An Assignment on Business Strategic process

ETIHAD AIRWAYS

By: Ms.Balghaiss Mossa Ramouk

Business Strategy

A long-term approach to implementing a firm's business plans to achieve its business objectives
the prime aim of a business strategy is to provide superior value, differentiation, and core
competencies for an organization. The paper provides an insight into the mission, goals, and
objectives of business strategy. It also looks at the 'hierarchy of strategy' and also explores the
inter-relationship between the relative market and business policies.

Forming a successful business strategy involves creating a first-rate competitive strategy.

Businesses must develop a plan that addresses ways to compete in their respective markets.
The first step in accomplishing this is to identify the competition. 

Focusing on Etihad Air ways in air line industry they have to complete a large no of different
companies and to come up with new and new innovation to compete and survive in the
market. If we go through the strategies process, certain steps are involved as follows.

Etihad Airways has the world’s best First Class product and service. The confirmation of the
news came today, Thursday May 20, at the announcement in Hamburg of the results of the
latest Skytrax survey of 200 airlines across the world. The Abu Dhabi-based airline won three
titles for its First Class at the Skytrax World Airline Awards, following a poll of almost 18 million
global air travelers, from more than 100 countries.

Let’s have a loon on business strategic process in context of Etihad Air Ways.

Business Strategic process

This process is most applicable to strategic management at the business unit level of the
organization. For large corporations, strategy at the corporate level is more concerned with
managing a portfolio of businesses. For example, corporate level strategy involves decisions
about which business units to grow, resource allocation among the business units, taking
advantage of synergies among the business units, and mergers and acquisitions. In the process
outlined here, "company" or "firm" will be used to denote a single-business firm or a single
business unit of a diversified firm.Following is the steps for business strategy formulation

Mission

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V

Objectives

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V

Situation Analysis

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V

Strategy Formulation

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V

Implementation

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Control

Mission & Vision

A company's mission is its reason for being. The mission often is expressed in the form of a
mission statement, which conveys a sense of purpose to employees and projects a company
image to customers. In the strategy formulation process, the mission statement sets the mood
of where the company should go.
Etihad Air ways Mission

It is our mission and our pleasure to ensure that our guests enjoy their stay here. That’s why
we’ve created this quick guide. 

Etihad Crystal Cargo is changing the way you see the world.
 
Our vision is to become the leading and most profitable Middle East airline offering consistently
high standards of air cargo services through our excellent customer service, connectivity,
transparency, and technology.

Business Objective

Objectives are concrete goals that the organization seeks to reach, for example, an earnings
growth target. The objectives should be challenging but achievable. They also should be
measurable so that the company can monitor its progress and make corrections as needed.

“Our mission is to maximize cargo profitability for Etihad Airways by implementing effective
business processes for optimum yield, maximum load-factors, and minimum transit times,
immediate and seamless information to the shipping community, customer service and reduced
administration”

Situation Analysis

Once the firm has specified its objectives, it begins with its current situation to devise a
strategic plan to reach those objectives. Changes in the external environment often present
new opportunities and new ways to reach the objectives. An environmental scan is performed
to identify the available opportunities. The firm also must know its own capabilities and
limitations in order to select the opportunities that it can pursue with a higher probability of
success. The situation analysis therefore involves an analysis of both the external and internal
environment.

The external environment has two aspects: the macro-environment that affects all firms and a
micro-environment that affects only the firms in a particular industry. The macro-
environmental analysis includes political, economic, social, and technological factors and
sometimes is referred to as a PEST analysis.

An important aspect of the micro-environmental analysis is the industry in which the firm
operates or is considering operating. Michael Porter devised a five forces framework that is
useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers,
substitute products, and rivalry among competing firms.

The internal analysis considers the situation within the firm itself, such as:

 Company culture
 Company image

 Organizational structure

 Key staff

 Access to natural resources

 Position on the experience curve

 Operational efficiency

 Operational capacity

 Brand awareness

 Market share
  Financial resources

 Exclusive contracts

 Patents and trade secrets

A situation analysis can generate a large amount of information, much of which is not
particularly relevant to strategy formulation. To make the information more manageable, it
sometimes is useful to categorize the internal factors of the firm as strengths and weaknesses,
and the external environmental factors as opportunities and threats. Such an analysis often is
referred to as a SWOT analysis.

