Thunderbird International Business - Research Paper Example

Strategic Management Name Institution Strategic Management Table of Contents Strategic Management 2 Table of Contents 2 1.0 Introduction 3 2.0 Background of Emirates airlines 3 3.0 Internal and external environment of Emirates Airlines 4 3.1 PESTLE analysis 4 3.1.1 Political 4 3.1.2 Economic Factors 5 3.1.3 Social Factors 6 3.1.4 Technological factors 6 3.1.5 Legal Analysis 6 3.2 SWOT analysis of the Emirates 7 3.2.1 Strengths 7 3.2.2 Weaknesses 7 3.2.3 Opportunities 8 3.2.4 Threats 8 3.3 Company's mission 8 3.4 Vision 8 4.0 SMART Objectives 9 5.0 Strategic marketing 9 5.1 Ansoff Matrix 10 5.1.1 Market penetration 10 5.1.2 Market development 10 5.1.3 Product development 11 5.1.4 Diversification 11 6.0 Implementation plan 12 7.0 Evaluation 15 8.0 Conclusion 16 9.0 References 16 1.0 Introduction Liberalization of world markets has posed pressure on companies to develop unique products or services to survive stiff competition. PricewaterhouseCoopers (2015) stated that globalization, fluctuating economy and entry of low cost are some of the factors which are currently controlling airlines market. Dunn (2009, p.57) posited that the situation has led to less demand on air transport. In addition, increases in number of airlines in Asian markets have reduced the dominance of some established airline like the Emirates airlines (Anwar, 2015). The stagnation of Emirates airlines profits has prompted its management to review their marketing plan so as to remain competitive. Therefore, this report will describe and analyze strategic plan Emirates can adopt to strengthen its position and market share in both domestic and international airline industry. The strategic plan will focus on objectives like investing on low cost airlines and increasing passenger and cargo capacities, and acquiring more aircraft fleets. To put the discussion into perspective, the report will describe and analyze, internal and external environment of Emirates airlines, draw a strategic plan, compile an implementation plan and develop the evaluation mechanism. 2.0 Background of Emirates airlines Emirates Airline Corporation is a subsidiary of the larger Emirates Group. Research and Markets (2016) claimed that this airline company was established in 1985 and has its headquarters in Dubai, UAE. The company has grown over the years to become one of the largest airlines companies in the world based on revenue and number of fleets. A research into the company held that Emirates Airline now serves 143 cities in 78 nations in six continents. The company operates in two segments including passengers and cargo business and operates in other countries (Safi, 2011). According to its website, Emirates airline was rated amongst the top ten airlines globally with regards to passenger service in 2012.Over the years, the company has created a strong brand as a business leader in airline sector and in return, has spackled rapid and constant profitability. For Instance, in 2013, Emirates airlines posted half-year profits of AED 42.3 billion representing 13% increase in spite high global economic difficulties and high fuel prices (Emirates Airlines, 2016). The top management of Emirates Airlines positions it as a premium brand and a market leader in the global airline. Nataraja and Al-Aali (2011, p.473) contended that the company has invested heavily in the market and use strategies such as sponsorships, online marketing, and television adverts to attract more customer base. However, one area which Emirates has ignored over the years is investing in low cost airlines. 3.0 Internal and external environment of Emirates Airlines The capability of Emirates Airline to maintain its status as a strong brand in Airline industry can be credited to its competence and quality status which comes from its internal environment and how it handles external environment. The Report presents a PESTLE and SWOT analysis to show what opportunities and threats present to Emirates Airlines currently and in future. 3.1 PESTLE analysis 3.1.1 Political Airline industry is one sector that is sensitive to terrorism, instability and wars. Middle East region has faced threats of terrorism in the recent past scaring away tourists and in the long run leading to less demand in air travels (Massachusetts Institute of Technology, n.d).Yemen, Iraq, Afghanistan, Lebanon, and Syria have been market has some of the dangerous countries which face threats of terrorism and suicide bombings (Anwar, 2015). Terrorism attack in New York on 11 September of 2001 is still fresh in some consumers memory and has made them cautious of travel using airlines from the Middle East. However, Anwar (2015) added that UAE has enjoyed an environment of political stability in the recent year. The situation has led to increase of tourists and business people who are willing to invest if UAE emirates such as Dubai and Abu Dhabi (Nataraja and Al-Aali, 2011, p.476). Emirates also enjoy political patronage from the government of UAE in terms of protection from competitors and grants. The company is wholly owned by the government of Dubai. 3.1.2 Economic Factors Some of the economic factors which influence airlines companies’ operation include oil prices, income, economic growth and exchange rates. The fluctuating crude oil price has put more pressure on the operation of Emirates Airlines as they are sometimes forced to adjust their budget upwards to effectively cover oil costs (PricewaterhouseCoopers, 2015). Asia is still recovering from economic crisis of 2008 and research has pointed out that the region is headed for growth in the next five years. The same research by IBISworld (2015) has stated that consumers in that region are likely to increase their spending due to increasing income and disposable. The potential economic growth is appointer of high spending especially in premium airline, and Emirates airlines look to the beneficiary. Nevertheless, increase in the number of low cost airlines in Asian regions is likely to affect emirates operation as more people across the region are likely to prefer low cost airline which offers quality services (PricewaterhouseCoopers, 2015). 