The Strategies applied by Emirates airlines

This report talks about Emirates Airlines. The first part of the report concentrates on the sales and profit trends, the market share and provides in depth knowledge about company’s market environment and its competition . It then explains the various marketing strategies and the company’s marketing mix. Finally this report talks about the company’s current position with the help of various matrixes.

Introduction

The journey of Emirates started in March 1985 when The Dubai government provided it with two aircrafts and a capital of 10 million $. It started due to cut backs in destinations from Gulf Air and has evolved as one of the best service providers worldwide. Their very first air route was from Dubai to Karachi followed by Delhi and Bombay. Within its first year of operations emirates flew 26000 passengers and carried 10000 tons of freight. Since then Emirates has seen only profits except for the second year of operations when it made a loss. The most important factor contributing to its success was the Gulf war which kept all the other aircrafts outside the gulf area. Every year its revenues increased by 360 million Dirhams reaching about 42477 million dirhams in the 2008-2009. Emirates now flies to over 100 destinations in 60 countries and operates 700 flights a week.

THE MARKETING ENVIRONMENT

Businesses

Emirates is mainly involved in the aviation industry, however it also has many other subsidiary businesses. The emirates group owns two main corporations, namely Emirates and Dnata. Dnata is one of the leading travel organizations in the Middle East and is responsible for handling cargo ramp and technical services at the Dubai international airport.

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Emirates and Dnata incorporate the following divisions in terms of destinations and leisure management. Emirates has Emirates holidays , Arabian adventures , Congress Solutions International , Emirates Tours , Wolgan Valley Resort and spa , Timeless spa and Dubai desert conservation reserve. It has also diversified into Emirates Sky Cargo which is currently the most profitable, Skywards, Emirates official stores and Em quest, Emirates Aviation College and Emirates Engineering. Dnata on the other hand handles Dnata Ground Handling,Marhaba, Dnata Cargo(the most profitable), Dnata Travel Services, Mercator, Transguard and Dnata World.

Pest analysis

Political analysis

Emirates is successful mainly because it operates through protectionism. Since its establishment it has been protected by the government’s regulations and policies. The Dubai government being the sole owner of the industry makes it feasible for the company to adhere to the policies given by each government thus ensuring the successful and effective running of the company’s business. Furthermore the company also has formulated its own strategies against any government restriction and limitations.

Economic analysis

Emirates being one of the world’s largest and competitive company, is economically stable. Regardless of all the dangers that the company encounters in different parts of the world, the management of Emirates sees to it that they are able to overcome all hurdle thus achieving a better economic condition.

Social analysis

Emirates is affected by the situation prevailing in the society in which they operate. The increase in the number of expatriates in Dubai leads to an increase in the profit margin as they use the airline to travel back home. Emirates also tries to ensure that the society is given equal chances of taking advantage of the services provided by them

Technological analysis

IT developments have affected Emirates in a major way. The company uses different IT/IS system and makes use of the internet to communicate with their customers and staff. Besides this, Emirates also uses facilities like self and online check in for passengers to improve their services and operations.

General environment

Air pollution is a definite environmental hazard that any airline needs to consider. Emirates has taken various steps to reduce their contribution, the most important being their advanced and fuel efficient aircraft fleet. They burn less than 4 litres for every 100 passenger kilometers. Because of their efficient hub based operation lesser number of flight are needed to transport passengers and cargo.

THE COMPETITION

Main competitors

The main competitors of Emirates being Lufthansa, British Airways and Air France are the only airlines that can provide superior service and comparable in flight experience.

Sales and profit trends

The primary competitor is British Airways. After making a loss for the past two years they announced a pre tax profit this September of £158m reversing last year’s losses of £292m.Their operating profit was up by £370m & total revenue by 8.4 %.

With regards to their sales their passenger revenues were up by 7.9 percent and overall yields improved by 17.2 percent

Market share

The market share of British airways is 45% and is greatest in flights from Heathrow to United States.

