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EasyJet Company’s Strategic Analysis and Marketing Essay


Executive summary

The airline industry is an industry which is growing to greater levels. This can be attributed to the nature of economic trends plus the growing technological innovations. As an airline, EasyJet seems to be well placed in the kinds of services and products it is providing (Ahlstrom & Garry 2009). Furthermore, experts are predicting excellent growth opportunities for the low cost airline in the near future. However, given the nature of the market and the shortage of other options in Europe, competition is likely to intensify. This paper seeks to evaluate the strategies which will ensure that this company consolidates its position in the airline industry (Anderson 2011). In essence, focus remains on pricing strategy and the expansion of its route network across Europe and even other parts of the globe. In spite of the threats and risks associated with airline travel, this company should strive to accomplish its set objectives which will ensure that it thrives even amidst hostile environments (Ballesteros 2007).

Company profile

EasyJet is a public limited company which is located in the United Kingdom. In England, this company is registered with the number 3959649. The company’s activities are aimed at offering international air transportation. These services are on a low cost basis. This airline focuses on low cost, financial strengths and on high efficiency. Currently, the company operates in over 27 European. It has over 380 routes. In addition, this company operates on 100 airports all over Europe and carried 51.9 million passengers in 2008. During the financial year 2007/2008, this company recorded a profit of 2.3 million pounds. It is also listed in the London Stock Exchange. This airline company was the brain child of Stelios Haji – Ioannou. The concept of this airline is based on the fact that the following the loosening of the restrictions regarding the airline industry, the demand for the short routes would be on the increase. This was based on the argument that if the airline prices were reduced on these short routes, then the demand for airline travel when it came to short airline routes would also increase (Cameron & Mike 2009). Although this company undertook her first flight in 1995 and operated on two routes, ten years later the company has been able to operate on 212 routes across Europe. This implies that the company was able to launch into 644 destinations within that span or period of time (Jones 2005 ). In 2005, the company had transported over 29 million passengers. Currently, this company operates and boasts of carrying more passengers within Europe than the British Airways.

ROCE

This is a ration which indicates the rate of return on equity shareholders’ investment. This ration is an index of rate of return of risk takers. Numerator is obtained after meeting dues of all claimants of contractual dues. But the numerator is affected by various factors such as profitability of sales, assets turnover, and financial leverages. This ration may appear to be simple but disaggregation of the same into various components gives a detailed picture of major players of the rate of return on equity capital. According to this airline, this airline’s ROCE indicates a very steady company. In essence, it gives a reflection of the confidence that the customers have in this company. Furthermore, the strategy which has been employed by this company has ensured that it is able to operate and bring forth profits and dividends to the investors (Burrow, Kenneth & Brad 2007 ).

Company purpose

EasyJet’s serves airline travellers. This is based on the mission statement which informs the mode of operation of the airline (Jones 2005 ). It is worth noting that the airline’s mission statement is to provide the travellers with safe, good value, point – to – point air services (Ballesteros 2007). This is to in effect offer consistent and reliable products at reasonable and fair prices in the European routes. Thus, in order to achieve this, the company seeks to establish relationships which are lasting with the potential company suppliers (Cummings & Worley 2008).

External and internal environment : The company operating environment Airline industry is one of the industries which are characterized by challenges which are dynamic. This implies that it is important to consider the fact that strategy is crucial when it comes to this industry. In this case, strategy in this industry is about the approaches the companies in this industry seek to survive and prosper within its environment over the long – term (Anderson 2011). The decisions and actions which are taken within the operations of EasyJet have a direct impact on the fundamentals which form the basis of this company. The way in which the organization secures, deploys and utilizes its resources will determine the extent to which it can successfully pursue specific performance objectives.

The strategic objectives which have been put into focus with this company are cost. That is the ability to produce and deliver services at a considerably lower cost as compared to other airlines (Barnes 2008). Quality is the ability which is characterized by being in a position of ensuring that one gets a certain specification without any problems. Essentially, speed entails the ability which is characterized by responses to the specific customer demands within the least time possible. This ensures the customers are satisfied with the nature of operations which are in progress. Fourth is the dependability, which is the ability to ensure that the stated services are delivered in accordance with the promises which have been made to the customers. And lastly, flexibility, this refers to the ability to change operations (Jones 2005 ). Flexibility can comprise four aspects. These aspects include the ability to change the volume of production, the ability to change the time taken to produce, the ability to change the mix of different products or services produced and lastly the ability to innovate and introduce new products and services.

