Strategic Management For Fly Dubai

Strategic Management For Fly DubaiThis paper explores the existing aviation ships company Fly Dubai in a manner that analyzes and evaluates their current operations and efforts in a manner relative to strategic management. Further to this, the paper suggests that Fly Dubai is so far comparatively young in the merchandise and requires a signifi e artistryh-closettly to a greater extent amount of experience before it plainlyt be label guide as rivalrous with different companies in the constancy- namely, Emirates Airlines, Etihad Airlines and Air Arabia, SAMA, NAS in Saudi Arabia.The front sever of the paper comprehensively analyzes the aviation industry at the present, and this serves purpose to gain knowledge about the competition and the market before a constructive and logical analysis can be made about Fly Dubai. Therefore, important factors such as the external environment, internal environment and Porters five dollar bill Forces are discussed.The insurgent part of the paper is directly relative to Fly Dubai as puff up as their chief competitors in the industry. Here, certain Generic strategies are analyzed and proposed to indefinitely help the company gain a competitive value. A nonher important framework we partd is the Product Growth Matrix, which analyzes the situation that they are facing, and we have proposed that they engage Market Development.Ultimately, the paper ends with a conclusion and recommendations, which we believe would scoop out, support Fly Dubai.Part 1- Industry AnalysisIntroductionThis paper is foc officed on develop Strategic Management for a major(ip) public aviation company and their refinement into the industry with a new strategy to excrete them a competitive advantage against their competition. Unlike a personal line of credit plan, a strategic management focuses on the two major factors that surround scheme of business development for the related to industry, and the company. Since the aggregate apprais e of a business is generating acceptable returns, this paper concentrates on the methods that they particularly went through in ramble to achieve it.Although strategic management is more(prenominal) and more important for the success of products, it is also important to establish that the industry is swiftly ascending with fresh ideas continually making a consumers life relatively easier and more pleasurable. A profit- base business is extensively labour-intensive, and to sell the service requires an excellent business development team and therefore, it is also inevitable to productively market your employees and their skills in order to gain more business.Therefore, in this paper, we will be studying the public aviation business ground in Dubai that only when concentrates on chartering passengers through the use of their menial speak to carriers. This company is known as Fly Dubai. Our Strategic Management analysis will conclude theories and frameworks parkly used in th e corpo authorized world today such as PEST Analysis, Competitor Analysis, SWOT Analysis, Porters Five Forces, Porters Generic Strategies and many a(prenominal) more. Ultimately, we will establish a number of results and based on it we will provide several recommendations and a conclusion.Industry TrendsThe Aviation industry in the UAE developed in 1985 when Emirates Airlines was founded after Gulf Air minify their flight work to Dubai. This is when Sheikh Ahmed bin Saeed Al Maktoum took action and started the company in order for citizens in the UAE to be able to travel more frequently. In October 1985, the company flew their first routes from two leased planers. Nowadays, many other air passages have emerged in the UAE to compete with Emirates including Etihad Airways, Air Arabia and Fly Dubai. (AFP, 2009).Not with standing the change magnitude success in commercial airlines appearing in the UAE, Fly Dubai differs largely due to the fact that it is a cost effective airline. According to Saif Mohammed Al Suwaidi, Director everyday of GCAA said Air operations in UAE so significant growth in the first quarter of 2010 (n/a, 2010). The Middle eastern United States Business Aviation railroad tie (MEBAA) has confirmed that the number of business jets in Middle East region have grown to about 500 aircraft in the past few eld showing a growth of approximately 30-40%. Further to this report, the Aviation industry is expected to grow at 15-20% annually over the contiguous four historic period to become a multi-billion dollar industry. It also assumes that from the year 2012-2018 the MENA region will receive 20-25% of the new business amounting to about 300 billion. (n/a, 2009).PEST AnalysisThe first general method, which is usually used in the analysis of the external environment, is through the PEST Analysis. It is change magnitudely important to understand the nature of external surroundings as they inevitably play a major role in effecting the compan ys operations. Fly Dubais PEST projections can be seen on the next page.FactorDescriptionImplications on the Aviation IndustryPoliticalLow government interventionSupports foreign direct investments which leads to political stabilityIn regards to locally owned companies, the government does non intervene and actually supports their operationsInvestments help change magnitude the countrys GDP which is favorable for the governmentEconomicInflation over the past few years has led to more costsStable interest rates and no taxesRise in GDP and disposable incomeGCC unemployment rate had decreased from 12.4% to 10.5% (McGinley, 2010)Inflation has led to postgraduate up labor and operating costs, but also shows the expansion in the UAEThis has led the business being able to borrow more without the fret of taxation and increased costThe countrys growth in GDP and disposable income mean that consumers have more gold to spend on Aviation workThis gives a cocksure sign to increase liquid ity in the market.Socio-culturalGrowing social trend in the Aviation industryYoung work forceLow cost assemblage (n/a, 2010).Increased