Executive Summary
Emirates Airlines is a Dubai-based leading global aviation company. It is also Middle East’s most valuable airline brand and the national flag carrier for the United Arab Emirates (UAE). As a state-owned enterprise managed by the Emirates Group of Companies, Emirates Airline has grown from a small flight company in the mid-1980s to one of the world’s most formidable airline brands with a market presence in six continents. While its success is largely commendable, Emirates Airlines needs to come up with new strategies to support its next phase of growth.
This report identifies and evaluates different factors relating to the company’s internal and external environment that would affect the aforementioned goal. The external environmental analysis will be undertaken using the PESTLE tool, external factor matrix and competitive portfolio matrix. Comparatively, the analysis of the internal environment will be undertaken using the internal factor evaluation matrix and the SWOT analysis method.
The SWOT analysis technique will be used to evaluate the company’s strengths, weaknesses, opportunities and threats, while the PESTLE analysis will be used to evaluate the political, economic, environmental, social, technological, legal and economic forces affecting its operations.
From the above analysis, ineffective marketing was identified as the main issue characterizing Emirate’s internal and external environment and that has the potential to influence the company’s future operations. Particularly, it is established that Emirates Airlines is not equipped to exploit the myriad of opportunities that emerge from the growing prominence of the millennial generation as a powerful target demographic in air travel and the rising cohorts of middle-class populations in emerging markets who are eager to travel.
Therefore, Emirate’s current strategic environment is not well adapted to exploit these new market opportunities. Relative to this challenge, three long-term objectives have been formulated to improve the company’s future market positioning. They are outlined below:
- To develop innovative travel products for millennials
- To sustain growth by addressing the attitudes and preferences of millennials
- To make millennials the new target market
To meet the above goals, it is recommended that Emirates should inculcate a new cultural ideology of innovation that would accommodate new ideas in product development as opposed to the current corporate environment that is heavily top-down and ineffective in addressing changing consumer tastes and preferences. Relative to these facts, it is proposed that Emirates Airline should redesign its training programs to teach existing employees about newer ways of addressing the needs of millennial travellers. Similarly, the airline’s management should allocate more resources to the company’s research and development department to spur more innovation and churn out new ideas on how to develop new products that would fit the needs of the target demographic.
Introduction
Emirates Airline is one of the world’s leading aviation brands with a market presence in more than 80 countries and a fleet of more than 250 aircraft, which fly to six continents around the world (Corder, 2019). The United Arab Emirates (UAE) – based corporation is part of a larger group of companies known as “the Emirates Group,” which operates other subsidiary firms in the aviation sector. Emirate’s main operational hub is the Dubai International Airport where about 3,600 flights are set off per week (Emirates Group, 2020).
The airline has more than 59,000 employees and rakes in more than $25 billion per annum in revenue (Corder, 2019). According to the company’s website, it has flown more than 56 million passengers across a vast network of 150 cities around the world between the years 2018 and 2019 (Emirates Group, 2020). The company’s vision statement is “to make civil aviation safe, leading and sustainable” (Emirates Group, 2020, p. 5), while its mission statement is “to deliver the world’s best in-flight experience” (Emirates Group, 2020, p. 5).
In this report, the internal and external factors affecting Emirate’s operations will be evaluated with the view to improve its strategic preparedness to address future challenges. The external environmental analysis will be undertaken using the PESTLE analysis, external factor evaluation matrix and competitive profile matrix.
Comparatively, the analysis of internal factors will be undertaken using the internal factor evaluation matrix and the SWOT analysis tool. The strategic recommendations propose to din the report will be supported by evidence gathered from the use of the grand strategy matrix, Boston consulting group matrix and Strategic Position and Action Evaluation (SPACE) Matrix. The end of the evaluation will outline a set of proposals for improving the company’s strategic focus on market expansion, including a raft of measures that should be adopted to review the status of the progress made.
