Efficiency driven operational model

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1.0 Company Profile:

The easy jet airline is the leading low cost air line in europe's airline industry.the serial entrepreneur mar steles haji-ioannou (namely called stelios) is the founder of easy jet with the mission that “to offer Low cost airline service to the masses”. It was launched in November 1995 and it adopting an efficiency-driven operational model, creating brand awareness and maintaining the high levels of customer satisfaction. In early stage the serial entrepreneur face the internal challenges that were typical of many start-up companies .growing competition from other small low cost carriers as well as threats from Europe's major carriers, required much of the company's attention and resources. For the success stelios argued that it was important to be first at market and to saturate the globe market and don't need to conquer the world in order to be profitable.

This company was began with the amount of £ 5 million and then initially it was operated with two leased aircraft from Luton airport due to lower labour cost and close proximity to downtown London and charged lower airport fees. His first flight from London to Glasgow with a fare of £29.it was completely full because it was advertised with the slogan “fly to Scotland for the price of a pair of jeans!”then the next two years increase 6 flights with the 12 new routes to 5 countries and 1999 he increased 18 Boeing 737-300s(which is having maximum no of seats(149)) with 27 routes in Europe.stelios modelled for estabilising easy jet organisation is southwest airlines. He researched and met with southwest airlines CEO and he found some concepts that one type of air craft point to point short haul travel, no in flight meals, rapid turnaround time and very high aircraft utilization. He completely avoided travel agents and encouraged direct sales over the internet. The concept of easy jet air transport is price elastic means that the prices of the flight will be reduced if more people will fly.

The concept of the airline industry isthat its traffic grows with the economy the dedudtion prices lead to decrease the revenues. But these concepts are broken by easy jet in the European market by the. It growing in his own way in market and its taking more no passengers (refer www.easyjet.com ).now its handling many destinations:-

2.0 Introduction:

Easy jet which is having Mission statement as “to provide our customers with safe,good value,point to point air service “ and “to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of european routes” and to achieve this will develop our peoples and estabilish lasting relation ship.this mission statement is clearly saying that wat they want and we will get in to this case study and find out how easyjet get there on the level and where it is now and where it is going what it should do with the following analysis given below,

  • What is easy jet competitive advantage based upon?
  • At would a 5 forces analysis of the airline industry look like?
  • Is market positioning enough to achieve sustainable competitive advantage in this industry?
  • What does the future hold?

To analyse this activities we will use Porter's Five Force analysis and SWOT and PEST analysis of this industry and we will check the value chain and competitive scope of this easyjet.The overall analysis will give the clear conclusion that its profitable factors and to be continued in same manner and to develop to get grow in the future.

3.0 What is Easy Jet competitive advantage based upon?

The primary goal of strategic management is achievement of sustainable competitive advantage. So we give the introduction for sustainable competitive advantage is that achieved by the efficient synergy of resources and core competences with an organisation. This will provide the effective strategic management and it requires a strategic leadership able to adapt to an increasingly dynamic international business environment. When an industry sustains profits that exceed its competitors, that firm can be said to possess a competitive advantage.

The main competitive advantages for the easy jet is that low cost, No fills ,business positioning ,the service quality-Brand Image, unified aircraft, maximise utilization ,simple fare, simple service, internet booking, economy of scale, dense networks and very good entrepreneurship.The basic business model of easy jet is low price and no fill. Let's take this into porter's generic strategies 1985

In this diagram, first Cost leadership: it is not a competitive strategy as the customer does not perceive it unless it leads to lower prices. Then Focus: it identifies where to compete and then last Differentiation: It is a genuine strategy

In this cost leadership that is low price lead a strategy clock as well from the easy jet's business model also low cost and no frill. About this low price strategy Johnson, et al, define that a low price strategy seeks to achieve a lower price than competitors whilst trying to maintain similar perceived product or service benefits to those offered by competitors. Company need two basic choices to achieve these competitive advantages that one is to find where main competitors are not interested in and another one is attract price sensible consumers.