number of tourismMore people are using chartered service which indicates an boilersuit industry growthA younger workforce will reduce costs for pensionsBecause of the recession, people have decreased their spending by allocating cheaper airlinesTourism will increase by 40% in next 3 years. (n/a, 2008)TechnologicalNew plane models available in the marketBetter operational engineering scienceOnline bookingThese models which companies have ordered make them more competitive as their service is more desirable by having modern technologyBusiness operations can run smoother as technology helps them reduce costs and improve eccentric of the serviceLCC dont focus on gross sales offices for humbleering their costs ,so they focus on their website and make it more economical for them and clinets.Strategic Group MapAs we can see from the graph above, the two measurements we have chosen for our strategic group map is product quality and terms. The graph above shows us that Emirates airlines and Ettihad airways have the biggest market contribution and they are competing against each other. As Emirates Airlines announced in their website, that they aim to increase their market share to 70% by 2010 without compromising their genius for quality. (Emirates, 2010). Although they dont start from the akin point, but Ettihad Airlines are trying their best to compete with Emirates by giving better twistings and prices to kindred destinations, so people got attracted and didnt mind the 45 minutes drive to Abu Dhabi for the same kind of quality and cheaper prices. Now these two companies are indirect competitors for Fly Dubai. The major competitor for Fly Dubai is Air Arabia, where they launched in Sharjah Int. Airport before Fly Dubai was established. So, people were aware of Air Arabia and tried the experience of flying on a low cost car rier. Thats their major competitor, and they have other competitors but from diametrical countries such as, Al jazeera airlines where they are based in Kuwait, and Fly Nas and Sama airlines where they are based in Kingdom of Saudi Arabia.Five Forces AnalysisMichael Porter, the man behind the theory of differentiation states that a business needs to spend more cash on creating these values added products or services in order to make it relatively obvious that the product or service is different. (Cordle, 2008).Michael Porter developed the Five Forces Analysis, which primarily helps companies in dealing with internal and external competition from customers and suppliers as well as from other competitors. It also establishes the risk of the current product or service offered. This is all interconnected into a diagram, which is illustrated downstairsThreat of new entrantsProduct differentiation Medium as the aviation industry has been quite modernistic on product development and ha s used all the ideas available- however they have also turn up to be strong competition and adapted similar features as well as their own unique features.Capital requirements mellowed as the technology used is perpetually changing, developing and evolution which would justify the need for high smashing technological assets and new aircraft modelsCost advantages independent of size last as costs in the main vary depending on how large the establishment is, how many staff members are employed, and the amount of customers that use the services or buy the productsAccess to distribution take High as the airline companies can let customers through different means such as the internet, travel agencies, sales calls and from their own officesAfter this analysis we can see that the threat of new entrants is low because the industry is hard to enter.Bargaining power of buyersConcentration of purchases High as the amount of purchases is decided by the buyer and ultimately determines sa les revenueAlternatives and allayers High as there are a large amount of carriers that consumers can choose from and all have access toPrice or cost sensitiveness High as consumers would generally select a business that offers a fair otherwise cheaper price for the same productsImportance of quality High as consumers have adapted to a certain taste and they constantly assess product quality and customer service to determine their buyAmount of money saved by consumer High e exceptionally during the financial crisis where savings and survival is has grown to be extremely important. (n/a, 2009).Here the bargaining power of buyers is high.Threat of substitute productsPrice limitations Medium as this affects the highest amount they are able to charge to consumers and ultimately demonstrates the amount of revenue they will makeAbility to upgrade High due to the rapid advancement of technology and the introduction to newer models of aircrafts from different companiesCosts in employment Medium as technology can enable cheaper production but they still employ a large amount of staff in the regionPrice of substitute High as this can negatively affect each companies sales growth if another company gains customers due to cheaper prices- this ultimately seems to benefit Fly Dubai more due to their cheaper pricesPerformance and quality Low as Low cost carriers are new companies that only started up a few years ago and their scope in the business is low. That is, they do not fly to many destinations and they do not have a wide customer base at the moment. It is high for companies such as Emirates as they have experience, and their high quality brand name and services is difficult to matchHere the threat of substitute products is Moderate.Bargaining power of suppliersLow cost carriers purchase their complete air fleet from suppliers such as Boeing and Airbus. They then hand this to third party companies to input entertainment systems and furnish the interior for the differ ent classes, which ultimately ca-ca value-added amenities by using this method.Here we can see that the bargaining power of suppliers is ModerateRivalry among competing firmsNumerous competitors High rivalry as each company is trying to capture the same intent