Emirate Airline Strategic Management and Leadership

Question

Emirate Airline Strategic Management

Abstract

The increasingly growing competition in the international markets is forcing global organizations to use strategies to enhance or sustain their competitive advantage in the market, and Emirate Airlines well recognizes this fact. According to the market environment, Emirates Airlines design its strategies with available resources and implement them after analyzing the impact of competitors’ strategies to achieve organizational objectives. This involves the conceptualization of a business plan and the implementation of efficient and effective strategies.

Emirate Airlines focus on unique strategic management in identifying and enumerating the objectives of the company by demonstrating sound business practices to increase revenue, as well as satisfy the demands and needs of the target market. Besides these, Emirates Airlines tries to be marketable and competitive through the leadership styles of their leaders that they are using and implementing. The current paper examines various strategies of Emirates Airline that helps the company to sustain its competitive advantage. Besides, the current paper also documents the leadership style practiced within the organization. Furthermore, the paper discusses the organization’s external and internal environment with the help of SWOT analysis and conducts an in-depth study of the international strategy of Emirate Airlines, concluding that the implementation of exceptional strategies has helped the company to become one of the top airlines in the world.

Table of Contents

1. Introduction…………………………………………………………...……………………….4
2. Leadership Definition………………………………………………..……………........5
3. Leadership Style in Emirates Airlines………………….……………………...…6
4. Strategic capabilities leading to competitive advantage……………...8
5. SWOT Analysis……………………………………………….……….……...............11
6. International Strategy of Emirates Airlines………………………………....13
7. Conclusion…………………………………………………………………………….……...16
8. References…………………………………………………………………………………....17

Strategic Management and Leadership

Introduction

During the middle of the 1980s, Gulf Air services to Dubai declined, because the airline started providing feeder flight services for other carriers. This resulted in the incorporation of Emirates in March 1985 with the US $10 million start-up capital and support from the royal family of Dubai. The airline started its flight operations from Mumbai and Karachi and then extended to Delhi in October. Today, Emirates Airlines is a subsidiary of the Emirates Group headquartered in Dubai, UAE. The Emirates Group consists of Emirates Airlines, a provider of airport services to DNATA, and a chain of hotels. Owned by the Dubai government, Emirates has progressed significantly under the sheikdom’s policy of “wide-open skies” encouraging more than 110 international airlines to operate from Dubai’s airport, the busiest in the Middle East.

Emirates Airlines, popular as Emirates, has earned recognition for its famous luxurious in-flight service and demonstrates consistent profitable growth. In a short span, it has become the largest fleet carrier in the Middle East, operating over 2,800 passenger flights weekly, and is unique among long-distance airlines. This growth resists the company to join a global alliances such as One World and Star Alliance. However, Emirates participates in code-sharing arrangements with several airlines and holds a minority share in Sri Lankan Airlines.

The company has gained international recognition and, in 2010, Emirates became the fifth-largest airline in the airline industry in respect of carrying international passengers and the largest in the world in terms of kilometers covered during long-distance international flights. Emirates Airlines are also one of the five famous airlines that operate an entirely wide-body aircraft fleet.

Equipped with a fleet of 165 aircraft, airlines currently fly to 105 destinations in 70 countries all over the world and continue to expand their network in African countries. Every week, Emirates operates nearly 725 flights to different destinations on six continents. Needless to mention, Emirates Airlines flights account for more than 42% of all flight movements of Dubai International Airport while in 2012, they increase their total market share to 65% at the international level. Propelled by incomparable strategies, the Emirates have evolved at a phenomenal rate as an immense organization, spanning a portfolio of more than 55 brands and employing more than 60,000 people (Emirates Annual Report, 2103).

Within the existing markets, one of the most significant challenges in front of Emirates Airlines is to create a strategy, which will be purposeful for various activities of the company and expand the value of the business as a whole. The changes take place since the global competition among these industries results in the development of new products in the market. In line with this, the company strives to implement and adopt different innovative strategies to sustain their business as more competent and to acquire a competitive advantage in the market. The objective of this paper is to examine insightful details regarding the innovative strategies implemented within Emirates Airlines, as well as to compare its activities with competitors’, to determine the success achieved in a short period.

