Amanda Lungile

Nxumalo

Project 2

Strategic
Management

Student #
131988
Table of Contents
Question 1
1. Introduction
The history of Emirates Airlines traces back to the 1980s when Gulf Air, the
dominant regional airline, started cutting trips to Dubai. The government of Dubai
responded by unveiling the Emirates in 1985. The company received an amount
of $10 million from the royal family as a start-up capital. This was to enable it to
operate independently without any further government subsidies.

Over the years the company has grown in leaps and bounds by adopting various
strategic operations that have assisted it, to realize growth and profitability. It is
now rated as the top leading airline in the Middle East Region and one of the top
airlines in the world and beyond.

Despite these successes, the Emirates Airline is still committed to pursuing further
growth through innovation and hopes to become the largest and leading airline in
the world.

In examining the strategies that will help the brand grow over the next three years,
it is important to shed light on the pivotal points that the airline can work on to
improve its services and to keep abreast of market challenges and competition.

In order to perform a detailed environmental analysis for Emirates Airlines, the

following tools will be used:
 Pestle Analysis
 SWOT Analysis
 Porters Five Forces Analysis and
 Key Success Factors Analysis
2. Pestle Analysis
Pestle analysis is an analytical tool utilized in accessing and monitoring the
potential impact of external market environment on an organization to identify
areas of weaknesses and strengths. The components of this analysis include
political, economic, social, technological, legal and environmental factors.

2.1. Political Factors

The nature of the airline industry is sensitive. Although Emirates Airlines has
its headquarters in Dubai, United Arab Emirates a relatively peaceful city. The
airline business is not confined to the one country and city, but it is important
to consider the global political factors.

The airline is based in the Middle East, a region that is marred by political
conflicts and terrorism. This has propelled the company to invest in very costly
security measures and airport surveillance.

Emirates Airline operates flights to many regions of the world. The political
environment in many of these countries is stable, however any political change
or security concern can halt demand for Emirates.

In 2016/17, Europe, one of Emirates operating regions, saw heightened

concerns around immigration, terror attacks in Brussels, Nice, Berlin, Paris,
London, a coup in Turkey and The Brexit vote all sent shock waves not only in
the United Kingdom but also more widely across the globe as businesses
began to grapple with its repercussions for their operations, supply chains and
talent pool. (Emirates Annual Report, 2016/17)

The United States of America ushered in a President, and a new administration

which in the first three months issued a raft of new measures relating to entry
requirements, enhanced security vetting procedures, and restrictions on
 personal electronic devices in aircraft cabins. These all directly impacted
Emirates operations into the US. (Emirates Annual Report, 2016/17)

All the above developments affected travel demand patterns and more broadly,
consumer and business confidence. Although Emirates made an effort to
respond to the new developments especially in the U.S., the drop in demand
for flights to the U.S. continued and had to finally make a decision to reduce
some of the flights to the U.S. and redeploy capacity to other parts of the
network.

Regardless of the challenges Emirates continued to grow its global footprint

and capabilities. The airline added 35 new flights and retired 27 older ones.
The airlines overall capacity grew by 7% and it added six new global
destinations, as well as the enhancement of services with bigger aircraft or
additional flights to existing destinations.

2.2. Economic Factors

The economic factors are of great importance for the success of any business.
Economic factors will affect profit margin, demand forecast and capital
availability.

The regional economic environment that Emirates operates in can be argued

to be relatively supportive. The UAE has been ranked as one of the top 10 most
improved business environments. In the Global Entrepreneurship Index Report
2016, the UAE was ranked 19th in the world. (Emirates Annual Report, 2016/17)

Aviation and travel are today one of the engines and enablers of the UAE
economy, connecting us to the global trade commerce and tourism
opportunities. (Emirates Annual Report, 2016/17)
 Emirates is an international airline so the revenues are collected in multiple
currencies. The DAE is fixed at 3.67 against the US Dollar so currencies
fluctuations are not significant. However, the strong US dollar kept eroding the
airlines top line in major markets, some parts of Africa faced ongoing currency
devaluations.

The declining oil price is considered to be a positive development for airlines

because it has the potential to bring down operational costs, thus resulting in
higher profit margins. However, this also has a negative impact as it may
reduce premium travel to the Gulf Region, which means less passengers for
Emirates.

The decline in oil deposits and unstable oil prices has led Emirates to develop
strategies that will effectively deal with unstable jet fuel prices. The airline has
entered into deals with several major oil companies to supply jet fuel at prices
that will remain unchanged no matter what the future markets present. These
strategic fuel partnerships have ensured that Emirates maintains its
profitability, thus staying ahead of its competition.

2.3. Social Factors

The increase in the world population is alone an important factors that shapes
the demand for air travel.