REPORT ON ANALYSIS OF STRATEGIC OPERATIONS
Introduction
Emirates Airline (Emirates) is an airline company in UAE. The company principally engages in providing commercial air transportation services in the United Arab Emirates and internationally. Emirates Airline operates as a part of Emirates Group. Emirates offer passenger, cargo, and postal carriage services. In addition, the company also engages in providing wholesale and retail consumer goods, in-flight and institutional catering, and hotel operations. Emirates operate in seven segments namely, Destination and Leisure Management; Emirates Hotels and Resorts; Emirates SkyCargo; Skywards; Emirates Official Store; EmQuest; and Emirates Engineering. The company operates a group of more than 130 Boeing and Airbus jets and about 10 cargo freighters. Emirates Airline is headquartered in Dubai, UAE(Anne 2012 p.157).
Emirates Airlines originates from a search for efficient fundamental drivers for the economy of Dubai. Its an organization that offers air transportation services, promotes tourism, hospitality and real estate. Dubai government ventured in establishing this organization during the period when there was scarcity in oil resources and therefore had to search for an option that would boost the growth economy .
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QUESTION ONE :Critical assessment of the links between operations strategy and business strategy within your chosen organization. Clearly state any assumptions you make.
Appropriate strategy:Emirates Airline Company is differentiated as a heritage airline where by high levels of technological, employees skills and auxiliary services are the major factors that facilitate its accomplishment. As a result, Emirates is responsive of the necessity of consistent innovations, whereby improvement is done in both fleet and staff expansion and in premium services. The organization has been well-known for technology development and skilled staff of multi-culture backgrounds (Hephaestus ,2011p 97)
The connection between the operation strategy and business strategy in Emirates is based in various premises in its business model. Which include:
Labor cost economies: A combination of the company’s lean employees and young fleet is attributed to f its incredible low cost and a firm cost-based competitive strategy. Its employs exceptionally lean workforce that ensures a labor-prompted low cost. Therefore the company is able to run as a relatively fore from low-cost “no frills” airlines compared to other conventional “flag carriers”. This strategy is congruent with the simple organizational structure, enables the company to reduce overheads costs. According (Guilherme et all.2009 p.124).Its low cost strategy is subsequent only to Ryanair Airline company on a cash cost per seat stand point. Consequently, the workforce Emirates is not unionized hence termed as a toothless workforce.
Emirates have received a significant blithe support for the Government: The organization has been obtaining and keeps on obtaining both direct and indirect monetary and other forms of support from the government of Dubai. Conversely, Emirates gets a lot of benefits in Fleet cost economies. Since the organization operates as an all wide-body fleet it has been able to reduce unit costs in contrast airlines that function as mixed narrow/wide-body fleets. This operation strategy has enables Emirates to make use of these aircraft’s cargo competence to advance its general revenues and total profits, in particular during periods when the customer business gets to a seasonal channel or else when there is an economic depression that has an unpleasant effects of reduced number of customers. Its Dubai hub also gives it an advantage of growing cargo business between other regions of the world such as West Africa, China, and India
So far the organization has declined to bond with the other chief global airline alliances. It further queries the benefits of these associations to both the airlines and its customers. in particularly after considering the high costs of compliance and membership associated with this association the company has been able to lower its operational costs and hence able to sustain its low cost business strategy. The company has also strived to be very responsive in taking up any given business opportunity. The behavior of the organization in some of the instances has been termed as proactive and opportunistic. The company has been able to seize market through its price differentiation model. Concurrently, Emirates has ensured the establishment of efficiently position hub. Dubai airport is a proficient hub that enable Emirates airline beneficially cater for secondary destinations on top of linking such regions through its comprehensive Dubai hub(John .2011 p.340)
The company’s Strategies
The links in operation and business strategies of Emirates are an integration of the surroundings where it operates and the produce of inherent strategic thoughts from inside the carrier. The environment could be perceived in a perspective of Porter’s five forces which include threat of entrants, power of suppliers, and power of buyers, substitution impact and rivalry
Begging with the Threat of New Entrants, it appears in many dimensions that the airline industry is a low access obstacle industry. Funding which is the primary access barrier seems to be readily accessible in the United Arab Emirates and technology and expertise also seem to be affordable. On the Power of Suppliers, Boeing and Airbus are the two key suppliers and competition within them is possible, evident but not detestable. Furthermore, the probability of a supplier assimilating vertically is not very prone to occur. The Power of Buyer that is the negotiating power of airline industry consumers in the Middle East is rather reduced compared to other region in the world. Conversely, on the substitution impact that is Availability of Substitutes, Threat is in actual fact narrow regarding the distances in the United Arab Emirates and the fast speed that is fitting a symbol of the area.
