Easyjet Airline - Environmental Analysis of the UK and European Airline Market - Case Study Example

Easyjet Airline Contents Introduction 2 Environmental analysis 2 Environmental analysis UK airline 3 Political 3 Economic 3 Social 4 Technological 4 Environmental analysis European airline market 5 Political and legal issues 5 Technological 5 Economic 6 Social 6 Competitive analyses of the UK and European markets 7 Threat of substitutes 7 Threat of new entrants 7 Power of suppliers 7 Power of buyers 8 Rivalry among existing firms 8 EasyJet strategic and competitive position in Europe and UK 8 Opportunity for EasyJet to expand 9 Conclusion 11 Introduction There seems to be a number of factors that affect the daily operations of firms in every industry. These factors are external while others are internal and the firm will therefore need to adjust its current strategies from time to time so as to make accommodation of the both factors (Budhwar & Varma 2010). The European and UK passenger airline market is usually made up of native and foreign firms. For example in the UK the native firms that operate there are British Airways, EasyJet and Ryan air just to mention a few and the foreign firms that also operates in the UK includes but are not limited to emirates, Kenya airways and delta lines. In the European markets there are also foreign airlines that operate there and they include Lauda air and Austrian airlines. These airlines play a great role in moving passengers from one destination to another. Though some of the airlines are from foreign countries they tend to occupy a larger market share (Stephen 2004). In this paper I will focus on conducting an environmental analysis of both the European and UK airline markets. This will be closely followed by the competitive analysis of the two markets that is the UK and European market (Stephen 2004). I will further discuss the strategic and competitive position of EasyJet in Europe and in the UK and lastly offer a conclusion. Environmental analysis In conducting the environmental analysis of the two airline markets I will use the PEST analysis. It will take into account the economic, political, technological and social environment (Cento 2008). This report will further discuss how the various environmental factors will have an effect on the operations of the airline each of the country. Environmental analysis UK airline Political The political firmness of UK suffered a great blow by the terrorist bombings. This have in a way led to decreased revenues in the airline industry. Other passengers who preferred personal air travel also shunned away and at the same time airlines beefed up their efforts to enhance flight and airport security and this in a way reduced their profitability levels (Cento 2008). There are also other political factors that tend to have a negative impact on the airlines and they include the price regulations that have been outlined by the government, union requirements as well as wage legislations. Economic It can be noted that the economic factors in the UK have been for the benefit of the airline industry. The pound has attained more strength against the other currencies and this has been to the advantage of the airline industry (Holloway 2003). Also the fluctuation and inflationary tendencies of the dollar has also in a way been an added advantage in the airline industry. Nevertheless, the slowdown that is being experienced in the domestic economic growth seems to have a negative impact on the airline industry since as it accelerates the power of the people to make use of air travel is declining. Also the latest global meltdown has also affected the airline industry a great deal. And as a result most players in the industry reported of massive losses. It was very severe that even some of the airlines had to lay off some of their employees. The other economic factor that has had a lot of impact on the airline industry in the UK is the ever increasing cost of fuel. This has really had an impact on the profitability levels of the airline (Holloway 2003). Social Terrorism has over time proved to be a major threat to a great number of people in the UK as well as other destination states and people therefore tend to fly less. It has been noted that as compared to earlier times when people preferred to use air travel when travelling short distances many people are now using roads and rails and this is solely based on the vulnerability of airlines to terrorism (Mark 2006). Also the global financial crisis that was experienced led to the laying off of many employees and this in turn had a noteworthy impact on the employee’s economic potential. This had also led to a decrease in middle and lower class travelers. The threats posed by substitutes also seem to have a noteworthy impact on the airline industry and when coupled with the emergence of other cheaper airlines such as the Rynair the domestic market has in a way been affected. Technological Most technological factors have been working in the favour of the airline industry. Most players operating in the UK airline tend to possess a strong technological edge and this seems to be a key source of their competitive advantage over their core competitors in Europe and in other parts of the world. Most of the airlines have applied the technology so as to improve their services and at the same time add some value to their customers. The airlines have added various technology