Strategic Management of Emirates Airline

Abstract

This Assignment includes three parts. The first part is strategic planning of Emirates airline. The second part discusses the type of decisions which are made in different levels of Emirates and explain the information systems used in these levels. The last part highlights the ethical issues involved in the organization’s processes.

Part 1: Strategic Planning

The purpose of this part is to consider the overall strategic management process and consider what is happening in the environment in order to judge how those happening may affect the organization. In addition there is a consideration of organization’s strengths and weaknesses and the opportunities and treats that has significant impact on the organization process.

Company overview

Emirates is a national airline of Dubai in the Middle East. Emirates flees to over 100 destinations in 60 countries around the world from Dubai International Airport with a fleet of 137 aircraft. Emirates Air line has been existed for 25 years. Although Emirates is a young airline, over one decade it has become one of the most respected brands in the world. The key of their success is using new technology and information systems in their business processes. (Emirates group, 2010)

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Company’s mission:

Generally, Emirates’ growth has never been lower than 20 per cent annually, and the airline has recorded an annual profit in every year since its third in operation. Their effort is to continue their explosive growth and increase the percentage of this growth.

Mission statement analysis

This analysis will help organization to reveal objectives, goals and plans for achieving them which are important for the long term survival in the industry.

In any organizations, managers need to focus their efforts and resources on long-term, general objectives, and provides a foundation for short-term, specific objectives in order to achieve their mission statement. (Robson 1997)

General objectives:

As mentioned in mission statement, Emirates is trying to increase the percentages of their annual benefits.

Emirates carried 21.2 million passengers and 1.3 million tonnes of cargo during the previous years (Annual report, 2010), and they need to carry millions more across a growing network of international destinations if they want to increase their profit. Therefore their aim is to provide the best service in the industry in order to have more passengers and cargo.

Specific Objectives:

Currently, Emirates’ flights account for nearly 40 per cent of all flight movements in and out of Dubai International Airport, and their main aim is to increase this market-share to 70 per cent by end of 2010 without compromising the reputation for quality.

Moreover, they are trying to add 18 new passenger aircraft to their fleet, increase seating capacity by 14 per cent. They also plan to increase frequencies on many existing routes as well as expanding cargo capacity by 17 per cent. These specific objectives are all to support the general objective which mentioned above.

Environmental analysis

The organization’s environment is an important point to be considered by managers because environmental factors can significantly influence organizational operations. Good managers must be aware of their organization’s environment and know how any changes may affect the organization and their organization’s available resources. (Robson 1997)

Remote environment

Remote environment analysis lists all those events, issues and facts which will influence the company performance, but over which they have little influence and those facts are usually out of control.

Nature of the environment

The United Arab Emirates (UAE) has the seventh largest proven oil, according to the Oil and Gas Journal in January 2009. Because of this geography, United Arab Emirates has rich natural resources and high amount of natural resources of fuel. The availability of large amount of fuel in UAE helps Emirates to provide fuel for its aircrafts much easier than its airline companies. (Business news, 2007)

Political challenges

One of the reasons that had significant impact on Emirates was experiencing a downturn of their competitors because of the Gulf War. Gulf War was a war which took place in the Persian Gulf between 2 August 1990 and 28 February 1991. Because of this political war, Emirates was the only airline to fly in the last ten days of the war. (Press, 2001)

Economies

Dubai International Airport’s Terminal 3 was built exclusively for the use of Emirates at a cost of $4.5 billion. Terminal 3 is the largest building in the world by floor space. The influence of this environment is that many people may want to use this flight in order to visit the largest building in the world even though they have other choice of airlines.(Caswell, 2008)

Industrial environment

United Arab Emirates (Dubai), which was a fishing village at the southern end of the Arabian Gulf, has grown to become one of the leading trade center of the Middle East. Large number of businesses and trades are running in there. This influences Emirates Airline deeply because many people start coming to Dubai from oversee and also many people need to flight to other countries. Emirates, by providing good airline services, is one of the high demanded airline in this country.

SWOT analysis

SWOT analysis is a basic tool for analyzing the organization’s status. SWOT analysis addresses organizations strengths, weaknesses, opportunities and threats.

A SWOT analysis defines the relationship between the internal and external appraisals in strategic analysis. It is an exercise in identification and analysis. Analysing the key factors of the environment and the fundamental internal strengths and weakness of the organization will help dictate the strategies appropriate to the firms. (Robson, 1997)

Strength:

Strengths are the positive internal factors that add value to the company.

New business idea:

One of the facts that makes organizations stronger is when they create a new business idea. In 2005, Emirates began flying non-stop to New York. This happened when only Delta Air Lines had the same service. Therefore Emirates started to give a service which was not provided by so many airlines, and that helps them in increasing the number of their customers

Reputation:

Another internal factor that makes the business strong is having good reputation among customers. For example:

In 2009, Emirates was voted the fifth best airline in the world by research consultancy firm Skytrax.

