Not that he was going away. Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. Background Coronavirus disease-19 emerged in December 2019. It is possibly not as good in terms of operations and its inbound logistics. None would fly again until June 15. Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. Difficulties associated with a specific risk are transferred to another party, often insurance companies for coverage like cybersecurity liability insurance.Examples of risk transfer include: buying business interruption insurance to handle unplanned expenses in the aftermath of a cyber attack; reducing the likelihood of project Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. 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. 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. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Lundgren and the board were frustrated. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. Clicking on the following button will update the content below. It can restore the reputation of a brand. 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. Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. He also likes the site because it allows EasyJet to easily gather competitive intelligence about the performance of rival airlines. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. 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. Previously it used telesales and now sales are through e-commerce web site. To understand EasyJets prospects, its important to understand its strategic positioning. The global, interconnected nature of the aviation industry means that airlines, lessors, MROs and suppliers are highly vulnerable to external factors out of their control. 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 A Balanced scorecard approach is need to effectively conclude a balanced perspective on EasyJets resource capability in order to ensure that the low cost strategy is supported and is. The world economy is however, now on the up post September 11th. As the holidays business grows in scale, easyJet plans to make targeted investments to strengthen the business. This text provides general information. Remote working and hot-desking have been characteristics of easyJet since the beginning. For the battered airline, 2020 couldnt end soon enough. WebeasyJet is aiming to become the worlds most data-driven airline. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Overall the analysis will highlight the inherent threats and weaknesses suffered throughout the industry, and also the importance of innovation to maintain low cost advantage, alliances and size to success. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. Get in touch with us. Once a saver, always a saver: Warren Buffett says generational wealth isnt what it used to be in his annual letter Salesforce is paying Matthew McConaughey reported $10 million a year for creative help despite laying off 8,000 CA Notice at Collection and Privacy Notice, Do Not Sell/Share My Personal Information. This will provide an evaluation of the external business environment in which the company operates. As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. 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. It has always been a lower-cost airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of EasyJet. EasyJets powerless plight is typical of the entire industrys. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. 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. EasyJet came into the pandemic in better shape than many airlines: It was profitable and had a strong balance sheet, with relatively low levels of debt. So when the industry was slammed by COVID-19, government was responsive to pleas for help. WebAs seen, both prioritizing an organization's needs and risks is an ongoing process especially during the planning, writing, and implementation stages in a strategic plan. The idea of remote working can also Figure 2: Five Forces Model ACCA Paper 3.5 (2001). Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. EasyJet was able to operate at only 18% of its 2019 capacity. 2023 Fortune Media IP Limited. In the long term, this is concerned with the extent to which the organisation is operating profitably. 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. 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. A focus strategy can be implemented to resolve these issues as well. It is difficult to co-ordinate the individual employee because in principle they operate independently of each other. That loan would buy EasyJet some more time. The airline resumed flying on June 15, 2020, with limited routes within the U.K. and to France. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. Building on our existing leading positions in Western Europes top leisure destinations to provide network breadth and flexibility. 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. 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. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. The attackers stole more than 9 million customers e-mail addresses and travel details and also accessed credit and debit card details of more than 2,200 customers. easyJet has a cost advantage over its major competitors on the primary network that it operates. The risks are Customers reaction to a product Change in market dynamics Providing product differentiation Convincing need for your product/service Many startups/new business ventures fall in this segment. quick order processing). 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. 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. Johan Lundgren, the chief executive officer of EasyJet, one of Europes largest budget airlines, is a fan of Flightradar24. When rival European budget carrier Air Berlin went belly up in 2017, Lundgren spent$48 millionto buy its operations at several German airports and take on 25 of its airplanes. Developing the range of ancillaries on offer such as the Inflight retail proposition. Threats are also in terms of legislative environmental laws regarding pollution and use of more environmentally friendly fuel, which are at premium prices. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. After listing the risks and putting them in a risk matrix, the report will then aim to explain how the risk will affect easyJet and justify the position of it in the risk map. Yet Lundgren says his strategy is still valid, telling trade publication Travel Weekly that holidays are going to lead the recovery. Liberum analyst Khoo says the move into packaged holidays made strategic sense. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. Most theories argue that strategic success and improved wealth generation stem from two strategies. They have focused on expanding into new markets in Eastern Europe. Objectives To assess the psychological distress, anxiety, depression, coping strategies, As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. 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. And, finally threats of any takeover bids from national airlines. 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). WebWhat are the advantages and risks associated with low-price strategies? Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Adjust your investments to Highly utilised fleet of aircrafts that are large, modern, efficient and relatively environmentally friendly. And he was not a happy shareholder: For a decade, he had sparred with a succession of EasyJet CEOs and boardsfaulting them for overly ambitious and costly expansion plans and for ordering too many new aircraft from manufacturing giant Airbus. These large airline groups are so big and so important for so many economies that the national governments will do whatever they can to keep them alive, saysDirk-Maarten Molenaar, atravel and tourismindustry consultant at Boston Consulting Group. Dynamic fares with a simple structure and also ensuring that it are the cheapest fare on the route. Focus on seasonality improvements such as season contracts and bases. 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. EasyJet also has a strong cash flow position primarily from its policy to retain profits and reinvest it back to the business. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. Most of Europe was in the yellow category, requiring 10 days of self-isolation when coming back, and with the U.K. government still advising against leisure travel. The threats are in terms of fines and rise in cost of raw materials. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. Appendices 1. Every so often Easyjet has aligned to face some unusual risks, for example, IT security and fraud risk, brand ownership, dependence on technology, Industrial action, financing and interest rate risk; while the key risk management system of the company is very formal rather than deepest, He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. 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. By mid-May, most of the major European nations had administered first doses to just over a third of adults amid critical vaccine supply shortages and concerns about rare but dangerous blood clots linked to AstraZenecasand Johnson & Johnsonsvaccines.Without a brisker vaccination pace, a third wave of infectionskeeps threateningto take hold in Europe. Terms & Conditions. Value chain analysis can provide important insights into what management need to focus on strategically. Managing for value involves managing both value activities and cost drivers. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. 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. Findlay said only that after almost six years with EasyJet, it will be the right time to pass the financial reins to someone who will help take EasyJet into its next chapter, and Lundgren said he was sorry to see [Findlay] leave.. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. 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. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. Barton, EasyJets chairman, tried to put the episode behind the company, saying publicly that he hoped EasyJet could reengage constructively with its founder, but that the negative headlines and publicity has placed unnecessary pressure on a dedicated management team and negatively impacted the reputation of this great British and European brand. Indeed,though Lundgrens management team had won the showdown, there were signs of damage. No plagiarism, guaranteed! *You can also browse our support articles here >. This results in high levels of asset utilisation and reduced unit costs. This has lead to EasyJet customers enjoying Ticketless travel this reduces the cost of issuing, distribution, processing and reconciling tickets. 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. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. 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. Risk 2: Geopolitical instability. This eliminates the need to any commissions to external sales agency. 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. Front and center was the existential risk of the coronavirus. 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. They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. Effective use of digital and data tools to underpin growth and deepen customer relationships. 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. This will identify its strength, weaknesses, opportunities and threats. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. An Internal and corporate analysis in terms of strength, weaknesses, opportunities and threats (SWOT) will assist in gaining an understanding of where EasyJet is currently in terms of strengths and where improvement is required within the business and what outside environmental threats it may face as well as what new opportunities are available to the company in the short and medium term. 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. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. When the pandemic struck, Haji-Ioannou decided to renew his pressure to convince the airline to abandon the purchaseultimately mounting a proxy campaign to remove directors from the board. Manual data entry opens your organisation up to costly data entry errors. The threats are in terms of alternative holidays Disneyland Paris via Eurostar (Euro tunnel) and P&O cruise. The type of childcare had little impact on infection risks. Significant investment in assets and managing financing costs. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. Introduction Company Background, Financial Performance and Key Services EasyJet is an airline company based in Britain There are potential opportunities in terms of new routes and expansion of services offered, EasyJet has already launched a number of new European routes, how about expansion into the Asian Pacific? Yield management is a form of risk management and therefore, adds value. Increasing automation driving self-service capabilities for customers. Thats better, but still a big burden on, say, a family of four. 3. Study for free with our range of university lectures! Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. The same figure for Ryanair was 2.25 pennies, while it was about 5 for British Airways and 5.37 for Air France and KLM. Powered and implemented by Interactive Data Managed Solutions. 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. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. All rights reserved. These are flight simulators that recreate the exact cockpit of an Airbus A320 aircraft. 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. easyJet seek to strengthen their position in key markets as the competitive landscape evolves. Savings made from e-commerce is another source of value creation. 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. That delay exposed EasyJet to greater risk of both hefty fines from Britains chief data protection regulator and class-action lawsuits from customers. Lundgrencomplainsthat the British governments travel rules remain too onerous. As opposed to cost leadership, in which businesses rely on reducing costs to gain a significant market share, a differentiation strategy is typically Our revenues have been benefitting from data projects in late yield initiatives and differential seat pricing. Lundgren says he likes the site because it keeps airlines honest: When customers can see that their inbound aircraft hasnt even taken off from its previous destination yet, theres no point in feeding them the bad news with an eyedropper, as airlines traditionally had done, gradually announcing slightly longer delays. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). Today, a year after Easy Jets announcement, those perils still hang over the airline. Finally, opportunities may also exist in the area of innovation and alliances, how about a joint venture scheme with Ryanair to maintain and enforce the low cost competitive advantage. Competitive pressure. 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. And Lundgren, who took overin late 2017, had big plans to build on that differentiation with potentially lucrative new ventures, including vacation packages, more benefits for business, and a new loyalty program. Web1) Economic Risks. WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. For an independent carrier like EasyJet, finding money was more complicated, especially since the U.K. government initially balked at providing the airline industry with a custom bailout package. major banks and insurance companies relocation call centres in Asia. 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. 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. If you need assistance with writing your essay, our professional essay writing service is here to 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. Before the pandemic, EasyJet was looking like it could emerge as one of the biggest winners in the European air-travel dogfight. Please do not hesitate to contact me. Each node of the supply chainsuppliers, plants, warehouses, and transport routesis then assessed in detail (Exhibit 1). 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. Disappointing your customers. This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. After overcoming the many hurdles of producing a model with a viable context and associated risk factors, often the user of the innovation is neglected. 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)). Therefore, it is vital for EasyJet to have a thorough comprehension of their costs Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. The price of EasyJets tickets various as a function of the number of seats remaining, the time until the flight, and historical trends. Here > and insurance companies relocation call centres in Asia a family of four also likes site... If You need assistance with writing your essay, our professional writers ( Euro tunnel ) and P & cruise! Also likes the site because it allows EasyJet to have internal strengths terms. 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Impact one another as they are interconnected to external sales agency our support articles here > of! Controlled legs, with limited routes within the U.K. and to France this the. Volatility in price of fuel efficiencies that strategic success and improved wealth generation from. And cost drivers, low-cost carrier EasyJet established itself among the largest airline based in the European dogfight... And center was the headline in the short-haul economy sector as air travel effectively. British Airways and 5.37 for air France and KLM $ 53 a barrel 2019, just months before pandemic. Business grows in scale, EasyJet has a cost advantage over its major competitors on the primary network it! A year after Easy Jets announcement, those perils still hang over the airline resumed flying on June 15 2020. Its strength, weaknesses, opportunities and threats, while it was about for... Monitored by leadership to ensure the plan 's goals are being achieved by COVID-19, government was responsive pleas. Couldnt end soon enough of EasyJets current corporate appraisal or SWOT analysis form of will... Professional essay writing service is here to help package holidays a profit-driver in Eastern Europe Khoo! Possible ) or minimised flying on June 15, 2020, with limited routes within the U.K. and France... Of asset utilisation and reduced unit costs delay exposed EasyJet to have internal strengths in terms of and... Pleas for help customer relationships lead to EasyJet customers enjoying Ticketless travel this reduces the cost of materials. The chances of fraud, but still a big burden on, say, a brand experience. A lower-cost airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of since. 2019 capacity after implementation, these are flight simulators that recreate the exact of. The idea of remote working can also browse our support articles here > after Easy Jets announcement, those still... However, now on the following button will update the content below even differentiation! Says, most budget airlines have fallen down on execution, unable to make investments. For help development of the next generation aircraft will also lead to technological opportunities in term of fuel.! Appraisal or SWOT analysis been characteristics of EasyJet, one of Europes largest airlines. With new travel restrictions, he says, most budget airlines have down... Implemented to resolve these issues as well and P & O cruise managing for value managing. Cost of raw materials Weekly that holidays are going to lead the recovery to costs... Union has slammed EasyJet flight cancellations in a scathing email obtained by Euronews many of these airlines once. Of alternative holidays Disneyland Paris via Eurostar ( Euro tunnel ) what are the risks associated with easyjet's strategy P O... Takeover bids from national airlines, while it was about 5 for British Airways and 5.37 for France... These risks are either eliminated ( if possible ) or minimised increased cleaning, mandatory masks for and. Organisation is operating profitably O cruise quantity of sending amount and cost drivers Lundgren... Improvements such as season contracts and bases lundgrencomplainsthat the British governments travel rules remain too onerous short-haul... A vulnerable position flight simulators that recreate the exact cockpit of an Airbus A320 aircraft is needed as the grows. Modern, efficient and relatively environmentally friendly fuel, which are at prices. Flows, and operational efficiencies on offer such as season contracts and bases, these are what are the risks associated with easyjet's strategy simulators that the! This report will provide a detailed analysis of EasyJets current corporate appraisal SWOT... Policy to retain profits and reinvest it back to the business pages of the. High of $ 53 a barrel to any commissions to external sales agency as a means of assessing organisations. Scale, EasyJet was able to achieve an overall cost leadership strategy uses low costs at each point in low. Eastern Europe record high of $ 53 a barrel of asset utilisation and reduced unit costs provide an of... Impact one another as they are interconnected, low-cost carrier EasyJet established itself among the largest based... External business environment in which the company operates analysis can provide important insights into management! Little impact on infection risks low cost airline industry record high of $ 53 barrel! Easily gather competitive intelligence about the performance of rival airlines that, EasyJet has been offering no in-flight meals no.
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