Leadership Definition

The performance of the company not only depends on the financial resources and implementation of the various business strategies, but the organization also depends on the people who work with the company. One of the most effective, essential, and efficient members of a company is the leader who leads the organization to success. The presence of a strong leadership enables tremendous accountabilities in the company’s team management networks because leadership context impacts the entire capacity of the company’s performance. Different scholars offer their assumptions and perception about leadership. One of the acknowledged United States Army’s finest leaders, General Omar Bradley, summed up his ideology on leadership and said, “The test of a successful leader lies in the response and reaction of his followers. He emphasized that a leader should never impose authority because bossiness in itself has never produced a leader. He should render his impact felt by example and by installing confidence in his followers. The qualities of a leader are judged by the achievements of led and this is the real test of his capabilities” (Bradley, 1971, p. 3).

Leadership Style in Emirates Airlines

The credit for Emirates Airlines' success lies in the consistency of its management team, many of whom have been working with the organization since its inception of the company. The organization has produced many successful leaders, and its leadership team with 28 years of experience leads the organization. The company is led by powerful leaders such as HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates Airlines, Maurice Flanagan Executive, Vice Chairman of Emirates Airlines, and Tim Clark, President of Emirates Airlines (Emirates Group World, 2012).

The incomparable success of Emirates and its competitive advantage over its rivals can be assigned to its leaders. The leaders at different levels exhibit the strong characteristics of Transformational and Transactional Leadership while applying relations-oriented attitudes in building trust with team members, ensuring that objectives are achieved effectively, and promptly. Furthermore, by employing transactional leadership methods to manage achievements and transformational techniques to influence others Emirates leadership has been able to convince systematic changes, which have been appropriate for the company; for example, the introduction of fuel-efficient aircraft has increased the profits of the company (Fiedler, 1994).

The success of the Emirates can be linked with the leadership style of the Dubai royal family. They demonstrate their ability in showing patience as well as listen to others to attain consensus with the capability to act decisively and quickly. The current leaders use a leadership style that has brought the company to international recognition, and they can be considered charismatic leaders because they can instill confidence in employees by motivating them to become productive members of Emirates Airlines. Besides, leaders of the company also possess comprehensive decision-making abilities, which are greatly helpful in the lean management structure. The management also believes in ethical leadership as such its leaders demonstrate appropriate conduct through interpersonal relationships, and personal actions and promote such conduct to co-workers through two-way communication and effective decision-making. Ethical leadership is a relational concept because it is built through social interactions with people and emphasizes on integrity, trust, and honesty as moral values (Armitstead, 2006).

In the Emirates, democratic leadership prevails to a large extent. The leaders from top to middle-level management work on the principles of democratic leadership, because according to them, this style of leadership inspires employees to demonstrate their skills, as well as influences the thinking and behavior of people. It increases the process of socialization in which an individual worker provides assistance and support for others to achieve common goals. There exists a leadership philosophy within Emirates Airlines that is being lived. The level of customer service, that the airlines offer, should have a strong leadership philosophy that is instilled in the culture of the company. Democratic leadership in Emirates helps to increase satisfaction, productivity, profits, commitment, and involvement of employees. For example, Emirates continues to show the 25th consecutive year of profitable operations; moreover, Emirates profit jumped to AED 2,283 million, which is a substantial increase of 52% from last year’s profit of AED 1,502 million. Emirates improved its profit margin at 3.1% when compared to the 2011-12 profit margin of 2.4%; consequently, it represents the presence of strong democratic leadership in the company. Another example of democratic leadership is the recognition of corporate social responsibility; the company invests substantially in environment management through which it has been successful in reducing carbon dioxide emissions to a large extent, and active participation in community development programs (Emirates Annual Report, 2013).

According to Pilling (2005), during the board meetings, all stakeholders receive equal opportunity to offer logical suggestions to improve the company’s performance, and their feasible opinions are incorporated into the company’s policies, which further help the company to arrive at better decision process. With this philosophy, the company has been successful in reducing costs, introducing fuel-efficient aircraft, and offering a new experience of flying for its customers. All of these have been possible with the presence of characteristics such as permitting self-determination, guidance, being a good listener, being situation-centered, distributing responsibility, and empowering group members in the Emirates leadership (Pilling, 2005).