The SWOT analysis

It is worth mentioning that due to this increase in demand of air travel, major airlines opted to reinvent the wheel. Initially these companies were focused on business travel, however due to the growing demand of leisure air travel the demand for airlines also increased. When this industry began, the industry was monopolized by the state owned flag carriers (Cameron & Mike 2009). These monopolies denied other interested stakeholders from actively taking part in the industry. However, with the gradual privatization and deregulation of the airline industry, there was a marked increase in the stakeholders in this industry (Barnes 2008). For instance, in 1992, following the expansion of the European Union, there was an increase in the airline destinations. Furthermore, this meant that airlines could take off and land in any of the destinations which were located within the European Union. Consequently, the airlines got the chance to expand their routes and fly across the continent (Belobaba, Amedeo & Cynthia 2009). This increased competition and consequently more people began using air travel as their preferred mode of travel.

This is a tool which is used to evaluate the internal and the external environment of a business. In this case, we are going to be looking at the environment of the EasyJet airlines (Ahlstrom & Garry 2009). In this case, EasyJet is a company which has demonstrated several strengths which have made it to stand out. As an airline, EasyJet has skilled and motivated workforce which ensure that the travellers are able to enjoy quality services. Secondly, the airline has a good market share in Europe. This enables the airline to be in a position of financing the projects that it may be having. As an airline which has low fares, this company stands out as one which has got superior reputation and efficiency (Anderson 2011). Looking at the weaknesses, as compared to other airlines, EasyJet does not have sophisticated aircrafts. This has dented its ability to effectively compete in the European airline industry. In addition, the airline faces stiff competition from the flagship airlines which are more stable financially.

EasyJet has various opportunities which are emerging. In this case, the emerging leisure travellers are providing a strong opportunity for this airline. Furthermore, since it is considered as the leading low fare airline, the airline commands a great deal of influence in the short routes within Europe (Mayer 2007). The company has shown growth in the existing market whereby it has managed to outdo airlines such as the British Airways in terms of local numbers. Furthermore, the airline’s location also bolsters the efficiency with it has (Mayer 2007). It is important to note that the economy is gradually stabilizing in Europe which implies that the number of short distance is likely to increase.

Currently, the airline industry faces certain threats. These include new competitors who are looming within the market. Secondly, the airline is not in a position of controlling the cost of fuel in the industry (French 1986). This implies that the company operates based on the international rates which may at times have a negative implication on the low fares (Bartholomew 2009). In addition, the risk of security in the airline industry has increased the number of regulations which may negatively affect the market strategy. Lastly, changing market tastes affect the market trends. These include the emerging technological trends in the market.

Porter’s 5 forces
Fig.1: Porter’s 5 forces

This is a tool which is used in analyzing the industry where a company operates. This model focuses on five forces that shape competition within an industry; these include; the risk of entry by potential competitors, the intensity off rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of the suppliers and the closeness of substitutes to an industry’s products.

The risk of entry by potential competitors In essence, the airline industry is placed in a position where there is a potential new entrant into the industry. In this case, EasyJet faces the same challenge as a company in Europe.

The intensifying rivalry among the established companies Thus the key aspect that has made this airline stand out is the brand name that it has managed to uphold. This is because a strong brand name ensures that the airline has got strong incentives to lure and keep their customer.

The power of suppliers is another aspect which is brought to the fore by the porter’s five forces. In this case, there is no cut throat competition among the supplier of these airplanes. This is because the only competitors in this case are Boeing and Airbus.

The bargaining Power of the suppliers

The bargaining power of the buyers in this case is quite low. This is because of the high costs which are associated with running the airline. What makes easyJet stand out is the flexibility which it offers its customers thus it leaves the customers with no choice but to stick to it. The threat which faces this airline is the availability of substitutes. This is especially so since the threat among the regional airlines is higher as compared to the local routes.

Existing strategy

There are several business strategies which this company has been employing in order to achieve its objectives. Essentially most passengers have discovered EasyJet airlines through its reputation for low fares (Jones 2005 ). Few airlines in Europe have lower fares. By innovating in myriad ways, the company has been able to save costs and pass those savings along to its customers. This has in turn led to an increase in the customer base and subsequently many passengers have resorted to this airline.