3.1.3 Social Factors Shaw (2007, p.55) opined that Airlines industry is influenced by population, health consciousness, safety issues and career attitude. Majority of the UAE population belongs to middle class hence have a high disposable income to spend in luxury. Airlines industry is one of the pollutants of air hence must put up measure if they want to attract more customers who are increasingly becoming wealth conscious (Shaw, 2007, p.59). According to the company’s website, Emirates Airlines has also adopted environmental-friendly engines to reducing green house gases emission into the atmosphere (Emirates Airlines, 2016). 3.1.4 Technological factors Technology has become a platform for aircraft manufacturing, management, branding, marketing and communication (Murph, 2010, p.5). Aircraft manufacturing companies now produce high quality fleets than before using latest technologies. Today, Emirates have acquired some of the best aircrafts with few accidents. Emirates run a mixed-fleet of the largest aircraft makers, Airbus and Boeing. One of the aircraft operated by Emirates is Boeing 777 which was the first to be developed using computer-aided design (Emirates Airlines, 2016). Technology has also created a platform for companies to virtually market their services or products. Similarly, customers can now book a flight online. In fact, Emirates Airlines uses both its Website and the social media to interact with customers. 3.1.5 Legal Analysis Emirates Airlines operate in a business environment which some markets are much regulated while others are partly regulated. Anwar (2015) asserted that the UAE domestic airline industry is partly regulated and the aviation authorities have allowed competition from Etihad airlines, FlyDubia, Air Arabia and Rotana jet. However, McGinley (2010) claimed that Emirates have been accused by competitors of being protected by the government from competition and paying tax. Airlines operations in UAE are managed and regulated by General Civil Aviation Authority. The body decides has met air competition and environmental law to operate in local industry (Anwar. 2015). 3.2 SWOT analysis of the Emirates 3.2.1 Strengths Emirates Airlines is considered a strong brand both domestically and globally Emirates Airlines has a large customer base internationally. The company has a large financial base. Emirates Airlines owns modern large fleets of aircraft. The company has low accident rates. 3.2.2 Weaknesses Emirates Airlines operate large and wide fleets of aircrafts which are expensive to maintain. Emirates Airlines is positioned as premium airline hence getting stiff competition from low cost and budget airlines. Emirates do not belong to any three airline alliances. Emirates Airlines has no hub in UAE capital Abu Dhabi. 3.2.3 Opportunities There is a new opportunity in low cost airlines market segment. Opportunities to access various markets exist in partnering with other airlines. Economic growth resulted by increased business activities and tourism in the Middle East presents a good emerging market for Emirates Airlines (Ong & Tan, 2010, p.211). Advancement of technology is good for marketing and operations. 3.2.4 Threats Economic fluctuation and the volatile cost of fuel. The insecurity and terrorism activities in Middle East and others parts of the world. Venturing into cost by Emirate Airline rivals. 3.3 Company's mission Over the years Emirate Airlines Company has been driven by different mission but of the same message. Currently, the mission of the company states “Emirates exists to deliver the world’s best in-flight experience” (Emirates Airlines, 2016). 3.4 Vision Emirates Airlines (2016) stated that the company vision cuts across three aspects including customer, shareholders and people. Therefore, the company vision includes; To become the leading airline in the world on service quality. To maximize the return of the shareholders whilst being watchful of the general responsibilities. To become the best organization where staff are motivated to achieve both organizational and personal career goals. 4.0 SMART Objectives Emirates Airlines intends to venture into low cost in the Middle East region to operate in UAE, Qatar, Bahrain, Saudi Arabia and Turkey by 2020. These countries are growing fast and economic indicators shows high demand for low cost airlines to travel across regional cities for business or leisure. Presently, Emirates Airline flights represent almost 40 % of all the flight operating from and to Dubai International Airport (Emirates Airlines, 2016). The company aims at increasing this market share by 70% by 2020 devoid of compromising the quality and reputation. Emirates Airlines intend to acquire more fleets to raise its seating capacity. The company is aiming at adding 20 new passenger fleets to raise the seating capacity by 15% by 2020 (Emirates Airlines, 2016). The situation is prompted by increasing network of the global destination, business and tourism activities. The company will also increase capacity of its cargo by 18 percent. Emirates Airlines annually report of 2015 showed that company carried cargo worth 1.5 million tonnes, and the management thinks or carrying more millions starting in 2018 and runs to 2020 (Research and Markets, 2016). To enhance ancillary revenues by through diversification into airport services, hospitality services, engineering, tour operations and catering starting by 2020 (Emirates Airlines, 2016). 