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Etihad Airways

Introduction to the Study

Operation management best practices have become more mature, and process used on the research has shown significant changes. Changes have been experienced from paying attention to the value of the services and goods that are produced by a company to those practices that allow understanding of the effectiveness and conditions of the processes used. The focus on the process management carefully manages the processes that result in distributions and production of the company’s goods and services. An analysis of the operation control of Etihad Airways will be conducted.

Background of the company

Etihad Airways is the second largest airline and one of the two major flag carriers of the United Arab Emirates. The Report (2009) indicates that Etihad airline started its operations in November, 2003. Its primary aim of operation was passenger transportation; in addition it also operates Etihad cargo and Etihad Holidays. Etihad Airways Partners launched in 2015 was established by airline alliance of its own..

Industry that the company operates

The United Arab Emirates carriers are mostly recognized for their cutting edge developments and innovativeness while maintaining an outstanding safety record. Apart from their network and their fleet expansions, the carriers still continue to match to improvements with significant development in their business strategy, and also partnering with major airlines through code sharing and acquisition of stakes. The technological position of the carrier is one of the best. Its main base of operation is Abu Dhabi International Airport. It is the 3rd largest airline business in the Middle East and the second biggest airline in the United Arab Emirates. The main competitors are the Fly Dubai airlines, Emirates, and the Air Arabia.

Strategy of the company

Business Strategy

Business strategy is the primary and most important strategy for the three types of approach. A business strategy refers to the ways through which a company sets out objectives to attain the desired output. It is the long-term planning of a company (The report, 2009). It can also be attributed to the process through which an organization specifies its objectives, mission, development of policies, vision and the allocation of resources to put into practice the plans and policies, programs and projects. It is fundamentally concerned with how an organization approaches the marketplace that is how to win and play. With play aspect, the company needs to find out the customer segment they want to target, the geographical location that they will cover and the type of goods and services to be produced for the market (Yu, 2002). In questions relating to winning, the airline should find out how they will position themselves in order to win the competitors and have a competitive advantage over them, the type of differentiation strategies to put in place to distinguish it from other airline operators and also the approaches they will use to develop new and more markets. Business plans are majorly developed by top airline managers. Clarification of the strategy is mostly done by the business architects; they produce a tighter alignment from those many options. They also ensure that the strategy is communicated to all sections of the airline. Airline executives tend to bring more experienced and advanced business architecture practices while coming up with strategy to provide models, tools, and facilitation that will enable a proper strategy development.

Operational Strategy

The other type of strategy is an operational strategy. It is mainly concerned with effectively and efficiently translating the business strategy into an actionable and cohesive implementation plan. Questions answered by the operational strategy include; the type of technologies that will be used to the airline company, the capabilities that need the expansion if there are enough skilled labor and the processes that need improvements. Most of the business architects work in this operational strategy domain, as they get up to the company strategy area to seek direction. They bring cohesiveness and clarity to the company’s operating model by working from the middle, they typically run vertically along a single unit while solving the business issues (Gross, 2013). Most of the experienced business architects work in multiple vertical to develop common business architectural plans. Strategies at the corporate levels are viewing the organization as a system of interrelated parts. Each section of an airline depends on other parts to produce the desired outcomes and assets in the corporation missions and visions.

Transformational Strategy

The transformational strategy is the third type strategy applied by airlines. It represents the entire transformation of an organization or business. It is much more comprehensive than the business strategy as it requires a highly and radical disruptive changes in process, people, and technology. The number of airlines using this strategy is limited. Strategy relating to transformations is the domain of people resources, consultants and organizational developments (O’Connell, 2011). These impacts are very complex and may experience significance results from using business architecture discipline. However, it is not common to see business architects doing significant roles here.

Etihad Airways differentiation strategy

Etihad Airways apply differentiation to be attractive to their consumers through their uniqueness. Etihad Airways has always ensured that they produce quality goods and services than their peers. The chief executive, Hogan James, chose to develop one of the biggest virtual networks and allowed for hub feeding to occur even with a small capital intensive placement of own capacity. A virtual network is an important way of for encouraging market share careers to attain positive growth rates without decreasing profitability. It is also observed in the case of Etihad. In 2012, Etihad launched six more aircrafts and seven new destinations. The most important aspect is that good traffic patterns enabled the carrier to strengthen some of its areas with additional frequencies. In addition, it was coupled with the young Etihad’s network against its two older and bigger competitors. It meant that they could serve seventy-five percent of destinations with a higher and daily frequency (Dhabi, 2009). The application of the virtual network was crucial to its achievements, but the airline carrier went past the expectations.

