Emirates Strategy Analysis
- 2. • Financial Report • Environmental Analysis PESTEL Analysis Porter’s 5 Forces • Inside Organizational Analysis The McKinsey 7S BCG Matrix Porter’s Value Chain • SWOT • References • Introduction History Today’s Situation Vision Mission Goals Volunteer activities • Strategy • Products • M&A Table of Context
- 3. 1959 • Dnata is established by the Dubai Government with just five staff to provide ground handling services at the new Dubai International Airport. 1960 • Sheikh Rashid bin Saeed Al Maktoum opens the airport and implements innovative open- skies policy. 1984 • Sheikh Mohammed bin Rashid Al Maktoum and Mr. Flanagan discuss launching an airline in Dubai. Introduction - History
- 4. 1985 • Sheikh Mohammed introduces Mr. Flanagan to his uncle and future Emirates chairman Sheikh Ahmed bin Saeed Al Maktoum. • Mr. Flanagan embarks on ambitious mission to launch an airline with $10 million in five months. • Pakistan International Airlines agrees to wet-lease Emirates two aircraft. • On October 25 Flight EK600 departs Dubai International for Karachi. 1987 • Deals are struck to fly into London’s Gatwick Airport, as well as Istanbul, Frankfurt and Male, the capital of the Maldives. 1988 • Damascus is added to the Emirates route network, giving it a total 12 destinations in just 38 months of business. Introduction - History
- 5. 1991 • Emirates finally get a slot at the busiest international hub in the world – London Heathrow. • As the airline celebrates its sixth anniversary, 25,000 passengers a week are being flown to 23 destinations. • 1992 • Emirates becomes the first airline to install video systems in all seats in all classes throughout its fleet. • $2 million terminal exclusive to Emirates is opened at Dubai International. • 1995 • As the airline celebrates its 10th birthday, it has a fleet flying to 34 locations in the Middle East, Far East and Europe. • Emirates Flight Training Centre opens. Introduction - History
- 6. 1999 • Emirates enters the hotel property market with the opening of the Al Maha Desert Resort & Spa. • Emirates Group’s workforce totals 11,000. 2003 • CAE and Emirates join forces to open the $100 million Emirates Aviation Training Centre which boasts numerous full-flight simulators. • Emirates shocks the industry at the Paris Air Show with the biggest deal in civil aviation history - a staggering order for 71 aircraft at a cost of $19 billion. • The A340-500 features revolutionary ice in-flight entertainment system – including 500 channels in all classes, while every seat is equipped with a phone. Introduction - History
- 7. 2005 • Emirates Group workforce totals 25,000 people from 124 destinations around the world, making it Dubai’s biggest employer. • Emirates orders 42 Boeing 777s in a deal worth $9.7 billion, the largest Boeing 777 order in history. 2010 • Emirates SkyCargo operates the first paperless flight between Mauritius and Dubai with all shipments carried processed electronically. • dnata becomes the 4th largest catering provider worldwide. 2012 • Emirates joins Boeing in Seattle to celebrate the unveiling of its 1,000th 777. The landmark aircraft becomes the 102nd to join Emirates’ Boeing 777 fleet. Introduction - History
- 8. • Emirates flies to more than 130 destinations in 70 countries on six continents • More than 1,200 emirates flights depart Dubai each week, accounting for about 40 percent of all air traffic out of Dubai international airport. Today’s Situation
- 9. • They now have a fleet of more than 170 aircraft. the company has another 230 aircraft on order (worth about $84 billion) and is the world’s largest operator of both the airbus 380 and Boeing 777. Today’s Situation
- 10. Mission Statement • We exist to become one of the top lifestyle brands in the world. Vision Statement • To make civil aviation safe, leading and sustainable. Goal • To reach on top by excelling at what we do. Introduction - Mission, Vision, Goals
- 11. • The Emirates Airline Foundation’s board of directors, made of Emirates Group management, decides on what projects to target. • Most of these projects are located at Emirates’ destinations where local Emirates staff volunteers can participate and oversee their management. • The foundation’s list of projects includes: The Emirates Friendship Hospital Ship, Bangladesh The Emirates-CHES Home, Chennai, India Supporting children with special needs, Dubai Kharja Charitable Society, Jordan Introduction - Volunteer activities