Easy jet ‘s low price strategy is exactly go well with airline business .easy jet operating many routes that other airlines are not care about it. Its marketing segmentation basically for businessman and low budget travellers and this segmentation gives them that idea of maximize utilisation of aircraft with same class seats. It also finds target consumers are quite pricing sensible. They are ready to go to interior airports to reduce their air travel fare. This price based strategy contains no frill as well.johnson, et al defines “it combines allow price low perceived product/service benefits and a focus on price sensitive market segment”. This easy jet's no frill is also one of competitive advantage because it ensures that its cost base is still low compare to other airlines. One of its competitive advantage is strong branding, from the beginning its campaign was started with the slogan”fly to Scotland for the price of a pair of jeans!” and its continuing still. The company is also keeping the very good company culture that is called Orange culture and it's including being up for it, passionate, sharp, cost and mad about safety. Easy jet office is a paperless office and in favours of an informal company culture with a very flat management structure. Hot desking and remote sensing have been the characteristics of easy jet from the start. For the success of any company is up to its ability to find valuable strategic position, where the company resources, strengths and rivalry abilities organised and managed to create some forms of competitive advantages. From the business strategy of easy jet and its environment analysis proving that its model is in right strategic direction to get success in a dynamic and competitive environment. Then other thing that safer service is one of its competitive advantage. Its internal procedures and process ensuring that there is no significant incidents.easyjet having a policy of “No comply, No fly”. We can tell some extend that safe means efficiency that low cost. The e- business is another advantage for easy jet. It is having the unique pricing system. This system is tied in closely with their IT systems and internet presence and easy jet's each flight is rated according to its popularity. The ticket price will get increase automatically once some percentage of tickets are purchased this help easy jet to fill their flights while making lot of profit of busy flights but still selling tickets at very competitive rates.

3.1 Value chain:

Competitive advantage can be achieved relative to other firms by restricting the value chain in order to increasing the customer value. Five primary activities are define the flow from inbound logistics, through operations and outbound logistics and onto sale and customer service and four supporting activities are no directly in the flow of the primary value chain but provide necessary service for on-going business. The final receipent of value chain activities are customers. In competitive terms value is the amount of buyers are willing to pay for what a firm provides them.

The value chain is very important to found their core competencies and to get the profit they should evaluate it. To found the core competencies at least following three steps can be applied because core competencies are often tightly linked with critical success factors

  • Provide access to a wide variety of markets.
  • Makes a significant contribution to the perceived customer benefit of the end product
  • Difficult for a competitors to imitate

4.0 SWOT Analysis:

It will provide as the strategic planning and from this we can clearly analyse the organisation by Internal and external analysis.In its internal analysis we can understand its strengths and weakness and its external analysis will define opportunities and threats.

4.1 Internal Analysis:

4.1.1 Strengths:

  • The brand Image and its identity,
  • Price variation compare to other airlines
  • Easy jet is successful financial deals
  • It is an moderate and orange culture organistion
  • It the e-business like tickets advance booking and deals customer in srong manner
  • Consistent,reliable and effective management & strong corporate culture

4.1.2 Weakness:

  • The main weakness of its - no customer retention policy
  • Easy jet ‘'s scope is almost nil in outside Europe.
  • Service limitation
  • Booking bottleneck
  • Limited departure airports

4.2 External analysis:

4.2.1 Opportunities:

  • Market expansion
  • Business to business cooperation
  • Internet revolution
  • The aircraft prices are reduced

4.2.2 Threats

  • Increasing competition.
  • Development of information technology
  • Increasing fuel price
  • High bargaining power of suppliers

5.0 At would a 5 forces analysis of the airline industry look like?

5.1 To analyse the airline industry in porter's five force analysis 1980,

The porter's five force analysis (1980) is the part of environment market analysis to determine the strategy. In this porters five forces are refer above diagram and that's are,

