Emirates- Porter's 5

EMIRATES - PORTER’S FIVE FORCES Ankit Yadav Smba08037 (section G)

1. The threat of the entry of new competitors • • • • • •

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the existence of barriers to entry (patents, rights, etc.):- national carrier(hence enjoying many benefits) brand equity:- renowned player, markets heavily, old in industry, very high brand value switching costs or sunk costs:- not very high to switch to suppliers as very high supplier base( except aircraft providers) Capital requirements: - part of emirates group, so capital is not an issue. Access to distribution: - very accessible, has its own terminal & direct metro & busses. Customer loyalty to established brands: has a program like skywards & frequent flyer miles. absolute cost advantages: in terms of fuel & flight caterings Government policies: - very flexible due to national carriers & monarchy. The intensity of competitive rivalry

1. The intensity of competitive rivalry • •

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Number of competitors:- 37 airlines fly from & to Dubai Rate of industry growth: - Middle East showed the strongest growth at 11 percent in the last decade. exit barriers :- fuel & capital costs diversity of competitors: international flyers, domestic flyers & global flyers fixed cost allocation per value added:- additional cost for services like meal choices for 1’s class flyers level of advertising expense:- really high (up to 10% of total revenues for airlines like jazeera) Sustainable competitive advantage through improvisation:new services like onboard Spas, fully reclining seats, live TV.

1. The bargaining power of customers • • •

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Bargaining leverage: - between tickets of budget & luxury flights for same destination. Buyer volume: - no of people flying to a destination, (more passengers to India then Nepal). Buyer switching costs relative to firm switching costs: easier to switch between airlines as people might find competitive schemes & offers or cheaper tickets or better services with other service providers. Ability to backward integrate: - emirates has its own emirates flight kitchen, catering food to its flights. Availability of existing substitute products: - no. of flights to a particular destination, e.g. only emirates operates direct flights to San Francisco from Dubai, hence has competitive edge. As no other carrier has a direct flight on this route. Buyer price sensitivity: - difficult to compete with competitive prices of budget carriers, but emirates compensates it by offering world class food, services, comfort & in-flight entertainment. Differential advantage (uniqueness) of industry products: - A380 aircrafts, world class service, choices of menu for elite class, its own private terminal, non-stop direct flights to various routes some of them world’s longest non-stop direct flights.

1. The bargaining power of suppliers • •

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Supplier switching costs relative to firm switching costs: - very high (only 2 suppliers) Presence of substitute inputs: - a lot of substitutes are present for suppliers as there are over a hundred airlines currently operating & most of them are planning for expansions. Supplier concentration to firm concentration ratio: - very high (two suppliers) many airlines. Employee solidarity (e.g. labor unions):- UAE does not allow any employee unions so there are no such concerns.

1. The threat of substitute products •

Buyer propensity to substitute: - very high as there are two types of players in market, budget & luxury. This leads to a huge price

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difference. So a lot of people prefer going for cheaper tickets for short distance flights. Hence emirates looses business. Relative price performance of substitutes:- Huge price differences due to services offered, but in luxury segments Emirates leads the market. perceived level of product differentiation:- in case of emirates the perceived value is fairly good due to new aircrafts, courteous crew which provides personalized services, gourmet food with at least 4 meal choices for business class & above, its own world class new private terminal to fly from, fleet of new latest technology aircrafts.