Strategic Management and Leadership Assignment Help
Individual report evaluating the external environment contributing to the effectiveness of the firm's competitive situation in the market
You are required to incorporate the following facts in order to compile the above report.
PESTEL framework.
Porter's 5 forces analysis.
SWOT analysis
Potential scenarios for the near future
Strategic recommendations.
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Introduction
Easy Jet is the low cost airliner and critical evaluation of the strategic initiatives taken by the CEO of the company in the wake of crisis makes up the core theme of discussion in the in following write-up. Easy jet started as a low cost carrier and has undergone rapid growth in the revenues; the company has actually shaken up the European Airline industry within a short span of its establishment. In the earlier years of establishment, the company managed to get patronship from about 10 million passengers for 10 European destinations with more than 60 million pounds of sales. At that time Flag carriers the state owned flights were making up the core business in the country. This is the time; the flag ship carriers are facing complications due to the high cost structures and operational deficiencies and making up losses consistently. European Union conducted deregulation program (Williams 2017) in the year 1978 and this is the time when several private airliners joined the business (Button 2017). This the time when Stelios, the founder of Easy jet joined the race, with extensive and radical cost cutting strategies, the flight lines have become highly popular within the short time of its establishment. Typical strategies like no free sales in the flight, no expenses for selling tickets, lower airport taxes, lower flight overheads managed to let the flight be run at the fraction of the cost at which the flagship carriers used to move in Europe. Several new airlines were started for the operations and the airlines have become very much popular and the revenues increased consistently. The company started with leased flights to reduce the intensive capital needs at the start of the operations and later has replaced its leased flights with second hand flights for operations. The number of flights increased for less fare and it is running well now with less pricing. Luton was strategically selected as the hub for the easy jet flight services, as it is very much nearer to the main stream London airport and secondly the United Kingdom passengers are more polished than other continental travellers from several other countries in Europe. Easy jet offered less turnaround time, less cost outsourcing the sales of the tickets to the third party. Also the company worked on to outsource several of its entrepreneur operations to the other agencies. Though it is started out of necessity to do the outsourcing of the entrepreneurship in the starting times, later it has was taken as a policy by Stelios to do outsourcing of the entrepreneurship activities for the services, while Easy jet retained the core operations like arranging for the flight, arranging for the flight crew, the main staff for operating the flight etc. At this time Easy jet has only about 4 key competitors. Debonair main strategy contained in its operational expansions and increasing the territory coverage. Ryanair (Barett 2016, P.170). with its fleet size and Virgin express with large pool of experienced staff and steady flow of revenues remained other key competitors for easy jet. KLM responded with low price options when Easy jet entered the London Amsterdom route. The low price airliner strategic advantage is completely overtaken by KLM by its options of easy choice and subsequently Easy jet faced strong complications and it happened for the company to ground its operations during this time. However slowly it managed to establish itself in Amsterdam route. Similar challenges raised from other competitors like British Airways (Pels, Njegovan & Behrens 2017, P.130) and Lufthansa airlines, mainly targeting the competitive advantage of Easy jet as low cost carrier.
The following write-up details the situation analysis in more in-depth based on the scenario analysis of the company for Easy jet.
Easy jet and the PESTLE Analysis:
Political factors:
A detailed overview of the establishment of Easy Jet and subsequent growth of the same as a start up liner and all the prevailing conditions present a clear indication of the fact that the Easy jet working domain is there in a steady political environment. The political environment in which the Easy jet working is very stable and there are not external influences on the company from political sides. There is ample feasibility for the company as well to other players to do investment formulate strategies of growth and excel in the business comfortably. Political conditions are favourable for making up strategic development initiatives and to excel in business by the company.
Economic Factors:
As of, at the times of the discussion, there is very clear and extensive carving by the passengers to change for economic prices. Passengers are looking for cheaper prices tickets and they are looking for more economic pricing. Easy jet low price tickets have worked as a big boost for its own business. However similar strategies helped its competitors too. The same economic factors of carving for low cost ticketing promoted the low cost carriers by its competitors as well and worked to support the business of the Easy jet considerably.
Social and Demographic factors:
It is very much visible that the social and demographic factors are contributing to the increase in the air travel in the region. More and more people are opting for air travel and also the cultural factors and increased interests in tourism contributed to the increase in the traffic in the Easy jet business.
Technological factors:
Technology is impacting several ways in the airlines in the times of the discussion made here. Technology enabled manufacturing of the flights that are of low cost. Booking at online paper less ticketing, low cost check-in processes evolved at the same time. Technology is becoming an indispensible part of the business at this time and it is unique element for competitive advantage in the market at this time. Easy jet embraced the technology growth as unique force to include in its strategy for sharing high stakes in the market.