Strategic Capabilities Leading to Competitive Advantage

Indeed, leading an organization towards success in an atmosphere where organizations are consistently struggling to increase their market share demands crucial and detailed studies as well as the investigation of those aspects, which can produce the best results for the accomplishment of the organizational objectives of the company such as Emirates Airlines. In this regard, Emirates management has always been constantly observing the performance of its competitors and the internal and external environment in which they operate. Accordingly, the company positions its strategies and implements them with available resources as it enables them to determine how to sustain competitive advantage in the increased market completion where all companies are striving to enhance their product image. Besides, business strategies also enable them to evaluate their strengths and guide them to maximize their strengths and minimize their weaknesses (Emirates Airline: EasyOz, 2008).

Emirates Airlines have always been at the forefront of the industrial revolution in the aviation industry throughout the last three decades. The company successfully operated under different high and low and volatile market conditions such as skyrocketing prices of oil had dominated in 2008, and the global recession loomed over the second half of 2008, but Emirates Airlines was successful to be operating in the Middle East where there was positive growth in air travel. The company with the support of advanced ICT has been able to introduce innovations in the airline industry and championed its excellence. Operating more than 120 flights to different cities all over the world, Emirates’ corporate strategy emphasizes the diversity of its stakeholders, especially about their vast category of clients. As the Emirates is committed to the diversity of their clients, the diversification management enables them to ensure that communities and clients receive excellent service, which is provided by devoted staff and employees (Emirates Airlines, 2010).

Emirates Airlines are in the business to provide passengers with excellent service, dependable and most friendly transportation along with other relevant services to their esteemed clients. The company dedicates to making each flight memorable and a new experience for clients. Convenience, comfort, and safety are the company’s prime essential concerns while providing quality airline service to their clients. The success of Emirates Airlines is also attributed to the generic strategies adopted by the company such as cost leadership, differentiation, and niche strategy (Porter, 1985). The cost leadership strategy enables the company to offer the lowest per-unit cost among competitors in a highly competitive market, although profits and returns are low but higher than rivals. Secondly, with the help of a differentiation strategy, the company can create its market by offering new technology, several additional features, and a new flight experience for its clients, which is unique in the airline industry. Thirdly, niche strategy helps the company to focus on product segments, particular buyer groups, and the expansion of the geographical market. The approach of Emirates Airlines with these generic strategies enables them to sustain their competitive advantage, thus reaching more clients, as well as enabling them to earn high profits (Doganis, 2011).

The marketing strategy of Emirates Airlines focuses on cusa tomer-oriented approach because the company has been successful in providing services to different categories of clients by introducing a broader range of destinations throughout the world. It can be seen that the marketing strategy of Emirates Airlines aligns with the focus strategy, which enables the company to provide the commitment and support of all organizational operations. This strategy helps Emirates outperform most of its rivals in the airline industry, because the strategy has been successful in enhancing market share, and increasing the overall demand for air travel among clients. The company’s geographic expansion including the market entry into the United States is a key example of market development (Aksoy, Atilgan, & Akinci, 2003).

The company’s entry into the storage market is another example of its attempts to diversify. Although, these attempts relate to product and market diversification, but the diversification strategy also increased asset, revenue, and capital expenditure performance over time. This strategy enabled the company to increase its revenues, which totaled AED 22.9 or $ 6.5 billion for the year 2006 or 28% above the 2005 level. The passenger seat factor also touched 75.8%, which is 1.4% above the 2005 level, and the capacity increased to 16,804 million ton-kilometers. These results demonstrate the Emirate's customer-oriented approach to offering a quality product, which is superior flight service and exceptional travel experience at a competitive price (Knorr & Eisenkopf, 2010).

SWOT Analysis

This section of the paper analyses the strategic capabilities of Emirates Airlines through the use of SWOT analysis. The increased competition in the airline industry demonstrates that the strategic position of Emirates Airlines continues to encounter challenges, because of various fluctuations concerning the increase in oil prices and the global recession in the airline market. The competitors such as British Airways, Qatar Airways, Singapore Airlines, and American Airlines threaten to seize their market share by continually introducing new products and packages, increasing cargo facilities, and extending shipment services. Undoubtedly, the strategies, at different times, introduced by rivals affect the strategic position of Emirates Airlines, and to ensure that the company retains its competitive advantage, the company should continue technological developments by investing substantially in research and development programs, which is a key tool of its rival companies. Through the use of SWOT analysis, the strategic position of Emirates Airlines is analyzed.

