BUS705 - Etihad Airways: Strategic Innovation and Decision Making

This case study examines the strategic challenges and opportunities facing Etihad Airways, particularly its equity-based strategic alliances. With a new CEO, Tony Douglas, the airline must decide whether to continue with the existing equity alliance model or pursue an alternative approach. The analysis covers key strategic issues, including losses associated with investments in Air Berlin and Alitalia, and explores actions the new CEO should undertake to ensure sustained future success. The study also addresses the need for a new vision, inspiring employees, promoting creativity and risk-taking, and building a cohesive and spirited team. The case highlights the importance of innovation, leadership, and shared vision in navigating the competitive global airline market. The solution also emphasizes the importance of codeshare agreements, low-cost leadership, and employee empowerment for Etihad Airways to achieve profitability and growth. The document is available on Desklib, a platform offering study tools and resources for students.

Running head: INNOVATION AND MANAGEMENT DECISION MAKING
Innovation and Management Decision Making
[Etihad Airways]
Name of the student:
Name of the university:
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Executive Summary
This study sheds light on the challenges and opportunities of Etihad Airways for their standalone
decision of equity-based strategic alliance. Strategic alliance is an important factor when two or
more companies take the decision to share their resources and capabilities. New CEO of Etihad
Airways, Tony Douglas needs to bring out the organisation from the money-losing situation.
Among eight strategic partner organisations, Alitalia and Air Berlin are the weakest. Innovation
and decision-making skills are important within the organisation for the employees who are
within Etihad Airways. Etihad Airways can take the method of codeshare to be profitable in
strategic alliances. Leadership skills are also important so that the employees must work in a
cohesive and spirited way. A common purpose for Tony Douglas is to provide better future with
strategic alliance as it can provide the organisation large passenger base and greater revenue. The
organisation needs to take some time to make strong the partners with low-cost leadership and
codeshare techniques. The management can also share the power with the employees to show the
sense of wellbeing.

Innovation means creating more effective way or changing process in implementing new
ideas in business or developing existing ideas. Management of business takes the decision
purposely selected from the alternatives and management wants to meet the business objectives
(Proctor 2014). Management thinks, questions, behaves and takes a decision in a way that
promotes innovation. Leadership within an organisation is also important to lead a team or group
for meeting the goals of the organisation. Profitable organisations always focus on business
philosophy and operation to meet the business objectives through providing guidance to the
employees for organisational strategies.
In this essay, Etihad Airways network of the equity-based model is explained in light of the key
strategies issues and opportunities.
Tony Douglas is the new CEO of Etihad Airways and he replaced the veteran CEO James
Hogan who retired the post in July 2017 (Etihad.com 2018). Etihad management thinks that it is
‘advanced stage' for the organisation to take the decision about strategies and innovation. Ton
Douglas will face the challenges of equity-based alliances of Etihad and its investments in
troubled airlines partners. Etihad had faced the loss of $890 million associated with investment
in Air Berlin, Alitalia. Tony Douglas needs to think about funding pull from Air Berlin and
Alitalia and Etihad have minority stakes in six of the small airlines. Tony Douglas has to face the
confrontation from the US as the USA government is taking action against the Gulf Carriers.
New CEO of needs to take the action about a diplomatic rift in Middle East Gulf carrier and he
needs to take decision funding investment in equity-based strategic alliances. Tony Douglas was
formerly worked in the ministry of Defence in the UK and he should take actions in a partnership
with Etihad. Mr Douglas should take actions to smooth the employment and economic engine of
UAE by creating attractions and infrastructure. Tony Douglas is going to take the actions to

