Managing Corporate Culture for International and Global Competitive Advantages in the Airline Industry

Seminar Paper 2015 26 Pages

Business economics - Business Management, Corporate Governance


Table of Contents

List of Abbreviations and Symbols

List of Figures

1 Introduction
1.1 Problem Statement and Aim of the Paper
1.2 Research Methodology and Structure of the Paper

2 Theoretical Foundation
2.1 Competitive Advantage According to Porter
2.2 Resource-based View
2.3 Corporate Culture

3 Practical Implementation at Emirates Airline
3.1 SWOT External and Internal Analysis
3.2 Corporate Culture

4 Critical Analysis and Recommendation

5 Conclusion and Outlook

Reference List

List of Abbreviations and Symbols

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure 1: Porter’s Generic Strategies

Figure 2: Links between Resources and Competitive Advantage

Figure 3: Aspects of Resources for Sustainable Competitive Advantage

1 Introduction

1.1 Problem Statement and Aim of the Paper

Ever since globalization has started companies have been looking for ways to compete successfully on a global scale. Trends in the global environment such as rapid communication, technology innovation, and global sourcing models requiring to manage cultural differences are still challenging for many industries(cp. Yip, 2003, pp. 1–3). The airline industry being itself a reason for an increasing borderless world also faces these global trends and high competition due to expansion, consolidation, concentration, and alliances. Terrorism and rising costs for fuel, labour, maintenance, and security have not been the only threats for the industry. Also rising customer expectations e.g. regarding comfort, entertainment, experience, convenience, innovation, personalization and value for money require the airline industry to change dynamically. Moreover, airlines face demands for pollution control, corporate social responsibility, and sustainable travel. Rising competition from low-cost carriers is also relevant since their share of global capacity increased to more than 25 % in 2013. So, even if demand for air transportation has grown by an average of 9 % per year since 1960, and global airline revenues reached a new high of US$708 billion in 2013, airlines need to find ways to stand international and global competition as their environment potentially endangers profits and economic survival(cp. Lynes & Dredge, 2006, pp. 122–129; PricewaterhouseCoopers, 2014, pp. 2–3).

Given the globalization and industry-specific trends companies need to define a strategy with a clear and distinctive competitive advantage which allows them to outperform rivals. Strategy researchers have long started to look beyond industrial economics-based concepts of strategy by considering “soft” aspects of an organization like corporate culture as a source of international and global competitive advantage(cp. Chan, Shaffer, & Snape, 2004, pp. 17–18; Fiol, 1991, p. 191; Petrick, Scherer, Brodzinski, Quinn, & Ainina, 1999, p. 59; Stroh & Caligiuri, 1998, p. 1; Woodruff, 1997, p. 139). Companies therefore put cost and time effort in building and sustaining corporate culture or corporate social responsibility. As this increases costs at first view the question arises whether this effort is worth to make. Moreover, it is questionable how corporate culture can become a sustainable competitive advantage.

The aim of this paper is to analyse what needs to be considered to manage corporate culture successfully and build sustainable international and global competitive advantages out of it. In this context, this paper will identify which special characteristics should be considered in the airline industry.

1.2 Research Methodology and Structure of the Paper

This paper is based on secondary literature. It starts with an introduction of the topic in question by giving an overview of the current situation and problem. Then, the theoretical background of competitive advantage, resource-based view, and corporate culture follow. In order to transfer theory into practice chapter three looks into the implementation of competitive advantage and corporate culture in the airline industry. Therefore, an internal and external analysis of Emirates airline is done and insight into the airline’s corporate culture provided. Moreover, the topic is critically analysed and recommendations are given. The paper closes with a conclusion and outlook.

2 Theoretical Foundation

2.1 Competitive Advantage According to Porter

For numerous years strategic researchers and managers have been trying to understand sources of competitive advantage (CA)(cp. Barney, 1995, p. 49). Porter (1985) established a widely-used theory describing competitive strategies and advantages. Companies have a CA over rivals when their profitability is higher than the average profitability and profit growth of others in the same industry. Those firms hold something special competitors are unable or find too costly to imitate, and thereby allows them to outperform their rivals. These unique resources are bases and drivers of CA(cp. Porter, 1985, pp. 1–4).

The choice of competitive strategy depends on industry attractiveness (“Five Forces”) and competitive position (“Generic Strategies”). Porter’s model of generic strategies covers the main strategic options of a company: performing primary and secondary value chain activities either at a lower cost or in a way that leads to differentiation(cp. Bharadwaj, Varadarajan, & Fahy, 1993, pp. 83–84; Porter, 1985, pp. 11–12). In order to achieve superior performance in an industry there are three generic strategies: cost leadership, differentiation, and focus. The figure below gives an overview of strategic options.