5.0 Strategic marketing Emirates Airline strategic marketing plan is directed towards achieving corporate and SMART objectives stated earlier in the report. The objectives set to see Emirates Airlines survive the strong competition in local and the international airline industry. Lawton, Rajwani and O'Kane (2011, p.220) stated that the strategic plan uses Ansoft Matrix model to analyze the company strategic goals and demonstrate on how the manager can pursue them to achieve future growth. 5.1 Ansoff Matrix Emirate earlier CEO Tim Clark can use four elements of Ansoff Matrix including marketing penetration, market development, product development, diversification to achieve potential growth and increase in revenues and market share. Research has shown that even though the company has not made loss in the recent past, its profits can still be matched by competitors hence the need to increase pursue avenues which will raise the revenues and competitive advantages (Research and Markets, 2016). 5.1.1 Market penetration Market penetration is one of the market strategies which can be used to achieve this objective. Emirates Airlines can market penetration strategies to target both its present customers and new ones by developing new products. In its market penetration strategy, Emirates need to introduce low cost airlines to operate within the Middle East and attract current and new customer who prefer travel in the region in such airlines. According to Dunn (2009, p.62) low Cost airlines segment has become very competitive and the most preferred transport to travel locally and regionally. 5.1.2 Market development Normally, firms use market development strategy to expand into the new market using its current products and services (David, 2011, p.69). A research about the operation of Emirates airlines showed that the company has began to steadily pursue North American Market directly from South Asia (Emirates Airlines, 2016). The new strategy enables the travelers to bypass some of traditional airport networks which company had to make a stopover in the past. In this new development, Emirates Airlines (2016) stated that its aircrafts do not need to pass through London Heathrow, Paris-Charles de Gaulle Airport and Frankfurt Airport, which are also the headquarters of British Airways, Air France and Lufthansa from at Dubai. 5.1.3 Product development This strategy is where company makes new products or service to sell to the current target markets to attain growth (David & John, 2009, p. 82). Emirates pursue this strategy by buying new and high quality products for operation efficiency. The company already has an order placed at the Airbus Company to purchase new 50 fleets of Airbus A380-800s to be delivered by 2020 (Emirates Airlines, 2016). In addition, Emirates Airlines (2016) claimed that the company’s CEO Tim Clark announced that it would embrace a two-class A380 and do away with its first class cabins. The new aircraft will carry a capacity of 615 travelers in both economy and business class cabins. A test of the same strategy was done Dubai to Copenhagen in late 2015 and proved to be successful. 5.1.4 Diversification Emirates also pursue diversification through investing into related sectors. The strategy has been to remain strong within the travel and hospitality industry hence the use of concentric diversification. The annual report of 2015 Emirates Airlines demonstrated that the company diversifies into the airport services, hospitality services, engineering, tour operations and catering (Emirates Airlines, 2016). Other diversification is done by the parent company, Emirates Group. Nataraja and Al-Aali (2011) pointed out that diversification will make emirates to generate profit from other avenues to supplement profit from core business. 6.0 Implementation plan A research carried by different scholars has established that implementation of strategic plans remains of the challenging factor for most managers (Lawton, Rajwani & O'Kane, 2011). Generally, implementation of strategic plans means making the ones on the paper to change to realistic objectives. According to Mullins, Walker and Boyd (2010, p.107), implementing a strategic plan involve reviewing, communication, building consensus, selecting a team, carrying a feasibility study and communicating the plan to the public to observe their reception. David (2011) has stated that implementation of strategic plan begins by evaluating and highlighting the components which may be challenging. In the process of evaluation, the Emirates need to recognize elements of the plan which can also be excessive or unrealistic in terms of cost and time. The second step in implementing the strategic plan entails CEO communicating the plan to others senior managers to get approval for the budget. However, Shaw (2012, p.36) argued that middle level and staff should be informed about the strategic plan and objectives which needs to be achieved. During this process, selected members of the team steer the strategic plan. A size team of 8 people is enough to steer this Emirates Airlines strategic plan. The CEO should appoint one person as the team leader who will communicate the milestone to him every month (Mullins, Walker & Boyd, 2010, p.97). The next step should involve a feasibility study to see which activity to prioritize on. An example is where Emirates has carried a feasibility study on two-class A380 plan between Dubai and Copenhagen and found it viable (Emirates Airlines, 2016). The last process of implementation is the creating of consumer