Can Easy Jet Be the Worlds Best Low-Cost Airline - Case Study Example

Table of Contents 1.0. Introduction 2 2.0. Company Background 2 3.0 Porter Five Force Model 3 4.0 PESTEL Analysis 6 5.0 Porters Generic Strategy 9 6.0. Porter Value Chain 11 7.0 Conclusion 14 8.0 Recommendations 14 9.0 References 16 1.0. Introduction The world economy is slowly coming out of recession which has increased the number of opportunities that business has. The present environmental factors highlight that people have a preference towards low cost airlines. This has increased the number of low cost airlines and has made it important that the different players performing in the market look to compete against each other on the basis of service. The report thereby looks to evaluate the manner in which Easy Jet can become the world’s best low cost airline and increase their operations to other countries. The research paper firstly presents some background information about Easy Jet and then moves to discuss the different models like; Porter Five Force Model; PESTEL Analysis; Porters Generic Strategy and Porter Value Chain. This will finally be concluded by providing the required recommendations and conclusion which will help Easy Jet to improve its position and become one of world’s most preferred low cost airline. 2.0. Company Background Easy Jet airlines are a low cost operator operating in London and are listed on the London Stock Exchange. The airline has been successfully working on the business model of being a low cost provider but ensuring that the quality of service rendered by the airline is of the highest quality. The airline in the second largest low cost airline in Europe after Ryanair and looks to transport more than 59 million people Easy Jet has over 200 fleet of airline and has increased their profits considerably over the years. The airline operates more than 9000 employees and has thereby transformed the manner in which the airline operates. The overall business strategy adopted by Easy Jet has been very successful and has thereby been able to ensure that they have a pool of loyal customers. Working on the same business model and developing the business according to the required standards will further help to improve the quality of service. 3.0 Porter Five Force Model The Porter Five Force Model helps to understand the manner in which different powers lies in the hand of different players. This helps to find out the manner in which different factors have a role in strengthening or weakeaning the performance of a player against the competitor and helps to look into the different environmental factors and the role they have in shaping the overall performance of the organization (Chen, 2003). The analysis of the Porter Five Force Model will help to understand the attractiveness of the industry and will determine the different factors and the role the factors have in shaping the overall performance of the organization (Zhang & Pearce, 2006). The analysis for Easy Jet is as follow 3.1 Competitive Rivalries among firms The competitive rivalry among the different players in the market helps to understand the manner in which business has to deal with the different degree of competition. The degree of competition determines the chances of new players entering the industry and also provides a directive which will help to understand the manner in which the different players are able to earn profits in the industry. The competitive rivalry also helps to determine whether the organization has little or more power as an industry which is competitive and provides similar products the degree of power is low. The competitive rivalry that Easy Jet has with other airlines in the market is high. Also the fact that most airlines look to work on the same business model like a low cost airlines and looks to differentiate their offerings based on service so the control of power is low and competition determines the manner in which decisions are made (Cook & Dave, 2004). 3.2. Threat of New Entrant The threat of new players entering the aviation industry is as the regulatory barrier which prohibits new players from performing in the aviation industry has been removed. The opening up of the skies has increased the degree of foreign direct investment and also increased more and more players working in different countries to work as an international player. The growth in technology has also provided an opportunity to get the required capital on rent. Since the bigger and the older players have a higher slot presence it has reduced the role of smaller players. Despite it the threat of new entrant entering the aviation industry is very high which will increase the level of competition for Easy Jet and they require formulating proper strategies so that they are able to be competitive and ensure that the effect of new player is limited. This will thereby ensure that Easy Jet will be able to improve their performance and ensure that they perform better (Cook & Dave, 2004). 