Abbildung in dieser Leseprobe nicht enthalten

Source: Adjusted view based on(Porter, 1985, p. 12).

Figure1: Porter’s Generic Strategies

With cost leadership strategy companies serve a broad scope and aim to become the low-cost producer in the respective industry by providing standard, no-frills products and services. When choosing differentiation strategy companies offer unique benefits to buyers and can demand premium prices. Focus strategy applies to a narrow competitive scope within an industry by targeting a segment or group of segments only. This can be done either as cost focus or differentiation focus; both ways companies exclusively address their target segments. A non-recommended strategic option is “stuck in the middle”, meaning engaging in every generic strategy but failing to achieve any of them. There, companies cannot gain CA and generally perform below-average(cp. Porter, 1985, pp. 12–17).

As generic strategy itself does not lead to above-average performance, the purpose of competitive strategy is to attain a sustainable competitive advantage (SCA) and so improving the company’s long-term superior performance. This sustainability is realized when the CA resists competitive behaviour and industry changes(cp. Bharadwaj et al., 1993, pp. 83–84; Boxall, 1998, p. 267; Grant, 2013, p. 235; Porter, 1985, p. 20). Generally, a company's competitiveness and the nature of markets in which it competes need to be examined and combined with the value it intends to deliver to its customers (e.g. low cost or extensive customer service). A firm can make use of the value chain analysis to identify the business processes which can give it an advantage over its rivals in delivering this value(cp. Bartmess & Cerny, 1993, p. 90; Gupta & Govindarajan, 2001, p. 45; Porter, 1985, pp. 36–39).

2.2 Resource-based View

Dated back in the 1980s the resource-based view (RBV) is not a new theory but the analysis of resources and capabilities as sources of SCA can still help to explain why some firms consistently outperform others(cp. Barney, 2001, p. 649). Basic assumptions of this theory are that heterogeneous, immobile, and unique resources and capabilities direct a firm's strategy and are primary sources of profit and SCA(cp. Grant, 1991, p. 116; Lado & Wilson, 1994, p. 702; Volberda et al., 2011, pp. 20–22). Resources are all input factors (tangible and intangible, human and nonhuman) into a firm’s production process of goods and services which are owned or controlled by the firm. Organizational resources comprise a company’s history, relationships, trust, and organizational culture. Organizational capabilities and core competencies are specific skills and resources a firm owns and uses in a superior way(cp. Barney, 1995, p. 50; Fiol, 1991, p. 193; Lado & Wilson, 1994, p. 701; Swiercz & Spencer, 1992, p. 37). These are “crown jewels” which need to be protected and play a key role in the competitive strategy of a company(cp. Grant, 1991, p. 129). All in all, a company needs to formulate and design a strategy which makes the most effective use of core resources and organizational capabilities, considers industry key success factors and finally leads to CA. These links are shown in the figure below.

illustration not visible in this excerpt

Source: Adjusted view based on (Grant, 2013, p. 117).

Figure2: Links between Resources and Competitive Advantage

The RBV understands organizations as bundles of resources and identifies several requirements for resources to be potential sources of SCA(cp. Chan et al., 2004, p. 18). According to Barney & Clark (2007) these are value, rarity, imperfect inimitability/substitutability, and exploitability through a firm’s organizational processes(cp. Barney & Clark, 2007, p. 57). Resources are valuable if they enable a firm to exploit environmental opportunities or neutralize threats, thereby improving organizational efficiency and effectiveness. However, if a firm's current or potential competitors own these resources as well or can easily duplicate or substitute them, they cannot be a source of SCA. Valuable and rare organizational resources can only be sources of SCA if firms not possessing these also cannot obtain them(cp. Bharadwaj et al., 1993, p. 84). Grant (2013) further differentiates the characteristics resources need to possess. In order to provide the potential to establish CA, a resource must meet the criteria of scarcity and relevance to key success factors in the market. In order to be a source of SCA, a resource must fulfil durability, imperfect transferability, and replicability(cp. Grant, 2013, pp. 127–129). The figure below shows a comprehensive overview of attributes needed for resources to be sources of SCA.



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Strategic Management Corporate Culture Airline Competitive Advantage



Title: Managing Corporate Culture for International and Global Competitive Advantages in the Airline Industry