Target market

British airways caters to international upscale, business and pleasure travelers in the age group of 30 – 50 who are able to afford their services .

THE COMPANY

Sales and profit trends

In 2010 Emirates recorded an unprecedented 415.7 % jump in net profits. Their profits jumped to $964 million from $187million last year. This remarkable growth was achieved during global economic recession by putting a stop on new recruitments.

In the same year the airline carried 20.8 % more passengers as compared to last year.

Market share

Emirates accounts for nearly 40 % of all flight movements in and out of the Dubai international airport with an aim of increasing it to 70 % by 2010.

Project focus

The organization emphasizes greatly on its product, brand, model, division, segment and country. As far as its product is concerned Emirates has a newer and more fuel efficient fleet of aircrafts as compared to the other airlines. Emirates is one of the biggest brand names and enjoys excellent brand loyalty as it doesn’t let its customers down. Concentrating on the model of its aircrafts emirates has ordered about 90 A380s which are currently the most efficient aircrafts. The airline segments its passengers according to economy, business class and first class passengers. Emirates uses Dubai as its main hub for stop overs during long haul flights which proves to be very advantageous.

SWOT analysis

Strengths

Weaknesses

Opportunities

Threats

Emirates is globally recognized in the airline industry

It incurs high operating costs as it invests heavily in new aircrafts

Announcements have been made by World travel and tourism stating that there will be an exponential increase in the number of UAE tourists.

Competitors like Singapore airlines , Lufthansa and British airways pose a major threat

It has the advantage of size and can cater to a diversified market rather than being restricted to limited number of destinations.

It is not affordable for the budget and middle class passengers.

It has the advantage of penetrating new markets because of its increase in the fleet size and number of destinations

Potential Increase in operational costs due to increase in fuel prices , insurance and security costs

It is able to rapidly adapt to the changing market conditions and hence maximize profits

It is a relatively new airline established in 1985

It has the ability to enter markets where internet adoptions is the norm.

Carriers like air Jazeera and air Arabia are low cost airlines and hence preferred by certain customers.

More fuel efficient and newer fleet of aircrafts as compared to other airlines.

It doesn’t have a major presence in the capital of UAE (Abu Dhabi)

A decrease in the operational costs due to the new A380s would help to cater to budget travellers

A pandemic or terrorist attack may lead to passenger insecurity.

Marketing Strategy

Segmentation

Emirates segments its market into two major categories, the profitable (business travelers) and the unprofitable one. These can be further divided on the basis of the average length of trip, the frequency of trips and the brand loyal customers.

Business class passengers are the most profitable to Emirates and are willing to pay for their luxurious services as price is relatively inelastic for them. Emirates offers these travelers great Wifi services and more room to work and hence they prefer nonstop trips.

Emirates loses out where the economy class travelers are concerned as they are very price elastic and prefer to choose low cost carriers.

Brand loyal customers are those who have been flying with emirates for years regardless of their prices and rely on the quality and reputation of the airline.

Targeting

Emirates caters to high ranking executives and businessmen belonging to the age group of 30-60 who are looking for luxury and comfort in travel. It serves all customers regardless of nationality.

Positioning

Emirates positioning strategy is primarily benefit oriented and aims at offering unique services. Emirates positioning is universal, innovative and offers good value for money.

Where business and first class passengers are concerned emirates positioning is one of high quality, luxury and comfort on board.

For families, Emirates positions itself as a premiere airline providing a complete and enjoyable inflight experience

British airways positioned itself as a brand that provides excellent quality and service but the losses incurred over the past 2 year tarnished the brand name and image.

Differentiation

Emirates ranks first when it comes to differentiation. Emirates was the first to implement modern technology like mobile phone usage on board, internet browsing and the sun and moon concept. They also offer services like showering on board for first class passengers and complimentary chauffer services.

Growth strategy

Emirates from the very beginning has adopted an aggressive growth strategy. Their profit figures show an annual increase without fail barring the second year of operations. Emirates has been continually expanding their passenger capacity and number of destinations.

