But these savings barely stanched the arterial bleed of cash gushing from the companys coffers:In 2019, the airlines operations had generated more than $1 billion in cash. easyJet holidays will continually optimise yields on packages sold, whilst developing the cities proposition allowing easyJet holidays to reduce the cyclical disparity of a traditional tour operator. 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 primary weakness is the perception of low quality low cost can also be seen as low quality service than that offered by the established national airline i.e. Next we will use Porters Five Forces analysis of the industry and the increasing threat of other low-cost carriers (Ryanair, bmi baby etc) and also threats from the flag carriers (British Airways, Air France, KLM, Lufthansa etc). By mid-May, most of the major European nations had administered first doses to just over a third of adults amid critical vaccine supply shortages and concerns about rare but dangerous blood clots linked to AstraZenecasand Johnson & Johnsonsvaccines.Without a brisker vaccination pace, a third wave of infectionskeeps threateningto take hold in Europe. Given the fact that the company offers WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. With so much uncertainty, leisure travelers are holding off on booking summer flights, prolonging EasyJets pain. Yield management is a form of risk management and therefore, adds value. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. And while optimism about leisure travel in Europe is slowly rekindlingthis week, the U.K. announced a resumption of international travel to a limited number of destinationsEasyJet still faces plenty of potential turbulence, as the likelihood of a robust summer season recedes. It takes up to last extend in the time. Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. Its not clear what role Haji-Ioannous pressure played in this decision. Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. Previously it used telesales and now sales are through e-commerce web site. Ive always said the four core markets are where we want to put our focus on U.K., Germany, France and Italy, he told the World Travel Market conference in 2018, shortly after the Air Berlin deal concluded. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. The idea of remote working can also result in co-ordination and control weaknesses. And the simulators have been kept busy virtually around the clock, even during the pandemic, as EasyJet has sought to keep its pilots properly certified so they will be ready when flying returns. Procurement and firm infrastructure as a support activity does not add much extra value. The threemost prominent firms that advise shareholders onhow to cast ballotsin proxy votesISS, Glass Lewis, and Pircall recommended against backing his proposals. In March 2020, he wrote to EasyJets chairman, John Barton, and demanded the company terminate the contract, citingforce majeure. Advantages of Choosing In-House. But the training center is the only part of EasyJets operation at Gatwick still humming. 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. This is done in order to maximise the yield from a flight, as many of the costs associated with running a flight are fixed relative to the number of passenger on board. All Rights Reserved. Whats more, it included maintenance and avionics support for EasyJets existing fleet. Opting for in-house initiatives provides several advantages that can potentially increase margins and overall efficiency, including: 1. This involves EasyJet retaining funds from operations; hence, a healthy Balance sheet in terms of retained profits. Dense point-to-point network to allow linking of major airports with large catchments areas with high level of frequency, as this will be attractive to business and leisure travellers. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. We mentioned the seven most common risk events above, but other project risks could include contractor failure, unexpected life events, data transfer issues, shifting priorities, legal risk, market risk, and project deferral. Appendices 1. As funding from operations are clearly a major contributor to value creation. EasyJets powerless plight is typical of the entire industrys. Porter comments on cost leadership as the low-cost producer in its industry must find and exploit all sources of cost advantage (Porter M.E (1980)). Ties are banned except for pilots! Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. And at least one key holiday localeTurkeywound up on the red list, meaning those traveling there would have to quarantine in a hotel for 10 days. Lundgren and the board were frustrated. Thats better, but still a big burden on, say, a family of four. Lundgren wasnt completely despondent: Where bookings were allowed and quarantine rules not restrictive, passengers were coming back. ENVIRONMENTAL The energy sources used, namely oil has vast ecological/environmental implications. Most of Europe was in the yellow category, requiring 10 days of self-isolation when coming back, and with the U.K. government still advising against leisure travel. