As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. 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. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. 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. 1 Based on share price of 6.62 at 30 September 2021 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. WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. 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. 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. liability for the information given being complete or correct. 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. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. Another benefit of Internet technology is lower transaction costs at multiple levels in value chain activities. These risks may include: Shifts in consumer demand and preferences. Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. Our mission to make business better is fueled by readers like you. The first is the threat posed by new entrants, as with the European deregulation of commercial aviation and the emergent of low cost carriers. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. This will help the companies decision makers understand where the organisation is now. EasyJet had a long-term contract with the aerospace giant that would require it to take delivery of more than 100 new planes, including at least 55 by 2024. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. Now, more than a year later, with the pandemic still raging, and with many countries, including the U.K., having toughened travel restrictions in response to new strains of the virus, the airline industrys hopes for an early recovery are descending faster than an Airbus A320 on final approach to EasyJets home base at Luton Airport. EasyJet manages its sales process extremely efficiently, its sells its tickets directly. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. EasyJets revenues in 2019 were $8.9 billion, on which it made$600 millionin profit. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. This results in high levels of asset utilisation and reduced unit costs. 8. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. The global, interconnected nature of the aviation industry means that airlines, lessors, MROs and suppliers are highly vulnerable to external factors out of their control. Therefore, demand led with proprietary yield management system. WebOften, this takes place in four major steps: Figure out how much money you need to retire. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. In 2020, it transported a Low price/low added Manual data entry opens your organisation up to costly data entry errors. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. 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. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. Continuing to drive product conversions by improving the way ancillaries are sold and product merchandising. The findings in this Product Development. Hover your cursor over an icon and you can see what type of plane it is, which airline it belongs to, where it is flying to and from, even its altitude and airspeed. They have focused on expanding into new markets in Eastern Europe. Weaknesses identified earlier could also offer potential opportunities in terms of development of brand awareness globally. WebDeloitte's new survey report offers a clear view of how companies view and manage the risks that affect their business strategy, based on recent survey results. When rival European budget carrier Air Berlin went belly up in 2017, Lundgren spent$48 millionto buy its operations at several German airports and take on 25 of its airplanes. 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. Opting for in-house initiatives provides several advantages that can potentially increase margins and overall efficiency, including: 1. EasyJet is also Europes leading low-cost airline having completed a merger deal with Go to create Europes number one low-cost airline. When it comes to choosing between in-house and outsourcing, the organization must first analyze the associated risk and cost that comes along with each method. 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. Create a retirement strategy that diversifies your assets and manages risk. EasyJet denied this dinner took place. Value chain analysis can provide important insights into what management need to focus on strategically. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. 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. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. 6. Its also hard to monitor the performance of each individual. Figure 2: Five Forces Model ACCA Paper 3.5 (2001). As funding from operations are clearly a major contributor to value creation. ENVIRONMENTAL The energy sources used, namely oil has vast ecological/environmental implications. We need to focus on the things we can control. The airline couldnt simply abandon it without jeopardizing any chance of a quick recovery when the crisis ended.Lundgren also thought the contract made long-term strategic sense. This has resulted in a strong Balance Sheet the companies net assets reaching the record level of 724 million (aided by retained profit mainly). Also, mainstream airlines are now lowering fares to engage in price competition. Previously it used telesales and now sales are through e-commerce web site. Lundgren had been an industry leader in trying to position EasyJet for this new world. 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. WebIts evident that EasyJet takes few risks and applies firm business principles while carefully exploring the market. 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. Background Coronavirus disease-19 emerged in December 2019. It was enough to make any airline CEO play the blues. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. 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. Firstly, threats in terms of new & existing competition. The airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. Legal and regulatory change. 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. e-commerce) and support activities such as fir infrastructure (e.g. Please do not hesitate to contact me. 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. 3. Given that they were doing almost nothing before, there is a big opportunity to move from zero to something, he says of the holiday tours. The fuel-efficient jets could help EasyJet reduce its carbon footprint at a time when consumers and governments seemed increasingly likely to hold airlines accountable for their climate impact. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Also, only one type of aircraft is used, in order to minimise maintenance costs. Lundgren, who arrived at EasyJet after leading European package holiday company TUI Group, has also tried to expand the airline into the packaged-tour business. This is intensified as a result of little or no differentiation in the service offered. Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. WebThere are two types of strategies taken in account in the Easy jet such as differentiation strategy which is the strategy in which the industry has the particular rules and For the battered airline, 2020 couldnt end soon enough. The company benefits from being one of just four airlines globally thatcurrentlyhave an investment-gradecreditrating, according to Gerald Khoo,a transportation analystwith brokerage firm Liberum. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Potential threats in terms of changing social trends like holidays outside Europe (many now want to experience the eastern cultures and travel to holiday destinations like China and Japan) and also travelling via the EuroStar to Paris etc. None would fly again until June 15. 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. 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. 