History and Milestones of Emirates Airline
Emirates Airline traces its roots to 1984, when the then minister of defense, Sheikh Mohammed bin Rashid al Maktoum, asked the managing director of another company known as “dnata” to evaluate the prospects of starting an airline company in the UAE. By the end of 1984, a business plan was set up and the name “Emirates” was chosen as the name for the new airline.
In 1985, Sir Maurice Flanagan who was the managing director of “dnata” was tasked with the responsibility of starting the airline with a $10 million budget (Emirates Group, 2020). The mission was simple – to start an airline that would “look good, be good, and make money” (Emirates Group, 2020, p. 1). To fulfill this mission, the company’s director entered into a lease partnership agreement with Pakistan Airlines where it received Boeing 737s. This aircraft was used for the first flight in October 1985, from Dubai to Karachi and Mumbai (Companies History, 2020). In its first five years of operations, Emirates was already operating across 14 destinations that included Amman, Colombo, Cairo, Dhaka, Male, Frankfurt, Istanbul, Damascus, Jeddah, and Kuwait (Emirates Group, 2020).
In 1992, Emirates Airlines started to cut a niche for itself in the market by upgrading its in-flight entertainment. In this setup, the company was the first airline to install video systems in all the seats (Emirates Group, 2020). In terms of logistical capabilities, Emirate’s operational plans were significantly boosted when it moved into a newly refurbished terminal at the Dubai International Airport (Stephens et al., 2017).
In 1992, the Dubai-based airline made headlines for being the first airline to order Boeing 737s. This was a mark of confidence for the airline industry, which was suffering in the aftermath of the Gulf War, to become profitable again. In 1993, it was also among the first airlines to pioneer inflight connectivity across all its classes, thereby garnering a lot of attention in the industry. Emirate’s first expansion plan was completed in 1998 when it acquired a 43% stake in Air Lanka (Emirates Group, 2020).
In 1999, the growth of Dubai as an airline hub in the Middle East further led to Emirate’s success in the region and around the world. Supported by the expansion and development of new terminals in Dubai International Airport, the airline benefitted from increased passenger numbers, which peaked at 11 million people in the 1999/2000 financial year (Emirates Group, 2020). Out of this number, Emirates Airlines carried 4.7 million of passengers. Towards the end of the 90s, the airline also expanded its transport network by adding 28 more new routes. Between 2000 and 2010, the company added 46 more routes as well (Emirates Group, 2020).
As part of its growth and expansion plans of the mid-2000s, Emirates Airlines signed a partnership deal with Qantas Airlines to improve the quality of services offered to both sets of customers. The partnership agreement required both airlines to not only share codes but also undertake integrated network collaboration activities to provide its customers with improved benefits and services (Centre for Aviation, 2016). These strategies helped the airline to rise to the top of the hierarchy of competitive airlines in the world – a feat that led to its culmination as the most valuable airline brand in 2014 (World Airline Awards, 2020).
In the Middle East, the airline was ranked as being the most valuable company with an estimated value of about $3.7 billion (Centre for Aviation, 2016). In 2016, it was named the world’s best airline (IBP, Inc., 2015). Its in-flight entertainment also continued to gain global attention for having twelve consecutive wins at the Skytrax World Airline Awards (World Airline Awards, 2020). Furthermore, from 2010 to 2019, the company added 54 new routes to its transport network (Emirates Group, 2020).
Industry and Market Share
The global airline industry is a multibillion-dollar economic sector, which supports livelihoods in many countries around the world. According to Figure 1 below, in 2019, it was estimated that the industry’s market size was in excess of $801 billion (Statista, 2020). This figure is expected to significantly decline to $686 in 2020 due to global economic uncertainties.
The decline in market size for the overall aviation industry is a negative sign for the industry because it means that there will be reduced business for most airlines. This aviation market is controlled by several leading airlines such as Lufthansa, American Airlines, and the like.
