Business Analysis of Easy Jet - Research Paper Example

Business Analysis of Easy Jet Table of Contents 0.00 Executive Summary 1.1Introducion 1.1.1 The Mission, Vision and Objectives of Easy Jet 1.2External Analysis of Easy Jet-The PESTLE Framework 1.2.1Easy Jet and the Five Forces Framework 1.3 Internal Analysis of Easy Jet-The SWOT Matrix 1.3.1 Easy Jet and Porters Competitive Advantage/Core Competencies 1.3.2 Easy Jet and Porters Generic Strategy 1.4Conclusion and Recommendation Executive Summary Easy jet is one of the largest low-cost airlines in Europe competing actively with other key players like Easy jet, Ryan air, Flybe etc. With, the study initiated to provide a management and business analysis report to the board on how to develop the brand and give it a leading edge in the low-cost market, in doing the analysis, we draw on several models from different disciplines (e.g., Keller brand equity model, the five forces frame work of Porter, guided in the strategic fit analysis). Using the PESTLE framework, the five forces framework, and Keller customer-based brand equity model, Easy jet was diagnosed to know the present challenges and position of the brand. Value drivers, core competences and competitive advantage were identified. Having suppliers dotted all over areas, our report finally uses the Balance Scorecard to make some recommendations for the company to successfully adjust Porters value chain to suit its needs. Though Easy jet has successfully and effectively integrated customers and suppliers into the value chain, certain issues remain a nightmare for the company to crack. The lack of a unique service with total differentiation from the competitors, the rising tension on world politics, the war against peace (terror), global warming and its negative contribution are some particular examples. However, with our client’s concept of marketing high quality services at low cost through a focused generic strategy, intended for its flight route, the company is gradually gaining an edge from its competitors. 1.0Introduction Easy Jet airline Ltd popularly known as Easy Jet is based in London, Luton airport (Company Report 2005). It is known as the largest airline in the United Kingdom operating both domestic and international scheduled services. Though it specializes on point to point services it sometimes goes on full service charter flights for other companies. This report is based on a business analysis report presented to the management of Easy Jet Company. Part one of the report carries out an external analysis of the company while stating the vision and mission statement. Part two looks at the internal resources to identify the core competencies and strategic resources while part three provides pertinent recommendations and conclusions. 1.1.1 The Mission, Vision and Objectives of Easy Jet The company’s mission vision and objective statement centers on offering customers higher value to their money, through security, safe and good point to point services. According to the company (2008) report, its mission and vision statement is to “provide our customers with safe, good value point to point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this, we will develop our people and establish lasting relationship with our suppliers”. Mission and vision statements are two strategic management concepts (SMCs) (Soyer & Asan 2007). These are important concepts that define organisations’ values, competencies and are quite useful in the strategic planning and management of the organisation (Soyer & Asan 2007). Soyer & Asan (2007:1) echo that, “SMCs together provide a common language and help stakeholders and other interested parties understand the business and its position in a competitive environment. This same view was earlier aired by Raynor (1988) where the researcher refers to mission and vision statement as an organisation cornerstone that guide and provide actions, directions and aspirations for the future. 1.2External Analysis of Easy Jet-The PESTLE Framework In business, environmental analysis is an appreciation of an organisations activities vis-à-vis its environment (Lin& Lee 2006). Such analysis has become imperatively necessary in the light of increase competition as present, subsequent operations and strategies direction will be dependent on the result (Lin& Lee 2006). In analyzing the environment, Easy jet, I will use the PESTLE and Porter’s Five Forces Model. According to Johnson et al (2006) the PESTEL framework is a framework that can be used to categorize the factors that influence the business environment of an organisation into six main types including: Political Influences, Economic influences, Technological influences, Socio-cultural Influences, Environmental influences, and Legal influences. The environment in which Easy Jet operates in is indifferent from this as is affected by governmental laws, international laws, competition from other low cost airlines as Flybe, change in interest rate, politics, technology etc. For example global warming has attracted attention on the activities of airline companies and today, Easy Jet offers its customers the possibility to offset CO2 to their customer’s trips as an extra service via a calculator. The growing terror treat, is a watch and caution on their activities. 