Introduction
This research was commenced to analyze two markets (host and home) that could enhance the international development of an aviation organization. The organization that is discussed here is Emirates Airlines. This organization is particularly important due to its rapid growth in the global aviation market. Such growth is vulnerable to competition and also has a significant impact on the global economy.
The paper looks at the position of the firm in terms of strengths, weaknesses, and market competition to select the potential host market. Since the success of the organization in internationalizing its business relates more to the market environment, it becomes important to identify the most significant ones. Therefore, there is an analysis of the UAE market where the Emirates is located that focuses on political, legal, social, economic, and technological suitability.
Further, there is an analysis of the suitability of the Egyptian market from a similar perspective. The need to analyze the two markets is to identify the advantages and opportunities existing and those that can be combined to facilitate the penetration of the organization into the host market. The paper is not complete without commenting on how Emirate Airlines might position its operation within Egypt in response to the emerging business opportunities.
Emirates Airways background
Emirate Airways is the international airline of UAE and its main activity is to provide commercial air transportation services. It also provides external services such as cargo, in-flight catering, engineering, and training, not to mention its involvement in hotel and resort development. The airline is fully owned by the government of Dubai and is located at the Dubai International Airport. Due to its recent airport expansion and government initiatives, Emirate Airways uses the recently developed terminal 3 facility.
The success and growth of Emirate Airways are entitled to several important strengths. First, the overall responsibility of the King and the government for all aviation-related initiatives in Dubai and the lack of a selfish-culture as regards airport expansion ensures that the airline does not face infrastructure disadvantages for years; which increasingly suppresses the growth hopes of its competitors (Knorr & Eisenkopf 2). Second, the airline benefits from the low charges in the home country.
While landing charges are huge and identical to other airports, no carrier landing on Dubai airports is supposed to pay additional charges. The third strength is associated with Emirate’s strong brand recognition. Its strong emphasis on its award-winning service through in-house training and development is beaten by only a few other airlines. Finally, the airline has established numerous routes including the longest direct route from Dubai to Los Angeles indicating its ability to cover a comparatively wider passage base.
For weaknesses, it is almost impossible for a person to distinguish any. Though, disreputable unreliable as a source, several comments posted on aviation-related blogs are suggesting the slipping service standards and lack of constancy in service quality from the carrier (Knorr & Eisenkopf 2). This observation could be justified by the recent failure to succeed in winning various awards for excellent service quality such as Skytrax.
Emirates entrant into new markets was envied by major international airlines that induced established airlines in Europe and Australia including British Airways, KLM, Air France, Qantas, and Lufthansa to perceive the carrier as a major threat. Most of these airlines compete for international passengers with Emirates and impose extra pressure by accusing the carrier of receiving state subsidies. Emirate Airways also competes directly with about 23 carriers operating in the Middle East. These are particularly threatening because they share the same good management as well as cost reductions as their competitive advantages.
UAE market
Dubai, the hub for Emirate Airlines, is an administrative and business center within the United Arab Emirates. Initially, these emirates were bound by treaty to Great Britain for many years. They later allied in 1971 and have since functioned mutually to create a stable economy and political environment. UAE is located in the southeast of the Arabian Peninsula between Saudi Arabia and Oman.
The country is in the Arabian Desert and hence is characterized by desert features such as dunes and limited vegetation. However, it lies along the coast of the Persian Gulf with many islands and several mountains along its coastline. Most of the cities including Dubai and Abu Dhabi are located along with the cost.
The main focus of the UAE government is investing in its people since the inception of the nation and particularly regarded as the wealth of the nation. The people are now enjoying the benefits of high standards of education and excellent health services. Significant efforts have been made to enhance human resources, achieve the empowerment of women, and offer social well-being to the more marginalized in society. The relatively young nation has a society with a unique blend of people and cultures. With a large foreign population, the country is the most socially liberalized in the Middle East.
Islam religion has played an influential role in determining the society and culture of the UAE (Denicola 2). It is the official religion and permeates almost every part of life. Education, law, mode of dressing, and conversations to name a few are strongly influenced by the Islamic religion. Family and tribal linkages further form the basis of social structure. They are largely influential and shape individual values and behaviors.
Moreover, hospitality is an important part of the culture and applies to both professional and social circumstances. The weight placed on hospitality closely relates to the significance of relationships that everybody strives to cultivate. The official language in UAE is Arabic and all government communication must be in Arabic. However, among the expatriate societies, other different languages are accepted with English being used for all written business communications.
In UAE there are no legal political parties or elections. Power rests with Sheikhs or Emirs who govern the seven traditional emirates and select a president or the overall leader among themselves. There is a cabinet in which positions are distributed among the Sheikhdoms. The parliament or Federal National Council advises the supreme council and the cabinet, but cannot claim superiority over them.
These leaders have steered the diversification of the UAE economy to become a politically stable nation. UAE is a civil law jurisdiction highly influenced by Islamic, French, and Roman laws. The legal system has been influenced by the increasing presence of foreign law firms based on the common law. In particular, many of the laws endorsed by the ruler of individual emirates are more administrative, like the creation of state-affiliated entities.
As of 2010, the total population of UAE was estimated to be 5.6 million. The three most populated sheikdoms are Abu Dhabi, Dubai, and Sharjah with about 85 percent of the total population. Most people are concentrated in major cities with Dubai topping the list. Total GDP was estimated at AED 987.5 billion at a growth rate of 3.2 percent with the non-oil sector seeking to provide an attractive business climate. Oil dominates the economy although it contributes just a third of the overall GDP.
Due to government policies and liberalization of the economy income levels per capita are among the highest in the Middle East (Denicola 5). UAE is a major exporter of oil, machinery, and electronics while the major imports include precious metals, telecommunication equipment, and foodstuff. Imports are quota-free and there are no restrictions on exports with an exception of items of historical value. The country strictly prohibits trade with Israel.
