EasyJet: Applying Strategic Theory To Service Organisations - Case Study Example

School of Services Management APPLYING STRATEGIC THEORY TO SERVICE ORGANISATIONS Company: Easy Jet Industry Sector: Travel Industry XXXXXXXXXX XXXXXXXXX Course: XXXXXXXX BASIC COMPANY INFORMATION Name of Company: Easy Jet Main activity: Air Travel Other activities: No –Frills airlines and cruises Location(s) the company operates in: EasyJet operates between a numbers of locations. A list of the locations is as provided below: Africa, Europe and United Kingdom. They operate from almost 153 airports in these places. Brands / subsidiaries and number of units of each brand / subsidiary: No Subsidiaries. Main Competitors: Ryan Air is the biggest competition for the company. However there are a number of other airlines which operate in the country as well which form a threat to Easy Jet. Name of Chairman: The current Chairman of EasyJet is Colin Chandler Name of CEO/ MD: Board of Directors Name Position Year Sir Colin Chandler Chairman Nov-02 Andrew Harrison Chief Executive Officer Dec-05 Jeff Carr Group Finance Director Mar-05 David Bennett Independent non - executive director Oct-05 Sven Boinet Independent non - executive director Mar-08 John Browett Independent non - executive director Sep-07 Professor Rigas Doganis Independent non - executive director Dec-05 Sir Stelious Haji - Ioannou Non - Executive Director May-05 Sir David Michaels Senior Independent Non - executive Director Mar-06 Table: Board of Directors (EasyJet, 2009) Names of significant other stakeholders: The major stakeholders of the company as has been included and discussed even on the website of the company are classified as the Customers, Staff, Communities, Suppliers, Investors, Government and regulators, NGOs, and the public policy engagement. Particulars 2004 2005 2006 2007 Approximate Number of employees 4859 5674 Approximate Turnover revenue £1091 million £1341.2 million £1619.7 million £1797.2 million Approximate trading profits £41.1 million £42.6 million £94.1 million £152.3 million Table: Company Details 2004 – 2007 (Yahoo Finance, 2009) International, Multinational or Globalized: EasyJet falls under the category of global companies. As discussed it is spread across a number of different countries. The strategies used by the company is more global and as the values of the company and the mission suggest, the main strategy used by the company is to provide the customers with better flight travel at lower costs with minimal extra benefits. The ethical stance that the company follows is based on three major stakeholders. Firstly to provide the shareholders with higher returns for their investments, secondly to provide the employees with better working conditions and last but not the least to provide the customers with the lowest and cheapest air fares in the industry. The company understands the needs of customers across the countries are different and it acknowledges the needs of the customers across the various locations and the various different cultures that it operates within. EasyJet is a very customer centric company and the strategies of the company are affected mainly by the different needs of the customers. EasyJet is a very ethical company and the company pays a lot of attention to all its stakeholders. Globalization Opportunities: Easy Jet has a number of markets where they could still introduce the operations in. One of the most potential markets for the company is the Asian markets. The Marketing Strategies are derived from EasyJet’s organizational profile and its environment. The strategic focus should be on Market Penetration of business and leisure consumers, to protect the market shares and sales, and also to focus on customer retention. Continuing it’s marketing to gain brand recognition and achieve volume sales can do this. In the short-term, the strategy can be to saturate the existing routes instead of seeking to provide new routes. It should seek to increase only the volume and not seek specialization as this leads to higher costs and might result in losing the price war. In the long run, it can concentrate on Market Development, i.e. addition of new routes to their network, once the existing routes are saturated. Monitoring new markets and entering them is not something that competitors can’t copy but being first will give EasyJet a competitive advantage. The chosen routes should be either un-served or served by incumbent at high fares and also they should have a large leisure and business customer base. Before these strategies are implemented, it is essential to carry out the appropriate Market Research to confirm that the firm is heading in the right direction. As the primary target segments are business and leisure travellers, market penetration requires thorough understanding of the consumers of these segments Mission Statements: “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 relationships with our suppliers”(EasyJet Mission, 2009). The statement used by EasyJet is one which portrays the highest importance that the company gives, i.e. to the customers. The main purpose of the organisation is to provide the customer with lower prices. As per their mission, the organisations’ main aim is to assist the customers save as much as possible to pay lesser and save as much as possible, for safe point to point travel and also reliable products and fares for leisure as well as business markets. I feel this is a very strong statement that the company uses and in numerous ways EasyJet has proved that it works on the mission that it has set down for itself. Also the mission of the company is a visionary and it is clear conveyance of aspirations and high intentions for the company to provide the customers with value products and services and safe flights for all. Environmental Analysis: Easy Jet had the first mover advantage of introducing a Pricing Strategy based on Yield Management – rise in prices according to rise in demand. Its Direct Distribution strategy and upfront payments in Internet are clearly its Strengths, as the administrative costs are reduced. GO Acquisition made it a no-frill airline giant with extended network. Possibility of failures is more in using the Internet for upfront payments and also there is a risk of safety and security. From the start, Easy Jet is reluctant to pay compensation due to its cost cutting policies. Though it operates with 237 scheduled service routes to 67 European airports including some major airports, the other secondary airports where it operates are distant from the main cities. These Weaknesses might lead to potential loss of