Introduction

The major differences between the organizations that are successful

and those that are not is the degree of the effectiveness of their
strategies. Any organization hoping to succeed in the market must
ensure that its strategies conform to the prevailing conditions in the
environment which could have negative impacts on its operations.
Even after the strategies have been formulated, they must still be
monitored and improved as future environmental fluctuations could
affect them. As a relatively new company in the air industry, Etihad
Airways has recorded significant growth due to its well formulated
and implemented strategies. This paper aims at analyzing the
strategies at Etihad Airways as well as their levels of effectiveness
in terms of the prevailing conditions, market competition, and social
responsibility and ethics.

Etihad Airways

Etihad Airways, the Abu Dhabi national carrier, was founded in 2003
and has grown to be among the leading airlines in the world. So
massive are its operations that on a weekly basis it operates 1000
flights across 44 different countries from its hub at Abu Dhabi
International Airport. Its headquarters are located at Khalifa City in
Abu Dhabi with plans underway to set up an ultra modern facility as
its new headquarters. The company’s workforce is composed of
8,000 employees that also include crews and pilots.

The company has diversified its investments owning several other

investments. Etihad Crystal Cargo is one of them and has been
dedicated to strictly handle cargo. It is also an aggressive sponsor
of sports clubs and events around the globe which are all in efforts
to increase the brand awareness level among the consumers. Some
of the key sponsorships include the Abu Dhabi Grand Prix and
Harlequins Rugby Club in London.

Despite having not attained the break even point, Jim Hogan, who is
also the current CEO projects that this would be realized in 2011
should the current level of operations be maintained. In 2010 alone,
the company transported 7.1 million passengers up from a mere
340,000 in its first year of operation. This shows how the company
is fast making impacts in the global market and has so far received
30 awards with the most notable among them being the 2009
World’s Leading Airline Award.

Abu Dhabi is among one of the fastest grow cities in the world
implying that there was a need to create an airline capable of
complementing the developments that are being undertaken. Etihad
has been formulated with the world class status in mind as it would
provide transport to and fro the city that has recently been
experiencing high number of traffic.

Implementing and Executing Etihad airways Strategy

Every company desiring to attain success in the market should be

able to formulate strategies capable of guiding the accomplishment
of goals and missions. Etihad is well aware of this and has
formulated a number of strategies that are discussed below. They
are all based on the Porter segmentation strategy that the company
has chosen to utilize in mainly targeting the prestigious market
segment.

There is the product strategy where the company has differentiated

its service into three; Diamond class, Business class, and Coral
economy class in the order of most expensive to the least
expensive. These categories are sensitive to the financial
capabilities of their passengers and strive to provide the best at
every class. The other type of differentiation is in the form recipient
of the service. The company has two division that each either
transport goods or passengers mainly. It has recognized the
inconveniences that are caused in combining the two and has
therefore opted to undertake their transportations separately.

The price strategy that has been adopted is aimed at penetrating

the market and increasing its market share. The company has a
comparatively lower price strategy to those of competing operators
and is capable of attracting more customers to complement its
efforts in recording high growth and breaking even. This however
should not be misinterpreted that the company is a low cost carrier.
It still is a premium airline only that it has discounted the prices to
attract more consumers that prefer the seasoned operators. The
reason behind such a move could be that the discount could attract
much more customers that could possibly offset the price reduction
therefore higher revenues.
The place strategy deals with how Etihad handles the ticketing.
There are official outlets from where the customers can get their
tickets and can be found in major traveling hubs around the globe.
Etihad also relies on its sales force to provide consumers in regions
that are not served with the above ticket outlets. Furthermore the
company has also initiated online bookings through its company
website and any consumer with access to internet can utilize the
service.

As a service industry, the quality of service is what differentiates

between the successful organizations from the rest. Etihad
understands this and has therefore hired only the highly qualified
and motivated employees to increase the chances of providing
superior services to the consumers. Employees are the most
important resources in an organization and only the highly qualified
should be allowed into the organization as they influence its success
by their individual contributions. The extent to which the company
goes to acquire employees is manifested by its decision to hire the
former CEO of Gulf Air, James Hogan, as its leader.

