Easyjet analysis, competitive advantage and plan Essay

Easyjet is one of the successful European ‘no frills airlines’. The airline was founded in 1995 by a Greek man called Stelios Haji-loannou. A concept that made him found the Airline was based on the fact that customers’ demand for short-haul air transport is price elastic. This can be translated to mean that when flight costs are reduced, many people fly due to the affordability of the flight prices. Easyjet has been successful because it has been able to liberate itself from traditional airline concepts. These concepts were based on the assumption that the lowering of flight costs could only lead to decrease in the economy. The traditional concepts made many airlines believe that airline traffic grows in line with the economy. Easyjet benefited from the introduction of the ‘no-nonsense’ concept and its deregulation in 1992, to the European market. (Gregory, 2000). The company has been able to woo customers from other airlines due to the low competitive prices it offers for its services. This has made the company expand and increase the size of the market it can access. As of now, the airline company provides 125 routes from 39 European airports with Geneva, Amsterdam, Luton and Liverpool operating as its base airports. As of November 2003, the company was operating seventy two aircrafts. The number now has tripled as the airline has continually increased in size. Easyjet has established goals that the company hopes will be able to attract and maintain its customers. The company’s strongest desire is to develop long lasting relationships with its customers. These goals have been incorporated into the Company’s Mission statement. These goals include: †¢ To provide customers with safe, good value, point-to-point air services. †¢ To effect, and provide a consistent and reliable product and fares, appealing to leisure and business markets on a range of Europe routes. (Collett, 1999) Porter’s five competitive forces have been used to effectively analyze the airline industry comprehensively. These competitive forces comprise: The threat of substitutes, the threat of new entrants, the power of suppliers, the power of buyers, and finally, the rivalry among existing firms. The airline industry experiences minimal threats from other substitute modes of transport. For example, transport modes like train and car are not speed conscious. For a journey that could take an hour when using Easyjet plane, a train takes approximately 6 hours. It is also cheaper to travel on an Easyjet plane than it would cost when travelling via train. Thus, the time and cost advantage of travelling by the low-cost carriers far outweighs the increased flexibility and comforts of trains. Trains and cars cannot manage long distance international routes. Therefore the only substitute is to ravel by plane and this is where Easyjet enjoys the competitive advantage it has over its substitutes. (Porter, 1985) Easyjet was founded using a large sum of money. It was established with a loan of 5 million dollars. This being not enough, it still required 50 million dollars for expansion to meet the needs and demands of customers. The airline sector demands of new entrants to have high capital in order to start a stable business. Limited finance has been a barrier for many businesses which consider entering the industry. New entrants in the airline sector are discouraged by the limited take-offs and landing slots which make it difficult for them to find suitable airports. The low cost airline market in U. K is very mature as compared to the rest of Europe. Easyjet has been in the market for quite long till it has acquired the title of being the biggest operator in the market. This is a very comfortable position for it as it considers itself as a leader in the field. This is not all advantageous to the airlines as entering new markets in Europe may become a big problem for it. Any entrant in the low-cost market has to be ready to make a few losses before establishing itself. Hence, Easyjet has not really considered the threats of new entrants as a big problem. (Gregory, 2000) Easyjet has been affected by the powers of suppliers. Easyjet has realized that depending on one supplier or manufacture for spare could pose a risk. Boeing and Airbus are the major manufactures in the industry providing majority of commercial planes. Easyjet needs to expand more in order for it to have more powers over its manufactures and suppliers. The cost of oil and the price of aviation oil have a direct relationship and it is not in the power of Easyjet to alter this. The power of buyers within the airline industry is very strong. Airline operators have the duty of checking on prices to avoid being exploited by the consumers. Consumers are in a position to detect price discrepancies which they exploit. Due to the low switching costs experienced within the airline industry, the customers need to be loyal. The Civil Aviation Authority (CAA) has ensured that the airline customers are well treated and protected. Some of the ways in which CAA sides with the consumers is by, protecting customers against the consequences of travel organizer failure for people who buy package holidays. It also ensures that airlines are licensed and comply with the requirements of UK and European liability, financial, and resources legislation. Easyjet experiences rivalry from existing firms. In the UK, Easyjet has My TravelLite, Ryan air, Buzz, and BMIbaby, as its major competitors. Ryan air is Easy jet’s greatest competitor as it has shown continuous yearly profit. Future expansion plans may increase its competitors to include the: Virgin Express, Hapag Lloyd Express and Air Berlin, some of which are already competing with the airline. The other competitor that Easyjet has is the British Airways but it competes at a lower scale as it targets different market segments. (Porter, 1985) SWOT-Analysis of the Easyjet Company which reveals its strengths, weaknesses, opportunities and Threats has been carried out. (Anthony, 1998). Internal analysis of the Company depict the fact that there are numerous strengths that it has enabling it to have a competitive edge over Companies in the industry. Easyjet has a strong e-business. This airline has incorporated the advanced technology and this has enabled it to offer quality services to customers. The other strength that Easyjet has is its ability to reach a wide scope of customers. This is due to many branches that exist all over the world. Research shows that this airline is expanding globally and will soon be able to have branches in all parts of the world. One aspect that is important to airlines is safety. This airline is highly reputed for safety and this has enabled customers remain loyal to it. Its up dated website enables customers to book for their flights on line. The comfort in travelling by Easyjet planes is exceptional. The airline also has got qualified personnel like the cabin crew, control assistants, flight attendants, customer care, pilots and stewards. Another strength that is found in Easyjet is its flexibility in adapting to new technology in the future. This airline is not tied to single technology. The airline has been financially successful and is part of the consortium that has been awarded to run UK’s air traffic control system (NATS). (Anthony, 1998) One of the world’s largest industries is the Air travel which in 2001 generated over $ 300 billion in revenues. In the past, business people dominated air travel but then this changed when living standards of people improved so that many people could afford air travel for leisure activities. The deregulation of the airline industry has served to increase the frequency of air travels. Easyjet contracts everything from pilots to check-in staff. The airline avoids travel agents high commissions by selling seats over a telephone reservation system. To ensure it grows in future, the airline invested 6. 