Emirates Airlines Internal Analysis
By choosing differentiation approaches to give the company a more competitive advantage in this extremely competitive market climate, Emirates Airlines devotes a substantial amount of its marketing budget towards promotion. Online advertising and PR are essential to the Emirate’s marketing effectiveness (Darcy, 2009). The focus of marketing is to project the image that Emirates Airlines is superior to the competition in terms of in-flight quality and the delivery of concentrated customer service. Thus, internally, Emirates Airlines maintains a very focused philosophy toward the provision of training and development of in-flight professionals. Some of this preparation requires diversity, as the business hires more than 150 different nationalities and has to deal with a diverse client population (Matly & Dillon, 2007). In terms of human resources, training, and growth is a vital internal tool for delivering continuous customer care and support to meet the company’s mission and differentiation strategy for a competitive advantage through care.
The company has also been able to develop a network of internal capabilities, including an ever-growing fleet of aircraft enabling Emirates to differentiate itself from being the only airline worldwide to provide non-stop flight service from a single airline hub to all six continents (emirates.com, 2009). This needs internal versatility and experience in arranging flight services in a way that does not estimate, delays, or inferior scheduling ability to the traveling customer. This is an internal competency that gives Emirates a reputation for being both creative and coordinating on-time arrivals and departures to meet international client demands.
To Emirates Airlines’ dismay, the cash status of the company is rapidly deteriorating; due largely to heavy financing of current planes and also the current economic climate which is causing drops in passengers as they cut back on business and personal costs (Kerr, 2009). The company has sought to diversify its assets, including new investments in building a hotel and its continuing dividends being paid to the government of Dubai (Kerr). Nevertheless, the company also retains a solid cash position of $2.4 (US) billion, giving the industry considerable opportunities to further diversify its market assets and produce more long-term revenues. Thus, from an internal strategic perspective, Emirates Airlines is well-positioned with favorable cash availability to reinforce its capacity to grow as the revenue perspective deems appropriate.
Emirates Airlines SWOT Analysis
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Strengths
All of the major airline companies in Europe and abroad are experiencing the economic pinch of high fuel prices. In many instances, competitors are adding fuel surcharges to absorb the costs of fuel on each flight, which is not a positive branding strategy for competing companies. Emirates Airlines has talented internal staff who are capable of negotiating sourcing through international channels to experience significant cost savings (thetravelinsider.info, 2009). Emirates procures its fuel buyer from Texas which has managed, through sourcing agreements, to save the company $242 million (US dollars) last year (thetravelinsider.info). This ability to procure new accounts for cost savings is not only a competitive advantage but also an internal competency to identify opportunities to streamline or enhance the supply chain.
Because of the business’ strong cash position and ability to procure financing, the business has some of the most updated and modern planes available, giving “overwhelmingly positive” reviews by passengers of Emirates Airlines (Thomas, 2009, p.32). The new A380 plane, built by Airbus, is part of the new airline fleet at Emirates which has one of the quietest cabins (due to quality construction) and the A380 provides aesthetic qualities in design not found on competing planes. This is both a competitive and consumer-related strength which only builds a stronger brand image and reputation for Emirates.
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Weaknesses
Even though the business has a strong cash position, the fleet of planes is heavily financed, which puts tremendous risk on the business in terms of capital procurement and terms of loan repayments to various contracted plane suppliers. Being heavily leveraged is not a solid business position and could cause problems in the event of even further consumer slowdowns and revenue decreases.
The business has also devoted considerable resources to “developing dedicated lounges across its network and refitting aircraft” (Kerr, 2009, p.1). This high financial spending has created modern and aesthetically pleasing lounges. However revenue has recently witnessed drops of over 20 percent in 2009 alone (Done, 2009). The business does not appear to be devoting enough capital to promotion to build brand loyalty. It should not be making significant planes and lounge renovations during this slow economic period and low growth environment.
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Opportunities
Having the flexibility to service multi-continent destinations, there are significant opportunities for growth both in passenger volume and in revenues. Emirates maintains the ability to further diversify the company’s portfolio by securing agreements for international mail delivery or package delivery, should the company require additional professional revenues not built on customer volumes and patronage levels. Expansion, again with a high cash position, is a realistic venture for Emirates.
The business also maintains the opportunity to outperform competition with in-flight mobile phone services, text messaging, and internet access while in-flight. Some of these have been testing-marketed on Emirates flights and there have been positive reactions from flyers. This opportunity should be considered rapidly, as many other competitors such as Ryanair are implementing these extended services and Emirates should utilize its strong cash position to refit its fleet of planes for these services.
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Threats
The evolution of cheap flights is the largest threat to the business in this highly competitive marketplace. Companies like Ryanair are offering price-focused discounts to passengers to make them defect from other European carriers in terms of value. With Emirates attempting to create a more diversified and service-focused brand reputation, this requires training and development of internal staff and also the funds necessary to provide an aesthetically-pleasing in-flight experience. Low pricing competitive business models maintain the ability to erode profitability and seize market share especially at a time where consumers, due to economic conditions, are focused on value and pricing (Barnes, 2009). Emirates recently offered some of its cabin crew staff to take unpaid leave for up to six months as a means to give incentives for cost reduction in labor (Morris, 2009). Thus, low pricing competitive airline business models are the single largest threat to Emirate’s profit margin.
Also study: Emirates Airline Strategic Management Project Report