978-1259278211 Case 34 Solution Manual Part 2

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NOTE WEB-LINKS:

To understand how the European market views competition, see

http://airlines.iata.org/blog/2015/06/working-towards-an-effective-aviation-strategy-from-

regulators. According to this report in 2015, the European Union feels that a common European

strategy is needed: “Other regions put aviation at the centre of their economic strategies. Fierce

global competition, paired with a relative loss of capacity at EU hub airports, risks leaving the

EU on the edge of the aviation world market. Capacity constraints are another major concern to

be faced swiftly. Building the right capacity fosters growth, with a positive impact on

employment in aviation. The new strategy should also take into account common priorities in

terms of regulation, such as the revision of certain safety standards, as well as new rules—for the

More information about the global effect on existing legacy air carriers is available at “The

Airlines’ Global Dilemma” strategy+business, October 25, 2010: http://www.strategy-

business.com/article/00047?gko=19274

Information on the challenges made by U.S. carriers against the three Middle Eastern carriers

Emirates, Etihad and Qatar can be found in this opinion piece from February 8, 2015 “Should the

big three middle eastern airlines be stopped?”

http://onemileatatime.boardingarea.com/2015/02/08/big-three-middle-eastern-airlines-stopped/

And here is a report on what it’s like to fly on Etihad, and why the experience is superior:

http://www.usatoday.com/story/travel/columnist/hobica/2015/09/29/etihad-emirates-qatar-

airlines-gulf-carriers/72986680/ Beyond the amenities, it’s the location that matters: “So while

these airlines do stand out in many departments, perhaps what really scares competitors about

Visit the website for Qatar Airways at http://www.qatarairways.com/global/en/ceo-message.page

And the website for Etihad Airways at http://www.etihad.com/en-us/about-us/

What stands out?

Given such a challenging industry environment, Emirates should be admired for its ability to not

only survive but to grow and remain profitable for 27 consecutive years. Given that it was now

larger and facing competition from other premium carriers in its region could Emirates continue

with its excellent track record?

Instructors can leave students with this question and possibly move on to discuss other airline

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

that may give it a competitive advantage?

Referencing Chapter 5: Business-Level Strategy

How firms compete with each other and how they attain and sustain competitive advantages go

to the heart of strategic management. In short, the key issue becomes: why do some firms

outperform others and enjoy such advantages over time? The viability of a firm’s success is

A business-level strategy is a strategy designed for firm or a division of the firm that competes

within a single business. Within the firm’s industry environment generic strategies include basic

types of business-level strategies based on breadth of target market (industrywide versus narrow

market segment) and type of competitive advantage (low-cost versus uniqueness). Here are the

three generic strategies that are used to overcome industry forces and achieve a competitive

advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The

Both casual observation and research supports the notion that firms that identify with one or

more of the forms of competitive advantage outperform those that do not. The strategy that

Emirates adopted was differentiation. The company was successful in implementing this

Instructors can ask students if it’s possible to compete on differentiation in the airline industry. In

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

leadership and differentiation, but in the airline industry there is often no choice other than

In Emirates’ case, the airline made the decision to not only be conscious of

costs but also to offer a better product, a unique and valued product that

would encourage customers to pay, regardless of price. Since many of

A competitive strategy is linked to the value chain, and supported by intangible assets. Emirates

had great strengths in its operations and its human capital. Tight links among its activities and

assets allowed Emirates to create a service that was unique and valuable to customers. From a

Referencing Chapter 3: Analyzing the Internal Environment of the Firm

When one firm outperforms others by a wide margin over a long period of time, it’s important to

figure out how this could be. The answer may lie in how that firm arranges its activities and

Remember, value chain analysis is a strategic analysis of an organization that uses value-creating

activities. Value is the amount that buyers are willing to pay for what a firm provides them and is

measured by total revenue, a reflection of the price a firm’s product commands, and the quantity

To answer the question of whether Emirates’ differentiation strategy is adequately supported by

its value chain and other internal resources, Emirates must assess the relationships between the

elements in its value chain. Every activity should add value. Take a look at Chapter 3, Exhibit

3.1 to see the value-chain activities. Here is what an assessment of this might look like for

Emirates:

Value chain activity How does Emirates create value for the “customer”?

What challenges does Emirates have in its value chain?

Primary:

Inbound logistics

warehouse layouts)

Emirates provided assistance with booking, encouraging

Operations (efficient work

systems)

Dubai airport design allowed for efficient throughput of both

Outbound logistics

distribution to customers)

Having control of gates at the Dubai hub allowed efficient

Marketing and Sales

promotion)

Innovative marketing connected with targeted customers.

