The 2002/03 annual report reconfirmed this business model of the airline: Another price-based strategy is the hybrid strategy this seeks to achieve an element of differentiation and a price lower than that of competitors. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. It has always been a lower-cost airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of EasyJet. WebThe following operating risks are associated with pursuing sustainability initiatives as part of a marketing plan: Loss in profitability Loss of focus Just as sustainability would seem to be a rallying cry for consumers, some companies have jumped on sustainability as a But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. It is here that EasyJets pilots practice and maintain their skills. 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. Lundgrens recovery plans hinge on infection rates throughout Europe, which have remained stubbornly high in many places, and vaccination rateswhich, in most of Europe, have badly lagged places like the U.S., U.K., and Israel. WebThere are two types of strategies taken in account in the Easy jet such as differentiation strategy which is the strategy in which the industry has the particular rules and Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. Background Coronavirus disease-19 emerged in December 2019. Given the fact that the company offers Also, only one type of aircraft is used, in order to minimise maintenance costs. The airline founders misgivings had only mounted after the aircraft maker agreed in January 2020 to deferred prosecution agreements with the U.S., France, and the U.K. and to pay billions of dollars in fines stemming from charges that it had for years routinely bribed airline executives to secure contracts.When the pandemic struck, the aggrieved founder saw an opportunity to force EasyJet to abandon the deal. Terms & Conditions. And hes moved aggressively to grab additional takeoff and landing slots in markets he sees as important. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. And while optimism about leisure travel in Europe is slowly rekindlingthis week, the U.K. announced a resumption of international travel to a limited number of destinationsEasyJet still faces plenty of potential turbulence, as the likelihood of a robust summer season recedes. Before the pandemic, EasyJet was looking like it could emerge as one of the biggest winners in the European air-travel dogfight. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. Investing in new generation fleet to replace older types drives economic value, lowering fuel and maintenance costs. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. Lundgrencomplainsthat the British governments travel rules remain too onerous. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. Budget airlines that fly point-to-point, such as EasyJet, can easily stimulate their demand by running price promotions and advertising and then shifting flight schedules to cover those new bookings. Another major industry wide threat is the volatility in price of fuel Oil price record high of $53 a barrel. this was the headline in the business pages of all the newspapers last November. A focus strategy can be implemented to resolve these issues as well. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Finally the report will examine the extent to which EasyJets current no frills strategy is the appropriate strategic fit to its organisation both in terms of resource capability and business environment. Table 1 shows that EasyJets sales has increase year on year since 1998, with profit and gross margins also experiencing a positive trends. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. 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. 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. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. The focused network strategy can be summarised as follows: easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to build on spend per customer, delivering enhanced sustainable returns. It is evident that having only one collaborate is risky due to the possible delays in time. 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. The increase growth of world tourism will offer opportunities in terms of undertaking joint venture with local/foreign travel companies; hence, Going places and Thomas Cooke are already providing such services to growing number of holidaymakers each year. The threats are in terms of fines and rise in cost of raw materials. Web Evaluate EasyJets operations strategy against Hayes et al. s criteria of consistency and contribution to competitive advantage. Dense point-to-point network to allow linking of major airports with large catchments areas with high level of frequency, as this will be attractive to business and leisure travellers. In this way, it has positioned itself as a more direct competitor to Europes traditional airlines.Lundgren says he wants EasyJet to be the No. In the May showdown vote, the disgruntled founders effort was roundly defeated, with 99% of the shares not held by the entrepreneur and his family casting ballots against removingthe directors. 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. Therefore, the low cost strategy is the ideal strategic fit to its environment. Lundgren and the board were frustrated. 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. 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. British Airways. Ryanair and Wizz Air cater almost exclusively to leisure travelers. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. In the long term, this is concerned with the extent to which the organisation is operating profitably. EasyJet denied this dinner took place. Within weeks of the vote, Findlay, EasyJets CFO, announced his intention to step down, and analysts speculated that the stress of Haji-Ioannous campaign, on top of that caused by the pandemic, had taken a toll. (EasyJets fellow European budget carrier, Ryanair, announced this week that it had lost about $1 billion in the preceding 12 months. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. Making it easy, enjoyable and affordable to travel again and again for business and holidays. The pandemic, of course, wiped out business and leisure travel alike. Ive always said the four core markets are where we want to put our focus on U.K., Germany, France and Italy, he told the World Travel Market conference in 2018, shortly after the Air Berlin deal concluded. major banks and insurance companies relocation call centres in Asia. EasyJet currently has two suppliers, Boeing and Airbus. At a budget carrier, you need to be aggressive and ruthless and abrasive, says Joachim Kotze, an airline industry analyst for financial research firm Morningstar. easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. 3. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. But what are the internal weaknesses suffered by EasyJet? Another benefit of Internet technology is lower transaction costs at multiple levels in value chain activities. Feeling powerless is one of the worst feelings, not just in business.. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. 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! Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. 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. Managing for value involves managing both value activities and cost drivers. Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. Still, it wasnt spared from the industrys general carnage. Front and center was the existential risk of the coronavirus. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs The company has also grown in terms of its acquisitions of GO and also increase in purchases of its own aircrafts. Background Coronavirus disease-19 emerged in December 2019. WebDeloitte's new survey report offers a clear view of how companies view and manage the risks that affect their business strategy, based on recent survey results. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. Most theories argue that strategic success and improved wealth generation stem from two strategies. Lundgren had been an industry leader in trying to position EasyJet for this new world. Adjust your investments to Given EasyJets cash burn, it needed to raise more moneyand quickly. As a result, EasyJet occupies a kind of middle groundin both pricing and costsamong European carriers. It is possibly not as good in terms of operations and its inbound logistics. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. 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. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. Improving scheduling processes to drive crew productivity, also benefitting from the seasonality of our network. EasyJet, on the other hand, flies fewer routes but operates from many more primary airports, with a heavier focus on Western Europe. 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. FORTUNE may receive compensation for some links to products and services on this website. The purchases rankled Haji-Ioannou, who had opposed EasyJets tie-up with Airbus ever since it had been signed in 2013. If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. It announced plans to gradually ramp up to 75% of its normal capacity by August. Opting for in-house initiatives provides several advantages that can potentially increase margins and overall efficiency, including: 1. Follow on from market expansion will also create opportunities for new facilities or services Free Lunch offer on board catering facilities to compete with mainstream airlines. To what extent does EasyJets concentration on Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. Hannibal HanschkePool/AFP via Getty Images, Christoph SoederPicture Alliance via Getty Images, Chris RatcliffeBloomberg via Getty Images, one of the biggest winners in the European air-travel dogfight, agreed in January 2020 to deferred prosecution agreements, began purchasing carbon offsets for the CO2 of all its flights, might not fully recover from the pandemic until 2024, LinkedIn has officially entered its cringe era, and its working. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. 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. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. Our mission to make business better is fueled by readers like you. The second is the threats from substitutes, rail travel v air travel, the growing demand in Eurostar and cruses. This is critical for EasyJet having analysed the competitive rivalry position in the industry. Get the best reports to understand your industry. At the same time that it was offloading planes to raise cash and placing others into long-term storage in boneyards, the company still took delivery of 14 brand newAirbus A320 and A321 Neos. The fourth force is the bargaining power of buyers. Budget airlines that rely on the leisure market make most of their money from April to August. Reducing the cost, managing the cash burn, and getting access to liquidity, Lundgren told CNBC inNovember. The way the report has classified the risk is whether the risk is a generic risk that will affect the whole industry of whether the risk is specific to the company. This results in a very strong competitive rivalry in the industry. Developing the range of ancillaries on offer such as the Inflight retail proposition. They have focused on expanding into new markets in Eastern Europe. The greatest dangers, however, may be the market leaders need to manage its evolving The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. This text provides general information. Yield management is a form of risk management and therefore, adds value. Hover your cursor over an icon and you can see what type of plane it is, which airline it belongs to, where it is flying to and from, even its altitude and airspeed. 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. Lundgren wasnt completely despondent: Where bookings were allowed and quarantine rules not restrictive, passengers were coming back. Objectives To assess the psychological distress, anxiety, depression, coping strategies, 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. So when the industry was slammed by COVID-19, government was responsive to pleas for help. 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. This will help the companies decision makers understand where the organisation is now. Ryanair uncompromisingly fought its way into the market with an aggressive pricing strategy. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. It is also anticipated that Ryanair will continue to lower costs, which will allow it to continue to engage in a price war, by lowering fares aggressively. Potential threats of economic recession, since air travel is effectively a commodity product, it is recession prawn. As funding from operations are clearly a major contributor to value creation. WebThere is one main reason which influences these economic factors is the recession in the Easy jet. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. These moves enabled EasyJet to reduce its operating costs, excluding fuel, by about 31% in the year through Sept. 30, 2020. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. 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 will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. The primary weakness is the perception of low quality low cost can also be seen as low quality service than that offered by the established national airline i.e. EasyJet had a long-term contract with the aerospace giant that would require it to take delivery of more than 100 new planes, including at least 55 by 2024. All rights reserved. Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. With so much uncertainty, leisure travelers are holding off on booking summer flights, prolonging EasyJets pain. 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. Of EasyJet strategy against Hayes et al operational savings for EasyJet that success! 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