Read the case on Emirates: Connecting the Unconnected and explain:

1.

The concept of Economies of Scale & Scope.

2. How this has created competitive advantages partially shaped by the location where a firm is
born?
3. How a firm can enhance its original competitive advantage by carefully choosing new
locations?

Ans 1-Economies of scale and scope in case of emirates arise due to various
factors
a) Extent of market-Since emirates is based on the hub and spoke model with
Dubai being the hub. Dubais proximity to population centres with one
third of world population living within four hour range of the city and two
thirds of the world population living within eight hour range of the city.
This kind of location allows it to have significant cost savings arising due
to greater geographic density of customers.
b) Economics of density-Economics of density occur because of spreading of
flight specific fixed costs or it is economies of scale along a given route
.The cube square rule states that if volume of vessel increases by a given
proportion the surface area increases by less than this proportion. In the
case of emirates use of planes with large load factors like A380 allowed it
to achieve lower cost per revenue passenger mile because capacity was
expanded without comparable increase in costs. For example in airports
such as London Heathrow with allocation of five daily landing and
departure slots a380 was used to maximize passenger traffic.
c) Purchasing power- Its ability to influence Boeing by guaranteeing demand
for new aircraft allowed it to get extended range aircraft to cater to entire
set of new cities. Due to its purchasing power it was better positioned to
be able to get Boeing 777 and a380 aircraft before its competitors due to
it receiving industry discounts for bulk orders. This also allowed Boeing
which kept three kinds of aircraft to ramp up supply to relatively untested
routes .Whenever it wanted to increase capacity it replaced a330 for a
777-330 ER freeing the a330 for a new destination. This route
management where it kept adding new services to existing routes which
was possible due to availability of aircraft helped it disperse fixed costs for
existing operations.
d) Advertising- emirates sponsored sports teams of sports most popular in
the countries they wanted to target .It thus enjoys lower advertising costs
due to higher advertising reach .

Ans 2- The economies of scale and scope coupled with location where firm is
born i.e Dubai confers certain comparative advantages to emirates-

1. Dubais location in the Arabian Peninsula between Europe, Oceania, Asia

and Africa placed it at the nexus of global transit routes.

2. One third of the worlds population lives within 4 hour flight of the city and
two thirds of the world population lives within 8 hour flight of the city. This
left emirates based in Dubai better placed to tap untapped BRICS markets.
3. Relative distance from congested airspace allowed it to connect flights at
any time of the day allowing for 24 hour operations.
4. Relatively Good weather (although plagued with occasional fog and
general heat) as compared to European counterparts where rain and
snowstorms caused delays in American and European airspaces.
5. Favourable weather conditions such as jet streams when taken advantage
of by Flex Tracks an in air routing system helped reduce over 3800 tons of
fuel on emirates dialy flights.

Ans 3The new locations need to be such that it provides the company with a
first mover advantage and identify new network potential to feed into the
hub system , thereby allowing it to operate in environments where there
are fixed demand for international travel and thereby capture steady
growth.
To continue tapping undeserved markets, Emirates needs to continue to
focus on market research and emerging markets. It has to emphasis on
aggregating demand from various macroeconomic trends and gain from
structural changes arising from shifts in flows of exports and imports
between countries.
In order to help improve the congestion arising from high footprints at
Dubai airport, it needs to find strategic ways to expand and develop a new
airport base for smooth service.