In today’s competitive business world, corporations focus on generating and maintaining a competitive advantage in their industry to ensure that they are able to sustain their future growth in the market. Competitive strategy provides an edge to companies over their competitors that sustain their profitability (Santos-Vijande, Lopez-Sanchez and Trespalacios, 2012). In the case of EasyJet, the corporation has generated a competitive advantage based on its cost-effective strategy which attracts a large number of customers. The company focuses on providing them a comfortable journey for lower price to increase the number of its customers. This strategy enables corporation to create more economic value than compared to its competitors, and it assists the company in outperforming its competitors. The corporation also has established a good design which attracts most customers. The company is able to operate more efficiently, smoothly and comfortably which creates a positive environment for its customers (Cattaneo et al., 2016). The use of technology to improve the effectiveness of functions also benefits the company in providing a comfortable experience to customers. These policies provide a competitive advantage to the enterprise which assists it in sustaining its growth in the aviation industry.
EasyJet Airline Company Limited is a low-cost British carrier airline which was established its operations in 1995. The corporation has established its headquarters in London Luton Airport, and it operates in both domestic and international schedules. The company offers its services in more than 30 countries, and it offers over 820 routes to its customers (Reuters, 2018). Customers prefer to select this airline because it gives them a low-cost option to travel to Europe. The corporation is popular with travellers who wanted to spend a luxurious experience in Europe; however, they did not prefer to pay heavily on air travelling. The corporation manages its operations through more than 200 aircraft; the company mostly uses Airbus A320 because it is cost effective and it provides a comfortable experience to customers. The corporation has employed more than 10,000 employees to manage its operations effectively (EasyJet, 2018a). Currently, the company is the second largest airline in Europe in terms of number of passengers carried; in 2017, the company carried more than 80.2 million customers. In terms of number of passengers, the company is right behind its one of the biggest competitor that is Ryanair which is an Irish law cost airline.
The instability in the political environment of major markets of EasyJet resulted in creating challenges for the enterprise. Brexit is a good example; the operations of the company in European countries will suffer after completion of Brexit. The competitive advantage of the company comes from offering low-cost airline services to passengers in European countries might be destroyed (Rogers, 2018).
The uncertainty caused due to Brexit regarding the economy of the country might create challenges for EasyJet by reducing the number of passengers. The changes made in inflation and interest rates after the completion of Brexit might result in increasing the operating costs of the enterprise due to which it might have to increase the costs of its services (Rogers, 2018).
Most customers prefer to go to European countries for travelling and spending their holidays and the select cheap flight options provided by EasyJet to save their costs on travelling. However, the strikes in France by air traffic controller (ATC) and 4000 pilots resulted in reducing the number of flights offering by EasyJet to the country which affected the profitability of the enterprise (Pollak, 2018).
The airline industry is undergoing a digital disruption after the incidence of 9/11 due to which corporations have to increase their security infrastructure. EasyJet uses technology to improve its performance while reducing its operating costs to offer cheap and discounted flight options. The corporation uses cutting edge technology in order to eliminate technical delays and making the travelling easier for passengers. For example, customers can book a flight through its mobile application, and it also uses image recognition technology to allow them to search for destinations (Hayhurst, 2018).
The corporation has implemented a sustainability model in the business which is focused on benefiting the environment. The company invests in the latest technology in order to efficiently manage its operations through which the company was able to reduce its carbon footprint by 22 percent. Although many actions are taken by the company, however, the carbon emissions of the company has increased from 6.5 million tonnes in 2016 to 7.1 million tonnes in 2017 (EasyJet, 2018b).
The legal penalty of more than £10,000 was imposed on EasyJet by a London court over denied boarding by the company (Shine, 2016). The corporation failed to ensure that it complies with the legal contract which it has formed with its customer. Ensuring the facilities of customers is necessary for the company, or else it faces legal chargers, for example, the company had to pay a fine of €60,000 for refusing to let a disabled passenger on the flight (Presse, 2017).
