Strategic Analysis Of Etihad Airways

Etihad Airways: Core Business and Industry

Etihad is an airline travel company that is headquartered in the United Arab Emirates, Khalifa city next to the Dhabi international airport. Since the time of establishment in the year 2003, the company has gained a persistent and lucrative growth. This is typically empirical as it can be noted that, according to the research reports; the company is the second largest airline in the United Arab Emirates after The Fly Emirates. It is reported that Etihad airlines operates over one thousand flights in every week with destinations to Africa, the middle east, America, Australia, Europe and Asia (Farouk Cherian and Shaaban 2017, p.341). With over 150 airbuses and Boeing aircrafts, Etihad is able to accommodate a considerable number of passengers to different destinations while ensuring all the flights are well planned, managed and effectively scheduled. The company was able to carry an approximated 14.8 million passengers in the year 2015, which generated an average revenue of us$9.02 billion and an approximated net profit of 103 million US dollars (Al and Ahmad 2014, p.12

Nonetheless, there have been series of reporting indicating that the aviation company made significant losses in both 2015 and 2016. Over $ 1.1 billion dollar was lost in both years and the losses were associated with the fuel crisis as well as a drop in passenger usage. Fortunately, there are reports signifying that the aviation company is gradually regaining its performance. This came after Etihad dismissed reports that fly emirates was in the verge of taking over from the aviation company (Etihad airlines)

The company position in the domestic market

There are considerably many airlines in the United Arab Emirates which are up and working, which have provided a completive market for the Etihad airlines. Different research studies reported in 2015 and 2016 indicated a significant fall in the performance of the airline. It was noted that over $1.9 billion was lost in 2015 and was caused by fuel crisis and fall in customers. The losses made in 2016 total to an approximated amount of $1.6 billion. Although the reports indicated that the company still made losses, it is important to note that the extent of the losses were gradually reducing (Al and Ahmad 2014, p.10)

Etihad as an airline company hold different market positions in different market categories. From the preceding tables, it can be noted that for commercial purposes, the airline is in the third position among its competitors while it is in the second place in cargo transportation (O’Connell and Bueno 2016)

Etihad position in the commercial airline in its domestic nation

Airline	ICAO	Commenced operations	IATA	Callsign	Notes	Hub Airports
Air Arabia	ABY	2003	G9	ARABIA	Largest low-cost airline in the Middle East	Sharjah International Airport
Emirates	EK	1985	UAE	EMIRATES	Largest airline in the Middle East, Flag Carrier of Dubai	Dubai International Airport
Etihad Airways	ETD	2003	EY	ETIHAD	Flag Carrier of Abu Dhabi, National Carrier of UAE	Abu Dhabi International Airport
Fly Dubai	FDB	2008	FZ	SKY DUBAI	Low-Cost Carrier of Dubai	Dubai International Airport, Al Maktoum International Airport

 

Etihad airline position in the domestic market of Cargo airlines

AIRLINE	IATA	Callsign	ICAO	Hub Airport (s	COMMENCED OPERATIONS
Emirates Sky Cargo	EK	EMIRATES	UAE	Al Maktoum International Airport	1985
Etihad Cargo	EY	ETIHAD	ETD	Abu Dhabi International Airport	2003
Maximus Air Cargo		CARGO MAX	MXU	Abu Dhabi International Airport	2005
Unique Air		UNICARGO	UQA	Sharjah International Airport	2014
Sky Bizz				Sharjah International Airport	2015

 

1. Other countries in which Etihad airways currently operates in (table form)

from the time of its invention/ formulation, Etihad has been able to extend its operation to imperatively many countries wild wide. In other words, the aviation company operates in over 100 nations from the 5 continents of Africa, Europe, Asia, Australia, and America among others. The places of operation of Etihad aviation company include United Kingdom, united states, Uganda, Kenya, Egypt, Australia, Asia, and United Arab Emirates and India among others.

Etihad Airways: Position in Domestic and International Markets

As noted from section one of the study, Etihad has extended its operations to many destinations around the world and different entry strategies were adopted depending on the market conditions of the respective countries, that is to say joint venture, and direct entry among others. However, it is substantia to hold that Etihad employs direct entry strategy in its establishment due to the fact that, it is the strategy which it has employed in many different destinations.

