Custom «Easy Jet Case Study» Essay Paper
Easy Jet Airline Company was founded in 1995 by Stelios Haji-loannou, a graduate from London Business School. The development of Easy Jet Airline was to compete with traditional airline carriers by undercutting the cost. The company was one of the first low cost airlines in the UK, with flights from Luton to Scotland. The company had two Boeing aircrafts with a capacity of 148 passengers each and the cost of one seat was $28.5 one way. In 1998 the company launched their website to improve their market. However, Haji-loannou denounced the use of internet in the company, as he suggested it did not improve the overall development of the business. In August 1999, the site had a turnover of 38 % from the sale of tickets, an equivalent to the sale of more than 136 000 seats. Currently, Easy Jet website provides 98 percent of its bookings (Boru, 2007).
To ensure growth of the online market, the company increased its online discount to $2.51 for one trip, which was higher than any other airline. By the month of September 2000, the internet sales of the company reached 85 percent of the total sales made by the company. In 2003 the company had managed to capture 90% of online sales. Additionally, in 2002, Easy Jet expanded its routes and fleet by obtaining British Airways low-cost subsidiary. Easy Jet Company has reduced Boeing fleet from 73 to 30 and has acquired 106 aircraft Airbuses. The Company operates 137 aircrafts with 289 routes in 21 countries. During the establishment of Easy Jet a lean operation was required to cut the cost. Haji-loannou established a single sales channel to achieve and survive. Likewise, he was encouraged by different companies like Direct Line insurance that worked in collaboration with the airlines, thus enabling it to meet its short and long-term plans.
The basic trial was established in 1997, where Haji-loannou observed closely on its popularity. The company had telephone reservation system for selling the seats. The number of callers rose daily from the call reservation system. This led to lack of space in the call centre, due to its growth. This called for a transaction site of $10 million to either build a call centre or sell over the internet. The company decided to sell tickets over the internet due to high demand of passengers. Easy Jet success was achieved by the founder vision and adaptability as well as market business model. The company had direct sales operations, which boosted the market. In addition, it was easy to integrate the call centre into a central booking system. Some of the low cost propositions for Easy Jet were no in-flight meals, no network tie-ups, no travel agents and no tickets. The customers were given personal identification numbers, a factor that significantly customized the products and services offered by the firm (Denton, 1998).
Strategic Evaluation - Situation Analysis
Easy Jet Airline success was substantially influenced by environment around the organization. Easy Jet concentrates on keeping its prices down to be ahead of competitors. The customer expectation on low cost carriers is flying cheaper. Low income people are given opportunity to travel to and from the UK at an affordable price. The firm has expanded its routes to North African region, therefore expanding their markets. The customers require more convenient ways of flying and booking. This has resulted to Easy Jet increasing the fares if booking is not done in advance, which is at times higher than their competitors. This encourages the customers to book in advance using internet since it is cheaper (Desiraju and Shugan, 1999).
To gain competitive advantage, Easy Jet has to keep track of technological developments in aircraft manufacture and e-commerce. The company uses Airbuses, which are lighter and fuel efficient. Likewise, the firm innovated Easy Jet holidays, thus offering hotel and flight packages to the customers booked directly on easyjet.com (Gale and Holmes, 1992).
There are several factors, which influence the economy of the Easy Jet and its operational costs. These factors include congestion of customers and increasing fuel prices among other notable environmental factors. To respond to high fuel prices, Easy Jet can stock large amounts of fuel to avoid short term price effect increase. To ease congestion of customers, Easy Jet should expand their routes and increase their fleets. The company vision is to have 120 airbuses by 2015 in the market domination. Easy Jet contributes to the environment through production of friendly planes, which do not emit carbon to the environment. This is due to the fact that carbon emission in to the air pollutes the environment, thus affecting the flora and fauna. Likewise, the customers contribute to the environment by paying small amount of money to Easy Jet which they invest in environmental projects.
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Easy Jet airline is affected by competitive forces, which affect its market. One of the competitive forces is threat from other substitutes of travel. Other modes of transport such as cars and trains threaten low cost airlines since they are flexible and comfortable. Another threat is from new entrants. To enter in the market, high capital is required to buy aircrafts. Easy Jet does better in the UK than in the rest of Europe region, since there are few market entrants in the UK. Expansion of new market in European countries for Easy Jet is difficult due to companies such as TUI, which are setting up low cost operations. Similarly, it is difficult for new carriers to find suitable airports due to lack of landing slots and takeoffs. Power suppliers are another competitive force, which affects the airline. There are many airplane manufactures in the airline industry. Easy Jet depends on one particular manufacturer of aircraft, a factor that may significantly poses a threat to the airline if the company fails. The high price of fuels in the international markets is another factor that affects the profitability of the firm. For instance, in the last five years, price of fuel has increased by almost 300% to $147.6 per barrel globally. The other competitive force is the power of buyers. Easy Jet is a low cost airline hence the buyers shop around for better prices on the internet. This forces the company to review its prices regularly to be ahead. Consequently, rivalry among existing firms is another competitive force affecting Easy Jet. Major competitors of Easy Jet in the UK are MyTravelLite, BMI and Ryan Air. In European countries the competitors are Air Berlin, German Wings and Virgin Express. These competitors affect Easy Jet market and target different segments (Gallego and van Ryzen, 1994).
