Etihad Airways: Strategic Management – Free Essay Examples

Etihad Airways: Strategic Management

Introduction

Strategic management incorporates various approaches used by organizations in the development and execution of goals and objectives. According to the theory of strategic management, strategic analysis is both an art and science dealing with formulation, implementation, and evaluation of cross-functional choices that enable an organization to meet its goals (Boer, 2017). This report analyzes the strategic approaches which are responsible for Etihad Airways’ business excellence. It focuses on integrated management, marketing, finance, information technology, research and development in regard to Etihad’s position in the UAE’s airline transport industry.

Literature Review

According to the 2012-2013 Global Competitiveness Report, the aviation industry in UAE is one of the most versatile in the world. This was enhanced mainly by the fact that the country is also one of the most toured in the world. Due to this, the industry’s competitive nature is also ranked highly compared to other countries. Interestingly, the competition is equal between the local airlines and the international ones. One of the elements identified to cause such intense competition is the issue of class versus price (Aviation Investment Summit, 2013). Whereas a significant majority of the clients who sought to travel into the UAE were foreigners, they valued price over quality. Therefore, they were comfortable flying economy or coach but paying a minimal fee. On the other hand, clients flying out of UAE preferred class over price and would opt to pay a significant amount of money to fly first class. International airlines benefitted greatly from this as more foreigners were traveling into and out of UAE compared to the locals.

A second report by IATA also shows that the air transport sector in UAE contributes greatly to the country’s economy (IATA, 2018). This is a combined look at both the local and international aviation companies that are hosted within the different cities of UAE. The reason this report is critical is the fact that it can be used to explain the flexible policies that govern the aviation industry in the region. Other industries are often strictly governed to make it harder for foreigners to invest in the UAE economy. Bailey et al. (2018) offer a financial report explaining how the country’s GDP is affected by the aviation industry. Figure 1 below shows the summary of the report. It can be assumed that the international competitors also help the country collect significant revenue such that the policies in the industry have to be flexible in order to support the country’s economy.

Table 1: Financial Report – Comparison between Aviation and Petroleum Industry in UAE

Financial Report - Comparison between Aviation and Petroleum Industry in UAE

Analysis of Etihad Airways’ Strategic Approach

The leading strategy of Etihad Airways is the strategic environment of the UAE’s aviation industry. The UAE’s attractive strategic positioning has ensured it is among the most toured region in the world. Its position is accessible from all other continents easily as well. The country’s aviation industry has grown exponentially due to this fact. Etihad Airways has tapped into the opportunity and developed strategies that have also led to its growth. Some of the strategies employed include strategic partnerships, proper brand positioning and impressive consumer relations. A review of the UAE’s aviation industry reveals that Etihad Airways is a multinational organization competing against other existing international airlines. The cut-throat competition explains Etihad Airways’ marketing strategy that involves the growth is its market share through service provision in other countries. The company has undertaken massive publicity and promotional campaigns like “keep discovering” and “Hello Tomorrow” to create a valuable brand image. Etihad’s major goal is to be more competitive against its low-cost rivals in the domestic market, including Air Arabia and Fly Dubai.

The company can be analyzed through both TOWS and PESTLE analyses. Table 1 below presents the TOWS analysis of the company.

Table 2: TOWS Analysis

Internal Factors
Shape 2
External Factors
Strengths (S)

Large fleet of quality aircrafts

  1. Over 100 destinations
  2. Over 20,000 flights every week
Weaknesses (W)

Contributing to gas emissions that are affecting the environment

  1. Dependent on oil industry
Opportunities (O)

Affordable flights

  1. Cheaper fuel options
  2. Infrastructure tourism
S1+O1= The large fleets can easily accommodate more affordable flights using older planesS3+O3= Can increase the number of flights per week to also include travels interested in infrastructure tourism. W1+02= There are various more affordable fuel options that are also environmental friendly that the company can use.
Threats (T)

Declining oil industry

W2+T1= The company’s over-reliance on the oil industry for its fuel is enhanced by the declining state of the oil industry.

