Critical analysis of external environment of Easyjet and Industry competition
Strategic management is the concept which is concerned with the identification and determining the strategies which the managers are required to implement and execute for the betterment and enhancement in the performance level of the business entity. This will also be aiding the business organization in the attainment of the competitive advantage over the rivals (Managementstudyguide. 2017). The term can also be defined as the decisions or the acts which are to be under-taken by the managers for deciding the results of the limits of the performance of the business entity. For taking the right decisions the managers are required to have an appropriate set of knowledge and also be able in analyzing the organizational environment. A number of approaches and theories can be adapted by the business entity for executing the different analysis which will be proven very much beneficial for the business corporation. The below report has been analyzed on the strategic management of EasyJet which is a multinational brand name of British airline. The entity has been operating the business activities under the low-cost carrier model, which is based at London Luton Airport (Goetsch and Davis, 2014). The firm has been offering domestic and international scheduled services to an approx. Count of over 820 routes in more than 30 countries and for analyzing the report the selected country is Germany. Moreover the further report has been made focused on the critical evaluation of the external environment of the business entity in EU and also the resources which can be utilized by the entity for gaining the competitive advantage will be discussed.
The concept is concerned with an analysis which is a framework for determining the level of competition in the business environment and also for the development of the business strategies. Moreover this concept has been considered as one of the significant analysis which can be executed by Easyjet for analyzing the external environment of the business entity (Waal 2013). The below presented is the description of the Porter’s five force model which has been executed for analyzing the external business environment of the above mentioned airlines firm:
- The airline industry has attained the name as the second largest low budget airline in Europe region and in fleet size and has the second largest number of routes as compared to Ryanair.
- The airlines entities with large frills are attempting to enter the low cost markets by making use of some partners for instance Air France or Flybe.
- Both the airlines industries will be experiencing an intense level of competition and this can also be prejudicial fof the organization if they both the business entities are planning or are operating as low budget airlines.
- Airbus has been considered as one of the biggest supplier of aircrafts for easyjet.
- Airbus and Boeing are the only two suppliers to which the limit of supply has been made limited and switching between these suppliers requires extra expenses as the pilots needs training for handling new aircrafts (Freeman, 2010).
- One of the biggest substitutes for the business entity is the high speed trains which are growing all over Europe and moreover Eurostar and TGV can also be considered as other options, as the time difference is not that big (Hitt, Ireland and Hoskisson, 2012).
- Most of the strategies of the business corporation has been made focused on the prices rather than giving importance to the customer service and this has become one of the reason that company have no brand loyalty or strong customer relationships.
- One of the biggest reasons behind consumers making easyjet their choice is their price awareness strategies are high.
- The buyers can also attempt switching over to different airlines if they are offering a low price for the same route and this will not incur any kind of additional expenses (Pitt and Koufopoulos, 2012).
- The low cost market has been experiencing an intense level of competition as it is very much easy for the business organization to match te packages which are being offered to the customers (Hesterly and Barney, 2010).
- For most of the cases Easyjet tries not to collide the routes with their rival companies so as to avoid the price battle until the business entity is available with the minimal profit.
Political: Germany has been considered as a demographics nation and has a political system which functions under a system known as Grundgesetz which was published in 1949 constitutional document. This type of government will be proven beneficial for easy jet as the governing authorities will be less interfering.
Potential entrants
Economical: The nation is low with the raw materials but the nation is leading producer of solar power technology and wind turbines (Pestleanalysis 2015). The service sector contributes 70% of the GDP and industry contributes 29.1% while agriculture backs 0.9 % and which proves that the economy is an economically stable nation and which will be proven beneficial for the easy jet as the standard of living, income level of the consumers will be high and will prefer to travel more through airlines.
Social: The nation comprises of around 82 million residents and this makes the region the largest EU country in terms of population. The German societies are full of diverse range of lifestyles and are a modern multicultural country. This proves beneficial for the business entity due tow pricing strategy and the nation is full of tourism activities and destinations.
Technological: Germany backs national science and technology in many aspects and also there are national laborites and private research which makes the country technologically updated and which wil be proven beneficial for the business entity the airline industry and business operations are concerned with the technology. .
Before executing the analysis of the key resources and competencies which are available and can be proven beneficial for the business corporation, it is of very much significant for making identification of the relevant components which are liable and play a vital role in the success of the business entity (Hesterly and Barney, 2010). For attaining the the business objectives and the goals the business entity is required to carry out the detailed survey over the needs, preferences, likes and demands if the consumers i.e. Demand analysis, and also over the competitors so as to survive and sustain competitive advantage in the market (Hill, Jones and Schilling, 2014). And for doing all this the business entity should have an enough availability of resources which in-turn will be proven beneficial for the business organization:
On the basis of the research conducted it has been determined that the business entity have both tangible and intangible resources. The tangible resources of Easyjet have been segmented in two major categories that are the financial and physical resources (Thompson and Martin, 2010). Whereas on the other hand the intangible resources comprises of the human and technological assets which the business entity have, moreover a detailed presentation of both the resources has been done as follows:
On the basis of the survey it has been identified that the as per the annual financial report of business entity, the business organization is having an availability of ample amount of financial reserves and by utilizing the same the business corporation will be enabling itself for grabbing opportunities with a greater speed (Johnson and et al, 2013). The recent bid made by EasyJet for the Great British Airlines is one of the examples.
