Strategic Management: Air Arabia Company

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Executive Summary

There are many ways of how a company may become more successful and recognizable in a particular market. It is crucial to pay much attention to strategic management, as a “set of managerial decisions and actions that determines the long-run performance of a corporation” (Wheelen and Hunger 5).

Therefore, a properly organized strategic case analysis organized by a sophisticated management consultant is an easy and effective way to define strong and weak sides of a company, evaluate possible threats and opportunities, consider political, economic, social, technological, and environmental issues, identify potential problems, and offer a good portion of the recommendations. The current paper introduces the example of the strategic analysis of a company from the United Arab Emirates, Air Arabia.

Description of the Organization

Air Arabia is an Arabic low-cost airline company established by Sultan bin Mohamed Al-Qasimi in 2003, with its headquarter in Sharjah, United Arab Emirates (Air Arabia: Press Dossier 4). Nowadays, about 2,500 people work at Air Arabia. The board is usually chosen for a period of three years.

Since 2003, Sheikh Abdullah Bin Mohammad Al Thani performs the function of the company’s chairman of the board. There are also several members, who perform significant functions in Air Arabia. They are Adel Abdullah Ali (the chief executive officer), Arif Naqvi (the non-executive director), and several independent members such as Ghanem Mohammed Al Hajri, Sheikh Mohammed Bin Abdullah Al Thani, Ali Al Midfa, etc. (Air Arabia Annual Report 3).

Adel is actually a person with a rich experience in strategic aviation, marketing, and tourism; he knows exactly what kind of work has to be developed within a company and what qualities of the employees are outstanding (Air Arabia: Press Dossier 10). Each employee has particular benefits for the company, therefore, they have a good stimulus to work better and maintain the rating of one of the most popular low-cost airline company in the region with assets of about $ (Arab Emirate) 10 billion.

Opportunities and Threats

The natural environment plays a crucial role in Air Arabia. In general, the transportation market depends considerably on climate change and weather conditions because many people decide whether to travel or not regarding temperature or even the possibility of rain during a flight.

Therefore, weather conditions turn out to be a significant threat to the company as it may lose a number of customers within a short period of time. At the same time, good weather conditions promote an opportunity for the company to find more potential customers.

The societal environment (PESTEL analysis) focuses on the combination of social, cultural, political, economic, technological, and legal factors, the evaluation of which help to comprehend the opportunities and threats of the company (Wheelen and Hunger 101). Air Arabia does not have a too long history, but it has already introduced itself as a powerful and profitable business with an ability to recognize the main factors that may predetermine the success in future.

The following PESTEL diagram will show how the combination of different factors helps to improve business and understand what kind of implementations are necessary for the company of a low-cost level that aim at providing services for people with various cultural backgrounds, financial incomes, and who live in different parts of the world.

PESTEL diagram

All these factors prove that it is not an easy task to remain stable. Still, Air Arabia demonstrates good results in achieving its main purposes and continues offering low-cost services for the Arabians and for the tourists. For example, the political instability that is still inherent in a number of Arabic countries put the development of airline companies under threat.

The presence of serious conflicts with some European countries becomes a serious obstacle for Air Arabia. It becomes difficult to develop international relations and introduce itself as a safe and appropriate organization with a qualified team and good services.

Due to a considerably fast spread of the tourism industry within the UAE, it is a very risky still effective idea to offer not too high prices for flights regarding the quality of services provided. This is what makes Air Arabia noticeable in the transportation market.

As it is seen from the diagram below, jet fuel prices are not stable; they have been increased from year to year, and Air Arabia makes everything possible not to change the prices for their services.

Jet fuel prices

Internal Analysis

Corporate structure

Air Arabia is a constantly developing company with its main focus on producing one type of services only. There are 44 aircrafts in service, and about 10 are ordered. Within a short period of time, the company has spread its services in several countries.

Nowadays, there three subsidiaries of the company: Air Arabia Egypt, Air Arabia Morocco, and Air Arabia Jordan: 5 Egyptian cities and 20 cities of Morocco use the services of the organization (Air Arabia Annual Report 1). The only disadvantage of its structure is an absence of unity on a personal level.

As a rule, powerful companies remind families according to their structure and relations. Air Arabia looks like a collection of independent departments that are able to produce high-quality services under the leadership of its director.

Corporate culture

The attention to culture and traditions is one of the main tasks Air Arabia sets. The UAE is the country with a powerful cultural background and the abilities to spread their interests through the whole world. This is why the concept of corporate culture for Air Arabia is powerful indeed.

All employees as well as its directors follow certain traditions, demonstrate the respect to the traditions of other cultures, still, never put their traditions at the first place and never neglect their rules. In other words, Air Arabia is one of the companies that tries to find out a kind of cultural consensus demonstrating a passionate loyalty to their traditions.

SWOT analysis

SWOT analysis promotes the identification of such issues like strengths, weaknesses, opportunities, and threats of the company (Wheelen and Hunger 176). Air Arabia is a perfect example of how to analyze its weak aspects and turn them into their strengths.