The external analysis of Etihad Airways can also be done using the multi-dimensional PESTLE model. Politically, the airline is affected by any new policies that the government puts out for the industry. For example, the passed environment bill discourages the emission of toxic gases in all industries for the benefit of the environment. This means that the airline will have to come up with alternative fuels for use. Economically, the growth of the country’s airports also impacts the company’s profitability as it is hosted by these airports. On the same note, the Social aspect of the PESTLE analysis reveals that more people have disposal funds that has led to the steady growth of infrastructure tourism. Despite this, it is critical for the company to create a package that is specific to these new group of travelers to UAE.

The fourth element of PESTLE is technology which the company has fully embraced. Etihad Airways uses all the latest technology in the aviation industry. It is important to note that the country is guided by one principle Legal aspect and body. This creates a challenge for the industry as decisions made by the body cannot be checked for accountability by any other body. In regards to the Environment, the company, as mentioned, is affected by the fact that the fuel used by its planes are contributing significantly to global warming. Therefore, the company has to come up with alternative sources of fuel.

In analyzing the external factors that affect Etihad Airways, it is also critical to mention some of the company’s competitors. One of the competitors is Republic Airways, which was founded in 1974. One of the advantages Republic Airways has over Etihad is that it has been in operation for a longer period. It, therefore, has more loyal consumers compared to Etihad. One disadvantage is that it has not invested in modern consumer relation techniques and this has led to Etihad being considered a better airline compared to Republic Airways.

The second competitor is Emirates which has been operating since 1985. One competitive edge that Etihad has over Emirates is the fact that the latter does not offer freight services. The large fleet that the former boasts of has allowed it to be significantly efficient in freight services and management. On the other hand, both airlines have near similar type of target audiences making competition between them high.

A third significant competitor is Air China. This is an international company that has taken advantage of affordable flights to attract its clients. Interestingly, Air China is highly competitive in UAE as it is a gateway to other continents. The more affordable offers and the large fleet the company boasts of have also ensured it has significant shares in the industry.

Corporate Strategies

Etihad Airways has incorporated various corporate strategies to ensure it captures the larger portion of the market share. One strategy that has proven viable for the company is the internationalization strategy that was studied in class. This is an innovative way of ensuring the company not only captures the domestic market, but also the international one. Belobaba et al., (2016) explain that the urban development policies in place allow for such innovative ways of business. The internationalization strategy allows the company to both provide locals with a reliable and well-known airline for their travel needs abroad while also ensuring foreigners get affordable options for travel to UAE.

Market Penetration

Market penetration allows a company to get into either a new or existing market with the intention of capturing a larger share of the same. Etihad Airways have grown its market share through targeted product development and quality services. As stated by Dale (2016) market penetration is the appropriate strategic direction. Etihad adopted more aggressive pricing concepts and invested heavily in innovative product and service development. Below is an image of the most common flight routes in UAE.

Table 3: Common Flight Paths in UAE

Common Flight Paths in UAE

Market Development

In this strategy, Etihad offers its current products and services to new divisions of the market which includes targeting new clients and advancing to new territories. The stated strategic direction has allowed Etihad Airways to capture new markets using its existing products. The other example of market development in Etihad Airways is called capital express where national cities are served by non-stop flights in new routes. Breaking the long-haul flight into short parts has also enabled it to be more flexible regarding aircraft choice and profitability. Arguably, the company has used a viable strategy of incorporating new routes to their new targeted markets.

Product Development

Etihad Airways implemented the product development strategy when it brought a new service to the current market. Etihad Airways’ innovation of offers like free Wi-Fi onboard enhances the company’s product development. Indeed, the company’s focus is the direct consequence of its mission to attract and retain new passengers.