1.2.1Easy Jet and the Five Forces Framework Porters five forces, is a framework developed as a way of assessing the attractiveness (Profit potential) of different industries. It is quite valuable in identifying the sources of competition in an industry or sector (Johnson et al 2006). In analysing Easy jet the suppliers those of its fixed assets, IT maintenance, cash transfer, it customers are owners of private and business accounts, IT maintenance etc while threat from new entrants is low because of the necessary capital requirements, and laws to comply with the European Union flights policies. Competitor’s rivalry will include actions from Ryan Air, Flybe and a host of other airlines plying the same routes. Porters Five Forces Approach Application to Easy Jet Relationship with suppliers The suppliers constitute independent artist, , designers, customers. Bargaining power of buyers Low switching cost due to numerous options available to buyers. Ryan Air, Flybe, SAS Threats of new entrants Low threats of new entrants because of the human, time, material and financial resources necessary to set up an airline. However, and entry of a new entrant from other continent like Asia remain a big threat. With competition increasing in some key routes Threats of substitutes products or services The industry is characterized with many niche players. Land transport and air are close substitute though poor ones Rivalry amongst established firms Fierce competition with flat cost. No major player able to dominate the market. How ever with continuous innovation and Easy jet has taken the lead. Figure:1 Porter (1985:4) contends that the Five Forces define the rules of competition in any industry and at the same time marks the bases for understanding a company’s success. Porter (1985) went further and argues that, competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry’s attractiveness. The researcher further claims that, “The ultimate aim of competitive strategy is to cope with and, ideally, to change those rules in the firm’s behaviour.” (1985: 4). 1.3 Internal Analysis of Easy Jet-The SWOT Matrix The SWOT (Strength weaknesses, opportunities and threats) analysis on its part is used by businesses for strategy formulation (Lin &Lee 2006). These researchers echo that it helps enterprises qualitatively in shaping their strategies and evaluating their competitive position. To these researchers, “it serves as a foundation for strategy design and formulation” (Lin & Lee 2006:3). The main weakness with the SWOT is that it cannot easily be related to several companies simultaneously (Lin & Lee 2006). In the situation of Easy jet, SWOT give the management a strategic fit, by specifying their objectives, those internal and external factors likely to affect the success of the objectives. It is quite flexible and serves as a precursor within the context of Easy Jet for subsequent strategic management planning (Lin & Lee 2006). Analyses of Swot Strengths Largest and strong portfolios of trusted brands. European presence, many countries, more than 200 routes value attached to their employees. New innovative product and services. Large investment on R&D with long and existing history on brand development. Effective and easy distribution chain facilitated by online sales and catalogue. Continuous improvement and development of new routes and services i.e. celebrity endorsement, with musicians and artists. Many of the brands are well known, cost leadership with high quality. Opportunities. Developing market opportunities and emerging markets. The potentials associated with the internet are numerous. Creating a customer supplier interface will proof quite profitable. Developing countries markets still remain virgin. This market makesup80% of the world’s population. Entering and strengthening holds into potential markets such as India and China. Opportunities for merger, acquisition, and joint ventures are bound. The world becoming a global village is an indication of weakening trade barriers. The creation of a common market for Europe and Africa. . Threats More than 50 competitors and other niche players operating almost in the same markets and products. The turn around market in Europe. Media Economic and political disruptions. The war in Iraq, the present situation in the Middle East, the situation in Iran, Kosovo, and the increasing threat of global warming. The fierce nature of the business characterized by flat prices, open market for competitors, rising commodity prices, media fragmentation. The certainty nature of government policies on taxes and trade barriers. Competitor’s websites are more informative. Fluctuations and foreign exchange exposure. The falling dollar Changing consumer patterns. Weaknesses A major competitor like Ryan Air, Flybe international continue to dominate in some other routes. The lack and absence of unique product with total differentiation from those of competitors. The lack of ownership of exclusive patents. Dropped and sold of many routes Some divisions have not been quite successful and profitable, e.g. UK Some market are already matured Fierce competition coming from direct competitors e.g. Ryan Air, BA, etc. The changing nature of the business environment requires firms to acknowledge their responsibility to a broader constituency than their shareholders and to help solve what Robert (1992) referred to as important problem they have helped to create. Today, a handful of researchers have gone as far as arguing that, the reasons for corporate restructuring or change are either competitive pressures, changing outside environments which in most cases is made up of mostly the stakeholders (Hsueh & Chang 2008). 