- 13. • Differentiation Strategy • Quality Control strategy • Extensive Aviation Training strategy • International Airline Information Technology Development Strategy • Resort, Hotel and Tourism Strategy Emirates Airlines Strategies:
- 14. One year of Action plan Months Descriptions Department responsible Completion expectation January R&D of designing all cabins Design & engineering department 1 until 29 January 2011 February Improve the media system in the first class cabin such as SMS, phone and e- mail IT department 1 until 15 February 2011 March R&D of buy or lease of new aircrafts Engineering & purchase department 1 until 30 March 2011 April Doing advertisements to introduce the benefits that customers can get of flying in Emirates Marketing department 1 until 7 April 2011 May Update airport system and entertainment system in flight IT department 1 until 20 May 2011
- 15. One year of Action plan Months Descriptions Department responsible Completion expectation June Training 50 crew to improve their performance Human resource department 1 until 25 June 2011 July Advertisements campaign to promote how easy to visa pass to enter Dubai if using Emirates airline Marketing department 1 until 29 July 2011 August Checking out of facilities pricing Marketing department 1until 27 August 2011 September Maintenance for 30 aircrafts Engineering department 1 until 30 September 2011 October Evaluating the sales performance Financial department 1 until 20 October 2011 November Secure the process of e-buying IT department 1 until 29 November 2011 December Set new promotions strategies for 2012 Telecom department 1 until 15 December 2011
- 16. • Master the art of me-time • Savour gourmet meals whenever you please • Reawaken your senses in the onboard Shower Spa • Meet the world at 40,000ft • Your window into new worlds • Experience a seamless journey from start to finish • Feel pampered in First Class Products: First Class Flights
- 18. • Arrive inspired • Taste your way around the world • Meet the world at 40,000ft • Your window into new worlds • Experience a seamless journey from start to finish • Enjoy extra comforts on your journey Products: Business Class Flights
- 19. • Experience a journey in a class of its own • Taste the flavors of your destination • Your window into new worlds • Boredom is grounded Products: Economy Class Flights
- 20. • Emirates SkyCargo is a cargo airline based in Dubai, United Arab Emirates. It is the air freight division of Emirates, which started operations in October 1985, the same year Emirates was formed. Since then it has been the main cargo division of Emirates, and the anchor cargo airline at Al Maktoum International Airport, its main hub. Emirates. SkyCargo operates dedicated cargo flights to 20 destinations in 15countries from Al Maktoum International Airport, and through the Emirates network has access to additional 79 destinations. Products: Sky Cargo
- 21. • Passengers may check-in between 2 to 48 hours prior to flight departure. This may be done over the counter of at the lounge within the airport. Self-service kiosks are also available at Dubai International Airport, as well as at certain stations of the Dubai Metro. Products: Airport Services
- 22. • Recently Emirates started a new service called “Emirates Holiday”. It is a new way to inspire holiday - fascinating destinations, unique hotels and all the little things that come together to create unforgettable moments for a family. Products: Emirates Holiday
- 23. • Emirates Skywards is a frequent flyer program that lets you accumulate points in different ways and it also enhances your travel experience with a wide range of services and benefits. • Emirates Skywards Blue • Emirates Skywards Silver • Emirates Skywards Gold • Emirates Skywards Platinum Emirates Skywards Frequent Flyer Program
- 25. • Entertainment Music & Radio Movie TV Games • Information: Airshow News and sport headlines Onboard cameras • Communication: Stay connected Wi-Fi in the sky In-seat phone, SMS and email Mobile phone and data roaming Seat-to-seat messaging Inflight Entertainment: ICE
- 26. ICETV Live: real time news and sport • Watch the news or cheer on your team – up to eight channels of live TV on select Boeing 777s Sport 24 BBC World News Sky News Arabia CNN International CNBC NHK World Premium Euro news Al Jazeera English Inflight Entertainment: ICE
- 27. M&A Emirates is currently not a member of any of the three global airline alliances – Oneworld, SkyTeam and Star Alliance. In 2000, however, the carrier briefly considered joining Star Alliance, but opted to remain independent of the three alliances.
