Advance

d Strategi
c
Management
Professo
Adria
Freire
r
no
2015
1st Trimeste
r 1420
/

Strategic Markets applied to

Emirates Case

a
n a Silv 152114036
Sar Hoga

Introduction
In this report we will cover the
following topics:
What are strategic markets and
which are the key indicators of an
attractive market;

Analyze Emirates global hub-andspoke strategy;

Why is Dubai considered a
strategic
market for airline industry;
The importance of BRIC countries
as
strategic markets.

Emirates
Airlines
Emirates is an airline based in Dubai,
UAE, and its foundation in 1984 was
related to a crisis in Dubai when Gulf Air
refused to increase flights from and
to
Dubai
unless the government
protected the carrier for its long-haul
services.
Soon Emirates started growing and
doubling its size every three years.
In
2014,
the airlines company is
considered the largest airline in the
Middle East, operating nearly
3400 flights per week to more than
142 cities in 78 countries across all
continents.

What are strategic markets?

The GE-Mckinsey Matrix is used

to determine where the best for
a company to invest its money.
Instead of focusing on the
projections of future prospects
of the business unit (BU), the
company can measure its
future performance according
to two factors: the industry
attractiveness
and
the
competitive strength of the
business
unit
within
that
industry. According to the
graph below:
1.
For BUs above the
diagonal, the company
can
apply strategies of
investment and growth;
2.
For the ones in the
diagonal,
they
are
candidates
for
selective investment;

Industry Attractiveness

A market is considered strategic when it can strongly influence, in a positive way, the
ability of a
company to achieve its goals.
In 2005, Emirates had the goal of becoming a global hub-and-spoke system with
passengers
travelling between cities with a stop at Dubai. Therefore, as we will show below, this
city is
considered a strategic market not only for Emirates but also to other airline companies.
3.
Howev
er, for
the
ones
below
the
diag
onal
,
the
com
pan
y
sho
uld
con
side
r
sell
or

Build
Selectively

Invest to Build

Expand or
Harvest

Selectivity/
Manage for
earnings

Divest

Manage for
Earnings

Po
sit
io
n

Protect
liquidate it.
In the case of airlines industry,
we
can apply this framework
by
analyzing country
attractiveness
and
aring
to the
comp
it
competitiv strengt of the
e
h
business.

Bui
ld
Selecti
vely

Protect
Position
and refocus

Competitive Strength of the Business

High
Moderate Low

A company can evaluate the attractiveness of a country by comparing it

with another nations regarding market, operational and risk factors. In the table
below, there are some key elements that can evaluate each of the factor. Bear in
mind that each factor can have different weight in the overall relative
attractiveness of the country.
After analyzing the attractiveness of the market, it is also necessary to
evaluate the competitive strength of the company. There are typical factors that
can affect the competitive strength such as: market share, market share growth,
customer loyalty, strength of assets, distribution, production capacity and
competencies, and relative brand strength.

Country
Attractiveness
Market

Factors

Operatio
nal

Risk Factors

Market Value
Market Growth
Rate
Pricing Trends
Opportunity
to
diferentiate

Factors
Minimum Local
Wage
Operating
Costs
Legal
Requirements

Exchange Risk
Political Risk
Industry Risk
Other

Emirates Global Strategy in 2005

Emirates has placed some big betson Dubai, the A380 and its global huband-spoke strategy and its ability to scale operations. And no one would
confuse the airline industry with an easy sector to make money

Hub-and-Spoke
Strategy

Why Dubai?

Nowadays, in 2014, Emirates

operates around
3400 flights per week, with a stop at
Dubai, to
more than 142 cities in 78 countries
across all
continents.

Advantages
Disadvantages
- Encourage
- Congestion
the
and
rapid growth
delay
at
in
hub
the
airports;
airline
- Airport
business;
dependency;
- Efficient use
- Discontinuous
of
use
transportation
of
resources;
airport
The success is Dubais location its
Europes
most easterly hub and Asias most
westerly hub
According to IATA, the UAE is the
most connected country in the world,
in no small part due to Dubais
thriving aviation sector.

Market Factors:
Decision
making
is
typically
collaborative and decisions
can be
taken quickly;
Open sky policy;
Strategic investments in topflight
aviation infrastructure;
Geocentric location.
Operational Factors:
Tax-free environment;
Economical
cost
structure
of
airports;
Competitive wages.
Risk factors:
Dependency on airlines
industry;
Negative image of MiddleEast.

holds even greater promise as we build our

infrastructure to support the impressive expansion of
Emirates, flydubai and other airlines and ascend the
ranks of global aviation hubs.
The past 50 years have
been
nothing
short
of
remarkable and the future

Paul Grifiths
CEO Dubai Airports

Due to Emirates global

hub-and-spoke strategy,
Dubai
International
Airport
constructed
a
new Terminal (adapted to
the new Airbus A380
fleet) that would be
exclusive for Emirates. It
was inaugurated in 2008
and it is considered the
largest terminal in the
world with capacity of 43
million passengers.