  • Degree of rivalry- the existing industry competitors try gain market share
  • Power of supplier- they will force higher costs
  • Power of buyer- they will bargain down prices
  • Threat of entry - they will bring new production capacity and sustainable resources
  • Threat of substitutes- they will rival's equivalent

In this porter's five force theory,

5.1.1 The Power of Suppliers,

In the airline industry the supplier power in fuel cost, airline manufacturing industry and airport authorities, lets we will get into deep,

  • Fuel cost: petrol supplier is having some power for the shortage of petrol but it is not that much high. The petrol is necessary material that increases the power of petrol suppliers. And then the price of aviation fuel is related to the cost of oil. After Iraq war the oil rates are become high throughout world. Anyhow from the annual report we can understand that they didn't affected so much but as an individual company they are not having alternative power.
  • Airline manufacturing industry : from 1995 until now easy jet is getting expansion in its market with the aircrafts of Boeing 737-700,Boeing 737-300 and airbus A319.Easy jet is holding the suppliers the very big deals and in fact there are big benefits for the suppliers. Easy jet is having the deals with Airbus at nowadays with the favourable agreements but dependence for the spare parts from one manufacturer will create a risk.
  • Airport authority: another one power of supplier is airplane parking and it is a very necessary and expensive one for the airline companies due to the reason of more intensive airports.thatswhy in initial 1995 easy jet chooses the Luton airport.

These things are revealed from the following structural elements containing in the diagram,

5.1.2 The Power of buyers,

In the airline industry the power of buyers are in low fare, Price awareness and widely geographic customer distribution,

  • Low fare: buyer power will act major in this low fare in airline industry. The customers will always check the better price and keep the low cost airline at front. The easy jet's most powerful advantage is low airfare thatswhy it will make make customers to difficult to choose other airlines. Then the easy jets leading position in airline market its policy is to book the ticket early pay less money makes the customers in its way.
  • Price awareness: the technology development make the customers very easy to compare the prices .nowadays consumers are very careful to choose the option and they are presented with more than one option and the travel represents a significant portion of the holiday budget. The customers will switch one airline to another easily for the price variation. This is the advantage for easy jet compare to others as well.
  • Geographic customer distribution : the Right now customer service of easy jet to help and manage the associated growth in customer communication.via right now the millions of customers are visiting www.easyjet.com every week to ask the help and they are receiving the instant answers. The deployment has proved success with over 90 percent of customers serving themselves to information without agent intervention.

5.1.3 Threat of new entrants,

In this airline industry in Europe is having lot of threats of new entrants mainly we can tell that low fare barrier and industry barrier, uk's low cost market is ok comare to other Europe countries but in this easyjet being inthe nice position in this market,

  • In the low fare barrier the current low fare operators holding some significant advantage s that access to capital and they are keeping the marketing knowledge with the operational experience and they are having experience in expansion that how to establish the new base in market. Main thing that they are having very strong balance sheets and strong cash flow for future development at an end they are holding the brand name and recognition.
  • In the Industry barriers we can classify that the capital intensive that expensive equipment and facilities and they should hold very good credit rate to lease or buy some planes. To get enter in the Europe's low cost market the loss leaders are required. The parking for planes also becoming huge problem.

5.1.4 The Threat of Substitutes,

The major substitutes for airways are Railway and Roadways, the minimal threat from other modes transport in domestic. Usually the time and cost advantages of the low cost carriers far outweigh the increased comfort and flexibility of trains or cars.

  • In railways nowadays new high-speed trains with great links with high-speed rail between major European cities. Its including the channel tunnel linking UK with France are much close to replace air travel because of the low price advantage and the relatively equal arrival durations to air travel. In this easy jet faces a low rail substitution threat because of its cost advantage even over train. In the rail services especially Euro star can be threat as they offer some advantages over planes an advantage is the fact that railway stations are easily access able and it all localized which makes the customer more comfort. In this rail travel they can enjoy the travel with viewing scenery but its main disadvantage is time consuming. But like London to Paris by Euro star is expect.
  • Roadways as well almost like railways it will provide customers more flexibility but it will make very costly and time consuming.