*Skytrax is a United Kingdom-based consultancy, the public face of Inflight Research Services

Competitive advantage:

Emirates has won some competitive advantages which made this company as one of the good airlines. To answer this question that how Emirates is able to retain its competitive position in the industry, looking at how good Emirates is serving its products could be the answer. Product in Emirates is the services that airline is providing for its customers such as flight, food.

Flight

Emirates’s offering is divided into three main lines; The First Class seat, the Business class seat and the Economy class. In all three classes passenger are provided by high quality and comfortable seats, in-seat laptop power-outlets, and an ICE system on a LCD screen. Business and firs class have more facilities include massage function, privacy partition, winged headrest with six-way movement, two individual reading lights and an overhead light per seat, in-seat power supply, over 600 channels of entertainment on ICE.

Emirates was the first airline in the world to introduce a personal entertainment system on a commercial aircraft and that was a good reason for them to gain completive advantages.

Weaknesses:

These are the negative internal factor that destroys values of company or put the company in risk.

Actually it is difficult to say what are the weaknesses Emirates, because Emirates is considered as one of the most respected travel brands around the world. However there are still some weaknesses that Emirates need to improve. I can say that one of the Emirates’ weaknesses is having expensive ticket price especially for the business and first class. Emirates started to lose some of its customer when Qatar Airline offered the same flight with cheaper tickets.

Opportunities:

Opportunities are external positive factors that represent the reason for an organization to exist and develop.

One of the opportunities that can add value to the company is having partners, agencies or distribution. Emirates has 6 subsidiaries and its parent company(Emirates Group). These subsidiaries which are operating separately can give Emirates benefits.

• Emirates SkyCargo
• Skywards
• Emirates Official Store
• EmQuest
• Emirates Aviation College
• Emirates Engineering

Threats:

Threats are external negative factors which could place the organization mission or operation at risk.

Market demand

In the commercial airline industry, unfilled seat on a regularly scheduled flight represents a threat cost to the operator. Although Emirates attempt to offer the best services for the travellers, it is not possible all the seats get fill during all the flights.

Competitor intentions

Another threat that might be danger for Emirates is it’s competitive in the market. While Emirates has one of the most modern fleets in the industry, and has service levels make other airlines to emulate, and start using the same strategy that Emirates is using.

(Williamson et al. 2004)

Part 2: Information system Analysis

There are four managerial levels in any organization that are responsible for organization’s plans and decisions; strategic, tactical, knowledge and operation levels. In this section, first the type of decisions that made in each level is discussed. Later, the information systems which are used to help the managers to make the right decision in that level of organization are listed. (Laudon, 2001)

Strategic Level

Decisions in strategic level:

In strategic level senior managers need to develop their skill of making the best decision possible. This type of decision usually concerns about general direction, long term goals. These decisions are the least structured but they could have significant impact on the future of the organization.

One type of decisions that is made in the strategic level is planning for gaining long term benefit, which is the Emirates’ objective. This type of decision could require managers to add new destination in their flight schedules.

Another long term decision in Emirates is buying new air plane (Airbus 380). Buying a new aircraft is a strategic decision because manager should consider this decision is it going to benefit them in future or not.

Information systems in strategic level:

Executive Support System (“ESS”) is the type of information system which is used in strategic level in order to help senior managers make strategic decisions.

A mentioned, making profit is one of the Emirates’ goals. Profit Planning System could help the organization to catch this aim. Profit planning system sets a profit target for the coming period. It is like a summarized version of estimated income statement. It starts with a forecast of expected sales and desired percentage for gross profit keeping in view the market conditions.

Another information system used in Emirates is Facilities Location system which helps manager access to external information decide where to locate new facilities. This type of system will help in gathering, analyzing and summering the key internal and external information used in the business.

Tactical Level

Decisions in tactical level:

Decisions in tactical level support the strategic decisions. They tend to be medium range, medium significance, with moderate consequences. The data used to drive this type of decision is usually found in summaries of routine transactions e.g. sales orders from the next level or classification. (Laudon, 2001)

For example in Emirates one of the main strategic decisions is to increase the profit of the year. Therefore the tactical decisions which are made by middle level managers would be how middle process could help this decision to be successful. The data used to drive this type of decision is usually found in summaries of routine transactions e.g. sales orders from the next level or classification.

Decision about determining ticket prices or producing a low priced ticket, or offering some seasonal promotion in order to attract more customers are those kind of decisions which are made in tactical level. Another tactical decision in Emirates could be determining optimal booking policy for multiple fare classes.

