Question Essay Example
What is the company’s present situation?
The airline industry in the Gulf region is generally undergoing transitions after suffering a longest and deepest downturn for the past sixty years (Doganis 2006). Among the challenges were financial difficulties, external shocks such as Iraq war, escalating fuel prices and outbreak of SARS. Emirates Airline has been committed to achieve its corporate mission of building a global network (Emirates 2011). Core to this mission, is the maintenance of high quality standards in every aspect of the business.
According to (Doganis 2006), the airline industry is highly competitive and Emirates has received competitive pressures from three major airlines in the region: Qatar Airways, Etihad and Gulf Airways, although to a lesser extent. There is aggressive competition among these rivals, not only in prices, but also in non-price dimensions such as marketing, innovation among others.
Emirates’ success is based on a hard to copy marketing mix. The company supports various sporting events such as FIFA World Cup™ among others. The company has also entered into travel and tourism operations and thus, standing as more than just an airline (Emirates 2011). Besides, the company has embedded outstanding management in its ambitious visionary development plan.
Many of Emirates’ competitive strengths are as a result of its unique organizational structure and the right decisions at its foundation. First, the company has a favourable political environment due to the fact that it is a state owned company. The government’s efforts to establish new airport projects and expand the existing ones have ensured that the airline will not be faced with any infrastructure bottlenecks any time soon (Knorr, and Eisenkopf). Second, the company benefits from the lows charges at the home airport unlike other airlines that must pay additional charges (such as ATC charges, noise charges, and security charges etc.). According to Emirates (2011), airport infrastructure is provided by the government and other related services are fully financed by the state budget. Finally, Emirates benefits from Dubai’s low tax regime-like other companies operating its businesses in the country.
The competitive weakness to the company is the lack of consistency in offering service quality. Although unreliable as a source, some travel-related internet blogs have noted that customers are allegedly complaining of the company’s slipping services standards (Knorr and Eisenkopf). Indeed, the company was less successful in winning the recent Skytraxx award among others in the recent past.
Where does the company want to go from here?
Regardless of its current market standing, Emirates wish to gain competitive advantage over its rivals in the industry expanding its business to the Australian market.
Expansion of the business based on the operating hubs that transfers long-haul traffic between the Gulf regions to Australia will enable the company increase its profitability as well as gain competitive advantage in the global airline industry. It will as well serve the busiest portion of the Australian domestic trunk network between major cities and other regional centres (Kain and Webb 2003).
In extending the company’s operations to Australia, the growing demand for transportation between these major hubs will be reduced and thus ensuring equilibrium is maintained between the supply of the company’s services and their demand.
In serving a new market, Emirates will offer its services to cater for the different customers in Australia other than its usual customers in Dubai.
Among the aims of the expansion is to achieve both financial and strategic performance. The key targets in financial performance are to increase the profit margins, return on investment and stock price (Knorr and Eisenkopf 2007). On the other hand, the targets in strategic performance include capacity utilization and gain of a larger market share. All these are aimed at achieving competitive advantage.
How should it get there?
Australian airline industry is dominated by Qantas Airway and Virgin Blue (in the domestic trunk routes) among other low-cost international carriers (Kain and Webb 2003). In trying to develop a new budget airline in Australia, Emirates should adopt best-cost provider strategies which take the middle ground of all the other four strategies: focused low-cost strategy, overall low-cost provider strategy, broad differentiation strategy, and focused differentiation strategy.
The reason for developing this integrated cost leadership/differentiation strategy is to cater for the needs of majority of air travellers who seem to prefer carriers that offer on-time arrivals; high service quality and low fares, all at once (Dostaler and Flouris 2005). Incase the strategy is not carefully done; there is a possibility of the company facing a dangerous situation that Porter (2000) refers to as being “stuck in the middle.”
By developing competitive advantage based on the simultaneous achievement of high levels of differentiation and low costs, the company targets air travellers who seek for services that they are willing to pay for a premium. Emirates will therefore offer superior value services that exceed the expectations of the customers at an economical price. Indeed, this strategy will work best since product differentiation is a norm in the Australian airline industry.
List of References
Doganis, R 2006, The Airline Business, Routledge, Oxon, OX.
Dostaler, I and Flouris T 2005, Business Strategy and Competition for the Future in the Airline Industry, Aerlines Magazine e-zine edition, 28, 1-3.
Emirates 2011, The Emirates Story [online] Available at: <http://www.emirates.com/english/about/the_emirates_story.aspx> [Accessed 7 September 2011].
Kain, J and Webb, R 2003, Turbulent Times: Australian Airline Industry Issues 2003, Information and Research Services, Commonwealth of Australia,
Research Paper No. 10
Knorr, A and Eisenkopf A 2007, How Sustainable is Emirates’ Business Model? Aerlines Magazine e-zine edition, 38, 1-4.
Porter, ME 1990, The Competitive Advantage of Nations, Free Press, New York, NY.
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