Strategic Growth Methods of Air France and Emirates Airlines

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Table of Contents

Introduction
Emirates Airlines
Air France
Advantages and disadvantages of the strategies
Conclusion
References

Introduction

When organizations operate in a competitive market, managers are compelled to formulate strategies for their organizations to gain a competitive edge in the market. The idea of strategic management can also be relevant to non-profit organization when competing for resources in the market.

This paper seeks to analyze the business environment, resources and strategic growth methods employed by Air France and Emirates Airlines.

Emirates Airlines

Emirates Airlines was invented in 1985 when it was issued with two aircrafts and ten million dollars as a starting capital by the government of Dubai. Its first routs were from Dubai to Karachi and Bombay to Delhi (Senge, 1990, 44).

Emirates is a successful organization because it has employed successful strategies in its operations which has helped in the management of the company. The company has employed the strategy of acquisition and mergers in its operations and this has resulted into greater benefits to the company (Carnall, 2007, p.42).

The Emirates merged with Qatar airways and Etihad so as to increase its profit margins. By merging with the two airlines, Emirates has been in a position to set high flight costs since there are no other competing airlines in the regions (Mintzberg, 1994, p.38).

The Emirates devised another strategy of ensuring that it offers high quality services to its targeted customers so as to gain a competitive edge in the market.

The company decided to order three hundred and fifty five wide body jets for Emirates, Etihad and Qatar airlines so as to overtake their competitors in the European and United States markets.

The company has attracted many clients who are willing to spend so as to enjoy the luxury and comfort of the Emirates air flights. Studies show that this strategy increased the profit margins of the company by nine percent in 2012 as well as its market share by three percent (Grant, 2012, p.98).

Research shows that Emirates is registered as the fastest growing company in the airline industry since 1990s. Their revenues have always increased by ninety nine million dollars each year.

This growth was accelerated by the Gulf War because during this time, Emirates carried over sixty seven thousand passengers and one point five tons of cargo (Burnes, 2009, p.56). In 2010, Emirates registered a net profit of nine hundred and sixty five million dollars in the first and second quarters of the year.

The company has experienced an increase in passenger traffic that in 2012 the company registered sixteen million passengers in the first half of the reporting period as compare to the previous fiscal year.

During the same financial year, Emirates managed to increase its profits up to three thousand five hundred and sixty dirhams as well as increased its sales by three point seven percent from the previous business year (Johnson, Scholes & Whittington, 2012, p.16).

Air France

Air France is another airline company which dominates the European market. The company was established in 1993 through an acquisition arrangement after the Gulf War.

The company was registered in the European stock exchange market in 1998. In 2004 the company merged with KLM- Royal Dutch Airlines which is based in Netherlands.

This helped Air France Company to establish point-to-point services internationally so as to counter the inroads that are incurred in the low cost carriers in France (Goshal et al., 2003, p.46).

This strategy was meant to restore and sustain profit margins both in the short-term and long-term operations of the airlines.

Air France has suffered stiff competitions during its short-haul operations from the high-speed rail in Europe. In 2011 Air France increased its destinations by fifty two new routes and this increased its regional capacity by thirty two percent (De Wit & Meyer, 2004, p.46).

Due to the increased competition in the market, the management of Air France thought of another strategy that was meant to help the company remain competitive in the market. The company implemented a strategy which reduced its operation costs by fifteen percent.

This strategy intended to push the profitable operations of the company since passengers were to be attracted to the low costs of the flight which were as low as fifty Euros for one way including the tax.

This strategy proved profitable to the company because the number of passengers travelling with Air France increased since it proved to be cheaper as compared to other LCCs peers (Grant, 2012, p.54).

This new strategy of reduced operational costs failed to yield the expected results since it did not last for long as many companies in the transport industry decided to lower their costs too. This strategy was implemented on four routes of the Air France which were in direct competition with the LCC applied the strategy.

The remaining nine routes were compelled to regulate their prices depending on the number of passengers so as to maximize their profit margin since they were not affected by the LCCs (Johnson, Scholes & Whittington, 2008, p.26).

Research indicates that after the merger between Air France and KLM the company became a leading transport company in Europe carrying over seventy four million passengers in the 2010-2011 fiscal years.

The company operated in more than one hundred and four countries with two hundred and forty three destinations.

The company increased its employees up to one hundred and eight thousand to achieve the objectives of the company. In 2012, the company increased its profits by two thousand one hundred and sixty six million dirhams as it increased its sales by three percent from the previous financial year (Lynch, 2013, p.88).

Air France employed the strategy of organic growth by making an alliance with Etihad which had merged with Emirates and Qatar. This strategy helped the Air France Company to increase its routes and destinations hence expanding the company.

This enabled Air France KLM to extend its operations into German as well as experienced the growth of Air-Berlin footprint in France unlike its competitor Emirates which did not want to make alliances due to fear of tarnishing its reputation.

Advantages and disadvantages of the strategies

The merger and acquisition strategy employed by both companies led to the expansion of alternative routes since it gave an access to already established markets.

It also increased the revenues of the companies since the merged companies hiked flight fares as there were no competitors in the market.

The major challenge was the issue of the expenses incurred like the increased duties of the passengers, unpredictable fuel prices and long processes of decision making.

Conclusion

The study has revealed that as much as scholars propose that merger and acquisition strategy is a solution to the ups and downs of a company, studies on the cases of Air France and Emirates indicate that the strategy can result to losses for the company.

The analysis indicates that Emirates has been able to devise strategies that have helped the company to stand tall in the market as compared to Air France which has always operated below the margins of Emirates.

References

Burnes B, (2009), Managing change, Financial Times/Prentice Hall, Harlow.

Carnall, C, (2007), Managing change in organizations, 5^th ed., London, Pearson Education

De Wit, B, & Meyer, R, (2004), Strategy process, content, context: an international perspective, Harlow, Thomson.

Grant, M, (2012), Contemporary strategy analysis, 8^th ed., Chichester, Wiley.

Goshal, S, Lampel, J, Mintzberg, H, & Quinn, J, (2003), The strategy process: concepts, contexts, cases, London, Prentice Hall.

Johnson, G, Scholes K, & Whittington R, (2012), Exploring strategy text and cases, 9^th ed., Financial Times/Prentice Hall, Harlow.

Johnson, G, Scholes K, & Whittington R, (2008), Exploring strategy text and cases, 8^th ed., Financial Times/Prentice Hall, Harlow.

Lynch, R, (2013), Strategic management, 6^th ed., Harlow Pearson, Education.

Mintzberg, H, (1994), The rise and fall of strategic planning, London, Prentice-Hall.

Senge, P, (1990), The fifth discipline: the art and practice of the learning organisation, New York, Doubleday.

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