Being a significant part of the transportation market, Air Arabia demonstrates good results. For example, its paid-up capital is about AED 4,666,700,000 (GulfBase para. 2). Though there are not many working aircrafts in the company, its services are in demands due to the low-cost strategy chosen by its leaders.

The analysis shows that Air Arabia makes use of the economic growth of the country, a demographic mix inherent to the UAE, air travel demand, and tourist desire not to spend much money on traveling.

The following chart introduces the results of the SWOT analysis made upon the company underlying its strong and weak aspects as well as its threats and opportunities.

Results of the SWOT analysis

Task Environment

This type of framework will help to analyze the level of Air Arabia’s readiness for competitions that take place in the transportation industry. With the help of this analysis, it is seen whether the company is ready to create a solid competition with other companies within the same industry and what may become a serious challenge.

Level of Air Arabia’s readiness

First, the entry of new companies in the same market is a serious threat to many organizations. In case of Air Arabia, the level of this threat is medium because of several facts:

Air Arabia may be also considered as a new company as its services and strategies are quite new for the sphere of aviation,
the company has a low-cost system that makes it noticeable among the other companies, and
the transportation industry is characterized by a very high barrier to entry.

This is why there is some threat of new entrants for Air Arabia, and the company should not neglect this possibility. Still, its already established position and low prices can hardly be surpassed by other new entrants within a short period of time.

Second, in spite of the fact that the airline industry is characterized by a high level of substitute services and products, a threat of substitutes is considered to be low for Air Arabia due to the location of the country and people’s choices of traveling to the UAE. Cars or trains may become successful alternatives for aircrafts.

However, such cheap and reliable services like those offered by Air Arabia can hardly be substituted soon. In addition, the UAE train industry, as well as car usage, is not highly developed due to the hot climate of the country. This is why it is evident that people can choose cheap but comfortable flights instead of dry travels by cars.

Third, the power of customers in the airline industry of the UAE is strong indeed. The Middle East is a region, where people are eager to wait but obtain their cheap services of high quality. Air Arabia is one of the companies that has already gained a successful brand and reputation. The only thing that Air Arabia should do is to remain the services at the same level and offer the same quality of services or even try to improve it regarding the current technological progress.

The next part of the analysis is the identification of the level of suppliers’ power within the company. It is expected to be high because Air Arabia depends a lot on the products and services delivered by different companies. The suppliers of Air Arabia have a possibility to influence its profits by changing the prices or the quality of the materials offered.

Air Arabia does not find it necessary to change the prices on their tickets because their cheapness is one of the most attractive for customers’ things. This is why, in case suppliers change and improve their conditions, Air Arabia has to change its own working conditions without changing the prices on services offered. This power is considered to be a serious threat to Air Arabia because it is wrong for suppliers to be more powerful than the company is.

In general, Air Arabia demonstrates a high level of rivalry among the existing organizations in the sphere of transportation. In fact, the competition between companies in this sphere is high indeed, and Air Arabia has all chances to take leading positions in the ratings of the Middle East and North Africa.

A low-cost price strategy is a winning decision that should not be changed. This is why Air Arabia has to think about the development of good business relations with suppliers to decrease the level of dependency.

Competitive Advantage

Competitive advantage is a combination of such concepts like company’s efficiency, quality, innovation, and customer responsiveness. It is usually organized on the results of the “Five-Forces” analysis and explains how successful the company works today. Efficiency is explained by the level of customer demand for Air Arabia services.

As a rule, customers are eager to choose Air Arabia among the rest airline companies due to its intentions to follow the European standards and set appropriate prices. It is proved by the profits of $425 million demonstrated by the company in 2013 (Air Arabia Annual Report 4). Even now, Air Arabia continues to be recognized as a high-quality service company on a local and international level.

Though the company does not make use of some innovative methods or technologies, its attention to the details that can make travel more comfortable remains to be crucial for its success. Finally, Air Arabia takes care of its customers and follows their responsiveness as well. Online services available for customers make it possible to choose and pay for Air Arabia’s services from any part of the world, where they are working.

Distinctive Competencies

With the help of a resource-based organizational analysis, the identification of distinctive competencies is possible. A distinctive competency is any high-level core competency of the company by means of which the company becomes noticeable (Wheelen and Hunger 138). The most famous and working distinctive competency of Air Arabia is its low-cost nature.

The company also becomes an example of how management development should take place. Properly organized business relations between the employees of the company and a certain identification of their rights and possibilities make Air Arabia able to compete with other organizations of the same industry.

Differentiation Strategy

A differentiation strategy is the company’s ability to create and offer unique products/services to customers and underline a number of features that are worth attention (Wheelen and Hunger 185). In other words, the presence of a differentiation strategy provides the company with a chance to be noticed and chosen by a variety of customers and makes the company competitive in a particular market.

