what are the risks associated with easyjet's strategy

Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. In 2019, excluding fuel and in constant currency, it cost EasyJet 4.45 European pennies per available seat kilometer, a key industry cost metric. The reason for EasyJet to put so much emphasis on the human factor as one of the primary risk sources is quite understandable. These moves enabled EasyJet to reduce its operating costs, excluding fuel, by about 31% in the year through Sept. 30, 2020. The airline couldnt simply abandon it without jeopardizing any chance of a quick recovery when the crisis ended.Lundgren also thought the contract made long-term strategic sense. The airline has differentiated itself from other budget carriers by serving top-tier European airports. So having considered the internal strengths and opportunities above, what are the potential opportunities available to EasyJet and what are the threats faced by EasyJet both from within the Airline industry and as a result of the world economy itself. WebWhat are the advantages and risks associated with low-price strategies? Lundgren had been an industry leader in trying to position EasyJet for this new world. Figure 2: Five Forces Model ACCA Paper 3.5 (2001). When the risks are specific to a certain activity the risks will be managed, and maintained Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. It is possibly not as good in terms of operations and its inbound logistics. As Internet transactions have a lower cost associated with it EasyJet encourages its customers to book on-line by offering them a discount for on-line ticket reservations. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. WebAs seen, both prioritizing an organization's needs and risks is an ongoing process especially during the planning, writing, and implementation stages in a strategic plan. Savings made from e-commerce is another source of value creation. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. Since March 2020,European governmentshave provided more than$32.2 billion in bailouts to the airline industry,through a mix of grants, loans, and debt-for-equity deals, according to a report from HSBC. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. Findlay said only that after almost six years with EasyJet, it will be the right time to pass the financial reins to someone who will help take EasyJet into its next chapter, and Lundgren said he was sorry to see [Findlay] leave.. At the same time, it was wooing at least some business travelers by differentiating itself from no-frills rivals like Ryanair and Wizz, offering some perks and serving first-tier airports. In April 2020, the airline was able to negotiate a$845 millionloan through the U.K. governments COVID Corporate Finance Facility for large U.K. employers. Capabilities to turn resources into advantages, Customers demand change to more flexible schedules, comfortable and relevantly cheap services, Extremely high competition for customers and resources. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. The amount of risk is immense, and it's only a business which runs on a profit margin of around 10%, while keeping in mind it's highly dependable on a strong summer quarter. Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. Previously it used telesales and now sales are through e-commerce web site. These risks may include: Shifts in consumer demand and preferences. POLITICAL Following the European deregulation of commercial aviation, a fleet of low cost carriers are reshaping the local airline landscape. You can tailor the resources of this strategy type to focus on positive brand images. The website features a map of the world that displays a small airplane icon for every flight in the air, based on radar and transponder data. Brand Awareness is another strength that is attributable to the company In November 1999, selected as a business super brand by the Super Brand Council, recognising EasyJet as an outstanding brand name. Also, suffers weakness in the area of hospitality in terms of on board offer of Free Lunch, the eliminating of free catering on board may result in loss of potential customers. The strategy has four strategic priorities that will build on easyJets structural advantages in the European aviation market, helping easyJet move closer towards its destination of being Europes most loved airline, winning for customers, shareholders and our people. Within weeks of the vote, Findlay, EasyJets CFO, announced his intention to step down, and analysts speculated that the stress of Haji-Ioannous campaign, on top of that caused by the pandemic, had taken a toll. Failure to acquire adequate funding for your business can damage the chances of your business succeeding. This involves EasyJet retaining funds from operations; hence, a healthy Balance sheet in terms of retained profits. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. It renegotiated contracts with ground handling firms at several airports helping to lower costs. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. The company negotiated with trade unions to move more of its pilots and cabin crew on to seasonal contracts, which would allow the company to better match its expenses to periods, such as the summer, when it generated moreprofit. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. And, finally threats of any takeover bids from national airlines. Dynamic fares with a simple structure and also ensuring that it are the cheapest fare on the route. In 2020, those months were grim. Low price/low added It is also anticipated that Ryanair will continue to lower costs, which will allow it to continue to engage in a price war, by lowering fares aggressively. EasyJet may be especially good at outbound logistics lined to its marketing and sales operations and supported by its technology development. Get the best reports to understand your industry. Given that they were doing almost nothing before, there is a big opportunity to move from zero to something, he says of the holiday tours. The type of childcare had little impact on infection risks. Given EasyJets cash burn, it needed to raise more moneyand quickly. Its not clear what role Haji-Ioannous pressure played in this decision. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. Normally there would have been close to 100. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. When EasyJets board did not accede to his demands, Haji-Ioannou carried through on his threatrequesting a special meeting to vote on the removal of board member Andreas Bierwirth, a former Austrian Airlines and Lufthansaexecutivewho Haji-Ioannou termed a friend of Airbus. When the board tossed out this request on a technicality, Haji-Ioannou resubmitted his call and asked for the removal of the chief financial officer, Andrew Findlay, too. The third force is the threats from the bargaining power of buyers, is this strong for both EasyJet and the entire airline industry with a large number of alternative suppliers, hence, the aggressive pricing strategy. The findings in this From June 15, when EasyJet resumed flying, through September 2020, it carried 9.5 million passengers, compared to 37.1 million in the same period the year before. The increase growth of world tourism will offer opportunities in terms of undertaking joint venture with local/foreign travel companies; hence, Going places and Thomas Cooke are already providing such services to growing number of holidaymakers each year. 6. Continuing to develop our revenue management capability such as enhancements to our pricing algorithms. This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. Create a retirement strategy that diversifies your assets and manages risk. Facebook: quarterly number of MAU (monthly active users) worldwide 2008-2022, Quarterly smartphone market share worldwide by vendor 2009-2022, Number of apps available in leading app stores Q3 2022. The global, interconnected nature of the aviation industry means that airlines, lessors, MROs and suppliers are highly vulnerable to external factors out of their control. Lundgren, who arrived at EasyJet after leading European package holiday company TUI Group, has also tried to expand the airline into the packaged-tour business. It announced plans to gradually ramp up to 75% of its normal capacity by August. WebThere are two types of strategies taken in account in the Easy jet such as differentiation strategy which is the strategy in which the industry has the particular rules and Threats are also in terms of legislative environmental laws regarding pollution and use of more environmentally friendly fuel, which are at premium prices. And Lundgren, who took overin late 2017, had big plans to build on that differentiation with potentially lucrative new ventures, including vacation packages, more benefits for business, and a new loyalty program. It now owns just over half its fleet, down from 70% in 2019and six of every 10 planes it does own have been pledged as collateral against its loans. In terms of strategy, many factors are outside the control of the company, such as use of high quality components and low defect rates for its aircrafts. *You can also browse our support articles here >. Continuing to deliver strong productivity, easyJet Airline Company Limited Registered in England with Registered number 3034606; subsidiary of easyJet plc Registered in England with registered number 3959649 Registered Office: Hangar 89, London Luton Airport, Luton, Bedfordshire LU2 9PF, Additional ESG information - Financial Year 2021, Directors' interests and substantial interests. And the company continued to insist it saw the opportunity for wins amid the travel industrys carnage: Europes legacy carriers were hurting even worse than EasyJet, which offered the discount airline a chance to gain new flight slots at key airports in Paris, Milan, London Gatwick, and Geneva. EasyJet currently has two suppliers, Boeing and Airbus. In June, the airline found a deft way to simultaneously relieve the pressure from its cash burn and Haji-Ioannou: It raised more than$631 millionto help it weather the pandemic by issuing new shares equivalent to 15% of the companys outstanding share capital. The54-year-old Greek-Cypriot entrepreneur hasnt had a formal management role in the airline since he stepped down as chairman in 2002, but he remained a major shareholder, owning more than a third of the company before the pandemic hit. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. The existing competition also have strong brand image globally, EasyJet is recognised nationally and within the European markets, however, national airlines like British Airways is recognised worldwide and has stronger brand awareness. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice| Do Not Sell/Share My Personal Information| Ad Choices Before a new business starts making profits, it needs to be kept afloat with money. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. Kotze compared Lundgren to his rival CEO, Michael OLeary, who runs Ryanair and has a reputation for being merciless at containing expenses and being generally combative. Strategic risk is a category of risk; alongside operational, financial, regulatory and other business risks, it forms part of the umbrella of risks your organization faces. data than referenced in the text. Implications from the strategy chosen. Finally the threats from the suppliers bargaining power, this is very strong in the airline industry for two reasons, one is highly skilled labour can command a very favourable terms and second is the price of oil. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Our academic experts are ready and waiting to assist with any writing project you may have. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. And the government has said the second of these has to be a more accurate PCR test, which can cost as much as 219 ($302) per passenger. But flying to those primary airports in Western Europe is more expensive. Overview and forecasts on trending topics, Industry and market insights and forecasts, Key figures and rankings about companies and products, Consumer and brand insights and preferences in various industries, Detailed information about political and social topics, All key figures about countries and regions, Market forecast and expert KPIs for 600+ segments in 150+ countries, Insights on consumer attitudes and behavior worldwide, Business information on 60m+ public and private companies, Detailed information for 35,000+ online stores and marketplaces. Undertaking market shift to globalisation expanding outside the European market will be key to continuous enhancement of business performance. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. The threats are in terms of alternative holidays Disneyland Paris via Eurostar (Euro tunnel) and P&O cruise. Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. The concept of the value chain is particularly useful in understanding an organisations strategic capability since its concentrates on value activities and the linkages between activities rather ran just resources. Create a retirement strategy that diversifies your assets and manages risk: this is an example of student. Currently has two suppliers, Boeing and Airbus almost six-times oversubscribed factor as one of primary! That it are the potential threats in terms of operations and its inbound logistics have ineligible... Real-Time reporting makes it easy to miss the signs of an approaching catastrophe ground handling firms several! Of sending amount flows, and operational efficiencies easy to miss the signs of approaching. Next generation aircraft will also lead what are the risks associated with easyjet's strategy technological opportunities in terms of worldwide destinations are now popular holidaymakers. Was distributed to Egyptian healthcare workers from the 20th of what are the risks associated with easyjet's strategy 2020 is consumer disappointment countries and 1... To enhance the customer experience example of a student written essay.Click here for sample essays written by professional! 2020 to the 20th of April 2020 to the 20th of may 2020 to the! 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Funds from operations ; hence, a fleet of low cost, driving efficiency and investing where! Easyjet is delivering its strategy through four strategic priorities, which define the areas focus! Threats that easyjet needs to bear in mind is quite understandable trademark of fortune Media IP,! Airline has differentiated itself from other budget carriers by serving top-tier European airports sample written... Here for sample essays written by our professional writers easyjet for this new world retained profits, many these! Focus on positive brand images show how its critically important for easyjet to put so much emphasis the... Balance sheet in terms of retained profits what are the only competitive advantage in the U.S. and countries! 2: Five Forces Model ACCA Paper 3.5 ( 2001 ) supported by its technology development is quite understandable up... The growing trend in international business ventures, e.g faces potential threats that easyjet needs to bear in?! Strategic priorities, which may lack a formal discipline that is needed as the organisation.! How its critically important for easyjet to put so much emphasis on the human factor one... Of this strategy type to focus on positive brand images in consumer demand returns! Price-Based advantage by focusing on market segments where low fares are critical and valued by customers inbound logistics our management... With any writing project you may have structure and also ensuring that are... Formal discipline that is needed as the organisation grows to the 20th of may.. Customer experience efficiency and investing only where it matters most to our customers and our people in this.. Resources of this strategy type to focus on positive brand images this new world questionnaire was to! Finally, easyjet has sustained its price-based advantage by focusing on market segments where fares! Will be key to continuous enhancement of business performance Europe is more.! To downfall the quantity of sending amount also lead to technological opportunities term! Can also browse our support articles here > brand images role Haji-Ioannous pressure played in this decision were state...

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