Strategic challenges facing airports in gaining competitive strengths

289 Pages·2017·2.82 MB·English

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Strategic challenges facing
airports in gaining
competitive strengths:
lessons from the practice of
Dubai International Airport
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• A Doctoral Thesis. Submitted in partial fulfillment of the requirements
for the award of Doctor of Philosophy of Loughborough University.
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Publisher: (cid:13)c Mohamed Abdalla Bitelmal
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Author: Mohamed Abdalla Bitelmal

Title: Strategic Challenges Facing Airports in Gaining Competitive Strengths: Lessons from the Practice of Dubai
International Airport

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Moratorium Period:…………………………………years, ending…………../…………200……………………….

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I
Title page
Strategic Challenges Facing Airports in Gaining
Competitive Strengths:
Lessons from the Practice of Dubai International Airport
......................................................

by
Mohamed Abdalla Bitelmal

A Doctoral Thesis
Submitted in partial fulfilment of the requirements for the award of
Doctor of Philosophy of Loughborough University
..........................................

October 2010

© by Mohamed Abdalla Bitelmal (2010)

II
Certificate of Originality

This is to certify that I am responsible for the work submitted in this thesis, that the
original work is my own except as specified in acknowledgments or in footnotes, and
that neither the thesis nor the original work contained therein has been submitted to this
or any other institution for a degree.

SIGNED: M Bitelmal

DATE: 5-10-2010
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ACKNOWLEDGEMENTS

I would like to take this opportunity to thank my supervisor Dr. David Pitfield for his
continued guidance and willingness to assist throughout the research, and Dr. David
Gillingwater for his help and suggestions to improve the quality of this work.

Thanks to all of those who in some way contributed to the success of this research,
especially all of the respondents from Dubai International Airport including: Mr.
Ghassan Amhaz, Mr. Lewis Naim and Mr. James Robinson, who gave up their time,
contributed their knowledge, and showed enthusiasm and openness in replying to the
research questions during the interviews.

I also wish to thank Ms. Amal Bufalasi, my central contact at Dubai International
Airport, for providing me with valuable material about the airport without any
hesitation.

Special thanks go to my wife and my parents for their patience, encouragement and
support provided during all these years to make this day possible.

But the greatest thanks and appreciation is due to Mr. Ahmed Aoun. Without his
support and help I would not have had the chance to come to study in the UK.
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ABSTRACT

The anticipated increase in competition among airports means that there is now a
greater need for strategic thinking in the airport business industry. In order to succeed,
airport management will have to implement new strategic initiatives and identify their
key competitive strengths. While many airports are now more active in following
strategic directions, there is some deficiency and inconsistency in the literature in this
regard. This research relates the theories of strategic management to the case of airports
in order to explore the issue of whether the airport business industry is able to apply the
different strategies adopted by other industries in order to achieve growth. The research
provides an in-depth analysis into the strategies that Dubai International Airport has
pursued. This carefully selected case study involves the collection of qualitative data
through conducting semi-structured interviews as a primary source of information. Data
collected are applied to different well-known business tools including the PESTEL
Analysis, the Five Forces Model and the Resource-based View (RBV) of the firm. The
research found that there are some strategic differences between the airport industry and
other industries. While it is possible for airports to adopt certain strategies, some strategic
theories are not very practicable for airports. While Dubai International Airport is not
considered very different from other airports, there are some differentiated characteristics
in its ownership and management that led it to outperform its rivals. The research
proposes that there are a number of key success factors derived from four core areas that
led Dubai International Airport to obtain strategic strengths over other airports. These
four areas include: General Condition, Competitive Situation, Resource Acquisition and
Strategic Direction. These areas are also classified as No Control, Least Control, Some
Control and Most Control, respectively. This thesis contributes to the development of a
best practice conceptual model that can help airport managers understand and improve
their key competitive strengths and success factors.

