Strategic Management Report: Etihad Airways' Performance and Strategy

This report provides a strategic management analysis of Etihad Airways, examining its financial performance, market share, and industry life cycle. It delves into key success factors, competitive analysis, and internal/external resources. The report explores financial ratios, market share data, and the airline's position within the industry life cycle, including its challenges in the decline stage. It assesses Etihad's competitive landscape against rivals like Emirates and Qatar Airways, analyzing its strengths, weaknesses, and strategic alliances. The report also includes recommendations for improvement and a conclusion summarizing the key findings, based on the airline's performance indicators and financial data. The report is a comprehensive overview of Etihad Airways' strategic approach to business development.

STRATEGIC
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Financial analysis...............................................................................................................1
2. Details about market share.................................................................................................3
3. Industry life cycle...............................................................................................................4
4. Briefing about evidence......................................................................................................5
5. Balance in the report...........................................................................................................6
6. Key success factors of Etihad airways...............................................................................6
7. Competitive analysis, internal and external resources, organisation capabilities and value
chain analysis..........................................................................................................................8
8. Porter's five forces............................................................................................................10
9. Recommendations............................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
APPENDIX....................................................................................................................................14

INTRODUCTION
Strategic management is like an administrative exercise of company's assets with which
firm can attain its targets and objectives in an effective manner. It may includes determination of
competitive surroundings, analysis of intrinsic condition etc. Along with this, it is essential for
the manager to identify opportunities in the marketplace so that they can grab it effectually
(Barney and Hesterly, 2015). Etihad Airways is second top most airline which is situated in UAE
and they started their activities in approx. November, 2003. Fundamental purpose of this report
is to analyse the current financial position of firm along with their market share. There are
various elements which provide success to association. Additionally, it is necessary for employer
to determine internal as well as external resources so that they can easily analyse their rivals. To
determine financial stability of enterprise, it is essential for the manager to calculate ratios.
Aims and Objectives: There are some targets of this report, which are mentioned as below:
 To determine current financial status of organisation.
 To identify internal as well as external environment.
 Calculate ratio for the company.
 To analyse key elements of firm.
1. Financial analysis
It is essential for manager of Etihad airways to examine external environment, thus they
can analyse their competitors at marketplace. It will assists them to develop strategies which will
help them to beat their rivals at competitive world. Some of main competitors of cited
organisation is Qatar Airways, Emirates and so on. Along with this, they have to assess condition
of market, therefore they can use methods accordingly and enhance their revenues.
Etihad Airways is the second largest airline which is situated in UAE. Their financial
position in market is much effective as well as efficient. As per current analysis of organisation,
their net profit is about US$ 103.5 million on total income of US$ 9.05 billion.
 Company has equity strategy which provides growth as well as success in network,
increment in incomes and in addition, economies of scale (Bettis and et.al., 2016).
 Their partnership profits are approximately US$ 1.3 billion and along with this, they cater
their services to more than four million people in a year.
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 Their passengers are continuously increasing as services are very much impressive.
 Net revenue of Etihad airways is almost US$ 103.5 million in 2016 – 17.
 Business class of airline which consists MRO, cargo and so on, is continuously
developing.
As per the performance of company, they are marked as the best according to their profits
from last five continuous years. Along with this, their EBIT of US dollar was 260 million and in
addition, income before tax, interest, payment, diminution and rentals of US$ 1.5 billion are
there which is showing almost 15 percent of their total profits (Buckley and et.al., 2016).
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(Source: Etihad airways, 2017)
2. Details about market share
It is essential for each and every kind of organisation to determine about their market
share as it assist them to take benefits from their competitors in the marketplace. In 2016 – 17,
almost 20.290 million domestic people travelled in their airline. There are various competitors of
Etihad Airways in the market such as Indigo, JetLite, Spice Jet, Go air, Air India domestic and so
on. Their market share is mentioned as below:
Company Market share
Air India 12.70%
Jet airways 12.50%
Emirates 10.10%
Air India express 4.90%
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Illustration 1: Financial analysis of Etihad airways

Etihad airways 3.70%
Qatar airways 3.70%
IndiGo 3.20%
Air Arabia 3.10%
Others 46.10%
Interpretation: As per above indicated graph, it has been concluded that market share of Air India
is almost 12.70% and they are on top in the list. Rather than this, Etihad airways has 3.70%
market share which is similar to Qatar airways. Along with this, approx 46.10% market share is
obtained by other organisations.
3. Industry life cycle
There are four stages which are mentioned as below:
1. Introduction stage: It is the starting phase of products and services as per which
manager of company conducts marketing for their items. Employer wants to develop new
or innovative business by offering creative goods to people (Carraher and Paridon, 2015).
Along with this, data about merchandise is not much clear so that manager is not able to
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Illustration 2: Market share