Legal factors:
There is element of legal control on the operations of the airliners. However still they are not obstructing the main stream business of the airliners. The legal factors are not actually impending the business of the company and Easy jet as is legal obliging company there are no complications in taking up the business by the same in UK as well in the other routes of the Europe. However still its competitors are also law abiding and legal factors are actually neutral in the macro scenario and however still they need to be followed compulsorily for business of Easy jet at present.
Environmental factors:
Apart from routine environmental regulations and the necessities to take up the preventive measures as suggested by the regulatory entities there is no much obligations put before by environmental agencies on the business. Apparently there is no restriction or obligations on the company operations in the form of environmental restrictions and controls. As long as the airliners do oblige the basic environmental compliances as such they is no hindrance to the business from their side.
Porter's Five Forces
Competitive rivalry within the industry:
There is intense competitive rivalry in the industry and the competitors are facing neck cutting competition. The strategies of one company are being copied and regenerated. When Easy jet wanted to enter into the London Amsterdam route, the strategies of low cost business are copied by its competitor and the Dutch company almost made Easy jet ground(Carraher,2018).
Bargaining power of the customers
The bargaining power of the customers is also quite high in all the domains where Easy Jet is operating as of now. As there are multiple options for the customers, all with equally competency in operations and with equal facilities; Consumers are now having options to select the airliner whichever is right fit for them. They can select the right company that suits their interests. Customers as they have choice now for low cost carriers as well they have option for more convenience and comfort, they can always bargain for better. The customer's competitors power is high in this market.
Threat of new Entrants
Though there is considerable scope for the existing giants to vary their strategies and to take advantage of the situation, the possible entry for new entrants is limited in this domain. There is always less scope for the new entrants to get into the market. They are cost factors, obligation factors and also man power problems. Procuring sufficient number of skilled personnel for all the flight operations and doing heavy investment in this highly competitive market is curtailing several new entrants from getting in. However still the existing giants can manipulate their operations and provide several new options of travel for the customers. During the early stages of 1990s several new entrants entered into the market due to the deregulation and liberations could not stand up in the market and simply undergone bankrupt. Hence to summarize it can be said that the threat of the new entrants is quite heavy in this market and it is very much difficult for new entrants to enter and sustain in the current market.
Bargaining power of suppliers:
Suppliers do have certain control and power but still it can be rated just medium. It is not very high due to the fact that there is alternative supplier always existing in this route. Hence customer will not take up a particular supplier and always will check for an alternative supplier with better promotion and better services; apparently, all these factors limited the power of suppliers in the market. However still as there is limitation for free entry of new entrants into the market, there is considerable power of suppliers who are already there in the market. Hence considering all these factors, the bargaining power of suppliers can be considered as medium.
Threat of substitute:
The airline transport services are very unique, the comfort and luxury in offer in airline services cannot be met in road ways or marine based transport services. Also there can be limitations in terms of the route distribution for the marine transportation services. In any case, the airline transport services though have the threat of the substitution; the total threat of the substitution is limited and is medium. Though there are recent developments coming up in the high speed train and flexibility with the high luxury cars, the substitution for airlines started growing. However still the developments in the low cost carriers actually working for offset the advantage offered by the expensive cars and high cost high speed trains in these areas. Hence threat of substitution is there but still it is having limited power.
Comments: As a whole still there is life for the industry and the low cost budget airways still do have life on this planet, they can survive well the competition, however what is needed is strategic planning and dynamic action plans. Since the industry very competitive and as the competitors are developing strategies from time to time to lead the market, it is very much required for the Easy jet to develop strategies that can face the challenge and survive the market from time to time. Also the strategy of the airlines needs to be adaptive and flexible to take up the challenges from time to time to sustain the market forces.
Coming to the evaluation of the industry lifecycle, both the demand of the passengers seeking the flight travel increasing from time to time and also the service providers are developing their services portfolios and competitive edge, the portfolio has not yet reached the maturity and so hence the life cycle has not reached its peak or maturity still there is scope for the transformation in the breadth and width of the service profile of the airline industry service providers and also the market demand has not reached its peak, still in the coming years the business demand will increase considerably adding new prospects to the industry survival.
