Analysis of EasyJet - Report Example

EasyJet Table of Contents EasyJet Table of Contents 2 The Company: An overview 3 SWOT Analysis of EasyJet 3 PESTLE analysis 6 Reference 10 Bibliography 11 The Company: An overview EasyJet, the no-frills carrier, serves more than 100 destinations in around 30 countries (Hoovers, 2010). These places include well known vacation spots, various business centers across Europe, North Africa and the Middle East. The low fare base carrier operates from about 20 crew bases within the Europe continent and UK region, including some major airports. Established in the year 1995, the carrier now operates with a fleet of 175 Airbus and Boeing jets. SWOT Analysis of EasyJet Analysis of the internal and external environment of a company is significant to assess the relative competitiveness of an organization. Analysis of the company’s strengths and weaknesses are included in the internal analysis of the company, while threats and opportunities comprise the external analysis. Strengths Strong brand image: The low cost airline has a strong brand image. This has been possible only because the airline uses new aircrafts. Adding to it, the aircrafts are well maintained by the organization. As a consequence, the airline is perceived as one of the safest airlines across Europe. Punctuality has been the biggest strength of the organization. The organization is accepted by all the European countries as one with no home country (Kirnchen, 2007). EasyJet has been able to create a strong Pan European brand image through intensive promotional activities. Strong e-Business: The Company sells almost all of its tickets through its website (Mayer, 2003). This, in turn, has resulted in the total cost reduction for the organization without compromising on ease and comfort of the passengers. Quick Turnaround: EasyJet has a quick turnaround time at the airports, which means the company is able to fly more flights with better productivity. Flat Organizational Structure: EasyJet has a flat organizational structure. This flat structure has enabled the company to implement and control the total quality management very easily. Cost Effective: EasyJet has positioned itself as a cost leader in the industry. The company operates without offering any extra service to their passengers, like charges for the meals served on board. This has enabled them to build up a ‘cost effective’ image. EasyJet has positioned itself as a ‘different company’ with statements like “We are not fussy, not snobbish, forget about the unnecessary service” (Kernchen, 2007). First Mover Advantage: EasyJet is the first one to launch ‘flight arrival information service’ on the company website. The organization is innovative and flexible in its operation. For example, it cancels the routes which it finds are not productive enough to support the cost incurred. Weaknesses Low remuneration: Employees are not happy with their remuneration structure. Flight attendants are often found to leave their jobs because of low salary. Low frequency on the routes: In any specific route, EasyJet flies only for one or two times. So sometimes they miss on the passenger traffic. No customer retention policy: The carrier does not have any customer retention policy and it does not offer any benefits to its frequent flyers. Lack of business focus: Absence of attractive programs seems unappealing for its business class passengers. Weak management structure: As the company is having a high growth rate, the entrepreneurial management structure is no longer valid in this growth oriented organization. Outsourcing: EasyJet outsources most of its divisional work and therefore has to spend a lot of time to manage the relationship with the subcontractors. EasyJet has been experiencing difficulties with the subcontractors in making them share a common goal. Opportunities Takeover Opportunities: Due to the recent recession, a number of airlines in the UK airline industry have gone bankrupt. As a consequence, EasyJet can execute a few takeover opportunities which will enable the organization to grow further. Economic Downturn: The recent economic downturn has proved to be quite advantageous for the organization as low purchasing power has forced the people to opt for low cost airlines. Online Booking: As the number of internet users is increasing in the European region, online booking is gaining more popularity among the travelers. Regional Services: The traditional airlines are now withdrawing their flights from the regional markets to focus more on the long haul routes. EasyJet can explore this opportunity to grab the regional market of Europe. Reduced Aircraft Price: Decrease in the aircraft prices has enabled the organization to be more cost effective and pass on the advantage to its customers. Expanding short-breaks market: The short breaks markets are quite significant for EasyJet. The market is expanding faster than the entire UK airlines put together. Threats Intensified competition: Competition in this industry is likely to increase, as the market is getting saturated day by day. At the same time, traditional airlines are coming up with low cost carrier which is making the situation worse for the existing ones. Economic downturn: Various organizations have cut down on their business travels because of the economic downturn across Europe. In the place of business