Emirates primarily operates in the Asia-Pacific region, which has the highest market share in terms of passenger traffic across the entire global aviation industry (Statista, 2020). For example, the Asia-Pacific market accounts for about 36.3% of the total global airline market share followed by Europe, which has a 26.3% market share (IATA, 2018).
North American, Latin America and the Middle East follow each other in terms of market size at 23% 7%, and 5.3%, respectively (IATA, 2018). Lastly, Emirates is the third-largest airline after American and Delta Airlines in terms of scheduled passenger numbers flown in the airline industry (Centre for Aviation, 2016).
Evaluation
It is essential to understand the external and internal environmental factors affecting the aviation industry. In particular, it is essential to have a deeper understanding of the issues affecting the airline and how they can be solved. For purposes of analyzing external factors influencing the business, three key models are used: PESTLE analysis, external factor evaluation matrix, and competitive profile matrix. Comparatively, the internal environmental analysis will be undertaken using the SWOT analysis and the internal factor evaluation matrix. The first phase of review involves an analysis of the external environment highlighted below.
External Environment
PESTLE Analysis
This PESTLE analysis is aimed at evaluating the impact of political, economic, social, legal, technological, and environmental forces affecting the airline.
Political: The international nature of Emirates’ operations exposes it to several political risks stemming from multiple countries. For example, restrictions in travel movements across borders due to health risks could significantly affect the viability of the company’s operations and whether it will make profits at all (Sales, 2016).
Already, Emirates flies to some of the world’s emerging aviation markets, such as the Middle East and Africa. So far, most of these countries have a stable political environment. However, this situation could change and significantly suppress the demand for air transport. Similarly, unilateral actions were taken by different nations, such as the recent banning of flights to the US from specific Islam countries by the Trump administration could lead to a significant decline in air transport demand for airlines that ply routes in affected countries.
Economic: Being a global airline, Emirates operates in multiple markets with different currencies and economic characteristics. Therefore, changes in economic conditions could significantly influence the airline’s revenues and bottom-line performance (Sales, 2016). For example, the loss of value in one currency could mean a significant reduction in revenue in some markets.
Similarly, the non-oil investments made in the UAE economy through advances in tourism product development have significantly affected the airline’s operations through increased passenger traffic, as more people fly into the Arab country to enjoy its tourism products and services. This model of investment has had a positive impact on Emirate’s performance by making Dubai and the larger UAE region an international tourism hub. The airline is strategically positioned to benefit from the associated passenger traffic.
Socio-cultural: The sociocultural aspect of the PESTLE analysis relates to changes in the social environment, which influence Emirate’s bottom-line performance. For example, an increased interest in air travel among young people throughout the world has had a positive impact on the airline’s operations as it has increased demand for the airline’s services. Similarly, the general increase in the world’s population has meant an automatic surge in the demand for travel services, which has improved Emirate’s overall performance. It is estimated that the most active demographic group that fuels current demand is made up of “baby boomers” who are engaged in frequent travels as they are at the top of their careers.
Others are retiring and have chosen to travel instead of staying at home. The millennial generation is also actively involved in flying and is responsible for the high demand for air travel in some tourism markets (Machado and Davim, 2018). However, this demographic has different preferences, expectations, and attitudes about air travel from their older counterparts. For example, they have an insatiable appetite to travel, regardless of the prevailing economic or social conditions, and significantly rely on technology to make online travel bookings or stay engaged with their peers in their travel plans.
Lastly, the growing middle-class population in many emerging markets is also fuelling the demand for air travel, which is, in turn, increasing the demand for airline services (Business News Publishing, 2017). For example, there is a surge in the demand for air travel among many emerging economies, such as the BRICS countries, including Brazil, Russia, India, China and South Africa because of increased disposable income among most of their populations (Vaughan-Whitehead, 2016). Therefore, airlines can exploit this emerging opportunity for greater market expansion.
Technological: The importance of technology in promoting business performance cannot be overemphasized in airline operations because of its strategic role in creating synergy across different functional areas. For example, technology has revolutionized how customers book flights and consume their entertainment while on transit.
