Porter explains that there are five forces inherent in a market, which will jointly determine the intensity of competition and profitability of EasyJet and the airline industry. The airline has differentiated itself from other budget carriers by serving top-tier European airports. Its not clear what role Haji-Ioannous pressure played in this decision. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. Lundgren and the board were frustrated. Competitive pressure. 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. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. 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. 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. For the battered airline, 2020 couldnt end soon enough. Disappointing your customers. Weaknesses identified earlier could also offer potential opportunities in terms of development of brand awareness globally. A strong and visible brand to create a high level of awareness with consumers. If COVID doesnt ease more quickly, and leisure travel doesnt rebound as hoped,EasyJetshole will only get deeper, and its plans to grow could be spiked indefinitely. EasyJet through its use of an overall cost leadership strategy can use internet-based technologies to reduce value chain costs in a variety of ways: On-line bidding and order processing to eliminate the need for sales calls and decrease sales force expense. But flying to those primary airports in Western Europe is more expensive. But what are the internal weaknesses suffered by EasyJet? A typical approach for risk identification is to map out and assess the value chains of all major products. This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. 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. 2023 Fortune Media IP Limited. Normally there would have been close to 100. The idea of remote working can also result in co-ordination and control weaknesses. liability for the information given being complete or correct. Still, the connection was critical for airlines. This time, he succeeded in scheduling a showdown vote for May 22, 2020. 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. 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. Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. With so much uncertainty, leisure travelers are holding off on booking summer flights, prolonging EasyJets pain. Beneath the surface of EasyJets cosmetic cost savings of not offering free in-flight refreshments or different first, business and economy classes, was a philosophy of cost saving that permeated through the entire organisation. Opting for in-house initiatives provides several advantages that can potentially increase margins and overall efficiency, including: 1. Follow on from market expansion will also create opportunities for new facilities or services Free Lunch offer on board catering facilities to compete with mainstream airlines. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. This needs to be updated constantly as this will be a live system. Funding strategies developments is clearly important in that the nature of funding must be appropriate and compliments the low cost strategy of EasyJet, by ensuring that interest costs are low. He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. 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. Upgauging the fleet enables easyJet to improve competitiveness on costs. This will involve retention of best salespeople supported by HR management, engineering support in terms of maintenance of the web page supported by technology development to ensure that web site has the latest prices and route and flight information. Haji-Ioannou also alleged three large minority EasyJet shareholdersthe asset management companies Invesco, Phoenix Asset Management, and Ninety Onewere straw men, secretly controlled by Airbus, since all three companies manage some of the aerospace giants employee pension assets.But, in the end, Haji-Ioannous campaign failed to catch fire with other investors. Reducing the cost, managing the cash burn, and getting access to liquidity, Lundgren told CNBC inNovember. The reason for EasyJet to put so much emphasis on the human factor as one of the primary risk sources is quite understandable. 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. On the other hand, risks which produce 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. 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. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. 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. 6. Another major industry wide threat is the volatility in price of fuel Oil price record high of $53 a barrel. this was the headline in the business pages of all the newspapers last November. 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. Lundgrencomplainsthat the British governments travel rules remain too onerous. EasyJet was able to operate at only 18% of its 2019 capacity. Undertaking market shift to globalisation expanding outside the European market will be key to continuous enhancement of business performance. 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. As it turned out, it wouldnt need those flights. We're here to answer any questions you have about our services. 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. Therefore, the low cost strategy is the ideal strategic fit to its environment. Remote working and hot-desking have been characteristics of easyJet since the beginning. Standardisation in its activities as an airline leads to both economies of scale and a simpler product, which is cheaper and easier to distribute. Finally, opportunities may also exist in the area of innovation and alliances, how about a joint venture scheme with Ryanair to maintain and enforce the low cost competitive advantage. That loan would buy EasyJet some more time. Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. Improving CSAT across the whole customer journey. (The others are rival budget airlines Ryanair and Wizz Air, as well as Southwest Airlines in the U.S., on which EasyJet originally based its business model. Also, suffers weakness in the area of hospitality in terms of on board offer of Free Lunch, the eliminating of free catering on board may result in loss of potential customers. Also, only one type of aircraft is used, in order to minimise maintenance costs. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. Ryanair continues to lower costs, which enables it to persist lowering fares aggressively. He also threatened to sue the airline if its payments to Airbus pushed it toward bankruptcy. EasyJet, on the other hand, flies fewer routes but operates from many more primary airports, with a heavier focus on Western Europe. Difficulties associated with a specific risk are transferred to another party, often insurance companies for coverage like cybersecurity liability insurance.Examples of risk transfer include: buying business interruption insurance to handle unplanned expenses in the aftermath of a cyber attack; reducing the likelihood of project 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. Front and center was the existential risk of the coronavirus. As opposed to cost leadership, in which businesses rely on reducing costs to gain a significant market share, a differentiation strategy is typically Get the best reports to understand your industry. Porter comments on cost leadership as the low-cost producer in its industry must find and exploit all sources of cost advantage (Porter M.E (1980)). As previously mentioned manual processes can increase the chances of fraud, but they can also result in other unnecessary risks. The threats are in terms of alternative holidays Disneyland Paris via Eurostar (Euro tunnel) and P&O cruise. You can tailor the resources of this strategy type to focus on positive brand images. But nothing has been normal for EasyJet since March 23, 2020. Budget airlines that rely on the leisure market make most of their money from April to August. In a vast hangar on the outskirts of Gatwick Airport, one of EasyJets big hubs, sit a row of five space-age pods, painted in EasyJets trademark orange-and-white colors. 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. Potential negative outcomes include bad publicity and a 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. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. The fourth force is the bargaining power of buyers. All work is written to order. SOCIAL changes in consumer taste and lifestyle represent both opportunities and threats for the industry. Haji-Ioannou founded EasyJet in 1995, eventually using it as a springboard to create of an Easy-branded empire that extended from car rentals and pizza delivery to a hemp business. Given the fact that the company offers WebIts evident that EasyJet takes few risks and applies firm business principles while carefully exploring the market. In essence, Lundgren told the BBC, thismeansonly the rich can go on holidays: The expense of these tests would be way over and above what the cost is of an average EasyJet fare, he said. Developing the range of ancillaries on offer such as the Inflight retail proposition. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. 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. 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. Worse, the company had discovered the hack back in January but hadnt notified people whose credit card details had been accessed until April, and was only now letting other customers know. The first is to reduce the bottom line costs of operation (low cost strategy) and the second is to increase the value of the organisation and its reputation to customers, so that they will demand more or pay more for what they receive (differentiation strategy) (ACCA Paper 3.5 (2001)). EasyJet may be prepared and has to a large extend engaged in price war with competitors via its lower cost structure (economies of scales due to its larger operations) and also has the financial resource capability to fund short to medium-term losses with the aim of driving out competitors in the longer terms. Balance your retirement plan with your other financial goals. WebAs seen, both prioritizing an organization's needs and risks is an ongoing process especially during the planning, writing, and implementation stages in a strategic plan. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. As a result, it finished 2020 with more aircraft in its fleet than it had at the beginning of the year, despite the pandemic-induced travel doldrums. British Airways. Statista assumes no This affects value creation as follows: Table 1: Sales and Trading Profit of EasyJet. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. (Lundgren declined to comment for this article.). This is critical for EasyJet having analysed the competitive rivalry position in the industry. Out on the tarmac, a short distance from the simulators, almost a dozen real EasyJet A320s sit idle. 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. There are potential opportunities in terms of new routes and expansion of services offered, EasyJet has already launched a number of new European routes, how about expansion into the Asian Pacific? Background Coronavirus disease-19 emerged in December 2019. 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. All Rights Reserved. This has resulted in a strong Balance Sheet the companies net assets reaching the record level of 724 million (aided by retained profit mainly). It wouldnt need those flights of its 2019 capacity popular with holidaymakers and also the trend! 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