is easyjet's concentration on low costs contributed to competitive advantage

The UK low-cost market is quite mature in comparison to the rest of Europe and easyJet, as the biggest operator has quite a comfortable position. The introduction of the single currency in Europe is likely to bring more business to easyJet as Europe becomes more integrated. easyJet’s own success makes it difficult to recruit and train staff quickly enough. Lack of service, flexibility and business focus (such as frequent flyer programmes e.g.) To differentiate its brand further on promotional lines, easyJet could introduce a CRM (cause related marketing) scheme, developing a reputation for being a ‘caring airline’, e.g. The threats in the SWOT Analysis of EasyJet are as mentioned: 1. There are many low-cost airlines in the world. However, low fares (based on low costs) will remain its key competitive advantage. Internet booking system (over 90% of bookings). Traditionally airline concepts are based on the assumption that airline traffic grows in line with the economy and that cutting prices will only lead to a decrease in revenues. For example, if two companies make essentially identical products that sell at the same price in the market place, the one with the lower costs has the advantage of a higher level of profit per sale. With the modern aircraft fleet that it possesses, the fuel cost and aircraft maintenance cost is also reduced. Airplane manufacturers are concentrated in the industry, with Boeing and Airbus providing the majority of commercial planes and with easyJet operating one type of aircraft until recently. It is advisable that easyJet targets mainly leisure travellers as business often demand frequent flights to a wide range of destinations, seek quality service and frequent flyer programmes, and are willing to pay a premium for these benefits. In the later part of the report, we will demonstrate these competitive advantages.The report reveals that its two main competitive advantages are the business positioning, and the service quality - brand image. Cost strategy. Recommendations will be made for easyJet's marketing strategies for the next three years. Low pricing and telephone or internet booking established a niche market, and high levels of advertising achieved brand recognition. The BrandGuide section covers SWOT Analysis, Competitors, Segmentation, Target Market, Positioning & USP of more than 2800 brands from over 20 industry sectors. The airline was founded in March 1995 by Greek-Cypriot entrepreneur, Sir Stelios Haji-Ioannou. Abstract: In this paper, the sources of competitive advantage of low-cost carriers such as Southwest, Ryanair and easyJet are identified. EasyJet Target Market Middle class / upper middle class. The price of aviation fuel is directly related to the cost of oil, as an individual company easyJet does not have the power to alter this. Amazon business strategy can be described as cost leadership taken to the extreme. Within this space, Ryanair and Easyjet are the two biggest low-cost airlines in the region (Elderman 2014; Dowling 2010). Markets/Customers Easyjet, Plc, has a good competitive advantage as it connects important city-to-city markets in Europe. Lowest cost base. The brand name easyJet is very easy to remember and hence brand recall is higher 2. Globalisation should continue to boost traffic in the long-term. The recent evolution of its product and service add new elements to the basis of competition. A key issue will be the extent to which favourable cost trends – such as the impact of the Internet on distribution costs and cost synergies from industry consolidation – can offset these upward pressures on prices and costs. EasyJet academy ensures a steady supply of pilots and cabin crew. That means, if prices for flights are being reduced, more people will fly. In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). More full-service airlines may withdraw from the regional market to focus on more profitable long-haul routes leaving the market to the low-cost operators. Seats are being sold over telephone reservation system only. Ryanair’s cost per passenger is the lowest in Europe by some margin, approximately one third lower than that of easyJet.Excluding fuel costs, the difference is even starker, with Easyjet’s cost per passenger 67% above that of Ryanair.This unit cost advantage against easyJet stems mainly from airport and handling charges. Experts predict great potential for future growth in the next years (see appendix 4). However they may feel begrudged where they see promotions found in newspapers where flight are for £10 only to find that the actual cost is much higher for the particular time or day they wish to fly on. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Looking for a flexible role? That means, if prices for flights are being reduced, more people will fly. Strategical moves like this have enabled it to reduce cost and improve the convenience for the customers. To make the strategic decision market research on the size of different combinations of pricing and service is needed. One year later easyJet launches its website, easyjet.com which will from 1998 onwards form an integral part of the business concept (and which provides for some 90% of the bookings today [2] ). We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. First among the LCCs to introduce e-tailing, thus eliminating intermediaries and distribution costs, 5. Concerning competitive advantage, Easyjet concentrates on costs therefore achieves overall cost leadership. 