It follows from my monitoring that social media are more attractive than news because nowadays people use social media like YouTube and visit social network websites instead of news-related sites.
I have also found that a very big number of people have watched the video of ETIHAD AIRWAYS on YouTube, with the resulting 81 “likes” and 5 “dislikes.”
There is also the type of people preferring the old media like newspapers, e.g., The National. Such media also advertise the Etihad airways in a very efficient way; however, the given method of advertisement can only be targeted at a particular part of the target audience.
Several flight recordings are available on Etihad Airways cabin crew leading the world with a smile video on YouTube (Etihad Airways). The creators of the given channel aimed at two targets: first, videos must show that ETIHAD AIRWAY, with its great service, puts a smile on every client’s face. Second, the videos must display the company’s innovations, such as a new cabin for customers to feel completely relaxed and comfortable in.
The Philippine Star claims that Etihad bags have been receiving the top 5 Airlines Award for five years running: “Etihad Airways, the national airline of the United Arab Emirates, took top honors for the fifth year in a row in this year’s World Travel Awards” (The Philippine Star). This means that ETIHAD AIRWAYS is represented among the target audience as a progressive company with high-quality services.
I think the articles and the videos that positively describe ETIHAD AIRWAYS do a good job, because ETIHAD AIRWAYS staff is doing their best to achieve their goals and satisfy people, and that they should be given credit for their efforts.
Etihad Airways is one of the leading airline companies in the Middle East. The firm commands a sizable global market share in the airline industry, competing favorably with top industry players from Europe, North America, and East Asia. It has registered impressive results in terms of revenues even at a time when other airline companies were recording slowed growth during the global economic recession of 2008. According to Cole (2013), the airline industry is one of the most competitive in the world and it is very delicate in terms of retaining customer loyalty. Airline companies are doing everything possible to not only improve the comfort and safety of passengers but also convenience. To achieve a competitive edge, firms are turning to creativity and innovation as a way of continuously offering high quality to their clients. One area that innovation has created significant change is in communication. Hanna (2016) says that clients need a platform where they can easily communicate with the company’s representative without straining.
Airline companies are currently struggling to come up with platforms that can facilitate clients-firm communication from the time these clients express their interest in using the firm’s services to the post-purchase period in case there is an issue that may need a follow-up. Digital communication has largely been seen as the solution to the challenges that this firm faces in the market. To be on top of the rest in this highly competitive industry, Etihad Airways will need to be a Digital Master. It will need a highly sophisticated communication system that enables it to interact with its clients at any time without any delays. In this analysis, the consultant will look at ways in which this airline company can elevate itself to the level of a Digital Master as a way of making it become more competitive in the market.
Etihad Airways Business Model
Snap-chat Business Model
Key
Users register in a snap-chart application
Users share moments photos and videos between each other
User information download in the data center
Designers and developers volunteer to design the logos and enhance filters
Investors invest in snap-chat
Customers contact the snap team to design for the filters
Transaction by customers sent through banks
Snap-chat has partners that release the latest news through snap-chat like CNN, National Geographic, people, and food network.
Snap-chart create a specific filter for the users to encourage using snap-chart
Clinics, reality TV, and salons use snap-chat accounts in advertising for their services
It is important to understand that users must have smartphones and internet data for them to use the above system. The system brings together so many stakeholders in a single digital platform where communication flows freely. As shown in the figure above, the data center snap-chat helps in connecting these stakeholders. Customers using Etihad Airways services can easily book hotels, cars, salon services, and much more through this digital platform. They are also capable of making payments to these vendors directly through their bank accounts without having to carry cash or make bank transfers. It makes their journey safer and it gives them full control of every activity they undertake through their journey. Other stakeholders that have partnered with Etihad Airways also get to benefit from these services. They get to advertise their services to travelers through the digital platform offered by this airline.
Etihad Airways Unification Business Operating Model
Figure 2: Unification Business Operating Model
The unification business operating model above shows how the operations of this firm can be integrated to achieve greater efficiency. As shown in the figure above, every single activity, from ticketing, to travel experience, customer management, communication devices integration, loyalty issues, maintenance services, and after-purchase services offered to the clients are controlled from a central database. It makes it easy to access data for clients, suppliers, partners, and all other relevant stakeholders. The highly sophisticated database above allows clients of Etihad Airways to conduct numerous transactions in the online platform.
Etihad Airways’ Resources
According to Uhl and Gollenia (2014), one of the most important resources at Etihad Airways is its highly trained human resource. The firm has a team of highly skilled employees capable of speaking a number of languages. This is important for an airline company that is operating on a global platform where most of its clients speak different languages. The management is also dynamic and committed to achieving success in the market. The company has also purchased some of the latest models of jets to ensure that it is capable of meeting the needs of its clients. The airline has fitted its planes with state-of-the-art entertainment equipment to ensure that its clients remain entertained at all times. The firm also prides itself with a wealth of experience earned from its many years of operating in this industry.
Transaction Information Flow
In this digital platform, the aim is to come up with an effective transactional system that will enable the clients to get services they need in the online platform. In this paper, the researcher will look at two important transactions important for clients, which are flight transactions and hotel bookings.
Flight
According to Bones and Hammersley (2015), clients often face a serious problem trying to make important transactions in relation to flight-related activities. Through its digital platform, the following online transactions can be made by clients online irrespective of their physical locations.
Online booking of ticket
In the past, clients had to visit designated physical locations to get their flight tickets. However, through the use of its digital platform, clients can now book for their tickets and make online payments without having to go to the physical offices of this firm.
Online confirmation of travel details
Once a client has purchased a plane ticket, it may be necessary to make regular check-ups in case there are any changes or updates in relation to the dates and times of travel. It eliminates cases where travelers go to the airport only to be informed that their flight has been rescheduled. Clients can also request changes in their travel dates through the online platform in case that is necessary.
Online booking of cars
When visiting a new city, one of the main issues that travelers are often concerned with is finding taxis that can safely take them to their desired locations. The airline company can help its travelers rent cars or get taxis as soon as they land at the airport. These cars can be paid for online to reduce the need to carry cash.
Hotel services
Travelers are often concerned about getting good hotels where they can stay while they are on their trip. Etihad Airways has created a business relationship with hotels, as shown in the diagram above that allows its customers to get accommodation that meets their needs based on their budget. Travelers get to view these facilities well before they travel so that they can choose those they consider most appropriate. As such, when they land at their airport their drivers take them directly to the hotels they had booked.
Etihad’s Digital and Leadership Capabilities
Below is a diagrammatic representation of Etihad Airways digital and leadership capabilities.
Figure 3: Etihad’s Digital and Leadership Capabilities Position
Overarching digital vision exists, but maybe underdeveloped- Currently, Etihad Airways has a clear digital vision that is yet to be fully developed because of a number of challenges. The firm has already developed an integrated communication system, but implementation is still a challenge that the top leadership of this firm must find a way of addressing.
Digital capacity –Etihad Airways has considerable digital capacity in terms of highly trained employees and a flexible leadership that is willing to try new methods to achieve the desired success. Its financial resources also increase its digital capacity.
Social mobile –Etihad Airways has come up with a platform that enables its clients to interact in their social media, share their experience, and get advice using hand-held devices such as Smartphone.
Digital culture- The management is currently trying to create a digital culture at this company. It is encouraging its clients to use digital services that it offers. The employees are also regularly taken through training to enhance their digital skills.
Leadership- To successfully enter the digital age, Etihad must have a leadership that trusts emerging technologies. The top managers at this firm have been at the forefront in introducing and supporting change based on the emerging technologies.
Playbook: How Etihad Airways Can Maintain Their Digital Master
The analysis conducted above shows that Etihad Airways is on its path to becoming a digital master. A number of issues will need to be addressed to help it overcome some of the current challenges that it is facing as it tries to transform itself from a conservative to a digital master. The following table shows the course of action that the management should consider.
Moving from Conservative to Digital Master
Components of becoming a digital master
Course of Action
Strong overreaching digital vision
The management should come up with a strong overreaching digital vision. The vision should clearly stipulate what should be achieved within a given period.
Good governance
To achieve the set vision, it is also important for this firm to embrace good governance. The managers should be ready to embrace change and commit resources that will help in achieving the set goals.
Many digital initiatives generating business value in measurable ways
The management will need to come up with digital initiatives that can generate business value. It should take advantage of the digital platform to create business opportunities.
Strong digital culture
The firm will have to create a strong digital culture. The top leaders and all the employees must develop positive attitude towards the use of emerging technologies.
List of References
Bones, C & Hammersley, J 2015, Leading digital strategy: Driving business growth through effective e-commerce, Oxford University Press, Oxford.
Cole, A 2013, Analysis of the Etihad Airways, John Wiley & Sons Publishers, Hoboken.
Hanna, N 2016, Mastering digital transformation: Towards a smarter society, economy, city and nation, Cengage, New York.
Uhl, A & Gollenia, L 2014, Digital enterprise transformation: A business-driven approach to leveraging innovative IT, McMillan, London.
A business-oriented information system can be characterized as a set of interconnected system elements that function in combination to input, process, store, control, and analyze the data obtained by the company (Rao & Klein 2013). The organization can use this data to take proactive measures and make the best use of decision-making activities. Five essential elements make up a business-oriented information system – human resources, software, hardware, data, and communications (Qiu 2013). Human resources contain the system developers, technical support, and the final users of the product.
Computers and other peripheral devices represent the majority of the hardware resources. The software is commonly perceived as the employees’ program to accomplish the organizational objectives (Plattfaut 2014). The data resources are represented by the company’s electronic database and all other files stored by the company. Communications resources are merely network resources (including intranet) used to connect the employees and maintain that connection (Linger, Fisher & Barnden 2016). Business-oriented information systems are essential because they provide their users with numerous advantages such as accuracy and agility. What is even more important, these systems are relatively flexible and can be programmed to perform an extensive array of complex tasks (Korunka 2014).