3.3. Threat of Substitute The threat of substitute is very high when travelling has to take place in the local country. The development of better roads and comfortable trains provides an opportunity for the different people to travel. This thereby ensures that people are able to use different forms of transport instead of aviation. In case of international transport the degree of substitute is low as people have to choose airlines as it is quicker and comfortable compared to other mode of transport. Thus, Easy Jet has to deal with a lot of substitutes when the fly in the local country or within the boundaries of the country but when they have to travel abroad the threat of substitute is limited. This thereby shows that Easy Jet to be the most desired low cost airline has to deal with the different substitutes which are available in the market (Cook & Dave, 2004). 3.4. Bargaining Power of Suppliers The different airlines operating have to rely on a few suppliers like Boeing, Airbus, Comac, General Electric and Irkut Corp. This has thereby increased the bargaining power of the suppliers as the limited access to different manufacturers has made the different players purchase the different airplanes from the above mentioned providers. This has thereby ensured that the limited suppliers have a high bargain and are able to make higher profits from the different offering which has been provided by the different airlines operating in the market. This has thereby increased the bargaining power of suppliers which Easy Jet has to watch out for so that they are able to deal with in and ensure that they are able to perform on the highest standards which has have been determined (Cook & Dave, 2004) 3.5 Bargaining Power of Customers The bargaining power of customers shows a mixed concern as very few customers directly come in contact with the airlines as the presence of different travel agent and websites have reduced the interaction with the customer. This has resulted in the customers to purchase the product at the price which the agents provide and has limited the degree of bargaining power. This is an aspect which Easy Jet has to be aware of as this will provide an opportunity through which the airlines can develop their business and ensure that the overall performance improves (Cook & Dave, 2004). 3.6 Summary The Porter Five Force Model shows a negative impression about the attractiveness of the industry as the analysis of the different factors shows; strong competition, high threat of new players, high availability of substitutes, high bargaining power of suppliers and low bargaining power for customers (Mason and Gerard, 2007). This helps to provide very little fact that Easy Jet has been successful because of the fact that the airline has been able to use the environmental factor to their advantage. 4.0 PESTEL Analysis 4.1 Political Political factors have a role in shaping the performance of the organization as understanding the manner in which the different factors are dealt helps to increase the chances of success of failure. The terrorist attack in 2001 where airlines were used have resulted in stricter rules which has affected the performance of airlines. This has also made changes in the rules which resulted in opening up of skies. This has provided an opportunity where Easy Jet which is a low cost airline has been able to use it for the growth of their business. This has ensured that better services need to provided to the different customers and Easy Jet based on it have been able to improve the overall performance and have thereby been positively contributed towards the growth of the business (Jeffrey 2003). 4.2 Economical The growth rate of the aviation sector and the airlines in particular is dependent on the manner the economy is performing as the growth in the economy results in rapid growth rate of the economy. Presently, the world economy is strongly growing which has helped Easy Jet to replicate the same. Further, Easy Jet works as low cost airlines has been facilitated by the same as it has provided the opportunity through which Easy Jet has been able to attract more people. This has thereby ensured that Easy Jet projects a better growth rate and has been aided by the changes in the economy growth rate which is slowly improving (Mathews, 2003). 4.3. Social People while looking to choose an airline prefer cheaper airlines and rate it over quality. This has increased the number of people travelling by economy class which has been aided by the fact that the economy is slowly recovering from recession. Easy Jet has been able to get the positives from it as the airline operates as a low cost airlines and the increase the preference of consumer towards low cost airlines has improved the overall business for Easy Jet. This has increased the number of consumer using airlines and has created a positive impact which has thereby increased the business for the airlines. 4.4. Technological The aviation sector has seen widespread technological changes which have made the different players to make the required changes and develop their business accordingly. Easy Jet has gained from the technological changes as it has provided an opportunity where they can directly sell tickets to the consumer to their website. Further, the use of similar airlines has reduced the cost as the same can be substitute for other thereby enabling the opportunity to reduce cost. The technological development has also helped Easy Jet to improve the ground clearance time and ensure that customer satisfaction can be maximized (Gooderham & Nordhaug, 2003). 