Table of Contents
The aviation industry is advancing at unprecedented pace much appreciation to technological advancements and increased levels of competition. Today the level of competition in the Airline industry is high, and airline companies in a bid to stay abreast of their competitors are embracing the latest technologies and processes. The Emirates Airline is among the global market leaders in the airline industry. They peg their success to some factors such as branding, customer loyalty and a strong financial ability among many other factors. In as much as the Emirates Airline is highly competitive, it also faces some challenges that impede its operations. This paper seeks to analyze the company’s competitiveness. It will analyze its competitive advantage based on the PORTER’S five forces model. Furthermore, it will also look into the company’s main components of capabilities and resources and how the airline can retain its current competitive advantage.
Before analyzing the company’s competitive advantage, it is prudent to have a brief overview of the airline’s background. The airline had the humblest beginnings with just two aircrafts which flew out of Dubai in 1985; these were the Airbus 300 B4 and a leased Boeing 737. The airline grew over time and pursued its focused differentiation in a legacy airline of hi-tech, luxury and excellent quality (Knorr & Eisenkopf, 2007). The airline has grown unprecedentedly and is now the Gulf’s largest carrier and the second world’s best airlines. It has had a steady growth, significant global expansion and its continuous innovation is a phenomenon (Knorr & Eisenkopf, 2007). It has set the bar high for other airlines, and most of them draw a lot of worthy lessons from this airline.
However, with the increased competition levels and with the current global economic recession, the airline has faced adverse challenges in its business. The economic downturn affected the company’s market demand, financial deficits, customer’s changing preferences and behavior and also challenges in internal resources. In a bid to sustain its stature the airline must take its core competencies, competitive advantage to overcome such situations and have sustainability in the future.
Competitive Advantage of the Emirates Airlines
The company pegs its success on some factors. This section analyzes the company’s competitive advantage based on PORTER’s five forces.
Intensity of existing rivalry
Relatively few competitors: at the moment there are few competitors that the airline is competing against. Few competitors mean that only a few airlines are competing for the same resources and customers. The main competitors for the airline are the Air France-KLM and the Lufthansa which are the two largest carriers in Europe. These airlines operate within the same destinations such as Hong Kong, UK, NZ, and America. The competition is, however, relatively growing as the global industry is experiencing boosting growth of low-cost airlines. Etihad Airways is also another major competitor. This competition impacts the airline as there will be increased promotional effort, reducing prices, increasing product line and even launching new products to stay abreast.
Despite the fierce competition in the industry, Emirates Airlines has still managed to sustain itself in the industry due to its brand and loyal clients and also provision of excellent services. It is the second best airline globally and thus enjoys economies of scale. It also commands a large market share and thus has been able to remain competitive. Moreover, the airline embraces modern technologies and is leading in innovation; this has given it an advantage over its competitors.
Threat of substitutes
Substitutes are of lower quality: the quality of service delivery of the competitors is much lower as compared to service quality delivery of Emirates airline. This means that customers are less likely to switch from the Emirates Airline to another product or service (Porter, 2008). Since the airline offers excellent service, it will incur an increase in profits. This factor has given the airline a competitive advantage in the airline industry.
A limited number of substitutes: there are no many substitutes, and this means that customers are unable to find other services and products that fulfill their needs and wants and will, therefore, stick to Emirates Airline. The airline enjoys monopoly since its reliable and convenient, travel several sin destinations unlike the substitutes and thus gaining a higher competitive advantage over its competitors.
Substitutes have lower performance: the available providers do not offer services or products that are commensurate with the needs and wants of the consumers, and therefore these consumers prefer the Emirates airline and are less likely to switch to any other service provider as their needs and wants are not well solved.
Threat of New competitors
High capital requirements: The airline industry is no doubt one of the most highly capital intensive industry. The financial requirements to get into the industry are too high, and this has been a major challenge for those willing to get into the industry. High capital requirements make an organization to spend a huge chunk of money to compete in the market (Porter, 2008). The Emirates Airlines, however, has a financial strength and thus can compete effectively in the market.
Advanced technologies: the current market is highly competitive much appreciation to advanced technologies. These technologies are costly and require huge financial obligations that most startups cannot afford to meet. To remain abreast implementation of these technologies and processes are integral. Advanced technologies are, therefore, no doubt making it difficult for new entrants to get into the market since they have to develop these technologies to compete effectively with the current firms already in the market. This factor positively impacts Emirates Airlines since it has the financial strength to cope up with technologies and effectively make innovations commensurate to market and customer needs and therefore granting the airline an added advantage over its competitors.
Brand names: developing and sustaining a good brand name is integral to thrive in the airline industry (Porter, 2008). For a new airline competes effectively, it will have to improve its brand value. Emirates Airlines is a global brand and thus enjoys the advantage of its brand value. The airline has made itself in the industry and has gained a significant share of the market. Strong brands positively affect Emirates Airline. This has enabled the airline to grow to its current state. Due to its brand, the airline has managed to attract and retain loyal customers over time. Furthermore, customers tend to be loyal to the existing brands more since they are well conversant with their services and do not wish to move to other brands. Emirates Airlines is one of these airlines that have strongly captured their market share and niche and therefore have made it difficult for new entrants to get and grow in the market.
