Feeling powerless is one of the worst feelings, not just in business.. liability for the information given being complete or correct. Failure to acquire adequate funding for your business can damage the chances of your business succeeding. easyJet has refined its strategy to drive our purpose of making low-cost travel easy. It takes up to last extend in the time. An Internal and corporate analysis in terms of strength, weaknesses, opportunities and threats (SWOT) will assist in gaining an understanding of where EasyJet is currently in terms of strengths and where improvement is required within the business and what outside environmental threats it may face as well as what new opportunities are available to the company in the short and medium term. The focused network strategy can be summarised as follows: easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to build on spend per customer, delivering enhanced sustainable returns. 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. Strategic risk management is the process of identifying, quantifying, and mitigating any risk that affects or is inherent in a companys business strategy, strategic objectives, and strategy execution. This affects value creation as follows: Table 1: Sales and Trading Profit of EasyJet. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. Highly utilised fleet of aircrafts that are large, modern, efficient and relatively environmentally friendly. 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. easyJet will maintain its advantageous cost position through continued cost action. With the modern aircraft fleet that it possesses, the fuel cost and aircraft maintenance cost is also reduced. It was enough to make any airline CEO play the blues. Worse, the company had discovered the hack back in January but hadnt notified people whose credit card details had been accessed until April, and was only now letting other customers know. Today, a year after Easy Jets announcement, those perils still hang over the airline. They have focused on expanding into new markets in Eastern Europe. Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. The airline has differentiated itself from other budget carriers by serving top-tier European airports. These are flight simulators that recreate the exact cockpit of an Airbus A320 aircraft. Web Evaluate EasyJets operations strategy against Hayes et al. s criteria of consistency and contribution to competitive advantage. He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. 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. A focus strategy can be implemented to resolve these issues as well. It announced plans to gradually ramp up to 75% of its normal capacity by August. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. 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. But flying to those primary airports in Western Europe is more expensive. This time, he succeeded in scheduling a showdown vote for May 22, 2020. Analysis of financial resources in order to understand the strategic capability of EasyJet will need examination of financial capability and performance. 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. The 2002/03 annual report reconfirmed this business model of the airline: Another price-based strategy is the hybrid strategy this seeks to achieve an element of differentiation and a price lower than that of competitors. The next quarter was not much better: A U.K.-wide national lockdown was imposed in November and, after a brief easing of restrictions in the run-up to Christmas, again in late December. Transfer the risk. Therefore, demand led with proprietary yield management system. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. Lundgren had been an industry leader in trying to position EasyJet for this new world. This is critical for EasyJet having analysed the competitive rivalry position in the industry. WebSupport Risk Management by conducting risk awareness workshops and trainings. 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. In the long term, this is concerned with the extent to which the organisation is operating profitably. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. These are set out below: easyJet has a strong network of leading number one and number two positions in primary airports, which has proven to be amongst the highest yielding in the market. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. Beneath the surface of EasyJets cosmetic cost savings of not offering free in-flight refreshments or different first, business and economy classes, was a philosophy of cost saving that permeated through the entire organisation. Each node of the supply chainsuppliers, plants, warehouses, and transport routesis then assessed in detail (Exhibit 1). 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. 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. 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. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. To accomplish that, Lundgren has taken drastic steps. 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. 1 Based on share price of 6.62 at 30 September 2021 The customers of EasyJet have been using the Internet for making bookings. Since the events of September 11th the airline industry suffered heavily, stocks plummeted and ticket prices are at all time lows. 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. The way the report has classified the risk is whether the risk is a generic risk that will affect the whole industry of whether the risk is specific to the company. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. But what are the internal weaknesses suffered by EasyJet? Adjust your investments to Our revenues have been benefitting from data projects in late yield initiatives and differential seat pricing. A typical approach for risk identification is to map out and assess the value chains of all major products. However, if EasyJet could significantly differentiate its service over its competitors then it could obtain higher prices. EasyJet also has a strong cash flow position primarily from its policy to retain profits and reinvest it back to the business. As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. EasyJet in its pursuing of low-price strategies may be prepared to accept the reduced margin either because it can sell more fares than competitors. A strong and visible brand to create a high level of awareness with consumers. We are seeing significant benefits already from operational resilience processes and predictive maintenance. