Application of Change Concepts and Theories in Etihad Airways in the United Arab Emirates
Change is essential and an inevitable issue that affects businesses worldwide. Further, it is one of the most complex undertakings since it requires vastly informed efforts to revamp the strategies and cultures that define the current state of a business. As a result, effective change calls for a well-founded plan, which borrows much from the data analytics and strategy evaluation exercises at the corporate level. This paper aims to illustrate the application of change theories and concepts in the Etihad Airways Company with an aim to inform feasible improvements, which lie within the business’ grasp. It is inspired by the need to inform successful strategic change in the business in an attempt to address the competitive needs on the market.
Company Overview and Performance Review
Etihad is an Emirati flag carrier and one of the largest airlines in the region. Etihad Airlines is headquartered in Khalifa City in Abu Dhabi. It was established in by Sheikh Khalifa bin Zayed bin Khalifa Al Nahyan in 2003 to address the need for an airline in Abu Dhabi. It operates more than 1, 100 flights in a week and to more than 121 cargo and passenger destinations worldwide. It serves more than five continents. Etihad Airways operates a fleet of 117 Boeing and Airbus aircrafts (Forbes, 2018). The Etihad Airways Partners alliance, which includes Air Serbia, Jet Airways, and Air Seychelles, was established in October 2015. Etihad Airways holds minority equity investments in the participating airlines; as well as holding a stake in Virgin Australia, which is not officially listed as an Etihad Airways Partner. Booking for these airlines is consolidated under one network.
For instance, in 2015, Etihad Airways carried about 14 million travelers, which s translates into about 22 % rise compared with the previous year. Also, the business delivered about US $ 9 billion in revenue and barely of US $ 103 million as net profit. However, the following years were tough for Etihad; which reported a loss of US $ 1.9 million.
Similarly, Etihad has been continuously reducing the number of planes in-use from 121 in 2015 to approximately 117 by mid-2016 (Forbes, 2018). Currently, Etihad Airways only operates with approximately 100 planes (Forbes, 2018). These figures portray a consequential effect of strategic management, which has become a constraint to the growth of the Emirati flag carrier. Evidently, there is a need for change to spearhead unidirectional development in the financial, market, and sales performance. This is good for the investors and other beneficiaries of the business.
Etihad Airways is one of the key driving forces of the UAE economy. Alongside market rivals Qatar Airways and Emirates, Etihad has prolifically contributed to the revolution of the aviation industry in the entire UAE market. Despite the fact that Etihad is a big company that is founded as a strong brand, it has failed to effectively contain its profitability dynamics in the recent past. Forbes (2018) reports that Etihad has registered a series of losses since the adoption of the ‘equity alliance’ approach to strategic operations. This was after registering a loss of about $ 1.89 billion in 2016 (Forbes, 2018). In this strategy, Etihad aimed to support struggling airline operators in other parts of the world with an aim to penetrate the international as the partner airlines were expected to bring in a larger pool of customers in the long run.
Notably, the ‘equity alliance’ strategy was recently pulled down owing to the failure of a majority of subsidiary operators such as Air Berlin and Alitalia in 2017. Further, Etihad attempted to restructure its business in 2016 in order to address the persistent drop in profits. This led to a revamp of its management team. Ironically, the carrier’s performance has been declining with evident cases of laid-off employees, trimmed route networks, and cut fleet.
Identification of the Change
Etihad is in a dire need for effective change to address the issue of consistently dropping profits. Evidently, Etihad needs to revamp the manner in which strategic decisions are laid down in pursuance of the prior-set corporate goals and objectives. Further, the required is on a relatively larger scale, involving the transformation of the organizational culture to focus on more success-oriented competencies, operations, and strategies in the various business units.
According to the stakeholders’ theory of management, businesses that are on the verge of elevating their performance with regard to departmental finances and the overall revenue on sales have the mandate to align their business model with the needs and expectation of core stakeholders (Harrison, Freeman, & Abreu, 2015). It is a guaranteed way of prioritizing stakeholder value, which calls for sound decisions to leverage the functioning of individual constituent sectors (Harrison et al., 2015). By doing this, Etihad will have changed its approach to profit-seeking in every functional aspect. It follows that a steady management team is a core to sound decision-making, which in turn determines performance as indicated by the level of profitability, size of the market share, and volume of sales.
Identification of the Major Change Required at Etihad
The main change required in Etihad is strategic management. There needs to be a more informed and tactic way of doing business for Etihad to address the issue of consistently dropping corporate performance. According to Hill, Jones, and Schilling (2014), a strategic management team is entitled with an essential duty to ensure operational strategies are well-researched, evaluated, and systematically improved to pave the way for excellence. Notably, strategic management works affect the Etihad entirety. This is to mean that operations in all the other business units (human and personnel resources, marketing, sales department, aerospace production, and management) entirely depend on the presence and functioning of a strategic management team (Hill et al., 2014).