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Bargaining power of suppliers
This is also another factor that has propelled the success of the airline. There is high competition among the suppliers, and this means that suppliers act to reduce prices to producers since there are many suppliers, and thus in a bid to get market they tend to reduce their prices (Porter, 2008). This has been an advantage to the Emirates Airlines since it results in reduced costs. Reduced operational costs have a positive ripple impact on the overall revenues accrued. There is also a large number of substitute inputs, which reduces the bargaining power of suppliers as compared to producers since there is tight competition among the substitutes. This factor has positively impacted the airline.
Critical production inputs are the same in the airline industry. When critical production inputs are similar; it makes it much easier to mix and match inputs and therefore reduces supplier bargaining power. This has greatly positively impacted the Emirates Airline giving it a higher advantage over other competitors.
There is also a low cost of switching suppliers and these results to a less bargaining power for them. A lesser bargaining power has been an advantage and integral to the company’s success in the industry since it has been able to acquire its suppliers easily at affordable rates and thereby cutting its overall operational expenditures. The extra expenses that could have otherwise been spent on suppliers have been channeled to other activities such as advancing its technologies and innovations and expanding their operations to other destinations.
Bargaining power of customers
Customers are the end consumers of the services and products offered by the Emirates Airlines. Modern customers have increasingly become more aware of their needs and want and always demand special customizations (Porter, 2008). When clients require special customizations, they are much less likely to switch to producers who have difficulty in meeting their demands. Most of the startups do not offer services and products that extensively meet their demands and needs. Emirates Airlines has been positively impacted by this factor since it is well established and offers services that are commensurate with the demands of its clients. It takes customer needs and wants into account as it greatly engages with its customers through the available communication platforms. By placing precedence on the needs and wants of its customers, it has been able to attract and retain a huge following of customers. Another factor is that customers need firms that can give them the required products. Most of the available competitors do not have comprehensive products and lack a lot of things (Knorr & Eisenkopf, 2007). However, Emirates Airlines provides a wide variety of products and services. Furthermore, its presence in several destinations makes it the most preferred airline in the market as it is convenient and highly reliable. Moreover, there is limited buyer choice making customers be willing and able to the available choices. This grants Emirates Airlines an added advantage since it is available and offers solutions to consumer travel needs.
Main components of resources and capabilities
The main components of resources and capabilities at Emirates are the success factors. They constitute the factors that make the organization to be what it is and to continue surviving in the competitive market of the airline industry.
The first component is the economies of scale that is at Emirates Airlines. Emirates are considered as one established organization that has very stronger network airlines over international destinations. This makes it retain its capacity and continue to rise. Despite this, the organization has continued to invest in its fleet, and through this, it is enjoying a high profitability. This is an indication that the organization can increase its capacity while it still can maintain fixed costs compared to their competitors. Emirates can access the global markets with a big geographical coverage. This means that it has created a big barrier to any other new entity wishing to join the industry through the scope of the business and the high costs that are involved.
Cost competitiveness is also another important component. This component is essential for a capital-intensive industry like the airlines. Emirates are advantaged because their managers can run operation costs at the minimum level to boost the maximum profit. To balance the total operation cost, the management of Emirates have always solved the challenge on cost-cutting in a process with the intention of maintaining the profitability.
The appropriate strategy is also another important component to put under consideration. The success of Emirates for a long time now that it has been in the industry is their right strategies that have enabled them to know what to do something at that given time, the ability to know where to put their funds and what to expect back. Emirates are differentiated as a legacy airline that has staff skills, advanced technology, and ancillary services which are their main drivers of success. This shows that Emirates knows of the need for continuous innovation and not only is the staff expansion and their fleet but also on their premium services. Emirates have been known worldwide for their technology development and the skilled staff that have different cultural background.
Brand loyalty and the quality of services is also another main component of resource and capabilities. Emirates have a name for it. Brand loyalty is regarded as one of the best assets that a company can have. It is a great resource for an organization. Emirates have been able to build up its brand and image expressively within the past 20 years. There are a lot of customers that have become loyal and have always selected Emirates as their best airline to use while traveling to any part of the universe. This is because of the product innovation, high quality of services and the excellent customer experience that the customers do get for using Emirates Airlines.
The above-named components are very essential in the day to day operation of Emirates Airlines. They are responsible for making the organization to be ahead of other competing airlines. It is a huge organization as there are some airlines in the United States as well as in the Europe that are doing good (Delgado, 2016). To continue with their capability and keep their resources in place, they have always maintained the above-named components.
