Companies in modern market environments are working towards achieving competitiveness. Emirates Airlines is not exclusion because the management of the company has established strategies to capture more customers in the global markets. The resources of the company have been strategically directed towards improving performance in the global markets.
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The intensifying competition in the airlines industry has forced players to embrace competitive strategies for sustainable business operation. Some of the competitive strategies adopted by companies in the industry are improving corporate social responsibility. This has achieved a lot of importance among many players in the airlines industry.
In addition, companies have focused on low-cost operations in the airline industry. This strategy has improved the prices offered in the market to the customers. Low cost products in the airline industry have been focused on reducing the prices of products in the market (Pride, William and Ferrell, p. 148).
Description of organization
Emirates Airline is based in UAE and was founded in 1985. It started from a humble beginning because it leased two aircrafts from Boeing and airbus to start operations. The first flights by the company were made to Mumbai, Karachi and Delhin. The company provides commercial air transport domestically and globally. Emirates has different products that range from the transport of passengers, cargos and carrying postage.
Other products of the company are wholesaling and retailing consumer goods, in-flights, as well as leisure management. More than 130 jets are operated by the company, and an estimated 10 cargo freighters. Emirates has established partnerships with Boeing and Airbus for the supply of jets, airplanes and other products (Graham, Papatheodorou and Forsyth, 155).
The most recent global economic crisis has affected the performance of the company. The uncertainty in recovery of the economies of most countries is not predictable, and this has affected the sustainability of the company. The purchasing power of customers in the industry has been reduced after the global economic crisis, and this has forced companies in the industry to apply low cost strategies to reduce prices of the products offer4ed in the market.
As such, most companies are entering the low cost markets to improve their profits. Emirates Airlines has been forced to start the strategy of low cost operations to attract as many customers as possible from the global markets (Graham, Papatheodorou and Forsyth, 156).
Corporate social responsibility
The company has operated responsibly to control the inflation in the global economies. The management has been responsive to global economic changes to ensure that the operations of the company do not violate the economic environments of the countries it operates in. In this respect; the company has introduced strategies to control inflation by minimizing expenditures. In addition, the company has been responsible in paying taxes to the government.
This has improved economic performance of the country. Even though the company is state owned, it has been responsible when complying with government regulations. Emirates has improved the GDP of the country by improving the tourism industry. The company has encouraged the growth of other industries (Ireland, Hoskisson, and Hitt, p. 104).
Emirates has complied with international law on green flying by reducing the amount of carbon released into the air. The activities of the company are ISO Certified, and this indicates that the company has been complying with the legal frameworks.
The company has complied with the legal impositions provided by the governments of the countries in which it operates. As a state-owned organization, Emirates consults all legal stakeholders when undertaking any strategy. This policy has been introduced to avoid conflict of interest among various state organs (Ireland, Hoskisson, and Hitt, p. 104).
Emirates conducts business in an ethical environment. The company has established leadership strategies to improve the status of its employees. The employees are provided with insurance covers. This helps protect workers against risks associated with the business. In addition, the company has encouraged its employees to improve the manner in which they handle the customers.
Customers are valued by the company, and the company has established communication systems where they express their opinions about the quality of services offered. The company has applied customer focused approaches when operating in different markets (Ireland, Hoskisson, and Hitt, p. 104).
Emirates supports communities with philanthropic activities. The company has established education and research programs to assist people in conducting expensive scientific research. It offers the required resources in supporting research. In addition, the company has established other philanthropic projects such as supporting children in poverty stricken areas (Ireland, Hoskisson, and Hitt, p. 104).
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Emirates has adopted advanced technological strategies in managing its operations. This has improved its innovativeness and competitiveness in the market. The company has developed diversified and differentiated products and infrastructure. For example, Emirates has terminal airport services, local and ground services. Emirates has purchased a fleet of jets which are large and young.
This gives the company a competitive strategy because it can accommodate services for several clients. The company has stable financial capacity because it is funded by the state. In addition, it makes a lot of profits from its operations, and this has made its financially stable. Emirates enjoys competent workforce, and this has been the source of strategic management as well as professional knowledge. The employees are skilled and are obtained from diverse cultural backgrounds.