• Strengths

Emirates Airlines has been able to retain its strategic position in the global market despite the gulf oil crisis and global recession in the year 2007. When Emirates Airlines streamlined its business, by increasing its fleet and introducing wide-body aircraft, it already had the advantage of size. With several consecutive years of multi-billion profits, Emirates has outshined its major competitors to become a model firm. At Dubai Air Show 2005, the company ordered 45 Airbus by 2012; thus becoming the world’s largest purchaser of Airbus’s super-jumbo. Emirates is the first airline in the Arab world, which provides an online booking service and offers long-haul flights from Tokyo to Dubai and US to Dubai as well as includes a self-check-in service for passengers at Dubai airport. The diversification into cargo shipping and offering a new flight experience on the board has enabled the company to retain the status of a top global brand in the airline industry, and the contract with British Telecom Global Connect for information technological developments makes the company more branded. The company is led by efficient and effective leaders from the top to the middle level that recognizes the worth of their employees and encourages them for their contribution by motivating and boosting their morale. The leaders provide training and reward them for their performance, which reduces labor costs and increases workforce loyalty (Shaw, 2007).

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• Weaknesses

Emirates has high operation costs, because of the huge investment in buying new aircraft and implementing the latest technologies, as well as the company is known for its high prices of air tickets when compared to other airlines. The company is not yet a member of any global alliance that devoid the company in availing of certain benefits, for example, the facility of flying on some shorter routes is not available to the company. The company too much focuses on high-end acquisitions and diversification despite the risks involved in such decisions.

• Opportunities

There is a tremendous opportunity for the company to tap uncovered markets and destinations, because the company is financially strong, backed by IT innovations in the aviation industry, and can increase the strength of the fleet. The government of UAE has an ambitious program to develop additional airports in Abu Dhabi and Dubai, which will help the company to extend its operations in cargo and shipping services all over the world. The income per capita is increasing in the UAE, which means that there will be substantial growth in the number of UAE tourists. Moreover, recent aviation events such as Dubai Air Show helped Emirates Airlines to demonstrate its achievements and facilities offering an instant comparison with other airlines (Benham, 2013).

• Threats

Competitors are one of the major threats to the business of the company. The inability to include innovations and technological developments, or recognize its need, can create a threat to the company. The political environment in the Middle East can potentially affect business growth because the company is located in a politically disturbed region, where the increase in terrorism activities has surfaced recently. An increase in the prices of aviation fuel, insurance, and security costs is another factor, which enhances the operational costs of the company. Thus, a threat prevails that the airline industry could face losses of nearly $2 billion if the prices of oil did not decline. The threat of natural disasters such as hurricanes and earthquakes may affect tourism; thus impacting Emirates Airlines indirectly. Besides, there is a global warning of the possible spread of acute diseases such as Bird Flu and SARS in this region, which may affect airlines and tourism business (Belobaba, Odoni, & Barnhart, 2009).

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International Strategy of Emirates Airlines

Emirates Airlines currently do not hold membership in any of the three global airline alliances such as Oneworld, Star Alliance, and SkyTeam. In 2000, however, the company briefly considered joining the latter but preferred to remain independent of the three alliances. The reason for this was later disclosed by the senior vice-president of the Emirates commercial operations, “Your ability to perform and react in the global competition is obstructed because you require a consensus from your alliance partner” (Pilling, 2005).

According to the codeshare agreements as of January 2011, Emirates has codeshare agreements with the airlines such as Air Mauritius, Air Malta, Continental Airlines (Star Alliance), Jet Airways, Japan Airlines (Oneworld), Korean Air (SkyTeam), Philippine Airlines, Royal Air Maroc, Oman Air, Thai Airways International (Star Alliance) and South African Airways (Star Alliance), which help international passengers to avail online ticket facilities of Emirates Airlines.