5.1.5 The degree of Rivalry,

In this existing and growing competitors will try get the high market share. The main extent of competitive rivalry is market position, regulation change and competition between low cost and traditional.

  • In market Position to compare with the rivals that easy jet holding strong competitive force we can find this in its no of passenger carrying and it is a largest Intra-UK and fifth largest Intra- Europe airline
  • In Regulation change the European single sky regulation which is progressively implemented from Jan'2005.This deregulation and the growth of European air transport will bring much intensive competition in European market.
  • The major is competition between low cost and traditional nowadays the traditional air transports like British airways are in great challenge they are planning for different marketing segments. Ryan air, BMI baby, Mytravelite and Buzz are the major competitors of easy jet in UK and growing competitors like virgin express,hapag Lloyd express,German wings and air Berlin will affect the future expansion plans. For Easy jet's Major competitor in this low price airline industry is Ryan Air. Nowadays compare to airline industry the peoples are choosing tour operators like Thomas cook and TUI because they are scheduling seats to reduced prices

These 5 forces things are revealed for the airline industry with reference to easy jets case study but these are all single point analysis that low price it's not giving the forward look and very qualitative and it's not guidance so let's we will check the market positioning and future holds in separate.

6.0 Is market positioning enough to achieve sustainable competitive advantage in this industry?

Market Positioning is means that efforts to influence consumer awareness of a brand or product relative to the perception of competing brands or product. The main objective of it is to occupy a clear, unique and advantageous position in the customer's mind. Like easy jet is hold the name low cost airline and web's favourite airline.

Yes, good Market positioning is almost enough to achieve sustainable competitive advantage in this industry. Because once we are keeping good brand identity, good strategic planning and excellent growth then only we can achieve some position in market. Clever market positioning can provide many opportunities for timing advantages but these are easily followed by competitors it is not sufficient for a company to distinguish itself by positioning, there must exist relative advantages for a certain organisation to fulfil that particular role. In the case study and relevant documents that easy jet seems to be positioned very well and the experts are predicting excellent growth opportunities for the low cost sector. UK's saturated market and the shortage of other options competition likely to be not avoid as well more stronger followed by consolidation. In the early sign of which is easy jet's purchase of GO. The UK airline industry focuses remains on pricing strategy and expansion of its route network. Promotion need to influence person that is safe to fly and establish easy jet as Europe's low cost carrier.

The brand and its positioning success rules are.....

  • Identify objectives and message
  • Ensure relevance to targets
  • Speak stakeholders language
  • Use realistic delivery channel
  • Keep pace with market trends
  • Recognise the real competition
  • match delivery standards to expectation
  • evaluate success to inform further development
  • articulate distinctiveness of the proposition
  • Use relevant communication channels.

Marketing mix is very important for market positioning this contains 4P's that Price, Production, Place/Distribution and Promotion.

6.1 Lets we analyse marketing mix of Easy jet for its market positioning,

Price:

Low fare is the key element of the brand. Differ the prices like off-Peak and advance booking and discounts

Product:

No frills and point to point air service and through easy jet's website customer can hire car and book the hotels

Place / distribution:

Easyjet having internet booking system and telephone reservation system

Promotion:

easy jet holding the number one position in Europe's low cost airlines and its advertisement strap line is Size Matters! And its slogan is The Web's favourite airline. Their approach is called No-nonsense approach like humorous and attention catching campaigns.

A new approach to the challenges of the digital world “Influence” allows us to determine the most successful strategies for brands in every channel.

7.0 What does the future hold?

PEST analysis will give the marketing plan and future hold of the airline industry and we already discuss in the market positioning about the present situation of easy jet and we did the Swot analysis as well.

