Etihad Airways’ Business Environment and Strategy

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Table of Contents

Executive Summary
Introduction
Internal Factors
PESTEL Analysis: External Factors
Impacts on the Organization
Strategies: Internationalization
Conclusion and Recommendations
Reference List

Executive Summary

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.
Ecological	—-	Finance-intensive ecological initiatives; environmental restrictions.
Legal	Domestic low tax regime.	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.

Aydrose, A. (2012) A research study on: Etihad Airway’s Product Offerings, Key Success Factors, Critical Issues, Mission and Strategy. Web.

Bolboli, S. & Reiche, M. (2015) Introducing a concept for efficient design of EFQM excellence model. The TQM Journal. 27(4), 382-396.

Dudley, D. (2016) Etihad Airways to cut jobs, signalling further trouble for gulf airlines. Forbes. Web.

Etihad Airways. (2013) Berlin – Etihad Airways opens new European headquarters. Web.

Etihad Airways. (2016) Fast facts & figures: Feb 2016. Web.

Santonocito, P. (2013) Minimizing the impact of layoffs on your corporate culture. Web.

Sumers, B. (2016) How Turkish Air will recover after airport attacks and coup plot. Web.

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