4.5. Environmental The airlines are at time impacted by the changes that the environment presents before them. This can be seen in case of volcano ash which resulted in the cancelation of many airplanes and had a direct bearing on the profits of the airlines. Easy Jet has also witnessed a reduction in its profits but is largely limited. In addition to it increasing environmental regulation and pollution has further intensified the level of problem for Easy Jet (Gooderham & Nordhaug, 2003). 4.6 Legal Easy Jet while performing in the airline sector has to ensure that they abide with the legal requirements pertaining to wheelchair chargers, safety standards, misleading advertising, air traffic regulations and etc. Easy Jet on this front has been largely ale to abide with the legal requirements and has thereby ensured that they have evolved their business which will provide them better opportunities to perform in the future (Witt & Lewin, 2007). 4.7 Summary The PESTEL analysis shows that Easy Jet has been able to change as per the evolving environmental conditions and have benefitted from it. Easy Jet has ensured that they comply with all the requirements and have been able to use technological advancement for the development of their service. Working on the same business fundamentals and looking to develop their services will ensure that the performance of Easy Jet improves in the future and will be able to set better standards in the future. 5.0 Porters Generic Strategy The generic strategy helps to evaluate the manner in which the organization is able to position their performance in comparison to the competitor. This looks to identify the different strategic position that the organization has adopted and helps to develop the required strategy which will help to improve the performance in the future. The three generic strategies thereby look to work on cost leadership, differentiation and focus (Cohen, 2007). Easy Jet has looked to work on the strategy of cost leadership where they look to provide the customers with the opportunity to travel by air at the lowest cost. Further, while looking to deliver the required service Easy Jet has ensured that they provide quality service so that they act as a differentiating factor and help to attract and retain people towards the airline. This has further been strengthened by analyzing the SWOT analysis for Easy Jet (Peng & Luo, 2000) 5.1. SWOT Analysis This aspect will help to identify both the internal and external factor and will thereby determine the manner in which the organization performs and will help to design the mechanism through which performance improves 5.2. Strength Low Cost Leader Strong brand name Strong growth rate Superior service quality Increasing market share 5.3. Weakness Unclear future policy Increase employee turnover Limited routes to fly 5.4. Opportunities Opportunities to fly in international destination Advance technique to reduce cost Expanding the fleet of airlines Operate on new routes 5.5 Threats Increasing competition within the industry Increasing fuel cost Alternative transport available 5.6. Summary The analysis of Porter Generic Strategy shows that Easy Jet has a strong brand image and has improved their performance on service. This also provides an opportunity to increase their business by working on the other business dynamics and highlights the different areas which when focused will help Easy Jet to become one of the most preferred low cost airlines (Laric & Lynagh, 2009). The analysis further throws light and helps to explain the different strengths and opportunities which Easy Jet has and can use for the development of their business. This thereby looks to substantiate the fact that developing strategies which helps to use the resouces in a better way provides an opportunity through which the overall effectiveness in services can be improved. This will thereby provide an opportunity through which the future performance of Easy Jet will improve and will be one of the most desired low cost airlines. 6.0. Porter Value Chain The Porter Value Chain looks to analyze the internal factors of the organization and helps to find out the manner in which the overall performance of the organization improves due to it. This will also helps to understand the manner in which the organization has been able to use its resources to improve its performance (Fletcher and Crawford, 2011) The Primary objectives which Easy Jet looks to achieve through the Value Chain Analysis is 6.1. Inbound Logistics: Easy Jet has followed a strategy where they look to use minimum fleet of airlines to provide services to its customers. The airlines has further ensured that the inventories are minimum and looks to follow the JIT technology 6.2. Operations: Easy Jet purchases finished products thereby outsourcing the activity. In some cases the products are made in