Service (ability to solicit

customer issues)

Flight attendants, especially, had strict guidelines for how to

Secondary (or support):

Procurement (relationships

materials and supplies)

Purchase of high end aircraft from both Airbus and Boeing

Technology development

Pushed for state-of-the-art designs and operations for in-flight

Human resource

retention mechanisms)

Very high standards for hiring, extensive training programs

General Administration

operating capital, effective

top mgmt communication,

relationships with diverse

stakeholders)

Top-down decision making, vision-driven strategy, close

Primary Activities

In terms of primary activities, the key to Emirates’ ability to successfully compete in the market

appeared to reside primarily in its operations, marketing & sales, and service. From the very

beginning, Emirates understood the value of its location and the importance of a well-functioning

Support Activities

With regards to support activities, a competitive advantage can be achieved by developing a

strong general administration that is built around visionary leadership and a supportive human

To further answer the question of how to support a competitive strategy, it’s important to

A firm’s strengths and capabilities – no matter how unique or impressive – do NOT necessarily

lead to a competitive advantage. The resource-based view of the firm takes the perspective that

firms’ competitive advantages are due to their endowment of strategic resources that are

An important issue to focus on here is the importance of intangible resources like innovation and

reputation. Especially in mature brands, sustaining reputation is essential. Look at resources that

Tangible Resources:

Financial – Emirates has remained profitable for 27 years.

Physical – up-to-date aircraft, new terminal facilities provide advantages.

Intangible Resources:

Organizational – relationship with founder Sheikh Mohammed bin Rashid al Maktoum means

Human – recruitment and training of staff is critical to Emirates’ ability to provide outstanding

Innovation – this has been a strength in the past, but needs to be managed in the right direction –

Reputation – Emirates’ brand is its most significant strength – this should be protected at all

Organizational Capabilities: Emirates, under Tim Clark’s leadership, had been able to execute

Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to

Applying the VRIN concept, in the case of Emirates, an argument may be made that its resources

are inimitable. This is because there was some path dependency, causal ambiguity and social

complexity in its operational history. The founding story, with the initial push by Sheikh

Mohammed bin Rashid al Maktoum, created a “path” that included valuable government support

As has been noted, with its vision of being a unique provider, Emirates had an interlocking

system of mutually reinforcing competencies that made its resources simultaneously valuable,

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

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

NOTE: There are no PowerPoint slides to accompany this discussion.

Emirates is a good case to use to demonstrate the importance of strategic leadership, and how

decisions about how to “control” operational elements can make a great difference in the success

of a given strategy. Although not every point is covered in the case, the following is an optional

Referencing Chapter 11: Strategic Leadership

In the case of Emirates, as with most companies, implementation issues such as those associated

with strategic leadership are important for organizational effectiveness. Ask students to discuss

See the concept of leadership, the process of transforming organizations from what they are to

what the leader would have them become. This involves:

●Setting a direction

Emirates had the advantage of strong leadership right from its beginning. Emirates’ founder

Dubai Sheikh Mohammed bin Rashid al Maktoum laid the foundation and set the tone from the

Setting direction. As outlined in the case, the direction for Emirates was

clear: Emirates original founder had the vision of helping Dubai become a

center of business and tourism, and he 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

Organizational design. The organization was designed to ensure that employees understood their

Nurturing a culture dedicated to excellence. At Emirates a culture dedicated to excellence was

nurtured by making excellence in customer service an explicit goal and aligning the reward

Emirates continues to focus on its founding principles: creating an ultimate experience to exotic

destinations for customers who don’t mind paying for the privilege. Do you think Emirates’

NOTE WEB LINKS:

For more information on how Emirates manages its flight attendants, see this article from 2008,

“Rich Dubai Flirts With Hard Times, But Its Airline Is Still Flying High:

Emirates Flight Attendants Live It Up; Champagne and Strict Rules on Weight” from

http://www.wsj.com/news/articles/SB122877609256789273. The article points out how the

airline is “a demanding employer” with rules that “would be deemed discriminatory in the West”.

However many of the recruits come from developing countries where a job at Emirates is

considered “a chance for independence.” Even for U.S. recruits the airline is a draw: although the

pay is less, the perks include exotic destinations, luxury hotels and generous per diem allowances

– the lifestyle is very attractive.

References

Porter, M.E. 1996. “What is strategy?”, Harvard Business Review, 74(6): 61-78.