EasyJet Airline: Strategic Management

Introduction

Strategic management encompasses a group of continuous deeds and well-calculated practices that businesses deploy to organise and/or set their assets in line with the established goals. Actions in strategic management have t be in line with the organisation’s mission, vision, and values. Activities in the discourse change the static plan into strategic performance outcomes (Bettis et al. 2015).

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Strategic management focuses on analysing an organisation’s strategic goals, which include vision, mission, and objectives alongside the analysis of the business’ internal and external environment. This paper has the objective of analysing easyJet airline in the context of these concerns of strategic management. The ultimate goal is to develop an appropriate strategy that the company can deploy to boost its operations with the view of becoming a leader in its line of business.

Industry Background

EasyJet is an airline organisation based in Britain. Its main offices are at London-Luton airport. The company was inaugurated in 1995. In terms of passenger carriage capacity (internationally and domestically), the company emerges the biggest airline in the UK. Millward (2011, p. 16) posits, ‘It serves 500 routes between 118 European, North Africa and West Asian airports’. The company had a workforce that exceeded 8000 people by September 2012.

The main mode of expansion for easyJet airline is through acquisitions (Sumberg 2011). The company anchors its growth on a strategy that emphasises the demand for low-cost air transport. In support of this assertion, EasyJet (2011, p. 13) notes, ‘the airline, along with subsidiary airline easyJet Switzerland, now operates over 200 aircraft, mostly Airbus A319’. The company comes in second to Ryan Airlines in terms of the cost of travel. In the fiscal year 2011, the corporation flew an excess of 55 million people (EasyJet 2011).

Tantamount to any other airline organisation, easyJet remains prone to operational challenges, including increasing fuel cost. To cut these fuel expenses, the organisation announced a decision to build its airliner, branded EcoJet. With prop-fan-engine features, EcoJet is aimed at raising fuel efficiency. In need of enhancing competitiveness in comparison with other airlines, the dawn of 2011 saw the company ‘paint eight of its aircraft with a lightweight, thin revolutionary nanotechnology coating polymer’ (Sumberg 2011, para.4). The coating reduces debris drag across the planes’ surfaces. Hence, the amount of power required to propel the aircraft is also reduced. This strategy has the implication of reducing fuel bills (Sumberg, 2011). EasyJet (2011) further informs that the company saved about 1 to 2 percent of the total fuel costs through this strategy. This saving amounted to about 14 million Euros.

EasyJet’s Vision, Mission, and Values

Mission, vision, and values define the current and future dreams for any company. EasyJet’s mission is customer-centred. The airline’s mission is ‘to provide its customers with safe, good value, point-to-point air services’ (EasyJet 2016, para.5). To this extent, the company offers reliable and consistent services and products that appeal to both business and leisure travellers in various European destinations. Low fares constitute one of the key areas that easyJet utilises in ensuring customer satisfaction and/or building its competitive advantage.

All the company’s people have the mandate of working tirelessly in their daily chores to realise the set vision. This vision entails ‘to be Europe’s preferred short-haul airline, delivering market-leading returns, and making travel easy and affordable for all’ (EasyJet 2016, para.7). Although the company believes that it has incredibly leapt from its commitment to this vision, it remains aware that the future holds immense potential.

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Therefore, it needs to do a lot to guarantee the complete realisation of its vision statement. Values inform all activities that an organisation engages in its everyday operations. Values shape a business’ ambitions that define what it stands for, including the appropriate behaviour that people who work for the organisation should demonstrate. EasyJet’s values are anchored on security, groundbreaking, one team, enthusiasm, truthfulness, and straightforwardness (EasyJet 2016).

The company is committed to ensuring that safety takes the first position in all its endeavours. Through the pioneering strategy, the company accepts tests that ensure that it acquires innovative approaches that can help to make travelling trouble-free and reasonably priced. Such challenges are addressed in a teamwork environment. Through integrity, easyJet is strongly committed to doing exactly what it promises its customers and employees. Simplicity implies the noble responsibility of ensuring lean operations and making processes easier. EasyJet believes that showing a genuine passion to its customers and employees has the capability of ensuring success in the long and short-term. Hence, it seeks to build its success on its people.

Internal and External Analysis

SWOT Analysis

SWOT analysis is a strategic planning technique that helps in evaluating the strengths, restrictions, prospects, and intimidations that business establishments encounter (Hill & Westbrook 2007). Low budget and a leading service provider constitute one of the strong points for easyJet. It also renders services to many destinations, including Barcelona, Berlin, and Prague. The company offers incredible quality services at customer-friendly prices.

It has also managed to build a magnificently recognisable brand name across the UK air travel industry. Customers can access all price breakdowns via the company’s user-friendly website. Additionally, the company is capable of providing competent and prompt services within the shortest time possible. This speed provides an opportunity for service seekers to acquire a full utility of the services with minimal hassle.