EasyJet airlines cuts costs through value pricing. There are no assigned seats, no meal, no movies and no first class travel on its flights. This airline is credited to having the quickest turnaround times on the industry. Many passengers have credited the management of this airline for such an ingenious venture and success in the past (Barnes 2008). Essentially this has boosted the quality of services that this company has been offering. The second aspect which is on the strategy of this company is sustainability. This company has separated itself from its competitors and it has shown other companies how to embrace what can be termed as sustainable business practices that aim to protect the environment. This has been clearly captured in the vision and the mission statement of this company. Some of the strategies which have been synonymous with this company include maintaining and promoting a people – friendly company culture, providing leadership to dynamic workforce, helping the community and charitable programs to get better results, ensuring suppliers optimize their energy usage and materials management and finding practical solutions to eliminating waste.

Other strategic innovations which have made this airline to stand out have included ticketless travel and lower fares (Jones 2005 ). In addition, the airline should consider having community programs which demonstrate to all other companies how a business can directly affect the people and communities in the many cities which it serves through outreach services and community building activities. Through such ventures, the airline will be in a better position of enacting principles and projects which will ensure that what is aimed at is achieved (Barnes 2008). Beyond the company’s industry innovations, the company should continue investing in practices which are customer friendly. These should include practices and policies which are in line with the company mission. When the company is able to create a massive following, then it should be able to separate itself from its competition in a variety of ways which will ensure that the strategic objectives of the company are maintained.

Generation of strategic options

Currently, EasyJet is ranked as a leading low cost airline in Europe. In 2001, a strategic analysis was carried out which brought forth the following findings; minimal impacts of the September 11, 2001 effects (Bartholomew 2009). This shows that the despite the prevailing threats in Europe, this airline still has a large market share in the market. Passengers have confidence in the airline’s security measures. Furthermore, the expected growth patterns which have been developed by the IATA estimates that the European scheduled passengers are likely to grow. The expansion of the European union brings to the fore issues of increase in the airline destinations.

There are several strategic options which are available for this airline. These options include the fact that since its launch in 1995, this airline has emerged to be among the leading low cost airlines in Europe (Mayer 2007; Jones 2005 ). The key strategic approach which has made this airline to get to this point is the low cost fare structure. In this case, the fares are one way and a price is quoted for all the seats on the same flight. It is also worth noting that all the booking on this airline are made via email or telephone.

In the recent past, the airline has been carrying out an evaluation regarding its fleet. The plans are underway to increase the fleet of this airline. This will ensure that the airline has got more bargaining power in order to accomplish its objectives. Furthermore, a larger fleet will ensure that the airline has got an increase in seat capacity thus this will translate into increased revenue for the airline. According to the Ansoff’s matrix, the airline should try to penetrate new markets with the existing products and services (French 1986). Then evaluate the other options which will bring to the fray better returns. The growth of the airlines in these markets will ensure that it is able to gain market share and expand its operations.

The company has invested in the efficient use of airports. This company’s airplanes fly to the less crowded airports of smaller European cities and prefer the secondary airports in the major cities. These preferences have lowered the landing charges (Jones 2005 ). In addition, they also offer faster turnarounds as there are fewer air movements. Easy jet’s efficient ground operations enable it to achieve extra rotations on the high frequency routes, maximizing the utilization of aircraft. EasyJet’s ability to offer point to point travel means that it does not have to worry about onward connections for passengers and their baggage, further simplifying its operations. Lastly, the paperless operations which have been embraced by this company have ensured that the travellers have an easy time when it comes of preparation for travel as well as when it comes to the management of any eventualities which might arise (Ballesteros 2007).

The Key Strategic factors

This airline has a strong presence in its operations. Some of the key success factors which have made this airline to stand out and achieve its goal include strong management. In this case, this airline has got a strong management team which has been working towards ensuring that the airline has got a major share in Europe. This has further been characterized by the capable workforce who delivers quality services to the passengers. Some of the services and packages which are being offered by this airline are competitive. In this case, easy Jet has been able to retain a class of leisure travellers which have ensured that it maintains a niche in the market. One of the most important aspects which have made this airline to stand out is the route system. This is because the airline has been able to capture key routes in Europe. This has managed to ensure that the presence of this airline in Europe is felt.