Looking at the Competition and Rivalry, the airline industry is in general exceedingly competitive and highly competitive industries generally acquire and receive low returns on investment due to the high cost of operation especially when trying to establish a strong competitive advantage. Nevertheless, The United Arab Emirates is advantageous due to the government’s support which is always prepared to moderate competition from other industries. Therefore, even though environment is composed of the threat of new entrants and competitive rivalry, it does not appears as an actual threat from substitution or consumers and suppliers for such a case.
The Strategic behavior of Emirates, inside this category of environment, operates corresponding to Ansoff’s product market strategies Matrix. In reality the equivalence is so close that one doubts if the top organization or persons accountable for formulation of the strategy operating within the company have been functioning on the basis if this model. The connection of Emirates operation and business strategies involves penetration strategies, product development strategies, market development strategies and the current component of diversification (Stephen .2012 p. 43)
Starting with the Market penetration in the United Arab Emirates, the region is Emirates’ major market fragment and the fragment that warranted the establishment of the organization in the first place. According to the deliberate policy of market penetration the company is intensively penetrating the market segment in this region on the Product development aspect, the company’s product development is of modest fraction. This approached linked product stipulations and the nature of services provided more than the institution of vagaries in product mix. On the Market development, Emirates has strived to undertake geographic extension including the entrance into the United States of America market is a distinctive instance for market development.
Diversification: the organization’s entrance in the storage market is a good example of its efforts at diversification. These efforts are all at linked product and market diversification. However in line with this approach, other measures of performance in addition to revenue, asset and capital expenditure performance developed over time.(Oxford Business Group, 2008 p. 180)
According to the 2006 annual report given by the Chairman , these results clearly illustrate the extent to which the company uses customer-oriented approach and investments in offering a quality product . The company has invested in acquiring the best aircraft available; the top-flight service and travel capability at a relatively fair cost and therefore these efforts have eventually resulted to a positive impact by sustaining and winning new consumers universal even though the company encounters challenges such as pressure from fuel costs endlessly reducing the vigorous net income creation. Emirates strive to revert its annual profit sequentially and ensure the achievement of this concrete performance is maintained while expanding its operations in an progressively competitive surrounding.
However, despite the magnificent success, there are strategic faults. For instance many wonder whether Emirates really the product of Arab strategic thoughtful. Emirates is controled
by a board whose chairman is Sheikh Ahmed bin Saeed Al Maktoum and Vice chairman is Maurice Flanagan, an expatriate, who is also a President of Emirates Group. While there is slight qualm that the broad strokes are Sheikh Al Maktoum’s, there is equally little doubt that Mr. Flanagan is the strategic overseer and the principle decision maker within Emirates airline. While there is no pressure from his employers to retire, Flanagan, who is 77explains that there is a succession plan in place. (Ibrahim , 2006 p. 302)
Secondly another query is the organizations disregard for the growing local competition is strategically appropriate. However, Competition is on the horizon and the competitors have a long way to go .Etihad Airways, being a government of Abu Dhabi invention, is establishing diverse frameworks of approach to the local and international travel in glaring contrast with Emirates airline. Unlike the low-cost airlines, Etihad is concentrating on providing a product that appeals to passengers that want a exceptional services, at a competitive international price.