2.Evaluate EasyJet’s operations strategy against Hayes et al.’s criteria of consistency and contribution. In a decade, low-cost airlines may be the dominant form of air travel in Europe. Browse marketing analysis of more brands and companies similar to EasyJet. In this paper, the sources of competitive advantage of low-cost carriers such as Southwest, Ryanair and easyJet are identified. It inhabits a low cost Niche position. Competitors have mimicked easyJet’s strategy and have introduced competitive brands with similar price strategies that have increased competition, and decreased market share. The two drivers of growth, the focus on price and the focus on convenience (frequent flights, few connections, more nearby airports e.g.) On international routes distances are usually too great for car or train to be an alternative to air travel, expect maybe from London to Paris, which can be reached by Euro Star. In Europe, no-frills travel accounts for only 5% of European air travel, but it is likely to grow to claim a 12-15% share in the next decade. Do you have a 2:1 degree or higher? Furthermore, yield management “can help to better use price in the marketing mix to best reach the most customers” [17] . In 1992, traditional airlines had brand loyalty, so the new entrants such as Easyjet had to differentiate their services in order to gain competitive advantage. easyJet keeps costs low by cutting off the unnecessary costs and ‘frills’ which is in ‘traditional’ airlines. The reduction in oil prices, and the expectation that the prices will remain low should cut the cost of travel and bolster the passenger volume, which should in turn have a positive impact on the financial performance of both EasyJet and Ryanair. High capital requirements negate threat to some extent. SWOT Analysis is a proven management framework which enables a brand like EasyJet to benchmark its business & performance as compared to the competitors and industry. With the introduction of the ‘no-nonsense’ concept to the European market, after its deregulation in 1992, easyJet has proven this theory wrong and goes from strength to strength by actually increasing the size of the market and more recently by taking away passengers from the majors (see www.easyjet.com for passenger figures, financial data and employee statistics). Loss leader is required in order to join the low cost market. Missing out on the advantage of having a frequent flier program, 2. A successful example of a European no frills airline is easyJet. Low-cost airlines are gearing up to take large chunks out of their rivals. A EU east-enlargement may provide access to viable, new markets. EasyJet is known for its low-cost competitive pricing. Concerning competitive advantage, Easyjet concentrates on costs therefore achieves overall cost leadership. High bargaining power of customers in the LCC segment 3. easyJet has to keep track of technological developments in the field of e-commerce and aircraft manufacture in order to gain a competitive advantage. Buyer power within the airline industry – and especially the low-cost market – is relatively strong, as customers will often shop around for the better price, particularly with the dependence that the low cost airline has on Internet sales. To provide our customers with safe, good value, point-to-point air services. The objective of the report is to bring out the competitive advantages of EasyJet through an in-depth analysis of EasyJet, its main competitor Ryanair and its environment. The UK/European tourism and airline industries are expected to expand, mainly in response to the improvement in the global economy as well as the favorable oil prices that have seen operating costs fall (MarketLine, 2015b). From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. In 1996 easyJet takes delivery of its first wholly owned aircraft and goes international with first services to Amsterdam from Luton. However, there are no cross-shareholdings between easyJet and these other easyGroup companies. Moreover, it reflects several decisions about what kind of air service easyJet wants to provide. List all the ways in which EasyJet achieves low cost operations. Strong operational efficiency leading to a low-cost model: To remain unmatched as a low-cost service provider, EasyJet has continuously invested in its network’s core strengths, building a higher operational resilience along with providing the best customer experience. It flies to main destinations throughout Europe making it a very attractive choice for flying 3.Single model of aircraft reducing training, maintenance and supervisory costs, 4. Cost strategy is built on no-frills. EasyJet academy can be a source of ancillary income 2. easyJet should continue to focus on price and attempt to connect the dots in its network, which cost less than opening new cities. Usually the time and cost advantage of the low-cost carriers far outweigh the increased comfort and flexibility of trains or cars (e.g. The brand name easyJet is very easy … The sector accounts for only around 5% of all intra – European capacity, though the share is much higher in the UK domestic market and on services between the UK and Europe, closer to 20%. The most obvious competitive advantages Easy Jet possessed are delivering low-cost and maximizing margins. As the recession is likely to last for some more time, business travellers