To analyze a business, several different models can be used. For instance, Porter’s 5 Forces Model, Porter’s Diamond Model, and McKinsey’s 7S Model (Isaias 2016). This report will analyze one of the work systems of Etihad Airways.
Business Overview
Etihad Airways is one of the most respectable UAE companies. They are aimed at providing high-quality services at competitive prices (Fleisher & Bensoussan, 2013). Etihad Airways represents Abu Dhabi, and their approach to business is based on Arabian hospitality and generous services. The company’s key focus is the collaborative growth and implementation of the latest technologies in their work systems. The company’s pricing policy complies with the middle-class requirements and can be described as reasonable (Rocha et al. 2014).
Business Strategy
The substitute competitors
Etihad’s substitutes are almost neutralized. Other companies do not offer lower rates, and Etihad keeps on raising profits.
The risk of the emergence of new opponents
There are many new challenges. Nonetheless, all these competitors fail to succeed and overcome Etihad.
The intensity of competitive rivalry
There is a slight threat due to the increasing number of Etihad’s competitors. Accurate decision-making and surveying helped the company to succeed.
The bargaining power of customers
Currently, there is no visible customer bargaining because Etihad provides its clients with the best offers.
The bargaining power of suppliers
The shareholders won significant due to Etihad’s expansion. An improved number of public stocks played a significant role.
Table 1. Porter’s Five Forces.
Figure 1. Porter’s Generic Strategies.
The value chain of Etihad Airways can be outlined as follows – primary activities -> logistics -> operations -> customer service -> secondary activities -> human resource management -> marketing and sales -> technology.
System Analysis
Figure 2. Porter’s Triangle.
The system of ticket ordering is reviewed within the framework of this report. The fundamental notions that can be used to characterize it are unique offerings and cost leadership. This can be explained by the fact that Etihad’s strategy is developed horizontally but focuses on the customer advantages that may help them win over the market. The company moved away from the undefined middle and allowed their customers to order tickets at an advantageous price (Balgieri 2014). Therefore, this Etihad Airways system allowed the company to become one of the most widely recognized airlines who showcase their differentiated offerings. The company’s horizontal focus can explain the complexity of the process of ordering tickets. In other words, Etihad Airways is aimed at connecting to more clients than simply adjusting their price/ quality ratio to the customers’ requirements.
Therefore, the ticket ordering system accurately reflects the overall company’s strategy and follows differentiation. If we look at Etihad’s competitors, we will see that most of these companies propose only generic offerings and specialize in vertical development. In perspective, this crucial difference will become the decisive factor in terms of the ticket purchasing process but may lead to the elimination of Etihad’s competitors. The company draws attention to their special offers and does not consider its pricing strategy to be the cornerstone of Etihad’s success. The current ticket ordering system can be improved by creating a “wizard” that will guide the customers through the stages of ordering the ticket instead of presenting all the information on the screen simultaneously. This strategy is costly, but it will allow Etihad to develop horizontally even more. On a long-term scale, this should improve the system’s performance and ultimate customer satisfaction regarding the interaction with the system.
Website Critique
The business strategy of Etihad Airways is aimed at providing its customers with high-quality services at a reasonable price. Therefore, if we analyze the ticket order system, we will see that the company’s strategy does not correlate to the website’s design. This is reflected in the complexity of displayed information and the inability to intuitively comprehend the information (Sorokin & Pardalos 2013). There are too many items on the home page of Etihad Airways’ website that may confuse the customers and take them away from ordering the tickets (See Figure 3). Moreover, the color scheme does not appeal to middle-class customers. It may turn off a cluster of clients who consider this company luxurious and expensive regardless of their offers.
Figure 3. Etihad Airways home page.
Reference List
Balgieri, D 2014, Information systems, management, organization and control, Springer, New York, NY.
Fleisher, C & Bensoussan, B 2013, Business and competitive analysis methods: Effective application of new and classic methods, Financial Times Press, Indianapolis, IN.
Isaias, P 2016, High level models and methodologies for information systems, Springer, New York, NY.
Korunka, C 2014, The impact of ICT on quality of working life, Springer, New York, NY.
Linger, H, Fisher, J & Barnden, A 2016, Building sustainable information systems, Springer, New York, NY.
Plattfaut, R 2014, Process-oriented dynamic capabilities: Framework development, empirical applications and methodological support, Springer, New York, NY.
Qiu, R 2013, Business-oriented enterprise integration for organizational agility, Business Science Reference, Hershey, PA.
Rao, P & Klein, J 2013, Strategies for high-tech firms marketing, economic, and legal issues, M.E. Sharpe, Armonk, NY.
Rocha, A, Correia, A, Tan, F & Stroetmann, K 2014, New perspectives in information systems and technologies, Springer, New York, NY.
Sorokin, A & Pardalos, P 2013, Dynamics of information systems: Algorithmic approaches, Springer, New York, NY.
Alitalia is the largest airline in Italy, with a market share capacity of 24% in the region. The carrier operates both domestic and regional network services within Italy, Europe, and international airports. However, the airline has made losses since 2009 when the new company came into existence after financial investors and Italian industrialist acquired assets belonging to the old Alitalia due to bankruptcy.
In 2012, Alitalia made a massive loss of 280 million euros, making its cumulative loss to 483 million euros since the new Alitalia was formed in 2009 (Alitalia, 2014). As a private entity, Alitalia has to be in a position to make profits or find itself being pushed out of the market/industry by its fierce competitors. The airline’s financial details indicate that it had to borrow money in 2013 from its shareholders in order to fund its operational costs (Alitalia, 2014).
There has been an improvement on operations since 2009 that led to rising load factors, on-time performance improvement, as well as a major fleet replacement and renovation process; investment in fleets and technological innovation has been the reason for success for many airlines in this competitive industry (Curran, Verhagen, Ghijs, Ghobbar, & Zwan, 2010). However, all these positive changes have failed to influence financial recovery at Alitalia. Its cost in the market has been competitive against full-service network carriers but it remains a high-cost airline in short route flights compared to its competitors (CAPA Global Aviation Industry Outlook, 2013).
Huge losses, current leadership woes, and bankruptcy are the main challenges that the airline continues to face even as it tries to improve its operations from 2013. Although debt may be termed as a viable source of capital due to its tax-shield benefits, excess debt to equity in the case of Alitalia has demonstrated the airline’s financial problems that have been precipitated by inadequate working capital. The effect of this heavy borrowing has been the worsening of liquidity position due to poor operational cash flows (Clougherty, 2002).
Fuel prices have also had devastating effects on the costs of Alitalia flights, just as they have to the entire airline industry (Curran et al., 2010). The increase in fuel prices has made operating expenses increase significantly to 160 million euros. Alitalia noticed that the average price of oil increased up by 40% from 78 US dollars per barrel to 108 US dollars per barrel (Alitalia, 2014). The change in fuel prices has caused debt increase for the company as it considers better strategies to reduce its operational costs.
Moreover, leadership wrangles had made Alitalia bankrupt, with top management unable to pay its employees. That problem continued from 2004 to 2008 when the company decided to enter into a partnership with international airlines in order to curb financial woes that had seen the company almost collapsed. The agreement saw certain terms and conditions reviewed before new owners and management took over the company.
Alitalia has encountered passenger capacity growth by 11% from 2009 to 2012, and a fall in 2012 by 1.3%. Its load factors have grown drastically, matching a figure of 74.6% in 2012, up from 65% in 2009 (Alitalia, 2014), thus moving in the right direction in trying to satisfy market demand. Despite the figures, Alitalia’s load factors continued to pull it below the average rate of 79.1% for 2012 (Alitalia, 2014) due to high carriage capacity in local travel channels. Although Alitalia has been on an upward trend for the last 4 years, its proposed partnership with Etihad that would see it take 49% control of Alitalia would be significant in turning around the airline to sustainable profitability (Jones, 2014). This will enhance its progress towards its objective of being among the leading airlines in Europe.
Impact of Partnership between Etihad and Alitalia
It is important to understand that the airline industry is one of the most competitive industries due to the presence of many players with low-cost carriers (Cento, 2008). This has forced many firms to initiate strategies that would enhance their competitiveness, with various companies preferring to enter into strategic alliances (Hunt, Lambe & William, 2002). Generally, various advantages and disadvantages can be realized when partnering with Alitalia airlines as shown below.
Access to New Market Advantage
A partnership with the Italian airline will allow Etihad airlines to strengthen its third position in market share in the global airline market as it plans to improve the number of customer flights and destination points internationally (Clark, 2014). This would enable it to generate more revenues to be able to acquire a larger fleet and expand in its market horizon (Cento, 2008). In turn, Alitalia airlines will be able to acquire an adequate supply of resources from Etihad airlines in order to curb their current debt crisis and be able to come up with new plans and strategies that would help them gain more resources (Etihad and Alitalia airlines in ‘final phase’ of investment talks, 2014).
Most Italian flights are domestic and have higher capacities than international seats. It is worth noting that, the airline’s biggest route in terms of capacity links Rome to Milan Linate, while other key domestic routes link Rome to other bases like Venice, Palermo, Turin, and Catalia. This indicates that the local market in Italy is well established for international flights to venture.
Alitalia financial burden disadvantage
Despite being the fourth largest airline in Europe (Flak, 2014), Alitalia has been facing a major debt burden since 2009, which had almost paralyzed its activities in Europe. The result of this huge borrowing means that Etihad Airlines will set aside funds to settle the long term losses that Alitalia has been incurring before embarking on new strategies for growth (Wensveen, 2012).
