Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. This time, he succeeded in scheduling a showdown vote for May 22, 2020. Next we will use Porters Five Forces analysis of the industry and the increasing threat of other low-cost carriers (Ryanair, bmi baby etc) and also threats from the flag carriers (British Airways, Air France, KLM, Lufthansa etc). In terms of strategy, many factors are outside the control of the company, such as use of high quality components and low defect rates for its aircrafts. Strategic risk management is the process of identifying, quantifying, and mitigating any risk that affects or is inherent in a companys business strategy, strategic objectives, and strategy execution. Given the fact that the company offers The first is to reduce the bottom line costs of operation (low cost strategy) and the second is to increase the value of the organisation and its reputation to customers, so that they will demand more or pay more for what they receive (differentiation strategy) (ACCA Paper 3.5 (2001)). And, finally threats of any takeover bids from national airlines. The customers of EasyJet have been using the Internet for making bookings. Noting that EasyJet had failed to say exactly how the deferral affected EasyJets cash burn, the founder said that EasyJet might have engaged in market manipulation by failing to disclose such details and by using overly optimistic forecasts for when the companys revenues and profits might recover. In an interview with LondonsEvening Standard newspaper in January, Lundgren sounded down, admitting he missed frequent trips to the Spanish island of Majorca, where he owns a house and where he and a friend also own a recording studio. And the government has said the second of these has to be a more accurate PCR test, which can cost as much as 219 ($302) per passenger. EasyJets revenues in 2019 were $8.9 billion, on which it made$600 millionin profit. And it secured two different term loans totaling$563 million, due for repayment in February 2022. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. It helps to remember that while you cant control what happens to you, you can always control your response. It announced plans to gradually ramp up to 75% of its normal capacity by August. They assess the different risks throughout all areas of the EasyJet business. Finally, in February 2021, the company took advantage of a sudden uptick in investor confidence on the news that vaccinations in the U.K. might allow international travel to return by late summer. *You can also browse our support articles here >. Where normally there would be the roar of engines and the trundling rumble of buses and baggage carts, the whistling wind is often the only sound. )The crisis has also posed complications for the 54-year-old Lundgren that his competitors dont face, including some particularly unwelcome excess baggage in the form of Stelios Haji-Ioannou. This has the highest risk, but This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. Potential threats of economic recession, since air travel is effectively a commodity product, it is recession prawn. But the training center is the only part of EasyJets operation at Gatwick still humming. POLITICAL Following the European deregulation of commercial aviation, a fleet of low cost carriers are reshaping the local airline landscape. 3. Having fought off Haji-Ioannou, Lundgren and EasyJets C-suite faced other foes they couldnt control. Such lower costs benefit EasyJet initially as innovation is rewarded. Balance your retirement plan with your other financial goals. Funding strategies developments is clearly important in that the nature of funding must be appropriate and compliments the low cost strategy of EasyJet, by ensuring that interest costs are low. The Essay Writing ExpertsUS Essay Experts. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. To accomplish that, Lundgren has taken drastic steps. The companys Online booking facility in October 1999 aided Internet sales to pass the one million mark. The U.K. requireseven those returning from green countriestake COVID-19 tests before boarding a plane to return to the U.K. as well as within two days of returning. EasyJet through its use of an overall cost leadership strategy can use internet-based technologies to reduce value chain costs in a variety of ways: On-line bidding and order processing to eliminate the need for sales calls and decrease sales force expense. But with new, more infectious variants of COVID-19 spreading rapidly in Europe, in October renewed lockdowns were imposed across many parts of the U.K. and from Helsinki to Tel Aviv. easyJet seek to strengthen their position in key markets as the competitive landscape evolves. It now owns just over half its fleet, down from 70% in 2019and six of every 10 planes it does own have been pledged as collateral against its loans. The fuel-efficient jets could help EasyJet reduce its carbon footprint at a time when consumers and governments seemed increasingly likely to hold airlines accountable for their climate impact. