EMIRATES AIRLINE CASE STUDY

EMIRATES AIRLINE CASE STUDY

Introduction to Emirates Airline

The Emirates Airline was established in 1985 following inconveniencies from the initial service provider, Gulf Air. Earlier on, the leaders of the United Arab Emirates (UAE) formulated the Gulf Air to serve the Gulf Cooperation Council (GCC). However, the relationship between Gulf Air and the Dubai Government became weak due to the open skies policy. Dubai Government was unwilling to give up the system which made Gulf Air minimize their frequency of operation in Dubai. As a result, the then leader of Dubai, Sheik Maktoum bin Rashid Al-Maktoum issued an Emiri Decree on 26 June 1985 that proposed the establishment of the Emirates Airline (Emirates n.d.).

The Emirates Airline received startup capital from the Government of Dubai. The Dubai Government, through the Investment Corporation of Dubai, invested a total of US$10 million in catering for the initial establishment of the limited liability company (Emirates n.d.). However, the ruler of Dubai wanted the company to operate without further financial injections and subsidies from the government whatsoever. During the initial stages, the company took its first flight on 25 October 1985, with operations from Mumbai to Karachi. Later on, the company expanded the scope of its services in September of the same year to other cities like Delhi. Currently, the industry has developed into a broader range and operates flights to different countries all around the globe. The company is part of the Emirates Group, which has its headquarters in Dubai, UAE.

Key Products

Emirates Group consists of the Emirates Airlines and the Dubai National Air Transport Association (DNATA), in conjunction with other activities that relate to transport. Emirates Airlines is a company that operates globally. The airline renders its services to 84 different countries in the seven continents. Accordingly, the airline company serves a total of 156 airports in those countries where it operates (Emirates Group Annual Report 2019). The company situates its hub in Dubai, UAE, from where it serves the world’s largest fleets of Airbus A380 and Boeing 777 aircraft. Emirates airline is an entity that has focused on providing clients with commercial air transportation services.

On the other hand, dnata is one of the top-rated air service providers in terms of general air services. Dnata has a scope of more than 320 airlines that provide specific services to 37 different destination companies. Some of the services include the provision of cargo and ground handling, catering, and travel services. The firm is also at the forefront to bring a positive difference in the battle against illegal wildlife trade;[;

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Ownership structure

Emirates Airline and dnata are independent entities. The International Financial Reporting Standards outlines that these two companies are separate and do not form a group. However, the two organizations render services under the same management, which is better known as the Emirates Group (Emirates Group Annual Report 2019). The current leaders of Emirates are the most influential and essential people because, through them, the industry is expanding. The leadership is characterized by a flat hierarchy, which makes it easy for the company to grow. Through the flat hierarchy, leaders can communicate easily, which facilitates rapid decision making in the company. The Emirates Airline is chaired by the Dubai ruler, HH Sheikh Ahmed Bin Saeed Al Maktoum. He oversees all operations of both the airline and the Group. Maktoum is assisted by the heads of the Emirates Airline and the Group services and dnata, Sir Tim Clark and Gary Chapman, respectively. Vice presidents of the respective sectors include Thiery Antinori, Abdul Al Ali, Ali Mubarak Al Soori, and Nigel Hopkins.

Figure 1: The Organizational Chart of Emirates

With the current trend and the desires of the customers in the air transport industry, some managers proposed that the company ventures into new markets on a global scale. However, another set was determined that the firm ought to maintain innovation as it is a strategy been used by the company.

Financial Situation

Emirates Airlines primarily focuses on investment. The company wishes to maintain a young and efficient fleet through investing. The balance sheet of the airline is stable with total assets at AED 127.4bn, slightly below the previous FY’s 127.6bn (Emirates Group Annual Report 2019). The airline has also increased capital expenditure through new aircraft deliveries. The FY 2017-18 has witnessed AED 13.4bn of capital expenditure, which accounts for a 58% increase from 8.5bn of the previous FY. Also, the company generated 37.7bn total equity signaling a 1.9% rise. However, the liabilities dropped due to reductions in trade payables, repayment borrowings and lease liabilities, and payment of dividend liability outstanding from last year. The total liabilities declined by 1% to AED 89.7bn

Table 1: Emirates Airline Assets

Table 2: Emirates Airline Equity and Liability

Emirates Airlines Awards

The airline has received several awards for its excellent services in the air transport industry. The company has fostered humanitarian and outreach projects globally (Emirates Group Annual Report 2019). The UAE Ministry of Foreign Affairs and International Cooperation (MoFAIC) recognizes the Emirates Airline Foundation for such exemplary acts. The airline also is keen on providing travelers with a conducive inflight environment. As such, the Airline Excellence Awards 2019 awarded the Emirates Airline as having the best inflight entertainment for the third year consecutively. The company has risen to a global scale, given the number of trophies it has acquired in the last financial year.