Information systems in tactical level:

Management information system (“MIS”) and Decision-support system (“DSS”) are two important information systems which support movement level. Management Information System mainly concerns with internal sources of information and usually takes data from the Transaction Processing Systems and summaries it into a series of management reports. (Laudon, 2001)

Budgeting System which used to prepare short term budgets is an example of this type of system. All the Emirate’s annual reports are provided by such system and they will be used by the middle managers.

Another system which is used in Emirates is Pricing Analysis System which is for determining ticket prices and promotions.

Decision-support system (“DSS”) is also one of the important systems specifically to help management make decisions in situations where there is uncertainty about the possible outcomes of those decisions. This system helps in gathering relevant information and analyzes the options and alternatives. Then the system provides spreadsheet and databases to create “what-if” models, and provide managers with the best decision to choose. (Robson 1997)

A example of DSS in Emirate is Compensation Analysis System. This system provides a comprehensive overview of the organization expenditure, monitor wages, salaries and benefits for the manager and they are able to plan.

Knowledge Level:

Decisions in knowledge level:

The decisions in this level are made by engineering and designer. This type of decisions involve creating new investment, designing new career paths and identifying new markets. The information which is needed for this level is structured internal knowledge such as research reports, product-oriented marketing metrical and techniques and methods. (Robson 1997)

Information systems in knowledge level:

Knowledge Management systems are used in knowledge level. The aim of theses system is to take documents with knowledge embedded in them, such as memos, reports, presentations, articles and store them in a repository where they can be retrieved easily. Examples of such system are:

Competitive Intelligent System which works based on a detailed business model that identifies what information it should collect.

Market Analysis System which provides tools for analysis of financial markets using technical analysis.

Operational Level

Decisions in operational level

Operational decisions are every day decisions and used to support tactical decisions. In the operational level the daily requirement are reviewed in order to make the decision. Thus, the operational decision is highly structured and their impact is immediate, short term, short range. The data used to drive this decision type is usually prescribed or defined in the procedures and rules of the organization. (Laudon, 2001)

Information systems in operational level:

An Operational Information System is a class of information system which provide information base for the day to day operation of the airline. In this system the information about lights, passengers, crew, situational, and environment gather. Some of these flows are carried by additional information such as passenger booking via the internet and form the travel agencies.

Transaction Processing System is one of the current systems in airlines companies to support of transaction and analytical processing on newly received operational information. This system includes source concentration, event derivation, and the ability to provide initial view or states of operational data to applications, where subsequently received events update these view.

Order Processing System is another system which is used in operational level and keeps track of daily orders and transaction.

Part3: Ethical issues

There is no doubt that with help of Information Technology and Information Systems human activities will be done more efficient and effective. However some concerns have been risen in usage of IS/IT that may make them to be unethical.

Ethical issues in usage of IT

One of the main concerns about the information technology is Internet. Internet has been changed the way people used to live. Nowadays people shop through internet, buy ticket online, communicate with friends, family, college in the other side of the word, and that means traditional business such as travel agents have lost their customers to the new competitor which called internet.

The other viewpoint of using internet is internet crimes (hacking into data, falsification of data). Internet has broken all the boundaries of personal securities. That could be a huge harm for a organization if their private data be stolen.

Ethical issue in usage of IS

Developments of information systems also involve ethical considerations in how information is used.

As mentioned information systems provides information to managers in organization to make plan and decision. The question is that “Do managers make legal decisions?”

On the other hand information systems are all about gathering information, analysing data. The ethical issue of this fact is that, are the information collected in ethical way.

Geographic Information System is a good example for show the unethical aspect of usage Information Systems.

American satellites orbit the earth, scanning for various kinds of data, which can then be used in a GIS. Analysis of resulting data tells researchers a great deal about, for instance, natural resources located in other countries.

The problem is that poorer countries, without the financial resources to send up their own satellites, claim that the U.S. is taking information from them without any kind of payment.

Conclusion

What is most concern in decision making not only is “Is this a right decision” but also is “Is this decision the best decision”. Managers will always need to access to the useful information in order to make the best decision.

An organization should have several types of information systems operating at the same time. The success of an organization which has information system in all the departments such as Finance and Accounting, Sales and Marketing, Manufacturing and Human resources department is guaranteed.

Here are two more information systems that I think will help Emirates to have better services:

In a company like Emirates which has 6 subsidiaries, Partner Relationship Management (PRM) is a system for improving communication between Emirates and their channel partners.

Another recommended system for Emirates is Customer Relationship Management (CRM) to help them stay close to existing customers. Skyward is the famous Customer relationship Management system for Emirates. Considering the strong competition in today’s market, they need to improve their CRM performance in order to increase the number of loyal customers. Resources:

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