will keep an eye on their travel expenses. In order to analyse the airline industry in detail, it is useful to apply Porters five competitive forces. April – September 2002 Year-on-year increase. A successful example of a European no frills airline is easyJet. In October 2002 the airline signs a deal to purchase 120 Airbus, which will facilitate the airline’s ongoing growth strategy. EasyJet’s concentration has so far been on low-cost airline services to the masses, and although it faces competition from other low-cost carriers as well as major carriers, it has been able to successfully sustain its business and turn around an initial loss into profits of £2,318,938 [exhibit 2]. Promotion needs to persuade people that it is safe to fly, and establish easyJet as Europe’s largest low-cost carrier (as easyJet is already doing in its advertisement: “Size matters!”). (e.g. 1 . By obtaining these information residual uncertainty would be limited, and the incumbent airline would be able to build a confident business case around its strategy [13] . …. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. The brand names and other brand information used in the BrandGuide section are properties of their respective companies. Choosing the right competitive strategy is crucial strategy development step for the corporate, business unit and products and/or services success. Crews have been reported to be staying at a low cost camping resorts in the south of France ! 10, issue 1, 41-50 . Until the year 1998 the number of the airlines in Europe has increased from 132 to 164.4 A detailed definition of the low cost … Price discrepancies can be easily found and exploited by the consumer, meaning that the operator must keep a regular check on prices. Ryanair is an older airline company than Easyjet because its operations started in 198… To win over the French and German publics might cause problems as there appears still to be a general reluctance to use credit cards over the phone and Internet. Is part of the consortium that has been awarded to run UK’s air traffic control system (NATS). 3.To what extent does EasyJet’s concentration on low costs limit its ability to perform well against the Europe is far more fragmented with the equivalent figure for the seven European majors at only 47% [12] . Published: 9th Jul 2018 in 3. However, easyJet’s new deal with Airbus is being viewed by the company as “stunning” as the additional costs, which incur through the new type of aircraft are “far outweighed by the financial benefits of this deal”. Highlights its number one position among Europe’s low-cost airlines (advertising strap line: “Size matters!”, slogan: “the web’s favourite airline”). Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. The current recession is favourable as people and businesses are more cost-conscious. (Source: International Travel News (2003), available on http://www.internettravelnews.com/article/20223 Friday, 28th November 2003). That clearly underlines that easyJet is not in the people or food business, neither in the service business as such, but in the mass-transportation business, and as such its model is based on cost efficiency of the mass-transportation business. However, expansion into new European markets might prove more difficult as established; cash strong holiday firms like TUI are setting up their own low-cost operations (see information about Hapag Lloyd Express, www.hlx.com). Under the easy brand Stelios Haji-Iannou has furthermore established and Internet car rental service (easyRentacar), a chain of Internet cafes (easyEverything), a financial services site (easyMoney), a portal site for bargains on the net (easyValue) and a free e-mail service (easy.com). easyJet was started with a loan of £5 million, with 2 leased aircraft, but required a £50million investment raised by debt and equity in year two to speed expansion and buy 4 new planes. Competitive advantage. Advocates internal marketing, creative work done in-house. The long-standing problems of the industry- in the form of large numbers of network carriers and substantial over-capacity in many markets – were exacerbated by the events of September 11th (see appendix 5 for a post-Sept. 11th overview). Is being seen as an innovative and flexible organisation. on the route Luton/London to Glasgow a train takes around 6 hours and costs around £80 while a easyJet plane takes just one hour and costs around £29). Also, trying to appeal to widely different customer needs runs counter to the overall trend in service industries, in which distinctive approaches, tailored to different customers, have generally come to dominate [14] . The experience of the US market suggests that deregulation will be followed by industry consolidation. David Gillen and Ashish Lall. The concept of easyJet is based on the belief that demands for short-haul air transport is price elastic. In all his ventures he is using “yield management to extract the ideal margin from each customer” [16] and keep costs down. MBA Skool is a Knowledge Resource for Management Students & Professionals. See http://www.ryanair.com/download/morganjune.pdf for actual data. Thereby, it needs to make sure that a growth in its network and fleet does not lead to higher operating costs. EasyJet: The 'Easy' Way to Succeed - EasyJet, EasyJet is one of the most successful low-cost airlines in Europe. Major players entering the LCC segment. Quizzes test your expertise in business and Skill tests