Analysing Abu Dhabi Etihad Airways
Application of the Strategy, Resources, Capabilities, and Competencies Model to Etihad Airways
It is a fact that Etihad is not the largest airline in Abu Dhabi and the larger Arab region. It is faced with competition from larger companies, such as Qatar Airways and Emirates. However, in spite of its size, Etihad has made some significant progress in the region’s airline industry. The strategy, resources, capabilities, and competencies model is significant to the future growth of this airline.
According to Teece (2010), a business model is important to any economic undertaking. It helps the business organization to convince the clients to pay for the value supplied, leading to profits. An analysis of Abu Dhabi Etihad Airways reveals that the company is utilizing its vast resources to establish partnerships. Such partnerships are designed to enhance the capabilities and competencies of the organization. For instance, the company has entered into an “equity alliance” with other airlines across Europe, Asia, and Australia.
The alliance strengthens the airline’s route networks. It leads to an increased number of passengers, which translates to more business opportunities for the firm. The model has increased market access for Etihad Airways. In addition, it has led to reduced operational expenses due to cost-sharing with the partners. The alliances are established with partners who have competent management teams, adding to the airline’s competency.
According to Watson (2005), the capabilities of a firm involve the ability to conduct relevant business processes to create value. The processes are supported by the organization’s resources. Casadesus-Masanell and Ricart (2009) conceptualize a firm as a collection of resources and capabilities. Consequently, the competencies of Abu Dhabi Etihad Airways are exhibited through strategic alliances with partners.
Application of Porter’s Forces to Etihad Airways
An Overview of the Forces
Porter’s forces model is applicable to any business in a given industry. The framework is an effective criterion used in determining market attractiveness (Porter, 1980). The various forces associated with this model can be used to analyze Etihad Airways’ business operations.
Porter’s Five Forces and Etihad Airways
Competitive Rivalry
The airline is located in a region with some of the best air transport facilities in the world. The Dubai Emirates and Qatar Airways are some of its major competitors in this region. Etihad has tried to overcome this competition by forging partnerships with such giant airlines as Air Berlin, Jet Airways of India, and Serbia’s national carrier (Clark, 2013). The alliances give the company a competitive edge in the market.
As a result, Etihad has access to the market controlled by the partners. In addition, the airline has at its disposal more routes compared with the competitors, increasing its business opportunities. Etihad has taken over a number of airlines in other countries to enhance its growth. Such a strategy has increased the organization’s passenger and cargo volume by 42% in the last two years (Clark, 2013).
Bargaining Power of Suppliers
Establishing partnerships in the airline industry is associated with a number of benefits. One such benefit is the reduced operational costs (Wensveen, 2010). Due to its collaborations with other airlines, Etihad can effectively bargain with suppliers. The airline engages in joint procurement deals for, among others, jet engines, new aircraft, and on-board entertainment systems. Such engagements increase the power that Etihad and partners have over suppliers during negotiations.
The Threat of Substitutes
Currently, this threat is not a major issue in the aviation industry. However, such developments as teleconferencing, high-speed railroads, and improved telecommunication systems may negatively affect the operators in this industry (Wensveen, 2010). Etihad is the 7th largest airline in the world (Clark, 2013). The ranking, coupled with the high quality of services offered, shields the company from the threat of new entrants.
References
Casadesus-Masanell, R., & Ricart, J. (2009). From strategy to business models and to tactics. Web.
Clark, N. (2013). Upstart Abu Dhabi airline becomes ally to European carriers. The New York Times, pp. A2, A4.
Porter, M. (1980). Competitive strategy: Techniques for analysing industries and companies. New York: Free Press.
Teece, D. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2-3), 172-194.
Watson, D. (2005). Business models: Investing in companies and sectors with strong competitive advantage. Hampshire: Harriman House Ltd.
Wensveen, J. (2010). The airline industry: Trends, challenges, strategies. Web.