In less than two years, the airline carriers had plowed in some other carriers especially the ones that needed strategic partners despite their outlook. This became an important feature of the airline model. Its main differentiation strategy was that it focused on the minority shareholding. Its main reason for this was due to the restrictions imposed on cross-border investments. Etihad then swiftly came up with an extensive codeshare alignment and connects the other partner’s hub with Abu Dhabi. Etihad is also ready to administratively and financially support the new partners and also provide some good solutions.

Forecasting of the company

Companies are willing and able to plan for future expectations due to their reliance on forecasting techniques. Organizations base their prediction on a given number of bases, historical data, and subjective criteria. Wishful thoughts that are not based on facts matter for subjective criteria. Historical data on the other side is a quantitative analysis that has a base with the past results of the company and is important because the desired data is on the table. Analysts and investors sourced outside must also analyze this data. No future predictions can be made through forecasting techniques. Only tips of the expectations can be given by these methods because there is surety in the outcomes. Production volume, labor, cash, hours required to ensure completely that the distribution levels and levels of production are met, inventory requirement can be determined through forecasting tools. When doing forecasting emphasis is put accuracy, cost, the period and preparation time.

The Etihad airline company had to pay keen attention to the hypothesis and assumptions used during the forecasting period, and they knew that not all those would definitely take place. Dhabi (2009) stated that some of the forecasting methodologies applied are trend extrapolation, genius forecasting, simulation periods, consensus methods, decision trees and scenarios. Some actions have been adopted by Etihad Airline to forecast its future projections. Some of the trends incorporated include; Trend extrapolation involves the use of the past data combining them with mathematical theories for future prediction. Some assumptions are drawn like and that the past will always recur. And as such, some of these trends are only applicable for the short term because it is hard to predict future long-term ambitions. An important aspect of this type of forecast is environmental stability. The development inertia of the products is also essential. Technological changes are the primary cause of that. Etihad Airways continue to improve their design, production and capabilities to the phone and computing industries. Extrapolate information is analyzed through determining and studying the past data of a company. Identifying the trends and the analysis of data can be applied in the chosen model used in analysis is the primary goal. This type of quantitative forecasting is crucial for the Etihad Airway’s future projections.

Consensus forecasting techniques involve using experts and combining their findings to determine the final decision. Etihad Airways uses this technique in coming up with their future projections decisions. Sourcing of information from all the stakeholders gave them a competitive advantage over their competitors. This method enables experts to argue their analysis easily. Thus, it allowed the company to combine ideas to analyze the future.

Product and service design

Etihad Airways have some product and service designs that it uses. To begin with, the product design entails the use of the typeface, color scheme, and the difference service delivery system that have been put in place for efficiency. The typeface of the new airline fleets by the company is engraved with the ‘Facets of Abu Dhabi’ reflecting the difference UAE landscapes and the continued natural nature of the country with the reflection of the Northern Emirates (McKechnie, Grant & Katsioloudes, 2008). The development of the design involved researching among the international travelers and the Emiratis to aid in the selection of such a unique typeface. The UAE flag emblem is also highlighted in the cockpit of the planes. The color scheme of the planes repositions and intensifies the brand of the company. The mixture of colors in the designing of the planes is fuzzy, warm, and appealing o the clientele. The design service delivery of the airline involves making the guest feel at home.

During the flights, the guests are served with snacks and refreshments for all the classes to enjoy. Despite the difference in service delivery between the difference levels, the overall service design is to cater and satisfy the needs of the clients. The new aircraft named Residence offers the best service delivery in the sky with a three bedroom suite. It is considered as the most luxurious space in the sky after it was introduced in 2014. The service delivery design in this plane involves an amalgamation of private butler and chef. The Cabin designs are unique with a seat arrangement and spacing that allows for comfortability (Gross & Lück, 2013). Cabin interiors and revamped seats in addition to the latest in fit entertainment facilities have restructured the service and product designs of the airline. There have been ground breaking innovations in the elements of the interiors of the cabin with attention on the product detail that facilitates a combination of creating benchmarks for cabin products an interior.

The position of the company in the product lifecycle is the maturity stage. Over the years, Etihad Airways has continued to restructure their operations that enable it establish as a high-end airline in the region with international recognition. The aim of the airline now is to maintain the market share that has already been built over the years. The airline has realized the competitive environment and has continued to invest heavily in technological improvements of their interior designs. Product improvements of the airline over the years has enabled the company achieve a competitive advantage. The product restructuring allows the airline be awarded the 2015 Crystal Cabin Award due to their unique interior designs in the VIP and Premium category.