Suppliers
EasyJet have approx. 137 aircrafts, which also includes the fuel efficient crafts and the most updated fleet of the Europe region (Wheelen and Hunger, 2011). The business organization has become one of the stiff barriers for the new pioneers in the sector and has also been giving an intense level of competition to the new entrants by attaining the competitive advantage. The quality of committed airport slot at the main airports has been considered as one more elements in the competitive advantage for the firm. Moreover maintaining the stock of the fuel in advance is the market strategy which has been adapted by the business corporation and which has been depicting the financial power of the business organization (Rothaermel, 2015). By maintaining the stock of the fuel, EasyJet has maintained a distance from the short term oil price variations in the market.
On the basis of the analysis in the sales graph of the business entity an approx. 98% of its sales of the flights have been done by booking the tickets from internet. And hence it is proven that the business entity has a well-updated online portal which is also technologically developed and through which the business entity has been maintaining all the queries of the consumers. The online portal also provides an easy access to the travellers with the services like ticket booking information over routes and destinations etc. Due to the low cost strategies the business entity has also been enjoying brand recognition among the customers (Grant, 2016). The business corporation has been making use of ‘easy’ as the brand name since 1998 for the diverse range of ventures such as easy-value, easy music, easycar, easybus etc. Further the organization has been following a flexible type of organizational culture which ensures an equal importance to the values such as team work and co-operation which has been proven beneficial for attaining the desired results.
The business corporation has a strong management team which comprises of strategic managers, general manager who are well-versed with all the professional capabilities and the skills required. Human resources are to be considered as the backbone of any of the business organization and so it is one of the most significant resources of Easyjet (Morgan, Pritchard and Pride, 2011). The board of management is held responsible for attainment of the goals and pre-determined targets and the further operations, EasyJet has been making use of subcontractors. Moreover the business corporation has a very strong and efficient communication strategy which is very much vital for achieving operational targets. Some of the approaches have been implemented by the entity and such as performance rating system, workshops and innovative programs which has provided contribution in the establishment and development of strong work relationships with the dealers and subcontractors.
Substitutes
The business entity has been experiencing an increase with stability on average load factor i.e. 83.7% to 87.3%, between 2007 to 2011, and on the basis of the survey of the 5 years data it has been observed that the business entity has steadily exceeded Ryanair which already had a high load factor. The high load factor provides a surety to the business entity that EasyJet will be able of spreading fixed cost over more passengers and decrease in the unit costs, but may also remitting the problem of overcapacity (Peppard and Ward, 2016). A high load factor also identifies a high possibility of earning the ancillary revenue since both total revenue and ancillary revenue are significantly shown a rise accompanying the increase in the load factor. Moreover the business entity has maintained long term contracts with the dealers which have benefited the business entity with ensuring an exact and fix amount of delivery, time and location of the aircrafts. Another core competency that the business entity possesses is that the company has been attaining a high level of customer satisfaction as compared to rival organizations. On the basis of the company survey about 80% of the customers are satisfied with the services which are offered by the business organization.
The mission statement is of very much significance for the business entity as t aids in identifying the business corporation’s products, services and customers. Moreover it also develops a distinct image of the business entity that from the competitors. It also helps in building and identifying the relations between the employees and mission, the business entity itself, the potential consumers, co-workers and suppliers (Grin. 2009). The major targets of the mission statement are the shareholders, leaders and workforce. The mission statement should be developed in such a manner that it should aid the workforce within the organization and also it should be established after considering the decisions and tasks that are best align with the mission of the company. It also helps in identifying about the insight about the company leaders view or have an idea regarding the primary purpose for being in business. The mission statement of the business entity has a strong relationship with the strategic planning as strategic planning is the process of development of the plans, strategies and tactics for the attainment of the mission of the business corporation. It can also be termed as the statement of the purpose for which the business has been operated. The statement works as the guide for the entire decision making. The vision statement is the directions which are being provided to the workforce and the organization for attaining the goals and targets. The directions are ethical and provide most relevant tracks for attainment of the objectives. However the concept of vision statements is more concerned with offering a correct direction and should be including a perspective of corporate values and ethics according to which the business should be operating the business activities. A vision statement can also be proven beneficial for the business entity in providing directions for long term for instance, for easyjet the vision statement will be aiding and enabling the management team in developing plans for next five to 10 years (Kleymann and Seristö, 2017). It also provides an assurance and a commitment to integrity, transparency, openness and other such values. The current mission and vision statement of Easyjet is to provide the customers with safe, good and point-to-point air services. Also to influence the and to offer consistent and reliable products adnd services and fair fares which are appealing to leisure and business markets on the range if European routes. And for attainment of all this the business entity will be developing the customers and also establishment of the long lasting and strong bonds with the dealers and suppliers. The above mentioned statement is very much customer oriented and which will be aiding the business entity in number of ways. Hence it has ebeen recommended that the current mission and vision statement will be proven beneficial for the business entity.
Buyers
Conclusion
In the limelight of the above carried out analysis it can be concluded that the strategic management is one of the significant management which is required to be executed by the business entities. This concept will be aiding Easyjet which is a low budget airlines brand name which is a domestic and international scheduled service to number of regions throughout the globe. The strategic management will be enabling the business entity in developing and identifying the strategies and pplans for attaining the competitive advantage and also for tackling from the competitors. The above report comprises of the critical analysis of the external environment of the above mentioned business entity and also the resources available and how they are utilized in attaining the competitive advantage. And at last the critical evaluation of the mission and vision statement and benefits of the same has been presented.
References
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