EasyJet Strategic Plan For Relocating HQ To Munich: Research Findings

External Environment Analysis of Munich

Brexit has produced a remarkable event, which would highly be remembered for many reasons in days to come. This would affect the different kinds of business as the multinational companies have their business communication in other than their parent country. European countries in particular are internally connected by means of business. This is because of many reasons of which one reason is free to move within the Europe for business purpose. However, the Brexit would now impose the necessity of having valid permission for companies in UK before they enter in any other European countries for business (Dhingra et al. 2016).

EasyJet is a British Airline Company that operates through the format of low-cost carrier model. It is based at Luton Airport in London. It follows an approximately around 820 routes covering more than 30 countries. The company is also listed in the London Stock Exchange as FTSE 100 Index. The company has witnessed its business expansion ever since its establishment in the year 1995. The series of acquisitions process and a strategy to offer low costs services have perhaps benefitted the company. The company in collaboration with its associate company EasyJet Switzerland has more than 200 aircrafts to their names (Fedosova 2016).

Munich is one of the most suitable cities for the business purpose. The purchasing power parity of the city is even better than the big names of Germany such as Frankfurt, Berlin, Hamburg and Stuttgart. Munich Airport is one of the largest aviation hubs of Europe (Rinne and Zimmermann 2012). The main purpose of this assignment is to relocate the EasyJet headquarter from UK to Munich in Germany. This assignment would further assist the relocation process by conducting an external environment analysis of the recommended locations followed by other business level strategies such as marketing mix.

Figure 1: PESTLE analysis

Source: (created by author)

Munich is highly advanced in technology, which is very much evident from the fact that it is the centre of technological advancement such as biotechnology and software (Barz, Reinhard and Zenk 2012). This is very opportunistic for any company that wants a business success at the global level. It is also the headquarter position for many big companies such as McDonald’s Microsoft, BMW, which shows that the centre has won high faiths from several multinational companies. Munich is the strongest economy of Germany, which makes this as one of the most selected destination for foreign direct investments. The good business opportunities in this city are associated by various employee centred rules such as strictness to pay minimum wages to the confirmed employees, maternal leave to the pregnant women etc. Employment rate is another very bright aspect of this place, which makes this as one of the most selectable destination for the employers. Nevertheless, it is voted as the fourth most liveable cities on this planet.

Porter’s Model for Value Chain Management

Bargaining power of suppliers- Supplier’s power in Germany is high. This is why the different Airlines companies in Germany have to spend 40% of their entire investments on the labour and the staffs. The power is boosted by the duopoly upstream of Airbus and Bowing. Suppliers have very less control on the rising prices of fuel (Helmold 2013).

Bargaining power of buyers- Buyer power is high as well. This is increased with the prevalence of online booking system that gives enormous options to the customers for different kinds of Airlines companies. Moreover, customers do also have opportunities to compare the services and prices of the different Airlines companies. Passengers in Munich are very sensitive to price. A favourable place to such Airlines companies that offers cheapest prices for the different kinds of air services (Hasan et al., 2012).

Existing rivalries- Competition in Munich is very high because of the low cost of Airlines. There is high competition in between the different Airlines companies that operates their business in the city. Barriers to exit are very high, which makes this a highly competitive place for the different Airlines companies. Competitive strategies are very much required because customers have variety of options to them to switch from one Airline to another (Wagner 2013).

Threat of substitute- Threat of substitution is very low. Substitution can be in the form of road, rail and marine transport system. However, Airlines take much shorter time than the other modes of transports. Interestingly, fares of low cost Airlines are even cheaper than the fast moving trains.

Threat of new entrants- Threat of entrant is very high. The barriers to entry in the Airline industry are very high. This is because it is never safe for the different Airlines companies that are operating in the city.

The competition in the Airline industry in the city is very high because of low barriers to entry in the Airline industry. In addition to this, the barrier to exit is very complicated and high as well. Therefore, the system encourages for being in the industry and competes to the different Airline companies by using some unique strategies. The competition is high because of some other reason as well such as the high supplier power and fare sensitive customers (Kuper 2014).

Porter’s model for value chain is very effective in managing the entire operations involved in the supply chain. EasyJet smartly manages its value chain by outsourcing many of its services to its suppliers. Services such as the maintenance of aircraft is taken care by SR Technics. On other hand, Alfred McAlpine takes care of the online booking system. The human resource management contributes in the mission of it by recruiting highly qualified professionals. They have various reward system such as incentive benefits to motivate their employee’s performance. They have highly capable technical platform, which they use to analyze the customer’s requirement and to reduce the wastages of required materials. They have reduced the complexity level of supply chain by aligning different services to their different suppliers. They tend to be in contact with their suppliers on a regular basis. Outsourcing the various services and operations is cost effective as well. This is why they have managed to offer such low-ticket prices to the travellers (Budd and Vorley 2013).