SWOT Analysis “ETIHAD AIR WAYS”

Etihad Airways has announced plans to increase its passenger numbers by 15% in 2009-2010 to
a total of seven million. The airline will expand its global flight network to 55 destinations
during the year as well as grow its fleet to more than 50 aircraft. A total of 900 weekly Etihad
flights will operate this summer, a 20% rise on the 750 weekly flights which operated during the
same season in 2008.Eleven new passenger aircraft are set to join Etihad’s fleet in 2009 which
will enable it to launch new services to Melbourne, Istanbul, Athens, Larnaca and Chicago, as
well as increase frequencies on many existing routes across its network of international
destinations.

Strengths

 Member of the Arab alliance, known as Arab Air Carriers Organization promoting cooperation,
safety standards among Arab airlines (Arab Air).
 First airline in Arab World that offers online booking service.
 Offering long-haul flights, like from US to Dubai.

 Offering self check-in service for customers at Dubai airport (Emirates expands).
  At Dubai Air Show 2005, Emirates made an aircraft order of 45 Airbus by 2012 making it
the world’s largest purchaser of Airbus’s super-jumbo.

 Providing employees with training, rewards and performance programs, thus reducing
labor costs and increasing employees' loyalty (People).

 An official sponsor of 2006 Fifa World Cup, which will increase its brand awareness.

 It has its own Frequent Flyer Program known as Skywards Miles that shared with
Srilankan Airways.

 It has recently chosen Dexterra Mobile Platform to enable front-office mobile solutions
that will enhance customer service interaction (Unisys).

 It offers training service to other airlines in Middle East which increase its profit.

 Weaknesses
 High Operation costs due to huge investment on buying aircrafts and implementing new
technologies.
 Known of its high prices of tickets comparing to other airlines.
 Not a member of any global alliances (UAE).

 It doesn’t have a hub in Abu Dhabi airport (capital of the UAE).

 Young airline that was established in 1985

  Opportunities 
    The income per capita is growing in UAE.
    Lots of investments will be made by the government of UAE for developing main
airports in Dubai and Abu Dhabi.  

    There is an overall growth in the population of the world and in UAE.

    World Travel & Tourism Council forecasts that there will be an annual growth in the
number of UAE tourists.
     There is an expected growth in internet users’ worldwide and in UAE.

 Aviation events such as Dubai Air Show promotes for Middle East airlines among other
participates worldwide airlines and show the growing of aviation industry in Middle East
( Walid).

  Threats  
 It is located in politically instable region and the terrorism activities have been increased
in Middle East recently.
 Increase of aviation security costs and insurance which increase the operational costs of
airlines.

 The increase of the fuel prices which rise the operational costs.

 The airline industry might face losses of around $ 3 billion if the oil prices did not
reduce. (IATA)

 New entrants and the raise of low cost airlines.

 The e-ticking system can be abuse by the hackers or it might be crashed by viruses, this
will damage the company database and will cost a lot of money.

 Passengers can be a threat to the company, as they have a strong power in the airline
industry.

 The natural crises such as the earthquake and hurricane. As mentioned by Al-Arabia
channel, Dubai is threatened by an earthquake (2005).  This will affect the tourism in
this region, which will reflected in the Emirates airline

 There is a possibility of rapid spread of new acute diseases such as SARS and Bird Flue
that affect tourism and airlines.

Summary of Internal Environment

 As external environments, companies should identify its internal factors, namely strengths,
weaknesses, opportunities and threats. Recognizing that enables companies to improve,
overcome weaknesses, handle opportunities as advantages and avoid threats. Emirates Airlines
has many strengths, like differentiating from other airlines, as it responses to new technology,
such as e-ticketing and self check-in services. An obvious weakness is the high prices of
Emirates due to its huge investments in ordering aircrafts. Although it has opportunities (near
investments in AD airport and increase of UAE income per capita in UAE.), many threats are
concerning it, such as increase of oil prices, low cost airlines and the spread of killer diseases.

Following section provides Emirates with the best solution in order to be competitive.  

 Major achievements
• the largest ever commercial aviation start-up aircraft order, announced in 2004, for 29 Airbus and
  Boeing aircraft.
• More than 17 million Guests carried.
• One of the youngest and most environmentally-friendly aircraft fleets, with an average age of three
years.
• A record-breaking order in July 2008 for up to 205 aircraft at the Farnborough International Airshow,
including
  firm orders for 100 aircraft.
• A record-breaking order in May 2009 for up to 469 engines at the Paris Air Show, including firm orders
for 239 engines.
• Sponsorship of the Ferrari Formula 1 team, Manchester City and Chelsea Football Clubs, Harlequins
Rugby   Football Club, the Etihad Stadium in Melbourne and the Formula One Etihad Airways Abu Dhabi
Grand Prix.
• More than 40 global awards for service and innovation including Best Business Class at the 2009
Skytrax
Porter’s 5 Forces
 Threat of New Entrants

The new entrants cause a threat to the existing company in any industry, because they might
offer better services, products or costs. In the airline industry the threat is low as the level of
entry barriers is high. There are many challenges that should be considered by the new entrants
as follows:

Capital Requirements. 