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Ways in which Emirates Airlines can use to sustain their competitive advantage
The airline industry is very competitive. There are airlines in the United States and Europe that are doing extremely well as are having their strategies right to be at the top of the industry. That is the desire of any organization. Emirates Company has been able to survive in the competitive market. The market is competitive, and therefore it is only right when they have the right strategies in place that will ensure that they retain their competitive advantage.
For any airline company to be able to succeed in the industry, it must be able to put in place sustainable competitive advantage. This means that any competitive advantage that is in place, the airline should be able to maintain it. The airline industry is regarded as one of the most competitive industry and therefore sustainable competitive advantage us a requirement to continue surviving in the aviation industry. The sustainable competitive advantage that Emirates should embrace requires is based on the airline strategy and the differentiation of competitors. Emirates display how it has a unique strategy and how the airline has managed to stay ahead of its competitors through their unique strategies.
The sustainable competitive advantage can make Emirates Airlines have a unique value position in the competitive environment and at the same time defending their supported proposition. The sustainable competitive advantage that is used in an organization requires being continuously updated so that the competitors can remain on the back foot. The inability to keep abreast of the shifting advantage and the challenges to implement or imitate that takes place.
Firstly, the competitive advantage of Emirates is its huge number of clients. This has been largely contributed to the location of the airport. Emirates airline is in the Middle East, Dubai. Dubai is a center where people meet for entertainment, luxury and business meetings. Over the recent past, a lot of people have been traveling to the Middle East because of the growth of the Area. Emirates should take advantage of this and use it to maintain their competitive advantage (O’Connell, 2011). They should create customer loyalty through this. To continue maintaining the competitive advantage at Emirates, it is important and prudent that the company encourages the growth of Dubai and the Middle East as a whole. They should encourage investors to continue investing in the Middle East and Dubai. They should allow the government to partner with other tour companies that are in different parts of the world. Through this, there will be the continuous flow of customers that are using the airline. It is no doubt that when these are done, there will be the maximum flow of customers to the airline. Maximum flow of customers to the airport shows that it has maintained its competitive advantage in the industry and it is not threatened by the existence of other competing companies.
The second way that Emirates can use to sustain competitive advantages in the market is through their customer interaction. This is very beneficial and helps in creating customer loyalty as well as positive customer experience. Any customer will want to feel that they have been accepted and that they are part of the company. Every customer will want to feel the value of the money that they are spending on their customers. Therefore, to be able to sustain the competitive advantage and remain relevant in the market, Emirates should have in place ways in which they can use to increase the customer loyalty. This can be done through the social media pages and the official website of their customers. The organization should be active in addressing the complaints that have been raised by the customers. They should put into consideration the opinion of every customer they serve. Through that, the will be able to make the custome3rs feel appreciated. The end product is that the customers will be loyal to the brand which will make the company survive in the market.
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Fleet efficiency is also another factor that can be used by the airline to ensure that they sustain their competitive advantage in the competitive industry. Every customer wants services that they can rely on. It is therefore upon Emirates to have reliable flights that are on time are in good condition, and the number of flights should be able to serve the demand of the market. Customers will shift to other airlines when the number of existing flights does not serve the customers. They will feel that Emirates is not reliable enough. Fleet efficiency will also entail the quality of services that the customers will be having. It must be premium. It is only premium services that customers will be loyal and feel the need to always use the service. Brad awareness is also another factor that the airlines can set to sustain its competitive advantage. This is done through intense advertising (Logothetis, 2016). All the targeted customers should be may be aware of the airline and also to make them loyal to the brand. The organization can use celebrity marketing and many other forms of marketing to ensure that they sustain their competitive advantage.
Time and price elasticity is also another factor that Emirates can use to ensure that they stay ahead of other carriers in the industry. It means that the prices that they set for their customers should be cost-effective and pocket-friendly. They should not be too expensive, and at the same time, the price should not below the extent the profit earned is compromised. Emirates should know when to adjust their prices during their peak seasons to earn more profits.
Conclusion and Recommendation
From the paper above, it is evident that the airline industry is very competitive. To survive in the market, there are a lot of factors that must be put into consideration. Emirates are a giant company in the aviation industry. However, there are other key players in the industry that also have a competitive advantage. For Emirates to survive and sustain its competitive advantage, I would suggest that the company uses all the factors suggested in this paper to sustain its completive advantage. The factors should be consistently reviewed to ensure that the company is in line with the dynamic nature of the market. Some of the factors that the can continue to foster on are the efficiency of the timeline, engaging with the consumers, increased marketing and keeping in place with the technological advancements. It is no doubt that the company will continue to enjoy its position in place when they implement the above-named strategies.
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- Knorr, A., & Eisenkopf, A. (2007). How sustainable is Emirates’ business model. Aerlines Magazine, 38.
- Logothetis, M., & Miyoshi, C. (2016).Network performance and competitive impact of the single hub–A case study on Turkish Airlines and Emirates. Journal of Air Transport Management.
- O’Connell, J. F. (2011). The rise of the Arabian Gulf carriers: An insight into the business model of Emirates Airline. Journal of Air Transport Management, 17(6), 339-346.
- Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.