To review the marketing strategy of Easy Jet, strengths, weaknesses, threats and all the possible opportunities need to be reviewed.
Easy Jet has different strengths which makes it stay ahead of the competitors. One of its strengths is strong e-business. Use of internet to reserve booking has improved the market of the airline. Flexibility and innovation is another Easy Jet strength (Done, 2004). Use of internet to book seats has increased convenience and flexibility to the customers. Differentiation on pricing is another strength which boosts Easy Jet. Easy Jet has different prices depending in the season. The company charges slightly high during high seasons and low during low seasons. Similarly, the company has strong financial position. Likewise, the company has a powerful branding of their services and products. Easy Jet has several products which improve the image of the company. These products include easy hotel, easy van, easy bus, easy cinema and easy gym among others. These products are available on their website hence boosting their market.
Despite the success of Easy Jet both in the domestic and international markets, it has several weaknesses. First, the company has no customer retention policy. Secondly, Easy Jet lacks service and business focus, thus making the low cost model unappealing. Thirdly, focus on convenience and focus on price are reaching to their limit hence expanding becomes difficult.
Easy Jet airline has various opportunities. One of Easy Jet’s opportunities is future growth for the company. Ful service airlines are withdrawing from regional market to focus on profitable routes, hence leaving the market for low cost operators. This is a great opportunity for Easy Jet to invest. Another opportunity for Easy Jet is short break market. This market is providing growth for Easy Jet rapidly (Gallego and van Ryzen, 1997).
There are several threats facing Easy Jet airline market. First, it is difficult to expand new routes from London. Secondly, the airline market is saturated; hence stiff competition from other airlines. Thirdly, there is high competition in demanding incentives from communities. Fourthly, economic downturn affects business travel times, hence time consuming. Fifthly, the company faces threats from terrorists which affect their market. Likewise, political instability, as currently witnessed in most of the Arabic countries, such as Syria, Egypt, Libya among other, affects their market since they cannot effectively offer their services.
PEST analysis describes macro-environmental factors which influence organizational environment. They include Political, Economic, Social, and Technological (Jones, 2007).
Easy jet organization is likely to be influenced by war in the Middle East. Likewise, there is a threat from European parliament which is forcing low cost airlines to pay three times higher the current price.
One of the economic factors likely to affect easy jet is rise in fuel cost, environmental restrictions, and congestion, since it may outlook higher insurance and security costs. Secondly, globalization will boost air traffic. Thirdly, introduction of Europe currency will increase easy jet business.
Social Cultural Factors
Firstly, use of promotions will be friendly to the customers thou may affect customers if they find that is not the actual price. Secondly, it may be difficult to win German and French cultures since they use credit cards on the internet and phones.
First, easy jet will be required to keep technological developments in order to gain competitive advantage. Secondly, use of cost synergies and distribution on the internet will affect costs and prices.
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Resources and Company Capabilities
For an organization to be successful, the success key factors must be determined and evaluated. There are different key success factors that have led to the success of Easy Jet Airlines Company. These factors include baggage delivery, punctuality, safety and low prices. These factors are threshold of customer expectation in any airline company. Likewise, possibility of one-way tickets enhanced Easy Jet success, since other airlines did not offer it. In addition, use of internet to book flights direct improves the market share of the company, due to the fact that it saves time and is convenient.
Easy Jet success factors evolved from the company low-cost business model. The model has different characteristics. One of the characteristics is selling ticket directly via internet as well as deducting travel agents commission. This saved time and was convenient to customers. Dynamic seat pricing is the second characteristic of the model. Easy Jet charges high during peak season and low during less busy periods. This has improved the market as well as maintaining the customers. The third characteristic is that the model has low cost prepositions which are used as revenue generating opportunities. Point to point is another characteristic offered by the model. The company has one type of aircraft to reduce the cost of maintenance and staff and crew training. Similarly, this has created economy scale for purchasing spare parts and aircrafts as well as increasing operational flexibility. Another characteristic of the model is that it offers short destination routes with single class cabin.
