Creating Customer Value for Air Arabia - Case Study Example

Creating Value for Air Arabia Creating Value for Air Arabia Air Arabia is an airline service provider that is located in the United Arab Emirates and was incorporated in 2003. The airline is a public organization whose shares trade at the Dubai Financial Market (Habibullah, 2005). Air Arabia may build customer value by ensuring that its environment aims at increasing customer satisfaction by providing high value. The organization may also use the marketing mix, positioning, target market, and SWOT analysis as tools of increasing customer value. An analysis of how these factors may help Air Arabia to increase customer value is essential in providing recommendations to the organization. Micro Environment The organization may increase value by taking into account the needs of its customers. Currently, the company provides services to customers in various locations such as Europe, Middle East, Asia, and Africa (Laura, 2012). The organization may increase the value of these customers by providing air services to all destinations that the consumers travel to; this will satisfy them and increase their demand. Air Arabia also needs to provide services that are provided by competitors in the industry. The main competitors of the organization include Etihad, Emirates, and Air India (Laura, 2012). Air Arabia also needs to formulate competitive strategies that will help it capture a larger market share than competitors, for example, lowering prices. The company may also find high quality products from suppliers who provide them at a fair price. However, since Boeing and Airbus are the only main suppliers in the industry, it means they have high bargaining power (Airlines of Saudi Arabia, 2010). Air Arabia may counter this by signing long-term contracts with the suppliers to avoid short-term fluctuations. The company may also find supply of fuel from the cheapest suppliers and charge customers low prices for airline services. Air Arabia may also provide consumers with high value by reducing the number of marketing intermediaries. This is because the involvement of numerous intermediaries leads to the increase in prices of services. The reduction of the number of intermediaries, on the other hand, lowers prices (Bhukari, Ghoneim, & Dennis, 2012). The airline company may also train its intermediaries so that they may provide customers with precise information about the organization’s services. The company should also train the intermediaries to be courteous and use effective communication skills when dealing with customers. Macro Environment Air Arabia operates in an environment with dynamic demographic characteristics. The consumers that the company serves are Asian, African, Indian, whites, poor, rich, average income, educated, and non-educated. The company needs to consider these characteristics when providing consumers with services to ensure that the customers are satisfied. Another factor that Air Arabia needs to adopt is the use of the latest technology in the industry because the organization thrives in a technologically developing environment. The organization, for example, needs to purchase the latest models of airplanes from Boeing or Airbus (Airlines of Saudi Arabia, 2010). These innovations attract customers and provide them with more needs than the outdated models. Air Arabia operates in a politically stable environment in the United Arab Emirates (Laura, 2012). The company may take advantage of the stable political environment to serve customers efficiently. The airline organization also needs to follow all legal rules because this will ensure its continuity of serving customers. The organization operates in an environment with fluctuating business cycles. There are times when the economies involved take upturns while other times they take down turns (Bhukari, Ghoneim, & Dennis, 2012). Air Arabia may not be in a position to stabilize the business cycle, but the company may formulate strategies of dealing with economic downturns successfully. Air Arabia conducts business in environments with dynamic cultures; for example, Muslim, Christian, African, Western, and Asian. These cultures are different, but they converge when accessing services of Air Arabia. The company, therefore, needs to consider the various cultures especially Muslim when designing airline facilities (Habibullah, 2005). This will ensure that all cultures are satisfied with the company’s services and it will lead to increased demand, sales, and profits. Target Market and Positioning Air Arabia targets customers who earn low and middle income in the locations where the airline operates. The company does this by charging low prices to its customers and this enables it to capture a larger market share compared to its competitors such as Jazeera Airways (Habibullah, 2005). The organization should continue targeting these consumers so that it may increase its market share further. While the company charges low prices, it should also ensure that it provides customers with value that matches the price that they pay for services and goods. The airline company also targets consumers who use the internet by developing a website that provides customers with all the information that they need to know about Air Arabia. The targeting of online consumers indicates that Air Arabia is keeping up with innovations (Laura, 2012). The targeting of online consumers also helps the company to increase its market share. Air Arabia should continue targeting online consumers by using additional tools such as Twitter and Face book. This will help to satisfy the needs of online consumers by providing them with their needs. The use of target marketing has positioned Air Arabia in a unique point in the industry. The company is in an exclusive position because it is able to take care of low- income earners unlike any other organization in the industry. The institution should continue using the strategies that position it at a distinctive point in the industry so that it may continue attracting customers and satisfying their needs. SWOT Analysis Table 1: SWOT analysis of Air Arabia Strengths Low cost of production Barriers of entry Ample parking space