driven entertainment tools and this has really made air travel more comfortable. The internet has also immensely affected the customer habits and business operations and this has also had an impact on the way in which the airline conducts their businesses (Harvey 2007). A number of airlines in the UK have also adopted the use of the internet to market their core services and sell tickets. Nevertheless technology seems to be a double edged sword in that though technology seems to be a source of competitive advantage most airlines are also expected to replace technologies which are also phased out after a very period of time since technological dynamism seems to be on the rise (Harvey 2007). Environmental analysis European airline market Political and legal issues Previously the airlines have been adversely affected by legal and political regulations. The European deregulation of aviation corresponded to the expansion of operations of the low cost airline industry (Holloway 2003). The LCC’s took advantage of the deregulation and they expanded their operations. In contrast, there was a threat that was posed by war in EU East and East Europe. Technological LCC’s like Easyjet are usually said to have the ability to maintain and leverage higher degrees of customer focus and this is mainly through the use of user friendly websites which has improved booking process for the customers (Harvey 2007). The website is bestowed with tools, that can able to charge bookings by the greater amount of ease and at the same time utilizing easy to use fare finders for the customers to be able to find the cheapest fares. The use of technology in selling tickets seems to be of advantage since they do not incur costs that are associated with travel agents. Economic A major economic issue that seems to be facing Easyjet in Europe is the oil prices. Oil prices usually have a profound and noteworthy effect on airlines economics since fuel costs tend to constitute to almost 10-14% of the operating costs of airlines (Mark 2006). This operating costs at times rise to higher levels depending on the situation in the globe. Another major economic issue is related to terrorist event and war. War and terrorist activities tend to have a negative impact on the airlines lines since it in a way reduces the number of people opting to use air travel as their preferred travel mode (Graham 2001). Social In the earlier days air travel was seen as an expensive cost and it was only afforded by a few in the society. The LCC revolution has made the service more available to a greater number of people in Europe and in the rest of the world (Mayer 2003). The other social issue is the decline of travel destinations both internationally and domestically and this has also had an impact on the number of travelers who are opting to use air travel. There has been a surge in that British residents are also engaging in real estate’s deals in France and this can be closely linked to the sudden rise in cheaper and lower travel costs between these two destinations. The low fares will ultimately increase in air travel since people will have a more often chance of travelling as leisure travelers or business travelers. Another social issue is that most of the airlines in Europe had to lay off some of their employees (Mayer 2003). This in turn had a negative and noteworthy impact of the people and this in a way affected their social life. Competitive analyses of the UK and European markets Threat of substitutes EasyJet seems to face a minimal threat form the other modes of transportation that are present for example trains and cars. Irrespective of these the cost advantage and time advantage that is associated with LCC’s seems to be higher (Khurana 2009). Threat of new entrants The huge capital requirements mainly posses a major threat of new entrants in the markets. The LCC markets in the two countries seem to be mature. Expansion to India may prove to be more difficult for the firm (Mark 2006). Power of suppliers The rice charged on the oil seems to be directly linked to the oil prices and Easyjet cannot be able to alter this (Khurana 2009). As easy jet expand to, the greater the power it will have on the suppliers. Power of buyers The buyer power seems to be strong, since customers tend to search for a better price and most especially on the use of LCC who have internet sales for their tickets. The customers tend to find and exploit the price disparencies and thus most operators must keep regular checks on their prices (Graham 2001). Rivalry among existing firms The airline seems to be experiencing a lot of rivalry from a number of airlines such as Ryan Air and buzz in the UK and virgin express and others which are based in Europe. Ryan air has showed a continuous increase in their profits over the years and thus it seems to be among the core competitors of Easyjet (Graham 2001). Another rivalry is derived for the emergence of tour operator’s ad they tend to sell their airline travel on only their scheduled seats and usually at reduced prices. EasyJet strategic and competitive position in Europe and UK The core strategic objective of Easyjet is to ascertain itself resolutely as being the leaders in the LCC market within Europe and the UK (Mark 2006). The strategy has been designed in such a way that it will be able to attain the following: Offering low fares Offering customers with optimum service Offering regular flights when