1.3.1 Easy Jet and Porters Competitive Advantage/Core Competencies Core competences are unique combination of technologies, knowledge and skills that are possessed by one company in a market. Its invisible nature renders it invisible to external observers and difficult to analyse (Hagan 1996:2). A firm’s core competence was originally developed and analysed by Prahalad & Hamel (1990). A firm core competence refers to a set of problem-defining and problem-solving insights that fosters the development of idiosyncratic strategic growth alternatives (Prahalad & Hamel 1990). According to Prahalad &Hamel (1990:2) and Stalk et al (1992:6) firms compete primarily on the basis of capabilities which develop through their idiosyncratic experiences and become the source of competitive advantage or disadvantage. Easy Jet competencies includes it brand, the number of route covered, the workers and employees. The low-cost flight industry has become diverse especially with the current pace of technological advancement; competition is not just on price, number of route covered, but on punctuality, security, and combine flight reservation packages 1.3.2 Easy Jet and Porters Generic Strategy According to Porter (1985,1990), there are three long-term strategies on which an organisation can build its core-competencies, core capabilities and resources (Stalk et al. 1992:59). These strategies include: Achieve overall low-cost leadership in the industry Market products that are differentiated Focus on market segments for growth in cost and/or differentiation According to Porters (1990), a cost leadership strategy means placing great emphasis on efficiency in all organisational activities in order to reduce the overall costs of products and services delivered to customers or achieved through partnership with suppliers. A low cost leadership strategy will work effectively when the organisation can provide products and/or services at a lower cost than the competitors. Figure 4 Porter's Generic Strategies (source: Porter, 1985, p.12) On the other hand, a differentiation strategy is aimed at delivering products and/or services that are different from the product mix of the competition. Differentiated products are often marketed at premium prices in order to cope with added costs of differentiation, leading to higher profit margins. Apart from high costs, the potential risk associated with this strategy is that consumers may not perceive product and/or services as differentiated (Stalk et al 1992:63, Johnson & Scholes 2007:78). The focus strategy of Easy Jet is a mix of the two of the generic strategies. It focuses on cost leadership and product differentiation simultaneously in one particular market segment, or a niche. Looking at Easy Jet, one will not hesitate to say that by continuously developing inexpensive but different brands, the company has successfully capitalize on focus strategy, that of low cost and differentiation making it easier for every one to fly, their slogan come and lets fly is a big marketing break through. Easy Jet is a low cost airline for all. Porter (1990) further identifies the following steps for a company to successfully follow before assuming a cost leadership position (Johnson & Scholes 2007): Create a good product draw advantage from many sources; make cost a part of corporate culture. Here is what Easy Jet presently does with its umbrella branding strategy. Analysis of the Easy Jet Brand using the CBBE According to Keller (2003) the CBBE model approaches brand equity from the perspective of the consumer-whether it be an individual or organisation (Keller 2003). This model is built on the premise that, the power of a brand in the market is in “what customers have learned, felt, seen and heard about the brand due to their experiences over time” (Keller 2003 59). Keller (2003:60) defines CBBE as the “differentiated effect that brand knowledge has on consumer response to the marketing of that brand: brand awareness and brand image (Keller 2003). The CBBE model suggests that four sequential steps are necessary in building a strong brand. As outlined in the model, these steps start from given an identity to the brand (who are you?), to marking a difference between the brand and other related brands (Keller 2003). Thus for the situation of Easy jet as a low cost airline our emphasis will be focusing on a cost leadership strategy by promoting those brand related salient features (low-cost, easy reservation, no luggage displacement, total comfort etc). Keller (2003) cautions that, each step in the customer based brand equity model is contingent of the other. This is what the management of most companies fails to do. However, using Easy Jet as a case study, this is should be made to become history (Keller 2003). Applying this to my case study, the question “who you are? Refers to Easy jet in this context, Easy Jet though is not a global brand, should become management priority as it subsequently breaks into other markets. It should remain a strategic player in the low-cost flight industry with other rivals like Ryan air etc. The management of Easy jet can through an extension of its service line, maybe combining hotel reservation and flight reservation, selling of combine in flight catering services. The Management of Easy jet, should through the brand equity model enhanced the brand aesthetic features perceived as the brand quality. This should be through Easy jet brand positioning-media visibility, effectiveness of its’ marketing in terms of sales, premium price to some of its flights, off-season discount, and customer’s loyalty preferential card. Customer travel with the airline should be made an enjoyable pleasant and memorable one. 2.0 Easy Jet Balance Score Card The next step is to determine the causal linkages between