UAE is among the most advanced nations in technology within the Middle East. In addition to automation in industries, the country has adopted technology in the transportation sector. For instance, the Dubai metro network involves high tech, electric trains that transport people within the emirate. Moreover, information technology is the core aspect of UAE policies. About 95 percent of the population in Dubai uses the internet either for professional or personal purposes.
Egypt market
Egypt has a long history of its pre-historic civilization and culture that attracts a large pool of tourists and scholars. The country is full of wonders and artifacts that were built thousands of years ago as well as features of modern civilization. It is among the first countries to develop both economically and socially in the world. Egypt is located in northeast Africa and borders Sudan, Libya, Israel, the Red Sea, and the Mediterranean Sea. Although the country is characterized by desert features of the Sahara Desert, it has a long coastline in the north and east as well as the river Nile that divides the country into two parts. Egypt is divided into four distinct sections: The Nile Valley and Delta, The Eastern Desert, The Western Desert, and The Sinai Peninsula.
The social environment and organization in Egypt are greatly influenced by the Islamic religion. Although the ancient culture still lingers in some aspects of social organizations such as family roles, the modern culture responds to Islamic beliefs.
Among other African states, Egypt has relatively higher literacy levels and most of the citizens have attained basic education. The population is principally made of Egyptians and Arabs as well as a small population of Nubians and Berber in the south and west respectively. With 95 percent of the Egyptians conforming to Islamic practices, a small population of other religion-based groups has maintained their practices. The official language is Arabic which is also used for written communication. Other languages such as French, English, and German are also used in business and education domains.
Egyptian political structure is such that the president is the head of state and is appointed by at least a third of the People’s Assembly. The administrative body and the supreme organ is the government and consist of the council of ministers headed by the Prime Minister. The ministers are collectively responsible for the policies of the country. Until recently when the people rebelled against Mubarak rule, the political environment in Egypt was stable. However, after the resignation of Mubarak, the country is gaining political stability. The judicial system is founded on Islamic law, English common law, and the Napoleonic code system. Four judicial bodies guarantee the independence of the system.
Egypt is the most populated Arab nation with a population of about 75 million as of the year 2005 (Awad and Zohry 2). The population growth rate is about 2.25 percent with most of the population concentrated in cities, along the river Nile and the coastal region. Egypt’s economic stabilization plan initiated some time ago has produced substantial results in most macroeconomic sectors. GDP growth is about 8 percent which is largely driven by domestic demand.
The export growth is about 10 percent and is expected to strengthen future GDP growth. Exports mainly consist of grains, industrial raw materials such as cotton and oil, while imports include machinery, electronics, telecommunication equipment, and precious metals. The stabilized economy has resulted in higher income levels and most of the people are in the category of medium-income earners. Most of the wealth is concentrated in the urban centers and in particular within the Nile delta region.
Compared to other African states, Egypt has developed its technology environment more than them (Abdulla 21). There is a remarkable application of automation in factories as well as within major facilities such as airports. There is also increasing adoption and application of information technology in governance, business, and education domains. Despite the recent political hurdles the country is only comparable to its Arab counterparts in terms of technological investments.
Market attractiveness
Considering the long-term goal of Emirates Airways to expand globally and increase its routes, the Egyptian market is attractive. The country is an ally of UAE which is also reinforced by their commonness and Islamic orientation. It appears that the two economies have a mutual economic interest especially when it comes to exports and imports. Egypt is a major producer of foodstuffs that are much needed by the UAE, while UAE has technological potentials required by Egypt. In addition to the two countries being members of the Arab League, Egypt is geographically close to Dubai. Moreover, Africa is becoming an important region for investing in the aviation industry partly because of the raw materials produced and the increasing movement of foreign investors into the region.
To reinforce the attractiveness of the Egyptian market, Emirate Airways can use the infrastructure to link to other African nations. Indeed, like other airlines, the carrier already has its operations in Egypt and hence the market already exists. Emirates Airways just needs to establish a tight presence and exploit emerging business opportunities by increasing its activities. This can be achieved by opening new routes to important cities like Alexandria and Suez which have become educational hubs and tourism destinations. In as much as the airline wants to penetrate Northern Africa, Egypt remains the most strategic market.
Conclusion
Emirates Airlines has demonstrated tremendous growth in the recent past partly because of its business model that focuses on cost and quality service. However, the global aviation arena is characterized by established airlines that have been in operation even before the conception of Emirates. Therefore, in the case of international development, it is important to identify the strengths and weaknesses that can drive strategies for successful implementation.
Emirates has several strengths associated with Dubai’s favorable political environment, its quality services, and strong brand recognition. In addition to these strengths, UAE being the home market is politically stable, has resources, is geographically advantaged, has an educated population, is technologically sensitive, and is economically advantaged. These factors add to the international development of Emirates as long as they align with those of the host.
Egypt in particular is psychologically, economically, politically, and religiously close to UAE, therefore, indicating its suitability as a market of choice. Emirates can build on these similarities and exploit the opportunities arising.
Works Cited
Abdulla, Rasha. The Internet in the Arab world: Egypt and Beyond. New York, NY: Peter Lang, 2007. Print.
Awad, Alyaa and Zohry, Ayman 2005, The end of Egypt population growth in the 21st century: challenges and aspirations. Web.
Denicola, Christopher 2005, Dubai’s Political and Economic Development: an Oasis in the Desert? Web.
Knorr, Andreas, and Eisenkopf, Alexander. “How sustainable is Emirates’ Business Model.” Airline Magazine, 38 (2010): 1-4. Print.