Similarly, aviation experts have used digital technology to forecast demand for aviation services and make plans on how to manage them (Belobaba, Odoni and Barnhart, 2015). Currently, there is a growing demand among some customers to further use technology to manage personal itineraries using mobile phones (Hanke, 2016). Particularly, this trend is common among millennial travellers (Belobaba, Odoni and Barnhart, 2015). The use of technology in this format provides airlines with an opportunity to customize their products to reflect the technological appeal of airline services.
Alternatively, technology has also affected the operational costs of airlines by improving fuel efficiency through the development of modern aircraft. Companies like Emirates are always under pressure to adopt these technological changes through the purchase of modern aircraft that would improve performance and services offered to customers.
Environmental: The aviation industry is regarded as one of the most significant contributors to greenhouse gas emissions around the world. Independent reports suggest that the sector is responsible for about 12% of the total greenhouse gases emitted in the atmosphere (Cook and Billig, 2017). This problem is worsened by the vulnerability of airlines to adverse weather conditions. For example, extreme weather conditions, such as hurricanes and tornadoes have a negative impact on airline operations.
The effects of adverse weather on flight operations was reported in 2010 when there was a volcanic ash cloud in Iceland that caused the delay of multiple flights across Europe (Cook and Billig, 2017). This event led to the closure of all airports in Scotland and created significant disruptions in other linked transport hubs in Manchester, Liverpool and New Castle because of the fear that the natural event could damage aircraft engines (Oregon State University, 2020). Broadly, this statement shows that the aviation industry is vulnerable to environmental factors affecting flight operations.
Legal: The aviation industry is one of the most regulated economic sectors because of the sensitivity of flight operations to human life. Although safety remains a top priority in the sector, governments have used new policies and laws to redefine industry outcomes based on competitive behaviours among regional and national airlines (Jarvis, 2015).
For instance, the growing prominence of Middle Eastern Airlines, such as Emirates, Etihad Airlines, and Qatar Airways, has increased rivalry in the airline market, especially between traditional Western airlines and emerging state-sponsored companies in the Middle East and Asia (Peoples and Bitzan, 2017). The trend has forced some governments to impose protectionist policies to safeguard their national airlines from the negative effects of stiff competition (Gross and Lück, 2016).
For example, the prohibition of air travel from some Middle East countries into the United States (US) is a form of protectionist policy that limits the outreach of Middle East Airlines in the American market. However, there has been a growing admission among key players in the aviation industry that the sector needs to be further liberalized (Cook and Billig, 2017). This is why there are increased cases of renegotiated open skies agreements emerging as a competitive strategy.
Competitive Profile Matrix
The competitive profile matrix is used to evaluate a company’s position relative to its competitors. By doing so, it is easier to identify its relative strengths and weaknesses. The information can be used to understand which areas need improvement and which ones need protection or safeguards. Similar to the PESTLE analysis, this external environment analysis tool is mostly used to estimate the impact of external factors on a company’s performance. In developing the competitive profile matrix, there was a keen emphasis on correctly estimating critical success factors associated with the airline industry that create an “edge” for one airline over another.
As highlighted in Table 1 below, the main critical success factors used were brand reputation, the extent of product integration, range of products, rate of bringing new products to market, market share, employee satisfaction, customer service, brand loyalty, customer retention, superior, information technology (IT) capabilities, strong online presence, and successful promotion.
Alternatively, Emirate’s main competitors in the Middle East region (Etihad Airways and Oman Air) were evaluated based on the critical success factors highlighted above, and the results are highlighted in Table 1 below.
Table 1. Competitive profile matrix table
The critical success factors highlighted above refer to the most important attributes of airline services that should be performed at the highest possible level of standard to realize a favourable market position. According to the results of the competitive profile table above, Emirates Airline leads its competitors in meeting the highest standards of excellence in the critical success factors identified with a score of 2.94, compared to its rival, Etihad (2.39) and Oman Air (2.75).