Key Competitors

Emirates Airline is facing severe competition from many airlines. Some of the competitor network providers located in Europe and Australia include Air France-KLM, British Airways, Lufthansa, and Qantas (Safi & Riccaboni 2011). Since customers can change flights directly in Dubai, they can bypass the standard airline hubs, which include London-Heathrow, Paris-CDG, and Frankfurt. Additionally, the Emirates Airline seemingly has a higher cost base compared to the alternative airline service providers. Emirates Airline also faces competition from other airlines located in the Middle East, such as Qatar Airways and Etihad, based in Abu Dhabi. Therefore, there is rigorous competition from various companies that also feature in the industry.

SWOT Analysis

A SWOT analysis of the Emirates Airline will further help the students to understand the case study questions. SWOT evaluates the strengths, weaknesses, opportunities, and threats (Helms & Nixon 2010).

Figure 2: Emirates Airline SWOT Analysis

Note: Although this case study is based on facts, aspects of it are fictional

Case Study Questions

1. How can the suggested innovation rather than marketing affect the competitive advantage of Emirates Airline?
2. What strategy may Emirates Airline follow for future global expansion?

Teaching Notes

1. How can the suggested innovation rather than marketing affect the competitive advantage of Emirates Airline?

Students can determine the effect of the suggested strategy on innovation rather than marketing. There are some strategic management theories that students could use to settle on the most favorable approach. Some of these methods include Porter’s Generic Strategy, Bowman’s Strategy Clock, VRIO & VRIN Models, and Value Chain Analysis.

Porter’s Generic Strategy

Porter’s generic strategy will help the student to understand the current situation of the company. Additionally, this strategic mechanism will help determine what the Emirates Airline must do to raise its level of advantage over their competitors. According to Porter’s generic strategy, a company has some strategies that help to stay competitive with other rival organizations. Therefore, the theory categorizes these strategies following two factors, which are cost leadership and differentiation or focus strategies (David 2005). Thus, Porter’s generic strategy will help students to decide on which of the two suggestions fits better.

A student may suggest that Emirates Airline strategy is indeed differentiation. The airline has managed to maintain the top position in terms of offering customers the best inflight environment, as in the case study above. In this regard, the company believes that having the best available airplanes such as the Boeing 777 and the Airbus A380 is the best way to attract and maintain their clients. Having such high-class aircraft equipped with the best inflight services is what enables the Emirates Airline to remain competitive over other organizations. The company has made substantial financial investments to attain such facilities, which other companies have not been keen to challenge.

The students can follow this strategy to explain why the suggestion of innovation is vital for the company. Emirates Airline’s differentiation strategy depends on the innovativeness of the company. Therefore, without maintaining high levels of change, the airline service provider will not compete favorably in the industry.

Bowman’s Strategy Clock

Students can also employ Bowman’s Strategy Clock. The method is similar to Porter’s generic strategy except for the aspect of the price (Ahmed 2014). Bowman’s Strategy Clock replaces the cost aspect with price as the factor of comparison (Bowman & Faulkner 1997). The strategy analyzes the perceived value of the product according to price. This scheme ignores whatever costs the organization incurred in coming up with and providing the product. In this regard, students may use Bowman’s Strategy Clock to weigh the position of competition that Emirates Airline holds over other organizations in the industry.

Given Bowman’s Strategy Clock, the student may determine the position of Emirates Airline. Accordingly, the company falls in the 4^th option, which articulates the Differentiation Strategy. The company regards proper inflight conditions as the critical factor that will guarantee continued competitiveness in the market. The customers feel the uniqueness in the Emirates Airline services as compared to other organizations in the industry. This aspect of differentiation helps the firm to hold its position of competition in the industry. Therefore, a student may suggest that the reason why Emirates Airline competes favorably is the innovativeness in the quality of inflight services.