Alitalia large Capacity Advantage
Alitalia is the largest airline based on capacity, comprising of an overwhelming 24% share market and group’s 29% market share when combined with its subsidiaries such as Air One and Alitalia Express. These numbers reflect the huge potential for growth and profits that the airline can achieve when good management and policies are implemented despite its huge debts.
Leadership Wrangles Disadvantage
In recent years, Alitalia has been involved in top leadership wrangles that forced the government to withdraw its financial assistance to the airline, even though it was a major shareholder. Generally, internal wrangles drive away any potential investors willing to help the company rise above its financial challenges; this has made the airline to stagnate over a long period of time without any growth (Oum & Yu, 2012).
Renovation Fleet Plan Advantage
Alitalia’s group had a large number of flights in March 2013 that comprised 140 flights, 10 of which were Airbuses A320. The airline embarked on a process to overhaul its fleet, with older flights such as Boeing 767 and MD 80 being replaced with new A320 and A330 family of flights; this makes the fleet pre-dominantly Airbuses, Embraer, and 777’s (Alitalia, 2014). Etihad would benefit from these capital and investment strengths when it enters into partnership with Alitalia.
Increase in Fuel Cost Disadvantage
Over the years, fuel prices have been increasing, thus contributing to increased operational costs for Alitalia. This makes it difficult for the company to pay its crew members and other employees, making it sink deeper into debt (Curran et al., 2010). However, for the past few years, the company has been trying to come up with strategies to reduce the overall company costs. When Etihad comes in, it would have to bring financial expertise on board in order to enhance stability in the company.
Conclusion & Recommendations on the partnership
There are numerous benefits that Etihad and Alitalia Airlines can reap from this partnership provided they come up with sound and effective strategies to counter competitions from other airlines in the market. This will lead to better profit returns and entry into a larger global market. Given the high turnover in the airline industry, proper strategies would help these companies to take advantage of potential growth opportunities by focusing on planned expansion and diversification of operations. However, the two firms would first have to find a solution to challenges that bedevil Alitalia.
Based on the information of market analysis and logistic issues, there are more potential benefits that can be accrued from Etihad’s partnership with Alitalia Airlines. Etihad Airlines, being a dominant player in the flight industry, can take advantage of the opportunity to diversify into the huge market controlled by Alitalia Airlines despite its financial crisis. This partnership should focus on potential long-term benefits that would accrue when the two firms invest prudently in the expansion and diversification of their operations in order to enhance sustainable profitability (Jones, 2014).
Clougherty, JA 2002, ‘US domestic airline mergers: the neglected international determinants’, International Journal of Industrial Organization, vol. 20, no. 1, pp. 557–576.
Curran, R, Verhagen, W, Ghijs, S, Ghobbar, A, & Zwan, F 2010, Air Transport and Operations: Proceedings of the First International Air Transport and Operations Symposium, IOS Press, Amsterdam.
Based on an examination of the different possible variables, the target market demographics for the Platinum Preferred Customer card will primarily be high-income frequent flyers of Etihad Airlines. The reason for this is quite simple; these are individuals with access to large amounts of money and, as such, are the best choice for utilizing the Platinum Preferred Customer card. It should also be noted that through an examination of frequent flyer customers, it is estimated that 60 to 70 per cent of the clientele that match the specified requirements will be female clients of the airline. The reasoning behind this is connected to the fact that women are more likely to buy good luxury items and travel extensively for pleasure as compared to men.
Geographic Selection
All in all, the geographic selection for this campaign was based on cities with the highest standard of living from Eithad’s selection of flight routes. The reason behind this was quite simple; these areas represent locations with the highest concentration of shops, services and amenities that Platinum Preferred Customer card would enjoy. These locations have access to airport lounges, delivery services, high-end shops, concierge services and other such amenities that are simply not available in other locations. As such, by focusing on these locations, the company will be able to provide the services it promised to its clients.
Product Design
The basis behind the product design was simply the credit card industry has been connecting special amenities, services and exclusive offers to particular credit cards and, as such, Etihad is well poised to take advantage of this particular trend by developing its own card and enticing the passengers that use the airline frequently to acquire one. The reason such services are included with the card package is due to the fact that ownership of particular credit cards these days have actually become a status symbol. This is one aspect that can be utilized by the company in order to entice more people to acquire a Platinum Preferred Customer credit card.
Service Design
One of the competitive advantages Etihad Airlines has over its competitors is its extensive client portfolio which includes several of the richest people within the U.A.E. today. Through such a list, the company is better able to target clients that it knows will be able to afford the card and utilize the various amenities that are attached to it. By being able to have a specific list of customers to entice, the company is better able to target its desired market and will not need to expend significant amounts of money in having to spend on extensive advertising efforts.
Pricing Strategy
The basis behind the pricing strategy is actually quite simple, the reason for the high cost is connected to the fact that it gives customers access to various services and discounts that would have a net value well in excess of the fees that are paid into the card itself. If the customer was a frequent flyer, they could take advantage of the discounts and services in order to save money and be far more comfortable when they arrive at a new destination. It is based on this that the chosen pricing strategy should be effective in terms of being able to provide the necessary services.
Advertising and Promotion
One of the current weakness that both Etihad airlines have to deal with the current economic downturn that has affected the U.S. While it may be true that the banks and several corporations have somewhat recovered from the 2008 financial crisis the fact still remains that there is still a lingering financial problem with the current economy. This leaves many normal and affluent consumers hesitant at even considering using Etihad Airlines as their primary airline of choice given its high fees. What is necessary at this particular point in time is for Eithad to improve its image to consumers and this can be done through the Platinum Preferred Customer card which will enable Etihad customers to save money on their tickets.
Customer Experience Strategy
When it comes to customer experience in Etihad, it is not just the quality of the flight itself that matters, rather, it also entails what customers feel when they utilize the services of the airline. This can range from how they are greeted, how easy the process is and other aspects related to good customer experiences. In the case of the Platinum Preferred Customer card, this involves making the process of acquiring and utilizing the card easy so that customers will be more likely to like it and use it continuously.
Information Management Operational Decision
Information systems can be described as the interface between people, organizations and technology, enabling the business to accomplish a specific task or action. When it comes to establishing the new Platinum Preferred Customer card, the implementation of such services can be considered as absolutely essential given the need to monitor and address the various technical issues that are sure to arise after having customers utilize the card. Etihad needs to be able to address such concerns; otherwise, customers would have no confidence whatsoever in using the card, which would result in a negative image for the company resulting in fewer long term sales.
Managing the Provision of Amenities and Services
With added services such as online methods of baggage claim tracking, additional frequent flyer miles, exclusive discounts on tickets, free use of airport lounges, free private shoppers, discounts at select stores, free international insurance for people travelling to other countries. It would be necessary to provide some means by which these services can be coordinated and properly monitored to ensure that the services continue to work properly for consumers. In the case of Etihad Airways, this comes in the form of having a management team on hand to specifically address the problems related to these services and ensure that, from start to finish, customers are treated right and are fully satisfied with the services of the company.
Marketing Research Operational Decision
In order to determine how well Etihad Airlines was able to meet its market objectives in promoting the Platinum Preferred Customer cards, sufficient market research will need to be conducted. The reasoning behind this is quite simple, if the company is not able to meet its targets when it comes to passenger adoption of the Platinum Preferred Customer card, the company must know when to cut its losses and attempt other potential products that could be implemented in its place. Without these alternatives, it is likely that the company will continue along an unprofitable path which could endanger its future if nothing is done to prevent it.
Application of the Strategy, Resources, Capabilities, and Competencies Model to Etihad Airways
It is a fact that Etihad is not the largest airline in Abu Dhabi and the larger Arab region. It is faced with competition from larger companies, such as Qatar Airways and Emirates. However, in spite of its size, Etihad has made some significant progress in the region’s airline industry. The strategy, resources, capabilities, and competencies model is significant to the future growth of this airline. According to Teece (2010), a business model is important to any economic undertaking. It helps the business organization to convince the clients to pay for the value supplied, leading to profits.
An analysis of Abu Dhabi Etihad Airways reveals that the company is utilizing its vast resources to establish partnerships. Such partnerships are designed to enhance the capabilities and competencies of the organization. For instance, the company has entered into an “equity alliance” with other airlines across Europe, Asia, and Australia. The alliance strengthens the airline’s route networks. It leads to an increased number of passengers, which translates to more business opportunities for the firm. The model has increased market access for Etihad Airways. In addition, it has led to reduced operational expenses due to cost-sharing with the partners. The alliances are established with partners who have competent management teams, adding to the airline’s competency.
According to Watson (2005), the capabilities of a firm involve the ability to conduct relevant business processes to create value. The processes are supported by the organization’s resources. Casadesus-Masanell and Ricart (2009) conceptualize a firm as a collection of resources and capabilities. Consequently, the competencies of Abu Dhabi Etihad Airways are exhibited through strategic alliances with partners.
Application of Porter’s Forces to Etihad Airways
An Overview of the Forces
Porter’s forces model is applicable to any business in a given industry. The framework is an effective criterion used in determining market attractiveness (Porter, 1980). The various forces associated with this model can be used to analyze Etihad Airways’ business operations.
Porter’s Five Forces and Etihad Airways
Competitive rivalry
The airline is located in a region with some of the best air transport facilities in the world. The Dubai Emirates and Qatar Airways are some of its major competitors in this region. Etihad has tried to overcome this competition by forging partnerships with such giant airlines as Air Berlin, Jet Airways of India, and Serbia’s national carrier (Clark, 2013). The alliances give the company a competitive edge in the market.
As a result, Etihad has access to the market controlled by the partners. In addition, the airline has at its disposal more routes compared with the competitors, increasing its business opportunities. Etihad has taken over a number of airlines in other countries to enhance its growth. Such a strategy has increased the organization’s passenger and cargo volume by 42% in the last two years (Clark, 2013).