Customers of Emirates Airlines are loyal to the brand and products of the company. This has increased the market share of the company. Emirates experiences cost advantages such as low labor costs from the home country, subsidized fuel costs, and low taxes at the domestic market. Since Emirates operates in large scale, the company has economies of scale in its operations. The scope of business has created value chain for the company (Ireland, Hoskisson, and Hitt, p. 103).
Emirates relies on outsourced labor force. Few professionals are recruited from the local and domestic labor market. The financial capacity of the company is depended on the oil exported by the country. This creates a risk of financial incapacity especially when global oil prices drop.
The company employs cost intensive strategies to promote its business. This has resulted from the diversity in the value chain of the company. Emirates has over-relied on domestic economic support. The company has obtained many subsidies from the government (Ireland, Hoskisson, and Hitt, p. 103).
Emirates Airline has the opportunity of gaining more customers because business ventures such as Disney Land attract global investors to Dubai. These investors will choose Emirates, and this will improve the economic performance of the company. Emirates Airlines has established airline alliance with other companies globally, and this will create more opportunities of exploiting the markets in the global scene.
There are incentives given by the government to companies with frequent flyers. Emirates has enjoy a lot of subsidies from the government and this gives the company the opportunity to exploit the market. There are other markets, such as Asia Pacific which have not been exploited by the company.
This provides the company with more market opportunities. The global market is increasingly becoming deregulated and liberalized. This offers more opportunities for the company because the global market will be expanded.
The low cost airline market has emerged and Emirates has the opportunity to exploit this market to gain more products for its operations. The company has economies of scale to operate in low cost transport. This will also reduce the costs incurred by the company (Ireland, Hoskisson, and Hitt, p. 103).
The Emirates Airline experiences threats from political interference because it is owned by the state. This threatens the efficiency and management of the company because there are many political influences on its activities. The company is exposed to threats of employee conflicts. There are different kinds of aircrafts, and this calls for the company to employ people from different careers.
Satisfying the needs of the diversified workforce cannot be successful without conflicts arising among the employees. More companies are entering the industry and Emirates Airlines faces threat of stiff competition. This may reduce the profits and competitiveness of the company in the market.
Most of companies in the industry have applied the low cost strategy of penetrating into the market. This has offered Emirates with intense competition. The global airline market is experiencing a lot of deregulation and liberalization. This creates more threats because more companies will penetrate the market to exploit the potential profits made in the company.
The fluctuation of oil prices threatens to affect the profits of the company. Oil prices have been unpredictable, and this makes it impossible to predict the future performance of the company. It is uncertain when countries will overcome the effects of the most recent economic crisis.
Most of the countries suffer from the impacts of global economic crisis. There are many environmental limitations such as change in global climate, global warming, reduction in natural resources and pollution of air. These are some of the environmental factors affecting the airline companies (Ireland, Hoskisson, and Hitt, p. 103).
Porter’s five forces analysis
Bargaining power of customers
Customers in the industry have a higher bargaining power. The industry depends highly on consumer loyalty, and this makes customers to have higher power in determining the strategies to be adopted by companies in the industry. There is intense competition in the industry, and customer satisfaction has been the main focus of companies in the industry.
Companies have focused on gaining high customer loyalty, and this has offered customers with more power to determine the strategies adopted by the companies. This has made companies to reduce their prices to accommodate the demands of the customers (Ireland, Hoskisson, and Hitt, p. 103).
Bargaining power of suppliers
The suppliers have high bargaining power in the industry. There are only two aircraft suppliers in the industry; Boeing and Airbus. Airline companies in the industry can make orders from either of the two suppliers. This provides the suppliers with bargaining power, and this has made the airline companies pay high prices for the products supplied.
The airline companies entirely depend of the two suppliers because they have differentiated their products. In addition, the suppliers have the required expertise which makes it impossible for the airline companies to use the internal employees to provide products for their companies (Ireland, Hoskisson, and Hitt, p. 103).