The cost of the implementation

It is worth noting that the cost of implementing these strategies will have an impact on the operations of this airline. Furthermore, it is important to note the fact that the management team should work out a plan to ensure that the cost estimates are within the range of the company operations. Some of the risks associated with this plans are associated with the prevailing business legal and political environment. That is in the event that the political and legal environment does not sustain the plans. In this light, it is the responsibility of the management team to come up with some options. These options should include various aspects such as the introduction of other services and products as well as seeking partnerships which would buoy the airline in times of crisis.

Implementation

Implementing any major strategic exercise requires insight and focus. In addition, there is need to ensure that all the stakeholders in the airline are involved in the process (Barnes 2008). Thus, EasyJet needs to know how much it costs the competitors to serve, and how much capacity the competitor has for every route in the plan. Through these strategies, the airline will be in a position of establishing the right framework of bringing positive results at the end of the plan.

Conclusion

Competition is stiffening in the airline sector. Furthermore, there is an increase in the challenges which are facing this sector. Aspects such as uncertain fuel prices as well as insecurity are major areas of concern. However, this being the case does not deny the fact that this industry is still a profitable industry (Kourdi 2009). Furthermore, the profitability of this industry depends on the business strategies which will be laid out by airline companies such as the EasyJet.

A key aspect of planning for profitability is to sustain the core businesses of an airline. This core business entails many aspects which include ticketing, marketing, planning and sales. Furthermore creativity and innovation are crucial when it comes to maintaining an edge over the other companies. Thus, it is the responsibility of this company to work on establishing the right strategies which will work to ensure that EasyJet remains to be considered as an airline of choice in Europe when it comes to short routes (Eichenberger 1996; Ferrell, Hirt & Linda 2006).

The other theme of future airline scheduling is planning for the robustness and the operational flexibility of the airline (Ballesteros 2007; Eichenberger 1996). Since the capacity of air transport infrastructure is always limited, the greater environment that airlines operate within will function in a similar manner in the future, although capacity constraints at certain busy airports may further constrain the air space. The tables below illustrate the current state and future plans of the company. The table on financial analysis provides a reflection of past performances. It also provides a reflection of what is anticipated to be achieved in the future, that is by the year 2013. The second table gives highlights on the financial status of the company in the year 2012 and the anticipated financial aspects in the year 2013.

Financial Analysis
Fig.2: Financial Analysis. easyJet Forecasts
Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG EPS Grth. Div Yield
30-Sep-12 3,846.10 260.69 47.00p 10.5 n/a -10% 9.75p 2.0%
30-Sep-13 4,122.04 291.22 52.83p 9.4 0.8 +12% 11.15p 2.2%

Reference List

Ahlstrom, D & Garry, DB 2009, International Management:Strategy and Culture in the Emerging World, Cengage Learning, California.

Anderson, D 2011, Organization Development:The Process of Leading Organizational Change, SAGE, London.

Ballesteros, JSA 2007, Improving air safety through organizational learning:consequences of a technology-led model, illustrated edn, Ashgate Publishing, Ltd., New Jersey.

Barnes, D 2008, Operations Management: An International Perspective, illustrated edn, Cengage Learning EMEA, California.

Bartholomew, E 2009, Airport and aviation security:U.S. policy and strategy in the age of global terrorism, illustrated edn, CRC Press, London.

Belobaba, P, Amedeo, O & Cynthia, B 2009, The Global Airline Industry, illustrated edn, John Wiley & Sons, New York.

Burrow, J, Kenneth, E & Brad, K 2007 , Business Principles and Management, 12th edn, Cengage Learning, California.

Cameron, E & Mike, G 2009, Making Sense of Change Management:A Complete Guide to the Models, Tools and Techniques of Organizational Change, 2nd edn, Kogan Page Publishers, New York.

Cummings, TG & Worley, CG 2008, Organization development & change, Cengage Learning, California.

Eichenberger, JA 1996, General Aviation Law, 2nd edn, McGraw-Hill Professional, New York.

Ferrell, OC, Hirt, GA & Linda, F 2006, Business:a changing world, 5th edn, McGraw Hill/Irwin, California.

French, WL 1986, Human resources management, Houghton Mifflin Co., New York.

Jones, L 2005 , EasyJet: the story of Britain’s biggest low-cost airline, Aurum, London.

Kourdi, J 2009, Business Strategy: A Guide to Taking Your Business Forward, 2nd edn, John Wiley & Sons, New York.

Mayer, F 2007, A Case Study of EasyJet and the Airline Industry, GRIN Verlag, New York.

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