For instance, decisions such as strategic goals are aimed to drive short terms outcomes, which might be discipline-specific such as to utilize social media opportunities for marketing to increase the size of market share by 40% in the UAE by the end of three fiscal years as measured according to the resultant volume of sales. This is a strategic marketing goal that requires technical strategic management insights to execute the necessary orders and action plans to achieve excellence. However, the strategic decision does not only affect the marketing team but also the entire Etihad fraternity.
Therefore, Etihad requires a sound strategic management approach to ensuring that goals are aligned with the corporate vision and mission. Also, it is necessary for discerning the appropriate measures that could be put into action using the available resources to optimally induce growth in the business. It calls for effective management to create positive change not only when it comes to accruing profits and expanding the market but also other essential business requirements such as leveraging the people’s welfare and transforming systems and cultures that make up the Etihad business. This will help foster improvements in all sectors without incurring extra costs.
The Significance of the Problem
Strategic mismanagement is a serious issue for Etihad Airways. It is only by adopting a more informed approach to management of strategies that Etihad can ensure consistency in improvement toward a competitive business in the Emirati travel and tours industry. It is evident that sudden changes in the management, which were made earlier, stunted the growth of the business. It is imperative for the Etihad top-management to consider investing in knowledgeable and wise decision-making and management structures, which could enable goal attainment. With the current deteriorating performance, Etihad stands susceptible to the prevalent risks, uncertainties, and constraints in the air travel and tours industry, which requires a stricter way of enacting policies to stay competitive.
How the Current Situation is Impacted by the Absence of Change
Without a change in the strategic management approach, Etihad finds it difficult to sustainably pursue its internationalization goals. This is a key goal for Etihad to sustain a top-selling position among industrial rivals such as Emirates and Qatar Airways. Etihad is in a better position to redeem its performance considering it is an established company with several other successful strategies such as marketing through sponsorship of sports and other programs that touch on the welfare of the people around. This is evidenced by the role Etihad plays in facilitating the operations of the Manchester City United, a soccer team in Europe (Bose, 2018). It is a famous airline business that could benefit from aligning employee development and corporate goals to improve services at all stages.
Two main changes under the strategic management sector are required in Etihad. They include adopting more effective leadership and leader development techniques that could enhance positive change in regard to organizational culture alignment. This is necessary for ensuring compliance with the corporate policies and strategic requirements according to the set standards and goals. In addition, there is a need for a well-pronounced employee development strategy that will enable the development of the necessary technical and soft skills that are required for the production of quality product and service deliverables that could attract significant growths in sales. The culture of Etihad should also be revamped wholly to tip toward customer-centeredness, continuous learning, and analytical judgment when it comes to making and executing corporate decisions.
An actionable plan for the proposed change entails employee training, teambuilding, extensive research and development of knowledge, human and personnel, and technical assets of the company. Top managers should be trained further to shift to an evaluative and people-engaging way of offering oversight when it is a matter of executing directives that drive the operations of the airline business (García-Peñalvo & Conde, 2014). If well enacted, these activities could enhance Etihad’s capacity to top the Emirati travel and tours market as well as stay competitive globally.
The significance of the Change
By focusing on effective talent development Etihad Airways stands a chance of getting on the forefront of embracing the current technology in production through innovation and creativity. Furthermore, effective leadership will bring together remarkable efforts toward a common goal. It is the duty of Etihad managers to ensure their followers are well-equipped with the right skills, knowledge, and an in-depth understanding of the work requirements to enable sustainable quality of production and service (García-Peñalvo & Conde, 2014). Furthermore, research will illuminate opportunities that lurk within the company’s reach. This is critical for informing strategic steps in the future. As a result, the proposed change emphasizes the application of analytical knowledge to strategic management to pave wise decisions and investments that guarantee continuous growth and value for the stakeholders.
Reasons for Change
According to the background research compiled for this change project, Etihad Airways is in a position of making a market comeback despite the subsequent years of failed strategy in the recent past. This is because it is an established brand in the United Arab Emirates, which is ranked second largest after Emirates in the UAE aerospace operating industry (Forbes, 2018). Therefore, there is need to devise strategies and measures that will transform the organizational approach to business dealings with an aim to ensure value for growth and resultant stakeholder value. Without which, it is going to be difficult for the business to lure customers and stakeholders who give relevance to Etihad’s existence on the travel and tours market.
For instance, deteriorating business results, which are currently leading to retrenching an assortment of the workforce, renders the remainder insecure with their opportunities at Etihad. Psychologically, it would be utterly futile for managers to strive to make the best out of such talents. In a much broader perspective, employee retention capacity improves according to the level of job satisfaction in the air (O’Connell & Bueno, 2016). Also, Etihad should emulate high moral standards whilst embracing effective leadership to ensure a success culture, which, is associated with goodwill and social responsibility. It is a critical marketing and stakeholder-retaining strategy.
