Individual (low-cost) companies, EasyJet have started by picking

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Individual Report – Strategic Thinking

BSS015-2

 

 

 

 

 

Marcus Filip Chis

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Table of
Contents
1.

Introduction. 3
1.1 The aim of this report 3
1.2 About EasyJet 3
1.3 Market Segmentation. 3
2. Porter’s Five Force Framework on EasyJet Company. 4
2.1 The threat of new entrants is low.. 4
2.2 The power of suppliers is high. 4
2.3 High Power of buyers. 5
2.4 Threat of substitution is low.. 5
2.5 Competitive rivalry. 5
Reference: 6
 

1. Introduction

 

1.1 The aim of this report

 

The aim of this report is: – to analyse the business environment and
industry in which the firm operates

– consider the main competitors and their competitive positions

– to conduct and analysis of internal of the firm

– to identify the current strategy and bring evidence from external and
internal analysis

 

1.2 About EasyJet

 

EasyJet is a British budget airline, is the 2nd largest low-cost
carrier in Europe. The company has been founded by Sir Stelios Haji-Ioannou in
1995 and it’s based at London Luton Airport. The company operates domestic and
international scheduled services on over 820 routes in more than 30 countries.

EasyJet is known as largest airline carrier in the UK by passenger’s number
carried. Just in 2016 they have carried more than 73 million passengers, making
them the second biggest airline carrier by passenger in the Europe after Ryan Air
(Annual Report 2016)  , EasyJet plc is
listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

EasyJet have nearly 11.000 employees throughout Europe but mainly in the UK. Part
of Easy Group are also: easy Hotel, easy Bus, easy Car.

 

1.3 Market Segmentation

 

Like the other small (low-cost) companies, EasyJet have started by
picking up some customers from their competitors like BA (British Airways) or
Air France. They also created a ‘new market’. EasyJet is operating in different
way to Ryan Air (its direct competitor in the market), which is targeting the
leisure travellers for whom the ticket price is so important. EasyJet has the
same type of clientele for whom the ticket price was slightly less important
and also business customers whose companies seek to save on transportation
costs, but care about the travel’s conditions. So, EasyJet is targeting
different kind of customers, business customers and leisure customers.   

 

2. Porter’s Five Force Framework on EasyJet Company

 

1 The threat of new entrants
is low

 

Airline industry is hard to
enter. Not everyone can have access to it because the initial price to invest
in that industry is very high. Buying a plane requires a big amount of capital,
and the equipment linked with airline industry are also so expensive. Also, the
airport taxes, regulations and trainings for staff are so expensive.

However, a big threat would
be if traditional airlines want to enter the low-cost market. They have already
the necessary equipment and knowledge.

 

 

2 The power of suppliers is
high

 

The two main suppliers that
can make up the majority of the production cost of air transport is: Airplane
supplier and oil supplier.

 

            Airplane Supplier

 

There are only two airplane
suppliers for the low-cost companies, Boeing and Airbus. So, bargaining power
of EasyJet is low. EasyJet are not in a position of power that means it is so difficult
for them to change prices. The bargaining power of EasyJet can be higher only
if they decide to buy several planes at the same time, in this case the
suppliers can low the prices.

 

 

            Oil Supplier

 

Because the planes cannot
fly without oil, the petrol suppliers have a higher power. Because of that, the
petrol suppliers are in the position of superiority. The price is usually high
and can be adjusted only by the oil suppliers. Price rise started since the
Iraq war.

 

           

            Airport

 

The last supplier is the
airport with its taxes. When the plane lands it need to be parked somewhere and
the parking is so expensive. But for EasyJet the cost is usually cheaper than
other companies. With the main offices and base to London Luton Airport, an
airport which is cheaper than Gatwick and Heathrow.

 

 

3 High Power of buyers

 

Because EasyJet is not the only low-cost company, the bargaining power
of buyers is high and it’s so easy for customers to compare the fares and
choose another company. There are plenty of low-cost companies and customer can
choose the most suitable one and also, changing companies does not implement any
cost of agent intervention.

 

 

4 Threat of substitution is low

 

 

The threat of substitution is low. The main substitute for planes are
trains, trains are cheaper than planes for short journeys. Moreover, train
stations are located within the city, while airport are often out of the city
centre, and therefore that means the people will need more time and money to go
to the airport. Also, the time to get to the airport is longer and the check-in
procedures requires more time. Besides the location, the trains do not have so
many advantages, because the planes low-cost companies (in this case EasyJet)
have ticket prices that are approximately the same to the train tickets or
sometimes cheaper.

 

Vehicles, such as car or buses, can be another substitute, this is
usually cheaper (especially when several people travel together) but the travel
time is much longer for long journeys and less convenient.

 

 

5 Competitive rivalry

 

EasyJet is the fifth largest intra-European airline in terms of
passengers, and the second most important low-cost company after RyanAir which
is its main competitor.

EasyJet competitors can be direct or indirect.

 

Direct Competitors

 

The low-cost
companies which are offering the same product with the same range of prices. Two
of the main competitors for EasyJet are RyanAir and WizzAir. The competition between
these three is extremely intense and each of them attempts to gain dominance
over others. Besides, EasyJet can differentiate easily from the rest of their
competitors, especially from RyanAir. For instance, EasyJet focuses on two
segments of people, business travellers and people traveling for leisure, while
RyanAir only focuses on the leisure segment. Then, EasyJet does use some of the
main airports, such as Paris CDCG or Madrid Airport, while RyanAir uses only
minor airports.

Their indirect
competitors are the traditional old and big airlines, such as AirFrance and
BirtishAirways. They are indirect competitors because they target different
market segments such as people interested in buying a cheap flight will be less
interested to buy tickets with traditional companies.

 

Substitutes are
also an indirect competitor but at the smaller level, as specified above,
trains and vehicles do present disadvantages.

 

In a nutshell one
can say that rivalry is especially high for the direct competitors.

 

 

Reference:

 

1.   
FTSE
100 Index:  http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/summary/summary-indices-constituents.html?index=UKX&page=2
Accessed 03.01.2018

2.   
London
stock Exchange, EasyJet plc: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B7KR2P84GBGBXSET1.html?lang=en
Accessed 03.01.2018

3.    EasyGroup:  
Koenigsberg, O., Muller, E. and Vilcassim, N.J., 2004. easyjet airlines:
Small, lean, and with prices that increase over time. Londin Business School, London.

4.    Pels, E. and Rietveld, P., 2004. Airline pricing behaviour in the
London–Paris market. Journal of Air Transport Management, 10(4),
pp.277-281.

5.     

Categories: Industry

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