Executive summary

Easy Jet Airline Company is a British company that has an aim to operate as low-cost carrier both for national and international customers. It wants to make the quality services but affordable for any customer. It is facing intense competition and needs to focus towards the enhancements in its current strategies to increase its profits.

Introduction and overview

Easy Jet Airline Company is second principal low-cost transporter in Europe (Williams and Baláž, 2009). It was established by the British entrepreneur Sir Stelios Haji-Ioannou. It is a limited company that was established in 1995(“easyJet,” n.d.). It is headquartered in Luton Airport and is serving in Europe, North Africa as well as in West Asia. It has a very low fare and striving to maintain the low costs. This is the part of its marketing strategy to gain the access to more and more customers by keeping the fare low. The company claims to reach 6 million passengers a month throughout Europe.  Its target market consists of people who finance themselves and not get financed by their companies. Leisure travellers are also its customers that make little trips. It also sells tickets online and making the passengers more comfortable by providing them speedy boarding.  It is following a point-to-point strategy and assists its passengers in not having the connection flights. This not only saves passenger’s time but this also saves the environment by reducing gas emissions. Moreover, it has also services based on the same principle of low cost. This includes a car service; Easy Car along with easyHotel and easyBus. It has the vision to make flights so affordable as a pair of jeans.  This report will analyse its aeroplane sector as a strategic business unit and will evaluate its strategies in this regard.

Business strategy

Business strategy can be developed by external and internal analysis of the company.

External analysis of the industry

Porter five forces framework

Porter five forces framework will analyse easyJet Airline Company with respect to industry.

The threat of new entrants

EasyJet has the low threat of new entries owing to serving in the low-cost market. There are extremely high startup costs associated with this business that is making the threat of new entrants low( Barros and Couto, 2013). There are strict regulations and airport taxes are high. Also after entering into the industry, it has to face the price war as a result profits will decline. The threat of new entrant’s increases in case of a company that already possesses equipment and knowledge and still wants to enter the low-cost market.

The power of suppliers

The power of suppliers is high for easyJet as there are only two suppliers in the industry; Boeing and Airbus (Palepu and Healy, 2007).  This can be low if the company purchases several planes at the same point of time. There is also the high power of oil suppliers for easyJet. There is another supplier for the company that is airports. When the company uses the airports, then it also pays taxes which are usually very high.

The power of buyers

It is high as a fact that easy jet is not only the single company that is operating at low cost. It is very easy for its customers to select another airline and avail the service. It has developed many strategies to reduce this power and to make the customers loyal to the company. For this company, it has introduced its booking services at the website that is increasing the number of passengers extremely high. There are also different allied services for the customers that are aimed to increase the customer’s loyalty. Its low prices are low and this makes customers not easy to switch to other competitors.

Threat of substitution

EasyJet is operating in such industry that has high costs associated. Due to this fact, the threat of substitute is high for the company. People may prefer to travel by some other means that would cost them low prices. There can be an efficient electronic train system that can replace the EasyJet services. But this is only a threat for the short routes. For the long routes, this threat is lower as trains cannot be used as a replacement for the customers for the long routes in an economical way.  Customers also feel it comfortable to have the use of airline for the long route and not go for any other option that decreases their comfort.

Competitive rivalry

There is a high risk of competitive rivalry due to operations in the low-cost market. There are a limited number of companies that are operating in low-cost marketing and this is also a factor in the increase in competition. Due to the low prices, customers can switch to any other company and thus companies are facing high rivalry. Its competitors are both direct and indirect. In the category of direct competitors, there are low-cost companies that have same product with the same assortment of prices. The competition among these companies is very intense and each company is trying is get the dominance in the market. Easy Jet is competing with these companies by focusing on the two segments that include business travellers as well as those people who travel for leisure. Other companies are only covering one segment. There is also competition for availing the services of main airports. The other type of competition is known as indirect competition that covers those segments which have the people who get interested in having cheap flights. In the list of indirect competitors, there are also substitutes as trains.

Internal analysis of the firm

Different models can be used for the internal analysis of the company. There can be the use of activity system involving the value chain and there are also the generic strategies that will provide the analysis of the firm.

Value chain analysis:

Easyjet is operating as a low-cost company and is thus facing a severe competition. Its business process consists of activities that put in value to the company products as well as services. This is known as value chain model. With the efficient management of this value chain, the company enjoys the competitive advantages over its other competitors. This is not only improving the quality of its products and services but it is also lessening the risk of substitutions of products. The value chain of easyJet has two sorts of activities. These include primary as well as support activities.