Bargaining power of suppliers
Establishing partnerships in the airline industry is associated with a number of benefits. One such benefit is the reduced operational costs (Wensveen, 2010). Due to its collaborations with other airlines, Etihad can effectively bargain with suppliers. The airline engages in joint procurement deals for, among others, jet engines, new aircraft, and on-board entertainment systems. Such engagements increase the power that Etihad and partners have over suppliers during negotiations.
The threat of substitutes
Currently, this threat is not a major issue in the aviation industry. However, such developments as teleconferencing, high-speed railroads, and improved telecommunication systems may negatively affect the operators in this industry (Wensveen, 2010). Etihad is the 7th largest airline in the world (Clark, 2013). The ranking, coupled with the high quality of services offered, shields the company from the threat of new entrants.
Organizations that wish to respond effectively to variations in their business environments cannot avoid change. Etihad Airways is among companies that need to embrace transformations to remain competitive in the market. Starting its operations in 2003, Etihad Airways operates from Abu Dhabi where its headquarters are located in Khalifa City. By February 2018, the company had a fleet of 117 planes consisting of Boeing and Airbuses that delivered cargo and passengers to destinations in Africa, the U.S., the Middle East, Europe, Asia, and Australia. From 2003, Etihad has experienced growth in terms of the number of passengers carried per year, employees, and cargo volumes. However, it reported losses in 2016 and 2017.
Etihad needs to respond to changes in the business environment characterized by a shrinking fleet. Due to this problem, Etihad reported a loss of $1.5 billion in 2017 (Howells, 2018). This challenging situation has emerged at a time when competitor airlines in the UAE are struggling to combat the problem of pilot shortages following their increasing demand. This report emphasizes the need for Etihad to undergo restructuring as a way of responding fully to this critical historical problem.
Benchmarking from organizations such as Brussels Airlines, Etihad should be prepared to face some pertinent issues and constraints. For example, when Brussels Airlines underwent restructuring, it was badly hit by changing market trends. Any effort to downsize was met with great resistance. Hence, Etihad stands to face the constraints of reduced motivation and organizational commitment among the remaining employees during its restructuring process.
This paper also considers appropriate theoretical concepts, including Lewin’s framework and Nadler and Tushman’s model, applicable to the change process. It recommends the adoption of Nadler and Tushman’s theory, which has been proven effective in guiding the process change implementation at Etihad Airways. Lastly, this paper synthesizes the presented ideas into a clear and coherent discussion that recaps all pertinent aspects of the identified problem, including its solutions.
Identification of the Change
A Major Change
All organizations strive to realize long-term success. Therefore, they are compelled to reform their ways of executing business. The most appropriate changes ensure that organizations become more profitable in a changing business environment (Baddah, 2016). This outcome is important for Etihad, which has been in operation for close to 15 years. According to Howells (2018), although earlier financial information was not published, this company is reported to have started making profits from 2011. It recorded positive net profits from 2011 to 2015 before reporting losses of 1873 million US dollars and 1520 million US dollars in 2016 and 2017 respectively (Howells, 2018).
These losses were attributable to failed strategic alliances with European air carriers, especially Alitalia coupled with Air Berlin. The significantly changing demand in Etihad’s line of business has not had any gain to the company, despite other airlines in the UAE facing shortages of pilots. Upon recognizing these dynamics, Etihad initiated changes in its management with the hope of turning losses to profits in the coming fiscal years.
Nevertheless, considering its current state of profitability, these changes have been inadequate and hence the reason why organizational restructuring is inevitable to help in reducing operating expenses in an environment of declining fleet numbers. Consequently, to effectively deal with the problem of reduced profitability levels, this company needs to consider changes in its human resources, strategic alliances, and corporate sponsorships.
The Significance of the Problem
The significance of any problem determines the extent of reforms that an organization should undergo regarding its business and leadership approaches. Since Etihad operates in an industry where success is determined by the effectiveness of prevailing strategic growth and operational initiatives, the current problem of negative profitability in this company is significant. Failing to implement appropriate measures in time may compromise Etihad’s survival in its line of operation.
Geopolitical, demographic, and technological variations and even intense pressure on the physical environment trigger the need for organizational change. As Baddah (2016) asserts, many organizations, including Etihad, adopt change following experiences in particular events or due to shifts in external business settings. However, internal environmental changes may trigger reforms. For example, new management, leaders, fluctuations in an organization’s performance levels, the adoption of innovative ideas and growth strategies makes change inevitable for Etihad.
How the Current Situation Is Effected by the Absence of Change
Challenges that Etihad Airways has been undergoing have forced it to adopt various strategies for dealing with the current situation. For example, in the effort to boost its profitability, it agreed in 2014 to buy a stake of 560 million Euros from Alitalia (Howells, 2018). Specifically, “On January 1, 2015, Alitalia-CAI formally passed its operations to Alitalia-SAI, a new entity owned 49% by Etihad and 51% by the Alitalia-CAI shareholders” (Howells, 2018, para. 2).
Although the company reported positive profits in 2015, it went ahead to make changes in its managerial structure. For example, it reshuffled its administration where James Hogan took over as Etihad Group’s CEO while Peter Baumgartner assumed the position of the business leader of the airline (Ball, 2016). In May 2017, Alitalia had trouble with the company’s administration. Etihad Airways responded by announcing that its CFO and CEO would be sent home. These arguments suggest that Etihad has been struggling to resolve its external and internal problems through a restructuring strategy.
The Proposed Change
From the above arguments, the problem of negative profitability arises from the changing external market dynamics such as competition. Rivalry compels organizations to implement strategic initiatives, which include the formation of alliances (Ball, 2016). In the current context, Etihad needs to review its partnership with Alitalia and Air Berlin. The idea of increasing economies of scale has failed to work as anticipated. Hence, Etihad should adopt change that assures it of breaking even in the short term. Restructuring its human resources and financial expenditures in corporate sponsorships become inevitable. According to Al-Ameri (2013), these proposed changes require the company to be prepared to deal with outcomes such as the turnover of employees who remain in the company and Etihad’s reduced role in corporate citizenship.
Significance of the Change
In 2017, amid recording negative profits, Etihad had a workforce of 24,558 employees (Howells, 2018). This number was lower compared to what the company had in 2015 when it realized revenue growth after employing 26,566 people. This outcome suggested that the problem with Etihad was not linked to its high number of workers. Nonetheless, the reported decreased profits were attributable to the declining fleet size. Therefore, restructuring human resources and expenditures on corporate sponsorships to match its income flows is a significant move that determines Etihad’s survival and competitiveness in the airline sector. Reducing the organization’s recurrent expenses is critical for its continuity. The overall outcome of this change entails a downsized organization.
Reasons for Change
Downsizing is an important strategy that helps to reduce operations costs. According to Al Jerjawi (2015), after a period of successful operations, situations occur when organizations need to reduce their operational costs to remain profitable. Downsizing entails reducing the size of a business, including its workforce and the number of cities in which it operates (Walker, 2016). In a highly competitive market that is characterized by changing demand trends, firms are under intense pressure to cut costs of operations as a way of improving their efficiency, productivity, and competitiveness. Organizations downsize to ensure they continue operating even during financially trying moments.
As Bin Taher, Krotov, and Silva (2015) observe, such a move helps to prevent bankruptcy while at the same time acting as a proactive measure for increasing productivity. Etihad’s proposed idea of downsizing will be a response to the challenges witnessed in its mergers and acquisitions plan, reduced market share, and declining revenue levels (Al-Ameri, 2013). Technological changes also signal the need for this company to undergo restructuring. Businesses that have embraced technology have reported increased outputs while operating with few human resources (Eggers & Bellman, 2016). Overall, Etihad’s downsizing emerges from the need to reduce its recurrent expenditure and abandoning non-profitable strategic alliances with other airlines.
Applying Theories and Theoretical Concepts
Any change within an organization is implemented through an evidence-based theoretical approach. Kurt Lewin’s framework and Nadler and Tushman’s theory of change are important in the analysis of the proposed reforms in Etihad Airways.
Nadler and Tushman’s Theory
Nadler and Tushman’s theory of organizational change presents companies as a set of systems with different inputs from internal and external sources. Etihad has people in the form of employees and managers. It also has cargo and passenger aircraft. These two categories of resources are converted into outputs as air travel services. Nadler and Tushman’s theory suggests that an organization transforms its inputs into outputs using four main components or subsystems, namely, work, people, a casual organization, and a formal business (Alasadi & Askary, 2014). Therefore, this theory of organizational change conceptualizes an organization as entailing an open system.
Internal and external environments affect its operations to the extent that inputs drawn from them are converted into profitable outputs in the form of improved performance levels. Consequently, if this process fails to yield the anticipated results, the leadership needs to consider adopting change that responds adequately to internal and external environments with the goal of increasing a company’s competitiveness as a strategy, which influences its long-term survival.
Nadler and Tushman’s theory explains the mechanisms under which change can occur at Etihad Airways. The first condition requires it to have the capacity for transforming inputs into outputs via interactions of different subsystems such as work, employees, and leadership. Work refers to any activity executed by employees. In Etihad Airways, such activities should contribute to a fraction of the overall profitability.
Therefore, if this expectation is not met, it becomes necessary to eliminate less productive workers until the organization breaks even and starts operating in the positive profit margin region. As Al Jerjawi (2015) asserts, restructuring human resources involves retaining people who have skills and abilities, which are appropriate to accomplish an organization’s purpose geared towards profitability. However, according to Nadler and Tushman’s theory, for change to be effective, companies should have formal subsystems, for instance, policies, organizational structure, culture, resources, investors, and standards that guide business operations. Figure 1 below shows the above components.
