The case study describes the story of Emirates Airline, which was founded in 1985 and belonged to the three largest commercial airlines by 2013. The case details the business strategy, how Emirates' chooses new routes, technology, and equipment and manages its human resources, marketing and branding, and government relationships, which form an internally consistent strategy, which capitalizes on opportunities across geographic markets. However, will Emirates' strategy be sustainable facing increasing technical and political challenges to expand and new competition from the Middle East?
Juan Alcacer, John Clayton
Harvard Business School (714432-PDF-ENG)
Jan 29, 2014
Case questions answered:
- In an industry where profitable companies are scarce, Emirates Airline has provided solid growth and profitability for years? Why? What is behind their success? Describe their global strategy.
- What is the role of Dubai in Emirates success?
- Is Emirates strategy sustainable?
- Make recommendations for future growth, include any control or implementation considerations
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Case answers for Emirates Airline: Connecting the Unconnected
EXECUTIVE SUMMARY – Emirates Airline: Connecting the Unconnected
Emirates Airlines is a Dubai-based airline that is focused on providing top-class service and in-flight experiences to its customers. Emirates’ commitment to its customers has been a key differentiator in the industry, allowing it to garner a significant amount of market share. Despite Emirates’ current position, however, market conditions and increased competition threaten its future prospects.
An in-depth analysis of Emirates and its industry has been completed in subsequent sections in order to devise strategic recommendations for Emirates to best address its weaknesses, leverage its strengths, and capitalize on market trends.
To better understand the dynamics of the airline industry of which Emirates is a part, Porter’s Five Forces analysis was performed. The results indicate an industry with a high degree of competitive rivalry, owing to strong buyer power, a high threat of new entrants, a high degree of competitive rivalry, and a high amount of supplier power. Operating in such an intense industry comes with risks. Therefore, an analysis of Emirates’ competitive advantages was performed in order to assess which of its competitive advantages was sustainable.
Of the advantages considered, Emirates’ ability to make quick decisions, due partially to a flat hierarchy and strong corporate culture, is the only sustainable competitive advantage found. Of note, Emirates’ brand strength and strategic location in Dubai are also competitive advantages, but they cannot be considered sustainable as they are not without a substitute.
Considering the points above as well as the market trends presented in the case, the following recommendations for Emirates have been formulated in order to help it build and maintain a competitive position in the market:
- Pursue financial derivative instruments such as currency swaps, oil futures and oil options in order to hedge against exchange rate and oil price fluctuations
- Increase the firm’s competitive position in the Gulf region by pursuing additional
sponsorship deals with popular sports teams
- Create a new strategic hub in the Australian market via an acquisition
- Enter into codeshare agreements with regional Chinese airlines.
A detailed overview of these recommendations is included in the Strategic Recommendations section of this report.
Emirates is a Dubai-based airline that is focused on providing top-class service and inflight experiences to its customers. Within the industry, Emirates is the third-largest airline and has competed head-to-head with nearly all other major international airlines.
Exhibit 1 highlights the intensity of the forces within the industry that have ultimately resulted in a high degree of competition. To better assess the competitive nature of this industry, Porter’s Five Forces analysis is detailed below.
Rivalry in the airline industry is high. There are a large number of airlines in the industry that compete on price and/or service. Overall, product offerings between airlines are only slightly differentiated and the competition is fierce among all players in the market. Concentrating on the Gulf region, the rivalry is also intense. In addition to Emirates, there are three main players (Qatar Airways, Etihad, and Turkish Airlines) who are all competing to be the dominant regional carrier. In addition, there are relatively new, low-fare competitors that have entered the regional market, such as Jazeera Airways.
Emirates, together with other players, have thrived in exploiting both regional and international opportunities within the airline industry as the market has become more deregulated. In light of this and due to the lure of high profits, particularly from emerging economies, the threat of new entrants is high. For one, large capital investments like the purchase of airplanes could be defrayed through leases. Additionally, gate rights could also be leased at market rates. To this point, Emirates started as a regional player with two leased planes and $10M in seed capital and eventually became the world’s 3rd largest airline. Given these factors, it is clear that there are no significant entry barriers. In addition, this lack of entry barriers, exit barriers from the entry are not very high either. This lack of exit barriers is mainly due to the fact that airplanes could be easily redeployed to other markets, sub-leased, or sold off. Additionally, gate and landing rights could be sub-leased to other carriers.
The buyer power of consumers is high in this industry. With the availability of the internet, consumers purchasing air travel have internet-based tools (i.e. Kayak.com or Airfarewatchdog.com) at their disposal that place extreme pressure on the airlines’ profitability. Additionally, the switching costs are low to non-existent between airlines as there are no real barriers preventing consumers from buying subsequent tickets from other airlines in the future. This is compounded by the fact that…