- 28. Financial Report:Revenue 42.5 42.5 52.9 61.5 71.2 87.8 96.5 0.0 20.0 40.0 60.0 80.0 100.0 120.0 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 Revenue in billion AED
- 29. Financial Report:Passengers 0.0 10.0 20.0 30.0 40.0 50.0 60.0 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 Number of Passengers in millions
- 32. PESTEL Analysis
- 33. • Emirates airline is owned by Dubai’s government which this will help it to follow the regulations of government. • Emirates has signed the agreements with countries in Asian Pacific also other countries about facilitate trade. These agreements have opened up Emirates to the world. • Wars and terrorism could affect the company negatively. • Deregulation and “Open Skies” PESTEL Analysis-Political
- 34. • Fluctuations in the fuel prices creates hurdles for the company to generate more profits. More than 40 percent of all expenses are related to jet fuel. • The potential investments in Dubai of the tourism industry and the business world will encourage more people to visit it. • Economic conditions around the world, specially the countries where the airline flies, could affect the company. • The Dirham is pegged to the U.S. dollar so currency fluctuations are not significant. PESTEL Analysis-Economical
- 35. • There is rapidly increasing world population and in this way increasing in number of tourist and educated people. • The company has maintained its social and cultural diversity by offering its airline services to various societies, religions and traditions who are all interacting at one place. The company’s workforces also try to adapt itself according to the social/cultural environment they operate in. PESTEL Analysis-Social
- 36. • teleconferencing decreased the need of physical and face to face business meetings which directly affects on the sale of the company and decreased the passengers. • A development in technology will help the company to improve aircrafts facilities and fuel in order to reduce the environmental impact of the Emirates operations. • Emirates develop the online ticket purchase to make it conveniences for customers. • Technology has also brought inflight entertainment services to a higher level. • Technology has made inflight communication services possible. • in august 2013, emirates became the first airline in the Middle east to provide Google now cards for their passengers who book via emirates.com. PESTEL Analysis-Technological
- 37. • Airbus 380 aircraft is friendly with environment. This kind of aircraft able to consume less of fuel and emissions. • Natural disasters like earthquakes and volcanic eruptions are a threat to this business PESTEL Analysis-Environmental
- 38. • Department of International Government Affairs, preparing the ground work for conducting negotiations for Air Service Agreements, by establishing links with other states and provides a necessary platform for the successful implementation, of an International Air Transport System. The department also serves as a point of contact for international and national aviation authorities and looks after aero-political rights of Dubai. • Dubai is one of the fastest-growing countries in the world because thousands of people migrate to Dubai monthly, often because there is no tax on the personal wages in Dubai. • The government of Dubai treats Emirates as a wholly independent business entity on its own and attributes this to the firm’s success. PESTEL Analysis-Legal
- 40. • In airline industry threats are low as comparatively barriers are high. Some challenges under below due to new entrants.. the existence of barriers to entry (patents, rights, etc.):- national carrier(hence enjoying many benefits) brand equity:- renowned player, markets heavily, old in industry, very high brand value Capital requirements: - part of emirates group, so capital is not an issue. Access to distribution: - very accessible, has its own terminal & direct metro & busses. Customer loyalty to established brands: has a program like skywards & frequent flyer miles. Porter’s Five Forces: Threats of New Entrants
- 41. Supplier switching costs relative to firm switching costs: - very high (only 2 suppliers) Presence of substitute inputs: - a lot of substitutes are present for suppliers as there are over a hundred airlines currently operating & most of them are planning for expansions. Porter’s Five Forces: Bargaining Power of Suppliers
- 42. Buyer switching costs relative to firm switching costs: easier to switch between airlines as people might find competitive schemes & offers or cheaper tickets or better services with other service providers. Number of flights to a particular destination, e.g. only emirates operates direct flights to San Francisco from Dubai, hence has competitive edge. As no other carrier has a direct flight on this route. Buyer price sensitivity: - difficult to compete with competitive prices of budget carriers, but emirates compensates it by offering world class food, services, comfort & in-flight entertainment. Differential advantage of industry products: - A380 aircrafts, world class service, choices of menu for elite class, its own private terminal, non-stop direct flights to various routes some of them world’s longest non-stop direct flights. Porter’s Five Forces: Bargaining Power of Buyers
- 43. Porter’s Five Forces: Bargaining Power of Buyers
- 44. Buyer propensity to substitute: - very high as there are two types of players in market, budget & luxury. This leads to a huge price difference. So a lot of people prefer going for cheaper tickets for short distance flights. Hence emirates looses business. Relative price performance of substitutes:- Huge price differences due to services offered, but in luxury segments Emirates leads the market. perceived level of product differentiation:- in case of emirates the perceived value is fairly good due to new aircrafts, courteous crew which provides personalized services, gourmet food with at least 4 meal choices for business class & above, its own world class new private terminal to fly from, fleet of new latest technology aircrafts. Porter’s Five Forces: Threat of a Substitute Products or Services
- 45. Number of competitors:- 37 airlines fly from & to Dubai Rate of industry growth: - Middle East showed the strongest growth at 11 percent in the last decade. diversity of competitors: domestic flyers & global flyers Sustainable competitive advantage through continuous improvisation:- new services like onboard Spas, fully reclining seats, live TV. Porter’s Five Forces: Rivalry amongst existing firms
- 46. Porter’s Five Forces: Forces Impact Threats of New Entrants low Bargaining Power of Suppliers High Bargaining Power of Buyers Maderate Threat of a Substitute Products or Services Maderate Rivalry amongst existing firms Maderate
- 47. Inside Organizational Analysis 7s Mckinsey BCG Matrix Porter’s Value Chain
- 48. 7s Mckinsey
- 49. 7s Mckinsey Strategy: Emirates Airlines has been considered to be at the forefront of industrial aviation throughout the years. Having flights to more than different cities all over the world, Emirates Airlines corporate strategy gives importance with the diversity of their stakeholders, specifically with their clients. As the company is committed with the diversity of their clients, the diversification management approach of the company enables them to ensure that clients and communities receive excellent service provided by passionate and dedicated staffs and employees. The success of Emirates Airline is also attributing to the generic strategies which include focus-leadership strategy. It can be said that the strategy of Emirates Airlines is a good strategy and it enables the company to provide total commitment and support organizational operations.
