Emirates Airline: A Case Study on External and Internal Factors

This case study analyzes the external and internal factors affecting Emirates Airline's strategy, including political/legal, economic, sociocultural/demographic, technological, and global forces. It also examines the primary and support activities in the airline's value chain and evaluates the VRIN analysis of its internal resources.

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Business Communication of Service Management
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University
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Questions
1. Summarize the case in 300 to max 400 words (5 marks)
Emirates airline was established in the early 1980s by the Sheikh of Dubai Sheikh
Mohammed bin Rashid al Maktoum after Gulf Air cut its flight to Dubai. The airline has grown
formidable to become among the leading passenger transporter along renowned routes of the
world. It has the largest fleet of Airbus A380 and Boeing 777. To maintain its global position,
the airline offers extensive amenities such as showers and bars aboard its aircraft. The
management also emphasizes quality services as the Airline boasts of 18,000 flight attendants
representing 140 nationalities. The growth of the airline is attributed to Sir Tim Clark who has
handled the role of route planning. Tim Clark insisted on the airline procuring additional aircraft
to maximize on the global routes. This facilitated the airline to expand at an astonishing rate. The
airline aimed at providing the best experience to its customers. Consequently, it became the first
airline to offer television viewing at the back of every seat. Emirates together with Qatar
Airways and Etihad Airways transferred the hub of international travel from Europe to the
Middle East. Dubai Airport became the busiest in the world handling over 75 million passengers
each year. This facilitated the construction of the largest terminal in the world at a cost of 4.5
billion US dollars. This was in order to accommodate the 224 Emirate’s aircraft operating in 145
destinations worldwide. However, on March 5, 2015, U.S, stated that Emirates Airline together
with Etihad Airways and Qatar Airways were had received over 42 billion U.S. dollars in
government Subsidies and tax breaks, giving these airlines unfair advantage in the industry. The
US carriers concerns were that they would face a decline in their market share due to competition
with Emirates. The president of Emirates airline, Sir Tim Clark, however, stated that the Airline
has never received any subsidies.

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Emirates restructured its advertisement campaign, by creating a message that could
develop the brand to the consumers. Strawberry Frog, an advertising agency was contracted by
Emirates and the agency established the phrase “Hello Tomorrow,” that Emirates-based its
advertising strategy on. The advertising campaign was based on creating a customer experience
and setting Emirates apart from other carriers. However, Emirates experienced new challenges of
competition from other carriers who were also enhancing their customer experience.
2. How the external environment might affect Emirates’ strategy? Assess the
political/legal, economic, sociocultural/demographic, technological and global forces. (10marks)
External environment factors involve those factors that the airline has no control over.
These external factors can either provide new opportunities for the airline or threat in their
operations.in the political front, terrorism has hugely impacted the demand for air travel.
Emirates operates in different parts of the world and any change in the stable political
environment may limit the airline flight to the affected area. Additionally, the ban by Trump
regime on Muslim countries passengers may reduce Middle East airlines flight to the US.
Economically, since Emirates accepts multiple currencies, fluctuation in the exchange rate may
affect the firm’s revenue (Klophaus, 2016, pp.128). The decline in the price of oil also provides a
favourable condition for the operation of Emirates. In the socio-cultural front, the ever-growing
world population increases the demand for air travel. Additionally, millennial travellers have
insatiable needs to travel the world and this may give Emirates an emerging market (O’Connell,
2014, pp.343). The advancement of technology and enhanced globalization may provide emirate
opportunities for more passengers. Online booking increases the efficiency of service for the
airline while globalization provides for more needs for business people to travel the world.

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3. Which are the current forces in the industry environments that affect Emirates’
ongoing strategy? Please apply Porter’s Five Forces of competition to the international airline
industry. (10 marks)
Porter’s five forces is a performance tool developed by Michael Porter in 1976 in order to
analyse the competitive environment of a business and identifying the potential opportunities for
profitability. These forces are competition rivalry, bargaining power of suppliers, bargaining
power of the consumers, the threat of new entry and the threat of substitute products (E. Dobbs,
2014, pp.40). Competition in the airline industry is very high. Emirates faces competition from
other international airlines who are improving their quality of services, lowering their travel costs
and offering alternative routes. In the airline industry, suppliers have bargaining power since
they are less in number compared to the airlines (Hafeez, et al., 2016, pp.400). Suppliers in this
industry provide aircraft and fuel. Emirates faces the challenge of complying with the
international fuel prices. Consumers in the airline industry are those who board airplanes. The
airline industry has a high demand due to globalization making more people travel overseas.
Additionally, the consumers have low bargaining power because planes are the preferred mode
for international travel since they are fast. In terms of the threat of new entry, Emirates faces low
threats since the company has already established and differentiated itself in the industry.
Additionally, investment in this industry is capital intensive which limits new players. The only
other substitute for international travel is maritime transport. Emirates and other players in the
industry are safe against substitute product since this form of transport is fast and convenient.
4. Since some of Emirates new competitors are also fairly new airlines (Qatar and
Etihad), what implications does this have for the threat of new entry into the industry? (10
marks)