Limitations are an organisation’s traits that place it at a drawback relative to other companies in the same industry (Hill & Westbrook 2007). One of the weaknesses of easyJet is its move to decline from offering foods services free of charge in case of flights that take more than two hours. Intensive competition is also witnessed by other service providers such as BMI Baby, Jet2, and Ryan. The competitive forces influence the company’s pricing policies to the extent of making some of the routes unprofitable.

Prospects are the existing external chances, which, while exploited, make an organisation improve its performance (Hill & Westbrook 2007). EasyJet has an opportunity, owing to the possibility of opening new routes such as Dublin to the UK. This route has the probability of increasing clientele levels due to the potential of a large number of air travellers who attend soccer matches. Another opportunity is to offer free food services to passengers who take flights for more than two hours. This plan can increase the customer experience.

EasyJet faces the threat of external competitive market forces. The intimidation creates pressure on the company’s profit margins, especially in some of the most popular routes. Despite the strategies deployed by the company to cut the cost of fuel, the escalating international price of fuel is another major threat. Instances of pressure in employee unions often lead to strikes, which paralyse the operations of the company.

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PESTLE Analysis

Several factors influence the decision of managers of any organisation. From the PESTEL organisational analysis approach, these factors may be political, financial, societal, technological, environmental, and/or legal in nature (Balas, Gokus, & Colakoglu 2014). For easyJet, the political environment influences the operations of the company via taxing policies. The company must pay charges when landing in various nations. The management must also comply with environmental regulations, tariffs, and employment laws established within the UK. It has to obey trade restriction policies.

In terms of economic factors, easyJet’s operational, economic environment is characterised by rapidly fluctuating prices. For instance, the increasing cost of fuel puts barriers to the profit margin that the company can reinvest in growth. From the context of social factors, easyJet’s passengers and staffs are promised excellent safety standards. Hence, enhancing the security of all flights helps in retaining and attracting new clients. People who have a first-time experience with the company always send an impressive message to other potential clients.

In terms of technology, the company deploys the internet to accomplish tasks such as booking and checking services. EasyJet (2011) notes that painting of the EasyJet’s planes with a nanotechnology polymer coating reduces frictional drag (p.39). Hence, the amount of fuel consumed reduces. The company is also incredibly concerned with its environmental impacts. EasyJet (2011, p. 38) asserts, ‘environmental concerns have a significant impact on public policy towards aviation, from restrictions on airport expansion to passenger taxes’. In the recent past, the UK introduced legislation on minimum wage, including another policy that required firms to recycle their wastes as a measure of being environmentally green. These two legal legislations have influenced easyJet’s profitability.

Porter’s Five-Force Analysis

Various forces shape industry competition. From Porter’s five-force approach, these forces comprise players’ rivalry, intimidation from new participants, buyers’ bargaining command, contractors’ negotiation supremacy, and threats of substitutes (Porter 2008). EasyJet has a low threat of new entrants. Starting a new airline industry is capital-intensive. For a new company, a large amount of capital is required to either lease or buy new aircraft. Large working capital is also required to absorb losses that are encountered within a short period of operation.

EasyJet’s bargaining power in relation to the suppliers is moderate. Since its establishment in 1995, easyJet has seen its aircraft increase from two to several hundred. Consequently, easyJet’s deal means quite a lot to suppliers who can immensely benefit from it. Suppliers of fuel have a significant impact on the company’s operations. The fuel shortage has a central role to play in determining the competitiveness of the company. However, easyJet has enormous storage capacities of fuel reserves to absorb temporary artificial shortages.

The bargaining power of easyJet’s clients is moderate. By utilising the weapon of low fares, the company can prevent its clients from seeking alternative service providers. In the economic sense, the lower the prices, the higher the demand. This effect is more valuable for the case of easyJet. The company’s threat from substitutes is very low. Although vehicles may provide convenience and flexibility in terms of enabling passengers to manage their journey better, the mode of transport is time-consuming.

In the case of international routes, vehicles are not an alternative to air transport. The other option is rail transport. With the introduction of high-speed trains, air transport is threatened due to the competitive nature of the rail shipment in terms of prices. However, easyJet has a minimal threat of rail transport substitution since it has the advantage of affordable fares in comparison with high-speed trains. The company faces a moderate extent of competitive rivalry.

Strategy Development

The most appropriate strategy for an organisation should be consistent with its mission, values, and vision. It should also integrate information garnered through internal and external environmental analysis (Balas, Gokus, & Colakoglu 2014). In strategic management, plans such as pursuing the low-cost technique help in driving the success of an organisation through the achievement of competitive advantage.

