Emirates also sponsors cultural events. If you look at the portfolio, almost the entire world has been reached. Emirates created its brand awareness among customer through its logo which was highly visible places on television, such as behind a cricket goal or on a referee's uniform. While sports franchising in the U.S. has been a tough nut to crack, the airline made inroads to the U.S. market by becoming the main sponsor of golf and tennis tournaments at the US Open. Emirates used sports to generate brand awareness in customers, and the firm made sure to have their marketing theme focused on premium in-flight customer experience and service.

3.2 Market/Industry Analysis There is high competition among existing players in the market as there are many airline service providers. The continuous increases in competition distorts the market and leads to changes in

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

legal legislation and technology. The bargaining power of suppliers in this field is high in this industry, as there are limited suppliers such as Boeing, Airbus etc. and this leads to price discretion and limited input by the suppliers. The threats of new entrants are low in this industry as the airline industry is a highly controlled industry that needs a relatively large amount of capital to start and remain competitive. Customer loyalty exists in this domain, so compete with each other by providing various benefits to the customers. Emirates attracts passengers with its emphasis on a premium service experience. Using a differentiation strategy not only allows Emirates to build passenger loyalty, but also allows Emirates to avoid direct competition with low-cost competitors. Starting from an airport that offers the world's largest duty-free retail shopping space (no need to pay taxes), modern facilities, and lounges with a spa for business and first class. In the last 10 years, Emirates has received the best class service award for 3 times. and claims more than 400 industry awards for aviation service, and there is the potential to win awards for all airlines in 2013. Industry analysis also reflects that Emirates has been continuing to expand its network to more distant destinations and markets. Forecasts suggest a strong continued growth for the firm through entrance in new market, that is, the trans-Pacific routes between Austrailasia and the Americas. Emirates has already began tapping this new market segment through the Dubai - Milan - New York route. Emirates should leverage the success gained by the firm within trans-Atlantic market and the firm should replicate the business model in other large European market.

3.4 Competitive Analysis One of the main competitors of Emirates is Etihad Airways. Etihad Airways was established in 2003, it is the second largest airline in the UAE, offering 86 destinations. Etihad Airways is wellknown for their outstanding services, excellent branding and recognition have led them to win and run the World Travel Award for the past five years. To appeal to rich Middle Eastern markets and to provide the highest possible comfort, Etihad uses a focus differentiation strategy

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

similar to Emirates. Another airline which acts a major competitor for Emirates is Qatar Airways. Qatar Airways was founded in 1993, offers 125 travel destinations and won two years and running the "best airline" award. The firm has a strong brand, the place they serve, and all the services offered are seen as superior by consumers. Emirates not only faces competition from regional airlines but also from international airlines such as British Airways, Air France, Lufthansa etc. which have very good brand recognition in their domestic market. These international airlines see the success of Emirates as an injustice in the form of aviation and labor regulations. The cuts in income tax, tension funds, fuel subsidies and other job regulations are considered the key to the success of Emirates. However, Emirates feels that this is not their main advantage because other airline brands (if they are in Arab coverage) can also benefit from it.

3.5 Macro-Environment Analysis Political\Legal analysis: According to Tim Clark, Emirates has the permanent advantage of being the sole owner of the company. They do not have to worry about shareholders nor need to hedge and pay attention to their rating (in rating agencies). So, they can focus on improving their operations and performance. However, this is also considered injustice by other airline companies because they believe Emirates can be greatly favored by the government of the country (Arab). Hence, anti-competitive claims have been filed on Emirates and some countries have restricted Emirates access to their airports. Economic analysis: Even though Emirates is the largest operator at Dubai Airport, there are 150 other aircraft carrying another 60 million passengers at the Airport. This has resulted in Dubai Airport being very congested, so there is a plan to make another larger airport in the Arabian desert. This factor has tensed the social environment within airlines considering new budget requirement for establishing their operations. Also, the new airport factor has increased various concerns among Emirates and other airlines on whether they should shift their operations to the

