Strategic Analysis and Recommendations for Etihad Airways

This case study report provides a comprehensive analysis of Etihad Airways, focusing on its strategic management within the airline industry. It begins with an executive summary and an introduction that highlights the changing landscape of the industry and the potential merger and acquisition plans of Etihad and Emirates. The report delves into the components of business system models, examining Etihad's resource base (tangible, intangible, and relational assets) and activity systems (value chain analysis). The report then analyzes Etihad's product offerings and value proposition, including segmentation and positioning of Emirates and Etihad. It explores the drivers of industry development, including Porter's Five Forces. The analysis concludes with key strategic issues, such as increasing fuel prices and government support, and offers recommendations for future operations. The report also includes references and appendices with additional details on business system models and product offerings.

STRATEGIC
MANAGEMENT

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Executive Summary
This report is going to discuss different aspects of the Etihad and Emirates plan for merger
and acquisition. Etihad utilises differentiation and focus as a business level strategies. This
can be understood in terms of the fact that Etihad is known for providing elite group of
services where they differentiates themselves in terms of the services they provide and the
numbers of destinations that they could fly. In terms of corporate level strategies, they are
using partnerships in the form of merger and acquisitions as their major strategies. As a
growth strategy, they have been continuously expanding in different parts of the world so as
to enhance their connectivity. They have also reduced their internal economies of scale. As a
part of the concentration strategy, they have concentrated on resource development and value
chain improvement. As a part of the corporate level strategies, they are focusing on the
profits. For this, they utilise best channel approach where they optimise their paths to reduce
the cost of operations. Business level strategies like concentric diversification where they put
innovations as their core strategy. They upgrade their resources and capabilities so as to
ensure that they remain ahead of their rivals. Capability building is done with the help of
human resources they have.
Content

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s
Introduction...........................................................................................................................................2
Body......................................................................................................................................................2
Components of business system models............................................................................................2
Resource Base/Stock of assets.......................................................................................................2
Activity systems................................................................................................................................3
Value chain analysis......................................................................................................................3
Product Offering/Value proposition......................................................................................................4
Drivers of industry development analysis..............................................................................................5
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7

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Introduction
The industries have changed and the change is also gets reflected in the way organisations are
doing their business. It is found that companies from different parts of the world and also
from the same companies are combining so as to become a larger force in the industry. These
are done for gaining competitive advantage over the rivals in any market but there are
different challenges that companies had to face when it comes to coordinating with each other
so as to make a better working team (O’Connell, 2011). It is seen that people from different
parts of the world are working in both the firms. This makes it essential for the management
to have an understanding about each other’s capabilities, resource base and internal and
external environment of the industry. This is also critical for the management of issues that is
faced by the firms and are related with current performance of the firm. This report will
highlight the industrial context of the Etihad; provide competitive landscape and resources
and capabilities of the Etihad. It also highlights key strategic issues related to Etihad’s current
performance along with the issues that it faces. At last, the recommendations for the future
operations of the company have been provided.
Body
Components of business system models
Resource Base/Stock of assets
Tangible assets: They have a healthy cash position and divined policy which allows them to
fund their different internal projects. This Company has a fleet size of more than 102 fleets.
Their fleet is also young when it comes to comparing with other company’s fleet (O’Connell
and Bueno, 2018).
Intangible assets: Companies intangible assets include having more than 20,000 skilled
employees working at global levels. The leadership style of their ex-CEO Hogan. They have
more than 11 million passengers as strengths and along with this they have Abu Dhabi as a
storied airport (Nataraja and Al-Aali, 2011). Their equity based model gave them good
returns in the start and they grabbed around $42 million net profit in the year 2013.

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Relational: They motivate their employees in the long term so as to ensure that they have
positive impact on the employee’s productivity (Balakrishnan, Jayashree and Michael, 2011).
Competencies: Their incentive programs include performance calibration approach where it
is seen that they are provide higher incentives to their employees that performs well. It is seen
that this company regularly trains their employees and expects a high performance from
them. They monitor their performance and accordingly they provide benefits to their
employees. In 2017, this company generated an annual revenue of 610 crores USD (Al
Kaabi, 2014).
Activity systems
Value chain analysis
Primary activities
 Inbound logistics: The suppliers of the Etihad are able to supply them with all the
high quality products. They continuously do audit of their supplier’s product so that
their end services remains of high quality.
 Operations: Their operational mechanism adds value to their products. Their skilled
workforce helps them in improving their operations (Al Ali and Ahmad, 2014).
 Outbound logistics: They have an excellent distribution mechanism where they have
packaged their offerings in a better manner so that they might be able to deliver their
offerings to the customers in a better manner.