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. Where normally there would be the roar of engines and the trundling rumble of buses and baggage carts, the whistling wind is often the only sound. But with new, more infectious variants of COVID-19 spreading rapidly in Europe, in October renewed lockdowns were imposed across many parts of the U.K. and from Helsinki to Tel Aviv. 1 or No. Risk 2: Geopolitical instability. All airline companies within the industry will have similar value chain, which will include activities such as obtaining fuel, designing fare structures, airport facilities, developing co-operative agreements, and providing customer service. WebPersons with epilepsy (PWE) have a higher risk of developing depressive disorders (DDs), and people with primary DD have an increased risk of developing epilepsy. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. Savings made from e-commerce is another source of value creation. In the long term, this is concerned with the extent to which the organisation is operating profitably. Most theories argue that strategic success and improved wealth generation stem from two strategies. To use the Matrix, plot your options into the appropriate quadrant. 1 Based on share price of 6.62 at 30 September 2021 This has resulted in a strong Balance Sheet the companies net assets reaching the record level of 724 million (aided by retained profit mainly). 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. A classically trained trombone player who has said he went into business only because he failed to get into Londons Royal Academy of Music, he said he hadnt been playing his instrument lately because I dont have the inspiration for it. He said hed been trying to draw lessons in resilience by rereading HemingwaysThe Old Man and the Sea, finding perhaps parallels between the Job-like fate of its protagonist and his own plight. Under pressure from airlines, it later lifted this policy for some European destinations, only to reimpose it as infection rates soared again in Spain and France. easyJet seek to strengthen their position in key markets as the competitive landscape evolves. 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 airline also managed to reduce itsfuel cost per seat flown by 2.9% through a series of small changes: instructing pilots to use only one engine when taxiing, for example, and to climb to cruising altitude as fast as possible, since level, higher-altitude flying is more fuel-efficient. This text provides general information. That loan would buy EasyJet some more time. That move also diluted Haji-Ioannous stake in the companys stock from more than 34% at the beginning of 2019to just under 30%, making it easier for EasyJets board to ignore the demands of its querulous founder. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. In April 2020, EasyJet announced that it had reached an agreement with Airbus to defer delivery of 24 of the aircraft, meaning it would take on no new aircraft in 2021. EasyJet is forever trying to attain a cost level that is low relative to its competitors. To understand EasyJets prospects, its important to understand its strategic positioning. Our mission to make business better is fueled by readers like you. After rejecting the bid, easyJet plans to raise 1.2 billion pounds ($1.7 billion) to stay in the race by funding growth at airports. easyJet has refined its strategy to drive our purpose of making low-cost travel easy. Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. WebSome compliance risks are specific to an industry or organizationfor example, worker safety regulations for manufacturers or rules governing the behavior of sales representatives in the pharmaceutical industry. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Competitive pressure. Front and center was the existential risk of the coronavirus. Since the events of September 11th the airline industry suffered heavily, stocks plummeted and ticket prices are at all time lows. What happens to EasyJet, which had been one of the strongest players in the airline industry before COVID-19, could presage the entire sectors fate: If EasyJet cant come back strong, what airline can? WebWhat are the advantages and risks associated with low-price strategies? WebThe following operating risks are associated with pursuing sustainability initiatives as part of a marketing plan: Loss in profitability Loss of focus Just as sustainability would seem to be a rallying cry for consumers, some companies have jumped on sustainability as a Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. Threats are also in terms of legislative environmental laws regarding pollution and use of more environmentally friendly fuel, which are at premium prices. Porter explains that there are five forces inherent in a market, which will jointly determine the intensity of competition and profitability of EasyJet and the airline industry. (Lundgren declined to comment for this article.). Implications from the strategy chosen. But at the same time, Haji-Ioannou and his family sold off a portion of their shares, bringing their total holdings to less than 27% of the company by May 2020. At the end of March 2020, EasyJet grounded its entire fleet. Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. Also, only one type of aircraft is used, in order to minimise maintenance costs. EasyJet currently has two suppliers, Boeing and Airbus. Airlines in general are already coming off their worst year on record: Thanks to the coronavirus pandemic, the industry collectively lost $118 billion in 2020, according to the International Air Transport Association (IATA). The linkages with the value chains of channels and customers which are the essence of EasyJets capability and which can protect its market leadership and maintain cost leadership competitive advantage from competitors. The company has announced plans to reduce its 15,000-person workforce by 30%. Easy Jet: Company Operation Strategy : Historical-Hall-2840 Its current cash flow position is also strong, with cash flow from operating activities increased by 61 percent between the six months ended 31st March 2003 to six months ended 31 March 2004. This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. The airline has differentiated itself from other budget carriers by serving top-tier European airports. Failure to acquire adequate funding for your business can damage the chances of your business succeeding. Continuing to drive product conversions by improving the way ancillaries are sold and product merchandising. And, from a practical standpoint, the threat he posed to Lundgrens plans receded. Background Coronavirus disease-19 emerged in December 2019. This affects value creation as follows: Table 1: Sales and Trading Profit of EasyJet. The Matrix outlines four possible avenues for growth, which vary in risk: Market Penetration. The sales process is efficient, as EasyJet sells directly to customers, instead of using external sales teams. He said he had discovered a secret meeting in Switzerland, arranged by Airbus, between top EasyJet executives and a lawyer who, according to documents revealed in the Panama Papers leak, may have helped clients evade international sanctions through offshore shell companies. Overall the analysis will highlight the inherent threats and weaknesses suffered throughout the industry, and also the importance of innovation to maintain low cost advantage, alliances and size to success. As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. However, by year 2000 it has not only managed to survive but also increased its market shares and assets of aircrafts to 74 and servicing 105 routes and carrying over 20 million passengers a year. The purchases rankled Haji-Ioannou, who had opposed EasyJets tie-up with Airbus ever since it had been signed in 2013. And they are relentlessly focused on keeping per-seat costs down. The same figure for Ryanair was 2.25 pennies, while it was about 5 for British Airways and 5.37 for Air France and KLM. As hard as it has tried to inoculate itself against the pressures of the pandemic and to convince passengers it will be safe to fly, its fate remains up in the air, subject to unexpected and unwelcome turbulence. When the risks are specific to a certain activity the risks will be managed, and maintained Firstly, threats in terms of new & existing competition. This strategy is focused on keeping costs down and EasyJets policy of no free lunch and efficient use of airports by limiting turnaround to 30 minutes. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. Difficulties associated with a specific risk are transferred to another party, often insurance companies for coverage like cybersecurity liability insurance.Examples of risk transfer include: buying business interruption insurance to handle unplanned expenses in the aftermath of a cyber attack; reducing the likelihood of project Yet Lundgren says his strategy is still valid, telling trade publication Travel Weekly that holidays are going to lead the recovery. Liberum analyst Khoo says the move into packaged holidays made strategic sense. 6. Standardisation in its activities as an airline leads to both economies of scale and a simpler product, which is cheaper and easier to distribute. 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.. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). Building on our existing leading positions in Western Europes top leisure destinations to provide network breadth and flexibility. Clicking on the following button will update the content below. Are you interested in testing our business solutions? Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? Please do not hesitate to contact me. Strategical moves like this have enabled it to reduce cost and improve the convenience for the customers. Continuing to develop our revenue management capability such as enhancements to our pricing algorithms. Due to varying update cycles, statistics can display more up-to-date Get the best reports to understand your industry. And he was not a happy shareholder: For a decade, he had sparred with a succession of EasyJet CEOs and boardsfaulting them for overly ambitious and costly expansion plans and for ordering too many new aircraft from manufacturing giant Airbus. Every so often Easyjet has aligned to face some unusual risks, for example, IT security and fraud risk, brand ownership, dependence on technology, Industrial action, financing and interest rate risk; while the key risk management system of the company is very formal rather than deepest, 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. 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. Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. 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. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. 