Easy Jet Resources
Easy Jet airline has different tangible and intangible resources, which boost its markets. Tangible resources include financial and physical resources. Easy Jet has 137 aircrafts which are fuel efficient. The airline has strong competitive advantage from new entrants’ barrier. Easy Jet has dedicated airport slots which are important assets for the company. Likewise, it forms a competitive advantage for the airline. Easy Jet stocks fuel in advance to beat the oil price fluctuations, thus ensuring that the company does not occur loses due to fuel prices.
The firm responds to opportunities fast due to financial reserves. Intangible resources include cultural, reputational and technological resources.
E-Marketing Strategies for Easy Jet
E-Marketing for Easy Jet has led to the rapid growth of the company. E-Marketing is a process of achieving marketing objectives by the use of electronic communication technology. E-Market tool used by Easy Jet is the use of website to sell tickets. E-Tools support marketing in several ways. First, it assists in identifying ways of using internet for marketing research to find out customer wants and needs. Secondly, they help in anticipating demand for digital services. Thirdly, they improve customer satisfaction through electronic channels. They also improve profit margins of a company (Grant, 2005).
Setting up e-market for Easy Jet was to reduce manual labor and booking centers cost. The use of internet reduces cost of issuing tickets, reduces tasks, reconciliation, processing and distribution of tickets yearly. This improved administration and management purposes in the business. However, e-market needs logic to be useful to the company. Easy Jet’s e-strategy scaled down call centre operations as most of the tickets were sold online. The use of internet has also made flights cheaper as compared to that of competitors, thus benefiting the customers (Johnson and et al, 2006).
One of the benefits to the customers is that they receive discounts when they book online for each journey. Easy Jet did put all cheap flight online to attract more customers, hence beating their competitors. Customers are able to make bookings, transfer flights, as well as requesting email confirmation duplicates. In addition, customers are able to reschedule their flight bookings and online check for its customers. The website offers an option to the customers to select speed boarding, which enables passengers to board flights before other customers (www.easyjet.com).
Easy Jet uses pricing strategy to improve its markets. Pricing approaches used including good value pricing and value added pricing. Easy Jet offers quality services which are of low cost and exceed customers’ expectations. Easy Jet makes savings through eliminating travel agents from the chain and reducing administrative costs. The company does not offer in-flight refreshments to the passengers. Likewise, the check-in luggage is charged, hence reducing basic air fares. To guarantee good services, Easy Jet ensures the records match with that of major carriers and the passengers are in the plane on time.
Value-added pricing includes in-flights and pre-flights. The preflight area has lounges, which are accessible to business passengers. The area has television sets and food stations accessible to the passengers. The in-flight area has comfortable seats, dining and entertainment areas, which are for the passengers who board the first class and business class. E-marketing moulds the passengers according to specifications (Porter, 2004).
Another marketing strategy is through promotions. The company runs its promotions online and sometimes in the newspapers. The use of internet has helped in beating the demand of rising number of customers. Promotions are offered online to passengers who book online. This eases congestion in the telephone reservation system as well as in the call centre. Easy Jet uses subcontractors to assist them in their operations. Innovative programs are put up by the management to improve relationships between suppliers and subcontractors. Some of these innovative programs include performaance rating programs and workshops (Desiraju and Shugan, 1999).
Value Chain Analysis
Easy Jet guarantees long terms contract to ensure delivery in location, time and amount of the aircraft. The operations are carried out by handling reservation staff. The use of online reservation system enabled the firm to cut cost on travel agents and commissions. Further, the use of subcontractors to handle flight services ensures that activities are carried in a convenient way. Outbound logistics ensures final distribution of services and products to the customers. These activities include safe, comfortable and punctual flight trips to the customers. Easy Jet planes are efficient due to large number of customers. Sales and marketing department creates awareness to the audience of its services and products. However, the firm has one weakness of not offering incentives. For instance, there are no refunds if the customers miss their flights. This puts off customers, hence low frequent fliers. The supporting activities for the firm include procurement, technology development, human resource management and firm infrastructure (Jones, 2007).
To outperform other firms in an industry, there are different generic approaches used. One of the generic strategies is overall cost leadership. This strategy ensures low costs to the customers, which increases the profits in return. There are three success criteria used to ensure effective use of this strategy. They include feasibility, acceptability and suitability. Suitability is the strategic position of an organization in terms of expectation of the stakeholders, strategic capabilities of the firm and strategic position of the environment. The strategic position of environment of Easy Jet indicates that this strategy is suitable to environmental factors. The factors of setting up, growing and availability of business model determine the market position of this company. The strong financial background and basic knowledge in transport business made it possible for Easy Jet success. Customers’ expectations of low market cost made it possible for Easy Jet to venture into the business (Kretsch, 1995).