Crucial to the Etihad’s probable is a move away from the old-fashioned classes, as it becomes the first regional airline to incorporate the idea of premium economy and amends it for the regional marketplace. Etihad denotes to travelers as guests and has guest zones instead of fare classes. These are significantly compelling competitors working hard to transform critical product attributes. Therefore one can be left to wonder whether Emirates is able to meet this encounters. Emirates are under cost pressure and one is left to wonder how far can be company lower its low cost strategy. The costs Fuel is constantly increasing. Like other airlines, Emirates
Might be forced to upsurge the fuel surcharge constituent of the fare .the company will eventually be left in the dilemma on how far a cost cutting strategy can reach given very lean staff and keenness the airline holds on other price products
Emirates airline has been focusing upon a immense buying swing that will expand the magnitude of fleet and enlarge capability rather than integrating backwards. The amount
Of investment is substantial and the tactical inferences are far accomplishing. The strategic query that could be raised at this point is the reason as to why the company is buying instead of integrating backwards. The company ought to have acquired equity into the aircraft building industry just like its competitor such as Qatar airline which is trifling with the concept.
This will result to apparently long term benefits and may even convert the fortunes of Emirates airline altogether.
Critically looking at the remarkable growth of Emirates by any measure one wonders whether this is sincere or it a by-product of Dubai’s government identifiable economic expansion. Despite that fact the perception that the airline’s growth was largely a windfall from Dubai’s Economic windfall can still be entertained. In spite of everything a GDP rate of growth of 8% for the United Arab Emirates as a complete, and figures close to that in earlier years, has an overflow. Consequently, if tourism is one of the primary boosters of this progression, that spread is most likely to replicate on other the prime airline companies within the region(Ibrahim ,2005 p.120)
Strategic associations are one of major the business tactics that have conquered the airline industry for years. However, it’s rather unanticipated, thus, that Emirates airline declines this strategy at both local and International levels. Its Point of view for this circumvention is not brought out in the airlines documents and concealed motives may not be identified. The subject remains nevertheless that associations within the airline industry have their validations and benefits and association abhorrence may not work to the benefit of Emirates in the longer term.
Finally one may wonder whether Emirates’ fleet composition is consistent since goods and whose revenues are well below the $100 million mark. Emirates have strategically positioned itself, market wise, in the first and third category and technology wise, in the first.
Whether this is strategically and operationally opportune remains to be seen.
QUESTION TWO. Critical appraisal of issues relating to layout, process type and use of technologies within your chosen organisation. Clearly state any assumptions you make.
Management’s competence
Presence a lean workforce and highly advanced technical know-how in combination with firm commitment are vital to the success of Emirates airline .These can be demonstrated through how organization was able to endure and made profits following the September 11 terrorist attack, an incident which was a basis of conflict in the airline industry whereas other airline companies declared economic failure or losses. Emirates airline was careful concerning not making an over-capacity and suitable initiation of novel goods when and where demand and prosperity are elevated (Benoît .2010 p. 250). The company thrived in growing and establishing a new destination into New Zealand in 2003 which saw 29international airlines companies providing services to the country. This advanced level of technology and center competences can not be duplicated. Therefore, Emirates airline possess a immense value of its benevolence that has been reputable throughout its existence.
Processess
The organizations business-level strategies and processes, aimed on differentiation as a 5-star standard airline. Product development was done in the concept of offering luxury, outstanding quality and first class service. Emirates airline has demonstrated to be a flourishing corporation by seizing every given opportunity in the market segment with high levels profitability .Bearing in mind its capabilities, proficiencies, competitive advantages and economies of scale, Emirates has diversified its processes to extend global market segments on its own. Clearly, the company has a strategic management system considers possible negative implications associated joining major associations with tough competitors of similar standards of economies of scale, working within the markets and channels. This is done while putting into Consideration the fact that it is well conventional business the capability to compete with other great airline companies with its own created competitive advantages and core competences. Emirates avoid disposing its technical know-how, expertise and other resource values to potential competitors This this can be used as an example of an exceptional strategic management process within the organization. Emirates exist in a secure growth stage of the industry lifecycle. The company’s strategies and processes have been regarded as suitable. This is the reason why the organization grew at an standard annual rate of 25% making it one of the 20 largest and the fifth most beneficial airlines company in the world in 2004.