Finally there is the promotional strategy which is relied upon by

market challengers such as Etihad. Such organizations aim at
acquiring market shares in their targeted segments at the expense
of the leaders. Etihad is an aggressive marketer and has spent
sizeable portions of its resources in increasing the visibility of its
brand. Adverts, sales promotions, direct marketing, and event
sponsorships are main forms of promotion that the company
employs in marketing its services in the market. As a relatively new
company in the air industry the strategy best complements its
efforts to attain high growth rates. Consumers, especially those of
premium services, insist on the operators they are used and by the
company increasing its market presence it is on its way to the
consumers’ memory that could influence their purchase decisions.

These are the strategies that have been relied upon by the company
in efforts to attain higher market shares. They are well suited to the
prevailing conditions and all that is needed is their continuous
development. With this in place, the company would have little to
worry about concerning the threats from experienced operators.

Strategy evaluation
Finalizing the strategy implementing process does not mark an end
to the undertaking of organization functions; rather, it sets the
stage for the other processes. After the strategies have been
implemented, it is of utmost importance that they are followed upon
so as to monitor the level of progress and to take any necessary
corrective measures. Without this the strategies are as ineffective
as the market fluctuations that will follow afterwards that have the
effect of altering the assumptions that were relied on in the
formulation of strategies.

Before the appraisal of strategies, organizations need to develop

performance standards that will act as the gauges in measuring
actual results. Comparisons have to be made between the standards
and the actual results to determine either the degree of consistency
or deviation. Etihad has done so and the following are the
performance standards.

First and most important the company hopes to break even by the
end of 2011. The costs have also been targeted for reduction by
roughly 10% of their current levels. Plans are also underway to
increase the returns in the market and hopefully from the luxurious
segments of diamond and business classes. As a luxurious airline,
Etihad aims at maintaining this perception among its targeted
consumers and will stop at nothing in protecting this value. All the
initiatives it undertakes will all be targeted at maintaining this
brand perception in the market.

To evaluate performance in the organization, a number of tools are

needed. First, performance appraisals need to be conducted
continuously and after specific intervals say six months for Etihad
case. Most preferably, a balanced score card could well aid in
evaluating all the divisions in the organization so that effective
measures are taken. The information from the appraisals can be
used to determine the effectiveness of the strategies being
implemented and whether the implementation is on schedule. The
managers also have to provide feedback especially in the case of
employees so that they can correct where they might be failing in.
In some other cases, retraining courses might be needed to increase
the effectiveness of employees.

Comparison between Etihad Airways and Air Arabia

Whereas Etihad relies on market segmentation to conduct
operations, Air Arabia prefers cost leadership better. The former has
identified the prestigious market segment which it has specialized
in while the latter aims at attaining high numbers of consumers
possible in order to enjoy the benefits of large scale economies.

In terms of price, the two rely on low strategies. But this should not
be confused for the same absolute values as those of Etihad that
has premium prices with discounts while Air Arabia absolute low
costs. The discounted premium price does not augur well with the
company’s quest to build a prestigious brand. Most of the
passengers who prefer such airlines associate high prices with
quality and would therefore misinterpret the discounts as a
compromise on the quality which they seek at all costs. On the other
hand the recently concluded global recession acts in favor of the
move as its effects are still being witnessed, consumers are still
cash strapped. This could turn out to be the strong point in the
strategy in that it attracts the consumers who normally fly first and
business classes but are unable to do so due to low financial
resources.

Etihad offers customer experience as the main service by providing

additional benefits on flights. Air Arabia on the other hand offers
transportation as the major service; it does not issue goodies while
on air and seems only to be concerned with ferrying customers.
They are both aimed at attaining market shares considering they
are new airlines both incorporated in 2003. The strategies well suits
their current positions. The other strategies for the two firms are
more or less similar paying attention to the people and promotion
strategies.

In terms of Etihad strategies, they seem to make assumptions that

the market will always be favorable as little has been done to
reduced costs. The events leading to the last global recession and
financial crisis proved beyond doubt that business organization
need to be on the look out so that they are not caught unawares like
was the case last time. A majority of the airlines had to reduce the
number of flights while reducing the costs in those that they still
maintained. It would be advisable that the company considers
changing tact to incorporate aspects of the low cost strategy that
has been implemented at Air Arabia. This however does not imply
letting go of the prestigious brand they have built all this time.
What they need to do is to have a low cost division within the
company. Like they have dedicated one section of the company to
the transportation of goods market they should also do so for the
low cost strategy. Should this pose challenges in marketing one
brand as having both low cost and premium prices then they should
simply re-brand the low cost section to avoid diluting the premium
brand. With such a move they would be shielded from negative
economic effects that might result in future which could threaten
the existence of a non diversified firm.