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 Marketing and Sales: For marketing this company uses both traditional and digital
marketing mechanisms to reach to maximum possible consumers.
 Services: They have given high quality training to their employees that help them in
enhancing the service quality. There are many additional products that is provided to
the customers which improves their overall service quality (Dresner, Eroglu, Hofer
2015).
Secondary activities
 Firm infrastructure: They have more than 102 fleet sizes and that too it is highly
advanced and technology equipped. They have Abu Dhabi as one of the best airports
having infrastructure of international standards.
 Human resource management: They recruit people from all across the globe. The
incentive scheme of the company is high hence it allows them to motivate employees
that are again essential for giving competitive advantage to the rivals (Alkaabi, 2014).
 Technology: The major reason for their success is the type of technologies that is used
by them. It is seen that technologies that are of higher standards are used so as to
reduce the cost of the operations. Research and development is continuously done
within the firm so as to ensure that they have something innovative to offer to their
consumers.
 Procurement: All the procurement has been done checking the quality of the object.
They are applying sustainable procurement to ensure that maximum efficiency can be
brought in their business model.
Product Offering/Value proposition
The product offering aims to collaborate Dubai based Emirates and Abu Dhabi’s Etihad
together in order to draw success over other major airlines and make it one of the best airlines
of the decade.
 Product offering: There are different types of products that are being offered by
collaboration. They might offer additional food and beverage items that can be
purchased by customers. Most of their delivered products are expected to be of higher
quality and the premium pricing is attached to these offerings (Bose and Mugambi,
2017).

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 Segmentation of emirates: This Company has segmented its market on the basis of
different parameters. In terms of demographics they have targeted people of all age
group both bachelors and couples, their main focus is on the people living in urban
areas. In behavioural terms they have segmented both switchers and hard core loyal.
In user status terms they have segmented people that travel regularly and sometimes
(Bose, 2018). In psychographic terms they have segmented people from all the classes
of the society and mainly focus on people living a wealthy lifestyle.
 Segmentation of Etihad: Etihad Airways have focused on traditional approach where
they use legacy carriers for segmentation. This company focuses on price sensitive
leisure travellers and business travellers. The business paradigm of this airline has
appropriately bifurcated these two segments by catering to their heterogeneous
requirements (Hazarika and Boukareva, 2016). For penetrating in new markets they
focus on additional segment on the basis of loyalty of customers. This airway utilises
a form of psychographic segmentation to bifurcate the market for its services which
includes finding out the lifestyle and social class.
 Positioning of Emirates: It is ranked among the top 20 airlines in the world where it is
positioned at number 4. They have kept their pricing on the higher side which allowed
hence offering all kinds of luxury services (Rachelle Ge’s Blog, 2013).
 Positioning of Etihad: It is also ranked in the top 20 airlines in the world with a rank
at 15. They are offering products at all the prices depending upon the market capacity
to purchase (Buyck, 2012).
Drivers of industry development analysis
For understanding the industry context porter five force analyses can be useful. The drivers of
industry include:
 Bargaining power of suppliers: There are large numbers of suppliers available in the
market hence their bargaining power remains on the lower side.
 Bargaining power of customers: Customers these days have huge options available
with them. This enhances the bargaining power of their customers (Zhang, 2019).
 Competition: The competition in the industry is very high. There are competitors like
British Airways, Qantas, Thai airways, Lufthansa, Qatar Airways and Singapore
airlines that are giving tough competition to both Emirates and Etihad. There are
many brands that have also come into the luxury airlines industry hence the

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competition is expected to go on further higher side. The competitive environment is
expected to increase hence such mergers and partnerships will play a major role in the
success of the organisation (Maszczynski, 2019). However with the merger there is
quite a bit chance that pricing in the market will be on the higher side as the
competition between the two major players will reduce.
 Threat of new entrants: The threat of new entrants is moderate as the quality that is
offered by both Emirate and Etihad is high and it is not possible for the new comers to
match this but in the changing global business landscape it is possible that new
comers might have greater impact on the competition.
 Threat of substitution: Threat of substitution at the national level is higher. This is
because there is development on new railway and roadways network which gives
options to the consumers and hence threat of substitution is on the higher side.
Conclusion
In conclusion it can be said that Etihad airways has noticed an improvement in the core
operating performance of 15% in the year 2018 which is 7% higher than what was forecasted.
They have been increasing their revenue but there had been loss in this year 2019 as well
(Etihad Airways, 2019). There are many key strategic issues related to Etihad’s current 2019
performance. Some of these issues are:
 Increasing fuel prices: There had been increase in the fuel price. This increase in fuel
prices has increased the overall operational cost which also had impact on the profits
generated by the company. It is also seen that companies had to gain clean fuel
technologies and hence companies have to invest a lot of their money on the fuel
related issues (GulfBusiness, 2019). There is a gap in the technology that is being
used within the organisation and the ones that are required at the global levels.
 Government support: Since the governments supports to the airlines companies has
reduced hence Etihad had to face challenges like heavy taxations. This is bit higher in
the countries that are facing the economic challenges. There is a gap in terms of the
fact that this company do not have many political ties with different country’s
governments.
 Global financial crisis: It is seen that global financial crisis is more in those countries
that is having a higher per capita income. Due to this people have restricted their
spending which directly has impact on the sales of the offerings of Etihad. This has

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again forced the company to reduce the overall cost of operations. This company is
facing gap in terms of increasing their financial base at the speed that is actually
needed in the global levels (Ben, 2018).
In order to deal with these issues it is critical that company takes several recommendations to
ensure that they face issues in the global aviation market. The first thing that needs to be done
is improving the technology that can reduce the fuel requirements of the company and at the
same time reducing the cost of operations. It is also recommended that company should
invest on innovation that can make flights run on sustainable and renewable source of energy.
It is recommended that companies should make more ties with the governments in different
parts of the world by providing employment to local people. This is necessary for reducing
the problems that is faced due to change in governmental policies. In order to manage the
global financial crisis company needs to add more investors and going into the strategic
partnerships with the companies like Emirates can help the firm in improving their sales.

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References
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