Question:
Write an essay on Emirate business model.
The heart of the commercial success of Emirate Airlines is their solo “Emirate business model.” The main ingredients of this strategy are a lean workforce, which contributes low cost carrier and the use of a flat organizational structure that allow the Emirate Airline in order to maintain low overhead costs. Based on the analysis of Grimme (2011), it is found that Emirate Airlines is second only to the Ryanair due to its lower operating costs (based on Dubai economy). This low operating cost enables Emirate Airlines to serve “secondary destinations profitability” by connecting these through its “global hub” in Dubai. The “airlines giant” of Middle East Emirate Airlines started their journey in 1985. Till 1985 the Emirate Airlines offers their services alone and has not joined with any airline alliance. The Emirate Airlines is a part of Emirates Group that is under the complete authorization of the Government of Dubai. This is the largest airlines group of Middle East, which operates more than 3400 flights in every week. This company has developed a brand name, which is popular worldwide. The goals of the Emirates Airlines are to reach on top by excelling what they do. On the other hand, the mission of the Emirate Airlines is to exist and deliver the world’s best flight service. The vision of Emirate Airlines is to make civil aviation safe, leading and sustainable. According to Demil & Lecocq (2010), it is recognized that Emirate Airlines operates an “all-wide body” fleet, which is largely composed of Boeing 777s and Airbus A380s. The service of the all-wide body also results contributing to lower unit costs in comparison with other large airlines services that provide a mixed service of wide and narrow body fleets. According to Bergström et al. (2011), it is found, unlike other international airports Dubai International Airport does not have any restrictions on the night flight schedule. Therefore, Emirates managed to achieve better utilization of its airline’s services than their competitors. From the survey it is also recognized that this Airlines service has a lower staff cost than that of the longer-established competitors. According to (Nyarko, 2010), there are no unions; therefore, the occurrence of labour unrest is a rare incident for Emirate Airlines. Therefore, it can be said that the Emirate Airlines is more advantageous position than that of the rival companies. Therefore, it is significant to analyze the airlines service strategy used by the Emirate Airlines. Following is the brief of the marketing strategy of the Emirate Airlines, which will be helpful to find out the steps, which taken by the Emirate Airlines to survive in the international market.
The Emirate Airlines is a well known brand name, and their customer satisfaction rate is higher than any other competitor airlines services (O’Connell, 2011). However, while analyzing the growing market of Emirate Airlines in New Zealand, it is found that this airline still has some tangible goals that need to meet. In order to achieve “the Finest in the Sky” position in New Zealand, the Emirate Airlines set their goals, which are as follows-
The top competitors of Emirate Airlines are as follows-
Evaluation of service strategy and service culture
In order to grow the market in New Zealand, the Emirate Airlines started a day-night service of their air craft. However, it is important to mention that providing services for 24 hours are not enough to sustain the market competition in New Zealand (Dobruszkes & Van, 2011). While analyzing the types of services provided by the Emirate Airlines, it is found that the types of services offered by Emirate Airlines can be divided in to three groups. The services offered y Emirate Airlines are as follows-
Key Partners: Boeing, Airbus, Government of Dubai, Dubai International Airport, AirLanka, Quantas and Codeshare Agreements.
Key activities of Emirates Airlines: Ground Handling, Baggage Handling, Aircraft Maintenance and Passenger Services.
Key Resources of Emirates Airlines: Fuel, Labour / Staff
Customer Relationships: Skywards, Business Rewards
Channels of booking ticker: Online, Airports, Travel Agents.
Cost Structure: Fuel, Airport User Charges, Staff / Labour, Taxes, Depreciation and Operations
Revenue Streams: Passenger, Cargo, Excess Baggage, destination, and leisure.
Target market and stake holders
Although Emirates Airlines is considered as one of the best airlines service providers, it is found that this organization is facing several challenges while launching their service in their target market “New Zealand.” A target market is a market where a company aims to sell their product as well as services (Schmith, 2010). The identification of the target is not only important but also critical for the growth of business. There are six steps that could be followed by the management authority of Emirates Airlines to determine if New Zealand is an ideal target market or not.
The airlines market in New Zealand is captured by several international organizations, such as Gulf Airlines, Air New Zealand, Hawaiian Airlines, Qantas Airways and American Airlines (Sokol, 2013). However, the charges in these flights are too high. Therefore, the Emirates Airlines has an opportunity to launch their quality service at a lower price in this country.