As we can see in Appendix 3, in 2010, just two

years after the opening of Terminal 3, the
annual number of passengers had increased
by 10 millions. Nowadays, Emirates handles
64% of all passenger traffic and 50% of all flights
at the airport. We can conclude that Emirates
was successful achieving its goal and that it will
be capable of continuing expanding their scale.
Compared with other main hub airports, Dubai
is the best one for growing as it still has a lot of
space to expand, besides all the attractive
factors mentioned before. Therefore, Dubai is
considered a strategic market for the global huband-spoke strategy of Emirates.

Other strategic markets for Emirates

BRIC countries (Brazil, Russia, India and
China) seem to be a potential strategic
market for Emirates as well, because
of their economic growth over the past
decade. However, according to the
graph on the right, there is low
propensity to travel by citizens from
these countries. Nevertheless, it is
important to mention that BRIC countries
represent approximately 40% of worlds
population, so this can be translated in
numerous flights for airline companies.
Nowadays, Emirates has flights from
Dubai to all these countries. In my
opinion, it is crucial to maintain
these destinations not only due to the
large population, growing middle class
and young population they have but
also because of the increasing demand
of these countries by tourists.

Strategic
Alliance

BRIC countries GDP per capita and propensity to travel

by air (2009)

In 2013, Emirates and Qantas airlines

decided to make a strategic alliance.
Qantas is the flag carrier airline of
Australia and has a 65% share of its
domestic market and carries 18,7% of
all passengers travelling in and out
Australia.
With this alliance, Qantas changed its
strategic hub in Singapore for Dubai,
which reduced flight times between
continents
(Australia
to
Europe).
Emirates benefited from this because
they
would
transport
Qantas
passengers from Dubai to their fnal
destination.

Bibliography
Internet
Enduring Ideas: The GEMcKinsey nine-box matrix:
http://www.mckinsey.com/insights/strategy/enduring_ideas_the_ge_and_mckinsey
_nine-box_matrix
Summary of GE Matrix:
http://www.valuebasedmanagement.net/methods_ge_mckinsey.html
Qantas-Emirates alliance to begin April 2013: http://www.ausbt.com.au/qantasemirates-alliance-to- begin-april-2013
Emirates, Qantas Friends For Life?: http://gulfbusiness.com/2013/11/emiratesqantas-friends-for- life/#.VCWZNfldWCo
How Dubai Became One Of The Most Important Aviation Hubs In The World:
http://www.forbes.com/sites/natalierobehmed/2014/06/04/how-dubai-becameone-of-the-most- important-aviation-hubs-in-the-world/
Brazil, Russia, India, China (BRIC): Emerging aviation markets performing
well in 2010: http://centreforaviation.com/analysis/brazil-russia-india-chinabric-emerging-aviation-markets- performing-well-in-2010-26497
Reports
Emirates Annual Report 2013/2014
Connecting the world today & tomorrow, Strategic Plan 2020, Dubai Airports

Appendix 1

Market Attractiveness

Build Selectively
Specialize
around
limited strengths
Seek ways to
overcome
weaknesses
Withdraw if
indications
of sustainable
growth
are lacking

Expand or
Harvest

Look for ways

to
expand without
high
risk;
otherwise
minimize
investments
and
rationalize
operations

Dives
t

Sell at time that

will
maximize cash
value
Cut fixed costs
and
avoid
investment
meanwhile

Invest to Build
Challenge
for
leadership
Build
selectively on
strengths
Reinforce
vulnerable
areas

Selectivity/Man
age for
earnings

Protect
existing program
Concentrate
investments
in segments
where proftability
is good & risks
are relatively low

Manage for
Earnings

Protect position
in
most
profitable
segments
Upgrade
product
line
Minimize
investment

Protect Position

Invest to grow at
max rate
possible
Concentrate
on
maintaining strength

Build Selectively

Invest
in
most
attractive
segments
Build up ability to
counter
competition
Emphasize proftability
by
increased
productivity

Protect Position
and refocus

Manage for
current earnings
Concentrate
on attractive
segments
Defend strengths

Competitive Strength of the Business

Source: www.mckinsey.com

Appendix 2
Opening of Terminal 3

Appendix 3