awareness. Shaw (2012, p.41) argued that the process tests the reception of consumer about the new products or services. Implementation plan of the Emirates strategic plan ensures that activities (objectives) run concurrently but proprieties on more viable ones. The decision is arrived based on the fact that competition is stiff in the market and doing one activity at a time will create a situation where these programs will be overtaken by events. The implementation plan and timeline is shown on the table as follows: Figure 1: Implementation process of Emirates Airlines strategic plan Figure 2: The Gantt chart demonstrating the implementation plan 7.0 Evaluation Emirates Airlines will set up an evaluation and control team to look into the general progress in order to attain set strategic goals. The team will first deal with short terms goals control and adjust where targets are missed; short terms goals are determinant of meeting the long term ones. Formal controls roles will be carried out by the top management (CEO Tim Clark), the middle level managers and the financial officers who approved the strategic plan budgets. In the marketing activities, the marketing manager will be mandated of controling and conduct market research of their target market and report to the Emirates Airlines Company board (Mullins, Walker & Boyd, 2010). The marketing manager will also monitor sales against set objectives after increase of seating and cargo capacity. Team members will also have roles of evaluating the current performance against the set target and reporting what could have led to deviation. Specific evaluation of the strategic plan can be done using various indicators as stated below. Emirates Airlines CEO Tim Clark can compare the actual results against the projected results by use of sales analysis to break down based on various products or service the company offers and segments to enable it allocate resources and expertise in a better way for future growth. The company can carry out market share analysis to evaluate business sales against the competitors’ performance (Lawton, Rajwani& O'Kane, 2011, p. 225). The company can evaluate the strategic plan by creating a financial projection of the revenue through statistical models, executive judgments, market research on consumer purchase intents and previous sales data (Kotler & Armstrong, 2010, p. 405). The company has a formal an accounting department and can help with financial analysis and auditing to observe whether the company is making a progress and whether the plans are worth carrying out. 8.0 Conclusion In conclusion, the report has established that change is becoming an inevitable factor in both local and international airline industry and modern managers must formulate effective strategies to survive. In particular, low-cost airlines segment is fast gaining moment and managers must not be left out because most consumer travelling within local or regional cities now prefer this segment. Strategic plan has always provided growth opportunities in increasing seating and cargo capacity, increasing number of routes and diversification as viable avenues to maximize profits. 9.0 References Anwar, S.T. (2015). Super-Connectors: A New Model of Internationalization from the MENA Region. Thunderbird International Business Review. David, J. & John, F. (2009). Foundations of Marketing. McGraw-Hill Education. David, F.R. (2011). Strategic Management - Concepts and Cases (12nd ed.). Prentice Hall India. Dunn, G. (2009). Special report low cost carriers: Ready for battle. Airline Business, 56-62. Emirates Airlines. (2016). Emirates Airlines Official Website. Retrieved 14th March 2016 from http://www.emirates.com/english/ IBISwolrd. (2015). Global Airlines: Market Research Report. Retrieved 14th March 2016 from http://www.ibisworld.com/industry/global/global-airlines.html Kotler, P., & Armstrong, G. (2010). Principles of Marketing, 13th (Global) ed. Boston: Pearson Education, Inc. Lawton, T., Rajwani, T., & O'Kane, C. (2011). Strategic reorientation and business turnaround: the case of global legacy airlines. Journal of Strategy and Management, 4(3), 215 – 237. Massachusetts Institute of Technology (MIT). (n.d). Airline Industry Overview. Retrieved 14th March 2016 from http://web.mit.edu/airlines/analysis/analysis_airline_industry.html McGinley, S. (2010). Top Emirates exec slams gov't protection claims. Arabian Business. Mullins, J., Walker, J. O., & Boyd, H. W. (2010). Marketing management: a strategic decision making approach. Boston: A McGraw-Hill Irwin. Murph, D. (2010). Technology and innovation in airline distribution. Airline Business, 7(3), 5-8. Nataraja, S., & Al-Aali, A. (2011). The exceptional performance strategies of Emirate Airlines. Competitiveness Review: An International Business Journal, 21(5) 471 – 486. Ong, W., & Tan, A. (2010). A note on the determinants of airline choice: The case of Air Asia and Malaysian Airlines, Journal of Air Transport Management, 16, 209-212. PricewaterhouseCoopers. (2015). Industry Perspectives: 2015 Aviation Trends. Retrieved 14th March 2016 from http://www.strategyand.pwc.com/perspectives/2015-aviation-trends Research and Markets. (2016). Emirates Airline - Strategic SWOT Analysis Review. Retrieved 14th March 2016 from http://www.researchandmarkets.com/reports/1495902/emirates_airline_strategic_swot_analysis_review.pdf Safi, A.J. (2011). Analysis of Luxury Airlines Emirates Airways and Competitors. SSRN Electronic Journal. Shaw, S. (2007). Airline marketing and management. 6th ed. Washington: Ashgate Publishing, Ltd. Shaw, E. (2012). Marketing strategy: From the origin of the concept to the development of a conceptual framework. 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