Primary Activities:

EasyJet has a focus on the primary activities and these are the main concern for the company. The company has an objective of having the operational effectiveness of the use of these activities.  Included in the primary activities are inbound logistics, outbound logistics, marketing and sales as well as operations. Inbound logistics management includes such activities that consist of receiving of material and resources, storing them and distribution rights related to the products and services.  Within the distribution rights, there are rights of material handling along with warehousing and stock management. Within the inbound logistics, easyJet makes purchasing of routes and fuels. It has to make the route efficiently operated and for this purpose, it has to make their availability timely. There is a need of confirming that crew is always in the correct consigning. There is also the purchase and management of fuel for the company and in this regard, it is facing intense competition and pressure from these sellers is also high. The other reason of competition here is the fluctuations in the prices of petrol. These fluctuations have a direct impact on the easyJet also. It is still not self-sufficient in the fuel area and effect of the price fluctuations in fuel impact negativity over the profit of the company.

Within the operations category, there includes the flight scheduling and management. As it works on the point to point strategy and make those flights available to customers that make them reach their destination directly. In this way, passengers do not need to have the connecting flights. It is using this also as a strategy of having a competitive advantage. In the context of its outbound logistics, it operates effectively at the customer service level. There is an aim of providing the quality services with their availability at the same time in an economical way at low cost.

With the airline services, it also provides car service known as Easy Car. The other areas of operations include easyHotel and easyBus. Customers make the long-term hiring of cars and avail these rental services. There is also the availability of luxury cars services on customers request by the company. In this area, the company also has a large number of target markets. It serves the market with a huge number of customers as there is a huge range of prices available that can be taken by a large number of customers.  The marketing activities are carried out by easyJet in order to attract the buyers and make the sales and earn profits by ensuring that products are purchased by buyers. These marketing activities consist of making the services available to the consumers and determining the price strategies such as low-cost leadership strategies. There are also the promotional activities parts of this marketing strategy. Now technology has been using in the selling and distribution of products that include the booking of tickets rental cars and many other services. The use of technology is significantly reducing costs both for the customers and company.

Services are also part of primary activities which also include those activities that are used for the addition of the value of the product or assisting the customer along with providing him repairing and, installation plans. This also takes into account the in-service training as well as the implementation of any new technology as the advancement of equipment used in flying. These services are aimed to increase the service standards and use this as a source of competitive advantage in the airline industry.

 Support activities include management of the differentiation strategy in order to gain the competitive advantage. The firm infrastructure is also the part of its support activities. There is the development of fiscal policy can be included under the management of firm infrastructure. Human resource department is also included in the infrastructure of the firm and its effective management has a contribution towards the progress of the company. There is an intense competition with the use of technology in different functions of the airline company. In order to survive in this competition, there is a need for implementation of technology in different functional areas of the company. Currently, it is using the technology while making the reservations and there is now the availability of online ticketing along with the flight scheduling system. Now there is also the use of e-procurement in order to make the purchasing cost-effective. This strategy is also used for the purpose of achieving the price goals. Adopting more and more IT systems have enabled organization to shift towards the paperless organization. This is providing efficiency and flexibility in operations of the company. Procurement activities are carried out as support activities and these are related to the achievement of inputs or assets.

Generic Strategies

The other approach to analyze the company internally is to analyze with the help of generic strategies. It is the more effective method as it allows companies to accomplish their long-term goals with the help of these generic strategies. It is possible to either follow only a single generic strategy or use the combination of these strategies. These include cost leadership, differentiation as well as segmentation strategy. Using these strategies companies successfully compete in the market.

Cost leadership

Easy Jet is pursuing the low-cost strategy and is earning profits as a result of this strategy. For this purpose, there is the use of several methods that make the services available to customers at a low rate such as the use of technology in selling the services or tickets. In order to save the costs, the company uses those airports that have low tax rates.

Differentiation

The company can only survive in the competitive environment if it is pursuing the differentiation strategy. Innovation is the key to pursue this strategy. Easyjet has also used this strategy by keeping its fare low and different in ranges from other competitors. There is a use of premium price for a separate group of customers and use the low prices for another group of customers (Barros and Peypoch, 2009). Another differentiated feature of the company is the selling of e-tickets. This facilitates the customer and saves the costs on customer’s part also. He also gets the facility of being a remaining update regarding his reservation. He can check the prices before purchasing and can compare them with other prices prevailing in the market.

Segmentation strategy

Easy Jet has a focus on the European market and is not still going towards the Asian markets. These are still untapped markets for the company. This is due to the reason that company uses the low-cost strategy and it is not possible to compete with a large number of competitors in more than one market. This is due to the reason that each market has its own demands.