Fig. 1. Elements of Nadler-Tushman’s change framework (Sabir, 2018)
Ensuring the availability of the above aspects requires Etihad to have a transformational leader who can alter the existing counterproductive norms and systems. Therefore, changing this company’s organizational leadership structure and ethical norms is necessary. According to Ball (2016), Etihad Airways recognized this need when it restructured its leadership by announcing James Hogan as Etihad Group’s CEO while Peter Baumgartner took the responsibility of being the airline’s business leader.
Lewin’s Model of Organizational Change
Upon identifying the necessary change, which has the capacity to alter an organization’s current problem characterized by operational and performance challenges, the next step involves its implementation. Change execution frameworks help in this process. Etihad Airways can deploy Kurt Lewin’s model to implement the proposed change. This theoretical system has three key stages, namely, unfreezing, moving, and refreezing (Bin Taher et al., 2015).
In the unfreezing stage, Etihad should find out whether its current business practices are appropriate in helping to respond to the dream of becoming profitable in the changing market environment that has led to a significant decline in the company’s number of carriers. Etihad’s business conditions imply that it does not require this step. Hence, it should proceed to the next phase of Lewin’s model of change implementation. This stage involves redesigning and reorganizing tasks coupled with the roles of different stakeholders.
Etihad’s HR department and the top management team should play the critical role of determining the optimal size of the workforce after resizing, specific unprofitable strategic alliances it needs to abandon, and corporate sponsorships that yield the best results in terms of representing the organization as a good corporate citizen. Otherwise, all non-core activities that do not contribute to this company’s profitability, despite consuming organizational resources, should be frozen. Nonetheless, there should be clear and concise communication of the changes, including their value to all parties, which are interested in the operation of Etihad Airways.
As argued in the discussion section, after executing the restructuring process, Etihad should have a detailed mechanism for addressing the underlying impacts of these reforms. Such a plan determines the airline’s capacity to deal with the refreezing phase following the implementation of change in line with Lewin’s model.
Discussion
Analyzing the implications of the proposed change for Etihad Airways requires one to understand its primary function and purpose. According to Bin Taher et al. (2015), organizations are established to achieve specific goals, missions, aims, and objectives. Etihad aims at ensuring that the world becomes a habitable place where people can travel conveniently to any country of their choice. Achieving this slogan demands this organization to meet all its operational obligations and vision.
This goal may be impractical if no profits are reported to facilitate its realization. Nadler and Tushman’s theoretical model is recommended because it can help the company to convert inputs efficiently into profitable outputs through its organizational processes (Sabir, 2018). Outputs entail the services and products it sells to customers. The most effective outcome occurs when it can deliver these products and services to clients using the required number of workers and financial resources.
Variations in the service demand rate and a decline in the size of Etihad’s fleet can render some employees redundant. This company has experienced such unnecessary human resources and avoidable expenses following fluctuations in the demand for air transport services and non-working strategic alliances. According to Baddah (2016), the capacity to establish coherency, congruence, and integrated inputs that act as autonomous variables to influence the required output is an important factor that affects the ability of firms to realize their objectives. Hence, when Etihad Airways experiences problems in meeting its projected outputs, it becomes foreseeable that it will make losses.
The low demand for airline services requires it to adjust the size of the organization. In addition to lowering the amount of resources necessary to generate outputs, it needs to discard partnerships, which do not deliver any value in terms of profitability. As earlier mentioned, Etihad can abandon its joint venture with Air Berlin and Alitalia. Decreasing the size of redundant organizations should also be accompanied by a reduction of financial resources allocated to corporate activities such as sponsorships.
When implementing the proposed change of downsizing, Etihad Airways should benchmark from experiences of other organizations in or outside of the airline industry. For example, Westpac Corporation and St. George Bank engaged in a delicate downsizing strategy upon forming a strategic partnership. The two companies’ management teams had to make intelligent decisions at a time when superiority battles raged between employees (Al Jerjawi, 2015).
These experiences arise, especially when a merger is accompanied by layoffs. In each company, retained employees believe they escaped layoff because they are superior to those who are fired (Iverson & Zatzick, 2011). Therefore, Etihad Airways should be careful in the downsizing process since some employees may feel intimidated. Etihad has requested some of its pilots to join other airlines in the UAE. Other air carriers can view Etihad’s pilots as a threat or inferior since they come from a loss-making company.
One of the pertinent issues that need to be considered entails the overall impact of downsizing. From the perspective of performance, productivity and efficiency may not increase after downsizing. According to Iverson and Zatzick (2011), a downsized organization may be unprofitable, unproductive, and non-efficient in some cases. Such a change interferes with product development processes. It also increases turnover rates due to employees’ reduced organizational commitment after downsizing. Etihad should be aware of these possible outcomes.
Conclusion
After its establishment in 2003, Etihad began reporting profits in 2011. It recorded massive losses in 2016 and 2017. It attributed these losses to shifts in the demand for airline services. Etihad attempted to make managerial changes, although this strategy failed to yield any improvements. Efforts to form strategic alliances with Alitalia and Air Berlin did not result in positive outcomes. Consequently, this paper has emphasized the need for Etihad to undergo restructuring in its human resources and administration while at the same time reducing its commitment to corporate affairs such as sponsorships.
Nonetheless, it needs to consider the cons of these changes in terms of productivity, efficiency, and its image as a good corporate citizen. The primary objective of the proposed change entails reducing Etihad’s workforce with the intention of increasing productivity and lowering operational costs. Kurt Lewin and Nadler-Tushman’s models have been found to be effective in helping this company to execute this change.
Nevertheless, this paper has recognized the inability to achieve the anticipated outcomes in all situations. The survival syndrome upon downsizing translates into reduced work commitment and motivation among the remaining employees. Hence, it is equally important for Etihad to consider the ripple effects arising from the proposed change.
References
Al-Ameri, M. (2013). Assessing resistance to technological change for improved job performance in the UAE (public sectors). Web.
Alasadi, R., & Askary, S. (2014). Employee involvement and the barriers to organizational change. International Journal of Information, Business and Management, 6(1), 29-51.
Baddah, A. (2016). The direction of change management in the United Arab Emirates. International Journal of Business Management, 11(9), 126-133. Web.
Ball, L. (2016). Etihad came out swinging in 2015. Air Cargo World, 19(1), 17-17.
Bin Taher, N. A., Krotov, V., & Silva, L. (2015). A framework for leading change in the UAE public sector. International Journal of Organizational Analysis, 23(3), 348-363. Web.
Eggers, W. D., & Bellman, J. (2016). The Journey to government’s digital transformation. Santa Clara, CA: Deloitte University Press.
Iverson, R. D., & Zatzick, C. D. (2011). The effects of downsizing on labor productivity: The value of showing consideration for employees’ morale and welfare in high-performance work systems. Human Resource Management, 50(1), 29-44. Web.
Sabir, A. (2018). The congruence management -A diagnostic tool to identify problem areas in a company. Journal of Political Science and International Relations, 1(2), 34-38. Web.
Walker, K. (2016). The partner. Air Transport World, 53(2), 55-56.
Etihad Airways is one of the largest airlines in the United Arab Emirates. Founded in 2003 with its headquarters in Khalifa City, Abu Dhabi, this company has registered impressive growth over the years and it is currently one of the dominant players in the aviation industry (Grand, 2017). The aviation industry is highly competitive and the firm has been keen on ensuring that it lowers its cost of operation while offering the best value to its customers as a way of remaining sustainable in the volatile market. According to Cook and Billig (2017), one of the biggest concerns to aviation companies is the fluctuating cost of jet fuel. A significant percentage of the expenses of these companies go to fuel. As such, stakeholders in the aviation sector have been working on ways of reducing the cost of energy as a way of lowering their overall cost.
Etihad Airways can increase its profitability without compromising on the quality of its products by embracing the renewable energy. According to Boer (2017), although the current level of technology does not allow planes to fly on renewable energy, scientists are making advanced steps that would enable planes to use a combination of renewable energy and the traditional jet fuels (Kaltschmitt & Neuling, 2018).
This company should be at the forefront in introducing this form of energy in its planes when it becomes available. In the meantime, renewable energy sources such as solar, wind, hydropower, and bio-fuels can be used in the offices of this company to reduce reliance on fossil fuel and cut down the cost of operation. In this paper, the focus is to discuss reasons for and how Etihad Airways can embrace renewable energy in its operations.
Ways Companies Can Adopt the Various Aspects of Renewable Energy
The aviation sector is growing rapidly, but the high cost of fuel remains one of the biggest challenges that these companies face. As Blockley (2016) observes, these companies mainly rely on fossil fuel for their operations. It is important to note that heavy reliance on fossil fuel is also witnessed in other industries around the world. Figure 1 below shows that fossil fuel accounts for an overwhelming 78% share of the total energy used around the world. Renewable energy only accounts for 19% while nuclear energy accounts for just 2%. Fossil fuel is not only expensive to the aviation sector but it is also responsible for the emission of greenhouse gases. According to Kelemen (2014), environmentalists have been critical of the aviation sector because of the amount of carbon that airlines emit to the atmosphere. As such, any effort, that Etihad Airways and other airlines would be appreciated.
Figure 1. Global energy sources (Kelemen, 2014, p. 67).
Companies can adopt various aspects of renewable energy in various ways. As they wait for technological advancements that would make it possible to use renewable energy instead of jet fuel, they can start by embracing its use within their premises. Solar energy is one of the most reliable energy sources in regions that receive regular sunlight (Nelson & Reddy, 2017). The United Arab Emirates enjoys several months of sunlight every year, which means that they can use this energy source to power their office operations. Instead of relying on the hydroelectric power that has to be paid, they can install solar panels in strategic locations to generate their own renewable energy.