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. But at the same time, Haji-Ioannou and his family sold off a portion of their shares, bringing their total holdings to less than 27% of the company by May 2020. Effective use of digital and data tools to underpin growth and deepen customer relationships. (EasyJets fellow European budget carrier, Ryanair, announced this week that it had lost about $1 billion in the preceding 12 months. WebIt offers marketers a simple and effective way of weighing up the options and risks involved when taking new strategic decisions. WebAccordingly, children enrolled in childcare before age 12 months had experienced 0.5-0.7 more infections at age 6 years (in total 4.5-5.1 infections) than peers enrolled at age 3 years, differences that persisted throughout adolescence. Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. Statista assumes no Procurement and firm infrastructure as a support activity does not add much extra value. In a vast hangar on the outskirts of Gatwick Airport, one of EasyJets big hubs, sit a row of five space-age pods, painted in EasyJets trademark orange-and-white colors. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. This eliminates the need to any commissions to external sales agency. Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). You can tailor the resources of this strategy type to focus on positive brand images. Of popular holiday destinations, only Portugal and Gibraltar were put on the initial green list, with no requirement to self-isolate upon return. Furthermore, a lifetime history of D If COVID doesnt ease more quickly, and leisure travel doesnt rebound as hoped,EasyJetshole will only get deeper, and its plans to grow could be spiked indefinitely. It also offers passenger a few more extras, such as allowing them to check in at the airport without charge (Ryanair charges passengers who dont check in online) and a loyalty program that confers priority boarding privileges. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Potential threats in terms of changing social trends like holidays outside Europe (many now want to experience the eastern cultures and travel to holiday destinations like China and Japan) and also travelling via the EuroStar to Paris etc. EasyJet is known for its low-cost competitive pricing. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. The company has also grown in terms of its acquisitions of GO and also increase in purchases of its own aircrafts. It hoped these measures allow the public to feel confident flying again. Given EasyJets cash burn, it needed to raise more moneyand quickly. Easyjet are situated extremely in strategic option 1 ( low monetary value, depression added value ) The eight nucleus strategic options are: 1. 6. Feeling powerless is one of the worst feelings, not just in business.. In terms of strategy, many factors are outside the control of the company, such as use of high quality components and low defect rates for its aircrafts. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Do you have a 2:1 degree or higher? This is critical for EasyJet having analysed the competitive rivalry position in the industry. Are you interested in testing our business solutions? They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. But flying to those primary airports in Western Europe is more expensive. Web Evaluate EasyJets operations strategy against Hayes et al. s criteria of consistency and contribution to competitive advantage. All work is written to order. All rights reserved. Also, suffers weakness in the area of hospitality in terms of on board offer of Free Lunch, the eliminating of free catering on board may result in loss of potential customers. This will help the companies decision makers understand where the organisation is now. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. The findings in this Dynamic fares with a simple structure and also ensuring that it are the cheapest fare on the route. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. Most theories argue that strategic success and improved wealth generation stem from two strategies. Strategical moves like this have enabled it to reduce cost and improve the convenience for the customers. Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? The54-year-old Greek-Cypriot entrepreneur hasnt had a formal management role in the airline since he stepped down as chairman in 2002, but he remained a major shareholder, owning more than a third of the company before the pandemic hit. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. It was enough to make any airline CEO play the blues. This form of strategy combines a low price, low perceived service benefits (no free lunch) and a focus on a price-sensitive highly competitive market segment. Terms & Conditions. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. The next quarter was not much better: A U.K.-wide national lockdown was imposed in November and, after a brief easing of restrictions in the run-up to Christmas, again in late December. WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. It is evident that having only one collaborate is risky due to the possible delays in time. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs 1 or No. British Airways. Meanwhile, the U.K. has announced international travelwill resume as of May 17, but willoperate according to a traffic light system, with arrivals from red-, yellow-, or green-designated countries subject to different requirements. SOCIAL changes in consumer taste and lifestyle represent both opportunities and threats for the industry. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. The second is the threats from substitutes, rail travel v air travel, the growing demand in Eurostar and cruses. Improving CSAT across the whole customer journey. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. EasyJet is forever trying to attain a cost level that is low relative to its competitors. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. Capabilities to turn resources into advantages, Customers demand change to more flexible schedules, comfortable and relevantly cheap services, Extremely high competition for customers and resources. Transfer the risk. The airline also managed to reduce itsfuel cost per seat flown by 2.9% through a series of small changes: instructing pilots to use only one engine when taxiing, for example, and to climb to cruising altitude as fast as possible, since level, higher-altitude flying is more fuel-efficient. The federal government recently made cloud-adoption a central tenet of its IT modernization strategy.An organization that adopts cloud technologies and/or chooses cloud service providers (CSP)s and services or applications without Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. Whats more, it included maintenance and avionics support for EasyJets existing fleet. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. The customers of EasyJet have been using the Internet for making bookings. In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. Also, only one type of aircraft is used, in order to minimise maintenance costs. EasyJet in its pursuing of low-price strategies may be prepared to accept the reduced margin either because it can sell more fares than competitors. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. Strategic risk is a category of risk; alongside operational, financial, regulatory and other business risks, it forms part of the umbrella of risks your organization faces. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. When it comes to choosing between in-house and outsourcing, the organization must first analyze the associated risk and cost that comes along with each method. The pace of recovery will be determined by vaccination rates, Alton Aviations Ryan says.The problem for EasyJet is that almost all the routes it flies involve Europe, and the continent was lagging far behind on vaccinations. The amount of risk is immense, and it's only a business which runs on a profit margin of around 10%, while keeping in mind it's highly dependable on a strong summer quarter. The globalization is also another factor influencing which build up the air traffic as lifelong. Lundgren has pulled every financial lever available to him to keep EasyJetaloft. And the simulators have been kept busy virtually around the clock, even during the pandemic, as EasyJet has sought to keep its pilots properly certified so they will be ready when flying returns. In fact, Haji-Ioannou continued to press his allegations that corruption underpinned the Airbus contract, raising the matter at EasyJets general meetings in July and December. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. The company benefits from being one of just four airlines globally thatcurrentlyhave an investment-gradecreditrating, according to Gerald Khoo,a transportation analystwith brokerage firm Liberum. Free resources to assist you with your university studies! Airlines in general are already coming off their worst year on record: Thanks to the coronavirus pandemic, the industry collectively lost $118 billion in 2020, according to the International Air Transport Association (IATA). Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. To what extent does EasyJets concentration on EasyJet has other advantages over its full-service rivals too. They have focused on expanding into new markets in Eastern Europe. The management of the element of working capital. He said he had discovered a secret meeting in Switzerland, arranged by Airbus, between top EasyJet executives and a lawyer who, according to documents revealed in the Panama Papers leak, may have helped clients evade international sanctions through offshore shell companies. The concept of the value chain is particularly useful in understanding an organisations strategic capability since its concentrates on value activities and the linkages between activities rather ran just resources. This will provide an evaluation of the external business environment in which the company operates. Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. These are set out below: easyJet has a strong network of leading number one and number two positions in primary airports, which has proven to be amongst the highest yielding in the market. Cost advantages might be achieved because of EasyJets efficient use of airports. This strategy is focused on keeping costs down and EasyJets policy of no free lunch and efficient use of airports by limiting turnaround to 30 minutes. The third force is the threats from the bargaining power of buyers, is this strong for both EasyJet and the entire airline industry with a large number of alternative suppliers, hence, the aggressive pricing strategy. Get in touch with us. In the long term, this is concerned with the extent to which the organisation is operating profitably. Its also hard to monitor the performance of each individual. The pandemic, of course, wiped out business and leisure travel alike. easyJet has a cost advantage over its major competitors on the primary network that it operates. 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