market and therefore use their advertising, marketing and promotion techniquesIndustry growth High-the market has shown that this industry has grown significantly over the years and more people are gaining access to travellingDifferentiation Medium as there is only a limit to the innovation that can be done on an airplane. However, Low cost carriers have incorporated many other components on their plane such as entertainment, shopping and many more.Amount of fixed costs This can be determined by factors such as rent, wages and capital expenditure. From this, we can say that it is high.Height of exit barriers Low for Low cost carriers as they control a relatively small market share, but it is high for Emirates and Etihad who have a vast number of customers which they cater to.Here we can see that the Rivalry among competing firms is Moderate/high.In conclusion, we see after analyzing the five forces, we can say that the market is moderate to high, which is hard to get in because of the difficulties, high starting cost and the experience needed to enter to airline industry.Core Competencies/ underlying Success FactorsA core competency is defined as a companys basic business and area of greatest expertise that provides consumer benefits, not easy for competitors to replicate and can be leveraged widely too many products and markets. (Campbell Luchs, 1997) Essentially, a core competency should accomplish three thingsConcrete on the popular destinations to set forthed their market.importantly improve the following attributes.Availability / Scheduling concluding / Ground helpingsPriceReputationProve to be challenging for competitors to imitate their cost leading strategy.Based on this, airlines would h ave three major competencies to gain a competitive advantage over each other in the region.The first core competency that low cost carriers will have is related to their prices, which is significantly cheaper compared to other airlines in the region. To accomplish this, they will need to identify and analyze their operations and costs thoroughly to see where they can minimize their costs so that their low fares will not disrupt their ability to generate profit. This will give them a competitive advantage, as customers would prefer low cost airlines, and retain their loyalty to the brand.The second core competency they will offering additional services to customers. Generally, people associate a low-cost airline with no service- but Low cost carriers will differentiate them here and offer a special service by adding additional costs for the service.The last core competency will be the vast variety of destinations they travel to. Although the companies are still relatively small now- they will eventually expand and fly to a large number of countries in the different regions which will attract more people to use their service for less cheaper price from the other airlines.Industry Environmental ScanExternal Opportunities and ThreatsOpportunitiesLack of price competition in the UAE market Since most of the airline carriers are relatively high in costs compared to others in the world, local air carriers do not engage as actively in price competition. Fly Dubai however has started with this.Potential to attract clients from the entire region Since the other airline companies in the GCC do not often fly internationally to popular destinations, the local air carriers in the UAE can attract them as they do fly to these areas.Expansion into international markets Due to their value added services and state of the art planes, they appeal more to customers and therefore if airline companies in the UAE situate themselves more internationally, they can gain more customers.Co ntract to corporations and executives The airline companies can further increase the amount of frequent flyers and gain more revenue by targeting companies that are situated around the GCC. In particular, multinational companies are ones that have executives that need to constantly travel, and therefore they can take advantage of this situation.ThreatsIncreasing costs in the aviation industry Due to the increase in technology and the value added services they provide, costs have become increasingly expensive for the aviation industry. Furthermore, the costs of labor are also quite high which adds to their total expenses.Shortage of proficient labor In some areas, the aviation companies here lack skilled labor to perform certain tasks such as aircraft engineering and maintenance, marketing and other activities. Emirates is the only company who has skilled employees in these departments whereas others are not as efficient.Damaging impacts on the environment The emission of carbon and greenhouse gases from the aircraft fuel has proven to be detrimental to the environment and therefore companies need to be aware of this and somehow prevent it.Falling prices In certain industries such as real estate, prices have fallen drastically, and this leaves corporations with less money to spend on services. As a result, companies have cut back their traveling costs.Competitors increasing Due to the increasing amount of free zones in the UAE, multinational companies have found it convenient to start their developments in the region as it is low in cost. As a result, there is an increase in competition from other airlines internationally.Industry Internal ScanInternal Strengths and WeaknessesStrengthsSupport and patronage from government The UAE government owns and controls all of their airlines and therefore they all gain financial support.Diversified and state of the art planes The planes, which they own, are newer and significantly better than many other airline companies around the world.Popular and growing companies The aviation industry consists of the few original companies offering flights and since their services are relatively good, this improves their brand image to the population.Value added services provided to all customers The service incorporated in the UAE airline companies are significantly better than others around the