Thence, Etihad aviation airline company will adopt direct entry in the Rwandan aviation market. Thus, strategy applied for Rwanda due to the fact that there are already many of the market competitors operating in Rwanda. Nevertheless, it is important to note that the company may face obstacles of winning a significant market share due to the fact that other competitors are already operating in the market and this requires that Etihad employs the most optimistic and strategic plan of gaining a significant market share

Conduct a PESTEL analysis of the country micro environment

The study adapts the use of PESTEL analysis in the evaluation of the potential market in which Etihad can further extend its operation. Firstly, it is important to note that PESTEL analysis is an economic tool and framework that is used in the investigation and scanning of the macro-environmental factors of the market when strategizing, improving, entering a new market as well as improving the competitive advantage of a firm. PESTEL is an abbreviation used to imply the political, economic, social-cultural, technological, environmental and legal factors, which help in the external analysis of the market (Ahmad Rezaei Sadaghiani and Tavasszy 2017, p.252)

PESTEL analysis of Etihad airlines in Rwanda

The politically

In references to a series of recommendations drawn by different scholars, it has been noted that business performance is highly reliant on the political condition of a country. In other words, economists have stiffly noted that business organizations which settle in politically stable countries have high prospectus succeeding in such markets more especially an emerging market (Blanco and Cohen 2017, p.166). Using such insight as the basing point, Rwanda as a country has gained a consistent political climate for the last two decades. Even though there was a general suicide in the country, reports have shown that the nation has gained a state of political stability which definitely provide a favourable political environment for the Etihad airline to extend its operation (Bai et al. 2017, p.768)

Additionally, basing on the fact that the country is currently stable, it is attracting many other investors from the developing countries. Wit reference to the company’s industry of operation, the more movement within and out of the country implies more revenue for such a travel company and thus, the country provides a prospectus and promising environment politically for Etihad airlines to extend their operations in Rwanda (Song Sun and Jin 2017, p.289).

Economical;

It is also important to note that there Etihad operates in an industry that is very competitive with many potential out competitors in the market. Most of its competitors have already extended their operations to Rwanda. Among the many airlines already operating in Rwanda, Qatar airlines, Kenya airlines, south Africa airways, brussels airways, and Ethiopian airlines are inclusive (Banahene Ahudey and Mensah 2016, p.644). This implies that the company competitors are able to gain a higher competitive advantage over Etihad. This consequently cuts down the company’s market share in the world market. It is therefore of typical advantage that Etihad airline extends its operation to Rwanda (Igli?ski et al. 2016, p.750)

Expanding into new countries

 Looking at the Rwandan economy, it is regarded as one of the growing or rather emerging markets. Research studies have indicated that emerging markets provide the most favourable policies to investing companies which offers the company an upper hand in effectively progressing its services to the country (Chan Zheng Fok and Ao 2018, p.78)

The social cultural factors

Current report studies indicate that Rwanda is adopting and promoting the tourism industry. This implies that here are substantially positive prospects of many people travelling to the country as tourists (Moutinho and Phillips 2018 p.79). The travellers are the potential customers for the aviation company in question. Studies have also indicted that the population of Rwanda has grown to more than 50% in the last one decade, this implies a high level of population, which comes with subsequent remedies of development (Barkauskas Barkauskien? and Jasinskas 2015, p.172)

Technological

The increasing level of technology is continuously improving the level of cost efficiency. The ability to use smartphones and place orders online help in saving the costs incurred and also improved communication with the potential customers/ returning (Ahmad Rezaei Sadaghiani and Tavasszy 2017, p.252)

Environmental

Basing on the fact that the country is still young but growing, the nation’s environment is not congested as compared to many other developed countries. The number of aircrafts flying of the sky is surely too low (Mhlanga 2018)

Legal

as the government still lobbies for development from other international countries, the legal restrictions are minimal as they aim at promoting foreign investors as a strategic way of accelerating development (Ling 2016, p.06)

The PESTEL can be summarized as below

Political	· High level of political stability in the country for the last few years · Favourable aviation policies adopted by the Rwandan government · Protectionism from threats and assurance on increased support
Economic	· Rwanda is a developing market with lots of expectation in development · Etihad is an established company thence, will enjoy economies of scale · The prices of oil are favourable as compared to the developed countries of operation
Social	· Young but growing population of the country also raises prospects of success · Rwanda is currently advertising its tourism sector at the international level which indicates high prospects of travellers into Rwanda (tourism)
Technological	· The adoption of new fuel efficient/ saving aircraft for the company · Improving use of internet facilitates e-booking, customers can book online · Increasing popularity of smartphones further accelerates customer communication · Improvement in technology also reduces accident uncertainties
Environmental	· The country is not congested as compared to other developed countries · The aviation may also fasten pollution in the country · Worsens the greenhouse effect of the country w · Favourable weather conditions throughout the year
Legal	· Open skies within and around Rwanda · Low level restricts on firms operating in aviation’s · Low level of documentation during entry process

Porters 5 forces model

Porters five forces is an analytical model that helps in the examination of different markets and how firms can be able to attain and sustain a particular level of profitability in a given market. The porters five forces analyse the competition in the industry, potential entrants into the industry, powers held by the suppliers, the customers powers and the threat of substitute products (Dobbs 2014, p.45)

Application of porter’s five forces model to examine the aviation market in Rwanda