create a global hub for commerce, transportation, culture and tourism through Etihad
(Reuters.com 2018).
Etihad Airways has been going through the issue of economic trouble for equity-based
strategic alliance and Tony Douglas should implement a set of strategic initiatives to provide a
position for sustained success in the competitive global and regional market. Etihad Airways
now is in a loss-making situation for the equity share in the partners. The challenges are coming
from the macro-environment circumstances and Air Berlin and Alitalia are now insolvent.
Alitalia is a strategic gem in Europe as far as location goes, just a shame about the irrevocable
debt brought on by decades of poor management. Alitalia needs the help of finalising the
business plan and marketing to bring back on track. Air Berlin's strategy is now on track as
Etihad won the legal battle in Germany of codeshare. Codeshare in aviation is about business
agreement when two or more airlines can share the same flight (Fan and Lingblad 2016). Etihad
has a strategic geographic location, easy access to cheap fuel and capital, fulfilling their role as
the 'hub-runners' of the future. Etihad diverged from the usual method of building a bigger
international network and they are following codeshare and alliances to a more direct and
potentially more profitable method of purchasing large chunks of existing carriers. If Etihad can
pick better investments, this method will build them a network quick smart, and one which they
will have a great deal more control over than simple alliance and codeshare arrangements.
Etihad Airways has been going through the economic loss and it needs new vision from
the management. Etihad has tangible resources from a financial perspective like dividend policy
and healthy cash position. In physical resources, they have a young fleet and more than 102
fleets. In case of intangible resources, Etihad has more than 20,000 employees in different
countries and ex-CEO Hogan's leadership's styles. It has more than 11 million passengers'

strengths and Abu Dhabi as a storied airport. Most importantly, the equity-based model gave
good return at first and it grabbed $42 million net profit in the year 2013 when they had taken the
equity-based model (Reuters.com 2018). Therefore, the new these strategic capabilities can
provide the organisation with a new vision and Tony Douglas will bring out the economic loss.
At first, Etihad Airways wants to be profitable airlines in the Middle East. It wants to show the
Arabian hospitality and it increases the destinations to leisure spots. The vision will comprise the
strategy of collaboration with the air partner to be more competitive. Etihad will transform weak
partners into a strong one by codeshare partnership with Lufthansa. Etihad wants to take the
strategy of a low-cost airline that goes short-destinations. These partnerships help Etihad to go to
the destinations where its aircrafts do not go.
Tony Douglas needs to inspire the employees and senior executives for a common
purpose. The purpose is to provide the shared vision to lead the team to better future. The
common purpose of Tony Douglas is to develop the economic condition of Etihad Airways and
at the same time, he needs to improve the condition of Alitalia and Air Berlin. He should be
realistic and he should propagate the achievable goals for the team. His ‘shared vision', personal
anecdotes and stories can motivate the employees. His first purpose will be to help Etihad to
come out from loss and give the partners more power to increase the destinations. Strategic
alliances help Etihad Airways to have extra revenue from the partners and it will also help to
increase the total numbers of passengers. In an organisation, the CEO sets the clear goal and
he/she sets the goal by examples (Tjemkes et al. 2017). Mr Douglas needs to show professional
integrity and he should show ‘can-do' attitude as it will impact positively on his team. As stated
by Hmieleski et al. (2015), CEO of an airline needs to be optimistic and risk-taker as it will help
the CEO of seeing the big picture.

New CEO of Etihad Airways can propagate shared vision and innovation in the
workplace. Innovation and shared vision will eventually create an environment where everyone
will share their views before taking any decision regarding business performance. Creativity
comes with innovation and innovation leads to competitive advantage (Johnson 2016). For
instance, Ryanair’s strategy of low-cost airline makes them one of the successful airlines in the
world. The staffs and senior executives of Etihad need to brainstorm and they can do regular
workshop and meeting for taking any business decision for future strategy. Their equity-based
strategic alliance gave them success in the past; however, in the recent economic scenario, it sets
them back foot. They need to actively solicit the ideas and the management can train the staffs in
innovation techniques. Tony Douglas can take the idea of cross-fertilise where new staffs need to
work with experienced people to gain the knowledge. On the other side, as opined by Albers et
al. (2016), management first defines the smart risks and they need to set the limit before
executing any decision. Creating a safe environment is very important before taking the risk.
Etihad is not in a situation to take further risks and they need time to solve the issue. Mr Douglas
can also reward the management if smart risks fail.
Etihad is in the Middle East and this airway has employees from various parts of the
world. In order to solve the issue of Etihad regarding economic performance, profitability,
revenue and equity-based strategic alliance, new CEO needs to build a cohesive and spirited
team. At first, the CEO should establish mission and vision for the team. The team should be
diverse as successful teams always require diversity. Etihad teams need to have employees from
different religions, caste, creeds and nationality. Etihad Airways always believes in teamwork
and Mr Douglas should utilise the individual's strengths. Within the team, it is needed to
communicate effectively with the team members and with management (Kogan et al. 2017).