This form of energy can be used in heating, lighting, and operating machines within its offices. The firm can also consider using wind energy. Although the initial investment may be relatively high, this form of energy is very reliable because of the strong winds common in the country. Figure 2 below shows the image of the two very viable options of renewable energy that companies in the aviation sector can embrace, especially those operating in the United Arab Emirates.
Figure 2. Generating solar and wind energy (Karakoc et al., 2016, p. 76).
How Energy Efficiency Affects its Approach to Sustainability
In a highly competitive industry such as the aviation sector, it is critical for firms to ensure that their operations are sustainable. Blockley (2016) argues that many airlines have been forced out of the market because of high cost of operation, competitiveness of the market, and the inability to understand customers’ need. In this case, Etihad Airways will improve the sustainability of its operations when it embraces the concept of sustainability. As shown in figure 3 below, any successful firm cannot afford to ignore the three pillars of sustainability. The first and central pillar is the environment. Successful firms must protect the environment within which they operate. Excessive pollution of the environment may render it unsustainable.
Kelemen (2014) explains that environmental agencies have put spirited fight against companies that pollute the environment. As such, the image of Etihad Airways may be tainted if it fails to protect the environment. Moreover, many countries are also coming up with policies that limit the amount of greenhouse gases that a company can emit within a specific period. These factors mean that airline companies must find ways of reducing their carbon emission to ensure that they remain sustainable in their operations. One of the best ways of achieving such an ambitious goal is to embrace renewable energy. The strategy will help in significantly lowering the amount of carbon dioxide that the firm emits into the atmosphere.
The second pillar of sustainability is the social aspect. As Boer (2017) explains, a firm should ensure that its operations do not have any negative consequences on people. Environmental degradation has become a social problem in the global society. According to Grand (2017), some of the respiratory diseases that affect many people around the world are caused by emission of poisonous gases, including carbon dioxide into the atmosphere.
In some cities such as Beijing, the level of air pollution is so high that young children and the elderly are sometimes not permitted to out of the house at specific hours of the day. A deliberate effort by this company to embrace renewable energy will show its commitment to eliminating such health concerns. It will demonstrate that it is not just focused on making profits but also serving people.
The third pillar of sustainability, which companies often take seriously, is profitability. Kelemen (2014) observes that the ability of a firm to ensure that its operations are sustainable depends on its profitability. The government of Abu Dhabi provided the initial capital used to start the company. Blockley (2016) notes that the business owner may be willing to provide the capital used to start operations within the market. However, such funding cannot continue indefinitely. It is expected that the firm will reach a point where its expenses are met with the revenues that the firm generates. The owner also expects to make profits from such operations.
Introducing renewable energy will help achieve this goal by lowering the cost of operations. Cost of electricity bills will be eliminated or significantly reduced if the company introduces the use of solar and wind energy in its offices. As the practice becomes common, the overall cost of operation will be reduced, and the firm will increase its profitability. It will gain a competitive edge over its rivals in the market.
Figure 3: The three pillars of sustainability (Kelemen, 2014, p. 67).
Importance Renewable Energy to the Organization
Renewable energy is important to Etihad Airways in three main ways discussed above, which are socially, economically, and environmentally. Besides these three areas, renewable energy offers the firm an opportunity to make a successful entry into a future where planes will be using clean energy to sustain their operations. According to Kelemen (2014), although the manufacturers of aircraft engines such as General Electric and Rolls Royce mainly do this scientific research, it is necessary for individual airline companies to find ways in which they can ensure that their operation can evolve effectively under the new system.
According to Grand (2017), Virgin Atlantic, one of the largest private airline companies, has been investing in this areas of research to ensure that its operations can transform seamlessly to a new model when clean energy is introduced. Etihad Airways should consider making similar investments to enable it prepare adequately for the eminent change. Introducing solar and wind energy in its ground operations will help to its energy cost.
The savings that this company makes from such initiatives can help it fund research an innovation. Cook and Billig (2017) observe that in the aviation sector, innovation is a critical factor that helps companies to overcome stiff competition. Firms are developing new systems that can ensure that their clients are entertained. The introduction of music systems and screens that can be used by individual client was a major discovery that has transformed the sector.
Currently, almost every major airline company has the same entertainment system. To gain competitive edge over its rivals, Etihad Airways should use funds saved from the use of renewable energy to fund other projects that would enable it develop other systems that would make their products unique in the local and global markets. It focus should be to remain a step ahead of market competition in terms of the superiority of its products.
Strategies the Company Should Adopt in Implementing Renewable Energy
When introducing this new concept within the firm, it will be necessary for the management to identify effective strategies that would ensure that the intended goals are realized. One of the main issues that the management of Etihad Airways should be concerned about is possible resistance. Boer (2017) explains that when introducing a new system, it is normal to find a section of the stakeholders being uncomfortable with it.
They may feel that their positions within the firm will be threatened, especially when they do not have a proper understanding of the new concept. Renewable energy is not a new concept in the United Arab Emirates. Solar energy has been used for industrial and domestic purposes for decades. However, the use of fossil fuel gained massive popularity in the country, especially in the aviation sector, that many people still do not understand how it may be possible to use renewable energy. The shareholders will also want to be assured that the new system will not affect the firm’s profitability and its capacity to operate at a full potential. As such, it may be possible that there will be some form of resistance among a section of the stakeholders.
Kurt Lewin’s change model offers an effective strategy that the management of Etihad Airways can use to overcome such possible resistance. It provides three stages that a firm should use to introduce change in an organization, as shown in figure 4 below. The first step is to unfreeze, where the management of this company will be expected to prepare all the stakeholders for the change. At this stage, it is necessary to explain to the employees and shareholders why it is necessary to introduce renewable energy in the firm’s operation. Shareholders will be convinced about the need for the project when they are informed that it will lower the overall cost of operations.
Employees will have a positive attitude towards the new concept if they are assured that operations at the firm will be improved. They need to be informed that introducing alternative energy sources will eliminate cases of power outage in their offices. Kelemen (2014) emphasizes the need to assure employees of their current positions even after introducing change. Some people tend to oppose change because of the fear that they may be eliminated from the firm. Such assurance will ensure that they feel comfortable with the new system. The unfreezing stage helps eliminate any possible resistance to change. The support of these stakeholders is critical in the successful implementation of renewable energy at the company.
The second stage involves the actual introduction of change. The management, working closely with renewable energy companies and experts, should install the necessary infrastructure needed for the production and supply of the energy. It will involve installation of relevant solar panels and wind turbines needed to generate energy. The team will then be expected to integrate the various sources of energy to ensure that Etihad Airways’ premises are properly supplied with energy.
It will be necessary to ensure that if the energy produced by the renewable sources is not adequate to support ground operations, then it should be supplemented with hydroelectric power supplied by the government. Employees of this company should be actively involved at this stage because they will be expected to operate the new system after installation.
The third and final stage is to freeze. It involves ensuring that all the stakeholders understand the value of the new system and those employees can effectively work without facing any challenges. Some form of training may be necessary.
To cut on the cost of training the current employees, the management of Etihad Airways may consider hiring experts in this sector. Grand (2017) notes that an alternative strategy may be to contract the services of renewable energy firms to avoid the stress of training employees about a concept they do not understand. The management can conduct a comparative analysis to ensure that approach that would be most effective and least costly between hiring its own employees and contracting services of other companies. This strategy will ensure that the company introduces the new concept in a seamless manner and without any significant resistance.
Figure 4. Kurt Lewin’s model of change (Karakoc et al., 2016, p. 57).
Industry Best Practices
When operating in a highly competitive market, Kelemen (2014) argues that it helps to embrace industry best practices. When industry leaders introduce concepts, which are proving popular with customers, or helping to lower the overall cost of operation, it would be necessary to embrace it within the shortest period possible. Renewable energy is gaining popularity in the aviation sector and it is becoming one of the best practices in the industry. As airlines wait for the time when planes will be capable of fully relying on renewable energy, many large airlines are using solar and wind energy to facilitate their ground operations. In the United States, Reagan National Airport in Washington, DC has successfully introduced the use of renewable energy as a way of lowering cost of operation and reducing carbon footprint.
In Europe, Germany, France, and the United Kingdom are some of the countries with advanced systems of renewable energy. Many airports are embracing this firm of energy and airlines are finding it effective in lowering their cost of operations and improving efficiency (Karakoc et al., 2016). Locally in the United Arab Emirates, Etihad Airways will need to work closely with the management of Abu Dhabi International Airport to ensure that they introduce the use of alternative energy sources.
The close coordination between the airline and the authority mandated with the management of the airport is necessary because of the nature of work involved. The airline may need the approval of the authority to install solar panels at strategic locations to help generate electricity. Alternatively, the management of Abu Dhabi International Airport can take the initiative of installing the relevant infrastructure and producing the electric energy needed for the benefit of all its tenants. The company should remain sensitive to industry’s best practices.
Conclusion and Recommendation
Renewable energy is rapidly gaining popularity around the world as a cleaner alternative to fossil fuels. In the aviation sector, there is an effort to ensure that there is a shift from using fossil fuel to cleaner alternatives because of the need to fight global warming, often caused by massive emission of greenhouse gases. Etihad Airways needs to align itself with the eminent industry changes. It should be ready, when the time comes, to use renewable energy to run the engines of its planes.
In the meantime, the firm should introduce the use of solar, wind, and bio-fuel in its ground operations. The discussion shows that these clean energy sources will have positive social, economic, and environmental benefits for the firm. It will strengthen its brand in a global market where customers are getting increasingly concerned about carbon emission and how large companies can fight it. It will lower the overall cost of operation at the firm. The management of this airline should consider the following recommendations to ensure that it successfully introduces the use of renewable energy sources in its operations:
The management of Etihad Airways should work closely with the management of Abu Dhabi International Airport to determine the best way of installing relevant renewable energy infrastructure.