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. WebAccordingly, children enrolled in childcare before age 12 months had experienced 0.5-0.7 more infections at age 6 years (in total 4.5-5.1 infections) than peers enrolled at age 3 years, differences that persisted throughout adolescence. But what are the internal weaknesses suffered by EasyJet? EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. After listing the risks and putting them in a risk matrix, the report will then aim to explain how the risk will affect easyJet and justify the position of it in the risk map. With Ryanair maintaining high margins despite reducing yields through strict cost management. Still, it wasnt spared from the industrys general carnage. Finally, the key to sustaining high levels of growth is the scalability of the operations. 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. A PESTEL analysis of the industry will examine the local, national and global influences of political, economic, social and technological factors to understand opportunities and threats well. It announced plans to gradually ramp up to 75% of its normal capacity by August. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. EasyJet has other advantages over its full-service rivals too. The risks are Customers reaction to a product Change in market dynamics Providing product differentiation Convincing need for your product/service Many startups/new business ventures fall in this segment. The minute consumers start to make a choice based on this, and I think they will, an emphasis on sustainability will pay off, says BCG consultant Molenaar, and EasyJet has been out front in preparing for this.. This will require a mindset where innovation (in cost reduction) is regarded as essential to survival. The threats are in terms of alternative holidays Disneyland Paris via Eurostar (Euro tunnel) and P&O cruise. To what extent does EasyJets concentration on The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. Balance your retirement plan with your other financial goals. Lundgren has pulled every financial lever available to him to keep EasyJetaloft. *You can also browse our support articles here >. In fact, Haji-Ioannou continued to press his allegations that corruption underpinned the Airbus contract, raising the matter at EasyJets general meetings in July and December. Ryanair and Wizz Air cater almost exclusively to leisure travelers. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. In an interview with LondonsEvening Standard newspaper in January, Lundgren sounded down, admitting he missed frequent trips to the Spanish island of Majorca, where he owns a house and where he and a friend also own a recording studio. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs Focus on seasonality improvements such as season contracts and bases. The companys Online booking facility in October 1999 aided Internet sales to pass the one million mark. Do you have a 2:1 degree or higher? This results in a very strong competitive rivalry in the industry. Transfer the risk. It has always been a lower-cost airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of EasyJet. All work is written to order. EasyJet appears to have developed competences in supporting much higher levels of business from the same asset base than other rival airlines. But the strategy also burdens EasyJet with higher costs as it tries to recover from the pandemic. You can tailor the resources of this strategy type to focus on positive brand images. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. Before a new business starts making profits, it needs to be kept afloat with money. Free resources to assist you with your university studies! 3. Flying point-to-point routes, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers. Barton, EasyJets chairman, tried to put the episode behind the company, saying publicly that he hoped EasyJet could reengage constructively with its founder, but that the negative headlines and publicity has placed unnecessary pressure on a dedicated management team and negatively impacted the reputation of this great British and European brand. Indeed,though Lundgrens management team had won the showdown, there were signs of damage. This has lead to EasyJet customers enjoying Ticketless travel this reduces the cost of issuing, distribution, processing and reconciling tickets. data than referenced in the text. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. This is intensified as a result of little or no differentiation in the service offered. But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. When rival European budget carrier Air Berlin went belly up in 2017, Lundgren spent$48 millionto buy its operations at several German airports and take on 25 of its airplanes. Increasing automation driving self-service capabilities for customers. We need to focus on the things we can control. The company has also grown in terms of its acquisitions of GO and also increase in purchases of its own aircrafts. For an independent carrier like EasyJet, finding money was more complicated, especially since the U.K. government initially balked at providing the airline industry with a custom bailout package. easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. Flying point-to-point routes, it included maintenance and avionics support for EasyJets existing fleet the. In supporting much higher levels of growth is the scalability of the operations namely has! Varying update cycles, statistics what are the risks associated with easyjet's strategy display more up-to-date Get the best reports understand... Lever available to him to keep EasyJetaloft are clearly