evaluate your management traits. Contribution to competitive advantage The best-known low-cost airlines in Europe are Ryanair (Ireland), EasyJet (England), Norwegian (Norway), Vueling (Spain) and Wizz Air (Hungary), they are present in most European countries. (See appendix 1 for Stelios Haji-Iannou’s other easyGroup enterprises). easyJet seems to be positioned very well with experts predicting excellent growth opportunities for the low cost-sector. Low-cost airline easyJet runs a number of operations from its aircraft hangar, an orange beacon near the departures terminal at Luton Airport.. Need for customer loyalty because of low switching costs. to competitive advantage (see Figure 2.2). With the acquisition of Go, the low-cost subsidiary of British Airways in 2002, easyJet became the biggest low-cost airline in Europe, overtaking rival Ryanair to the top position. In EasyJet SWOT Analysis, the strengths and weaknesses are the internal factors whereas opportunities and threats are the external factors. Evidently, its focus is on ‘European routes’, targeting business and leisure travellers alike. make the low-cost model unappealing for most business travellers. EasyJet’s competitive advantage has been derived from a policy to cut down on costs and hence frills in every aspect of short distance travel. Difficulties to expand as viable new routes from London are scarce. Also, results of the non-airline businesses have been mixed as they have lost £75m in three years [18] . 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. In the US the industry has consolidated into seven major carriers, which carry over 80% of passenger traffic of US airlines. Uses differential pricing; off-peak travelling and booking in advance makes a ticket less expensive. The table below lists the SWOT (Strengths, Weaknesses, Opportunities, Threats), top EasyJet competitors and includes EasyJet target market, segmentation, positioning & Unique Selling Proposition (USP). introducing a customer retention scheme. Yes, this helped EasyJet’s to increase online revenue, and get more customers thus making EasyJet flights price cheaper using the internet to reduce distribution cost. EasyJet’s route network shows broad coverage of western and southern Europe, with a focus on key holiday destinations. the giving away of free tickets on Go’s inaugural flight and Stelios protesting in a orange boiler suit against an increase of airport fees at Luton in a branch of Barclay’s bank which owns the airport). The following factors are likely to have an influence on the airline industry and should therefore be taken into account when formulating a Marketing Plan for easyJet. The full-service airlines, saddled with big networks and strongly unionised workforces, cannot easily embrace the management strategies of the no-frills airlines. also car hire on its website (use of the Internet for bundling products) and links to other easyGroup websites (see appendix 1 for other easyGroup enterprises). The ability of international airlines to expand is limited by ownership restrictions (In the US foreigners cannot own more than 25% of a national airline, in the EU the restriction is 49% [11] ). Similar analysis has also been done for the competitors of the company belonging to the same category, sector or industry. [5]) Salaries: By using Irish labor contracts with its employees, the company avoids the rules on wages and social benefits that are required by some European countries [6]. Highly sensitive to any additional taxes or charges imposed by government due to its lower operating margins 3. It should also consider putting more emphasis on direct marketing by e.g. The companies are not associated with MBA Skool in any way. Focus remains on pricing Strategy and expansion of its route network. Management. Likelihood of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risk of terrorism. However as the UK market becomes saturated, these carriers are likely to focus their development at continental European hubs. A key issue will be the extent to which technological advancements – such as the use of the Internet on distribution and cost synergies from industry consolidation – can offset upward pressures on prices and costs. Virgin Express, Hapag Lloyd Express, Germanwings and Air Berlin already are or might become competitors in the light of future expansion plans. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. Ryanair's Strengths. Competitive advantage of low-cost carriers: some implications for airports. Its negotiating power is likely to have secured favourable terms with Boeing and this should also give Ryanair an advantage over competitors in ownership cost per seat. The content on MBA Skool has been created for educational & academic purpose only. It is based on the low-cost, no-frills model of the US carrier Southwest. It is based on the low-cost, no-frills model of the US carrier Southwest. Experts believe that there is not room for the current multitude of carriers in Europe, and that these will eventually be whittled down to three or four major airlines, with the others absorbed or restructured to focus more on regional traffic. The airline market is best classified as having a monopolistic competition market structure, whereby there are many firms will similar, yet differentiated services. To achieve this will develop our people and establish lasting relationship (see www.easyjet.com). All work is written to order. Ryan air, BMIbaby, MyTravelLite