Etihad Airways will need to take its employees through some form of training to ensure that they can work efficiently under the new system.
The company should invest in research and development of renewable energy to ensure that its operations can evolve based on the emerging trends.
References
Blockley, R. (2016). Green aviation. Hoboken, NJ: Wiley.
Boer, E. R. (2017). Strategy in airline loyalty: Frequent flyer programs. Cham, Switzerland: Palgrave Macmillan.
Cook, G. N., & Billig, B. (2017). Airline operations and management: A management textbook. New York, NY: Routledge.
Grand, K. (2017). How to become a flight attendant for airlines in the Middle East. Dubai, United Arab Emirates: Flight Attendant Central.
Kaltschmitt, M., & Neuling, U. (2018). Biokerosene: Status and prospects. Berlin, Germany: Springer.
Karakoc, T. H., Ozerdem, M. B., Sogut, M. Z., Colpan, C. O., Altuntas, O., & Açikkalp, E. (2016). Sustainable aviation: Energy and environmental issues. Cham, Switzerland: Springer International Publishing.
Kelemen, R. D. (2014). Lessons from Europe: What Americans can learn from European public policies. Washington, DC: SAGE Publications.
Nelson, E. S., & Reddy, D. R. (2017). Green aviation: Reduction of environmental impact through aircraft technology and alternative fuels. London, United Kingdom: CRC Press.
Strategic management entails implementing and developing an airline or company’s goals and initiatives, which will foresee it, possesses a competitive advantage over its perceived competitors within the same field. The aviation industry has recorded a tremendously faster growth over the decade due to the demand for cargo and tourism worldwide (Dube, Nhamo, & Chikodzi, 2021). The analysis is likely to use methods such as Porter’s Five Force, strategic capabilities entailing the VRIO framework, competence, and resources, benchmarking, technology advancement, and value chain analyses.
Purpose of the research
This research report aims to provide strategies that are considered generic, orientational, and appropriate for making decisions that are deemed to contain a global impact on Etihad Airlines. This is necessary since it seeks to offer a competitive advantage to the airline while extrapolating its capabilities for survival. Furthermore, it seeks to analyze and assess the airline during this COVID-19 pandemic period. An alternative that is pertinent to assist Etihad Airlines in overcoming the significant decline in passenger numbers during this period will also be outlined. This uses essential concepts and periods coupled with different businesses that will significantly facilitate the realization of Etihad Airline to be competitive and remain relevant.
Literature Review
The changing business environment, externally and internally, has prompted organizations to design methods essential for their survival. These shifting demand components tend to impact a firm’s market size and value position, prompting an organization to apply architecture to link these elements together within the appropriate timeframe (Saebi, Lien, & Foss, 2017). Similarly, this issue will be solved if a company employs strategic planning to improve its performance toward meeting its long-term obligations (George, Walker, & Monster, 2019). Designing strategies will assist airlines to effectively be in positions in which they cannot be disadvantaged by the changing market needs likely to lock them out of business.
The needs of people require services they perceive as efficient and affordable concerning time costs and usage. The demand for a full-service airline is diminishing among the users, while a witnessed trend is the rise in the need for a carrier providing low-cost services (Simarmata et al., 2017). The introduction of a newer baggage policy by Etihad Airways, setting an allowance in all markets except for the United States and Canada, was aimed at targeting passengers’ attention towards using their services. Furthermore, Etihad Airways has entered into partnerships with leading airlines worldwide by buying shares (The Huffington Post, 2018). These seem to be a strategic move aimed at exploiting the aviation market segment in all dimensions and attracting more passengers to the airline.
People utilize the airlines for their movement as well as transportation of goods across the globe. Therefore, the industry is sensitive to certain factors such as economic turbulence, natural phenomena, pandemics, and political instability (Dube, Nhamo, & Chikodzi, 2021). The nature by which COVID-19 is transmitted from one person to the other coupled with associated challenges prompted the government to lock its airspace as a restrictive and closure measure (Organisation for Economic Co-operation and Development, 2019). The pandemic has led to the disruption of airline activities globally, resulting in a shrinking market value for this business (Maneenop & Kotcharin, 2020). For instance, Etihad Airways has registered a reduction in total passengers by about 64% in 2020 to 37.5 billion of available seat mileage (Etihad Airways, 2021). The occurrence of COVID-19 has significantly impacted airlines globally since the number of passengers has reduced dramatically.
Analysis
Strategic Capabilities
The availing of competitive abilities by Etihad Airways is incorporated in its management’s designs skewed towards a sustainable and improved overtime value. The analytic technique looks at the airline’s competence and resources, benchmarking, value chain analysis, and VRIO framework.
Competence and Resources
Etihad Airways has a variety of tangible assets which are essential in the accomplishment of its operations. By June 2004, the airline placed an order worth $8 billion for new planes with a direct flight to Geneva (The Huffington Post, 2018). These newly acquired assets are vital in providing the airway with a competitive advantage. Similarly, the airway offers employment to a variety of people. The COVID-19 pandemic has seen the airline reduce its workforce by 33%, from 20,369 in 2019 to 13,587 by 2020 (Etihad Airways, 2021). The airline seeks to increase its market access and is anticipated to boost employees’ and customers’ satisfaction through commercial and product development activities (Wade et al., 2020). This category is vital in assisting Etihad in fulfilling the set goals and targets.
The airline boasted of higher revenue returns before the pandemic impacted it negatively. A fall in revenue by 74%, from $4.8 billion in 2019 to $1.2 billion in 2020, was registered due to COVID-19 (Etihad Airways, 2021). This return would be realized to its average level since Etihad had already vaccinated more than 75% of its workforce as they set to resume their operations worldwide (Etihad Airways, 2021). Provided they engage in low-cost services, they are bound to earn excessive profits. The commitment of Etihad Airways to expansion and providing clients with the best services and experiences has resulted in receiving a variety of awards. The airline had received at least 30 awards coupled with Skytrax’s four-star rating since it launched operations in 2003 (The Huffington Post, 2018). This was realized since they utilized the competitive marketing strategy offering low-cost services.
VRIO Framework
The VRIO framework perceives the airline as an active participant in the aviation industry. As of October 2005, direct flights were accomplished for Toronto and Brussels, while over 30 destinations were registered by the end of June 2006 (The Huffington Post, 2018). This growth is attributed to Etihad airway’s new baggage policy, strategic management measures, culture, and committed human resources. These factors created a boost to the strategic management aspects being utilized by the company.
Benchmarking
Etihad Airways was established after a royal decree which required it to be the United Arab Emirates’ national airline. This was in February 2003, a period which saw the airline start its operations in November of the same year with a flight to Al Ain (The Huffington Post, 2018). As of October 2005, direct flights were accomplished for Toronto and Brussels, while over 30 destinations were registered by the end of June 2006 (The Huffington Post, 2018). The set target of 70 goals by the year 2010 saw the airline anticipate to be serving about 7 million guests by the year 2009 (The Huffington Post, 2018). This shows how the airline was growing steadily over the years ever since it first launched its operation from UAE to other destinations.
Value Chain Analysis
The COVID-19 pandemic sparked various challenges in the aviation sector. This industry is intertwined with other sectors, including plane manufacturing, leasing, rental services, biofuels blending, and supporting elements to air transportation (Organization for Economic Co-operation and Development, 2019). The incorporation of strategic planning is essential to enhancing Etihad Airways’ effectiveness towards its achievement of the set goals as it adheres to its objectives in the long run (George, Walker, & Monster, 2019). Therefore, failure by a single unit would halt the airline’s operations inconveniencing the users.
Five Force Analyses
The Entry Threat
The growing economies witnessed in Asia have increased the demand for air travel. This is expected to significantly increase across the region in the coming ten years since it is estimated that the air traffic growth stands at 85% (Wade et al., 2020). This advancement in development within Asia creates a likelihood of new airline providers such as Lufthansa, Air France-KLM, Wizz Air, and Ryanair, posing a threat to the arising customers’ options (Wade et al., 2020). The new market entrants are impeded by the requirement for adoption within the existing market gap. Therefore, the airlines will be finding it hard to create a threat initially (Saebi, Lien, & Foss, 2017). The capital injected by the government, coupled with the exemption of fees and payment deferment done in March 2020, was aimed at cushioning the airline’s financial capabilities and lessening the investors from COVID-19 effects (Maneenop & Kotcharin, 2020). These threats of entry by other airlines reduce the competitive advantage of Etihad Airways.
The Substitute Threat
The need to use transportation skewed towards saving time has made air traffic a better alternative. This is further coupled with the demand for affordable air services prompting the airline to adopt a low-cost strategy (Simarmata et al., 2017). The limited options for long-distance travelers who require transport utilizing a short period and faster movement make air transport suitable. Adopting relevant technology, which will foresee the quicker screening and processing of passengers, will ensure efficiency, reliability, urgency, and accurate operation flow in the airline (Dube, Nhamo, & Chikodzi, 2021). By 2018, shareholders became the most significant domestic air transport users within their travel zones (Organisation for Economic Co-operation and Development, 2019). This phenomenon is associated with travelers found in the Middle East and Europe.
The Buyers Bargaining Power
The shifts in pricing offer designing where airlines move away from the traditional methods towards the dynamic and continuous price evaluation techniques determine the airline use. The provision of offers deemed competent by the passengers, which entails the combination of ancillary and seat services matching the customers’ trip specifications, will attract clients (Wade et al., 2020). An airline seeking to provide low prices and reduce operating costs is hugely less likely to indulge in modeling its business adaptation features (Saebi, Lien, & Foss, 2017). Failure to adhere to the customers’ demand would make Etihad Airway lose the buyers’ bargaining power to other new market entrants.