There are other positions on the ‘clock’ that are fit for the company—for example, the Hybrid Strategy option number three. According to the option, a company competes with rivals not only in matters of differentiation but also in price. A student may suggest that Emirates Airline falls under position three because, in as much as the company offers favorable air travel conditions, the customers can still afford to pay for the services. As the company strives to provide the best services in the industry, the price also remains part of their consideration. As such, the student may opt for the third option as an alternative to position 4.

Students may find this model appropriate for comparing the competitiveness of Emirates Airline. Accordingly, the student will find out that the company has two advantages, differentiation and hybrid strategy, which allow it to compete with the rest of the rivals in the industry. This is because the company fosters innovative style and facilities that customers enjoy while traveling. Despite these improvements, customers can afford to pay for the specific services. Conclusively, the student may state that without the innovative aspect of the company, then the level of competition would be a thing of the past.

VRIN & VRIO Models

Other students may link the competitive advantage to the resources a company has. The students may determine the effect of the marketing suggestion by analyzing the source of competitive advantage, resources. Students who propose the idea of analyzing a company’s resources will opt for the VRIN model to further their analysis.

Emirates Airline has got several resources at its disposal. The funds could either be those that are physically counted, tangible, or the intangible ones that cannot be seen. For example, human and social resources are invisible, while the financial resources are physical. A company may have many resources, but only a handful will constitute part of the competitive advantage (Jugdev, Mathur, & Fung 2007). The student will bring in the aspect of the VRIO model to evaluate these resources. The model uses five characteristics to assess the resources, including Valuable, Rare, Inimitable, and Non-Substitutable (Barney 2012). However, some students may prefer Organizational Support instead of the Non-Substitutable factor, arguing that the firm is always capable of utilizing these resources.

Table 3: VRIN Model

To elaborate on the analysis above, students can major on marketing knowledge. The Dubai ruler is the same chairman to the Emirates Airline and Group. The leadership the ruler has applied to Dubai as a country also features in the management of the firm. Additionally, the kind of governance that the company employs, flat leadership, is another efficient resource that helps to compete over other firms. In this scenario, the company can communicate easily, and this leads to making decisions within a short time. Students will view this aspect as a competitive advantage over other companies who also operate in the industry.

In terms of the final placement, the Emirates has its terminals at strategic points. The customers can travel without passing through other regular airline hubs, which are Paris-CDG and Frankfurt. This is because Emirates Airline has a favorable geographic location that suits the clients. In this regard, students can validate the terminal exclusivity of the Emirates Airline as the competitive factor of the company.

The inflight entertainment also features as a resource for the company. The company is one of the best inflight service providers that use the state-of-the-art mechanism to ensure that customers are well entertained when traveling. For the third year consecutively, inflight entertainment has enabled the Emirates Airline to compete with other companies like Qatar Airways. Students may, therefore, recognize this aspect of first-class inflight entertainment as a boost to the competitiveness of the Emirates Airline.

Lastly, the number of countries where the emirates operate is also a resource. The company features a total of 84 countries, which levels up its competitive level. Students may realize that no matter the scope of operating states, the feature is easy for many rivals to adopt. Therefore, the resource will not be the best for students to consider when analyzing how Emirates Airlines can continue to compete. The student will, therefore, conclude from the VRIN analysis of resources that the inflight entertainment is by far the best strategy that Emirates Airline can use to maintain its competitive position in the industry.

Finally, students will have to select the best out of the three strategies to visualize the competitive advantage of the Emirates Airline. Porter’s generic strategy may be faulty because cost leadership and differentiation can exist in the same company. Bowman’s Strategy Clock contains the Hybrid approach that encompasses differentiation and cost leadership. However, the student will not envision the conditions that the Emirates Airline can pursue this 3^rd strategy of the ‘clock.’ The student might find the VRIN model as the best to answer the company’s competitive advantage. According to this strategy, the student will realize that inflight entertainment is an added advantage to the firm compared to the suggested marketing strategy.

2. What strategy may Emirates Airline follow for future global expansion?

PESTEL Analysis

Students may use the PESTEL analysis to determine whether the growth of Emirates Airlines is appropriate. PESTEL model comprises six elements, namely: political, economic, social, technological, environmental, and legal (Yüksel 2012). The external environment of the firm involves all of the elements (PESTLE Analysis n.d.). In this regard, students can use the PESTEL analysis to evaluate the context of the firm and also provide vital information regarding the circumstances of future expansion.