The strategy employed by them relies on the acquisition of fuel efficient luxurious aircrafts and competent staff and the ability leading to lower operational costs.

The company’s lean management structure and quick decision making ability also plays a contributory role.

THE MARKETING MIX

Price

Emirate uses the premium pricing strategy because it offers luxurious and high quality services that merit more money as compared to other airlines. It targets those customers who demand better services regardless of price.

Product

Emirates , owns fleet of 120 wide bodied aircrafts and flies to 108 destinations in 60 countries over 6 continents. Emirates almost doubles its fleet every year. This year Emirates received 12 A380s and has placed an order for another 78 A380s. Prior to this Emirates purchased 8 Boeing 777 freighter aircrafts.

Place

Dubai serves as the main hub of Emirates as it occupies a very strategic position in terms of its location and oil reserves. In addition to owning its own airport terminal in dubai Emirates has 11 travel shops in UAE and 122 travel shops worldwide aimed at providing superior services.

Promotion

A combination of both traditional and modern marketing methods is employed by emirates. Advertisements in newspapers, magazines, television and billboards along with a website in 9 different languages are some examples. The aim is to reach customers of all nationalities. The primary way however in which emirates promotes itself is through organization of different events to increase brand awareness.

People

Emirates not only focus on the satisfaction of customers but also on the satisfaction of shareholders, employees and the general public .In year 2010 when emirates announced a profit of $964 million, it also announced a bonus 3 weeks for its employees and share prices rose by about 2.6 %

Processes

Emirates provides an overall interactive experience to its customers on board. Using its websites people situated throughout the world can not only book themselves on a flight but can also provide detailed preferences on their choice of seats or meals.

Physical evidence

Emirates understands that physical evidence is extremely important for an intangible product and hence tries to deliver excellence in quality. Emirates tries to anticipate its customers’ expectations and provide value for money.

BCG MATRIX

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Emirates is a cash cow when it comes to the BCG matrix. As a leader in the mature market the company exhibits greater return on assets than the market growth rate and hence generates more revenue than they can consume. This organization is able to fund its own research and development to service its debt and to pay dividends to its shareholders. Since emirates generates a stable cash flow its future cash flows can be determined with reasonable accuracy

Product life cycle

Introduction

Emirates originated in 1985 with two aircrafts provided by the Dubai government and a capital of only 10 million. Its first destination was Dubai to Karachi and later Bombay and Delhi were added.

Growth

Emirates became the fastest growing by 1990s. Their revenues increased by about $100 million every year reaching about $500 million in 1993. The primary factor contributing to its growth was the gulf war. In 1993 emirates carried 6800 thousand passengers and 1.6 million tons of cargo.

Maturity

Emirates is now in its maturity stage. In view of heavy competition, Emirates is concentrating on heavy advertising and promotion. They have added large number of destinations to their list and intend on adding many more. With the growth in passenger numbers worldwide Emirates is expected to maintain its current growth pattern.

EVALUATION OF THE COMPANYS STRATEGIES AND TACTICS

Evaluation of the company’s current position

Emirates produced a net profit of $964 million in the first 6 months of 2010. The company has seen a marked increase in passenger traffic, carrying 15.5 million passengers the highest ever for a first six month reporting period.

Evidence of company’s success

Emirates has made an incredible profit of 3538 million dirhams and its sales increased by 3.6% from the previous year. Evidence has been attached in the appendix

Prospects of future growth

Emirates aims at operating 120 airbus a380swhich implies that it would have to place an additional order of 30 aircrafts worth $10 billion. With an increase in the fleet size emirates would be able to increase their number of destinations leading to an overall increase in revenues

Conclusion

Emirates growth during the past 25 years has been phenomenal and it aims at maintaining the current growth rate of 20% per annum. Emirates has an extremely strong brand name which attracts customer loyalty. It has achieved this by implementing the latest technology and has positioned itself as a forerunner in the aviation industry.

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