The Suppliers Bargaining Power
The aviation industry is intertwined with other sectors of the economy. Airlines have utilized the public, which aims at providing coordination between the various suppliers in this field to ensure the safety of the airway (Organisation for Economic Co-operation and Development, 2019). The liquidation of Etihad Airways may be unavoidable if the government fails to boost its financial debt. This would, in turn, result in the disruption of the formed international supply chains relating to various ventures (Maneenop & Kotcharin, 2020). The government financial boosts and the coordinated supply chains would improve the bargaining power of Etihad Airways.
The Existing Extent of Rivalry Between Competitors
The competition between players in the aviation market is an issue of concern. The witnessed shifts in airline networks and fleets have led to the placing of constraints on capacity growth because of economic upheavals (Wade et al., 2020). Similarly, the competition by airlines for the provision of low-cost services for international flights poses a threat to Etihad Airways (Simarmata et al., 2017). This shift in capacity and availing of low-cost services by other market participants is a threat to the survival of Etihad Airways.
Technology Advancement
Improvement of Etihad Airway’s technological capabilities is essential. Etihad must digitalize its critical functions to reduce the over-reliance on the provided traditional technology to utilize the hybrid technique (Wade et al., 2020). The technological advancement in January 2020 by Etihad Airways targeted zero carbon emissions by the year 2050, reducing the 2019 levels of emission by 2035 (Etihad Airways, 2021). The possession of necessary technology will allow Etihad to deal with customers’ issues related to the company.
Strategic Alliances
The airline had taken up a partnership with the other aviation stakeholders. For instance, it signed a partnership agreement with Virgin Australia, Air Berlin, Republic of Seychelles national Airlines, Air Serbia, Dubai Airshow, and Alitalia (The Huffington Post, 2018). These partnerships were entered into to assist the airline in expanding its operations within these countries. A business strategy skewed towards achieving a competitive advantage over their likely competitors within the aviation industry.
Conclusion and Recommendations
The COVID-19 pandemic led to the disruption of Etihad Airways’ operations alongside other airlines in the aviation industry. The utilization of the outlined strategic capabilities will assist it in making good decisions. Similarly, the performed analysis such as the value chain, five forces, and technology advancement on Etihad Airways would be essential in surviving through this pandemic period. The airline’s performance is tied to the strategies to overcome the faced arisen situations resulting in losses. These analyses would provide the airline with a tremendous competitive advantage and assist it in extrapolating a mechanism vital for conducting operations within this market gap during the COVID-19 period.
References
Dube, K., Nhamo, G., & Chikodzi, D. (2021). COVID-19 pandemic and prospects for recovery of the global aviation industry. Journal of Air Transport Management, 92, 102022. Web.
George, B., Walker, R. M., & Monster, J. (2019). Does strategic planning improve organizational performance? A meta‐analysis. Public Administration Review, 79(6), 810-819. Web.
Maneenop, S., & Kotcharin, S. (2020). The impacts of COVID-19 on the global airline industry: An event study approach. Journal of Air Transport Management, 89, 101920. Web.
Saebi, T., Lien, L., & Foss, N. (2017). What Drives Business Model Adaptation? The Impact of Opportunities, Threats and Strategic Orientation. Long Range Planning, 50(5), 567-581. Web.
Simarmata, J., Keke, Y., Silalahi, A. S., & Benkova, E. (2017). HOW TO ESTABLISH CUSTOMER TRUST AND RETENTION IN A HIGHLY COMPETITIVE AIRLINE BUSINESS. Polish Journal of Management Studies, 202-214. Web.
Wade, B., Topalova, Y., Boutin, N., Jhunjhunwala, P., Loh, H., Oertzen, T. V., & Ukon, M. (2020). Seven trends that will reshape the airline industry. Web.
In the given report, we analyzed Etihad Airways’ business environment. The first step was the review of the corporate profile: organizational management style, strategic priorities, mission and vision, achievements, etc. Then, we proceeded to the evaluation of internal factors and identification of the organizational strengths and weaknesses. Afterward, PESTEL analysis of the external factors was conducted. The study results helped to develop awareness of the multifactorial influences on the corporate performance and strategies. Lastly, we summarized the findings and gave the relevant recommendations to Etihad’s management.
Introduction
Etihad Airways is the national UAE airline enterprise launched in 2003. Throughout the several decades, the company significantly expanded its operation capacity and partnerships and became one of the most rapidly growing airline companies. Nowadays, Etihad Airways is one of the leading premium airline brands in the world. The company’s total combined network serves over 25.000 flights to over 600 destinations in 68 countries per week (Etihad Airways, 2016). It receives a great number of awards such as ‘World’s Leading Airline,’ ‘Best First Class,’ ‘Middle East’s Leading Airline,’ and many others (Etihad Airways, 2016). The recognition of Etihad Aviation Group’s excellence by the international community indicates the strong position of the organization in the industry. To understand the company’s key success components, in the given report, we will analyze how the internal and external factors may affect its performance and evaluate the strategic moves and methods implemented by the management.
Internal Factors
Strengths
The major organizational strengths include a product excellence, well-developed organizational culture, knowledge management, and employee training. For example, Etihad established own aviation academy to ensure a high level of competence among its workforce members (Aydrose, 2012). Secondly, Etihad Airways embraces the core excellence values such as leadership, innovation, social responsibility, and customer focus, etc. in every business and operational activity. And it is observed that the inclusion of these principles in the corporate culture largely defines success in the achievement of business excellence (Bolboli & Reiche, 2015).
Weaknesses
The major weakness faced by the organization is the increasing fuel expense. “The growing fuel prices globally are creating a negative after effects for the total aviation industry” (Aydrose, 2012, p. 7). Due to the high costs, Etihad products and services may be compromised. The given treat provokes the need for strategy advancement as puts the company at risk of the competitive position weakening.
PESTEL Analysis: External Factors
The macro environmental factors define the organizational behavior to a large extent. The six major types of environmental impacts are outlined in the following table:
Positive
Negative
Political
Governmental support.
The Middle East conflicts.
Economical
Improving domestic economy; the existence of trade agreements with a number of Asian countries.
Close links between the US and domestic currency; European Crisis 2017.
Social
International socio-cultural environment; workforce Emiratization initiatives; a high level of individuals’ prosperity within the UAE.
Social inequality and discrimination.
Technological
The management encourages innovation.
The need for more sophisticated and advanced aircrafts.
Difficulties in gaining operational rights and receiving slots in some European countries.
Impacts on the Organization
The identified external factors have some positive and negative impacts on the organizational performance. For instance, one of the positive political influences includes the continual support from the government. The company was founded by Royal (Amiri) Decree and, since the very moment of its establishment, the company’s activities were supervised by the government as the officials recognize the important role of Etihad Airways in the development of the national welfare and improvement of sustainability. At the same time, a negative political factor is the Middle East region’s instability. For instance, the terrorist attacks that took place in Turkey significantly affected one of the major partners of Etihad Airways, Turkish Airlines, and caused a significant drop in demand (Sumers, 2016). Since Etihad Airways has the interline relationships with the organization with a purpose of carrying international connecting traffic, it could be indirectly affected by the adverse events as well.
The current European crisis threatens the organizational sustainability as well. For a significant time, Etihad strives to enhance its presence in Europe. For instance, it launched the headquarters in Berlin and some other large European cities and actively developed the relationships with the commercial teams of the local airlines (Etihad Airways, 2013). The adverse economic situation provoked the need for the internal organizational restructuring aimed to cut costs and improve productivity (Dudley, 2016). In the face of the difficulties, the management cut jobs and changes the flying routes decreasing the number of destinations. The employee’s layoffs may lead to decreased employee morale and, consequently, reduce the overall productivity (Santonocito, 2013). Therefore, significant efforts may be required to restore the positive organizational culture and employees’ trust.
Strategies: Internationalization
Etihad Airways employs the active internalization strategy through the development of alliances and codeshare agreements with a large number of international carriers (Aydrose, 2012). By developing the partnerships, the company entered the unexplored markets in a cautious manner. It is possible to assume that by doing so, the organization avoided significant financial loss and reduced the costs. Overall, it is possible to say that the given expansion strategy benefited the organization in the accumulation of experience and learning of local customers’ preferences. The cautious approach is a smart strategic decision helping to dodge the fatal errors and ultimately consolidate the position in the market in the long run.
The primary purpose of the international expansion of business is the development of competitiveness. The entry to the different regions including Europe and Far East region helped the company to take a portion of the rival’s profit. Moreover, the investigation of new regions facilitates the building of new knowledge and its application for the enhancement of innovativeness and technologic advancement (Amann & Cantwell, 2012). Therefore, as a result of Etihad’s active internationalization strategy, new competitive advantages were developed. Additionally, the strategic alliances help the company to compensate the financial risks and increase profitability by attracting new local customers. For instance, the development of a strategic alliance with Virgin Airlines alone allowed Etihad to get US$ 1 million per day (Aydrose, 2012).
Conclusion and Recommendations
Etihad Airways strives to be the leader in the aviation industry and aims to become the best company in the international market. Expansion of business operations is the strategic priority of the enterprise, and it endeavors to fulfill this goal by developing long-term partnerships with the most prominent international air carriers, diversifying product range, and introducing the innovative and unique offers. However, due to the close connections to various international markets, Etihad is exposed to numerous economic threats. To maintain its competitive advantages, the company may attempt to increase pricing flexibility. Additionally, it is possible to say that the success in expansion to the greater number of destinations will depend on the corporate capacity to keep up with the pace of technologic advancement. The use of the latest equipment and top-notch facilities, as well as the attraction of talents and development of the skillful workforce, are essential factors for Etihad Airways’ future success.
Reference List
Amann, E., & Cantwell, J. (2012) Innovative firms in emerging market countries. Oxford, Oxford University Press.