The stage in the product lifecycle of the company clearly shows that the company is managing its product and service designs, according to the differentiation strategy. Etihad Airways has brought forward their thoughts and reality of redefining the travel industry through the investing on innovation. For example, in the B787, the First insult design by the Etihad Airways has enabled the addition of a chilled mini-bar. Additionally, the Residence aircraft interior designs entail classy comfort for the clientele. Etihad Airways has also introduced the Panasonic eX3 system on all their fleets. A clear understanding of their realization on the differentiation strategy was seen when the scoped the 2015 Crystal Cabin Award.

Etihad Airways is ensuring that they consider the ethical, legal, and sustainability considerations in the design of their product. To begin with, the company has assured that they redefine the cost of their interior designs and charge higher prices to the consumers. This is also a sustainability strategy as the investment costs on the luxurious plans will enable the breakeven point to be achieved at an earlier stage. The legal aspects of the design of the Airline’s aircrafts involve the passing of the engineering regulation (Alwahaishi, Snasel & Nehari-Talet, 2009). The regulations have clear guidelines on the requirement of aircraft. The company has ensured that they promote safety travel and conformability throughout their activities.

Capacity

Etihad Airways is managing its capacity through the introduction of new large size aircrafts. Over the years, the demand for the airline has increased. The new products and service involve the use of the new Boeing B787 and the Airbus A380Dream liners. Etihad Airways demand was estimated to have grown by 23% in 2014 alone indicating a passenger manifest of 15 million during the same year. In the beginning, the rise in the capacity outstripped the airline’s capacity before the introduction of the dream liners in the same year. Etihad Airways has now enough capacity to cover all their destinations. The airline has more than 100 aircrafts that operate worldwide.

The combined increase in the demand resulted in the restricting of their capacity to include new planes. The business model for the company focuses on organic growth entailing the introduction of new aircrafts periodically. The baggage allowance is also sufficient for the passengers. The business model enables the surpassing the set figures for cargo and passenger growth in 2014 (Plunkett, 2009). The airline introduced new aircrafts to allow it manages its capacity. The new aircrafts present in 2015 to help in managing capacity include the three Boeing 787-9s, four A380s, and the seven A321s aircrafts.

The long-term capacity planning for the company revolves around the major facilities of the enterprise. Moreover, the long terms capacity strategies revolve around the locations decisions. For Etihad Airways, the long-term capacity planning techniques involves the introduction of new aircrafts to facilitate the increased demand for their products. The technological concept of the company is also a long-term capacity strategy. The new planes are fitted with advanced monitoring and control features that enable the increased size of the planes to be managed. Long term capacity planning evolves in the event that the short term capacity planning is not sufficient. For Etihad Airways, the ability for them to maintain the competitive advantage gas enables their flights to increase. The introduction of a new route for the company has been facilitated by the increased number of planes at their disposal. The airline continues to get into new courses to increase their investment portfolio. For example, the Boeing 787-9s provided increases the airline’s carrying capacity, therefore, increases their profits. Buying the large planes is a long-term strategy that will benefit the company.

The short-term capacity strategy revolves around the labor shifts, scheduling and balancing the capabilities of the resources. The goal of the short terms plans for the airline is to facilitate management of the unexpected demand shift. The time frame for the company for short term planning does not pass six months. Working overtime is the most seen short term capacity planning for the company. Due to the increased numbers in high seasons, the staff is required to work overtime to handle the increased number of clients. Most of the workers appreciate earning extra wages. The other short term capacity planning techniques include adding shifts, using floating workers, employing casual workers, leasing workers, and embracing subcontracting. This helps in increasing the productivity levels in the airline.

The company is managing capacity, according to the selected differentiation strategy. The new aircrafts unveiled by the airline are unique and provide high-end services to the consumers (Plunkett, 2009). For example, the Residence, one of the Boeing B787s aircrafts, is the most luxurious aircraft on the planet with super amenities that cannot be found I any other aircrafts. The interiors of the new aircrafts are breath taking with a new upper deck cabin seen in the Residence and the A380. The features of the new aircrafts include the living rooms, the en-suite showers, bedroom, and the personal butlers for the guests.