7.1 So let's we will do the PEST analysis for Easy jet for future hold,

The following factors are having the influence in airline industry and should therefore taken into account when formulating a market plan for easy jet,

7.1.1 Politico - legal factors:

  • Governments rules and requlations like The Air miles scheme
  • May be a Europe East enlargement provide access to feasible for new networks.
  • Struggles with the oil countries may become as a threat.

7.1.2 Economy factors:

  • If the recession is being in some more time then companies will keep the eye on their business trip expenses
  • Due to war in middle east fuel rate can get increase more and congestion and other environmental restrictions can get increase
  • Due to the risk of terrorism higher security and insurance cost get increase
  • Globalisation will be very useful for longterm traffic.
  • If the single currency introduced in Europe may be it increase the easy jets business.

7.1.3 Socio-Cultural factors

  • To develop thee organisation in german and france should hold some different methods because they don't have the culture like credit cards and internet
  • The customer s always like to travel in chap flights so maybe marketing may be cheat the customer very well.

7.1.4 Technological factors

  • To IT is getting grow day by day show the company should spend some time and to fix the prices about it.
  • For getting the competitive advantage company should track the technology developments

7.2 Marketing research

should be needed continuously for the future development and gain competitive advantage. To achieve the competitive advantage through marketing research the turning points are,

  • Focus on the relationship with all stakeholders-Success depends on customer-centric approaches that build an ongoing relationships between the brand and key stakeholders
  • Look forward and Back
  • Consider a mix of drivers-to identify the commitment drivers should consider brand power in mind and market
  • Consider supply and side issues
  • Promotion-how much to spend and how it should be?
  • Generate the Most powerful communications
  • Track overtime - to find new indications, new foemulationsor new delivery systems

8.0 Conclusion:

The future of easy jet has to be consider that the response to new entrants by ceding or by competing aggressively on price, rotes and service in an attempt to drive the entrant out of the market. To make the strategic decision market research on the size of different combinations of pricing and service is needed and they should know how much it costs the competitor to serve and how much capacity competitor had. At last the new entrants competitive objectives are of relevance to anticipate how it would respond to any strategic moves it might make. If they found this information, then they will get minimum problems. Now easy jet can build the confident business strategy. It is advisable that easy jet targets mainly leisure travellers as business often demand frequent flights to a wide range of destinations, seek quality service and frequent flyer programmes and are willing to pay a premium for these benefits. Also trying to appeal o widely different customer needs runs counter o the overall trend in service industries, in Easy jet for the continuously improvement it should connect the extra locations as well in new places and it also try to put more awareness on direct marketing like introducing customer retention scheme, to differentiate the brand may introduce cause related marketing and keep the reputation like caring airline. To give the passengers a sense of psychological comfort and well being when they choose to fly with easy jet. Overall for the future easy jet should do accurate assessment about the market and it has to develop a realistic. a relentless commitment to quality service and cost control is as important as the discipline to estapilish a growth plan.

“Skill at creating, exploiting and exiting crucial alliances beats ownership of fixed assets” - Tom Peters

“Know the enemy and know thyself and you will win a hundred battles” - sun-Tzu

“Lead, follow or get out of the way” - Arab proverb (http://thomasbarker.com/content/competitive-advantage)

References:

  1. http://en.wikipedia.org/wiki/EasyJet
  2. http://en.wikipedia.org/wiki/EasyJet#Strategy
  3. www.easyjet.com
  4. Magna carta college moodle (readings and case study,lectures and study guide)
  5. McGee, J., Thomas, H., & Wilson, D. (2005). Strategy: Analysis ad Practice. McGraw Hill.
  6. Harvard business review on managing uncertainty Boston MA(1999 strategy under uncertainty)
  7. Cheap feats management aaccounting hattee J(2000)
  8. Porter Michael E(1980) competitive strategy :techniques for analysing industries and competitors
  9. http://stirmedia.bokee.com/1415635.html
  10. http://www.bestessays.com/Essays/Marketing_Essay.doc
  11. MacMillan & McGrath “Discovering New Points of Differentiation”

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