Air Arabia’s differentiation strategy is cost-focused. During the last three years, this organization proves its ability to offer people low-cost services of a good quality. What the company offers is the possibility to “Pay Less. Fly More.” (Air Arabia: Press Dossier 3).

Strategic Alliances

An ability to arrange a strategic alliance is a proof that a company has already done something to be recognized as a powerful business body in the field and used as a solid strategic partner in order to achieve the required goals. For example, the current strategic alliance of Air Arabia is the agreement with Shurooq (the Sharjah Investment and Development Authority) to “promote Sharjah’s world-famous business projects and brands across the globe” (“Shurooq and Air Arabia” para. 1).

It is very important for the emirate to develop its social and economic relations, and its government truly believes that the cooperation with Air Arabia is a good way to continue its development.

Global Perspectives

The stakeholder analysis helps to realize that Air Arabia is the company that can easily go global in case the demands and expectations of all stakeholders are taken into consideration. For example, the primary stakeholders are those, who have a direct connection with Air Arabia. As a rule, they are buyers (who want to be sure in quality of services, safety of flights, and abilities to save their money) and employees (who want to be sure of their rights and abilities to be developed in regards to their professional qualities).

The secondary stakeholders are all those alliances and companies Air Arabia makes agreements with. As a rule, this type of stakeholders does not influence the economic responsibilities of the company, still it helps to improve the global perspective of Air Arabia.

Main and Potential Problems

Taking into consideration all those facts about Air Arabia that have been identified during the analysis, it is possible to underline its main and potential problems. For example, the evident low-cost focused business strategy does not hide the absence of an actual value of a company.

This is why it is very important for Air Arabia to think about some better services, fast innovations, and the usage of advanced technologies in order to prove that Air Arabia is not only an ability for people to save their money. The company should be introduced as a chance to enjoy a flight, get qualified services, and learn about the opportunities available for its customers.

The evaluation of customers’ reviews shows that there are many shortages the correction of which may considerably improve people’s opinions about the company. For example, many people underline that they, as airplane passengers, want to be provided with food during a flight. Another insignificant problem that may become a potential one is the absence of any entertainment.

Of course, people, who choose Air Arabia as the cheapest option for them to get the necessary destination point, usually expect a minimum of additional services. Still, it can be a pleasant surprise for Air Arabia’s customers to get more than they expect. In fact, the main problem of the company is its inability to improve their services.

Many customers’ reviews sound the same – the quality corresponds with the price set by Air Arabia. However, to become really the best representative of its kind on a global level, Air Arabia employees should think how to make its consumers to write the following – “the quality of services is higher than I expected” or “I really enjoy the flight and cannot even imagine that such services can be offered for such a low price”.

The potential problems may be considered on a global level as the company is not able to introduce itself as a constantly reliable airline service company. Due to a number of technical problems during the flights, not many customers want to choose the company without any doubts. This is why it is also necessary for Air Arabia to re-evaluate its agreements with suppliers and start focusing on a high quality of services for its customers.

Recommendations

Regarding the evident problems and shortages of Air Arabia, it is possible to recommend the company to focus on the diversity and quality of services offered to passengers. The company may try a new quality-based strategy with a few efforts to be spent. It is not necessary to begin the strategy with a number of financial demands.

The corrections can be made slowly in regards to the customers’ responses. For example, it is possible to re-organize the work of an onboard team and make the work more customer-centered. Air Arabia should focus on the passengers’ satisfaction and consider their human needs during flights.

Even if it is not provided for passengers to be fed during the flight, the company may offer pay food services instead. And these should be diverse ideas for people to be sure they can have a choice and the ability to consider their needs. This is why the main recommendation is based on the improvement of the quality of services and should result in customers’ 100%-satisfaction.

Another recommendation that can be given for Air Arabia is the attention to employees’ level of professionalism. The company should provide its workers with an ability to develop their skills and learn more about the differentiation of services offered. When a person knows how to satisfy a customer spending few efforts, it does not cost too much for a company.

This is why Air Arabia may also improve its services and get a chance to be properly recognized on a global level focusing on one of its primary stakeholders, its employees, and their professional skills. In general, Air Arabia has a number of opportunities to become better and impress its customers.

Air traveling should not be too expensive, and this company has already shown how it is possible. Of course, it is wrong for customers to expect too much from a company of a low-cost level. However, it is never too late for Air Arabia to use its brand, available advanced technological resources, and innovations and implement changes in regards to customers’ needs and expectations.

Works Cited

About Us. n.d. Airarbia. Web.

Air Arabia Annual Report 2013. 2013. Airarabia. Web.

Air Arabia: Press Dossier. 2010. Airarabia. Web.

GulfBase. Air Arabia Co. 2015. Web.

“Shurooq and Air Arabia Sign MoU to Promote Sharjah Globally.” WAM: Emirates News Agency. 2015. Web.

Wheelen, Thomas, L., and David Hunger. Strategic Management and Business Policy Globalization, Innovation and Sustainability. Upper Saddle River, NJ: Pearson Education, 2012. Print.

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