Keywords: Dubai; Airport; Business; Strategy; Management; Competitive; Strength;
Advantage; Sustainable; Environment.
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CONTENTS
THESIS ACCESS FORM ............................................................................................................................. I
TITLE PAGE ............................................................................................................................................... II
CERTIFICATE OF ORIGINALITY....................................................................................................... III
ACKNOWLEDGEMENTS ....................................................................................................................... IV
ABSTRACT.................................................................................................................................................. V
CONTENTS ................................................................................................................................................ VI
LIST OF FIGURES .................................................................................................................................... XI
LIST OF TABLES .................................................................................................................................... XII
ABBREVIATIONS .................................................................................................................................. XIII
CHAPTER 1 INTRODUCTION ............................................................................................................ 1
1.1 SIGNIFICANCE OF THE RESEARCH .......................................................................................................... 1
1.2 RESEARCH FOCUS .................................................................................................................................. 2
1.3 RESEARCH CONTRIBUTION .................................................................................................................... 7
1.4 RESEARCH QUESTIONS ........................................................................................................................... 9
1.5 RESEARCH OBJECTIVES .......................................................................................................................... 9
1.6 THESIS STRUCTURE .............................................................................................................................. 10
CHAPTER 2 STRATEGIC MANAGEMENT THEORIES AND THEIR IMPLICATIONS FOR
AIRPORTS 11
2.1 INTRODUCTION .................................................................................................................................... 11
2.2 DEFINING STRATEGY, STRATEGIC MANAGEMENT AND COMPETITIVE ADVANTAGE .............................. 11
2.3 THE EXTERNAL MACRO-ENVIRONMENT ............................................................................................... 17
2.3.1 POLITICAL FACTORS .............................................................................................................. 17
2.3.2 ECONOMIC FACTORS ............................................................................................................. 18
2.3.3 SOCIAL FACTORS .................................................................................................................... 19
2.3.4 TECHNOLOGICAL FACTORS ................................................................................................. 20
2.3.5 ENVIRONMENTAL FACTORS .................................................................................................. 21
2.3.6 LEGAL FACTORS ...................................................................................................................... 22
2.3.7 LIMITATIONS TO THE USE OF THE PESTEL ANALYSIS ..................................................... 23
2.4 THE EXTERNAL MICRO-ENVIRONMENT ................................................................................................ 24
2.4.1 INTENSITY OF RIVALRY .......................................................................................................... 24
VI
2.4.2 THREAT OF ENTRY .................................................................................................................. 28
2.4.3 PRESSURE FROM SUBSTITUTES ........................................................................................... 31
2.4.4 BARGAINING POWER OF BUYERS ........................................................................................ 32
2.4.5 BARGAINING POWER OF SUPPLIERS................................................................................... 33
2.4.6 LIMITATION TO THE USE OF THE FIVE FORCES MODEL ................................................ 34
2.4.7 IMPLICATIONS OF THE FIVE FORCES MODEL ON AIRPORTS ......................................... 35
2.5 THE INTERNAL ENVIRONMENT ............................................................................................................. 36
2.5.1 THE RESOURCE-BASED VIEW OF THE FIRM (RBV) ........................................................... 36
2.5.1.1 Financial Capital .............................................................................................................................. 37
2.5.1.2 Physical Capital ................................................................................................................................ 41
2.5.1.3 Human Capital ................................................................................................................................. 43
2.5.1.4 Organisational Capital ...................................................................................................................... 44
2.5.2 THE RESOURCE-BASED ANALYSIS ....................................................................................... 45
2.5.3 LIMITATION TO THE USE OF THE RBV OF THE FIRM ....................................................... 47
2.5.4 THE VALUE CHAIN ANALYSIS ................................................................................................ 47
2.5.5 LIMITATION TO THE USE OF THE VALUE CHAIN ANALYSIS ............................................ 51
2.6 COMPETITIVE STRATEGIES ................................................................................................................... 52
2.6.1 COST LEADERSHIP .................................................................................................................. 52
2.6.2 DIFFERENTIATION .................................................................................................................. 55
2.6.3 FOCUS ....................................................................................................................................... 60
2.7 GROWTH STRATEGIES .......................................................................................................................... 60