travels they are trying to accomplish their objectives through video conferencing and other procedures. The future position of the company seems bright as the organization has a strong financial state and an equally strong brand image as a cost leader in the industry. However, as the market is getting saturated and intensified by the competitors, the company has to work on cost leadership initiatives and find out new ways to differentiate its service specifications. PESTLE analysis The UK airline industry has been experiencing a tough time since 2002. After the tragic incident of 11th September, the airline industry has seen a drastic decrease in the number of passengers travelling by air. The ever rising cost of aviation has been influential in declining the profit margin. Recent addition has been the economic downturn across the globe. However, very few of these incidents have flaunted the inequality between the traditional and low cost airlines. The budget airlines have continued to dominate the European aviation market. In a much simpler term, they have been the only ones to fetch profit, even in the troubled times. There are a number of forces that have the potential to influence the company as well as the performance of the industry. Political and Legal factors The European Union has realized the advantage of privatization. Ownership of a number of airline organizations has been given to the private sectors. The airlines, therefore now have to show greater competence to attract the shareholders for their companies (Stanford, n.d.). Some six or seven years back, the Europe government had decided to charge the low cost carriers for any overbooked and cancelled flight. This has negatively affected the organizations like EasyJet which are trying to emerge as cost leaders in the industry. The government has decided not to offer any aid to the ailing airlines, which means the airline needs to be more cautious to keep afloat its financial state. Economic factors The recent economic downturn had a huge impact on the European economy. People have reduced their travel to holiday destinations, which in turn has reduced the passenger traffic. However, despite the financial downturn, the budget airlines have been doing well as people prefer to travel at a comparatively lower cost. In the wake of recession, the government has relaxed the taxation amount which could prove advantageous for the low cost airlines and help it to be more cost effective. Social and Environmental factors With the enhancement in the social lifestyle, the average European customers now prefer to travel by air rather than travelling by train or by road transport. In most of the European countries, people have to travel nominal distances to reach some holiday destinations. This explains why people prefer travelling in their cars over airlines while going for a vacation. This is where the low cost airlines fail to match up with low cost of train and other means of transport. In the wake of recent awareness about environmental issues, the government has introduced new regulations to check the increasing emission from the airlines. Being a small hauled airline, EasyJet may have problems to match up with the standards prescribed. EasyJet conducts short distance travels and thereby has to travel more than the traditional airlines causing more emission. Technological factors The aviation industry is technology oriented. EasyJet has been the first one to make flight information available for its passengers on its website. Apart from that, the airline has also enhanced its technology to match up with the e-business options. Undoubtedly, the low cost airline industry has been experiencing stupendous growth in regards to the number of passengers. However, in future the competition is going to be more intensive as it is tough to compete solely on the basis of cost. EasyJet must find out some other ways to differentiate itself from its competitors. Reference Hoovers. 2010. Company Description. [Online]. Available at: http://www.hoovers.com/company/easyJet_plc/hxrhif-1.html [Accessed on July 13, 2010]. Kernchen, N. Marketing Differences Between Traditional Airlines and Low-cost Airlines in Europe. Germany: Grin, 2007. Mayer, F. A Case Study of EasyJet and the Airline Industry. Germany: Grin Verlag, 2003. Stanford. No Date. The Airline Industry. [online]. Available at: http://adg.stanford.edu/aa241/intro/airlineindustry.html [Accessed on July 13, 2010]. Bibliography Euroflights. 2010. Find Flights on European Low Cost Airlines. [Online]. Available at: http://www.euroflights.info/ [Accessed on July 13, 2010]. Gross, S. & Schroder, A. Handbook of low cost airlines. Berlin, 2007. Hill, C. & Jones, G. Strategic Management: An Integrated Approach. USA: Southern Western Cengage Learning, 2010. Milmo, D. May 23, 2008. The end of the budget airline? [Online]. Available at:http://www.guardian.co.uk/business/2008/may/23/theairlineindustry.ryanair [Accessed on July 13, 2010]. Solvay Business School. 2004. Ryanair Plc. [Pdf]. Available at: http://solvay.ulb.ac.be/cours/alle/BuspPresRyanair04.pdf [Accessed on July 13, 2010]. University of Connecticut. April 20, 2010. Can the European low-cost airline boom continue?: Implications for regional airports. [Pdf]. Available at: http://ideas.repec.org/p/wiw/wiwrsa/ersa04p571.html [Accessed on July 13, 2010]. . Read More