978-1259278211 Case 34 Solution Manual Part 1

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Teaching Note: Case 34 – Emirates Airline

Case Objectives

1. To examine how external and internal forces affect competitive strategy.

2. To investigate the challenges of choosing an appropriate competitive strategy.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The

Chapter Use Key Concepts Additional Readings or

Exercises

PRIMARY

1: Strategy

Concept

Strategic management; vision,

See web links, embedded video

2: External

External environmental forces;

See web links

3: Internal

Value chain; tangible vs. intangible

5: Business-

Generic strategies See optional advanced reading,

SECONDARY

CONCEPTS

11: Strategic

Leadership

Case Synopsis

In 2015 Emirates Airline was one of three Middle East carriers that were singled out by the

largest U.S. airlines as being competitive threats in the U.S. markets due to an “unfair advantage”

Emirates’ founder Dubai Sheikh Mohammed bin Rashid al Maktoum saw an opportunity to start

an airline that would help build Dubai into a center of business and tourism, and recruited British

Airways veteran Sir Maurice Flanagan to lay the groundwork. However, the airline’s growth has

This geographic advantage was not the only way Emirates was able to become the airline of

choice for over 45 million passengers. In addition to making the Middle East the hub of

international travel, Emirates had created a reputation for extraordinary service, especially in the

In the past Emirates had set itself apart from other carriers by enhancing the customer

experience, but its competitors, especially those also based in the Middle East, had been

improving their offerings, particularly for premium passengers, even creating an additional tier

Teaching Plan

The Emirates case is a good example of what a firm has to do to choose a competitive strategy. It

also provides an opportunity to discuss how competitive options are dependent on resources

available. Therefore, this case can be positioned in the middle part of the course, to discuss the

components of strategic analysis and formulation. For more advanced students, it can also serve

as an example of the nuances of strategic implementation.

The instructor can also position this case discussion with a PRIMARY focus on Chapter 5:

Business-Level Strategy, contrasting Emirates to the JetBlue and Southwest cases – in discussing

choice of competitive strategy, students are encouraged to choose between low-cost leadership

and differentiation, but in certain segments of the airline industry there is really no choice but

competition based on controlling costs. Although students may try to explain how service

amenities and features such as leather seats can create a differentiated advantage, customers

rarely are willing to pay a premium for these things. This means the differences between carriers’

success often revolve around operational choices and strategic implementation. However,

Emirates operates in a unique geographical niche, offering an exclusive long haul luxury service.

Its choice of destinations is key to maintaining a differentiated advantage. Uncovering those

sometimes subtle differences between airlines can be a challenging yet fruitful discussion.

For advanced students, the instructor may wish to assign Michael Porter’s 1996 article “What is

Strategy?” (Harvard Business Review, November-December, pp. 60-79) as companion reading to

the case. Southwest is used as an example in this article of how tight linkages across its value-

chain activities give it a valuable, rare, in-imitable, and non-substitutable competitive advantage.

What might the Emirates value-chain elements look like, and are they necessarily different from

Southwest’s? In what way might Emirates have a VRIN advantage?

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

Discussion Questions:

1. PRIMARY QUESTIONS: What are key forces in the general and industry environments

that affect Emirates’ choice of strategy?

2. How does Emirates compete? What internal resources and assets does Emirates have that

may give it a competitive advantage?

3. OPTIONAL QUESTION: Assess the effectiveness of Emirates’ leadership.

Discussion Questions and Responses

1. What are key forces in the general and industry environments that affect Emirates’

choice of strategy?

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter

1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an

organization undertakes in order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●includes multiple stakeholders in decision making;

Leaders face a large number of complex challenges. Leaders must be proactive, anticipate

change, and continually refine changes to their strategies. This requires a certain level of

“ambidextrous behavior”, where leaders are alert to opportunities beyond the confines of their

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision,

mission, and strategic objectives. Leaders must communicate their initial vision of the

inspiring, overarching, and long-term, that represented a destination that is driven by and evokes

passion?

Is the original vision still applicable given the present circumstances?

Emirates’ organizational mission needs to be considered: a mission encompasses both the

purpose of the company as well as the basis for competition and competitive advantages. In

writing a mission statement, it is important to understand the definition of the business by

Organizations must respond to multiple constituencies if they are to survive and prosper, and the

mission provides a means of communicating to diverse organizational stakeholders. Although

Anticipating that things might change, Emirates’ leadership must establish strategic objectives to

operationalize the mission statement with specific yardsticks. That is, objectives help to provide

Emirates’ original founder had the vision of helping Dubai become a center

of business and tourism, and foresaw a premium quality experience that

started with a national airline that could carry those business people and

tourists to its exotic destination. Emirates was not just an airline that delivered a superior

Now the airline was faced with changing competitive conditions. Dubai had become a worldwide

wonder, attracting travelers for multiple purposes, and the airline had helped create and then

to achieve the mission and vision, but which objectives, and what resources, might be needed in

order to do this? Was the original strategy still sound?