worldMemberships They all have memberships in prominent establishments such as Middle East Business Aviation Association which improves their trustworthinessWeaknessesBased mostly in UAE which limits their intake of customers from abroad and around the region Most of the aircraft companies focus solely on chartering customers in the UAE which limits the potential business they could be makingHigh employee turnover due to low morale Labor laws are constantly being amend in the UAE, as it is still a developing country. Further to this, they require more experience human resources staff in order to motivate employees to taste their job and stay at the company as well as performing highlyBusiness opportunities such as onus transporting are not always taken advantage of and are expensive The UAE is a business hub and many companies around the world are establishing themselves. However, most of these companies have restrictions so they cannot advance many products and local companies only produce products for the UAE- the rest is imported. This greatly increases the amount of costs as exported goods are expensive, and they do not partake in export their own products, which could potentially earn them more revenue.Part 2- Company schema AnalysisMission relationA mission statement may be identified as the purpose behind a companys existence. The aim is to create an internal image towards employees and an external image towards the public indicating their intentions of operating the business, as well as what they wish to accomplish. Fly Dubai does not have a mission statement on their websites, but from the words of the chairman (Sheikh Ahmed bin Saeed Al Maktoum), he mentioned the followingOur mission is to bring some two billion regional inhabitants affordable, efficient and flexible travel options to and from Dubai.Nine Essential Components of a Mission StatementCustomersServicesMarketsTechnologyConcern for Survival, Growth and ProfitabilityPhilosophySelf-ConceptConcern for Public ImageConcern for EmployeesJudging by the various essential components of a mission statement, it is clear that Fly Dubai still needs to work on developing theirs more. (FARNBOROUGH, 2008).Fly Dubai Generic StrategyEssentially, a company that excels in the industry with exceptional performance that yield significantly larger profits than their rivals, they are said to possess a competitive advantage. There are two common strategies that allow a company to reach this goal, and this can be identified asCost StrategyNiche Differentiation Strategy (CAPA, 2009).Cost StrategyIn order for a company such as Fly Dubai to implement a Cost Strategy, they need to be able to deliver the same benefits as competing airlines, but should operate under a lower cost. In the research studies on Strategic Management, the resource-based view is a well-established principal that helps a business gain competitive advantage by working on their Value Chain and implementing value-added principals. In the next section, I will describe Fly Dubais value chain, which will allow us to see how they gain a competitive advantage.The Value ChainThe value chain comprises of a number of activities that are commonly found in business operations, and is identified as important in gaining a competitive advantage and developing and sustaining shareholder value. The diagram below best represents the value chain and the significant inputs that are analyzedPrimary ActivitiesInbound Logistics This refers to how Fly Dubai receives their aviation products and services before distributing it.Operations This refers to how F ly Dubai uses their resources and change it into a service. Their resources are primarily their fleet of planes, which are docked at several international terminals, and in this method they pick up and drop off passengers.Outbound Logistics This refers to the channels of distribution Fly Dubai uses to effectively sell their flights to customers. They mostly use online booking, travel agencies, and contact customers directly, or customers can contact them via their office.Marketing and Sales This refers to the identification of target markets, which bring Fly Dubai sales revenue. Fly Dubai carries out extensive market research to reach their customers who are interested in low fairs. Also, they have to create brand awareness among their customers since they just launched. This step is important to expand their market share. Also, through out their marketing research, they can develop new attractive packages as part of their promotions. It will be difficult to develop large marketing campaign because most of their money will be as operational expenses. Moreover, sales are more cost effective when they make it through Internet. However, consumers in Middle East region are not used to buy from Internet.Service This refers to the post-purchase activities that ensure customer satisfaction. Fly Dubai issues a questionnaire, which they can follow up with customers on the quality of their products and customer service. Also, they added additional services to their customers such choosing seats when buying tickets. Those extra services will add more value to Fly Dubai image. In addition, those services will generate a good publicity for the company through word of mouth.Support ActivitiesFirm infra organise Fly Dubais firm infrastructure ensures that certain policies and procedures are followed to support the primary activities. Fly Dubai operates from Dubai International Airport, Terminal 2. Dubai Government developed high infrastructure for Dubai Airport to provide ex cellent services to passengers. Since Fly Dubai fully owned by Dubai Government, they have all the necessary facilities under their control.Human resource management Fly Dubai uses extensive human resources practices to recruit the best employees, and effectively trains them, develops them in certain company positions and finally gives them earnings for their hard work through salaries, benefits, bonuses and motivation. However, lack of experience is major issue in this new