Emirates Airlines PESTLE and SWOT Strategic Analysis

Introduction: Strategy and Emirates Airlines

A strategy is defined as a plan of action intended to accomplish a specific goal. Strategy encompasses attaining — or at least attempting to attain — a competitive advantage over rivals. According to Porter (1996), differentiation involves being different through the selection of a distinct mix of activities to deliver a product or service. Furthermore, a strategy is a decision that will make a significant difference to the long-term performance of an organization.

Emirates Airlines is one of the major airlines not only in the Middle East but also across the world, and its center of operations is situated in Dubai, within the United Arab Emirates. Emirates Airlines is owned by the Investment Corporation of Dubai, an entity of the government of Dubai. However, the airline's operations run on a commercial basis, and the business does not receive any financial support or domestic protection from the government. At present, Emirates Airline is the largest airline in the Middle East, providing air transportation services to more than 150 cities in over 80 nations and operating more than 3,600 flights every week. Notably, in addition to being ranked the largest airline in the Middle East, the airline is the fourth largest globally in terms of revenue and passenger traffic (Alshubaily, 2017).

The history of Emirates Airlines dates back to the 1980s, when the then-dominant regional carrier, Gulf Air, began cutting flights to Dubai. The government's response was the launch of Emirates Airlines in 1985. The initial capital for the start-up was $10 million for independent business operations, without any additional government subsidies. The organization thereafter embarked on a path of strategic operations to achieve growth and profitability. Since then, it has grown substantially to become one of the top airlines in the Middle East and the wider world (Alshubaily, 2017).

Strategy plays a pivotal role for Emirates Airlines. Strategies provide direction and action plans, encompassing the everyday decisions and actions undertaken within the organization. Strategy also aids in prioritizing and aligning activities — making choices, establishing priorities, allocating resources, and coordinating efforts to accomplish desired outcomes. Additionally, strategy helps delineate accountabilities and timelines for achieving agreed strategic initiatives. Strategy is also important for improving communication and commitment: by clarifying visions and accountabilities, it increases the alignment of all organizational activities and fosters dedication at all levels. Most importantly, strategy provides a framework for ongoing decision-making, serving as the reference point against which all decisions are measured (Tomlinson, Murdick, & Moor, 2000).

Macro Environment: PESTLE Analysis

The macro environment encompasses the key external and uncontrollable factors that impact an organization's decision-making, performance, and strategies. These factors include legal, economic, demographic, political, social, technological, and natural forces. The macro environment has a major impact on Emirates Airlines because key changes in it are more often than not outside the control of the business. It is therefore imperative for Emirates to anticipate the influence of these changes — on either the organization itself or on its market — before they materialize, so that adjustments to product offerings and processes can be made accordingly. Furthermore, it is necessary for Emirates management to remain cognizant of prospective changes in the macro environment, as failure to do so might cause the business to lose any competitive edge it holds and could threaten its very existence.

Political and Economic Factors

Political Factors

1. Brexit

Britain's decision to leave the European Union significantly impacted travel across Europe. The vote to leave the EU created economic disruption alongside political and economic volatility across European nations. This political instability led to declining demand, meaning fewer consumers chose to travel by air. Emirates Airlines was among those that had benefited greatly from EU arrangements regarding open airspace and the free movement of persons. Brexit triggered a lengthy period of renegotiation between governments to ensure that prevailing access to airspace was maintained (Reuters, 2016). The impact on Emirates was tangible: the airline reported a decline in annual profit as it added more seats than it could fill, while stiff competition simultaneously placed downward pressure on ticket prices (Fortune, 2017).

2. Trump's Travel Ban

Emirates announced that its expansion plans in the United States were placed on hold following an announcement that flights to five U.S. cities would be cut due to weakened demand. This was directly linked to travel restrictions imposed by the administration of President Donald Trump. The actions taken by the American government regarding the issuance of entry visas, enhanced security vetting, and restrictions on electronic devices in aircraft cabins had a significant direct influence on consumer interest and demand for air travel to the United States. This gave rise to weakened travel demand and consequently reduced ticket sales and revenues. Emirates was effectively forced to cut flights to the United States (Zhang, 2017).

3. Militant Attacks in Europe and Turkey

Militant attacks in Europe and Turkey significantly impacted Emirates Airlines' operations. According to Wills (2018), Europe experienced 205 terror attacks in the preceding year. The growth in jihadist terrorist attacks fueled fears of a perceived Islamization of society. The effect of these attacks was a decline in the number of individuals traveling to the Middle East owing to negative perceptions of the region, and consequently a decline in demand for air tickets.

It is recommended that Emirates Airlines work to advance its brand image in a positive manner, ensuring that consumers continue to choose the airline for transportation irrespective of negative perceptions of the Middle East.

Economic Factors

1. GDP

GDP in the United Arab Emirates was projected to reach 390.00 USD billion by the end of the 2018 financial year, according to Trading Economics global macro models and analysts' expectations. In the longer term, UAE GDP was estimated to trend toward 425.00 USD billion by 2020, according to econometric models. This presents a strong opportunity for Emirates Airlines, given the healthy economic environment. The company should therefore capitalize on these favorable conditions to advance its business operations.

2. Economic Development

The economy of the United Arab Emirates has historically been supported by the oil industry. In recent times, however, the government and private sector have made significant investments in other industries and sectors — such as trade and commerce — in an effort to position the UAE as an attractive business destination for the world. This has directly benefited Emirates Airlines, as increased travel to the UAE generates increased ticket purchases and revenue. It is recommended that Emirates capitalize on its brand image by associating it with Dubai's growth story to appeal to premium and business travelers (Malek, 2016).

3. Oil

The Middle East's economic status has long been bolstered by oil. However, in recent times, demand for oil has declined — largely owing to increased demand for and adoption of alternative energy sources. The key advantage for Emirates is that declining oil prices reduce its operational costs. The downside, however, is a corresponding decline in premium travel in Dubai (Malek, 2016).

The UAE economy is expected to grow and advance in the coming years. Emirates Airlines should capitalize on these favorable economic conditions to increase its fleet, strengthen its brand image, and grow its revenues.

Micro Environment: SWOT Analysis

The micro environment refers to the factors within an organization's immediate operational sphere that influence its performance and decision-making. These factors include consumers, competitors, employees, and suppliers. The micro environment is important for Emirates Airlines because all marketing plans, approaches, and objectives are executed through these constituents. It is the arena in which practical implementation of ideas takes place and where the responses of key stakeholders are most directly felt. Furthermore, it provides guidance for the future communication strategies of an organization (Craig & Campbell, 2012).

The SWOT analysis is a strategic tool that identifies the key strategic messages originating from within an organization and its business environment. It captures the organization's strategic competences — its distinctive mix of resources and capabilities — organized into four categories: strengths and weaknesses (internal) and opportunities and threats (external). The objective is to assess the extent to which existing strengths and weaknesses are relevant to and capable of managing changes in the business environment, and to evaluate the opportunities the organization should pursue and the threats from which it must defend itself (Zanoni, 2011).

Strengths refer to areas where a firm has a competitive edge over rivals. Weaknesses are areas where competitive disadvantages exist. Opportunities are features of the external environment that can help the firm achieve its strategic goals. Threats are external features that may hinder the organization from realizing its strategic objectives. Examining the internal environment reveals strengths and weaknesses; examining the external environment reveals opportunities and threats (Daft, 2003).