Since critical success factors capture internal and external forces affecting a business, Emirates airline seems to have a better understanding of prevailing market dynamics because it has managed to respond well to current challenges by churning innovative products and services that have been well received by the market. For example, its world-acclaimed in-flight service entertainment is like no other in the industry. It has played a key role in boosting the company’s brand image among consumers.
On this basis of assessment, some of the critical success factors highlighted in Table 1 above are linked to one another because a good score in one area of service quality would automatically lead to the improvement of a related area. For example, brand loyalty would lead to increased levels of customer retention.
External Factor Evaluation Matrix
Unlike the internal factor, evaluation matrix that evaluates a company’s in-house capabilities with the view of identifying its strengths and weaknesses, the external factor evaluation matrix is used to assess the external environment to identify threats and opportunities that exist in the market. In this regard, Emirate’s external environment can be assessed based on the opportunities and threats that exist in the market.
The growing middle-class population in many emerging economies, such as South Africa and India, portends a significant opportunity for the airline to expand its travel network to serve new markets (McLeod and Croes, 2018). Additionally, airlines have benefitted from signing partnerships and agreements that are geared towards exploiting such opportunities (McLeod and Croes, 2018).
Emirate’s partnership with Qantas is one of the most significant partnership agreements that the Dubai-based airline has entered into. Signed in 2012, the partnership agreement allowed Qantas the right to use Emirate’s Dubai hub for logistical purposes (Emirates Group, 2020). The two airlines also agreed on a code and revenue-sharing agreement that would improve operations both in Sydney and in the UAE (Emirates Group, 2020).
Broadly, Emirates has been steadily following this strategic plan of entering into partnerships with other airlines as was recently reported when it published its intention to work with American Airline as well to benefit from the same advantages it has accrued from the Qantas agreement (McLeod and Croes, 2018). Coming from the backdrop of the Emirates-Qantas partnership agreement, Emirates Airlines has made it known that it does not fear to pursue partnerships, which will benefit its shareholders and create value for its customers.
The growing demand for cargo traffic in the aviation sector has also emerged as another opportunity for Emirates Airline to expand its market share. This opportunity is occasioned by the decline in passenger traffic in the first quarter of 2020 and fears that the trend is expected to continue in the future (Diamond, 2020).
Lastly, the sophisticated taste of the modern passenger also creates another opportunity for airlines to develop products that appeal to the changing needs of their clients. Particularly, emphasis has been made to understand the unique transport needs of the millennial traveller because their demographic will soon encompass a majority of the population of airline passengers (McLeod and Croes, 2018). On this basis of growth, there is potential for airlines to further develop products that appeal to the unique market needs of these growing demographics, as they will largely define future consumer tastes and preferences.
In table 2 below, these opportunities have been weighted and rated to determine their impact on Emirate’s operations from a scale of 0.0 to 1.0. Both scores represents the lowest and highest possible scores, respectively. Stated differently, the numbers have been ranked according to how important the external factor is in helping Emirates to succeed in the industry by achieving its objectives. It was important to assign these weights to different external factors identified in the assignment because without them, it would mean that all the issues mentioned carry equal importance to the company’s success. However, such a scenario is unrealistic because in the real world, some factors are more important to the airline’s success than others are.
Table 2. External factor evaluation matrix
In the above-mentioned table, the most significant factors affecting the airline’s operations are the growing demand for cargo traffic through the growth and expansion of e-commerce (0.24), the growing prominence of other Middle Eastern Airlines, which use the same business model as Emirates (0.17) and the potential that a slump in the global economy would cause a decline in demand.
According to table 2 above, the growing prominence of other Middle Eastern airlines is problematic for Emirates Airline because it threatens its dominant position in the market. Again, as highlighted in this analysis, the activities of Emirate’s rivals in global aviation industry challenge its position as the Gulf region’s leading airline because it means that other Middle Eastern airlines are also working towards increasing their market share. Their use of aggressive competitive strategies to accomplish this goal creates a competitive business environment, which may threaten the viability of Emirate’s business because airlines will be competing for a limited number of passengers.