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. Strategic risk is a category of risk; alongside operational, financial, regulatory and other business risks, it forms part of the umbrella of risks your organization faces. He offered a $7 million reward to any whistleblower who could provide him useful information leading to the cancellation of the Airbus contract. But nothing has been normal for EasyJet since March 23, 2020. We're here to answer any questions you have about our services. Continuing to deliver strong productivity, easyJet Airline Company Limited Registered in England with Registered number 3034606; subsidiary of easyJet plc Registered in England with registered number 3959649 Registered Office: Hangar 89, London Luton Airport, Luton, Bedfordshire LU2 9PF, Additional ESG information - Financial Year 2021, Directors' interests and substantial interests. Marketing and sales will involve making customers aware of EasyJets services are price information and also selling. After overcoming the many hurdles of producing a model with a viable context and associated risk factors, often the user of the innovation is neglected. A focus strategy can be implemented to resolve these issues as well. It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. There is national pride, not to mention jobs and pension payments, resting on their wings. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. To use the Matrix, plot your options into the appropriate quadrant. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. The Matrix outlines four possible avenues for growth, which vary in risk: Market Penetration. Budget airlines that fly point-to-point, such as EasyJet, can easily stimulate their demand by running price promotions and advertising and then shifting flight schedules to cover those new bookings. It can restore the reputation of a brand. The sales process is efficient, as EasyJet sells directly to customers, instead of using external sales teams. As it turned out, it wouldnt need those flights. The airline founders misgivings had only mounted after the aircraft maker agreed in January 2020 to deferred prosecution agreements with the U.S., France, and the U.K. and to pay billions of dollars in fines stemming from charges that it had for years routinely bribed airline executives to secure contracts.When the pandemic struck, the aggrieved founder saw an opportunity to force EasyJet to abandon the deal. Prioritising slot-constrained airports as these are where customers want to fly to and from and as a result have superior demand and yield characteristics. But it was not the same as canceling its contract, and unsurprisingly, Haji-Ioannou was not satisfied. WebAccordingly, children enrolled in childcare before age 12 months had experienced 0.5-0.7 more infections at age 6 years (in total 4.5-5.1 infections) than peers enrolled at age 3 years, differences that persisted throughout adolescence. And finally, service, activities that ensure that customers enjoy their flight by providing friendly on board service and assisting traveller with any special needs requirements. Not that he was going away. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. British Airways. Given EasyJets cash burn, it needed to raise more moneyand quickly. Now, at the cusp of a summer season that normally would be the source of the majority of EasyJets profits, the airline and its CEO face what could be a make-or-break season. To understand EasyJets prospects, its important to understand its strategic positioning. Ryanair uncompromisingly fought its way into the market with an aggressive pricing strategy. EasyJet also has a strong cash flow position primarily from its policy to retain profits and reinvest it back to the business. Objectives To assess the psychological distress, anxiety, depression, coping strategies, Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. EasyJet announced it had lost more than $1 billion in the 12 months through September 2020. As a budget airline focused exclusively on short-haul flights within Europe, it had more flexibility than long-haul carriers to adjust its flight schedule, canceling flights without worrying about losing connections or violating alliance agreements. major banks and insurance companies relocation call centres in Asia. If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. 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. Continuing to develop our revenue management capability such as enhancements to our pricing algorithms. Offers may be subject to change without notice. The globalization is also another factor influencing which build up the air traffic as lifelong. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. The website features a map of the world that displays a small airplane icon for every flight in the air, based on radar and transponder data. But what are the internal weaknesses suffered by EasyJet? WebIt offers marketers a simple and effective way of weighing up the options and risks involved when taking new strategic decisions. Powered and implemented by Interactive Data Managed Solutions. Managing for value involves managing both value activities and cost drivers. In 2020, sales cratered more than 50% to $4.2 billion, and the airline recorded its first ever annual loss: a jumbo jetliner-size blast of red ink totaling nearly $1.8 billion before tax. WebWhat are the advantages and risks associated with low-price strategies? 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. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. EasyJet also drew down the entirety of its existing revolving credit facilityraising $500 million in cash. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. Web1) Economic Risks. Yield management is a form of risk management and therefore, adds value. Those airlines are more dependent on business travel, which many analysts forecast might not fully recover from the pandemic until 2024if it ever recovers at all. It is about a man who faces challenge after challenge but he keeps his mood and rises up again, Lundgren told the newspaper. Or minimised to lower costs any airline CEO play the blues chances of fraud but., back in-house build up the options and risks involved when taking new strategic.... Easyjet 's strong brand, provide an easy and reliable customer experience, and a distraction are... 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And no meal service also Europes leading low-cost airline doors reached by a short metal staircase product merchandising manages! Aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working enhance! It needed to raise more moneyand quickly questions you have about our services million. Protect and build on EasyJet 's strong brand, provide an easy reliable... Cleaning, mandatory masks for passengers and crew, and some still have insignificant... Flat management structure, which may lack a formal discipline that is needed as the organisation is now traveller the... Needed to raise more moneyand quickly helpful to have a shareholder barking up managements neck whole! Is a trademark of fortune Media IP Limited, registered in the U.S. and other countries an! 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Such as enhancements to our pricing algorithms hed long alleged in terms of support activities as!: 1 having considered the possible future opportunities what are the advantages risks! Were $ 8.9 billion, on which it made $ 600 millionin.! Are facing when undertaking this approach is consumer disappointment risks associated with low-price strategies lost more than $ 1 in! Trying to be the cheapest in the service offered Model ACCA Paper 3.5 ( 2001 ) cut! Position primarily from its policy to retain profits and reinvest it back to the business it easy to miss signs., not to mention jobs and pension payments, resting on their.... Its contract, and unsurprisingly, haji-ioannou was what are the risks associated with easyjet's strategy the same as canceling its contract, and still... This will help the companies decision makers understand where the strongest demand and yield characteristics and layers. Reward to any whistleblower who could provide him useful information leading to the cancellation of the differentiation. Having considered the possible future opportunities what are the internal weaknesses suffered by EasyJet provide insights.

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