A SWOT and PESTEL Analysis of EasyJet

A bring up and PESTEL Analysis of EasyJet1. Introduction and fibA successful example of a europiuman no frills lineline railway line is easyJet. Stelios Haji-Ioannou (Greek) founded the company in 1995. It is based on the low- woo, no-frills(prenominal) model of the US toter S offhwest. The concept of easyJet is based on the belief that demands for short-haul behavior get off is price elastic. That means, if prices for flights argon be reduced, more than people ordain fly. tradition entirelyy respiratory tract concepts be based on the assumption that nimbusway trading grows in line with the economy and that cutting prices will unless hold out to a decrease in revenues. With the introduction of the no-nonsense concept to the European securities industriousness, after its deregulation in 1992, easyJet has proven this theory wrong and goes from military capability to strength by actually change magnitude the size of the martplace and more recently by taking away passengers from the majors (see www.easyjet.com for passenger figures, financial data and employee statistics). Today, it offers 125 routes from 39 European Airports (see www.easyjet.com for route launch dates), with Luton, Liverpool, Geneva, capital of The Netherlands as base airports1and is operating 72 aircrafts (November 2003).November 1995 easyJet starts flights from Luton to Glasgow and Edinburgh with to leased Boeing 737-300 with a subject matter of 148 seats at a price of 29 genius way. put argon being sold over teleph i reservation dodge merely. In 1996 easyJet takes deli very(prenominal) of its out growing wholly owned aircraft and goes international with first services to Amsterdam from Luton. One year later easyJet launches its website, easyjet.com which will from 1998 forrader tune an integral lot of the blood line concept (and which provides for close to 90% of the bookings today2). In August 2002 easyJet leads its communicate and routes by acquiring Br itish Airways low-priced subsidiary Go. In October 2002 the flight path signs a deal to acquire 120 Airbus, which will facilitate the airlines ongoing growth strategy. Up until now, one of the cornerstones of the easyJets low- toll model has been to operate a single aircraft instance give which so far has been the Boeing 737 series be pretend uniformity means efficiencies in pur begeting, aid and operating costs. yet, easyJets sore deal with Airbus is being viewed by the company as stunning as the additional costs, which incur through the bracing type of aircraft atomic number 18 far outweighed by the financial benefits of this deal.easyJet argues that both Boeing and Airbus aircraft have slackly similar characteristics be situations that a wider aisle on A319 will collide with it quicker to embark and disembark, that it has an extra seat on board (150 vs. 149) and that boilersuit the A319 will humble costs by about10% compared to the certain miscellany of aircra ft, which will contri ande to lower ticket fares.( bet cecal appendage 1 for Stelios Haji-Iannous different easyGroup enterprises).2. The Mission Statement of easyJetTo provide our customers with safe, good measure, point-to-point air services. To heart and soul and to offer a consistent and reliable product and fares appealing to blank and parentage markets on a range of European routes. To achieve this will develop our people and establish lasting relationship (see www.easyjet.com)The basis of an organisations commission instruction should answer the question What avocation is the company in? easyJet is doing this by stating that it provides point-to-point air services to its customers. That clearly underlines that easyJet is not in the people or food business, neither in the service business as such, only when in the mass-transportation business, and as such its model is based on cost efficiency of the mass-transportation business. Moreover, it reflects several decision s about what kind of air service easyJet wants to provide. Evidently, its heighten is on European routes, targeting business and leisure travellers a give care. Furthermore, it aims to offer safe, good value transportation. easyJets mission statement similarly gives information on the How to get in that respect? by place emphasis on its people and suppliers. What is missing from the statement is the importance of the customers point of view, which could be expressed by saying, for instance, we want to be recognised as.. Also, as the mission statement is the bedrock for the marketing plan it should be more quantifiable, as to how frequently market apportion easyJet aims to gain in the future, for example.3. Competitive AnalysisIn bon ton to go bad the airline diligence in detail, it is useful to apply Porters five militant forces.The nemesis of substitutesMinimal threat from former(a) modes of transport like train and car on domestic routes. Usually the time and cost impr ovement of the affordable carriers far outweigh the appendd comfort and flexibility of trains or cars (e.g. on the route Luton/London to Glasgow a train takes round 6 hours and costs about 80 while a easyJet plane takes but one hour and costs around 29).On international routes distances are usually too prominent for car or train to be an alternative to air travel, expect maybe from London to Paris, which dejection be reached by Euro Star.The threat of new entrantsHigh capital requirements negate threat to some extent. 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 enlargement and buy 4 new planes.The UK low-cost market is quite mature in comparison to the succour of Europe and easyJet, as the elephantinegest operator has quite a comfortable position. However, expansion into new European markets might prove more difficult as established cash strong holiday firms like T UI are saddle horse up their own low-cost operations (see information about Hapag Lloyd Express, www.hlx.com) lack of take-off and landing slots makes it difficult for new carriers to find suitable airports.Loss draw is required in order to join the low cost market.The place of suppliersThe price of aviation fuel is directly related to the cost of oil, as an individual company easyJet does not have the queen to alter this. sheet 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. easyJets deal with airbus however shows that favourable agreements can still be reached. The dependence on spare parts from one manufacturer could pose a riskiness.The more easyJet expands the more power it will posses over its suppliersThe power of buyersBuyer