Diversification Strategies

Diversification is an innovative strategic position that enhances a company’s ability to penetrate markets and also invest in products that are not directly linked to its core business. Etihad Airways has employed both related and unrelated diversification strategies. The company’s related to diversification involves cargo; maintenance, repair and overhaul; catering; information technologies; and leisure management. The stated approach supports consumer operations and enhances the quality of the company’s current services.

Strategic Approaches to Internationalization

Etihad Airways has employed the use of franchises, organic growth, viable partnerships, and inorganic growth in its strategic approaches to internationalization.

Organic Growth

Organic growth allows for the growth of the organization’s market or goods by utilizing its available resources. On the other hand, inorganic growth encourages the acquisition of competitors to allow for a wider reach into the target market. Some activities associated with inorganic growth include mergers and acquisitions. Each of the said approaches has its advantages and disadvantages. For instance, organic growth allows for a more planned and structured way of penetrating a market. Additionally, inorganic growth allows for a faster way of getting the same results. Interesting, organic growth can be slow and unsteady while inorganic growth can be costly. Etihad Airways has focused more on organic growth.

Joint Venture

Other than the strategic alliance, the company entered into a joint venture with Hala travel management. Hala Abu Dhabi opens a new window as the destination management division of Etihad Airways. Etihad Airways owns 51% shares in a joint venture with Armguard valuables management, which secures logistics services to the global valuables, secures storage, and staging airside. Also, the company is in a joint venture with Amadeus gulf, which provides a global distribution system for travel companies and travel agents (Boer, 2017). It offers travel agents access to a database of Etihad’s full range of airfares. As regards the Licensing contract, the company has been Manchester city football club’s main club partner. Being partnered with such a successful club, it gives Etihad Airways vast coverage to a global audience of sport fans.

Recommendations and Conclusion

One recommendation that can be made is the maximizing of profits through proper penetration of new markets. One element that many airlines in the country assume and thereby, ignore, is the fact that many citizens of the country would also appreciate using the local airlines to get back home from abroad. Etihad Airways, like the rest of the airlines, have focused mainly on the need to travel outside UAE. There is little investment done to attract clients traveling from abroad to UAE. It is critical to note that there is a significant number of UAE residents who travel abroad for studies, work and even leisure. The marketing approach should follow such travelers such that they also book return tickets using the same flight.

Secondly, from the lessons shared in class and the analysis of the company, it can be recommended that the management consider adding a more specific yet affordable infrastructure tourism package. Indeed, this is a new group of travelers who are interested in experiencing the different architectural advances that several cities in UAE are known to have. Part of the suggested package for infrastructure tourists should include smaller connected flights to the different UAE cities. Again, marketing plays a crucial role in ensuring that the targeted clients understand that they can get significant discounts if they were to book multiple routes for their different stays.

Thirdly, it is recommended that the company considers adding new routes that will open them up to new markets. As explained, airlines have used this strategy to gain access to markets that were otherwise impossible to operate. It is critical to note that new routes also include the removal of lay-overs which are often time wasting. This can be done through a viable partnership between the airline and the responsible parties in both the airports and the governments of the destination points. In conclusion, there are various ways Etihad can ensure it remains one of the most recognized and profitable aviation companies in the UAE. However, the company has to ensure that it follows an innovative strategic management plan to achieve this goal. The plan relies fully on innovation, technology and advancements in both the aviation industry and consumer management to ensure the company achieves its mission.

References

Aviation Investment Summit. 2012-2013 Global Competitiveness Report. Web.

Bailey, C., Holyoak, A., & Snider, J. (2018). An analysis of the effects of the aviation industry in the United Arab Emirates: A financial report. Web.

Bauer, L.B. (2018). Commercial viability of ultra-long-haul operations. Evidence from Qantas’ Perth-London service. Grin Verlag.

Belobaba, P., Odoni, A. R., & Barnhart, C. (2016). The global airline industry. Wiley.

Boer, E. R. (2017). Strategy in airline loyalty: Frequent flyer programs. Palgrave Macmillan.

IATA. (2018). The importance of air transport to United Arab Emirates. Web.

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