Environmental factors, which manifest in natural disasters, also threaten the activities of airlines in the industry because they could cause disruptions in air travel operations. These environmental effects may also be felt by the airline through an increase in operational expenses, as would be evident if the price of fuel increase because of global warming or climate change (Oregon State University, 2020). This effect could also be seen through a slump in the global economic environment, which would lead to a depressed demand for air travel. This effect is captured in Table 2 above, as is the case with the policy changes and bans on travel imposed on passengers from selected countries because of political factors influencing travel decisions. For example, the travel bans imposed on certain Islamic countries by the US government impedes the frequency of travel between countries.
The effects of such actions could best be compared to the effects that terrorism has had on global travel in the past decade. It led to increased scrutiny at airports and a heightened level of safety surveillance among travellers, especially from Middle Eastern countries (Corder, 2019). Collectively, these forces have negatively influenced the global airline travel market. They are likely to continue to affect the industry through the proliferation of current protectionist policies adopted by selected governments. Collectively, a cumulative score of 2.40 for external factors affecting the airline industry means that the above-mentioned factors have a significant impact on airline operations.
Internal Environment Analysis
SWOT Analysis
In this document, Emirate’s response to its competitive environment, relative to its internal capabilities, is going to be assessed using the SWOT analysis technique, which focuses on a company’s strengths, weaknesses, opportunities, and threats. Table 3 below highlights the SWOT analysis findings for Emirates Airline.
Table 3. SWOT Analysis Findings
According to table 1 above, the main strengths of Emirates airline is a strong brand name, its competitive fares, strong brand image, and high frequency of flights form the Dubai International Airport, which is its main hub, to other destinations around the world. Its weaknesses include a shortage of experienced workers and high maintenance costs.
These challenges are contextualised within the overall understanding that they stem from the failure of some employees to work within the company’s culture or operational framework that demands high levels of expertise in the delivery of set targets. However, there are new opportunities for growth available for the company, including developing new products to appeal to new market segments and aligning the company’s operational plans with shifting customer needs and requirements.
Additionally, the company could pursue productive mergers and acquisitions that would see it expand its market share beyond the current level. Lastly, there is a threat to the airline’s business operations that stems from the heightened competitive environment created by other players in the industry. Furthermore, the failure to comply with environmental conservation standards and the decline of the airline industry because of global economic uncertainties paint a grim picture for the company’s future in aviation.
Internal Factor Evaluation Matrix
As highlighted in this report, the internal factor evaluation matrix is a useful tool in evaluating a company’s key weaknesses and competencies. The results are useful in identifying key strengths and weaknesses that need to be tweaked to realize optimum performance (Katsioloudes and Abouhanian, 2016). According to table 4 below, the most important strength of Emirates Airline is its extensive travel network to more than 150 cities around the world (0.11) and the most significant weakness being the overdependence on the UAE government for political and financial backing (0.13).
Table 4. Internal Factor Evaluation Matrix
The findings highlighted above mean that Emirate Airline needs to address its key area of vulnerability, which is its overdependence on government support to sustain its business and amplify its main strength which its vast travel network. The latter approach is especially important to the company’s overall sustainability plan because customers have traditionally flown with the airline due to its affordable ticket costs in frequently travelled routes. In this regard, few rivals have been able to effectively compete with Emirates in terms of its market appeal, mostly because the airline enjoys immense support from the government and people of the UAE.
Emerging Issues
One of the main issues emerging from this case study is the need to develop new marketing strategies that would increase the company’s market share beyond Middle East. This problem involves maintaining the airline’s dominant position in the gulf region as well, while taking advantage of the immense market opportunities that are emerging in new territories.