determine the demand. This stage does not provide higher profits as employers invest
their maximum funds to develop the market and as a result, profits are less.
2. Growth stage: As indicated by this, clients can easily comprehend value of new or
unique items and thus demand increases at a fast pace. Now, organisation can compete to
set their market share in commercial centre. Organisation spends their fund on research as
well as development and profit making is not their priority. Along with this, they are
continuously improving their business procedure. Many firms acquire some other
associations for their growth and success in the marketplace.
3. Maturity stage: According to this phase, products and services are used by customers at
a high range (Carroll, 2015). Hence, growth can be easily measured by the organisation
of their goods and services. At this stage, item gets more standardized and can beat any
other item in market on the basis of value. Therefore, manager does not focus on their
revenue margins and in fact, they only want to enhance their profits at any cost. Many of
enterprises such as cash cows because their flow of cash is much consistent and they
provide less opportunities for profits increment.
4. Decline stage: As per this stage:
 Sales of product is going down
 Profits as well as prices will go less
 Demand of products and services diminishes
Manager of organisation starts a new flight to attract more clients towards them and along with
this to beat competitors at marketplace. For this, they introduce about it to their customers and
after that they come to growth phase and continuously improving their revenues. When they
come to maturity stage they only focus on their profits and increase the prices of their tickets.
There competitors also begin new flight for the same route and provide tickets to customers at
reasonable rates, as a result they beat them. Thus, Etihad airways has to face decline stage.
4. Briefing about evidence
Etihad Airways is providing the best as well as user friendly technologies to their people
(Chiarini and Vagnoni, 2015). They have almost 2,200 crew members of flight and along with
this approx. 6,000 cabin who are working at the time of check – in. They render exact data and
information to their clients so that they can get appropriate information regarding flight’s
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weather, destination and so on (Etihad airways open new state of the art crew briefing centre,
2017).
5. Balance in the report
Performance index of Etihad airways, 2016
Key indicants 2016 2015
Revenues related to traveller in US$ billion 4.9 4.9
Profits which are associated with Cargo in US$ billion 0.9 1
Total incomes in US$ billion 8.36 9
Net loss or profit in US$ million -1873 103
Entire passengers in million 18.5 17.6
Incomes passengers km in billion 89.5 83.2
Acquirable seat km in billion 113.9 104.8
Factor related to seat 78.60% 79.40%
Total amount of aircraft 119 121
Cargo tonnage (tonnes '000) 596 591
(Source: Etihad Airways reports net loss for 2016, 2017)
Interpretation: As per the above mentioned data, it has been concluded that in 2016, company
faced heavy loss i.e. almost US$ million 1873. Passengers of company are continuously
increasing in the year 2016 as compared to 2015. Their passenger’s profits are still stable and
total revenue is going down to US$ billion 8.36. Total number of aircraft of Etihad Airways
reduced by 2. Along with this, elements which are associated with their seat was 78.60% in year
2016.
6. Key success factors of Etihad airways
There are various key elements which are related with the success of company. These are
discussed as below:
Key success indicators Description
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People  They have special crew members who are working with
them.
 Manager of organisation has appointed a chef in flight also.
 Employers provide training to their staff and thus, they can
improve their communication skills. Along with this, it is
essential to manage firm at time of crisis (Demil and et.al.,
2015).
Products and services  Company provides the best administration to their clients at
affordable prices.
 They continuously develop their flights, for example, provide
hot deserts and beverages to people, render Korean menu in
entire Seoul flights.
 Manager of firm also gives ground goods offering such as
free Wi-Fi, family lounge, printing and so on.
Route system  They continuously enhance their route system which will
assist them to improve their revenues.
◦ AUH – Beijing: Daily flights (five in a week).
◦ AUH – Seoul: Daily flights (Six in a week).
◦ AUH – Bangkok: Double flights (ten in a week).
Partnership and alliance  They have almost 28 code share contracts with major airlines.
 In September, 2010 Strategic alliance is associated with
Virgin Atlantic.
 They generated profits almost one billion AED (Dess,
McNamara and Eisner, 2016).
Revenue and cost control  Dinner services of company is very quick.
 In April, 2010 they introduced new meal planning system for
their customers.
From above description it has been concluded that if company wants success and growth
then they have to control their unwanted cost. To improve their market share they can use some
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strategies, such as merger or acquisition. They will improve their route system more, so that they
can increase their goodwill at marketplace. Along with this, they can give training to their staff
members, as a result they will do their work in more professional manner. In addition, they will
provide numerous services to their clients, which will assist them to attract more people towards
their items as well as services.
7. Competitive analysis, internal and external resources, organisation capabilities and value chain
analysis
COMPETITIVE ANALYSIS:
There are many competitors of Etihad airways at marketplace, such as Emirates, Qatar
airways and so on. Etihad airways: It is set up in UAE and they started their activities in November, 2003.
They operates almost 1,100 flights in a week and along with this their cargo destinations