Ethics and Social Responsibility at Etihad Airways

Organizations are finding it necessary to act as responsible

members in the societies in which they operate. This is stark
contrast to the past situation where they were only concerned with
making profits with little efforts channeled towards bettering the
societies. With the massive environmental destructions that have
been witnessed since the beginning industrialization, it has become
necessary for business to take charge of the problems they cause to
avert possible serious consequences in future. This would guarantee
the future survival of not only the society but also the individual
companies. The corporate world has therefore been actively
embracing the concept and Etihad has not been left behind. The
company’s strategies are not only in line with the ethical values of
United Arab Emirates but also with those recognized globally.

Ethics demand that organization only undertake activities that are

acceptable socially according to the standards that are in place. It
would therefore be irresponsible for any organization to undertake
ventures that only support the welfare of a few individuals in the
society and worse still affect other negatively. Etihad is as good a
model of an ethical company as it is responsible.

Corporate social responsibility involves all the stakeholders that are

present in a company. They include both those in the inside as well
as the outside environment and are as follows; the employees,
consumers, shareholders, suppliers, debtors, creditors, government,
competitor, and the society in general. Etihad bears responsibility to
all these stakeholders and has been successful in fulfilling them.
It is important that organizations provide quality services to
consumers and Etihad has undoubtedly fulfilled this obligation. The
2009 World’s Leading Airline Award that it received manifests this
as other industry insiders agreed that indeed the company met the
needs of the consumers. In addition to this, it also provides
comfortable flights to the delight of passengers that continue
choosing the airline as their most preferred carrier. It is no wonder
that its passenger traffic has risen from roughly three hundred
thousand to seven million in a period less than a decade.

The employees are also the other stakeholders present in Etihad

internal environment. Employees are the most important resources
in an organization and special attention should therefore be
channeled towards them. Their welfares are well tended to by the
organization as there are various initiatives aimed at making their
stay at the company enjoyable and fulfilling. With the appropriate
trainings and high-standard work environment provided to ensure
they perform their duties effectively, the company has dutifully
attended to the needs of its employees.

To the society, the company has fulfilled its obligations by providing

services that increase its general welfare. Social responsibility
demands that the welfare of the society overrides those of
individuals and should never be compromised in any case. Etihad
has embraced the green concept that has recently gained popularity
in the corporate world. As an organization located in Abu Dhabi, it
has done all to comply with the city’s initiative in reducing the
levels of carbon emissions in agreeing to sign the Masdar Initiative
that emphasizes economic use of energy resources. The levels of
pollution have reached intoxicating levels and it is upon the
organizations to act before it is too late. By opting to tackle the
effects of pollution head on, the company has fulfilled its obligation
to the society by ensuring any source of harm is removed without
any delay.

Furthermore, the company is an aggressive supporter and sponsor

of community initiatives and sports issues that boost the
psychological health of the society.

To the government, the company has met its obligations by

complying with the regulations governing air travel. It is no wonder
that through its brief history it has not experienced any accidents
and misfortunes which is all attributed to its heeding safety
standards. It also pays taxes to the government as is required of
any business organization.

Conclusion

The company seems to have done a good job in the formulation and
implementation of its strategies. This is evidenced by the high
success that it has recorded in the market in less than a decade.
Some of the operators in the industry have been in the market much
longer but still cannot be compared to Etihad that is hoping to break
even in less than a decade. Despite the effectiveness of its
strategies, a lot still needs to be done in ensuring that the high
growth rate is maintained and it is only through continuous
strategies improvement that this can be guaranteed.

In terms of Etihad strategies, they seem to make assumptions that

the market will always be favorable as little has been done to
reduced costs. The events leading to the last global recession and
financial crisis proved beyond doubt that business organization
need to be on the look out so that they are not caught unawares like
was the case last time. A majority of the airlines had to reduce the
number of flights while reducing the costs in those that they still
maintained. It would be advisable that the company considers
changing tact to incorporate aspects of the low cost strategy that
has been implemented at Air Arabia. This however does not imply
letting go of the prestigious brand they have built all this time.
What they need to do is to have a low cost division within the
company. Like they have dedicated one section of the company to
the transportation of goods market they should also do so for the
low cost strategy. Should this pose challenges in marketing one
brand as having both low cost and premium prices then they should
simply re-brand the low cost section to avoid diluting the premium
brand. With such a move they would be shielded from negative
economic effects that might result in future which could threaten
the existence of a non diversified firm.