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

new airport at the risk of disrupting the new spot or if only foreign airlines should move to the new airport. Technological analysis: Emirates faced very tough competition from other airlines as it expanded to new markets. Flagships carriers in developed market such as Europe and emerging markets (Singapore Airlines, Thai Airways or Cathay Pacific) were expanding beyond their regional bases by increasing their non-stop service offering to key gateways in Asia, Europe, and America. This increased competition had a negative impact on Emirates, as the firm’s innovations such as in-flight bars were being heavily copied and leveraged by the competitors. Social analysis: Consistent leadership style from visionary leaders, Sir Maurice Flanagan, and Tim Clark, has benefited the organization thus far in terms of growth trajectory. However, as Clark is near retiring age and the firm does not have a successor to replace him, hence company’s leadership team would have to work towards developing plans to continue the rapid growth without its charismatic captain.

4. Alternatives and key decision-making criteria: Alternatives and key decision-making criteria associated to the problem statement have been designed and presented within Exhibit 2 & 3 below, along with their pros and cons.

5. Recommendation: Based on the overall analysis (internal, consumer, industry\market, macro-environmental, and competitive) done for Emirates, along with the analysis performed using decision matrix developed in Exhibit 3, the recommendation which will help the company to continue to grow profitably in a price-competitive environment and maintain sustainable competitive advantage is to capture profitability opportunities in new market segment while creating strategic partnership with other airline companies. This is an important strategic recommendation as it will help Emirates reach a higher number of customers and penetrate deeper into target emerging markets

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

as well as new markets. The recommendation would also help provide superior quality customer services in different markets, locally and internationally. This recommendation would provide the company with more opportunity to provide premium customer service in the local market, post their learning from emerging markets consumers and competitors. Overall, this recommendation would help Emirates gain sustainable competitive advantage and reach next level of scale within their domains in a price-competitive environment, while adhering to their values and principles.

5.1 Implementation Plan First, Emirates should perform market research to determine on how to establish operations in the new market segments, which are: Trans-Pacific routes between Austrailasia and the Americas. Firm can achieve this either by establishing operations, by collaborating with firms in the emerging markets through joint venture or by acquiring established middle-sized firms in the new market. Additionally, Emirates would need to focus on building strategic partnerships while improving the ambience of services as they would be providing customer service to new customer group and adapting to new target market’s culture. Furthermore, Emirates would need to create marketing budget for strategic promotions and marketing communications in the emerging market and pursue a balanced expansion strategy.

6. Exhibits 6.1 Exhibit 1: SWOT analysis

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BUSI 6414 Case Assignment: Emirates Airline: Connecting the Unconnected

Strengths (component of internal analysis): Emirates has been able to scale the firm successfully and it has established itself as a strong leader globally. • The products and services offered by Emirates to their customers are of predominant and superior quality. • Emirates recognize the value of robust and warm relationships with their current customers, suppliers, and employees. • Emirates have been able to adopt strong brand recognition, which has contributed to drawing different consumers to their products and services. • Generate strong overall financial performance. Opportunities (component of external analysis): •

•

•

Emirates can grow their revenue streams through expansion in the trans-Pacific routes between Austrailasia and the Americas. Partnerships with different domestic and international airlines along with Hotels, Restaurants, etc. can help Emirates to increase their overall market share and revenue.

Weaknesses (component of internal analysis): •

• • •

Other airlines have used the arguments of weak tax laws and numerous subsidies offered by Dubai to Emirates as unfair advantage. Declining market share and lower gross/operating margins. Some setbacks can decrease company’s valuation and trust of consumers. To gain competitive advantage, competitors copy the technological advancements of the company.

Threats (component of external analysis): •

•

•

In terms of price wars, Emirates competes against a wide variety of firms in their industries, which includes both premium companies as well as cheaper firms. Increased competition for Emirates can increase the cost of doing business for them, as they would need to spend more for retaining customers. Volatility in market can affect Emirates profitability, as can be seen in the case of Covid-19.

6.3 Exhibit 3: Alternative Analysis Alternatives

Description

Profitability opportunities in new market segments

Increase revenue streams through expansion into transPacific ...