6 million dollars for developing a safe, reliable and efficient air traffic system. This was meant to ensure that it has sufficient capacity in the air and on the ground. Easyjet acquired British Airways ’low-cost subsidiary GO which played a huge part in its expansion. Easyjet stands for ‘orange culture’ which means being ‘up for it’, ‘passionate’ and sharp. Easyjet has low operational costs because all bookings are done via phone and it has less cabin crew due to the absence of the business class. Easyjet has been able to recognize that Business class reduces seats from 149 to 109. (Matthias, 2005) Some of the other players in the airline industry include the: Virgin Atlantic, Ryan air and British airline. These airlines pose a healthy competition to Easyjet which it has to measure up to improve on its position in the market. These airlines have a strong brand name which makes them to have a competitive advantage over Easyjet. The name ‘Virgin Atlantic’ is quite unique and it attracts many customers to use the airline. Research shows that virgin atlantics’ airline provider is global in nature. It operates its services to Barbados, Lagos, Johannesburg, Hong Kong and London Hub. This is a great strength for this airline. (Branson, 2006). One aspect that is important to airlines is safety. This airline is highly reputed for safety and this has enabled customers remain loyal to it. The airline also has got qualified personnel like the cabin crew, control assistants, flight attendants, customer care, pilots and stewards. (Branson, 2006). The British and Ryan airlines have efficient customer service and effective policies that positively affect the overall running of the airlines. These airlines have a competitive edge over the Easyjet and Virgin Atlantic in terms of the many operation routes they have. The British airline has a high technological advancement which has greatly increased its customer base. The Virgin Atlantic has some weaknesses which affects its smooth operation in the airline industry. One of them is very evident in its prices. Virgin Atlantic airline flight charges are slightly higher than the other airlines. This makes most people who are middle class not to afford their services. Another weakness in Virgin Atlantic airline is in its departure control systems which are not really updated to the current technology. Ryan airline which is the major Easyjet competitor in the market has continually expanded and made lots of profits over the years. Thus, the airline has enough resources to cater for its consumers. It has a stable base and enjoys the comfortable position it holds in the market. Easyjet offers affordable flight prices attracting many customers to use its services. The Ryan airline and British airlines have very high operational costs. This is because they contract the services of customer agents who charge them exorbitant prices. Similarly, because they have a business class, the numbers of seats are reduced and the airline is also forced to increase the number of cabin crew it has to cater for passengers in the business class. The low flight charges of Easyjet plane are what attract customers to its services. The key element of the brand is the low price. The management uses differential pricing systems. (Michael, 1985). The cost of flight is directly related to the time one wishes to travel. Off-peak travelling and advance ticket booking is less expensive. Easyjet encourages its customers to book tickets online by giving discounts to tickets booked online. The airline company has good promotion strategies that catch the attention of many potential customers. Some of the attention catching lines that the airline uses include: ‘size matters’, and ‘the web’s favourite airline’. Most of its advertising campaigns are humorous, attention-catching and unforgettable. (Hilltop, 1994) For Easyjet to do well in future, it has to consider how it is going to handle new entrants in the market. It should decide whether it is going to create niche segments in the market for the new entrants or if it is going to compete aggressively on price, routes and services to drive the entrants out of the market. Easyjet should make strategic decisions market research on the size of different combinations of pricing and service if it intends to increase its market share over the next three years. It has to know the amount of power the competitor has over it. (Massingham, 1988). For example, the competitor’s service costs, competitor’s capacity for the various airline routes. Easyjet should target leisure travellers this is because business travellers usually seek very high quality service, frequent flights to a wide range of destinations which could translate to high operational costs and low profits. The airlines need to develop an accurate and realistic assessment of the market-niche it wants to serve. The market shares of Easyjet could increase in the next three years if it adopts CRM (Cause Related Marketing) scheme which involves selling shares in forest help programmes over its websites and supporting charity by collecting foreign currency on flights. The airline should also establish a growth plan that would see it expanding over the next three years. (Matthias, 2005) Experts have predicted that Easyjet airline is well positioned in the market and that it has excellent growth opportunities for the low-cost sector. Competition is likely to intensify because the UK market is really saturated. Therefore, marketing is very important if Easyjet wants to attract new customers as well as maintain those that it already has. Since the UK market provides very little growth opportunity, more airlines are likely to invade the continental market with new bases being established at Berlin as well as Eastern Europe. (Collett, 1999). Marketing should play a role in convincing customers that flying is the safest mode of transport. Before formulating a market plan for the airline, the political, legal, Technological, Socio-cultural, and Economic factors should be taken in to consideration. (Massingham, 1988)