Huge budget is required for starting a new airline company to buy aircrafts and provide services
Brand name & Customer loyalty: 

to customers. Ex. Boeing costs around $ 2 billion. (Ashraf, Emirates Airline)

Airlines companies have built an excellent position in the market which helps them to compete
against the threats of new entrants. The experience curve of the existing companies is high
according to their long experiences in the market, Ex. American Airlines. Generally, alliances
between key airlines companies make the entry on the industry hard for any new airline

company.  

 Bargaining Power of Suppliers

 Suppliers can affect the industry through their abilities to raise prices or reduce the quality of
purchased goods and services. The airline industry has few suppliers globally, namely Boeing
and Airbus. Thus the power of the suppliers is high, because those limited suppliers have a
control on the market due to the huge demand of their manufactured products.

 Bargaining Power of Buyers

Buyers affect the industry through their abilities to reduce prices, bargain for higher quality or
more services. The power of the buyers in this industry is strong as there are lots of passengers
(1.8 billion yearly), the switching costs are low and passengers have many choices in the market

(ITAT).  The new technology of e-ticketing gives people the chance and flexibility to search for
many airlines companies offering better or cheaper costs and services. Furthermore, it eases
the operation of switching between different airlines companies. Therefore, many companies

provide the air miles system to gain customers’ attention and to keep them as well.  

 Threat of a Substitute Products or Services

 The threat of substitutes differs from the regional and international airlines. In the regional
airlines it can be higher as people can drive their cars or use trains as a way to travel within the
same region, but on the international level people use airplanes to move faster and more
comfortable. In the Europe they are using trains to travel from country to another for example,
it’s easy to travel by train from the UK to France by “Eurostar train” in just 1 hour 40 minutes

(London to France). However, in many countries trains are not available ex UAE, accordingly
such carries have a weak threaten in the airlines industry since they are not used for long

distance journeys by many countries.  

 Rivalry among existing firms

 In airlines industry, the rivalry is very high between the companies, as there is variety of airline
companies that provides best aircrafts and services to passengers. For instance, many
companies try to expand their market shares by offering best prices, best customer services and
exclusive promotions as well as by being creative in their advertising campaigns. (Ex: Air Arabia

is low cost airline). 

 (Thompson & Strickland, 1995)

Key Competitors

 British Airways
 British Airways is ranked # 2 in Europe and one of the biggest in the world. They have 300
planes and 216 destinations in 94 countries. The key success factors of British Airways are: it’s a
member of the largest alliance and it is known of its technology projects in offering unique

services, such as touch screens service and being the first in implementing full flat beds.  

 Qatar Airways
 Qatar Airways was established in 1994. It has 44 fleets linking 69 international destinations. Its
services and events, gives the company special position amongst its competitors.  The success
of Qatar Airways comes from its aggressive growth plan that includes the construction and
development of the new Doha international airport, which will include the world’s largest
aircrafts' hangers to be used for maintenance of Qatar Airways. Additionally, by 2009 Qatar
Airways plans to get 36 aircrafts from Airbus, including two A380, for Qatar Airways. (Airline

website, Amino) 

Singapore Airlines

 Singapore Airlines is one of the most respected travel brands founded in 1947. It has a fleet of
90 aircrafts and it flies to more than 60 cities in 30 countries. Many factors cause Singapore
Airlines success, such as young and efficient fleets, educated staff, top ranked travel gateway
and its low cost airlines known as “Tiger Airways”, plus it’s a member of star alliance airline

networks. (Singapore Airlines Company Information) 

American Airlines

 American Airlines was founded in 1930 and is positioned as the largest airline in the world in
terms of the total passengers transported of 80 million yearly. It has the highest number of
aircrafts that reach up to 991 and serve 172 cities with five main hubs. Also it is first to launch
the loyalty program “frequent flyers”. All of theses are considered as the key success of this
airline. (American Airlines)

Key Success Factors

 To maintain airlines companies’ success, various key factors should be implemented for this
purpose:   

Differentiation

 Airline companies tend to differentiate by providing advanced services. For example, providing
the aircraft with the latest technology, such as wide seats, e-ticketing (as mentioned in 5
porters section) will attract customers and distinguish the company among other companies.

