what are the risks associated with easyjet's strategy
Porter through the use of the value chain illustrates how resources should be utilised to enhance least-cost production or differentiation strategies (the generic strategies suggested by Porter). EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. 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. Front and center was the existential risk of the coronavirus. EasyJet has other advantages over its full-service rivals too. Building on our existing leading positions in Western Europes top leisure destinations to provide network breadth and flexibility. It takes up to last extend in the time. Furthermore, a lifetime history of D ENVIRONMENTAL The energy sources used, namely oil has vast ecological/environmental implications. 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. 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. Balance your retirement plan with your other financial goals. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. 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. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. Table 1 shows that EasyJets sales has increase year on year since 1998, with profit and gross margins also experiencing a positive trends. Ties are banned except for pilots! Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. No plagiarism, guaranteed! The U.K. is doing well: It had approved two vaccinesone from Pfizer and one from AstraZenecain December and a third, from Moderna, in early January; by mid-May it had given 68% of the adult population at least one shot. Clicking on the following button will update the content below. 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. WebWhat are the advantages and risks associated with low-price strategies? Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. 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. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. Upgauging the fleet enables easyJet to improve competitiveness on costs. If you need assistance with writing your essay, our professional essay writing service is here to help! In this way, it has positioned itself as a more direct competitor to Europes traditional airlines.Lundgren says he wants EasyJet to be the No. liability for the information given being complete or correct. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. Significant investment in assets and managing financing costs. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. Balance your retirement plan with your other financial goals. 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. Before the pandemic, EasyJet was looking like it could emerge as one of the biggest winners in the European air-travel dogfight. 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. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. 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. EasyJet cost efficiency is achieved in a variety of way as shown in the following diagram: The success of low-fare (cost) strategy is primarily dependent on the maintenance of a low cost base. Remote working and hot-desking have been characteristics of easyJet since the beginning. Such lower costs benefit EasyJet initially as innovation is rewarded. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. But EasyJets contract required it to pay the aircraft maker at least $6 billion through 2023a sum considerably greater than the airlines entire current market Improving scheduling processes to drive crew productivity, also benefitting from the seasonality of our network. 1 Based on share price of 6.62 at 30 September 2021 If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. The threats are in terms of fines and rise in cost of raw materials. 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). 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. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. Lundgren had been an industry leader in trying to position EasyJet for this new world. Improving CSAT across the whole customer journey. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Introduction Company Background, Financial Performance and Key Services EasyJet is an airline company based in Britain As the holidays business grows in scale, easyJet plans to make targeted investments to strengthen the business. In 2019, excluding fuel and in constant currency, it cost EasyJet 4.45 European pennies per available seat kilometer, a key industry cost metric. 1 or No. None would fly again until June 15. Supported by innovative and effective advertising. 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. Also, only one type of aircraft is used, in order to minimise maintenance costs. The company carries out Ryanair continues to lower costs, which enables it to persist lowering fares aggressively. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Strategies are largely determined by the extent to which they deliver best value to both customers in terms of being competitiveness in the marketplace (leading low cost airline) and also to provide value to shareholders. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. 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. Study for free with our range of university lectures! Enabling risk management through a EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. 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. That loan would buy EasyJet some more time. As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. 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? Get in touch with us. 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. Lundgrens recovery plans hinge on infection rates throughout Europe, which have remained stubbornly high in many places, and vaccination rateswhich, in most of Europe, have badly lagged places like the U.S., U.K., and Israel. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. EasyJets no frills strategy does not only mean a cut in Cabin crew and denial of food, but also allows for a faster pre-flight preparation, thereby reducing the time grounded as well maintaining fare. A Balanced scorecard approach is need to effectively conclude a balanced perspective on EasyJets resource capability in order to ensure that the low cost strategy is supported and is. 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). ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. 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 says the funds will give it the firepower to grab slots at premium airports like Paris Orly, Lisbon, Milan Linate and London's Gatwick. The company has also grown in terms of its acquisitions of GO and also increase in purchases of its own aircrafts. If easyJet were to raise money from shareholders, he risks falling below this figure a level at which he can no longer unilaterally block special resolutions. 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. In terms of competitive advantage, the internet offers overall cost leaders new abilities to reduce costs in primary activities such as marketing (i.e. Objectives To assess the psychological distress, anxiety, depression, coping strategies, 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. Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. Risk 2: Geopolitical instability. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. easyJet has refined its strategy to drive our purpose of making low-cost travel easy. WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. 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 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. All Rights Reserved. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. This is critical for EasyJet having analysed the competitive rivalry position in the industry. 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 In the long term, this is concerned with the extent to which the organisation is operating profitably. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. This is intensified as a result of little or no differentiation in the service offered. 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. 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. Out on the tarmac, a short distance from the simulators, almost a dozen real EasyJet A320s sit idle.