Threat of new entrants
The company experiences high threats of new entrants because there are high profits made in the industry, and there are few restrictions of entry. The growth in tourism industry has increased the profits made by companies.
For example, Asia Pacific market has been experiencing increasing profits at a rate of 8% by 2010. The airline companies working in the region have gained a lot of profits. This has attracted many investors into the industry to exploit the high profit potential (Ireland, Hoskisson, and Hitt, p. 103).
Threat of substitute products
There is high threat of substitution of products offered by the company. The products offered by most airline companies are almost similar. Some of the common features are low prices, high quality services, among others. There are many companies offering different products in the global markets.
In addition, customers have alternative choice of using other means of transport such as road transport, sea transport and others. This makes it possible for the customers to avoid using products of the company. This has created high substitution factor for the products offered by the company (Ireland, Hoskisson, and Hitt, p. 103).
Rivalry among competitors
Emirates Airlines experiences competition from Air France and Lufthansa from the European region. In the Asia pacific region, Emirates experiences competition from Cathay pacific. In the American market, United Airlines posses high competition to Emirates. These companies operate in the same market: NZ, UK, the US and the Hong Kong destinations. Competition in the industry has intensified, and growth in low cost airlines has been experienced (Jha, p. 169).
Major issues facing the company
The Emirates Airlines has been voted number one in contributing towards promotion of tourism in the country. The company has increased its air flights by 16 percent, and this has improved the tourism sector by a great extent. It is predicted that Emirates might become the biggest airline in the world within a few years to come due to its fast growth (Report dubai, p. 170).
- Emirates should expand its cargo flights to achieve more profits. The existing markets are under-served with cargo flight services and expanding these services would increase the profits and competitiveness of the company.
- The labor costs of the company should be reduced to improve the profits made. Labor costs form 25-30 percent of the total costs of the company, and this is reducing the profits made by the company. The management should restructure its employment strategy to reduce the number of employees. The management should negotiate wage reduction and control the increment on wages to all workers.
- Emirates should outsource most of its services to reduce the operational costs in the value chain. For example, the engineering services, maintenance, and other services such as catering should be sourced from other companies rather than using internal workers. This will not only reduce costs but will also improve production efficiency and expertise in operations.
- To penetrate new markets, the company should use cost reduction strategy because other companies in the industry are using low cost strategy. Price competition is the most applicable strategy that the company can use to penetrate the low cost market. Customers in the industry are sensitive to price changes, and a slight price adjustment can affect the sales made by the company.
- Emirates should consider establishing acquisitions or mergers with other companies so that access to certain markets can be possible. Strategic alliances will help reduce costs incurred by the company. These strategies will improve the market share and acceptability of the company’s products in many markets.
Emirates Airlines has been successful in establishing excellent strategies to survive in the turbulent global market. The company has achieved growth since it was established, and this has been achieved from the support the company gains from the state. Irrespective of the global economic crisis which affected most countries in the recent past, the company has registered good and improved performance.
However, the company faces the challenge of increased political interference, changes in economic environments and increase in competition. Many companies are being established in the industry, and the liberalization in the industry has caused the competition to affect the existing companies. The management of the company has adopted corporate social responsibilities to improve the status of the communities in which it operates.
The company ahs adopted various CSR strategies to improve its image in the global markets. It is commendable that the management should reduce the operational costs to improve the long term sustainability of the company. This can be done by employing few workers, and outsourcing most of the services of the company. As such, the company will improve its profits, and the competitiveness in global markets.
Ireland, R D, Robert E. Hoskisson, and Michael A. Hitt. Understanding Business Strategy: Concepts Plus. Mason, OH: South-Western Cengage Learning, 2012.
Graham, Anne, Andreas Papatheodorou, and P Forsyth. Aviation and Tourism: Implications for Leisure Travel. Farnham, England: Ashgate, 2010.
Jha, Abhas K. Institutions, Performance, and the Financing of Infrastructure Services in the Caribbean. Washington, DC: World Bank, 2005.
Report: Dubai 2008. S.l.: Oxford Business Group, 2008.
Pride, William M, and O C. Ferrell. Marketing. Mason, Ohio: South-Western Cengage Learning, 2012.