customers. UK airline grows at a higher rate when compared to the other global services, 34.3% and 25.5% respectively over the last 5 years. Growth in regional departures indicates substantial potential in the rise in demand of air travel from smaller airports. (Reached 66 million as of November 2006) Also, Easyjet’s target market (leisure and business) segments have grown by 36.6% and 25% respectively. The high frequency operation in each route due to the fast turn over time from uncongested airports attracts business customers. This coupled with the prediction of rise in demand for short breaks, are great Opportunities for Easy Jet to exploit the growth of their target markets. The Threat of fierce competition it faces leads to lesser time in training and revision of services to achieve customer satisfaction. Its rival, RyanAir has expanded its network to Morocco. Consumers are attracted to Easy Jet due to its low price, which it is likely to lose, if it adds a surcharge due to rise in oil prices. Pestle Analysis: ‘Open Skies Agreement’ - liberalization of aviation within and between US and Europe, is in place for summer 2007 which is a favourable Political factor. Also, investigation on BAA dominance and joint ownership of Scottish and London airports is going underway by the OFT (Office of Fair Trade), to ensure consumers interest. This will also lead to competition within the airports if the monopoly breaks. Travel sector benefited from increased Economic activities and its positive impact on disposable income. Increase in air travel had been at a faster rate then other transportation modes in UK since 2001. Economic Growth Rate (2005) indicates, Increase in passengers by 8% Number of seat kilometres by 8.8% Revenue reached 15bn. (Increase of 1.9% since 2004) Percentage of air travellers increased from 39.4 in 2001 to 45.5% in 2005. In the UK the number of passengers on the scheduled flights increased at a rate higher then the rest of the world, increasing its share from 4.2% in 2001 to 4.7% in 2005. In 2005, 22 million visits were made by air to the UK by overseas residents. The low unemployment rates in UK, GDP rising by 21.3% at current prices and by 9.8% in chain-linked real terms, Inflation easing out in 2005 to 2.8% (which rose up between 2001 & 2004) and the rise in disposable income per capita by 15.5% between 2001 & 2005, aided to the increase of passengers travelling through air. The Social factors can be analysed using the available information on demographics of air travellers. Male and female traveller percentages are 48.95% and 51.05%. After US the most overseas visitors are from Republic of Ireland and Germany. The fastest growing western European market is Spain with 55% increase from 2003 to 2005. The increase of Polish workers to UK has also made Poland a good source of visitors to UK, leading to new routes to Poland. Eastern Europe including Bulgaria and Hungary are fast growing overseas destination for UK residents. The Legal factors include the constraints on the amount of information collected about the passenger and the Aviation Tax regulations. Effects on Environment and global warming due to increased air travel over the past 5 years might lead to higher tax and restriction on the number of flights. This factor along with Technological innovation suggests that the future of aviation is in huge air buses such as A830; passengers will travel to major airports on such planes till they further board on small jets, increasing the demand of small planes domestically. Ethics: Ethically EasyJet has always been very ethical. The company participates in a number of charities and provides a lot of funding for special charities that deal with Alzheimer. One of the major societies that the company deals with is the Alzheimer’s Society. The company provides a percentage of all the scratch cards that the company sells. Also, Easy Jet has been able to meet the four ethnic stances for the company. Firstly considering the short term shareholder interest and the longer term share holder Interest, it has been clear from the operations of the business that the company considers its shareholders before making any decision. This indicates EasyJet being ethical towards its shareholders and considering the impact of every decision made in the company on the shareholder profits and benefits (Johnson, et.al. , 2006). EasyJet has been very aware of the environment it operates in including the customers, employees, suppliers and any other related to the business. Also considering the company and the amount of changes it has brought into the society in terms of the Alzheimer Society. This mainly deals with the shaping of the society and also the firms here generally pay more attention to the social aspect of the business than the financial considerations. Figure: Four Possible Ethical Stances (Johnson, et.al, 2006) Culture: The culture of the company and the various elements of the company have been noted to be positive. It has also been noted that the company is faced with a positive approach to most of its cultural elements. The stories, organisation structure, symbols, control systems and all others have all gained positive and good feedback from all. Figure: Cultural Web / The Paradigm (Johnson, et.al, 2006) Training: EasyJet has very straight forward processes and procedures. The company does not require any particular training that they require to provide to the employees, However the company does provide off the job training which provides them with continuous programs for the employees to improve their current skills and also to gain new skills which will benefit them not only for the current job but also with their career on the whole. This interest of the company on the personal benefits of the employees in terms of their careers leads the employees to be happier and perform better. Bibliography Hamel, G., & Pralahad, C.K., 1996, ‘Competing for the future’, Harvard Business School Press Hessan, D., & Whitleley, R., 1996, ‘Customer Centered Growth: Five Proven Strategies for Building competitive advantage’, Cambridge, M.A. Perseus Books Jobber, D and C. Rainbow, 1977, ‘A study of the development and implementation of Marketing Information Systems in British Industry’, Journal of the Marketing Research Society 19(3), 104-11 Johnson, G., Scholes, K. and Whittington, R., 2006, ‘Exploring Corporate Strategy’, 7th edn, Prentice Hall, Essex Markides, C., 1996, ‘Dynamic View of Strategy’, Sloan Management Review, pp 83- 92 Moncrieff, J., 1996, ‘Is strategy Making a difference?’, Long range Planning 32. 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