EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. All airline companies within the industry will have similar value chain, which will include activities such as obtaining fuel, designing fare structures, airport facilities, developing co-operative agreements, and providing customer service. Paperless operation, the management and administration of the company are undertaken on IT systems, which are accessed through secure servers; provide flexibility in the running of the airline. On the other hand, risks which produce Overview and forecasts on trending topics, Industry and market insights and forecasts, Key figures and rankings about companies and products, Consumer and brand insights and preferences in various industries, Detailed information about political and social topics, All key figures about countries and regions, Market forecast and expert KPIs for 600+ segments in 150+ countries, Insights on consumer attitudes and behavior worldwide, Business information on 60m+ public and private companies, Detailed information for 35,000+ online stores and marketplaces. 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. And hes moved aggressively to grab additional takeoff and landing slots in markets he sees as important. EasyJet was able to operate at only 18% of its 2019 capacity. Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. 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. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. None would fly again until June 15. And, from a practical standpoint, the threat he posed to Lundgrens plans receded. FORTUNE may receive compensation for some links to products and services on this website. 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). A prime example of this was the subsequent takeover of Go by EasyJet. 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. Still, it wasnt spared from the industrys general carnage. )Compared to some of its low-cost rivals, EasyJet also owned more of its planes outright. From June 15, when EasyJet resumed flying, through September 2020, it carried 9.5 million passengers, compared to 37.1 million in the same period the year before. Front and center was the existential risk of the coronavirus. 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. So having considered the internal strengths and opportunities above, what are the potential opportunities available to EasyJet and what are the threats faced by EasyJet both from within the Airline industry and as a result of the world economy itself. But flying to those primary airports in Western Europe is more expensive. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. Standardisation in its activities as an airline leads to both economies of scale and a simpler product, which is cheaper and easier to distribute. 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. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. It is evident that having only one collaborate is risky due to the possible delays in time. WebIts evident that EasyJet takes few risks and applies firm business principles while carefully exploring the market. Ryanair and Wizz Air cater almost exclusively to leisure travelers. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. Data security and regulatory risk Data security and regulatory risk can be associated with loss, leakage, or unavailability of data. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. Supported by innovative and effective advertising. Step 1: Identify and document risks. Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. It hoped these measures allow the public to feel confident flying again. To what extent does EasyJets concentration on In essence, Lundgren told the BBC, thismeansonly the rich can go on holidays: The expense of these tests would be way over and above what the cost is of an average EasyJet fare, he said. TECHNICAL Changes in retailing methods as such ticket sales via the Internet is now a common place in air travel, passengers receive an email containing their travel details and booking reference when they book online. Building on our existing leading positions in Western Europes top leisure destinations to provide network breadth and flexibility. EasyJets revenues in 2019 were $8.9 billion, on which it made$600 millionin profit. In 2020, sales cratered more than 50% to $4.2 billion, and the airline recorded its first ever annual loss: a jumbo jetliner-size blast of red ink totaling nearly $1.8 billion before tax. easyJet's updated framework continues to build on its competitive advantages - an unparalleled network and market positions, efficient low cost model, well-known brand and strong balance sheet - positioning easyJet to deliver sustainable and disciplined growth and returns for shareholders. The airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. Risk 2: Geopolitical instability. Flying point-to-point routes, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers. LEGAL The European deregulation of the commercial aviation provided both major strategic threats and opportunities, the national mainstream airlines faced severe price competition from discount carriers. Introduction Company Background, Financial Performance and Key Services EasyJet is an airline company based in Britain WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. EasyJet is known for its low-cost competitive pricing. The airline began purchasing carbon offsets for the CO2 of all its flights in 2019. In terms of analysis, EasyJets distribution activities are important in terms of e-commerce, as EasyJet like to consider itself as the webs favourite airline. Ties are banned except for pilots! A PESTEL analysis of the industry will examine the local, national and global influences of political, economic, social and technological factors to understand opportunities and threats well. As hard as it has tried to inoculate itself against the pressures of the pandemic and to convince passengers it will be safe to fly, its fate remains up in the air, subject to unexpected and unwelcome turbulence. 8. easyJet seek to strengthen their position in key markets as the competitive landscape evolves. Focusing on improving the control and decision making across operations. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. Porter through the use of the value chain illustrates how resources should be utilised to enhance least-cost production or differentiation strategies (the generic strategies suggested by Porter). EasyJet also enjoys internal strengths in its operations in terms of efficient use of airports by reducing turnarounds to 30 minutes and below, EasyJet can achieve extra rotations on the high frequency routes. The value chain analysis will show the total value added by the airline industry and EasyJet. The customers of EasyJet have been using the Internet for making bookings. Table below provides an analysis of EasyJets sales revenue and profitability ratio since 1998. However, by year 2000 it has not only managed to survive but also increased its market shares and assets of aircrafts to 74 and servicing 105 routes and carrying over 20 million passengers a year. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. Firstly, threats in terms of new & existing competition. 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. This is done in order to maximise the yield from a flight, as many of the costs associated with running a flight are fixed relative to the number of passenger on board. Cost advantages might be achieved because of EasyJets efficient use of airports. But EasyJets contract required it to pay the aircraft maker at least $6 billion through 2023a sum considerably greater than the airlines entire current market Its not clear what role Haji-Ioannous pressure played in this decision. WebEasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. Appendices 1. *You can also browse our support articles here >. They fly into second- and even third-tier airports, where they control a dominant share of the gates and can drive tough bargains on any airport fees and charges for ground crews and baggage handlers. Lundgren had been an industry leader in trying to position EasyJet for this new world. This will identify its strength, weaknesses, opportunities and threats. Our revenues have been benefitting from data projects in late yield initiatives and differential seat pricing. (The others are rival budget airlines Ryanair and Wizz Air, as well as Southwest Airlines in the U.S., on which EasyJet originally based its business model. Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. Disappointing your customers. Budget airlines that rely on the leisure market make most of their money from April to August. The company carries out To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! And they are relentlessly focused on keeping per-seat costs down. Investments in assets are also key consideration in value creation in that consideration of the extent to which assets and working capital are being utilised. Competitive pressure. For the battered airline, 2020 couldnt end soon enough. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice| Do Not Sell/Share My Personal Information| Ad Choices Enabling risk management through a WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Implementing this strategy successfully depends on EasyJets ability to deliver enhanced benefits to customers over its competitors together with low prices. Lundgren wasnt completely despondent: Where bookings were allowed and quarantine rules not restrictive, passengers were coming back. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. Due to varying update cycles, statistics can display more up-to-date In June, the airline found a deft way to simultaneously relieve the pressure from its cash burn and Haji-Ioannou: It raised more than$631 millionto help it weather the pandemic by issuing new shares equivalent to 15% of the companys outstanding share capital. Terms & Conditions. Weaknesses identified earlier could also offer potential opportunities in terms of development of brand awareness globally. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. 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. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. As a result, it finished 2020 with more aircraft in its fleet than it had at the beginning of the year, despite the pandemic-induced travel doldrums. Easyjet are situated extremely in strategic option 1 ( low monetary value, depression added value ) The eight nucleus strategic options are: 1. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. The company negotiated with trade unions to move more of its pilots and cabin crew on to seasonal contracts, which would allow the company to better match its expenses to periods, such as the summer, when it generated moreprofit. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. As Internet transactions have a lower cost associated with it EasyJet encourages its customers to book on-line by offering them a discount for on-line ticket reservations. Porter explains that there are five forces inherent in a market, which will jointly determine the intensity of competition and profitability of EasyJet and the airline industry. The idea of remote working can also result in co-ordination and control weaknesses. 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)). 3. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. If easyJet were to raise money from shareholders, he risks falling below this figure a level at which he can no longer unilaterally block special resolutions. In March 2020, he wrote to EasyJets chairman, John Barton, and demanded the company terminate the contract, citingforce majeure. Haji-Ioannou also alleged three large minority EasyJet shareholdersthe asset management companies Invesco, Phoenix Asset Management, and Ninety Onewere straw men, secretly controlled by Airbus, since all three companies manage some of the aerospace giants employee pension assets.But, in the end, Haji-Ioannous campaign failed to catch fire with other investors. Given that they were doing almost nothing before, there is a big opportunity to move from zero to something, he says of the holiday tours. EasyJet is forever trying to attain a cost level that is low relative to its competitors. data than referenced in the text. Please do not hesitate to contact me. 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what are the risks associated with easyjet's strategy