(ex: British Airways).  

Strong brand name
 Obtaining a strong brand name plus building a base of loyal customers are the carriers'
companies most concern. It guarantees that customers will stick with the strong brand name
company and ignore any attractive offers from other competitors. Some airline companies
utilize some techniques to have a retain customers, such as offering a flyer mile to win a free

ticket if the points were completed. (ex: American Airline)  

Alliances

 Airline industry is moving toward establishing alliances between companies. This will let
companies to share resources via linking their networks to build a wide base of customers,
develop services and increase number of routes. Additionally, it results in sharing experience
and decreasing the operation costs. Ex. British Airways is a member of largest airline alliance

known as “One world”.  

Relations with supplier

Airline companies must build a strong relation with suppliers by setting long-term contracts
with them. Such relations will benefit the airlines companies, because this will keep them in the
safe side even if there was any change in the pricing strategy (ex. increasing costs) in the future

as there is a contract between them.  

Strategy Formulation

Once a clear picture of the firm and its environment is in hand, specific strategic alternatives
can be developed. While different firms have different alternatives depending on their
situation, there also exist generic strategies that can be applied across a wide range of firms.
Michael Porter identified cost leadership, differentiation, and focus as three generic strategies
that may be considered when defining strategic alternatives. Porter advised against
implementing a combination of these strategies for a given product; rather, he argued that only
one of the generic strategy alternatives should be pursued.

Implementation

The strategy likely will be expressed in high-level conceptual terms and priorities. For effective
implementation, it needs to be translated into more detailed policies that can be understood at
the functional level of the organization. The expression of the strategy in terms of functional
policies also serves to highlight any practical issues that might not have been visible at a higher
level. The strategy should be translated into specific policies for functional areas such as:

 Marketing
 Research and development

 Procurement

 Production

 Human resources

 Information systems

In addition to developing functional policies, the implementation phase involves identifying the
required resources and putting into place the necessary organizational changes

Control
Once implemented, the results of the strategy need to be measured and evaluated, with
changes made as required to keep the plan on track. Control systems should be developed and
implemented to facilitate this monitoring. Standards of performance are set, the actual
performance measured, and appropriate action taken to ensure success.

Dynamic and Continuous Process

The strategic management process is dynamic and continuous. A change in one component can
necessitate a change in the entire strategy. As such, the process must be repeated frequently in
order to adapt the strategy to environmental changes. Throughout the process the firm may
need to cycle back to a previous stage and make adjustments.

Conclusion

To achieve success, Etihad Air ways should look at capitalizing on its strengths, such as an
effective marketing strategy. By using their strengths, they should also be able to strategize
against the threats that are inherent in the market. The following strategies represent starting
points in which Etihad Air ways can optimize their opportunities as well as increased revenue.
The elimination of meals during flights is a sensible choice because their plan is to operate
“short-haul” domestic flights. By only operating short flights, it will save money in the end.
Although Etihad Air ways believe that their comparatively low-cost structure will enable them
to continue their existing successful strategies, expanding the network would provide them
with opportunities to further enhance the experience in innovative ways and stimulate
increased demand for air

Travel from existing and new customers. Additionally, by continuing to add flights to the most
demanded and popular routes, Etihad Air ways Airlines is allowing for convenience and setting
itself apart from other low-fare carriers. Moreover, by focusing on customer demand and the
lack of “decent” fare options, Etihad Air ways could over-take the market as it relates to short-
haul flights.

While Etihad Air ways Airlines marketing efforts target both business and leisure travelers, they
have developed a number of unique and innovative programs designed to stimulate demand
for travel, create customer loyalty, and highlight their unique product attributes. Another
major opportunity for Etihad Air ways to drastically increase income could be to decrease their
operating cost per available seat mile (ASM).

In addition to the aforementioned opportunities, Etihad Air ways Airlines will utilize the new
technology, a state-of-the-art reservations system, which will contribute to cost savings. By
using new technology, reservationalist at Etihad Air wayswill completes transactions faster.
This in turn, will reduce training cost. Furthermore, by Etihad Air ways Airlines leasing new MD-
80 series aircrafts for their fleece, it will not only reduce cost as it relates to maintenance, but
will also avoid additional government regulations.