Competition in the aviation industry

The aviation industry is characterized by oligopolistic nature of market. There are stiff competitions among the very many established airlines. There are several modes of competition employed including price wars. It is typical that those that charge less prices ave the potential of winning more customers (Johnsen, Å., 2015, p.268). With such an empirical finding, Etihad should emphasis on lowering profitability and considering customers. In other words, the company need to consider winning customers using the most appropriate and optimistic ways of competition to enable the company gain reputability and a larger market share (Yunn and Yisheng 2014, p.805)

The potential entrants into the market;

as previously noted, there are significantly many aviation companies/ airlines in the world and they are all looking forth to the expansion of their services in and around the world and yet only a few of them are already operating in Rwanda. This is an indication of high level of new entrants into the Rwandan market. However, studies have indicated that early entrants have a higher success rate as compared to later investors (Mathooko and Ogutu 2015, p.354).

PESTEL Analysis for Expansion into Rwanda

Etihad should therefore base on this coherent argument to establish/ expand its operation in Rwanda as early as possible so as to enjoy the remedies of being an early entrant.

Powers held by the suppliers

taking a critical analysis of the aviation industry, the suppliers of the aircrafts may have little impact on the aviation industry. Also, if the prices charged for the new aircrafts may influence the final prices imposed on the consumers, there other variable suppliers who include the fuel suppliers and other equipment (Porter and Heppelmann 2014, p. 88). In the previous section, it was reported that Etihad airlines made a loss of over $ 1 billion. This indicates that the suppliers have a great influence in the success of Etihad airline in Rwanda. Therefore, Etihad has to critically evaluate and investigate the expected actions of the suppliers before program implementation (Toro Ponce and Güemes 2016, p.225)

the customer powers.

just like any other market, the customers are influential in determining the performance of the aviation companies. Much as the customers are not price dictators but rather price takes, they aim at maximizing satisfaction at the lowest cost. This implies that Etihad should consider the additional services provided to the customers so as to make the services at Etihad exceptional (Jarzabkowski and Kaplan 2015, p.558)

The threat of substitute products

Aviation industry has no close substitute or rather perfect substitute. Individuals may choose to switch from air to road transport on very rare cases. This is because the distance covered by air transport in a given period of time may not necessarily be covered by any other means. This implies that there is no perfect substitute (Takata 2016, p.5619). The customers may only have to choose to switch from service provider to another say from Etihad to Brussels airways.

                             

From the preceding visual, it is indicated that Etihad will adopt specific activities to boost its entry success in the market. In other words, With the aim of effective operation of the internal activities, a logical model will be adopted during the entry process into the Rwandan aviation market. The model engages the activities as logically indicated in the chart.

Additionally, the process will engage high use of information technology as one of the most vital activities to ensure services rendered are up to date and meets the competitive environment.

Additionally, well coordination of the stakeholders within the new market will be offered high attention through the adaptation and use of the most appropriate communication media to the respective stakeholders.

There are many entry models that businesses can adopt when establishing themselves in a new market. However, the choice of entry solely depends on the type of business, market, and the market environments. Some factors match specific entry models while other do not.

With the prior essence, Etihad can adopt entry models such as;

Acquisition; this is type of entry model where a firm or company wholly purchases a foreign organization in which market it endeavours to enter. In other words, the firm planning to enter the market purchases an already running firm in another market. Reflecting this to the Etihad case, the firm can acquire/ purchase an already existing and running airline in Rwanda and simply takes control. For example, Etihad may attempt to acquire any current running airlines like Rwanda airlines, Brussel airlines, and/ or the Kenyan airlines. This method is only recommendable when the firm being purchased is doing well in the market. Else, it may lead to losses more especially when the purchased/ acquired firm has a bad reputation and low competitive advantage in the foreign market in question.

5-Forces Analysis of Rwandan Aviation Market

In addition, it is also appropriate to acquire a firm that is not doing well in the market but with easily identifiable and addressable issues such as managerial and financial disparities.

Operation of joint ventures. This is a situation where a firm joins with another firm that is already in operation in the Rwandan aviation authority. This would involve the Etihad airlines purchasing a given number of shares and the business runs as a joint venture. This method is recommendable as it permits the pooling of more resources and sharing of losses in case of shortcomings. Additionally, this method also helps in improving the competitive advantage of the joint firms. Studies indicate that most successful firms and companies in the world are as a result of mergers.

Direct exporting; another method that can be adopted is direct exporting, where a firm directly extends its operation to a new country. With a reflection in the Etihad case, the company can directly establish new offices in Rwanda and start having its aircraft to Rwanda. There are however, many other methods that firms could adopt in entering new market.

Based on the preceding explained methods, the Etihad airline will pick either joint ventures and acquisition. This method is most recommendable as it does not require the company to freshly join the market. It is typically true that gaining a considerable market share in an industry that is already existing is significantly challenging more especially for such a competitive industry like aviation

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