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EMIRATES - PORTER’S FIVE

FORCES
Ankit Yadav
Smba08037 (section G)

1. The threat of the entry of new competitors


• 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


• 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
• 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


• 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
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.