The international strategy of Emirates Airlines emphasizes continuous expansion by increasing the strength of carriers, as well as covering more destinations all over the world. Every year the company invests heavily as a part of its expansion program and to stay ahead of the competition.

During 2009-2010, the company took delivery of 15 new aircraft, 11 Boeing 777s, and 4 Airbus A380s. This brought their fleet strength to 152 carriers and 194 aircraft on order up to date. The commitment to improve service and product continues to be the focus of Emirates' international strategy, which includes client experience on board the flight and their experience within the airport. This is based on the general study that airports are stressful as a result of mandatory security checks. In 2009-2010, the company established an additional six Emirates lounges besides those at Manchester, Hamburg, and Mumbai airports. The AED 265 million equivalents to the US $72 million were spent worldwide to provide comforts and win the loyalty of premium customers. The international strategy also focuses on pioneering Airbus A380 Superjumbo, which has increased the company's business at airports such as Bangkok, Paris, Toronto, Jeddah, and Seoul. These destinations were in addition to the A380 network, which already included Sydney, Auckland, and Heathrow airports (Bieger & Agosti, 2011).

In 2009, a steep recession in business travel and tourism affected the profits of the company. Emirates Airlines launched a series of initiatives that included an incentive for premium class customers in the shape of free luxury accommodation in Dubai and a largely successful “kids go free” promotion. This campaign attracted more than 20,000 international customers; thus encouraging the company to launch such campaigns in future years.

In 2010, new markets were introduced in Emirates operation for inbound and outbound flights. Emirates Airlines added value to existing passengers by creating global account managers for the corporate sector, which enabled senior executives of international companies to manage their business more efficiently. During the same time, the new markets were trapped and targeted, which included the increasingly significant cruise segment operating on other continents. New contracts were signed with Royal Caribbean International and Costa Cruises. A wide range of attractive packages was introduced during the occurrence of major events that included the Dubai Rugby 7s, the Dubai World Cup, and the 2010 FIFA World Cup. The company introduced innovative payment schemes for online booking, and credit card holders were offered an opportunity to pay for airline tickets in three monthly installments with zero percent interest. The payment options also offered extra incentives to customers to conduct their transactions online. The facility of online booking, available in 58 countries in 12 languages, continued to grow at a faster rate. Thus, revenue received via emirates.com showed an increase of 45% a year, and in a few markets contribution was more than 22% of total revenue obtained (Emirates Annual Report, 2012).

Emirates is not only dedicated to protecting its long-haul network but continued to expand globally. The strategy to expand internationally by connecting Dubai with the rest of the world received international recognition with the network covering 102 destinations in 2010; for instance, the company successfully introduced the new Dubai-Tokyo route after years of negotiations. Emirates SkyCargo also adopted an international strategy of protecting and increasing market share and was successful to buck the trend in 2010 by rapidly reacting to rightsizing its fleet. The results were appreciable as the business showed double-digit growth in the volumes transported. Initially, SkyCargo launched the service with eight old carriers and ended with five new Boeing 747Fs and two Boeing 777Fs (Boetsch, Bieger, & Wittmer, 2011).

Conclusion

The current paper documents an overview of Emirates Airlines' achievements and success in a short time, describing how a young company with its incomparable strategies can successfully compete with renowned international airlines. Emirates Airlines has been able to understand the increasing needs of passengers, and reacted timely by offering them a new experience of flying with those facilities that are still not available with its competitors. The 400 international awards received by the company show the significance and necessity of luxury airlines. In addition, the company has set up an example by showing how a company can offer the best luxuries while maintaining the cost structure of long-haul services. One of the prime reasons, which contributes to the success of Emirates Airlines, is the powerful leadership team having more than 28 years of experience with the company. The leaders well recognize the increasing demand for air travel and with their strategies, available resources, and excellent workforce they lead the company to sustain a competitive advantage. The company adopts a differentiation generic strategy to achieve a competitive advantage amongst its rivals by providing the highest quality services to enhance its brand image in the market, which differentiates from its rivals. For instance, Emirates Airlines was the first airline that introduced a TV screen for all aircraft classes and the first company in the Middle East to offer an e-ticketing facility. The ultimate aim of the company is to incorporate the latest technology, remain a leader in the airline industry, hold the brand awareness internationally and lead the company to success by increasing demand and profits.