But it was not the same as canceling its contract, and unsurprisingly, Haji-Ioannou was not satisfied. The third force is the threats from the bargaining power of buyers, is this strong for both EasyJet and the entire airline industry with a large number of alternative suppliers, hence, the aggressive pricing strategy. Therefore, capability is strongly related to the way that resources are used and controlled. At the same time, it was wooing at least some business travelers by differentiating itself from no-frills rivals like Ryanair and Wizz, offering some perks and serving first-tier airports. Procurement and firm infrastructure as a support activity does not add much extra value. 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. Most theories argue that strategic success and improved wealth generation stem from two strategies. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. In 2020, those months were grim. The airline resumed flying on June 15, 2020, with limited routes within the U.K. and to France. None would fly again until June 15. Normally there would have been close to 100. EasyJets no frills strategy does not only mean a cut in Cabin crew and denial of food, but also allows for a faster pre-flight preparation, thereby reducing the time grounded as well maintaining fare. 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 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. 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. The existing competition also have strong brand image globally, EasyJet is recognised nationally and within the European markets, however, national airlines like British Airways is recognised worldwide and has stronger brand awareness. 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. 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 analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. Protecting and building brand awareness and consideration. 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 The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. easyJet holidays will continually optimise yields on packages sold, whilst developing the cities proposition allowing easyJet holidays to reduce the cyclical disparity of a traditional tour operator. The idea of remote working can also 2023 Fortune Media IP Limited. EasyJet appears to have developed competences in supporting much higher levels of business from the same asset base than other rival airlines. Balance your retirement plan with your other financial goals. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. Do you have a 2:1 degree or higher? This level of disruption and deterioration of the operation cannot continue," the email reads. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. 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. Of popular holiday destinations, only Portugal and Gibraltar were put on the initial green list, with no requirement to self-isolate upon return. 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. 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. WebOften, this takes place in four major steps: Figure out how much money you need to retire. Organizations continue to develop new applications in or migrate existing applications to cloud-based services. 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. 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. In March 2020, he wrote to EasyJets chairman, John Barton, and demanded the company terminate the contract, citingforce majeure. Value chain analysis can provide important insights into what management need to focus on strategically. WebThere is one main reason which influences these economic factors is the recession in the Easy jet. Whats more, it included maintenance and avionics support for EasyJets existing fleet. The Matrix outlines four possible avenues for growth, which vary in risk: Market Penetration. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. SOCIAL changes in consumer taste and lifestyle represent both opportunities and threats for the industry. With the modern aircraft fleet that it possesses, the fuel cost and aircraft maintenance cost is also reduced. Research expert covering mobility and logistics. In April 2020, the airline was able to negotiate a$845 millionloan through the U.K. governments COVID Corporate Finance Facility for large U.K. employers. Worse, the company had discovered the hack back in January but hadnt notified people whose credit card details had been accessed until April, and was only now letting other customers know. A prime example of this was the subsequent takeover of Go by EasyJet. Now, at the cusp of a summer season that normally would be the source of the majority of EasyJets profits, the airline and its CEO face what could be a make-or-break season. It can restore the reputation of a brand. WebEasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. The business has also enjoyed an increase turnover and trading profits resulting in continuous substantial growth in underlying profitability over the last 7 years (see table 1). Statista assumes no 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. In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. 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. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. In April 2020, EasyJet announced that it had reached an agreement with Airbus to defer delivery of 24 of the aircraft, meaning it would take on no new aircraft in 2021. 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. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. That move also diluted Haji-Ioannous stake in the companys stock from more than 34% at the beginning of 2019to just under 30%, making it easier for EasyJets board to ignore the demands of its querulous founder. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. 6. Since the events of September 11th the airline industry suffered heavily, stocks plummeted and ticket prices are at all time lows. All Rights Reserved. This will help the companies decision makers understand where the organisation is now. Having fought off Haji-Ioannou, Lundgren and EasyJets C-suite faced other foes they couldnt control. Now, more than a year later, with the pandemic still raging, and with many countries, including the U.K., having toughened travel restrictions in response to new strains of the virus, the airline industrys hopes for an early recovery are descending faster than an Airbus A320 on final approach to EasyJets home base at Luton Airport. 1 Based on share price of 6.62 at 30 September 2021 EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. This will provide an evaluation of the external business environment in which the company operates. The sales process is efficient, as EasyJet sells directly to customers, instead of using external sales teams. As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. Legal and regulatory change. Finally, in February 2021, the company took advantage of a sudden uptick in investor confidence on the news that vaccinations in the U.K. might allow international travel to return by late summer. But what are the internal weaknesses suffered by EasyJet? Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. Today, a year after Easy Jets announcement, those perils still hang over the airline. When it comes to choosing between in-house and outsourcing, the organization must first analyze the associated risk and cost that comes along with each method. The type of childcare had little impact on infection risks. 100 per cent direct selling of fares; over 90 per cent of sales are online. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. ENVIRONMENTAL The energy sources used, namely oil has vast ecological/environmental implications. Enterprise risk management does not create the organisations strategy, but it helps in understanding the risks associated with alternative strategies being considered and, ultimately, with the adopted strategy. With Ryanair maintaining high margins despite reducing yields through strict cost management. 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. Ryanair uncompromisingly fought its way into the market with an aggressive pricing strategy. Lundgren and the board were frustrated. FORTUNE may receive compensation for some links to products and services on this website. To what extent does EasyJets concentration on Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. Technological Factors. EasyJet is faced with balancing technological advancements, for example, the use of the internet on distribution and cost synergies from industry consolidation, and the risk of rising costs and competitive pricing. (Lundgren declined to comment for this article.). We mentioned the seven most common risk events above, but other project risks could include contractor failure, unexpected life events, data transfer issues, shifting priorities, legal risk, market risk, and project deferral. Marketing and sales will involve making customers aware of EasyJets services are price information and also selling. Create a retirement strategy that diversifies your assets and manages risk. Before the pandemic, EasyJet was looking like it could emerge as one of the biggest winners in the European air-travel dogfight. He offered a $7 million reward to any whistleblower who could provide him useful information leading to the cancellation of the Airbus contract. 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. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. EasyJet also drew down the entirety of its existing revolving credit facilityraising $500 million in cash. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. Highly utilised fleet of aircrafts that are large, modern, efficient and relatively environmentally friendly. 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. To enjoy unlimited access to our journalism, subscribe today. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. So when the industry was slammed by COVID-19, government was responsive to pleas for help. Product Development. The globalization is also another factor influencing which build up the air traffic as lifelong. The airline couldnt simply abandon it without jeopardizing any chance of a quick recovery when the crisis ended.Lundgren also thought the contract made long-term strategic sense. Take it up as a as a proactive exercise embedding it into the organizations strategy instead of merely keeping it a reactive one Periodically monitor, review and update the digital risk framework. But nothing has been normal for EasyJet since March 23, 2020. Clicking on the following button will update the content below. 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. 500 million in cash your other financial goals strategic success and improved generation. He offered a $ 7 million reward to any whistleblower who could provide him useful leading! 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what are the risks associated with easyjet's strategy