The customers have different choices based on their religion and cultural background. Although a huge number of people live in New Zealand who belongs to different culture, it is found that the number of these people is relatively lower than Australia, the United Kingdom or the United States (Emirates, 2010).
The stake holders of the Emirates Airlines organization will be beneficial and gain the value of this service (Pickering & Weber, 2013). The Emirates Airlines offers importance to their customers as they are the valuable stakeholders of this organization.
The New Zealand market is considered as one of the most potential market for the airlines companies. To gain access to this market, the Emirates Airlines needs to perform a proper market analysis.
While launching or improving the service in New Zealand the Emirates Airlines needs to analyze their strength and weaknesses (Michael et al., 2011). There is a high competition level in New Zealand market; therefore, the Emirates Airlines needs to focus on their strengths and mitigate the weaknesses as per the business requirement.
The Emirates Airlines is considered as one of the best airlines service providers. However, like other airlines services this company is also experiencing several challenges (Gustavo, 203). While launching services in New Zealand, the challenges faced by the Emirates Airlines has also increased. New Zealand is a developed country and the market of airlines services in this country is high. On the other hand, the number of existing competitors in this country is also very high. There are more than five rival companies are providing their services in New Zealand. Apart from the existence of the competitors, the Emirates Airlines is going through an extremely challenging time due to the rise of fuel prices, an increase of government taxes and weak demands.
The Emirates Airlines is admired widely almost in every country because of their dedication and commitment in every aspect of their business especially the customer satisfaction rate. According to Nataraja & Al-Aali (2011), Emirates Airlines developed their service strategies at a level that many other companies envy them. According to Barros & Wanke (2015), in 2001 the Emirates Airlines announced: “the largest ever order” for the Boeing 777 aircraft in a deal, which worth USD $9 billion.
Although the Emirates Airlines have a long chart of competitors both in New Zealand and in other countries, it is recognized that Etihad Airways is one of the worthiest competitors of the Emirates Airlines. According to Bel & Fageda (2010), the Etihad Airways is the considered as the national carrier of the United Arab Emirates (UAE). This giant international airlines service provider is also found as the carrier of the Abu Dhabi region. This airlines company currently controls a fleet of 55 aircraft. The Etihad Airways shares a code agreement with 23 other airlines, which may include Jet Airlines, Malaysian Airlines, American Airlines and much more. Unlike Etihad Airways, the Emirates Airline does not have a code of agreement with other airlines companies. Therefore, operating solo in New Zealand is not a very easy task for Etihad Airways. The Etihad Airways is giving a fair competition in New Zealand market. Although the main business of the Etihad Airways is international air transportation, it is found that this company also have a subdivision, called Etihad Crystal Cargo that controls all of the international goods transportation services. According to Hazledine (2011), the Emirates Airlines held almost the same value as the Etihad Airways, but still over achieved the success for the last 25 years. Apart from Etihad Airways, the other competitors of Emirates Airlines are Gulf Airlines, Air New Zealand, Hawaiian Airlines, Qantas Airways and American Airlines.
According to Forsyth (2014), the Emirates Airlines is the single giant organization, ho achieved their success without making ant collaborations or joint ventures, however, it is found from the study of (Bronsvoort et al., 2011), that the Emirates Airlines recently made joint ventures with Qantas Airways, which in turn helped to replace Singapore with Dubai as a stopover to London. Apart from the joint venture with Qantas Airways, the Emirates Airlines also have six subsidiaries that may include emirate Holidays, Emirates Tours, Arabian Adventures, congress Solution International and two others.
According to Squalli (2014), several tools can be used to perform target market analysis; however one of the best tools that can be used to analyze target market is market segmentation. The target market is also defined as target consumers, which is a certain cluster of customers with the same or similar needs but with different tastes based on their region or cultural background.
The tool, market segmentation is used to divide the market into four main categories such as demographic, psychographic, geographic and behavioral segmentation. After dividing the target, it becomes easier for the management to make several subdivisions, which in turn are helpful to understand consumer demand. After defining the customer demands, the Emirates Airlines can determine their marketing strategy and launch their products in an effective way (Vij & Vij, 2012).