Students will evaluate the political factors the company might encounter upon venturing globally. The company will have to consider the government regulations of the potential countries. However, the complicated political situation of the country has limited the trade opportunities of the firm. Economically, Emirates Airline is situated in a financially stable state. The student can propose that the stability of the country and citizen’s economy will keep the company operational. The drawback may occur when the firm institutes a branch in a developing country with poor infrastructure. This move will account for additional expenses such as electricity to maintain customer satisfaction. Students can argue that expansion will be beneficial in developed countries as compares to the developing ones.

In the social category, the student may consider that the company suits customers from different social backgrounds. Since the company is established in many different countries, then the social identity of the customers is not a hindrance to the operations instead an added advantage. Technologically, the student may rank the Emirates Airline as a tech-driven firm because of the quality of inflight environment like no other. Investing in technologically advanced nations will benefit the airline. The student may also realize that the company is eco-conscious since it is against the illegal wildlife trade. The student may even realize that the company conforms to the legal framework, such as the provision of an annual audit report.

Ansoff’s Matrix

Other students may opt for Ansoff’s model to answer the expansion query. The model enables the learner to identify the risks that may arise due to new business directions (Campbell, Edgar & Stonehouse, 2011). A company may focus on an original path, such as expansion to a global scale, which will involve new markets (Hussein et al. 2013). On the other hand, the firm may opt to venture into a new service that was not available to clients earlier on.

Since Emirates Airline is interested in expanding its scope beyond the 87 nations onto a global scale, Ansoff’s matrix is appropriate. The student will not only focus on the risk associated with new products but also the latest market risks. This move follows the factors outlined in the SWOT analysis, adaptability, and diverse market. In addition to highlighting, the students may also further their study by mapping the risks on the matrix. The map will demonstrate how the expansion strategy for Emirates Airline would feature in the new market. The student may note that investment and competitors in the new markets are, by far, the factors that will variate the profitability of the company’s decision.

The student may opt for these two strategies, PESTEL analysis and Ansoff’s matrix, to answer the second question that concerns future global expansion. PESTEL analysis helps to analyze the various external factors that the company will have to consider during development. Ansoff’s matrix contrarily focuses on the risks that Emirates Airline will face in the new market. The two strategic management theory will serve the student best when complemented. An exemplary student will, therefore, analyze the Emirates Airline from the Ansoff’s matrix, then, later on, focus on the PESTEL analysis.

References

Ahmed, G. (2014). Bowman’s Strategy Clock Model & its Eight Competitive Directions for Edge. [Online] Studylecturenotes.com. Available at: http://www.studylecturenotes.com/management/bowmansstrategy-clock-model-its-eight-competitive-directions-for-edge [Accessed 12 May. 2020].

Barney J.B. and Hesterly, WS (2010). Strategic Management and Competitive Advantage: Concepts and Cases (4th edition), Upper Saddle River, NJ: Pearson.

Bowman, C. & Faulkner, D. O. (1997). Competitive and Corporate Strategy. London: Irwin

Campbell, D., Edgar, D., Stonehouse, G. (2011). Business Strategy: An Introduction. 3rd edn. Basingstoke: Palgrave Macmillan. ISBN-13: 978-0230218581.

David, F. R. (2005). Strategic Management: Concepts and Cases. 10th edn. New Jersey: Pearson Prentice Hall.

Emirates (n.d.). Emirates then and now. [Online]. Available at: http://www.emirates.com/english/about-us/timeline/ [Accessed 12 May. 2020].

Emirates Group Annual Report (2019)

Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis, where are we now? A review of academic research from the last decade. Journal of Strategy and Management, 3(3), 215-251.

Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., (2013). ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.

Jugdev, K., Mathur, G. and Fung, T.S., (2007). Project management assets and their relationship with the project management capability of the firm. International Journal of Project Management, 25(6), pp. 560-568.

PESTLE Analysis. (n.d.). What is PESTLE Analysis? A Tool for Business Analysis. [Online] Available at: http://pestleanalysis.com/what-is-pestle-analysis/ [Accessed 12 May. 2020].

Safi, A. J., & Riccaboni, M., (2011). Analysis of luxury airlines Emirates Airways and competitors. SSRN Electronic journal, pp.1-33. Doi: 10.2139/ssrn.2045661

Yüksel, İ., (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52-66.