- 50. 7s Mckinsey Style: The competitive advantage and position of Emirates can be attributed by their leaders. The leadership style of "family style". It can be said that they are able to integrate patience as well as their will to attain consensus with the capability to act quickly and decisively. Emirates leader can be considered as an influential and democratic kind of leader. It is known the leadership composes the aptitude and skills to inspire as well as influence the behaviour and the thinking of the people or the subordinates.Emirates leader looked for final decisions made by the other members of the corporation especially the shareholders.
- 52. 7s Mckinsey Shared Value They believe their business ethics are the foundation on which their success has been built. Caring for employees and stakeholders, as well as the environment and the communities , have played a huge part in their past and will continue to shape their future. Staff: remuneration packages are offered based on the labor law of each country and are benchmarked with other reputed airlines. Emirates provides a Profit Share to all eligible staff based on company performance which has ranged from between 2 and 14 weeks of basic salary. All eligible staff can avail concessional airline rebated tickets for self and family.
- 53. 7s Mckinsey System: The most important issue in Emirates system is their IT solution. Being an international company resulted in needing a high qualified IT system to manage and control all the branches’ performance. Skills: Emirates has a training center named “Emirates Aviation University” which has helped the company to acquire new skilled employees. They also have a in-house training center for training and development of the employees.
- 54. BCG Matrix Emirates Business Class Emirates First Class Emirates Economy Class Emirates SkyCargo Emirates Holidays
- 56. Porter’s Value Chain Support Activities Firm’s Infrastructure Vertical hierarchy Government financial support Department of International Government Affairs legal support Free tax by Dubai international airport Standardized aircrafts HR Management Emirates Aviation College Rewards based on performance program Accommodation and transport allowance Technology Development Inflight Entertainments (ICE) In-house research center Engineering center New Technologies in SkyCargo Online reservation system Procurement Emirates catering system Fuel Handling
- 57. Porter’s Value Chain Primary Activities Inbound Logistics Exclusive Emirates terminal for fuel storage Organized catering system Operation Check in Service Desk Boarding and lounge services Baggage and handling Outbound Logistics SkyCargo Marketing & Sales Official Sponsorship Slogans like “Fly Emirates”, “Hello tomorrow”, “keep Discovering Awards achieving Pricing strategy Services Skyward Emirates Lounges Emirates hotels & resorts ICE
- 58. SWOT Analysis
- 59. SWOT Analysis- Strengths Having strategic position in the global market. Huge profits from several consecutive years The ability to continuously renew and improve their service in the airline and aviation with strong support of Dubai government. Customer loyalty program Skilled workforce
- 60. SWOT Analysis- Weaknesses • Analysts have accused the company of focusing too much on their high-end acquisitions and diversification in spite of the risky effects of such decisions. • No global international alliance • Fares are higher than other international airlines
- 61. SWOT Analysis- Opportunities Emirates have ability to develop continuously new generations of more advanced airline and aviation services for long-term competitiveness. The important contributing factor to Emirates’ success, and a huge opportunity for future growth, is Dubai’s very suitable location. The UAE’s government has been a successful in negotiating free-trade agreements with all major economies from the USA to the emerging markets of Asia (though not with a reluctant EU), which are very likely to further increase demand for air travel to and from the UAE.