The threat of new entrant is low in the aviation industry because the initial cost is considerably high. The new corporation has to invest huge capital in the beginning, and they did not start to get profits quickly. The well-established brands such as United Airlines, Etihad, Singapore Airlines and EasyJet have already established a positive brand reputation in the market (Evans, Harvey and Turnbull, 2012). It creates many entry barriers for new companies due to which the threat of new entrants is low.
The bargaining power of suppliers is high in the industry because currently there are only two aircraft manufacturers which include Boeing and Airbus. The corporation can choose between them, however, they can drive the prices of the company based on their bargaining power is strong (Cattaneo et al., 2016). The jet fuel prices also fluctuate based on which the company has to set its pricing strategy based on the agreement with jet fuel suppliers.
The bargaining power of customers is high in the aviation sector because there is no significant cost incurred on the changing the company. The customers can simply choose between the offers of different corporations without paying any additional costs for the change. Many online websites and mobile applications allow customers to choose between offers and services of a wide range of airline which allow customers to choose the most suitable option for them. Thus, their bargaining power is high.
The substitute for flying is travelling through train, bus, cars and other mediums. Although these options are more easily available and cheaper, however, they did not match up with the efficiency provides to customers in airline industry. Customers are able to travel to long distances in very limited time frame, and they are also able to get a comfortable journey than compared to substitute options such as train, car, bus and ship.
The competition in the aviation sector is considerably high because already established brands fight with each other to attract more customers. The corporations leverage factors such as efficiency, comfortable, availability, accessibility, lower prices, discounts and others to expand their customer base (Harvey and Turnbull, 2012). This industry is highly competitive because the number of passengers who use airlines is increasing globally which attracts new players in the market as well. Customers loyal did not exist in this industry which creates intense competition for organisations.
Strengths
The key strength of EasyJet is its pricing strategy because the corporation offers somewhere around 50 percent lower prices on its services which make it an attractive deal for its competitors (Malighetti, Paleari and Redondi, 2015). The company’s cost per seat advantage is higher than compared to most major carriers which include high seat density and high load factors. The airport network of the company is strong as well which allow corporation to connect major cities in European countries to provide effective services to customers.
Weaknesses
The main weakness of EasyJet is that its cost base is not as low as that of Ryanair. Its cost advantage is lower than compared to Ryanair which is a 50 percent lower cost per seat providing it a competitive advantage in the industry. The brand and legacy carriers create significant competition for the enterprise which offers more international destinations to their customers. The earning of EasyJet is seasoning which is higher in holiday seasons but lower in other seasons.
Opportunities
The number of airline passengers has increased globally which create potential growth opportunities to EasyJet to expand its operations and increase its customer base. The corporation can leverage market growth by increasing the size of its fleets which result in increasing its customer base (Morlotti et al., 2017). The corporation can further reduce its cost per unit to give equal competition to Ryanair.
Threats
The major threat is that airport price increases which increases operating costs of EasyJet. It is a labour intensive industry, and labour unrest is a major threat for the company. With the advancement in technologies, complexity has increased in the business due to which the company has to adopt complex seating and distribution channels. The fluctuation in jet fuel prices makes it difficult for the company to maintain its cost advantage in the industry which creates risks for its profitability.
Strategic Capability Mapping
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Resources and capabilities
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Tangible resources
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Financial resources
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Intangible resources
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Human resources capabilities
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VRIO Framework
EasyJet has strong financial resources in the industry which is its key sources. Its revenue has increased by 16.8 percent in 2017 to £5,898 million which create strong financial resources for the enterprise (EasyJet, 2018c).
Valuable: The financial resources are valuable because they enable the company to expand its operations in new markets and increase its customer base by increasing the number of aircraft.
Rare: It is rare in the aviation sector that corporations are able to sustain revenue each year. The growth reported by EasyJet is uncommon in the industry which makes it a rare resource.
Inimitable: For new and even established brands, it is difficult to maintain and sustain growth in their revenue which makes it difficult for them to sustain their growth.
Organised: The business strategy of the company is organised to leverage its financial resources to sustain its growth which provides a competitive advantage to the enterprise.
The corporation has hired more than 10,000 employees to conduct its operations (EasyJet, 2018a). The staffs of the company are highly talented and motivated enough to perform its operations effectively.