in Asia, Africa, Europe etc. with fleet of approximately 85 Airbus. In the year, 2012
approx 10 million passengers travelled with Etihad airways. Net profits of company is
almost US dollar 42.5 million (Helfat and Peteraf, 2015). Emirates: It is also established in UK and along with this they are subsidiary of Emirates
group which is entirely regulated by regulated body of Dubai. They operates almost
3,400 flights in a week. They are come under top most airlines in across the world.
Profits of company in 2015 was approx US$ 16 million.
 Qatar airways: They are connected with approximately 100 international places which
comprises Africa, South Asia, Europe, North and South America and so on. Organisation
has almost 30,000 trained workers who provide best services to all clients.
Analysis: All companies which are mentioned above are doing their business in the same
category. They all are doing their work in a creative manner so that they can easily compete with
each other in the marketplace. Etihad's mission as well as vision is much linked with culture and
as a result to it, they can attend their customers more friendly. Comparison to other airlines,
Etihad Airways provide more qualitative goods and services to their passengers. Main purpose of
these firms is to attract more clients towards them (Karepova and et. al., 2015). Their
fundamental aim is to improve their revenues along with market share. All airlines which are
mentioned above are using different kinds of strategies in their business which assist them to
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take benefits from their competitors. Along with this, Qatar airlines focus on more inventive
items as well as creativity.
Manager of company is going to start new flight, thus it will assist them to take benefits
from their competitors at marketplace. Along with this, they can easily improve their market
share as well as profits.
ANALYSIS OF INTERNAL AND EXTERNAL RESOURCES:
There are various resources which are associated with intrinsic as well as extrinsic as
mentioned below: Financial resources: Money which is available for company so that they can run their
operational activities in an appropriate manner (Luo and et. al., 2015). If is essential for
organisation to protect their financial assets effectively as well as efficiently. As result to,
they can attain their goals and targets within adequate time span. Etihad airways are not
selling their shares and this association is run by ministry body. Organisational resources: Each and every kind of firm needs appropriate assets for their
companies so that they can accomplish their objectives in an effective as well as efficient
way. It may comprise of human assets, inventory and so on. Physical resources: presently, Etihad Airways holds approximately 5% of holdings of
Virgin Australia. They are continuously increasing their equity share and thus, they can
improve their profits and market share. They have joint venture with BCD travels which
assist them to compete with their competitors at commercial centre. Technological resources: It is essential for company to utilize new or inventive
techniques in their business and thus, they can accomplish their work in an effective
manner. Along with this, it is essential for them to provide training to their staff members
to improve their work execution (Morschett, Schramm-Klein and Zentes, 2015).
 Human resources: It is necessary for manager of organisation to recruit the best
candidates in premises so that they can successfully provide their services to people. With
the help of this, firm can easily enhance their reputation in the market. For the above
stated purpose, they arrange some development programs for their employees.
ORGANISATIONAL CAPABILITIES:
It is essential for Etihad Airways to use all resources in an effective and efficient manner
so that they can easily take benefits from their competitors at marketplace. Most appropriate
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methodology which is utilized by the manager of company is to develop a new item for their
customers and as a result to it, they can compete with their rivals. Along with this, they are
continuously improving their products and services to improve the effectiveness of their goods.
There are many capabilities from manager and their thoughts to staff members, which comprises:
 Functional expertise
 Creative knowledge as well as skills
8. Porter's five forces
Porter's five forces: Threat of new entrants: Basically, organisation has threat of new company as they can
give their best items as well as services to clients at affordable value (Rothaermel, 2015).
There are various challenges which must be considered by new entry i.e. requirement of
capital. Firm operating in airline industry needs too much capital and a positive as well as
strong brand name along with client loyalty. Bargaining power of suppliers: They can influence company directly and indirectly like
if value increases then they can reduce the quality of products and services. There are
some suppliers of airline firm, such as Airbus, Boeing, etc. As a result, supplier’s
bargaining power is high as they have proper control in the marketplace. Bargaining power of buyers: Purchasers always want affordable values along with the
best quality. There are many competitors of Etihad Airways in marketplace and thus,
customers have many options to choose the airline that offers cheap cost as well as
services. Threats of a substitute products: It may vary from international and regional airlines. In
regional people have variety of options, as they can travel through bus, car, trains and so
on. But at international level, they can travel via flights only (Slack, 2015).
 Rivalry among existing firms: It is much high among organisations, as there are various
firms in the UK airline industry that are offering high quality products and services to
passengers. For example, there are some associations that are trying to enhance their
market share and for this, they are providing the best products to their customers. Along
with this, it assists them to take benefits from their competitors also.
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