The demographic segmentation focuses on some specific aspects of the target market such as occupation, gender, sex, age as well as education. According to Bloch (2010), “demographic segmentation almost always plays some role in a segmentation strategy.” The demographic segmentation is important as it helps to determine the taste or nature of the consumers. The demographic segmentation will be helpful for the Emirates Airlines to determine the charge of their flight tickets as well as other services. On the other hand, the geographic segmentation is helpful to divide market by location. However, it is found that the geographic segmentation is not important in the target market study of Emirates Airlines. On the other hand, the psychographic segmentation is helpful to divide the customers based on lifestyle and culture. It is found that the behavioral segmentation is also helpful to determine the attitude of the customers towards the service offered by Emirates Airlines. Apart from all of these factors, there are other segmentation criteria that need to be considered while analyzing New Zealand as the potential market for the service offered by Emirates Airlines. These “other segmentation criteria” may include- Type of the Travellers: Business traveller, traveller on a religious purpose and Leisure traveller, Value: some people value more the convenient flights while others consider price a more significant, Motivation: Various reasons for travelling, Travel Pattern: Frequency, Buying Pattern: online ticket booking or buying ticket from the counter. Apart from these segmentation criteria, the management needs to focus on several other criteria such as Needs and Wants: this may include the primary requirements of the consumers and determine how price sensitive they are (Jang, 2011). Satisfaction is another criterion that needs to be discussed. The satisfaction may include the commitment of the customers towards the Emirates Airlines and the chances of their switching carriers. Based on these criteria the Emirates Airlines will determine the customer segments such as First Class, Business Class, Economy Class and Individuals business.
Political and Legal Environment: According to O’Connor & Fuellhart (2012), the Emirates Airlines has an agreement with Asian Pacific countries. Apart from this agreement the Emirates Airlines also signed other agreements to facilitate their services as well as the quality of services. According to the study of Ringbeck et al. (2010), it is found that the trades made by the Emirates Airlines have been proved as favorable for the growth of the company. However, in New Zealand, the Emirates Airlines does not have any agreement accept the alliance with Qantas Airways. On the other hand, it is observed that there is less turbulence in the political environment of New Zealand. Therefore, it can be said that the stable political environment s helpful for the business growth of the Emirates Airlines in New Zealand.
Economic Environment: According to Cheng et al., (2014), it is recognized that the increment in fuel prices created hurdles for the Emirates Airlines to expand their business in other countries and generate a higher amount of profits. However, it is found from the research study of Al-Ali (2014) that the economy condition of New Zealand is running well. Although, there was an economic turbulence due to the recession from the last couple of years the economy of New Zealand became stronger. The per capita income for the common people of New Zealand is 38,678.41 USD (GDP, 2012). Therefore, it can be said that the chances of business growth in New Zealand for Emirates Airlines are higher.
Social and Cultural Environment: According to the study of Alkaabi et al., (2013), The Emirates Airlines so far maintained its cultural and social diversity. They maintained cultural and social diversity through their wide range of services towards the religions, societies and traditions of different countries. The workforces hired by the Emirates Airlines are also diversified based on their cultural and social backgrounds. In New Zealand, the number of people who belongs to different religions is comparably lower than that of Australia, the United Kingdom, and the United States. In addition, the scenic beauty of New Zealand attracts a huge number of tourists from different countries. Therefore, it can be said that the social and cultural environment of New Zealand is favorable for the business growth of Emirates Airlines.
Technological Environment: Although the Emirates Airlines installed a lot of modern technologies to enhance the quality service of this airlines company, after analyzing the technologies used by other airlines companies, it can be said that the Emirates Airlines needs to implement more technologies to support their service system. According to Holland (2010), a development in technology can be proved as helpful for the Emirates Airlines to improve the aircraft facilities as well as fuel in order to reduce the wrong impact on the environment due to the Emirates operations. It is found that the company has already spent more than USD 4 million to buy biofuel, which is technically safe for the environment as well as cost effective. Apart from biofuel the Emirates Airlines also invested a huge amount of money to buy new Boeing 747-8F and Airbus A350, which helped them to remain in competitive advantage.
The threat of New Customers: New Zealand have lesser barriers for the new companies; therefore, the Emirates Airlines is facing more threat of competitions in New Zealand than in other developed countries. On the other hand, the Emirates Airlines has a high brand value that repeals other competitors. As this organization is a part of the Emirate groups, it has accesses to a large source of capital as oppose to other entrants. In New Zealand, the Emirates Airlines has already established an alliance with Qantas Airways, which is helpful for the entry and expanding business in this country.
