Dominant Market Share in the United Kingdom: EasyJet - Dissertation Example

? What are the Strategic Initiatives Required of easyJet plc to maintain its Dominant Market Share in the United Kingdom Introduction The credit of the concept of “no frills airlines” or budget limited service airlines belongs to the British entrepreneur Sir Freddy Laker, who introduced the “Skytrain” in the 1970s on the transatlantic route. The venture failed, being squeezed out by the established airlines, but the concept remained and was revived in the 1980s, when deregulation in the airline industry in the U.S.A. witnessed Southwest airlines using this strategy to gain dominance in the domestic market. Liberalization in the airline market by the European Commission resulted in this concept reviving in the European sector in the 1990s. Consequently, “no frills airlines” sprung up by the mid-1990s in the United Kingdom and began dominating the European Market. easyJet came into being in 1995 as the brainchild of the Cypriot businessman Stelios Haji Ioannou, having a background steeped in the shipping industry. The early days of easyJet did not witness much success in proving to be a profitable venture. However, between the period 1998 to 2002 easyJet demonstrated the hunger and drive for larger market share and profitability through an impressive record of raising its 77 million pound turnover and 5.9 million pound profitability to 582 million pound turnover and 71.6 million pound profitability over this period. Strategic initiatives in the form of mergers and acquisitions of competitors and brand extension resulted in easyJet rising to a dominant market position in the United Kingdom market (Homer & Swarbrooke, 2004). 2. Rationale Borrowing a business model idea that had failed in a different environment, easyJet has made use of the opportunity of the liberalization of the European airline market to not just carve out a satisfactory market share, but to become one of the dominant players in the U.K. airline market. Many strategic business initiatives have brought easyJet to this market position. It would be an enlightening journey in evaluating how easyJet has used strategic thinking to reach such a position and whether these strategic initiatives are sufficient to sustain the competitive edge of easyJet to offset threats from competitors or whether other fresh strategies would be needed to sustain its market position. Such a study would add to the body of knowledge of strategic management, providing insight into sustaining competitive advantage. 3. Literature Review easyJet has its headquarters in Luton England, providing direct employment to 7,300 people that include 1,900 pilots and 4,300 cabin crew. It has revolutionized the manner in which people in Europe travel for business or for pleasure. It has led the way in utilizing the Internet as means of providing convenience in ticketing and quick dissemination of information. It operates on more than 540 routes in Europe with its 196 aircraft. In 2010 it carried fifty million passengers. It has strong market positions in key markets in Europe. It holds the dominant position at Gatwick, Milan and Geneva and is a strong contender in Paris (easyJet plc, 2011). The business and financial highlights of easyJet for the year 2010 shows a total revenue of 2,973.1 million pounds, profit before tax of 154.0 million pounds, return on equity of 8.6% and return on capital of 8.8%. easyJet has demonstrated continuing growth, with passenger numbers up by 7.9% and total revenue per seat up by 5.1% (easyJet plc, 2011). With the passing of each year easyJet’s market position in the European short haul aviation sector has only grown stronger. In the first half of 2010 it increased its market share from 6.5% to 7.6% (easyJet plc, 2010). easyJet has demonstrated how to use the resource based model to attain competitive edge and success in the business world. In its initial days it imitated this business model used by Southwest Airlines of U.S.A. which was characterized by use of one type of aircraft, the Boeing 737; catering to short haul needs; no in-flight meals; and quick turnaround time of the aircraft enhancing aircraft utilization efficiency to almost 50% more than the industry’s average. easyJet then extended this resource based approach by dispensing with travel agents, no issuing of tickets, selling food and drinks on the aircraft, and development of sales through the Internet. From a customer’s perception these actions showed strategic priorities consisting of efficiency, awareness and customer satisfaction. This led to easyJet becoming popular with differentiated service offerings that proved to be successful in a highly competitive environment (Kourdi, 2009). Making use of the Internet for cost advantages was one of the key strategic initiatives of easyJet. A website was designed and developed to integrate with the existing business processes and systems. In addition to information dissemination, the website also served to meet ticketing needs. The efficiency of the website was such that very quickly it began to generate 20% of the easyJet’s business. There was no looking back in utilizing the benefits of the Internet by easyJet from that point inwards (Chaffy, 2009). easyJet has used the business strategy of mergers and acquisitions for expanding its business. In 2002 easyJet and Go merged under the