See Chapter 1, Exhibit 1.3 for a depiction of the strategic management process. During strategic

analysis, the leader does “advance work” to anticipate unforeseen environmental developments,

In strategy implementation, depending on the type of organization structure, the leader might

include key individuals in a discussion around selecting which strategies might be best to

The basic question strategic management tries to answer is: How can we create competitive

advantages in the marketplace that are not only unique and valuable but also difficult for

competitors to copy or substitute?

NOTE – ADDITIONAL EXERCISES:

As stated, in writing a mission statement, it is important to understand the definition of the

business by answering these questions: 1) Who are its customers? 2) What customer need is the

See the promotional video for the Emirates A380 featuring Jennifer Aniston. What does this say

about Emirates’ approach to strategy? https://www.youtube.com/watch?v=kwYr4LAIUjk

Watch the “Hello Tomorrow” videos: https://www.youtube.com/watch?v=xG-

NGPbtOOk&list=PL45753735FC829B36

Based on your visit to this website, and what you saw in the videos, how do you feel about

Emirates’ mission and what its current priorities seem to be?

Referencing Chapter 2: Analyzing the External Environment of the Firm

In order to formulate a competitive strategy, organizational leaders must first become aware of

factors in the overall environment that might affect their ability to create a competitive

Environmental scanning involves surveillance of a firm’s external environment to predict

environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint

Environmental monitoring is a firm’s analysis of the external environment that tracks the

evolution of environmental trends, sequences of events, or streams of activities. Leaders need to

Based on the case, the major challenges for Emirates include increased competition from other

international carriers, how to appeal to the changing tastes of the premium first-class customer,

To assess how the external environment might affect Emirates’ strategy, it’s necessary to take a

look at the factors in the general external environment. Emirates must consider the

factors in the general environment students might pick that have a significant impact on the

international airline industry. Students might respond as follows:

Political-Legal – airline regulations apply worldwide, yet certain trade provisions and alliances

between carriers are subject to country legislation, as noted by the demand by U.S. airlines for

Sociocultural-Demographic – the general customers’ preferences have changed to make air

travel more of a commodity – whichever carrier gets you there the fastest and cheapest

Economic – the airline industry is susceptible to upturns and downturns with the trends in the

global economy. A growing economy and booming business mean greater demand for air travel,

and a slowdown in the economy means reduced demand, consequent unutilized capacity and

Global – boundaries are disappearing, travelers are more aware of and give more scrutiny to

global consistency in service offerings – certain amenities are accepted, and expected,

everywhere (see the back-of-seat TV viewing that was unique when Emirates first offered it, but

Technological – advances in technology benefit the airline industry, especially in aircraft design

and engineering that increases efficiency in fuel consumption. Technology related to operational

To answer the question about the current forces in the industry environments that affect Emirates’

ongoing strategy, it’s necessary to assess the segments of the external competitive environment

First, however, it’s necessary to identify the industry. One important question is “what business is

Emirates in?” Until students are sure about the boundaries of the business, it is impossible to do

The airline industry is a well-established industry with multiple strong direct competitors,

especially at the local level. The comparative analysis of JetBlue against Southwest Airlines

demonstrates how competitive this business is. In contrast, the international airline industry

Help students apply Porter’s Five Forces of competition to the international airline industry by

drawing a diagram on the board similar to the following and having students fill in the details:

Based on the external environmental factor analysis, the international airline industry has many

competitors trying to carve out a piece of the “profit” pie. Here are some other relevant details:

Since some of Emirates new competitors are also fairly new airlines (Qatar and Etihad), what

implications does this have for threat of new entry into the industry?

Economies of scale. This did not work out well for many players in the airline industry. The hub-

and-spoke model developed by some major U.S. players such as American (Dallas hub) and

Rivalry

Very High

Substitutes

Buyers’

Power

Low

Suppliers’

Power

High

Suggested: Many rivals

compete in the international

airline business. Convincing

international airlines might

Suggested: Boeing & Airbus

are the only aircraft suppliers.

Suggested: There are

Location. Although the hub-and-spoke model became a disadvantage for many airlines over

time, it has worked for Emirates. Why? Location. Two-thirds of the world’s population live

within an eight-hour flight of Dubai, and Emirates’ long-range aircraft could link any two points

Product differentiation. Airlines try to create strong brand identification and customer loyalty by

using the frequent flyer programs. When there is strong brand identification, it forces the new

entrants to spend heavily on weaning away customers from the existing players, thus

Switching costs. There are virtually no switching costs for customers. The frequent-flier

programs attempt to create switching costs. However, when many customers are presented with

Thus, the international airline industry faces a threat of new entrants, particularly in the low-cost

short-haul segment. The barriers can be heightened when an airline has very closely tied and

The intensity of rivalry among existing competitors in the international airline industry is very

high. There are numerous competitors, and in times of low or moderate industry growth, the

competition gets fiercer as each one tries to nab customers from the other in order to keep their

capacity utilizations at acceptable levels. The exit barriers are high because it is difficult to