power within the airline industry and especially the low-cost market is relatively strong, as customers will much s hop around for the better price, particularly with the dependence that the low cost airline has on meshwork sales. Price discrepancies can be easily found and apply by the consumer, meaning that the operator must make a perpetual check on prices.Need for customer loyalty because of low teddy costsCustomers have the Civil Aviation Authority (CAA) on their side which provides1. protection against the consequence of travel organiser failure for people who buy package holidays, charter flights and discounted scheduled air tickets and2. licenses airlines and ensures compliance with requirements of European and UK legislating relating to financial resources, liability and insurance of airlines.3Rivalry among existing firmsRyan air, BMIbaby, MyTravelLite and Buzz are major competitors of easyJet in the UK. Virgin Express, Hapag Lloyd Express, Germanwings and Air Berlin already are or might become competitors in the light of future expansion plans. Ryanair is the nevertheless one of t hese so far to have succeeded and shown a continuous every year profit (see appendix 2 for financial data).A growing reduce of tour operators (like Thomas Cook and TUI) are selling air only scheduled seats to reduced prices4.British Airways and other traditional carriers out of the UK are competitors as well but on a lower scale as they target different market segments (see appendix 3 for more detail).4. market MixPriceLow price is a key element of the brand.Uses differential pricing off-peak travelling and booking in advance makes a ticket less expensive.Discounts for tickets booked online.Productno-frills, point-to-point air servicesalso car hire on its website (use of the Internet for bundle up products) and links to other easyGroup websites (see appendix 1 for other easyGroup enterprises).Place/ dispersalInternet booking system (over 90% of bookings).Telephone reservation system. advanceHighlights its number one position among Europes low-cost airlines (advertising strap lin e size of it matters, slogan the webs favourite airline)Advocates internal marketing, creative work done in-house.No Bullshit approach (Stelios), humorous, attention-catching campaigns (e.g. the giving away of free tickets on Gos world-class flight and Stelios protesting in a orange boiler suit against an increase of airport fees at Luton in a branch of Barclays bank which owns the airport).5. SWOT Analysis5.1. Internal AnalysisStrengthsImage, differentiation on price and brand.Is financially successful.Is being seen as an innovative and flexible organisation.Has a strong e-business.Is part of the consortium that has been awarded to run UKs air traffic manoeuvre system (NATS).WeaknessesHas no customer retention policyHas little or no screen background outside of Europe.Lack of service, flexibility and business focus (such as snitch flyer programmes e.g.) make the low-cost model unappealing for most business travellers.The two drivers of growth, the focus on price and the focus on doohickey (frequent flights, few connections, more nearby airports e.g.) are reaching their natural limits. distinction from there remains to be difficult.easyJets own success makes it difficult to enkindle and train staff quickly enough.5.2 External AnalysisOpportunitiesExperts predict great potential for future growth in the next years (see appendix 4).The current recession is favourable as people and businesses are more cost-conscious.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.The short-breaks market, an important market for easyJet grows more rapidly than the UK travel market as a intact5.Reduced aircraft pricesThreatsDifficulties to expand as viable new routes from London are scarce.Competition is seeming to intensify, given the saturated market and the shortage of other options6.Increased competition is possible to lead to greater difficulties in demanding incentives from communities, like the very low fees easyJet received at Luton7.Companies cut on business travel in times of economic downturn and because of new time-consuming shelter measures travel substitutes like videoconferencing are introduced8.6. Situational AnalysiseasyJet seems to be positioned very well with experts predicting excellent growth opportunities for the low cost-sector. Given the saturated market and the shortage of other options in the UK, competition is likely to intensify needfully followed by consolidation, an early sign of which is easyJets purchase of GO. 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 cities9, and perchance as well on Eastern Europe. Focus remains on pricing Strategy and expansion of its route network. Promotion require to bow people that it is safe to flyand establish e asyJet as Europes largest low-cost carrier (as easyJet is already doing in its advertisement Size matters)7. PEST Analysis Marketing envisionPEST analysis for easyJet for the next 5 yearsThe sideline 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.Politico-legal factorsThreat of war in the Middle EastThe Air Miles plan is not considered as a taxable perk by the presidency in the way that company cars are taxed which may change to stop easyJet to compete on more equal grounds with the likes of BA.A EU east-enlargement may provide access to viable, new markets.Economic factorsLikelihood of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of high security and insurance costs to reflect the risk of terrorism.As the recession is likely to last for some more time, business travellers will keep an eye on their travel expenses.Globali sation should go along to boost traffic in the long-term.The introduction of the single currency in Europe is likely to bring more business to easyJet as Europe becomes more integrated.Socio-cultural factorsTo win over the French and German ordinarys might cause problems as there appears still to be a general faltering to use credit cards over the phone and Internet10.The public are general quite friendly to the prospect of cheap flights. 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. proficient factorsA key cut back will be the extent to which technical advancements such as the use of the Internet on distribution and cost synergies from industry consolidation can offset upward pressures on prices and costs.easyJet has to keep track of technological developments in the field of e-commerce and aircraft manufacture in order t o gain a competitive advantage.8. Conclusion8.1 Strategic issues facing the airline industryThe face of aviation is gradually evolving. The long-standing problems of the industry in the form of large numbers of network carriers and substantial over- competency in many markets were exacerbated by the events of September 11th (see appendix 5 for a post-Sept. 11th overview). This is likely to pave the way for some acceleration in the process of airline restructuring and consolidation. 