the strategies and develop a strategy map to visually portray how your strategies support your mission and vision. One of the primary reasons for developing a strategy map is that it should clearly communicate the connection between strategies and mission and is an excellent communication tool. This is explain inline with the short, medium and long term plan. 2.1Short Term Plan 0-6 Months Managing for value is very important for Easy jet as it is in line with one of the organization objectives. With profit and greater margin currently being made by the company, opportunity for profit sharing and bonuses becomes available. Our focus in the short run will be on learning and growth perspective and the need to put appropriate motivation tools, to help us and retain those staff to continue with our team into the medium and long run. In the short run, we will developed a performance based compensation, a peer recognition program review and update salary to reflect competitiveness. Our achievement will be employee satisfaction, lower employee’s turnover rate 2.2 Medium Term 6-18Months Customers are interested to have a fair value for their money in terms of product and service qualities and price. Part of this profit could be reinvested in terms of price discount to easily challenge other competitors. In the medium term, emphasis will also be on internal perspective quality and safety. We will review the passenger’s flow process and streamline the staff to make sure they are adequate automated booking will be hooked to bank tellers all over UK and Ireland. 2.3 Easy Jet Long Term Plan 18Months and above In the long run, our attention will be to focus on all the other stakeholders interests, we will engage in certain activities if the organization’s hierarchy believes that these activities are expected by the communities in which they operate and to satisfy the community that the activities were carried out in compliance with the expectations, the management decides to produce a social and environmental report concerning the activities. If the organization does not perform the activities as perceived by the community it might no longer be regarded as a legitimate organization. This will also mean creating more flight routes, buying more airbuses, involving more mergers and acquisition. 1.4Conclusion and Recommendation Creative marketing people will come up with events and techniques that will leave lasting impressions. The marketing mix, the 4 P’s is the marketing “mix” of every brand and company. Flybe should strive at controlling the 4P’s known to be the “independent” variables. The dependent variable is sales volume. Thus the right mix should give the best sales volume. This can be possible through a definition of an appropriate “Product Space Map”. The management of Easy Jet however needs to consider using techniques such as above like integrated marketing communication, this kind of activity include broadcast and print advertising where an agency is paid on commission based on the media space bought. By using the technique, it is easy for the company to breakthrough competitors existing customers (Attitude). What consumers think about Easy Jet How the consumers feel about Easy Jet services How consumers have been reacting towards the Easy Jet’s products and who are those competitors. By using such a technique, Easy Jet with its current strategy of attacking virgin routes will be able to address consumer’s negative perception about some of its services. Such an action also, will help counter early post purchase dissatisfaction experience by customers may be done through television advertising. Changing the way customers think and feel about a product requires emotional messages to appeal to consumers and increase their likeability for the brand. A television message can portray a flight passenger, relaxing in flight, another passenger being asked to get up from sleep after landing. Their integration marketing strategy should be redesign to ensure that both trust and commitment can be developed and maintained and that there is a level of interdependence between the channel members, which means that an action by Easy Jet will impact all the channel members. Integration of a company’s marketing communication activities can avoid confusion and disaffection in the minds of consumers and buyers, offering a comfortable identity to customers and staff and give the brand a positive image. (Kotler. 2005). Schultz et al. (1993, 1998) postulated that any model of marketing communication should analyse what happens with the customer rather than starting with the marketer. By doing so, the communication mix is developed on the basis of (actual, ‘natural’) customer activity in relation to the brand and not (necessary) marketer activity in relation to the brand. This is the secret behind Nike, McDonalds marketing mix and other leading brands. Easy Jet and the suppliers can jointly invest and redeveloped its current weppage, in a common database which is more appealing and supporting to more support functions. Electronic commerce could boost sales, as it is a convenient way of purchasing and could also provide the ambiance of providing all the services and goods under one roof. Such a step towards technology could improve customer satisfaction and bring about additional revenues from satisfied clients. Competing in the right way in the right arena can be extremely profitable, but only for a limited time. The core competencies of the corporation, which are the basis of competition, provide the foundation of a sustainable competitive advantage