Applying Theories and Theoretical Concepts
Transformational leadership for Change
According to Caniëls, Semeijn, and Renders (2018), inclusive transformational leadership styles are the most preferred when it comes to managing change. These styles make it easier for managers to interactively engaging with workers, customers, and core business-facilitating to ensure the desired development in skills and competencies amongst followers as well as research and discern the needs and expectations of the stakeholders (Caniëls et al., 2018). This information enables leaders to foster positive change by channeling the appropriate efforts and resources in fruitful strategies that contribute to goal attainment (Boehm et al., 2015). Besides, inclusive transformational leadership styles are designed to enhance rapport between leaders and their followers. This way, there is reduced tension, which could otherwise deter successful change communication in Etihad.
In addition, as Etihad’s profit margins are on the reducing end, it could be difficult to talk investors and strategic facilitators into channeling more funds and resources toward a new strategic change. Rigidity is a question that needs addressing, in this case. Meuser et al. (2016) infer that change flexibility can be achieved by creating an in-depth understanding. It means that Etihad managers have to regroup and find short-term and long-term solutions to the prevalent deteriorations in business performance. It is only through effective data analysis that Etihad will compile a convincing strategic report with accurate and undeniably persuasive facts and figures on strategic projections (Grant, 2016). Excellent transformational leadership is necessary for engaging the investor from a stakeholder’s value perspective to ensure facilitation.
Accurate strategic analysis tools should be adopted in Etihad to ensure better insight into business projections and goal setting amid the prevalent market uncertainties and risks. Routine evaluations have to be undertaken to keep track of the strategy progress (Grant, 2016). The Etihad strategic management team should be keen when it comes to dealing with data from current and previous performance trends to give an attainable projection for the future (Huyghues-Beaufond et al., 2017). This will enable Etihad Airways to restrict its business dealings within affordable and manageable limits. Big data, Data Envelopment analysis, and other data mining techniques should be used to create a background understanding of the strategies and general progress of the business (Huyghues-Beaufond et al., 2017).
Etihad Airways operates in the travel and tours industry, which calls for sufficient marketing research to address the needs of consumers. As a result, Etihad has to remain competitive on the market by focusing on talent development. Programs such as employee training, mentorship programs, leadership development, and job enrichment can help create a turn-around in Etihad when it comes to the productivity of the workforce (García-Peñalvo & Conde, 2014). According to Hollenbeck & Huang (2016), the workforce is the pivotal unit of a business that must be satisfied and well-equipped to achieve optimum performance (Hollenbeck & Huang, 2016). Seminars, workshops, conferences, research grants, and scholarships will be used in Etihad to promote continuous learning as a tool of innovation and creative production, which tips toward 100% customer satisfaction.
The analysis shows that the Etihad Airways brand is founded a strong competitive foundation. Its initial milestones have placed the business in a top-selling globally-famous position. However, the current performance deteriorations challenge its supremacy on the Emirati travel and tours market. For this reason, the stakeholder value is at risk (Harrison et al., 2015). Change is critical to revolutionize the strategic approach to issues such as investments prior to resource allocation (Kuipers et al., 2014). Effective strategic management is expected to ensure on-time tracking of the progress in light of the business development and growth goals (Kuipers et al., 2014). According to Beckford (2016), this approach helps reduce the cost of quality by addressing faulty steps in the strategy in a timely manner.
Notably, the prevalent issues in Etihad sprung from uninformed managerial change decisions. As a result, the profitability of the business is compromised. At this rate, the business could be obsolete on the UAE market as stakeholders won’t help but notice the futile attempts to generate profits. Most are expected to refrain from further investing if they can’t profit. Change is needed to focus the potentiality of the company on informed opportunities that enable growth and sustenance on the market. Leadership and progress monitoring are outlined success determining factors for the change proposed for Etihad Airways (Boehm et al., 2015).
Recommendations and Conclusion
Knowledge is one of the essential assets businesses such as Etihad could use to make informed feasible decisions in the strategic framework. Knowledgeable decisions increase chances of succeeding through various strategies in business (García-Peñalvo & Conde, 2014). In light of the theory of inclusive transformational leadership for change, in order to ensure successful change, effective managerial and oversight principles must be appropriately applied. It means that managers should focus on the learning, research, and evaluation for knowledge to guide wise decisions (García-Peñalvo & Conde, 2014). Future projects must be appraised accurately and professionally to pave informed decisions. Also, in the event of applying the inclusive transformational leadership technique, Etihad should care for the resultant organizational culture. Leaders should thus advocate for upright ethics in the workplace. Tactical leadership should enable followers to see the need to comply with the proposed shared values and equality, honesty, transparency, and integrity.
In conclusion, Etihad Airways is typical of a failing business with great potentiality. It calls for a revamp of the management structure to an organic one where decisions can be made conveniently and fast whenever a need arises as indicated by data analytics (García-Peñalvo & Conde, 2014). Etihad Airways should invest in the use of accurate data to make informed decisions that create unidirectional growth. The theory of inclusive transformational leadership in change management clearly portrays how Etihad Airways could utilize the underlying opportunities to address the issue of deteriorating profits.
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