Strengths and Weaknesses of EasyJet as a Low-cost Airline Company

Figure 2: SWOT analysis of EasyJet

Source: (Businessteacher.org.uk 2017)

The Airline industry in Munich is very healthy for business. The economy of the city is the strongest in the entire Europe. This would be a fair enough chance for the EasyJet for a good business. The fact is also supported by its strength to provide cheaper flight services, a concept which is at boom in Munich. However, numerous existing customers such as Ryanair might challenge the success of the company. Ryanair comes at the top most slots when it comes to offer Airline services at the most affordable prices. Apart from Ryanair, EasyJet would have fear of some other Airlines as the Airline industry in Munich has fewer barriers to a new entry. This would be a very interesting shifting for the EasyJet as the recommended city Munich has high potential to benefit the company; however, high offerings are associated with high competition in the airline industry. This would be a real test for the company to be in the competition and offer the most affordable prices to the customers (Businessteacher.org.uk 2017).

“To offer reliable services to the customers and to offer them the demanded requirements at a consistent pace”

The existing mission statement is very much in line to the business requirements in Munich. This is because the city has high competition in between different Airline companies for offering the cheapest services to the customers. Customers in Munich are very specific to ticket fares. The existing mission statement has the potentials in it to justify the recommendation of change place for the headquarters (Abubakar and Dogoji 2015).

“To enhance its capability as the largest Airline in Europe that offers the services at the cheapest prices”

The vision statement is again suitable to the Munich city. This is because the Airline industry has high competitive environment for offering the cheapest prices of fares. The existing vision of the EasyJet Company would provide them a strategic approach towards the attainment of the highest position in the Munich Airline industry (Abubakar and Dogoji 2015).

The selection of Munich has been made by observing the below potential points (Le-Klähn, Hall and Gerike 2014):

• Very strong economy of the Munich city would provide high business to EasyJet
• One of the most busiest Airports in Europe
• One of the most widely connected airports from the different parts of world
• Centre for headquarters of various multinational companies such as BMW, McDonald’s, Microsoft, Allianz etc.
• Customers are sensitive to air fares, which is in the line of offerings of EasyJet
• High chances of growing if EasyJet capably offers the cheapest air services

Product- Products would include food services; however, it needs to be offered for a limited period. This would cut down on the prices. They can offer foods for the entire travelling time for Munich to Berlin and Munich to Hamburg routes. The high numbers of flights and the passengers would minimize the burden of expenses on the food services by maximizing the ticket sales. EasyJet can also offer holiday discounts to attract bulk ticket bookings on such occasions (Albalate, Bel and Fageda 2015).

Price- The low cost Airline model is at boom in Munich. People living in Munich are sensitive to Airfares. It is then necessary that the EasyJet must offer the cheapest fares for the number of flights to Berlin and Hamburg. Munich to Berlin and Munich to Hamburg are the two busiest routes in relation to number of flights and the numbers of passengers. It is challenging EasyJet to offer the cheapest prices because the bargaining power of suppliers is higher. This asks for high investments on paying salaries to staffs. In such scenario, sales maximization is the key to success and high revenues (David Mc A 2013). Sales maximization can be achieved through various options such as offering holiday discounts, offering discounted ticket fares to regular casual & business customers etc.

Place- For the headquarter place of EasyJet, large areas would be required. Such areas would be needed that has many other headquarters of other brands. The purpose would rightly be served by opening up headquarter at the Nymphenburger StraBe, Munich, 80335. The place is very close to many other company’s head offices, landmark places etc. The company would also be able to get a larger area for setting up its head quarter (Laulajainen and Stafford 2013).

Promotion- Online promotion mode would be required to introduce to the Munich’s people. This would educate them on the different products and services of the EasyJet Company. This would create hype before the start up of the operation as well. PR event should also be organized, which would help come closer to the media and to the different customer’s queries (Shimp and Andrews 2012).

The one possible risk in the airline operation is the cancellation of flights due to bad weather. In such cases, either Airlines can offer a full refund to the customers or they can relocate their trip to some other available flights. The highly recommended option would be to use alternative flights as per the available vacant seats in all the next flights. However, it is challenging because this would require extra ground staffs and cargo vehicle to relocates the passenger’s belongings. In such situations, they can relocate economy class passengers to higher class and reschedule their trip accordingly. This would prevent the reputation of the company from any serious damage (Oster, Strong and Zorn 2013).  

Conclusion and Recommendations

EasyJet is the second highly reputed companies in the low cost carrier model. The company had a highly successful business in the United Kingdom. However, the Brexit effect and the rising competition in the United Kingdom have encouraged the company for a shifting of headquarter. The recommended place Munich might prove its worth as a potential location for the EasyJet Company. The powerful economy of the city can be highly effective for the business of EasyJet provided if the company recruits German-speaking employees in huge numbers and strengthens its relationships with Berlin & Hamburg.  

Some innovative practices can be very effective for EasyJet for being the best low cost air service provider in Munich as well as the highest revenue gainer. EasyJet should consider working with the airports as this would help develop low cost terminals. Low cost terminals can effectively reduce the total expenditures of the company, which is required for gaining high incomes while offering the cheapest ticket fares. Some other practices can also reduce the expenses such as the use of Unmanned Aerial Vehicles (UAVs) for doing checkups of the aircrafts. Unmanned Aerial Vehicles (UAVs) can take the database images, which would help the engineers view the changes in the aircraft. This is necessary for being protected from any big loss of aircraft maintenance. Using smartglasses for pilots is another handful option, which is important for enhancing the security level of every flight. This again would save EasyJet from doing extra expenses on aircrafts that meet with the accidents.

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