- 62. SWOT Analysis- Threats The competitors have the very aggressive growth plans of some other Gulf- based carriers, most notably of Qatar Airways and Etihad Airways, that might pose the most serious future threat to Emirates. Qatar Airways’ catch-up strategy with Emirates seems to rely largely on undercutting its competitor while offering similar product quality. Etihad’s expansion might prevent Emirates from obtaining much needed traffic rights to countries that do not pursue an open-skies policy. Fluctuations in the fuel prices creates hurdles for the company to generate more profits Wars and Terrorism in Middle East.
- 63. • The long-haul, low cost carrier strategy. • Differentiation. • Horizontal Diversification. Emirates Airlines Strategies
- 64. • Emirates' unit operating cost is about 40% lower than the lowest cost European major, KLM. It derives its cost advantage from: I. Its business model is focused purely on long-haul aircraft II. The zero tax rate in Dubai III. It has not acquired legacy costs 4. It is a dollar-based carrie Emirates' strategy is unique in that it plans to serve the connecting market with just long-haul aircraft, whereas most hubs in Europe and the US have an expensive short-haul network (generally competing against LCCs) feeding into a hub. Emirates Airlines Strategies – The long-haul, low cost carrier strategy
- 65. • Emirates is differentiated as a legacy airline where advanced technology, staff skills and ancillary services are the main drivers for success. Therefore, Emirates is aware of the need for continuous innovations, not only in fleet and staff expansion but also in premium services. Emirates has been renowned for technology development and skilled staff of multi- culture backgrounds Emirates Airlines Strategies – Differentiation
- 66. • Although less well known than the airline, DNATA is a diversified, multinational force of its own. DNATA Airport Operations takes care of baggage and cargo handling at 17 airports in seven countries - the Emirates, Singapore, the Philippines, China, Switzerland, Pakistan and Australia. DNATA Travel Services, meanwhile, handles ticketing and travel bookings for individuals and corporations at dozens of locations in the GCC, and recently opened an office in Kabul. • Over the years, the airline has also diversified into hotels, a natural synergy with its airline and holidays divisions. It controls the Le Meridien Al Aqah in Fujairah, and the small but growing Premier Inn Hotels chain in the UAE. New projects include other hotels and resorts in Dubai, Australia and the Seychelles. • They have also diversified their business into “Education” through building Professional Aviation Universities. Emirates Airlines Strategies – Horizontal Diversification
- 67. • Generate Growth Through Innovation. • Enhance Customer Experience. • Create Operational Excellence. Strategy Themes
- 68. BSC Map
- 69. • Critical Success Factor (CSF) • Key Performance Indicators (KPI) Control and Monitoring
- 70. • This is vital for a capital-intensive industry such as airlines It is critical that good managers can run operation costs at minimum level to increase highest profits. To balance total operation costs, the management must solve the problem on cost cutting in process to keep profitability Critical Success Factors (CSF) – Cost competitiveness:
- 71. • Emirates is well-established with strong network alliances over international destinations. On the other hand, Emirates has continuously invested in its fleet and enjoyed high profitability (refer to Appendix 4). This means the company is able to increase capacity while still able to maintain fixed costs compared with other players. Emirates can have access to global markets with greater geographical coverage. Thus, this creates a high barrier to other entrants due to high costs and scope of business. Critical Success Factors (CSF) – Economies of Scale:
- 72. • Emirates has built up its brand and image significantly within the last two decades. Morecustomers have become loyal and chosen Emirates when travelling from the Middle Eastand Europe or NZ (Stanik et al, 2007) because of high quality, product innovation and excellent service. Critical Success Factors (CSF) – Brand loyalty and product quality:
- 73. Key Performance Indicators (KPI) – Revenue growth (Sale KPI): 42.5 42.5 52.9 61.5 71.2 87.8 96.5 0.0 20.0 40.0 60.0 80.0 100.0 120.0 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 Revenue in billion AED
- 74. Key Performance Indicators (KPI) – Market share (Marketing KPI): 0.0 10.0 20.0 30.0 40.0 50.0 60.0 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 Number of Passengers in millions
- 75. Key Performance Indicators (KPI) – Ground Operation KPIs:
- 76. References Strategic Management; Concepts and Cases; Fifteenth Edition; Fred R. David; Forest R. David http://www.emirates.com http://www.skycargo.com www.dnata.com www.emiratesholidays.com
- 77. Thank You!