Ethical assessment of strategy

All the strategies of the company are ethical and are more in the favour of the customers. It is pursuing the low-cost strategy, that is for the welfare of individual customers, who are not sponsored by their companies; middle-class families. The other strategy for the welfare of the customers is to no use of connecting flights. This saves their time along with benefiting the environment and economy by consuming less fuel. There is also the use of technology for the purpose of customers ease in buying. Customers get the option of making the comparison of prices and then make purchases.

Evaluation of strategy

Strategies can be evaluated both in short term and long term context. The evaluation of strategy is thus a complex process. There can be the use of different models for the evaluation of strategies. All the models use different criteria for the purpose of emulation. With the use of these models, one can assess the need for a change of strategy for the purposed of making improvements as well as making adjustments to the changing outside and inside environment. Richard Rumelts has four criteria for the purpose of evaluation. These include consistency, consonance, feasibility as well as an advantage.

Consistency: There must be consistency in the strategy with respect to goals and policies. And not any goal and policy get inconsistent.

 Consonance: The strategy should have an adaptive retort to the outside environment and there must be significant changes happening inside it.

Advantage: The strategy must give for the conception or upholding of a competitive advantage in the chosen region of action.

Feasibility: The strategy must neither work too hard to access capital nor lead to the devolvement of unsolvable sub-glitches.

There is another model that can be used for the purpose of evaluation of the strategies. This is known as Johnson et al. according to this, there are three criteria that can be used for the purpose of evaluation. These are suitable, acceptability as well as feasibility. The safe acronym is used for this purpose. Strategy evaluation is a complex process and its evaluation can be carried out with the use of these three criteria that allow the credible results for companies.

Suitability: It refers to the adaptability with the current and expected external environment.

Feasibility: It is the assessment of whether the organization has the resources to pursue the strategic choices.

Acceptability: It has a focus on the financial as well as stakeholder’s aspect when referring and evaluating the strategic choices.

Conclusion and recommendation

Easy Jet is the second largest company after RyanAir, which is a leader in the airline industry. Easy Jet enjoys the good reputation in the market due to its strategies that are for the benefit of the mankind also.  It has a huge customer base due to the affordability of its products and services by them and also the maintenance of the quality of the services by the company. But it also is facing severe competition in the industry as there are also many companies that are also operating and offering their services at low costs. The number of competitors is huge number due to the nature of having both direct and indirect competitors. In order to sustain in the market and work in a better way in the industry, the company is using more than one strategy at a time. This is allowing the company to face the competition effectively.

Although it is working in the best way in its industry there are some recommendations for the further improvements. These if followed will make the company enjoy the progress on long-term basis. The company is currently using the technology in most of its functions like selling, purchasing and other management functions. There is a need of having the use of technology to get interconnected with the customers also. This will provide the company direct feedbacks and will be able to improve its services and face the competition effectively. Also, it is operating in other areas as cars and hotels. There is need to pay more focus towards these areas also in order to gain profits from those areas. This will also assist in increasing the customer base of loyal customers and those who are purchasing more than one service or product at a single point in time. It will also assist the company to extend its markets and get enter into the saturated markets also using the different strategies.

It is currently working on saving the environment and fulfilling its corporate social responsibility. But it should go beyond the serving of customers to their direct destination. It is recommended to the company to go towards the green marketing. It will further enhance the company image as a socially responsible company. It is also in a need to add more strategies towards the preserving of the environment.  It must work towards reuse; reduce a recycle in order to preserve the environment from company activities. It can also face the competition in its industry easily by making alliances. It is also required to work more towards the employee progress and enhancement. There is also need of focus towards the marketing area. There must be the use fo huge adverting in order to reach each customer of the targeted group. The use of technology or the use of any social media will provide benefit in this regard.

 

Refernces

Barros, C.P. and Peypoch, N., 2009. An evaluation of European airlines’ operational performance. International Journal of Production Economics, 122(2), pp.525-533.

Barros, C.P. and Couto, E., 2013. Productivity analysis of European airlines, 2000–2011. Journal of Air Transport Management, 31, pp.11-13.

(“easyJet,” n.d.) easyJet [WWW Document], n.d. URL https://www.easyjet.com/en

Palepu, K.G. and Healy, P.M., 2007. Business analysis and valuation. Cengage Learning EMEA.

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.

Williams, A.M. and Baláž, V., 2009. Low-cost carriers, economies of flows and regional externalities. Regional Studies, 43(5), pp.677-691.