house but that is also sourced to outside parties thereby ensuring that finished products are sold (Cateora, Mary & Graham, 2009) 6.3. Outbound Logistics: Easy Jet sells most consumable items purchased from third parties and look to ensure that the organization is able to deliver quality service. The airline has thereby outsourced most of the activities so that proper business activities can be taken (Cateora, Mary & Graham, 2009) 6.4. Marketing & Sales: Easy Jet looks to sell products which customers require daily and focuses on meeting the daily needs of customers by allowing them to travel from one place to the other. Easy Jet has identified the different services and needs through which customers can be satisfied (Alvarez & Casielles, 2005) 6.5. Services: Easy Jet has worked on ensuring that customer satisfaction can be maximized and has thereby looked towards ensuring that the organization looks to satisfy the customer in the most productive manner (Alvarez & Casielles, 2005) To achieve the primary objectives Easy Jet has developed the secondary objectives to be as 6.6 Infrastructure of Firm: Easy Jet has developed the infrastructure in such a manner that the customers can be provided maximum satisfaction for the money invested by them for travelling. This helps to provide maximum information about the product to the customers and provides an opportunity where the customer can choose products which is required (Cable & Judge, 2006) 6.7. Human Resource Management: Easy Jet has employed the best manpower which looks to satisfy the customers and ensures that all the questions which have been posted by the customers are answered (Cable & Judge, 2006) 6.8 Technology Development: Easy Jet with changing time has used technology but further needs to used JIT technology to improve the efficiency in which the business will be conducted 6.9. Procurement: Easy Jet purchases the product based on customer demands and has ensured that they are able to satisfy the customers to the maximum possible extent. This will thereby ensure customer satisfaction gets enhanced and the organization has been able to grow its business (Firoziyan, Hasangoli & Stiri, 2009) 6.10. Summary The overall value chain analysis for Easy Jet shows that the airline has been able to use the different resources in the most productive manner. Easy Jet has ensured that the different resources which they have at their disposal are used in the best manner and has thereby helped Easy Jet to improve their performance. Further, the analysis also shows that Easy Jet has developed a framework through which they will be able to improve their performance and ensure that they are able to work as a leader in the lost cost airline segment. This will also help to develop the required business opportunities and ensure that the effectiveness in the services is multiplied. 7.0 Conclusion The strategic analysis conducted for Easy Jet highlights that the airline has been able to understand the different environmental factors and use them to their advantage. This has helped Easy Jet to improve their performance as a low cost carrier and working on the same fundamentals will help to further strengthen their position. The analysis which covers different models and theories shows that the aviation industry is highlight competitive and is influenced by governmental decisions and changes. The paper looks into the different dimensions of both the internal and external environment and shows that using the resources in the most effective manner will provide an opportunity through which the airlines will be able to attract most customers. This has to be matched by ensuring that the airlines look to provide similar or better services at a lower price so that it helps to attract people from all segments. The present economic condition will facilitate in using the strategy as it will attract people and ensure that the airlines further develops. 8.0 Recommendations The strategic analysis conducted for Easy Jet highlights that the airline has been able to understand the different environmental factors and use them to their advantage. This will ensure that the strategy made by Easy Jet will be after analyzing the different factors. To become the most desired airlines Easy Jet will have to look at attracting people from all segments by improving their quality of service and while looking to provide superior services the airlines has to ensure that the prices are kept low. This will help Easy Jet to work on the same business model and will ensure that their customer base improves all around the world 9.0. References Alvarez, B. & Casielles, R. 2005. Consumer evaluations of sales promotion: the effect on brand choice, European Journal of Marketing, 39 (1/2), pp. 54-70. Bateman, T. & Snell, S. 2004. Management: The New Competitive Landscape. 6th Edition, McGraw Hill, New York Cable, D. & Judge, T. 2006. Person-organization fit, job choice decisions, and organizational entry. Organizational Behavior and Human Decision Processes, 67(3), 294–311 Czinkota, M.R. & Ronkainen, I. A. 2004. International Marketing, 7th edn. 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