company. So, they supported by Emirates Group to overcome this weakness. According to Arabian Business that Fly Dubai has received more than 11,500 applications from flight and cabin crew. (Sambidge, 2009). This shows the huge amount of applicants who want to work with this company because they believe that it has bright future because of the reputation gained from its mother company Emirates Group.Technology development Fly Dubai uses technology to lower their cost by selling tickets through their website www.F lyDubai.com. Adding more features to help customers to print their embarkation pass and to choose their seat location by extra fees. Analyzing customer surveys to help with the general support of the company. Their technology is also developed to monitor sales and create functional reports.Differentiation StrategyThe differentiation strategy is when a company can successfully thrive in the market while charging bountifulness prices to their consumers for products or services. Essentially, leveraging either a better standard of service quality towards consumers, or having a better product performance does this. Fly Dubai can be differentiated from other competitors by adding flights to popular destinations that have great demand from their target market. Since their market is fragmented, differentiation is important to attract more customers and to expand their market share.There are several different ways in which Fly Dubai gain a competitive advantage in this way. It is renowned that they offer a great airline service along with the most state-of-the-art amenities and technology for all classes, and people gather such information when a company expresses their differentiation. The company does this in a number of ways, and this includesBrand AwarenessFly Dubai can use extensive advertising techniques in order to cut across the aviation market and create a higher demand for their services. Firstly, it is important to note that Dubai is one of the fastest growing tourist destinations in the world. Their rapid expansion in major industries has led them to dominate the tourism market.Business OperationsAnother method, which Fly Dubai can use to gain a competitive advantage through differentiation, is by offering cargo services, freight and logistics, engineering services, and plenty of other subsidiaries which associate these services with the company. Therefore, this reflects positively on the brand name.Service character referenceFly Dubai has won recogniti on for their high service quality. They spend extensive amounts of their budget on the development of human resources, which ultimately leads to a better service quality, and this improves customer satisfaction.Value Added FeaturesFly Dubai has a number of value added features, which basically offers them more for the money they spend when flying with them. Firstly, they have a service staff, which is guaranteed to gratify every customer they serve. These features contribute to customer satisfaction and improve loyalty in the long run.Marketing MixOne of the prime theories of analysis for a business includes analyzing the market in several terms that would help them identify ways in which they can improve, but more importantly creates a structure in which a company can base their product lines on. This is known as the marketing mix or the 4 Ps as it generally covers the following four factors- products, price, promotion and place.Product The product entails analyzing the services t hat Fly Dubai currently offers to their customers and how it meets their demands. They are a public aviation charter service that go a target market of consumers to a number of countries.Price The type of services that Fly Dubai offers generally have a high cost delimitation as they are using modern technology along with the most knowledgeable staff to carry out their operations. Therefore, we can establish that Fly Dubai uses a cost-plus pricing approach where they charge the cost of the operation plus a mark-up for their services.Promotion Currently, Fly Dubai uses many major forms of promotion, and they generally rely on loyal customers and repeat business to make their profits. They consider various forms of advertising through media sources such as television, radio, newspaper, magazines, cinemas, and Internet.Place Their operations are run from their primary location, which is in Dubai, UAE. Although they are currently quite profitable and the industry has witnessed a large amount of growth, they have room for expansion in the UAE and other GCC countries as a start. Dubai is quickly being recognized as a business hub and Fly Dubai can exploit that market to be competitive and increase their overall profitability.Competitor AnalysisWhen developing a Strategic Marketing strategy, it is always important to identify the main competitors and find out information about their services and how much of a threat they are to your company in the market. The most efficient way to do this is to compare their marketing mix with Fly Dubai, which is seen belowEmirates Airlines (Indirect)Etihad Airlines (indirect)Air Arabia (direct)ProductThey offer a range of flights to various different destinations and have a luxurious brand to speak of. They also have cargo transportation that is widely used by corporations.This company offers similar services to Emirates but they do not focus on luxury and are hold to flights. Etihad has cargo services but the division is relative ly smallThey offer similar services to Fly Dubai in terms that it is cheaper- but they are still more expensive. Furthermore, Fly Dubai has better planes.PriceEmirates has the most expensive prices in the region but they justify it due to the high value services that are offeredThey offer slightly lower prices than Emirates but their aircraft fleet is very limited and their services are less desirableTheir prices are comparable to Fly Dubai, but their services are not as goodPromotionEmirates advertises extensively and has many marketing promotions which is seen throughout the mediaThey