Process selection and facility layout

There are some processes and layout types that companies can implement. The process types include the primary, support, and the management processes. The primary processes are cross-functional, end to end that are aimed at delivering value to the consumers. These methods are considered critical as they represent the main activities that organizations conduct to achieve their goals and missions. The primary process result in the value chain as each of the step adds value to the preceding steps and is measured by their contribution to the delivery or creation of the services or products. The support processes are used for support to the primary processes. They are often utilized by the management or provide the infrastructural capabilities of the company to the major processes. The difference between the support and the fundamental means is that the support services are not able to generate direct value to the consumers whereas the major processes do produce. The support processes include the information technology, the capacity, infrastructure, and the human resource (Rhoades, 2014). Each of the support processes involves a life cycle linked to the functional areas. The management processes are used as a measuring, control, and monitoring tools for the business. These procedures ensure that the primary and support processes meet the regulatory, the financial, and the goals of the organization. Similar to the support process, the management processes are not able to add direct value to the customers.

The facility layouts include the product and process layout. The product layout is oriented towards the types of product being made. Product layout focuses on the final product being given to the consumer. The process layout revolves around the processes used for making the products. Product layout is only efficient for high volume operations that are repetitive whereas the process layout is efficient for small volume products that are custom made. Process layouts are configured to the operations that are similar in function or nature to enable grouping of the same. Due to this, the process layout is also known as the functional layouts. They’re purposed it to make use of some processing requirements that provides the services and process for the goods. Facilities configured by the individual processes or functions have the process layout. Firms adopting this layout are flexible and can handle a variety of process and route requirements (Rapajic, 2009). The cellular layout entails the use of small teams to handle different aspects of a product development. Each of the designed teams tackles a particular area of developing the final products.

Etihad Airways use the primary, management and the support processes. The major processes enable the company to provide value to the customer.   The main process for the client entails the use of direct interaction with the client. The management process controls and ensures that the delivery of services and interaction between the staff and the client are efficient. The control mechanisms ensure that each of the clients is treated well. The support service ensures that customization of service delivery to the customers. Each attendant has been trained to ensure that they provide the services, according to the preferences of the clients. The support process also includes the use of high-end information technology for communication and designs of the planes. Etihad has embraced the use of the process and the cellular layouts to enable flexibility and the handle different aspects of the product development. Both the process and the layout adopted by the company are in accordance with the differentiation strategy of ensuring high unique product development and delivery mechanisms.

Location

Etihad Airways has its headquarters in the Khalifa City the Emirate of Abu Dhabi. The United Arab Emirates comprises seven Emirates with Abu Dhabi as the capital. It is the second most populous emirate in the UAE after Dubai. The Emirate is the largest of the seven Emirates. Abu Dhabi has a population of over 2 million and is home to the Emiri family that is the family of the president of the UAE. Abu Dhabi is a metropolis with a high average income for the population. The city is the center of the industrial and the capital activities of the UAE and accounts for over two-thirds of the UAE economy. The Etihad Airways have been able to use more than 50 million dollars to develop the new advanced training and head office. The new office was completed in 2007 (Guttery, 1998). The location of the company enables centralization. Most of the flights of the company are from Abu Dhabi to other parts of the world.

Etihad Airways is strategically located enabling the growth of the airline. To begin with, the Abu Dhabi local and national governments support the carriers. This is seen in the reduced taxation system compared to the United States. The US airline industry has high taxes ranging from the regional to the federal taxation. The high taxes do not provide a business environment for the airlines. In the UAE, Etihad Airways have made use of the favorable tax system and the business environment to facilitate expansion. The UAE government supports local industry, and the airways have been in constant support from the government. Of particular interest of the government, investment is in the airports. The UAE government has recognized the economic importance of investing in airports and over the years improved the state of the airports in the country. Etihad Airways, therefore, have been able to expand into other regions around the globe. The Abu Dhabi Investment Authority is a state management fund that invests heavily in the local aviation industry. The Abu Dhabi air transportation industry is now a global hub.

During the initial start of the company, the location was ideal. Etihad Airways selected Abu Dhabi as their headquarters due to some reasons. The main reason was that the Emirate provided a conducive business environment for the company. This is not only in the taxation system but the airline administration policy. Also, Etihad Airways wanted to take advantage of the cheap oil prices in the region. Petrodollar have had a significant contribution to the development of the regional companies in UAE (Guttery, 1998). Etihad Airways management knew that by selecting an ideal location with low oil prices, the operation costs for the company will reduce resulting in increased revenue and profits. During the setting up of the company, Etihad Airways management knew that it will face little or no competition at the moment. The UAE policy requires the foreign investments with a local and ensures that the local has 51% of the stake in the company. Due to this, the power of new entrants by other international airlines was restricted. Etihad Airways, therefore, had an advantage to startup in its country. The Commercial Companies Law (CCL) of the UAE clearly indicates the aspect of starting up a foreign company in the country. The location of the company enables it supports its differentiation strategy as it can generate enormous profits to facilitate the costly innovation and customization of their aircrafts and their high notch service delivery systems.