and Buzz are major competitors of easyJet in the UK. Thus, the time and cost advantage of travelling by the low-cost carriers far outweighs the increased flexibility and comforts of trains. In the longer term, trend growth may itself slow gradually as the big air travel markets mature. by selling shares in forest help programmes over its website, collecting foreign currency on flights for charity etc., thereby giving its passengers ‘a sense of psychological comfort and well-being’ [15] when they choose to fly with easyJet. The Air Miles scheme is not considered as a taxable perk by the government in the way that company cars are taxed which may change to allow easyJet to compete on more equal grounds with the likes of BA. 2. Range, price and convenience are placed at the core of Amazon competitive advantage. The concept of Easyjet is based on the fact that short flights …show more content… Here are the weaknesses in the EasyJet SWOT Analysis: 1. It inhabits a low cost Niche position. Has little or no scope outside of Europe. Moreover, their scope for defensive mergers is limited by competition policy. Given the saturated market and the shortage of other options in the UK, competition is likely to intensify – inevitably followed by consolidation, an early sign of which is easyJet’s purchase of GO. Ryanair is the only one of these so far to have succeeded and shown a continuous yearly profit (see appendix 2 for financial data). It inhabits a low cost Niche place. ... and they should use it to achieve even better results. In a low cost strategy, the true winner is the company with the actual lowest cost in the market place. EasyJet will gain a competitive advantage over other airlines that fail to act on a key insight Tweet This! In this paper, the sources of competitive advantage of low-cost carriers such as Southwest, Ryanair and easyJet are identified. Therefore the only substitute is to ravel by plane and this is where Easyjet enjoys the competitive advantage it has over its substitutes. easyJet has to consider whether it should respond to new entrants by ceding niche-segments or by competing aggressively on price, routes and service in an attempt to drive the entrant out of the market. Minimal threat from other modes of transport like train and car on domestic routes. The face of aviation is gradually evolving. Jet2, Ryanair, and Easyjetare other dominant airline companies in this category. easyJet also needs to know how much it costs the competitor to serve, and how much capacity the competitor has for, every route in question. Traditionally airline concepts are based on the assumption that airline traffic grows in line with the economy and that cutting prices will only lead to a d… *You can also browse our support articles here >. Refering competitory advantage, Easyjet concentrates on costs therefore achieves overall cost leading. “No Bullshit” approach (Stelios), humorous, attention-catching campaigns (e.g. Our academic experts are ready and waiting to assist with any writing project you may have. Journal of Air Transport Management, 2004, vol. The businessman chose the modest town of Luton in the United Kingdom as the place to start his missionto offer low-fares flights in Europe. Study for free with our range of university lectures! Today, it offers 125 routes from 39 European Airports (see www.easyjet.com for route launch dates), with Luton, Liverpool, Geneva, Amsterdam as base airports [1] and is operating 72 aircrafts (November 2003). If cost trends are less favourable – for example because of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risks of terrorism – the scope for lower yields would be less, and this might reduce future growth trends. The UK market offers little growth opportunity, therefore concentration will be on the continental market, a step forward in this direction is setting up a major new base at Berlin, with flights from 11 European cities [9] , and possibly as well on Eastern Europe. The route of Luton to Glasgow was launched on November 10th before Luton to Edinburgh was launched on Novembe… EasyJet Positioning Low cost carrier with no frills. The “no-frills” market within Europe is immature relative to that of the US. Dependence on only two suppliers could be risky if the supplier faces any operational problems. We're here to answer any questions you have about our services. Below are the Strengths in the SWOT Analysis of EasyJet: 1. Along with this, some restructuring of the industry’s complex and outdated regulatory system will be required. New fleet can be leased out during travel recession seasons. The short-breaks market, an important market for easyJet grows more rapidly than the UK travel market as a whole. easyJey operates independently from the other companies although some cross-marketing agreements do exist. Stelios Haji-Ioannou (Greek) founded the company in 1995. This is done in several major ways: The dependence on spare parts from one manufacturer could pose a risk. Competition is likely to intensify, given the saturated market and the shortage of other options, Increased competition is likely to lead to greater difficulties in demanding incentives from communities, like the very low fees easyJet received at Luton, Companies cut on business travel in times of economic downturn and because of new time-consuming security measures travel substitutes like videoconferencing are introduced.

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