and long term performance. Unless there is an advantage over competitors that is not easily duplicated or countered, long term performance is likely to be elusive (Aaker, 1989, p. 91). Easy Jet one route one fare can be readjusted to be more competitive I will highly recommend Easy Jet to continuously take the lead in new service launch and entering new routes. By entering into partnership with key players in its value chain its value chain could be redefined with competitors innovation, technology and collaborate with other partners and competitors when entering new markets. Managing a company’s brand is a complex and complicated issue that needs to be thought of in terms of how feasible and applicable is it in relation to the resources and capability of the organisation Management of Easy Jet, as a service company should also consider incorporating it activities inline with the ASO model. The ASO model is made up of three elements which include: the service product; the service augmentation; and marketing support (Storey and Easingwood 1998: pp. 335-336). Easy Jet should incorporate and carry this three models out together in order for its services to meet the overall expectations of the customer. Under this model, the impact of the service product on competitive advantage is determined by five factors which include: product quality which is measured by the reliability, accuracy and consistency of the product, product distinctiveness, perceived risk, physical evidence and product adaptability (Storey and Easingwood 1998: pp. 335-336). The impact of service augmentation is determined by distribution strength, effective communication, staff/customer interaction and customer experience while the impact of marketing support is determined by marketing knowledge, staff training and skills, investment in systems and the launch strategy staff, their physical appearance or outlook, consciousness, promptness and efficiency. As far as experience is concerned, customers tend to purchase from a firm were they have had a positive experience with. References Aaker, D.A., (1989)“Managing Assets and Skills: The Key to a Sustainable Competitive Advantage,” California Management Review 17, Winter Issue 1989, 47–50. www.questia.com Hamel, G. and Prahalad, C. K. (1994). Competing for the Future. Boston, MA: Harvard Business School Press. Hsueh, C., Chang S. (2008) Equilibrium analysis and corporate social responsibility for supply chain integration European Journal of Operational Research, Volume 190, Issue 1, Pages 116-129 Keller, K. L., (1993). Conceptualising, Measuring Managing customer-based Brand equity. Journal of Marketing. 57(1) 1-22. Keller, K. L., (2001) Building Customer-based brand equity. Marketing Management 10(2) 14-19. Keller, K. L., (2003). Strategic Brand Management. Building, Measuring and managing Brand equity 2nd Edt New Jersey. Prentice Hall. Roberts, R.W. (1992) ‘Determinants of Corporate Social Responsibility Disclosure: An Application of Stakeholder Theory’, Accounting, Organizations and Society, Vol. 17, No. 6, pp. 595-612 Johnson, G. and Scholes, K., (2007). Exploring Corporate Strategy, Prentice-Hall, Europe Porter, M.E. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: Free Press. Porter, M.E. (1990). Competitive advantage of nations. New York, NY: Free Press. Prahalad, C. K. & Hamel, G. (1990). “The Core Competence of the Corporation.” HarvardBusiness Review 67(3): 79-91. Soyer, A., & Asan, U. (2007). Identifying strategic management concepts: An analytic network process approach. Computers & Industrial Engineering Stalk, G. Evans, P. and Shulman, L. E. (1992). Competing on capabilities: The new rules of corporate strategy, Harvard Business Review March/April, 57-69 (1992). Storey C., Easing wood C.J. (1998). The Augmented Service Offering. A conceptualization Study of Its Impact on New Service Success. Journal of Product Innovation Management, vol. 15, pp 335-351 Appendix 1 Once you have your strategy map, you can start identifying what actions you will take to achieve strategies and how you will measure the progress in accomplishing each strategy. The following are a few examples of actions you might implement under each strategy and two measures that could be used to track accomplishment of each strategy. For purposes of this example, both a lag (historical performance) and a lead (predictor of future performance) indicator are used. Learning and Growth Perspective (Staff & Clinicians): Motivate, recognize and retain staff ACTIONS: Develop performance based compensation Develop peer recognition program Review/update salary/benefits to ensure competitiveness MEASURES: Employee satisfaction (lag indicator) Turnover rate (lead indicator) Internal Process Perspective (Quality & Safety): Provide high quality services ACTIONS: Review ER patient flow process and streamline Review ER staffing to ensure adequacy Implement automated pharmaceutical dispensing MEASURES: % ER patient triaged within 15 minutes of arrival (lead indicator) Medication errors per dose (lag indicator) Customer Perspective (Patients & Community): Increase utilization of services ACTIONS: Implement customer service Implement marketing plan MEASURES: Patient satisfaction in 95%-tile (lag indicator) Average daily census (lead indicator) Financial Perspectives (Business & Development): Operate in the black with 5% margin by increasing revenues ACTIONS: Review billing and collections processes for accuracy and timeliness Develop incentive program for AR staff MEASURES: Net revenue increase over prior year (lag indicator) Decrease net Read More