Particularly, there is a need to develop effective marketing strategies that would appeal to changing consumer preferences in travel. This strategy is occasioned by the increasing influence of millennials in the air travel industry (McLeod and Croes, 2018). In this analysis, Emirates needs to realize that its traditional market segmentation strategy that is based on income differentiations should be updated to one that reflects the traveller’s tastes and attitudes.
This shift in strategic direction needs a wider cultural shift in the organisation’s practices from one that relies a lot on managerial direction to another that allows room for innovation from a bottom-up perspective (McLeod and Croes, 2018). Indeed, it is only through the lessons learned through the failures of experimentation that the airline can effectively adapt to changes in the industry.
Another emerging issue is the lack of strategic preparedness for Emirate Airlines to exploit new market opportunities that have emerged from economic developments in overseas markets. Particularly, the company has not come up with practical actions steps to exploit new market opportunities in countries that have a growing middle class population that is eager to travel. Therefore, Emirates remains strategically ill-equipped to take advantage of the new market opportunities posed by changing political, social and economic forces impacting its external and internal environment.
Strategy Assessment
In this report, an evaluation of the required strategies for Emirate to adopt as it embarks on sustaining its next level of growth will be undertaken through a review of the outcomes of three strategic evaluation frameworks: Strategic Position and Action Evaluation (SPACE) matrix, Boston Consulting Group (BCG) matrix and grand strategy matrix.
These evaluation frameworks will be used to provide the right context for the introduction and implementation of new recommendations that would address the emerging issues highlighted above. The models would also be used as a basis for formulating a raft of recommendations that would be outlined in the recommendations section of this report.
Strategic Position and Action Evaluation (SPACE) Matrix
The SPACE matrix is often used to evaluate the strategic choices of a company, relative to its prevailing internal and external environmental analyses. The structure of the matrix assumes that an organisation should either adopt a conservative, aggressive, defensive, or competitive strategy, relative to its environmental influences (Panigrahy, Kumar and Singh, 2017). Each of these strategic choices is represented by a quadrant that outlines the specific conditions that warrant the application of one strategic direction.
Based on the findings of Emirate’s internal and external environmental factors, the airline should pursue an aggressive international strategy because it has a strong competitive position in the gulf region as Middle East’s most dominant airline. Therefore, it needs to use its internal strengths to sustain its growth and implement an aggressive market penetration strategy to exploit market opportunities that are emerging in new territories. This strategy may involve the development of new products, integrating company functional areas with those of its partners and the pursuit of beneficial merger and acquisition strategies with like-minded airlines.
These recommendations have been developed after considering the effects of the company’s internal and external strategic dimensions. The goal is to determine Emirate’s strategic posture in the industry, relative to its competitors. The internal strategic dimensions have been borrowed from the SWOT findings and amalgamated in this analysis to highlight two key strategic decision-making areas – financial strength and competitive advantage.
As highlighted in the internal and environmental analyses highlighted in this report, Emirate’s key competencies are traceable to the company’s financial strength, which stems from its parent company – the Emirates Group. The entity is guaranteed by the state and provides an endless supply of resources to the airline to stay operational even in the wake of global uncertainties on travel. Its competitive edge stems from its value leadership brand in the Middle East region and the positive reputation it has built in the industry over the years. Nonetheless, the external strategic dimensions of Emirates Airline have been evaluated based on the considerations of the company’s vulnerability to environmental forces and its relative industry strength.
Boston Consulting Group (BCG) Matrix
The BCG matrix classifies a company’s strategic position into four groups “question mark” “starts” “poor dogs” and “cash cows.” The classification system is based on the level of industry attractiveness and a company’s competitive position (Pruschkowski, 2018).
Emirates should pursue a “cash cow” strategy because the airline already enjoys a positive brand image in the industry. Therefore, it would be leveraging this capability to “milk” as much cash as possible from the market. This type of strategy is linked to companies, which have a positive brand image and have gained their customers’ trust (Pruschkowski, 2018). Emirates Airline fits this profile because its strategic fit is contextualized within the dominant market position it enjoys in the industry.