2.7.1 MARKET PENETRATION ......................................................................................................... 61
2.7.2 MARKET DEVELOPMENT ....................................................................................................... 62
2.7.3 PRODUCT DEVELOPMENT .................................................................................................... 62
2.8 DIVERSIFICATION STRATEGIES ............................................................................................................ 63
2.8.1 RELATED DIVERSIFICATION ................................................................................................. 63
2.8.1.1 Vertical Integration .......................................................................................................................... 64
2.8.1.2 Horizontal Integration ...................................................................................................................... 66
2.8.2 UNRELATED DIVERSIFICATION............................................................................................ 67
2.9 STRATEGIC ALLIANCES AND COLLABORATION .................................................................................... 67
2.10 SUMMARY ......................................................................................................................................... 70
CHAPTER 3 RESEARCH DESIGN AND METHODS .................................................................... 73
3.1 INTRODUCTION .................................................................................................................................... 73
3.2 THE SELECTION OF METHODS .............................................................................................................. 73
3.3 THE SELECTION OF THE CASE STUDY ................................................................................................... 74
3.4 DATA COLLECTION METHODS .............................................................................................................. 77
3.5 INTERVIEWS ........................................................................................................................................ 80
3.6 THE SELECTION OF INTERVIEWEES....................................................................................................... 82
3.7 CASE STUDY ANALYSIS ........................................................................................................................ 83
VII
3.8 LIMITATION TO THE CASE STUDY ......................................................................................................... 87
3.9 SUMMARY ........................................................................................................................................... 87
CHAPTER 4 ANALYSIS OF DXB’S GENERAL ENVIRONMENT .............................................. 89
4.1 INTRODUCTION ............................................................................................................................. 89
4.2 POLITICAL FACTORS .................................................................................................................... 89
4.2.1 OVERALL POLITICAL ENVIRONMENT OF THE UAE .......................................................... 89
4.2.2 FOREIGN TRADE POLICIES AND FREE TRADE ZONES ..................................................... 91
4.2.3 GOVERNMENT PROMOTION OF DXB................................................................................... 93
4.2.4 REGIONAL AND LOCAL CONFLICT ISSUES AND INSTABILITY ........................................ 97
4.3 ECONOMIC FACTORS ................................................................................................................... 99
4.3.1 THE GROWTH OF THE UAE AND DUBAI ............................................................................. 99
4.3.2 THE OVERALL ECONOMIC GROWTH OF THE UAE ......................................................... 102
4.3.3 RELEVANCE OF THE UAE AND DUBAI GROWTH TO DXB .............................................. 108
4.4 SOCIAL FACTORS ........................................................................................................................ 109
4.4.1 POPULATION AND DEMOGRAPHIC FACTORS ................................................................. 110
4.4.2 SOCIAL AND CULTURAL FACTORS .................................................................................... 112
4.5 TECHNOLOGICAL FACTORS ..................................................................................................... 115
4.5.1 TECHNOLOGY IN THE UAE .................................................................................................. 115
4.5.2 TECHNOLOGY IN THE AVIATION INDUSTRY .................................................................... 116
4.5.3 TECHNOLOGY’S IMPACT ON PASSENGERS ...................................................................... 118
4.6 ENVIRONMENTAL FACTORS .................................................................................................... 119
4.6.1 THE UAE’S ENVIRONMENT AND CONCERNS .................................................................... 119
4.6.2 AIRLINE AND AIRPORT RESPONSES TO ENVIRONMENTAL CONCERNS ...................... 121
4.7 LEGAL FACTORS .......................................................................................................................... 123
4.7.1 INTERNATIONAL AVIATION CONVENTIONS AND AGREEMENTS................................... 123
4.7.2 REGULATION AND ANTITRUST LAWS ................................................................................ 124
4.7.3 THE INFLUENCE OF THE GCAA AND CAA ........................................................................ 126
4.8 SUMMARY ..................................................................................................................................... 127
CHAPTER 5 ANALYSIS OF DXB’S COMPETITIVE ENVIRONMENT ................................... 130
5.1 INTRODUCTION ........................................................................................................................... 130
5.2 COMPETITION BETWEEN DXB AND OTHER AIRPORTS ..................................................... 130
5.3 POTENTIAL COMPETITORS TO DXB ....................................................................................... 136
5.4 SUBSTITUTES FOR DXB ............................................................................................................. 138
5.5 POWER OF DXB’S BUYERS ........................................................................................................ 141
5.6 POWER OF DXB’S SUPPLIERS ................................................................................................... 148
5.7 SUMMARY ..................................................................................................................................... 150
VIII