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. It also offers passenger a few more extras, such as allowing them to check in at the airport without charge (Ryanair charges passengers who dont check in online) and a loyalty program that confers priority boarding privileges. EasyJet was able to operate at only 18% of its 2019 capacity. 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. 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. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. 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. Value chain analysis can provide important insights into what management need to focus on strategically. 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 denied this dinner took place. Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. Implementing this strategy successfully depends on EasyJets ability to deliver enhanced benefits to customers over its competitors together with low prices. Ties are banned except for pilots! This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). The reason for EasyJet to put so much emphasis on the human factor as one of the primary risk sources is quite understandable. This text provides general information. easyJet's updated framework continues to build on its competitive advantages - an unparalleled network and market positions, efficient low cost model, well-known brand and strong balance sheet - positioning easyJet to deliver sustainable and disciplined growth and returns for shareholders. 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)). Hopes for an early summer 2020 recovery were dashed when the U.K. government decided that it would impose a mandatory two-week period of self-isolation on all those arriving in the country. Ryanair uncompromisingly fought its way into the market with an aggressive pricing strategy. Also, only one type of aircraft is used, in order to minimise maintenance costs. They assess the different risks throughout all areas of the EasyJet business. This eliminates the need to any commissions to external sales agency. Once a saver, always a saver: Warren Buffett says generational wealth isnt what it used to be in his annual letter Salesforce is paying Matthew McConaughey reported $10 million a year for creative help despite laying off 8,000 CA Notice at Collection and Privacy Notice, Do Not Sell/Share My Personal Information. 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. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. EasyJets competitive advantages via low prices are sustained in a number of ways. EasyJet may be especially good at outbound logistics lined to its marketing and sales operations and supported by its technology development. Therefore, capability is strongly related to the way that resources are used and controlled. 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. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. EasyJet may be prepared and has to a large extend engaged in price war with competitors via its lower cost structure (economies of scales due to its larger operations) and also has the financial resource capability to fund short to medium-term losses with the aim of driving out competitors in the longer terms. The threemost prominent firms that advise shareholders onhow to cast ballotsin proxy votesISS, Glass Lewis, and Pircall recommended against backing his proposals. Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. The Essay Writing ExpertsUS Essay Experts. 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. 8. EasyJet also enjoys internal strengths in its operations in terms of efficient use of airports by reducing turnarounds to 30 minutes and below, EasyJet can achieve extra rotations on the high frequency routes. Finally the report will examine the extent to which EasyJets current no frills strategy is the appropriate strategic fit to its organisation both in terms of resource capability and business environment. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. Consumers are optimistic and the travel and tourism industry are now booming again. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. Lundgrencomplainsthat the British governments travel rules remain too onerous. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. But the strategy also burdens EasyJet with higher costs as it tries to recover from the pandemic. EasyJet announced it had lost more than $1 billion in the 12 months through September 2020. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. 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. The first is to reduce the bottom line costs of operation (low cost strategy) and the second is to increase the value of the organisation and its reputation to customers, so that they will demand more or pay more for what they receive (differentiation strategy) (ACCA Paper 3.5 (2001)). If you need assistance with writing your essay, our professional essay writing service is here to help! Yield management is a form of risk management and therefore, adds value. Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. 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. Still, the connection was critical for airlines. A no frills strategy is often associated with low cost airline companies like EasyJet. Since the start of the pandemic, it has sold and leased back58aircraft, raising$2.1 billion. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. 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. Risk 2: Geopolitical instability. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. 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. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. EasyJet has other advantages over its full-service rivals too. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. EasyJet through its use of an overall cost leadership strategy can use internet-based technologies to reduce value chain costs in a variety of ways: On-line bidding and order processing to eliminate the need for sales calls and decrease sales force expense. Create a retirement strategy that diversifies your assets and manages risk. )The crisis has also posed complications for the 54-year-old Lundgren that his competitors dont face, including some particularly unwelcome excess baggage in the form of Stelios Haji-Ioannou. Balance your retirement plan with your other financial goals. Given the fact that the company offers Increasing automation driving self-service capabilities for customers. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. Most theories argue that strategic success and improved wealth generation stem from two strategies. Another benefit of Internet technology is lower transaction costs at multiple levels in value chain activities. In 2019, excluding fuel and in constant currency, it cost EasyJet 4.45 European pennies per available seat kilometer, a key industry cost metric. But the disposition of EasyJets fleet would soonreignite a long-simmering feud between EasyJet and its founder. As funding from operations are clearly a major contributor to value creation. 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 airlines hopes for summer 2021, like those of almost all airlines, rest on vaccinations. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. This is intensified as a result of little or no differentiation in the service offered. Free resources to assist you with your university studies! Are you interested in testing our business solutions? With Ryanair maintaining high margins despite reducing yields through strict cost management. 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. The idea of remote working can also result in co-ordination and control weaknesses. Investments in assets are also key consideration in value creation in that consideration of the extent to which assets and working capital are being utilised. It is difficult to co-ordinate the individual employee because in principle they operate independently of each other. The pace of recovery will be determined by vaccination rates, Alton Aviations Ryan says.The problem for EasyJet is that almost all the routes it flies involve Europe, and the continent was lagging far behind on vaccinations. 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. They fly into second- and even third-tier airports, where they control a dominant share of the gates and can drive tough bargains on any airport fees and charges for ground crews and baggage handlers. Some wondered if Lundgren, who has a reputation for being a nice guy, had the stomach for the kind of aggressive cost cutting thatrunning a budget airline, especially during a pandemic, demanded. 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. 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. Study for free with our range of university lectures! 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. The price of EasyJets tickets various as a function of the number of seats remaining, the time until the flight, and historical trends. EasyJet came into the pandemic in better shape than many airlines: It was profitable and had a strong balance sheet, with relatively low levels of debt. It can restore the reputation of a brand. Upgauging the fleet enables easyJet to improve competitiveness on costs. Improving scheduling processes to drive crew productivity, also benefitting from the seasonality of our network. At a budget carrier, you need to be aggressive and ruthless and abrasive, says Joachim Kotze, an airline industry analyst for financial research firm Morningstar. In terms of analysis, EasyJets distribution activities are important in terms of e-commerce, as EasyJet like to consider itself as the webs favourite airline. Competitive pressure. Lundgren wasnt completely despondent: Where bookings were allowed and quarantine rules not restrictive, passengers were coming back. We are happy to help. While it is often lumped into the same European budget airline category as Dublin-based Ryanair and upstart Hungarian carrier Wizz Air, there are some key differences between EasyJet and those other airlines. British Airways. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. By the end ofJanuary 2021, about 1,400employees had been laid off or taken buyouts. This enables easyJet to be efficient with network choices, with an emphasis on maximising returns. 3. 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 EasyJet also drew down the entirety of its existing revolving credit facilityraising $500 million in cash. WebThere is one main reason which influences these economic factors is the recession in the Easy jet. Background Coronavirus disease-19 emerged in December 2019. 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 development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. The business has also enjoyed an increase turnover and trading profits resulting in continuous substantial growth in underlying profitability over the last 7 years (see table 1). Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. Background Coronavirus disease-19 emerged in December 2019. This has lead to EasyJet customers enjoying Ticketless travel this reduces the cost of issuing, distribution, processing and reconciling tickets. However, if EasyJet could significantly differentiate its service over its competitors together low. Been very successful for EasyJet having analysed the competitive rivalry position in the service offered Lundgren had laid. Industry are now booming again slammed EasyJet flight cancellations in a scathing email obtained by Euronews has. Prepared to accept the reduced margin either because it can sell more fares than competitors to external sales agency advantage... 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