SWOT Analysis (Gurel 2017, P.51)
Strengths of the Easy Jet:
As of now the company is mostly operating the single type of aircrafts and specific fleet type like Boeing 737, such aircrafts do have considerable scope to reduce the overall maintenance and the training costs as similarity will create economies of scale. As there is no frill online reservations and outsourced high quality and efficient fast check in operations, the operations costs are reduced drastically. Technology is being employed for mass scale and the websites are created with high stuff for the sake of brand promotion and cutting edge advertisements. All these factors are adding to the brand strength and revenues for Easy jet airliners. Further the lowest fares are creating good market to the company. Several passengers are taking up the services that are mainly cost conscious and this segment is growing in the European market, which is a fetching factor for Easy jet. The brand image and the market share of the company is commendable and there is considerable scope for the company to lead the market in the coming years. Also there are ancillary channels to create revenues by providing additional services to the customers.
Weaknesses of the Easy jet:
Easy jet is suffering with the industry problem of the rising fuel cost. Low cost carriage is becoming difficult with increase in the fuel cost from time to time. Due to the strategic interventions and low distance carriage systems, they cannot actually move beyond 2.5 hours of journey and this is creating considerable problems to the carriage for taking up long distance travels and losing considerable revenues due to this scenario. There is influence of the market conditions, the major market for Easy jet is UK- Ireland and there is considerable market influence on the flight from these domains. Agents or outsourced stakeholders do have considerable impact over the flight operations, their relations are straining due to variety of reasons. Sales are mostly from website which is a weakness to the company. All major airports are not connected by Easy jet. Overdependence on the third parties and no systematic customer relationship management are constraining the business of Easy jet. They are its visible weaknesses.
Opportunities for Easy jet:
Easy jet can take up promotional schemes to encourage flight travels. International flights with marginally more than 2-3 hours can be incorporated in the same category of low cost carrier segment of services. There are also opportunities for low cost sales of ancillary services like food and refreshments, which can add upto the business of the company further. There is scope to explore new segments and routes considerably. Easy jet can work on to form coalitions with other agencies for better promotion and grab of the business share in some of the new domains of the country. It is also possible for Easy jet to explore business chances with the bankrupt companies; it can work on to explore acquiring of these companies and revive the same with the same strategies of business. Already the company is instrumental in using secondary airports and hence it can work for betterment of the implementation of the same strategy throughout the country (Schlegelmilch, 2016).
Threats:
Existing players can copy the strategies of Easy jet and leading it to collapse. New routes can create new challenges like the company faced in the Amsterdam route. Low cost carriers from other company can take away the market share of Easy jet from the existing markets. Entry of new entrants always there. Mergers and acquisition of the existing players can create new competition problems to Easy jet. Also there is scope of failure of the current outsourced services (Witterman 2018).
Scenario Analysis:
(i) If there is Brexit in the country and if UK exits from EU, there can be mixed results and consequences to the Easy jet flight liners. In the routes where it is operating from the UK or confining to UK, Easy jet can avail privileges and protection from UK government as it is part of their airliners. However still in all other routes, where it is operating in the regions other than EU, it is possible that the airliner may face complications like taxations and discrimination and hence there is chance that the company may face inability to keep up its effectiveness in maintaining the low cost effectiveness.
(ii) Also there can be scenarios like oil price hike from Middle-Eastern wars. If such situation happens, there can be serious fuel price hike and the charges of flight from Easy jet will increase. However the situation will be same for other flight liners as well, but the company can able to retain its competitive edge by managing its other cost effective strategies and better customer relations. So there is need to develop the strengths of the company from this perspective to face the possible consequences in near future like in 2020 and beyond.
Strategic Recommendations based on porter and Brower man model:
Need to take further advantage of the no frills strategy, need to implement thoroughly the low cost strategies of the Easy jet in all new routes and able to sustain the same for better business advantage.
Low pricing hybrid models to take advantage of few customers' affordability and demand for better services will fetch the company to gain some marginal returns.
Entry into the new markets and new routes also will work for the betterment of the company revenues considerably.
Need to employ differentiation not only in the cost but in services sectors too for better advantages to Easy jet.
Since the competition is heavy, need to implement dynamic market strategies.Prices standardization, increasing reliability will work for the betterment of the market share.
Conclusion:
Easy jet faced the challenge of competition and it is key factor that contributed to the organization set back in the recent years. Though the company low cost modelling and outsourced entrepreneuring is an instance success, there is need for the organization to expand its scope of operations for much higher profile of operations. Further the strategies need to be developed beyond the threat of imitation. Typical capacity building, in-house capabilities built-up will create difficult to imitate type of strategies for the company. Further always there is scope for the company to involve in mergers and acquisition to sustain better market shares. When these strategies are innovated to acquire the bankrupt companies the company can gain the advantage to capture the established competency of these companies. Further there is always scope for the company to do strategic leaps in terms of promotion activities and better customer service initiatives. When all these activities are consolidated, there is always scope for Easy jet to sustain in the airline business and can gain its once leading position in the industry.
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