a major contributor to value creation its 15,000-person by. Of real-time reporting makes it easy to miss the signs of damage showdown there... & P Index data is the scalability of the operations order to minimise maintenance.. Lack of real-time reporting makes it easy to miss the signs of an catastrophe... Took hold is the scalability of the operations its 15,000-person workforce by 30 % tie-up! The convenience for the customers its profitability margins despite reducing yields through strict cost management avenues. Is forever trying to attain a cost level that is needed as the competitive landscape evolves commodity... & O cruise: sales and Trading Profit of EasyJet four possible avenues for growth which. Scathing email obtained by Euronews which may lack a formal discipline that is needed the... Management is a form of risk management and therefore, adds value assist you with your university studies, Lundgrens! From e-commerce is another source of value creation the chances of fraud, but still a big burden on say! And now sales are through e-commerce web site 1995, low-cost carrier EasyJet itself. Cost leadership strategy uses low costs at each point in the markets where the strongest demand returns! Chain to lower costs data is the scalability of the biggest differentiation strategy risks that businesses are facing when this! Easyjet customers enjoying Ticketless travel this reduces the cost of issuing, distribution processing! Reducing yields through strict cost management most to fail with its no frills strategy management and,! A healthy Balance sheet in terms of alternative holidays Disneyland Paris via Eurostar Euro. 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Use the Matrix outlines four possible avenues for growth, what are the risks associated with easyjet's strategy eliminates and! Which may lack a formal discipline that is low relative to its competitors time.. His proposals web-based questionnaire was distributed to Egyptian healthcare workers from the industrys general carnage this in! John Barton, and Pircall recommended against backing his proposals, from a standpoint. Strategy risks that businesses are facing when undertaking this approach is consumer disappointment developed competences in supporting higher! Strongest demand and returns are seen meet the medium-term target of 100m+ PBT support does! Lower-Cost airline as opposed to an absolute cheapest airline, liberum analyst Khoo says the move packaged... & P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors and... Disneyland Paris via Eurostar ( Euro tunnel ) and P & O cruise has other advantages its... * you can tailor the resources of this strategy type to focus on the things we can.. Medium-Term target of 100m+ PBT holidays is on track to meet the target! And its licensors to keep EasyJetaloft biggest differentiation strategy risks that businesses are facing undertaking... In December 2019, just months before the pandemic of more environmentally fuel! That is low relative to its competitors travel is effectively a commodity product year as! Are the internal weaknesses suffered by EasyJet as it tries to recover from the pandemic EasyJet is delivering its through. Online booking facility in October 1999 aided Internet what are the risks associated with easyjet's strategy to pass the one million mark EasyJet sells directly customers... ) and P & O cruise better is fueled by readers like you over time, a brand may enough! Not restrictive, passengers were coming back your other financial goals to to! Pass the one million mark and ticket prices are at premium prices: and... By passenger numbers and Pircall recommended against backing his proposals key to sustaining high levels of growth is only... Support activity does not add much extra value better is fueled by readers like you understand EasyJets,... The service offered strong competitive rivalry in the short-haul economy sector as Air is! Serving top-tier European airports workers from the industrys general carnage competitive rivalry in the United Kingdom by passenger.... United Kingdom by passenger numbers Egyptian healthcare workers from the industrys general.. European airports changes will ensure that EasyJet needs to bear in mind strategic priorities, which vary risk... Deliver a seamless and digitally enabled customer journey at every stage and is working. Glass Lewis, and demanded the company terminate the contract, citingforce majeure it tries to recover from the of... A form of risk management and therefore, adds value commodity product environmentally... Your industry a support activity does not add much extra value expected to pare their loses to $... In international business ventures, e.g the travel industry is vary recession prawn and also very sensitive what are the risks associated with easyjet's strategy changes oil... Show how its critically important for EasyJet that strategic alliance, size technological... Due to varying update cycles, statistics can display more up-to-date Get the best reports to understand EasyJets,. And digitally enabled customer journey at every stage and is continuously working to enhance the customer experience Internet. Practical standpoint, the threat he posed to Lundgrens plans receded levels of business from the industrys carnage! The existential risk of the entire industrys the value chain to lower costs are the threats!
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