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Emirates competes with Qatar and Etihad Airways in the Gulf region. Since Dubai has an
open sky policy, Emirates has to differentiate itself to remain relevant in the industry.
(Arjomandi, and Seufert, 2014, pp.135). Etihad has the advantage of extensive networks, having
a total of 41 code sharing. On the other hand, Qatar Airways has the advantage of oneworld fully
fledged membership. However, what Emirates lacks in terms of partnerships and codesharing is
compensated by its advantage of scale. Additionally, Emirates is refraining from its traditional
global alliance scheme and its now embracing interline partnerships and codesharing. The
biggest threat in the operations of Emirates in the Gulf region is Etihad (Farouk, Cherian, and
Shaaban, 2017, pp.330). The Airways is currently multiplying their fleet by entering into
agreements with other global airlines. The rivalry is fierce among the airlines in the Gulf region
as the available market has to be shared among the three airline industries (Hannigan, Hamilton,
and Mudambi, 2015, pp.150). Each of the airlines is trying to differentiate itself by offering
quality services and introducing premium strategies to increase their profit margins. The
campaign strategy of Emirates together with their robust team of qualified flight attendants have
given the airline a slight advantage over the others.
5. What are the primary and support activities in the value chain of Emirates? What
challenges does Emirates have in its value chain? (15 marks)
The value chain can be described as those activities that a business conducts to bring
value to the consumer in the best way possible. The primary activities for Emirates include
operations whereby Emirate has reduced the waiting time of the passengers on queues by
providing self-service check in (Farouk, Cherian, and Shaaban, 2017, pp.335). Another primary

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value chain is marketing and sales. The airline applies the use of vertical integration in this area.
Emirate portrays itself as a premium brand by providing luxurious experience. The airline under
Emirates group is dedicated in sponsoring various sporting events (Whyte, and Lohmann, 2015,
pp.163). The support activities of its value chain include human resource management, whereby
the company provides benefits to its employees. Another service is procurement where the
airline obtain aircraft from Boeing and Airbus while catering services are provided by the airline
crew (Squalli, 2014, pp.140). Lastly, in its technological advancement, the airline carries out
expansive research from its research centre to keep up with emerging technological trends
additionally, the airline offers on-board Wi-Fi. Among the challenges in its value chain, emirates
experience high cost in the operation and maintenance of its aircraft. Additionally, the bargaining
power of suppliers may result in delays in aircraft since the company relies on upon and Boeing
and Airbus of which the two companies are the global suppliers of aircraft. Economic recession
also hampers the ability of the company to provide efficient services.
6. Are the internal resources valuable, rare, difficult to imitate, or difficult to substitute
(VRIN) to help Emirates sustain a competitive advantage? (10 marks)
The competitive test (VRIN) is a framework that is used to measure the competitive
advantage of a firm. VRIN stands for valuable, rare, imitable and non-substitutable. Valuable
and rare measures of a resource can be competitive supportive while imitable and non-
substitutable measures the capability of a resource to be sustainable (Redpath, O'Connell, and
Warnock-Smith, 2017, pp.130). To address the VRIN analysis of Emirates airline, the following
resources will be considered. Customer service, advanced technology, a large innovative fleet,
and special aviation training. The following table is the outcome of VRIN analysis.

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Emirate Airline VRIN analysis.
resource valuable rare Imitable Non-
substitutable
Customer
service
The
customer
service at
Emirates is
exceptional
The service
is different
from other
airlines
making it
rare
Customer
service at
emirates can
be adopted
by other
airlines
Not easy to
be replaced,
although
airlines
operating at
low cost can
attract
Emirate’s
customers.
Advance
technology
The airline
as advanced
technology
with state of
the art
facilities.
No other
airline is
offering the
same
technology
Hard to copy
that’s why
other airlines
have not
adopted
Hard to
replace as it
enhances
efficiency
Large
innovative
fleet
Has the
biggest fleet
enabling it to
travel to
many
destinations
It has
maintained
its fleet for a
long time
Very hard to
imitate as the
capital
requirement
is large
Possible to
be replaced
through
codesharing
and airline
alliances
Special
aviation
training
school
The school
has played a
critical role
in educating
Emirate
staffs
It gives
ability to
offer quality
education
within the
best
standards
Very hard to
copy as it is
expensive to
run an
aviation
school
It cannot be
substituted
This analysis provide a huge competitive advantage for Emirate airlines by differentiating
the Airline from the competition.

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Bibliography
Arjomandi, A. and Seufert, J.H., 2014. An evaluation of the world's major airlines' technical and
environmental performance. Economic Modelling, 41, pp.133-144.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Farouk, S., Cherian, J. and Shaaban, I., 2017. Low cost carriers versus traditional carriers and its
impact on financial performance: a comparative study on the UAE airlines
companies. International Journal of Value Chain Management, 8(4), pp.325-341.
Hafeez, K., Foroudi, P., Dinnie, K., Nguyen, B. and Parahoo, S.K., 2016. The role of place
branding and image in the development of sectoral clusters: The case of Dubai. Journal of Brand
Management, 23(4), pp.383-402.
Hannigan, T.J., Hamilton III, R.D. and Mudambi, R., 2015. Competition and competitiveness in
the US airline industry. Competitiveness Review, 25(2), pp.134-155.
Klophaus, R., 2016. Fifth freedom airline network expansion: the case of Emirates flying
between Germany and the USA. International Journal of Aviation Management, 3(2/3), pp.125-
135.
O’Connell, J.F., 2014. The rise of the Arabian Gulf carriers: An insight into the business model
of Emirates Airline. Journal of Air Transport Management, 17(6), pp.339-346.
Redpath, N., O'Connell, J.F. and Warnock-Smith, D., 2017. The strategic impact of airline group
diversification: The cases of Emirates and Lufthansa. Journal of Air Transport Management, 64,
pp.121-138.

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Squalli, J., 2014. Airline passenger traffic openness and the performance of Emirates
Airline. The Quarterly Review of Economics and Finance, 54(1), pp.138-145.
Whyte, R. and Lohmann, G., 2015. Low-cost long-haul carriers: A hypothetical analysis of a
‘Kangaroo route’. Case Studies on Transport Policy, 3(2), pp.159-165.