Technology
The most recent technology is has significantly influenced progress of the organization in airline industry. The need for improved levels of technological is yet to be first driver in the industry since it will generate the benefits of acquiring a more of the profitable business market (Markus .2007 p.27) Emirates is entirely conscious of this concept in the course of continuous investments in most recent technology following its differentiation in the 5-star standard airline. The present order-book of the organization stands at 244aircrafts of the most recent Boeing and Airbus, with a cumulative value of about US$60 billion. Being already the latest aircrafts, they will be one of the most modern fleets in international commercial aviation (Emirates, n.d.). the company has the objective of being lead the way in technological advances, Emirates signed in-flight mobile phone coverage agreement with Aero Mobile,developing the use of mobile phones onboard (M2 Comm 199 ).For many decades, the organization has been granted various awards which include the world’s airline of technological advances, Best Global Airline Website, Best in-flight Entertainment, Best IT developer in in-flight entertainment etc. (Emirates, n.d)
QUESTION THREE: Critical appraisal of your chosen organisations exploitation of the value chain and quality. Clearly state any assumptions you make.
30 marks
Emirates airline is well-known for a wide variety of properties, broad business, adding to its complete operations. Majority functions are possessed and managed by Emirates where Dubai International Airport has an elite Emirates Terminal .The company implements vertical integration into its central part business structure by integrating variable possessions. This bears a resemblance to the company itself all the way through manufacturing, marketing and technology. The company straightforwardly carries out check-in, service desks, boarding and lounge services, baggage and handling and airport push-backs (Emirates, n d.). Accordingly, its hotels & resorts; Emirates sky cargo; Emirates aviation college for pilot and staff training; Emirates engineering centre for repair, maintenance and training; Emirates catering, incorporate business support, These processes enhance smooth operations for the progress and profitability of the airline. clearly, the company has a magnificent probability to establish added value with the help of vertical integration in the value chain, defined .There are numerous Emirates-branded ancillary and partner organizations that operate in collaboration with Airline Company. In regards to this evaluation, Emirates outweighs competitive advantages of numerous long established airline companies globally
Looking at the product quality and brand loyalty the company has built a renowned reputation for its brand and image extensively in the previous two decades. Increasing number of consumers have turn out to be devoted and preferred Emirates when moving from the Europe or New Zealand and Middle East (Anne 2012 p.157).due to high quality, product novelty and outstanding services
Conclusions and Recommendations
The Middle East airline industry is not different from others elsewhere. It is unstable and prone to recurring price changes. Emirates Airline Company has ascended in this background and has had the capacity to bear up this “air” turmoil in the most difficult times to develop in reputation and happened to be a universal airline located in the Middle East. Areas of flaw in this extremely affirmative picture conversely relates to the degree to which the company’s implemented strategies are a product of Arab philosophy and Arab administration, the confines of the price cutting policy followed by the Company, the cautiousness of buying instead of incorporating backward, the intelligence of avoiding universal alliances and disregarding local competition, and the asset composition framework sustained by the airline currently.
Labor takes a bigger section of the company’s operation costs that is up to 25-35% .Due to this, Emirates may to re-structure organizational resources so as to minimize cost. This approach may involve dropping number of employees, reallocating resources which will eventually cutback effectively in the experience of internal revenue. This is a reliable resolution in total cost control. In addition, the company needs to renegotiate work procedure and curb the rate wage increases. So as endure present financial crisis, Emirates may consider outsourcing some functions in the value chain which include engineering, repairs, catering or ground handling. This will result to considerable reduction practical costs run. Nevertheless, Emirates will gain from an elevated know-how and competence by contracting services (Nigel et al. 2007).
Access to Market is recommended by reducing prices in current markets. The company needs to readdress its strategy to price competition to expand its market scale from lower-cost market. This attempt aims at to balancing short-term objectives against long-term requirements. This makes a potentially effective strategy since consumers are more price-sensitive and growth of budget airlines is growing. Emirates should re-access its effectiveness within specific geographic markets so as to join alliances in given markets incases there is decline in profitability. Emirates will be able to eliminate significant costs. From competitive advantages and economies of scale, the company needs to consider focusing on expansion of its functions to cargo flights.
Reference
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