PESTEL Analysis

PESTEL Analysis Political Force 

In the case of Emirates Airlines, however, Dubai is an unprotected market. Its open skies policy helped Emirates to become a carrier that can compete with the world’s largest airlines (Stanik et al, 2007). Emirates have grown in scale and stature not through protectionism but through competition competition with the ever-growing number of international carriers that take advantage of Dubai’s open-skies policy (Stanik et al, 2007). Emirates has enjoyed the benefits of global market shares from entering international destinations such as America, New Zealand and Australia due to recent agreements on full traffic rights from the two governments (Stanik et al, 2007). Aviation deregulation has boosted airlines to develop for open route entry, exit of air carriers, competitive fares, service frequency (Goetz and Sutton, 1997). Further liberalization in the industry is unstoppably increasing. Hence, the playfield competition becomes more intense.

Economic Force 

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Emirates grew and developed its business in The United Arab Emirates which has a strong economy (World Fact Book, 2009). The markets where it selected to operate in are also powerful economies of stable growth. Indisputably, stable economic growth is a spring board to success of an airline’s development due to increasing demand in air travel by high-income people for business and leisure. Emirates recorded an increase in passenger numbers of more than 15 per cent annually (Stanik, et al, 2007) Recent economic downturn has significant impact on the industry. Air travel demand has fallen dramatically. Several major airlines will cut domestic and international capacity further in 2009 due to a falloff of about 25 – 30% over the last quarter of 2008 (New York News, 2009). Bisignani (2009) argues that the state of the airline industry today is grim. Demand has deteriorated much more rapidly in the economic slowdown. IATA, which represents 230 airlines including British Airways, Cathay Pacific, Emirates and United Airlines, also raised its estimate of international airline losses in 2008 to $8.5 billion, from its previous $8 billion estimate, according to Bisignani (2009). The industry is in intensive care (Roy Morgan, 2009). The challenge is how to survive beyond the current crisis.

Social Culture Force 

Both domestic and international markets where Emirates operates have culture diversity. Dubai, Australia, Canada, U.S.A and U.K are multi-cultural countries. Benefits come from a variety of consumers’ trends in accordance to their values, attitudes, education, religion and lifestyles. As a fact, stable incomers make holidays annually. Another example shows, in U.S.A, three quarters of highincome people take an air trip each year (Hanlon, 1999). It is true in European countries where most people have a strong demand to travel on annual holidays. Emirates have advantages operating in destinations where the trend of air travel is socially enhanced.

Technology Force 

Emirates are fully aware of this principle in sustained investments in latest technology pursuing its differentiation in the 5-star standard airline. Emirates’ current order-book stands at 244 aircrafts of the newest Boeing and Airbus, with a total value of approximately US$60 billion. It is already the youngest and will be one of the most modern fleets in worldwide commercial aviation (Emirates, n.d.). It aims to be a pioneer in technological advances, Emirates signed in-flight mobile phone coverage agreement with Aero Mobile, developing the use of mobile phones onboard (M2

Communications Ltd., 2006). For many years, Emirates has been awarded numerous awards such as the world’s airline of technological advances, Best Global Airline Website, Best in-flight Entertainment, Best IT developer in in-flight entertainment etc. (Emirates, n.d). 5 Forces Analysis (Porter Analysis) Threat of new entrants: LOW A highly profitable market boosts increased level of competition (Hill, Jones, Galvin and Haidar, 2007). In this effort, new firms will enter to take some market shares away. The Asia Pacific region is an example of a dynamic market where inbound tourism enjoys increasing growth of 7.9% and outbound with 25% by 2010 (WTO, 2008). All airlines, operating in the region before the current financial crisis, were having high profits: Qantas’ profit after tax: $618 million in 2007 (Qantas report, 2007); Cathay Pacific of HK$7,023 million in 2007 (Cathay Pacific, 2007). Consequently, Emirates, together with other players, have thrived to exploit new regional markets for high profitability as demand is growing. Rivalry among established companies: MODERATE Emirates competes with Air France-KLM and Lufthansa, the two largest carriers in Europe; with Cathay Pacific in Asia Pacific region; and with United Airlines in the Americas (Hoovers, 2008). These wellestablished network carriers operate within the same destinations such as NZ, UK, Hong Kong and America. The competition is aggressive as the global industry is witnessing boosting growth of low-cost airlines (Hofmann, 2007). Bargaining power of buyers: MODERATE Competition between companies is intense. Emirates may face a threat now and in future when customers nowadays have an ability to make demands on their products, in term of lower prices, higher service or product quality. Therefore, Emirates is unlikely to exhibit high rates of turnover over time due to price reducing, and investing more in product innovation (Hill et al., 2007). Bargaining power of suppliers: HIGH Boeing and Airbus are the two dominant aircraft producers for the world’s airlines. Orders by all airlines for the latest aircrafts are placed to either of them. As a large buyer, Emirates still has to face the threat of paying higher prices or even delivery delays. Moreover, Emirates depends so much on these suppliers as required products are differentiated while the suppliers have high expertise. Substitute products: MODERATE Most airlines offer products of similar features: low price, good quality and excellent service. In the region, for example, other direct substitute products to Emirates are Qantas, Cathay Pacific, and Singapore Airlines. Therefore, Emirates will experience challenges when most players become competitive enough to launch new products globally. An example is Virgin Blue, which launched VAustralia for Trans-Pacific services in 2008 (Virgin Blue, n.d). Customers benefit from a wider choice for their products of cheaper price but higher quality

Competitive Profile Matrix (CPM)

CRITICAL SUCCESS FACTORS Price Competition Global Expansion Management Technology Service Lines Customer Loyalty Market Share Advertising Service Quality Service Image Financial Position

WEIGH T 0.12 0.08 0.08 0.10 0.12 0.08 0.08 0.06 0.10 0.10 0.08 1.00

EMIRATES RATING SCOR E 2 0.24 4 0.32 4 0.32 4 0.40 4 0.48 3 0.24 3 0.24 3 0.18 4 0.40 4 0.40 4 0.32 3.54

BRITISH RATING SCOR E 2 0.24 4 0.32 4 0.32 4 0.40 3 0.36 4 0.32 3 0.24 4 0.24 4 0.40 4 0.40 3 0.24 3.48

QATAR RATING SCORE 2 4 3 3 3 3 2 2 4 3 4

EXTERNAL FACTOR EVALUATION OPPORTUNITY China and India have an economic boom and Emirates Airlines benefits form the opportunity Dubai is a regional centre of trade and tourism in the Arab world Emirates is most important customers to Airbus market THREATS Competition from (Gulf Air , Qatar Airways, etc) Airline industry pays high salaries to pilots compared With Emirates Airlines Political situation in the Middle East will affect Emirates Airlines

Weight

Rating

Score

0.3

4

1.2

0.13

3

0.39

0.16

3

0.48

0.20 0.13

3 3

0.6 0.39

0.08

3

0.16

1.00

3.22

0.24 0.32 0.24 0.30 0.36 0.24 0.16 0.12 0.40 0.30 0.32 3.00