CEO will also ask the team leaders to provide feedback and they learn how to celebrate the
success of the team. At first, the CEO will divide the team into separate departments to make
teams. In order to inject the spirit, the management can provide motivation in shape of rewards
and recognition.
According to Iturrioz et al. (2015), the leaders inspire the employees most by sharing the
power as personal power does not help to maintain accountability. Tony Douglas needs to sit
across with employees in a table to make employees feel equal. The new CEO should make the
employees feel that they have just different roles in a business; however, they need to share the
business challenges. Personal power needs to time to reinforce and to protect it. Share power
leads to make the leadership democratic where employees are given equal power to make-
decision. As opined by Lin and Damall (2016), accountability is an important ingredient for
successful collaboration and multinational companies take cross-company collaboration in order
to gain competitive advantage. In order to boost the accountability, it is needed to focus on
making a shared purpose. Tony Douglas should support the experienced group leadership
includes Ray Gammel who was the interim CEO of Etihad. The CEO needs to engage team
actively and align the team members around a shared team purpose. Tony Douglas needs to be
specific and open about expected results. Tony Douglas should pay special attention to team
behaviour if it is on wrong track.
At present, the condition of Etihad Airways may numb the employees; the CEO should
connect with the employees around him and making a good connection will build a sense of
wellbeing. Having goals related to commitment in order to make good relationships is helpful for
the management. The team leaders, all departments, the CEO and Board of Directors all should
be active to provide advantage organisation. Building a sense of wellbeing among the employees

towards the organisation will eventually provide mindfulness to the special skills of the
employees.
The instance simply validates the perspective that the Etihad Airways should have a
viable heading investigation starting with those CEO of the shares of the organisation. Mr
Douglas likewise talked about earlier, necessities to concentrate on actualizing about ‘shared
vision' at the authoritative level. Those shared visions may handle a percentage comes about that
need not happened yet. There need aid probabilities that an equity-based strategic alliance of the
organisation will be not focused. Those speculations ought to find its address done a durable
worth of effort surroundings which may be structured from a shared vision during those
organisation-wide (Vetri et al. 2015). This implies that Mr Douglas ought to start with a search
for shaping durable worth of effort nature's domain same time taking after recommendations.
Etihad Airways has always been trying to gain access from the rival routes and that is
why they always prefer strategic partnership. Etihad Airways should manage the alliance
strategically in terms of investment. Etihad Airways' should cut the cost of aeroplane
procurement and they need to offer larger network through strategic alliance to increase the
revenue. Etihad Airways can try to sell the share from the equity-based alliance; however, it
would be a loss at this stage. Controlling cost will be the main strategic factor with operation
management from the side of Etihad Airways. Etihad Airways needs to look for monitoring the
alliances as they want to operate with partners.
The CEO of Etihad Airways should ask the stakeholders to work as a spirited team in order to
tackle a hard time. Increasing the network and reducing the cost will be the main highlight of the

team. Recognition and rewards to the staffs can bring motivation in work and Etihad can go for
more global expansion and more foreign ownership later.
It has been observed that Etihad Airways has been struggling with money-losing for their
strategy of equity-based alliances. New CEO Tony Douglas has to face the challenges from cash-
poor alliances and he has to increase the Etihad passengers as well. He can opt for codeshare and
he needs to go for legal help to rescue Etihad. In order to secure the economy of Etihad Airways
and to compete with Qatar and Emirates to have a competitive advantage, cohesive teamwork
and sharing the vision with staffs are very much needed with good decision-making.

Reference List
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