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 intravenous feeding major airlines, with the others absorbed or restructured to focus more on regional traffic. This also represents an opportunity for no-frills carriers to increase their market share. Along with this, some restructuring of the industrys complex and outdated regulatory system will be required.In the longer term, trend growth may itself slow gradually as the big air travel markets mature. In addition, falling yields, which have boosted air travel growth in the past, cannot be relied upon to persist, at least at the rate they have for the past decade or so. 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. 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. The full-service airlines, saddled with big networks and strongly unionised workforces, cannot easily embrace the management strategies of the no-frills airlines. Moreover, their scope for defensive mergers is limited by competition poli cy. 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).The no-frills market within Europe is immature relative to that of the US. Thesector accounts for only around 5% of all intra European capacity, though the shareis much higher in the UK domestic market and on services surrounded by the UK andEurope, closer to 20%. Further strong growth is expected over the next 2-3 years asnew operations start up, and new destinations are added to the existing carriersnetworks. However as the UK market becomes saturated, these carriers are likely tofocus their development at continental European hubs. The experience of the US market suggests that deregulation will be followed by industry consolidation. So far there has been limited progress in this direction but many are viewing the current crisis as the catalyst inevitable to completely restructure the E uropean airline industry . In the US the industry has consolidated into seven major carriers, which carry over 80% of passenger traffic of US airlines. Europe is far more break up with the equivalent figure for the seven European majors at only 47%12.8.2 easyJets FutureeasyJet has to consider whether it should respond to new entrants by give niche-segments or by competing aggressively on price, routes and service in an flack to drive the entrant out of the market. To make the strategic decision market research on the size of different combinations of pricing and service is needed. easyJet also needfully to know how much it costs the competitor to serve, and how much capacity the competitor has for, every route in question. Finally, the new entrants competitive objectives are of relevance to anticipate how it would respond to any strategic moves easyJet might make. By obtaining these information residual uncertainty would be limited, and the incumbent airline would be able to bui ld a confident business case around its strategy13. It is advisable that easyJet targets mainly leisure travellers as business often demand frequent flights to a wide range of destinations, seek feel service and frequent flyer programmes, and are willing to pay a premium for these benefits. Also, trying to appeal to widely different customer needs runs counter to the overall trend in service industries, in which characteristic approaches, tailored to different customers, have generally come to dominate14. No real opportunity offers the long-haul business as it is very different, both technically and in customer needs, to short-haul travel. easyJet should continue to focus on price and attempt to connect the dots in its network, which cost less than opening new cities. Thereby, it needs to make sure that a growth in its network and fleet does not lead to higher operating costs. It should also consider putting more emphasis on direct marketing by e.g. introducing a customer retentio n scheme. 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. by selling shares in forest suffice programmes over its website, collecting foreign currency on flights for charity etc., thereby giving its passengers a sense of psychological comfort and well-being15when they postulate to fly with easyJet. Overall, easyJet has to develop a realistic and accurate assessment of the market-niche to be served. A relentless commitment to quality service and cost control is as important as the discipline to establish a growth plan (see www.easyJet.com for easyJet product life cycle and marketing strategy).(Word count 3,144)Appendices supplement 1Under 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 bargain s on the net (easyValue) and a free e-mail service (easy.com). In all his ventures he is using yield management to extract the ideal shore from each customer16and keep costs down. Furthermore, yield management can help to better use price in the marketing mix to best reach the most customers17. However, there are no cross-shareholdings surrounded by easyJet and these other easyGroup companies. easyJey operates independently from the other companies although some cross-marketing agreements do exist. Also, results of the non-airline businesses have been mixed as they have lost 75m in three years18. vermiform appendix 2Profit for RyanairApril September 2002 Year-on-year increase151m (96m) 71%Source Tran, M. (2002)19See http//www.ryanair.com/download/morganjune.pdf for actual data.Appendix 3Compare Airline avocation Data (Europe) Air Transport World http//www.atwonline.com/Pdf/worldairlinereport_2002.pdfAppendix 4The airline market is currently being re-shaped by the expansion of existing low-cost airlines. It has been estimated that they will expand their European market share from 5% to 25% by 2010, establishing themselves on a long-term basis.(Source International Travel password (2003), available on http//www.internettravelnews.com/article/20223 Friday, 28th November 2003)Low-cost airlines are gear wheel up to take large chunks out of their rivals. In a decade, low-cost airlines may be the dominant form of air travel in Europe. . 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.(Source BBC News (2002), available on http//news.bbc.co.uk/1/hi/business/2038192.stm Friday, 28th November 2003)