at Sharjah Airport Weaknesses High cost of fuel Few planes High competition Opportunities Expansion of airline Increase in demand New markets Threats Increasing operating costs Government regulations Limited capital Strengths The organization has strength of charging consumers low prices for its products and services. This gives it a competitive advantage over other players in the industry. Sharjah Airport has also reserved sufficient parking and operating space for Air Arabia to avoid congestion (Bhukari, Ghoneim, & Dennis, 2012). The high cost of starting an airline operation creates a barrier of entry into the industry. This enables Air Arabia to thrive in the market because it operates in a low competition industry. Weaknesses The main weakness that the organization has is that it has few planes and has to incur high cost of fuel. The high cost of fuel arises because of the scarcity of the commodity; therefore, Air Arabia has to pay the price when it uses the costly energy. Although there are few competitors in the industry, there is high competition between the surviving players. The high competition that Air Arabia faces from developed airlines such as Etihad Airways lowers its market share (Airlines of Saudi Arabia, 2010). Opportunities The airline has an opportunity for expanding and becoming a superior service provider compared to its competitors. The company has currently ordered for 34 planes from Airbus supplier; the supply of these products began in 2013 and it will continue. The expansion will enable the company to satisfy its increasing demand and penetrate into emerging markets such as China (Habibullah, 2005). The expansion will give the organization a competitive edge in the industry. Threats The prolonged increase in the price of fuel poses a major threat to the organization because it increases the cost of operations. The limitation of capital that the organization has also slows down the process of expansion (Laura, 2012). The emergence of new government regulations in the various markets where the company operates also causes a threat to the company: because the laws may be unfavorable to the company. Marketing Mix Product The airline provides travel services to destinations such as Europe, Asia, and Africa. This enables consumers to travel to their preferred destinations. Air Arabia also provides auxiliary services such as online booking of planes and hotel reservations to its customers (Habibullah, 2005). These services increase the satisfaction of customers because they can do numerous things simultaneously when they use Air Arabia. Price The airline charges low prices for its products and services to all consumers. Air Arabia does this because it aims at serving low-income earners who cannot afford the services of other expensive airlines (Airlines of Saudi Arabia, 2010). The use of low price strategy has enabled the organization to capture a large market share. The airline should continue charging low prices and increase the quality of its services despite their low price; this will lead to additional customer satisfaction and market share. Place Air Arabia conducts its business mainly in the United Arab Emirates at Sharjah Airport. The airport has sufficient space that may enable the organization to expand the number of planes. The airline also operates in three other hubs that include Egypt, Jordan, and Morocco (Bhukari, Ghoneim, & Dennis, 2012). The locations of the hubs are efficient because numerous customers of the airline reside in these places. The airline may expand the number of hubs to regions where there are emerging markets such as Asia. The use of a website also means that the airline operates online and is thus able to serve consumers who are in various locations. This is because the website is accessible by individuals who are in different parts of the world. Promotion Air Arabia promotes its products and services by advertising locally and internationally using techniques such as newspapers, magazines, websites, social media, and television (Laura, 2012). The use of a variety of advertising tools enables the organization to reach a large number of consumers. This enables the company to capture a large market share. Recommendations Air Arabia should take advantage of the opportunity that it has of expanding to enlarge its airline. The organization should use the new planes that it will receive from Airbus to penetrate in new markets; this will increase its market share, which will consequently lead to high sales and profit. The organization should also adopt the use of social media to listen to the suggestions of customers. This will enable it to provide services that meet the needs of customers and it will increase their contentment. The company should also continue using its low price strategy because this helps it to compete with key players in the industry. Air Arabia is an airline whose main hub is located in the United Arab Emirates; the organization began operations in 2003 and it became public in 2007. Air Arabia uses its marketing mix, target marketing, and strengths and opportunities to increase customer satisfaction. The techniques that the organization employs include charging low prices, targeting low-income consumers, and utilizing the marketing mix. The micro and macro environments of the company are favorable for providing customers with value except for the few suppliers who have a high bargaining power. The company should utilize its opportunity of expansion to enlarge and compete with others in the market. References Airlines of Saudi Arabia. (2010). General Books. Bukhari, S, Ghoneim, A, & Dennis, C. (2012). Understanding the factors that attract travellers to buy tickets online in Saudi Arabia. Brunel University. Habibullah, J 2005, Man-made islands and desert safaris: Air Arabia, the first low cost airline in the Middle East, is based in Sharjah, near Dubai. Jyotsna Habibullah, marketing communications manager for Air Arabia, gives some advice about what to do with a few spare hours in Dubai or Sharjah, Airfinance Journal, 283, pp. 56-89. Laura W., 2012. Research and Markets: Saudi Arabia Air Conditioners Market Forecast & Opportunities, 2017, Business Wire, 1, 1. 1-10. Read More