it comes to covering short distances Making sure that their operating costs are minimal Apply technology for expansion of their operations High level of commitment to quality maintenance Easyjet operates by offering low cost as compared to the other players in the industry. The airline has a competitive advantage through this policy since they are able to compete well with their competitors in both Europe and the UK. Easyjet has also been utilizing the small regional airports that are available and this has been crucial to the growth of the company over the years (Khurana 2009). This has also led to a reduction in total costs incurred when entering airports and also the small regional airports seems to be less congested when it comes to traffic and thus their customers do not experience any delays. Another core strategic issue is the issues of short haul flights Easyjet does not offer services such as meals to their passengers as compared to their competitors who are forced to offer meals since their customers are travelling over long distances. The policy of cutting cost to a smallest amount is and continues to be one of the factors in success of Easyjet operations (Mayer 2003). Through the use of technology Easyjet is able to keep reduce costs since they have eradicated middlemen and agents who linked the airlines to the customers. It has also been noted that almost 96% of the booking are usually done through the use of the internet. Opportunity for EasyJet to expand I would research and investigate on the opportunity of EasyJet to expand intarnat0ionallly to the Indian market by searching in the internet. I would look at the major players in the industry and their respective market share. I would also look at the strategies that they have put in place so as to attract their customers and maintain a competitive advantage over their competitors in the industry and through this I would choose on the ones to implement (Mayer 2003). A major threat that EasyJet need to take into consideration is terrorism. India has been a target country over the years by a number of terrorists groups. India seems to show a great level of flexibility in bouncing back to its normal operations after the attacks. In the same way the possibility of India to develop into been a global service hub solely depends on the capability of the country to be an attractive and safe destination (Khurana 2009). Another major threat that EasyJet needs to take into consideration when entering Indian market is the Middle East aviation carriers. Most carriers in the gulf region are belligerently expanding their operations in India and they tend to have high number of frequencies from several destinations to their hubs and from these hubs their customers can be able to access widespread global networks. A major opportunity in India is bestowed on the fact that the airline industry in India seems to be at the nascent stage and future economic growth in the country will ultimately lead to the increase in number of travelers who may opt to use air travel and also there will be an increase in cargo that need to be transported using airlines (Mark 2006). Another opportunity is based on the fact that India is over time becoming a major tourist attraction site and thus there will be an increase in number of foreigners visiting the country with some coming as tourist and others as investors and businessmen. Another opportunity is that India seems to be ideally positioned and it usually acts as a major aviation hub since it is at the crossroads of Asia pacific, Europe and Middle East. EasyJet can take advantage of this opportunity and expand its operations in India so as to gain additional profits. Another noteworthy opportunity is that the Indian government has formulated policies commonly referred to as the open sky policy and they are aimed at attracting foreign players into their market (Harvey 2007). This seems to be a major step to the growth of the industry. This seems to be a favourable opportunity for Easyjet to exploit. Conclusion From the above analysis it is clearly evident that aviation industry seems to be gradually changing. The strategies that Easyjet is applying assist them a lot in gaining a competitive advantage over their competitors in the market (Harvey 2007). Easyjet therefore needs to take into consideration of the possible threats and opportunities. Through this Easyjet will be able to make a careful consideration of whether to venture into India or not. Based on the analysis India seems to be a better place to venture in since it has a number of opportunities that if exploited well can be of benefit to the organization. References Budhwar, P & Varma, A 2010, Doing Business in India, Routledge, New York. Cento, A 2008, The Airline Industry: Challenges in the 21st Century, City Physical, Verlag Heidelberg. Graham 2001, Managing airports: An international perspective, Butterworth Heinemann, Oxford. Harvey, G 2007, Management in the Airline Industry, Routledge, New York. Holloway S 2003, Straight and Level: Practical Airline Economics, Ashgate Publishing, UK. Khurana, K 2009, Aviation management: global perspectives, Global India Publications, New Delhi. Mark, M 2006, The airline industry, Emerald Group Pub, Bradford, England. Mayer, F 2003, A case study of Easy Jet and the airline industry’, München, GRIN Verlag. Stephen S 2004, Airline Marketing and Management, Ashgate Publishing Ltd, UK. Read More