The bargaining power of the customers: According to Parker (2012), it is recognized that the Emirates Airlines has a buyer volume than any other airlines. On the other hand, this company offered a bargaining leverage towards the customers. This company places different tickets, which include budget and luxury flights for different types of customers. Unlike other airlines companies, the Emirates Airlines can reduce the price of their flight tickets without compromising the quality of their services. According to Schaberg (2012), it is recognized that Emirates Airlines has a higher “buyer propensity” to charge highly only for luxury services. It is found that this company charges less for the short distance flying, which costs the company more. Therefore, while expanding business in New Zealand, the Emirates Airlines needs to consider the budget allowances for the customers.
Bargaining power of the suppliers: There are only two resources for which the Emirates Airlines have to depend on and bargain with the suppliers. According to Aranjo et al. (2012), it is found that the bargaining power of the suppliers is very high as this business depends on only two resources. The Emirates Airlines needs fuels and human resources to carry out their businesses. However, the rising price, as well as crisis of fuel, pushed this company backward; the Emirates Airlines started searching for substitute fuel. Due to the limited supply of alternate fuels (bio fuels) as well as the limited number of suppliers the Emirates Airlines is facing problems to handle bargain of the suppliers.
The threat of Substitute services: there are two factors that play a major role to the increasing costs of the company. These two factors are budget and luxury can cause huge price differences. It is recognized that huge price differences have occurred due to service offered by the Emirates Airlines.
Competitive rivalry: A total number of 37 airlines are considered as the potential competitor of the Emirates Airlines services. However, in New Zealand, it is found that the number of competitors is only six. There is diversity among the competitors, which may include international flyers, global flyers, and domestic flyers. Fuel and capital costs are identified as the exit barriers.
Strength:
Weaknesses:
Opportunity:
Threat:
As the Emirates Airlines is experiencing strong competition, it is found that this company is growing fast. The Emirates Airlines is aggressively pursuing larger market share in developed countries, especially in New Zealand, Australia, and the United Kingdom.
Market scope concentrates more on the family market segment, which will result in increasing awareness as well as market share.
Market Geography: the Emirates Airlines is concentrating to spread their business across the domestic boundary, which may result in increasing growth in market share, profits, and growth in international market, especially in New Zealand.
Marketing mix strategy:
Product Strategy: the Emirates Airlines is offering special services which are unique and better from the other companies. This step will be helpful to enhance the sales and market share of the company in New Zealand.
Pricing Strategy: the Emirates Airlines is offering a better package of services in lower prices than that of the competitors. They are exclusively offering ticket for the children in half price and the children who are under three can enjoy flight for “Free.”
Promotion Strategy: the Emirates Airlines is using common media as well as social media (online) in order to promote their services, which in turn increased their sale from 3% to 5% in New Zealand.
According to Holland (2010), the main stakeholders of the Emirates Airlines are customers, shareholders, the government, the employees and the media. It is found that the commitments of the staffs are the key to the increasing reputation and business of the Emirate Group. Without the active involvement of the staffs it was impossible to reach the position where the company now belongs to. On the other hand, the dedication and trust of the shareholders were also very helpful to increase the profitability of this company. Billions of dollars were invested by the shareholders, which were used to develop the infrastructure of the Emirates Airlines. On the other hand, the contribution and the constant support from the government were helpful for the growth of the company. The contribution of the media to to promote the services of Emirates Airlines is also admirable.
The Emirates Airlines is renowned for their generous services at low prices. Therefore, the consumers in New Zealand will also expect to receive the same. From the study of Cheng et al. (2014), it is found that the airlines companies, which offer their services in New Zealand, are all expensive. Therefore, it can be said that they are looking forward to use Emirates Airlines services for their less charges.
The current revenue of this company increased 13.43% in 2014 from the last year (2013). The operating profit of the Emirates Airlines doubled in the year of 2014. Therefore, it can be said that this company has more in their “pouch” to enhance their services in New Zealand. The net profit level of Emirates Airlines this year is 41.9%. The profit attributable to the Emirates Owner is +42.53%.
Conclusion
After reviewing the marketing strategy of the Emirates Airlines and their current position in the international it can be concluded that this company has the potentiality to enhance their business in New Zealand. After SWOT and PEST analysis it is recognized that the Emirates Airlines have the strong economic background and high resources, which is indeed helpful for the growth of the company in this country. On the other hand, it is recognized that level of profit is already high enough to implement new technologies and services in the system. However, the rising price of fuel is a threat for the business, which needs to be handled carefully.
After reviewing the present status of the Emirates Airlines, the following recommendations can be made to enhance the quality service of the company in New Zealand and enhance their business-
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