Relative to this analysis, Pruschkowski (2018) argues that the money generated from the implementation of such a strategy should be invested in the “stars” portfolio of the BCG matrix for long-term dividends. Overall, the “cash cow” portfolio of the BCG matrix represents Emirate’s strategic position in the airline sector because the decisions made in this stage of the company’s growth are not supposed to induce growth but rather support the existing one (Pruschkowski, 2018). This is Emirate’s current situation because it already enjoys a strong growth momentum in the market that few other airlines in the Middle East enjoy (Stephens et al., 2017). Therefore, its strategic focus should be on extending its market dominance position.
Grand Strategy Matrix
According to table 5 below, Emirate’s grand strategy lies in the first quadrant of the grand strategy matrix because of its strong market position. It has also reported a strong rate of growth that outpaces its rivals in the industry (Stephens et al., 2017). Therefore, its grand strategy needs to exploit these attributes.
Table 5. Grand strategy matrix
Conclusion and Recommendations
The strategic evaluation process for Emirates Airline was undertaken through a careful review of the external and internal forces acting on it. The external analysis was performed using the PESTLE analysis tool, external factor evaluation matrix and competitive profile matrix. Comparatively, the internal factor analysis was completed using the internal factor evaluation matrix and the SWOT analysis tool. Based on the use of these strategic assessment methods, the biggest external factors affecting Emirates that emerged from the analysis is changing consumer tastes and preferences and growing uncertainties in the global economic environment.
A review of the company’s internal factors suggest that Emirates Airline also has a strong brand image and enjoys massive political and economic support from the UAE government and its people. Based on these analyses, the biggest issue that has emerged from this review is the need to sustain the company’s growth by appealing to the millennial population, which is expected to spur the next phase of airline growth. On this basis, the proposed long-term objectives of the airline are as follows:
- To develop innovative travel products for millennials
- To sustain growth by addressing the attitudes and preferences of millennials
- To make millennials the new target market
To achieve the above-mentioned goals, it is pertinent for Emirates Airlines to initiate a cultural shift in the company’s marketing plan and make it more receptive to innovation and new product developments. In other words, the company should no longer be focused on developing new products based on class as the main criterion of market differentiation. Instead, the overall marketing culture should be changed to address unique generational tastes and preferences in travel, as the new frontier for aviation innovation. The company will be a leader in this area of management focus because no other airline has adopted this approach.
Changing the company’s overall corporate culture may involve rethinking its training curriculum to make staff more aware of the needs of younger travellers and redesigning the company’s overall pricing strategy to make it more affordable for the new demographic of travellers. The new approach to learning may require some employees to be retrained about new customer service practices, while new recruits could directly be recruited based on the new criteria of employment identified above.
Emirates also needs to allocate more resources to the company’s research and development team to enable it to develop new products that appeal to the needs of millennials. This strategic management approach may involve the company’s top leadership and possibly the Emirates Group Chief Executive Officer since he is responsible for making critical resource allocation decisions.
Proposals for Strategic Review, Evaluation and Control
The proposed strategic approaches highlighted above need to be periodically reviewed, evaluated and controlled to make sure they meet their intended goals. Notably, it is critical to assess and evaluate the effectiveness of the proposed strategies because the recommendations outlined above were made with specific assumptions about the airline’s internal and external environmental characteristics in mind. For example, it is assumed that there would be no major political unrests that would significantly affect flight operations across international borders.
On this basis, the review, evaluation and control processes should be undertaken using the premise control method, which continuously tests the assumptions made in formulating the proposed strategic choices to understand their impact on the implementation process. For example, the proposed recommendations highlighted in this report relate to Emirate’s environmental and organisational forces mentioned in the external and internal environmental analyses highlighted in the PESTLE and SWOT analyses mentioned. The goal of the strategic review and control process is to track the progress made in the execution of the proposed strategic plan and guide the firm’s success in a rapidly changing aviation environment.
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