Acceptability is concerned with expected performance of the strategy. To determine Easy Jet strategy, stakeholder reactions, risks, and returns should be verified. Non-financial and financial returns are verified to determine the profit margins in terms of cash flow, pay backs and capital returns. Continuous improvement in profit growth indicates good choice of strategies.
Feasibility, access competences and resources of a company are used in accessing the strategy. There are two ways to determine feasibility. They include break even analysis and financial feasibility which help in identifying competences and resources for the strategy (Desiraju and Shugan, 1999).
Legal and Ethical Issues
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Businesses that are using e-commerce system are faced by a lot of ethical challenges. Legal and ethical issues facing e-commerce include consumer protection, computer crimes, taxation, free speech, intellectual property and privacy. Information collected from customers should be protected from hackers. There are different ways private information is collected. They include internal directory, emails, web browsers and user groups. To book flights on Easy Jet website, the customer is required to register by filling in registration form. This information is stored in the database and can be viewed by third parties. Easy Jet should introduce security measures to protect the customer information from hackers, which may destroy their market. The website contains cookies that help the users to maintain user status. Likewise, these cookies improve online services as well as customizing sites. To protect the information, cookies should be deleted from the website. In addition, anti-cookie software can be used to protect cookies from hackers (Rhoades and Waguespack, 2006).
There are several principles which protect privacy. One of the principles is to register with the government on legal remedies. Secondly, individual accessing the information should have authentication information to ensure that only individuals with the right have access to the information. Booking confirmation copies should have Easy Jet trade marks to ensure they are genuine. One of the ethical issues is misleading and false advertisements. The use of these advertisements may make the organization to lose its market to its competitors. Another ethical issue facing internet business is the use of obfuscating language. This destroys the market of the company hence there is a drop in profits. Another ethical issue is lack of clear requirements and procedures in the website. This may mislead the customers while booking tickets therefore this may bring about conflicts. Likewise, information may not be linked properly in the website where information is collected in the database. This may lead to vital information being left out during registration or ticket purchasing (Desiraju and Shugan, 1999).
Future Suggestions and Improvements
Easy Jet Company matches well with environment and strategies. Easy Jet has considered competing on services, routes and prices aggressively to drive entrants out of the market. In addition, Easy Jet has strategic decisions of reviewing the cost and routes offered by its competitors. Easy Jet Company targets travelers on leisure since business individuals travel to wide spectrum of destinations. The company needs to review its fleet and ventures into all cities to expand its market. However, the operating costs should not increase. Further, more emphasis should be put on direct marketing such as customer retention scheme. Easy Jet can start selling shares in environmental programs in the website to collect money for charity work. This will promote its market, since the customers will be giving back to the community. Further, the airline should venture into the use of green form of energies in all its branches. This will significantly reduce the firms’ carbon printing, a factor that will substantially enhance long-term sustainability of our environment.
In conclusion, Easy Jet is one of the most successful low cost airlines in the world. This has been contributed by introduction of internet booking to passengers who uses their routes. Factors which influence the economy of the firm and its operational costs include congestion of customers and increasing fuel prices among other environmental factors. Easy Jet airline’s competitive forces include threat from other substitutes travel, this threat from new entrants and competitive force is the power of buyers. The strengths of the firm include strong e-business, differentiation on pricing, financial position and powerful branding of their services and products. Easy Jet’s weaknesses include no customer retention policy, lack of service and business, high focus on convenience and price. They are reaching to their limit hence expanding becomes difficult. Easy Jet’s threats to its business include difficulties in expanding new routes from London, stiff competition from other airlines, high competition in demanding incentives from communities, economic downturn affects business travel times, hence time consuming and political instability in the countries.
Low-cost business model characteristics include selling ticket directly via internet as well as deducting travel agents commission; dynamic seat pricing, low cost prepositions, point to point and short destination routes with single class cabin. Easy Jet responds to opportunities fast due to financial reserves. Intangible resources include cultural, reputational and technological resources. Tangible resources include financial and physical resources. E-Tools support marketing in several ways. First, it assists in identifying ways of using internet for marketing research to find out customer wants and needs. Secondly, they help in anticipating demand for digital services. Thirdly, they improve customer satisfaction through electronic channels. Fourthly, they improve profit margins of the company (Desiraju and Shugan, 1999). It is notable that the website offers to the customers an option to select speed boarding which enables passengers to board flights before other customers. Legal and ethical issues facing e-commerce include consumer protection, computer crimes, taxation, free speech, intellectual property and privacy.
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