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Cost-cutting focuses on reducing products and service charges in an industry for an organisation to acquire cost leadership. It aims at increasing profits while at the same time reducing the operational costs. This strategy works best when customers are aware and conscious of the price and services offered. However, a reduction of prices also calls for an organisation to utilise tools for increasing the economies of scale. For example, when an airline company operates many large airliners, which fly different routes in full capacity, an organisation can charge low fares and remain profitable.

Articulating the above arguments with easyJet’s core values such as simplicity and the mission and vision of becoming the largest low-cost carrier in the European markets, the implementation of a strategy for increasing economies of scale is recommended. This strategy can ensure that easyJet remains competitive amid high rivalry in the airline industry, where many organisations struggle to differentiate their products and service offerings. Hence, a strategy for increasing economies of scale should also focus on reducing the degree of competition and ensure differentiation of product and services offerings.

EasyJet already has merit that can help in realising positive outcomes for the proposed strategy. The company creates intensive price awareness through the internet. Hence, whenever service consumers think about switching from one airline to another based on fair prices, the alternative is always easyJet. While it is the biggest intra-UK airline, it is also the fifth-biggest airline operating within Europe. Therefore, it is highly competitive when compared to rival companies.

The traditional low-cost airlines target different market segments in comparison with easyJet. This situation makes them non-competitors to the company. In terms of the low-cost business strategy, Ryan is the only company that has succeeded in reporting continuous profitability each fiscal year. Consequently, an opportunity for achieving high economies of scale to yield better outcomes of the low-price strategy involves forming strategic business partnerships such as an acquisition or merging with traditional discounted carriers that target different routes relative to those that are currently targeted by easyJet. The company also needs to form partnerships with businesses that target similar routes that have made them report poor profitability.

Critical Importance of Implementation, Execution, and Evaluation Strategies

When a merger or any other strategic partnership occurs between two organisations, tension is created between the different entities. DeVoge and Spreier (2005) argue that employees are the most affected elements of an organisation in the event of a merger. Considering that easyJet builds its success around its people, it is important to conduct a critical analysis of the implementation, execution, and evaluation of the recommended strategy. The worst scenario would occur when some companies object a proposal for forming a strategic partnership. However, this plan may not be a big challenge since companies such as Ryan that do not report continuous profitability are likely to welcome the proposal.

A clear implementation, execution, and evaluation plan is necessary since increasing the economies of scale through strategic partnerships, including acquisitions, brings together different organisational cultures (King & Schriber 2016). This situation may create cultural conflicts, which is detrimental to not only the company’s productivity but also employee and customer satisfaction.

Therefore, the evaluation of the different organisational cultures in the effort to determine cultural compatibility is necessary. Where incompatibilities are identified, the implementation and execution plan should provide a means for cultural integration. Following such integration, easyJet together with all partnering airlines can create one unit that can withstand market dynamics through gaining better low-cost competitive advantage via greater economies of scale.

Conclusion

EasyJet has been in operation since 1995. From this time, the airline company has experienced tremendous growth. This growth has been realised amid various challenges, such as the increasing fuel costs. Aligning its operations with its mission of offering safe, good value, and reliable point-to-point air travel services, the company has managed to record continuous positive profitably after exploring the low-cost strategy.

An examination of the company’s internal and external environment reveals that it has an opportunity to consider more strategic business partnerships with other carriers as the desired strategy for acquiring greater economies of scale. Although the strategy may be disastrous due to the possibility of creating organisational cultural conflicts, it is justifiable since past acquisitions have been implemented smoothly.

References

Balas, N, Gokus, O & Colakoglu, S 2014, ‘Exploring the Role of External Environment on Determining Strategic Focus, Market Orientation, and Firm Performance of Service Firms’, Academy of Marketing Studies Journal, vol. 18, no.1, pp. 19-40.

Bettis, R, Gambardella, A, Helfat, C & Mitchell, W 2015, ‘Qualitative Empirical Research in Strategic Management’, Strategic Management Journal, vol. 36, no. 5, pp. 637-639.

DeVoge, S & Spreier, S 2005, ‘The soft realities of mergers’, Across the Board, vol. 36, no.10, pp. 27-33.

EasyJet 2016, Our Culture, Vision and Values. Web.

EasyJet 2011, Annual report and accounts 2011. Web.

Hill, T & Westbrook, R 2007, ‘SWOT Analysis: It’s Time for a Product Recall’, Long Range Planning, vol.30, no. 1, pp. 46–52.

King, D & Schriber, S 2016, ‘Addressing Competitive Responses to Acquisitions’, California Management Review, vol. 58, no.3, pp.109-124.

Millward, D 2011, EasyJet to open a new base at Southend ,The Daily Telegraph, vol. 1, no. 1, pp. 16-16.

Porter, M 2008, ‘The five forces that shape strategy’, Harvard Business Review, vol.3, no.1, pp. 56-63.

Sumberg, J 2011, EasyJet paint job makes fuel bills less of a drag. Web.

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