name of easyJet. This merger made easyJet the market leader in low cost airline sector in Europe. The strategy involves the use of the best practices of both the companies for retaining the customer base of both the companies (Hall, Jones & Raffo, 2007). The cost leadership strategy of easyJet can be summed up into utilizing the Internet to reduce distribution costs; ticketless travel to eliminate costs involving issuing, distributing, processing and reconciling millions of ticket; no free on-board catering, efficient use of airports, and paperless office operations (Barnes, 2008). Cost leadership strategy has been built into business processes at easyJet. In this strategy easyJet has attempted to outperform its competitors by ensuring that its services are created at a lower cost than its competitors. This has made it necessary for easyJet to make choices in its product offerings, markets and development of competencies. However, the use of this strategy by easyJet exposes it to two threats in the form of the ease with its competitors can imitate its business processes to this end and the loss of customer satisfaction and customer loyalty in the competitive global market (Clarke & Chen, 2007). Research Objectives The objective of the research is to find out what additional strategic initiatives will be required of easyJet for it to maintain its dominant market position in the UK as it goes forward. To arrive at such an understanding the research intends answering the following questions: 1. What are the current strategic initiatives of easyJet? 2. What are the weaknesses in the current strategic initiatives that can be exploited by competitors to cause erosion in the market share enjoyed by easyJet? 3. What strategic initiatives will easyJet have to adopt to offset the competition that is nipping at their heels? The hypothesis here is that the current strategic initiatives of easyJet will be insufficient for it to maintain its dominant market position in the UK. Research Method The research is proposed to be undertaken on the basis of an inductive framework using a literature review. Nunes and Al-Mamari, 2008, p.67, argue in favour of such an approach in the use of the inductive method to formulate early theories and problems in research. According to Nunes and Al-Mamari, 2008, p.67, “the literature review process should therefore produce a priori theory that reflects the cumulative knowledge in the field on the phenomenon being studied, i.e., generic a priori categories that are strongly expected to be relevant in the discussion, explanation and understanding of that phenomenon”. The literature review will involve relevant articles from journals and books pertaining to the topic of investigation. It will also look into case studies of business enterprises using the resources based cost leadership strategy and how they have avoided the pitfalls of the strategy. To ensure that information used has current validity only relevant articles published on or after 2001 will be used for the literature review. Articles published before 2001 will be excluded from the study. Data from the literature review will be provided in a table format to arrive at the findings of the study. Time Line Milestones June July August September October November Permission for the Research and other needs of the research ?---? Collating of material for the literature review ?---? Conducting the Literature Review ? ----- ? Writing the Report ?---? Submission of the Report ?---? Practical Issues Since the research is based on a literature review many of the practical issues including ethical considerations are not there. Since information of ideas from many authors are intended for use in the literature adequate attention will be paid towards providing acknowledgement of these sources and avoid any attempts at plagiarism. Literary References Barnes, D. 2008, Operations Management: An International Perspective, Thomson Learning, Bedford Row, London. Chaffy, D. 2009, E-Business and E-Commerce Management, Third Edition, Dorling Kindersley (India) Pvt. Ltd., New Delhi. Clarke. A. & Chen, W. 2007, International Hospitality Management: Concepts and Cases, Elsevier Butterworth Heinemann, Jordan Hill Oxford. easyJet plc. 2011, ‘About easyJet’ [Online] available at: http://corporate.easyjet.com/about-easyjet.aspx?sc_lang=en (Accessed April 29, 2011). easyJet plc. 2011 ‘2010 Business Highlights’ [Online] available at: http://2010annualreport.easyjet.com/2010-in-brief.asp (Accessed April 29, 2011). easyJet plc. 2010, ‘2010 Half Year Results’, [Online] available at: http://corporate.easyjet.com/media/latest-news/news-year-2010/11-05-10.aspx (Accessed April 29, 2011). Hall, D., Jones, R. & Raffo, C. 2007, Business Studies, Third Edition, Dorling Kindersley (India) Pvt. Ltd., New Delhi. Homer, S. & Swarbrooke, J. 2004, International Cases in Tourism Management, Elsevier Butterworth Heinemann, Jordan Hill Oxford. Kourdi, J. 2009, Business Strategy: A Guide to Taking Your Business Forward, Second Edition, Profile Books Ltd., Pine Street, London. Nunes, M. B. & Al-Mamari, S. H. 2008, ‘Inductive Approaches Using a Priori Coding in Information Systems Research: A Discussion’, in Seventh European Conference on Research Methodology for Business and Management Studies, Regent’s College, London, UK, 19-20 June 2008, ed. Ann Brown, Academic Publishing Limited, Reading. Read More