Valuable: This is a valuable resource because the customers deal with the staff members who must be qualified and skilled enough to resolve their queries and providing them high-quality services.
Rare: The training and development program of the company has built a strong workforce which is highly talented and qualified which is rare in the industry.
Inimitable: Organisations have to spend years in order to develop their human resources to ensure that they are skilled enough to provide effective services to customers.
Organised: EasyJet has organised this resource because it uses it to offer a comfortable travelling experience to its customers without charging them higher prices for tickets which provides it a competitive advantage.
Recommended strategies
Strategy A: Market Expansion
EasyJet has a positive image in the aviation sector which can assist the corporation in expanding its market in new locations. The number of customers who select flights as a travelling option is increasing in developing nations. It provides a key opportunity to the company; EasyJet can leverage its financial resources to purchase new fleets in order to expand its operations in developing markets. The corporation can establish its operations in Indonesia, India and Thailand to reach a wider audience (Preston, Lee and Hooper, 2012). The mission statement of the company provides that its goal is to provide customers with safe, good value and point to point air services. The corporation focuses on providing reliable products and fares appealing to leisure and business markets on a range of European routes. The company should change its mission statement to include other nations than just European countries. Customers will prefer low-cost flying options in Asian countries which can assist EasyJet in expanding its customer base. Due to globalisation, the corporation will be able to avoid various fees and duties while expanding its operations in developing nations which will increase its profitability.
Strategy B: Diversification of offerings
Currently, EasyJet provides low-cost services to its customers in various European nations; however, the company can diversify its services to also provide more luxury services to its customers. The diversification of services will enable the company to target a new customer base such as businesspersons who travel to European countries for business purposes. The corporation can leverage its human resources to offer high-quality services to its customers. The company already has highly trained staff members who are skilled enough to provide high-quality services to its customers. The corporation should change its logo to make it more appealing to customers who prefer more luxury travel. Many customers travel for business purposes that prefer quick flights with luxury, and they did not care about the prices of the tickets (Wise, Muratori and Kyle, 2017). The company should target this customer base to ensure that it is able to reach a new audience to increase its profitability. The company can offer efficient services to its customers who wanted to travel to European countries without wasting significant amount of time. This will open new opportunities for the company to expand its offerings and increase its profitability.
SFA Analysis
The first strategy is more suitable based on SFA analysis through which the company will be able to increase its customer base. This strategy is more suitable because the company can leverage its financial resources to expand its business which will increase its profitability as well. This strategy is more acceptable from the perspective of stakeholders because it will enable the company to gain a competitive advantage over Ryanair in terms of number of customers. This strategy is more feasible because the company already has financial resources to comply with these plans. The corporation will be able to forecast its profits in this strategy. Customers already have luxury flight options available which make it difficult for the company to gain a competitive advantage through strategy B.
Key findings
Based on the above observations, EasyJet has generated a competitive advantage in the aviation industry based on its cost-effective strategy. The company leverages its resources to reach a wider audience who wanted to travel to European countries without spending significant cost on travelling. The corporation can leverage its financial resources to expand its business in new markets to ensure that it is able to sustain its growth in the aviation industry.
Conclusion:
In conclusion, EasyJet is a low-cost airline which offers cheaper flight options to its customers. There are various political, social, technological and legal factors which affect the operations of the company. The intensity in the aviation industry is high which creates various challenges for the company. Two strategies are recommended in this report which can assist the company in expanding its business. The corporation can expand its market to reach to a wider audience to increase and sustain its profitability.
References:
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Pollak, S. (2018) Ryanair and Aer Lingus cancel flights this weekend. [Online] Available at: https://www.irishtimes.com/news/consumer/ryanair-and-aer-lingus-cancel-flights-this-weekend-1.3548379 [Accessed 05/12/2018].
Presse, A.F. (2017) French court fines easyJet over refusal to let disabled passenger board. [Online] Available at: https://www.theguardian.com/business/2017/jan/20/french-court-fines-easyjet-over-refusal-to-let-disabled-passenger-board [Accessed 05/12/2018].
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