Quality

Etihad Airways has continued to improve its quality over the years. The management of the company has realized that quality enables them to achieve a differentiation strategy that allows them achieve competitive advantage. In this perspective, the company has continued to higher high-end designers and continued to train heir worker to ensure service delivery. Etihad Airways have been in partnership with top British interior designers to enable them design high-end interior cabins and décor that serves the high increased customer demand. In the same perspective, quality improvements have been seen in the new aircraft designs that have been observed in the company. The company improves the quality by developing a strategic quality plan that will enable it develops a benchmark for the organization performance. This will help in implementing the useful quality tools and processes. Additionally, the company can continue to train their employees (Gittell, 2003). High quality involves high pricing. Etihad Airways high-quality delivery process is linked with high pricing. For example, the Residence, which has a three bedroom penthouse in the sky, charges whooping 12,500 Euros per flight. This clearly indicates the cost that associated with the high quality of the aircraft.

There some quality tools that a company can be used to management’s quality delivery process including the control charts, the fishbone diagrams, and the check sheets. Control charts are graphs that are used to study the changes in the methods over a period. The control charts are used to control statistical processes for the determining of the business process in the state of managing the company statistics. The Fishbone diagrams were created to show the sources of events. Fishbone diagrams are used in the product design and to prevent defection of quality. Additionally, they can be used to identify factors that cause the overall effect on quality. The check sheet is used for the collection of information in real time in a location where the information is generated. The information can be qualitative or quantitative. In the collection of the quantitative data, the check sheet is referred to as a tall sheet.

Inspection is the examination of an organization and the evaluation process of an organization. Inspection can either be virtual or involve the use of sensing technologies that look at the finer details of a product. Review needs the physical appearance to enable analysis. Benchmarking, on the other hand, involves the comparison of a business’s process through the use of performance metrics with the best practice of the same organization or other organization. Benchmarking dimensions are usually the time, quality, or the costs.

Etihad Airways uses both inspections and benchmarking in their operations. Inspecting by the airline is seen on the engineering aspect. The engineering review makes use of the test, and measurements that are applied to the particular characteristics of activities or specific aircraft operation. Inspection of the engines, the fuel efficiency and the overall performance of the plane is usually done (O’Connor, 2001). Benchmarking in the airlines involve the use if he best practices of the company as the base for comparison. Therefore, the corporate culture of the company determines the capability of the benchmarking methods. Etihad Airways compares its current operations with the vast operations to achieve increased quality management and delivery. The airline, therefore, has a chance of developing and improving the current business and operations to meet their target or be similar to their target. The benchmarking for the airline is not a onetime thing but is a repetitive process that has been utilized for a number f years by the company. This clearly indicates that the company is managing quality in terms of their differentiation strategy. The benchmarking, inspection, and the pricing of the airline tickets show that Etihad Airways is in line with their differentiation strategy.

Conclusion

Etihad Airways has its headquarters in the Abu Dhabi. The operations management of the company is efficient. Over the years, Etihad Airways have grown to achieve a competitive advantage in the airline industry. The adoption of the differentiation strategy of the company has enabled it is at the top of quality management. Etihad Airways is strategically located enabling the growth of the airline. The company has continued to higher high-end designers and continued to train their worker to ensure service delivery. Etihad Airways have been in partnership with top British interior designers to enable them design high-end interior cabins and décor that serves the high increased customer demand. The company can continue to improve the quality by developing a strategic quality plan that will enable it develops a benchmark for the organization performance. This will help in implementing the useful quality tools and processes. Additionally, the company can continue to train their employees.

Etihad Airways high-quality delivery process is linked with high pricing. Etihad Airways uses both inspections and benchmarking in their operations. Inspecting by the airline is seen on the engineering aspect. Etihad Airways compares its current operations with the vast operations to achieve increased quality management and delivery. Etihad Airways is managing its capacity through the introduction of new large size aircrafts. For Etihad Airways, the long-term capacity planning techniques involves the introduction of new planes. The short-term capacity strategy revolves around the labor shifts, scheduling and balancing the capabilities of the resources. The position of the company in the product lifecycle is the maturity stage. The product and process designs of the company are efficient.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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