easyJet Starter Questions 1.What are the main resources that easyJet has used to achieve success so far? To what extent are they appropriate for the future success of the company? 2.Is the budget airline segment an attractive market to compete in? 3.Recommend a short term strategy for easyJet to strengthen its position in the airline industry.
easyJets main resources àCulture àAssets àCapabilities
easyJets Assets: àName and reputation/brand awareness àCustomer relationships (and database) àStaff (young, motivated, well paid, happy, experienced pilots) àLocation àNew planes, only 737 àProfits àFlexibility
easyJets capabilities: àMarket sensing/marketing àYield management àRelationship management (with suppliers as well as customers) àOperational - unique value chain: use of internet, rapid turnaround time, very high aircraft utilisation, punctuality
Resources and SCA àCulture: àVery difficult to rapidly create such a dynamic, entrepreneurial and innovative culture, particularly for long established competitors used to doing business in a different way (BA) àBut watch out for companies such as Ryanair àIs Stelios style appropriate for the future?
Resources and SCA àAssets: àName and reputation well enough established? àCustomer relationships: need to maintain them àStaff easy to poach àLocation: easy to copy àPlanes: easy to replicate àProfits and flexibility are more difficult to acquire quickly
Resources and SCA àCapabilities: àMarket sensing – a good MR firm? àYield management (can be bought in) àRelationship management: can be learned àOperations: an innovative value delivery (value chain) could create a real competitive advantage àUse of internet: need to stay ahead of competitors
Resources and SCA àConclusions: àMany resources are transparent and can be copied by competitors àKey competitive advantages come from name and reputation, relationships already built and unique value chain
Is the budget airline segment an attractive place to compete? European low cost market expected to grow by as much as 300% by Threat of entry (currently medium): the market is bigger than most people think, although availability of landing slots is a problem. Most low-cost carriers are currently not competing on the same routes. Entry of new players especially from France, Germany and Italy is likely. 2.Power of suppliers: suppliers have relatively low power, but if many new players enter the market, cost at secondary airport may rise
Is the budget airline segment an attractive place to compete? 3.Power of buyers: buyers have increasing power 4.Threat of substitutes: while low for many routes it is nonetheless a factor 5.Competitive rivalry: has the potential to be intense Overall, the segment is both unattractive and attractive: it is more attractive for an established player like easyJet. Overall, the segment is both unattractive and attractive: it is more attractive for an established player like easyJet.
A strategy for easyJet (to meet the stated main objective): àStrategic Focus: àContinue to expand the market àWin share away from traditional airlines àStrategic alliances to enhance service
A strategy for easyJet: àCompetitive positioning: àTarget market: those who are looking for value short haul flights, both tourists and business people àCompetitor targets: main carriers, trains, other budget airlines although not on the same routes àCompetitive advantage: low cost and reliability achieved via a unique value chain
Marketing Mix: àProduct: àRoutes (saturate current ones, new ones) àReliability, punctuality àAugmented product (strategic alliances) àPrice: àbudget, continue with yield management àPromotion: àPR àAdvertising (including on planes) àPermission marketing: etc…
Marketing mix: àPlace àInternet for tickets àNew local airports àPeople: àCritical: àTrain sub-contractors, bring some services in- house àTrain staff: resolve absenteeism issue àService: àCould be a differentiator: reliability will be important
Key issues: àHow to build a sustainable competitive advantage in an industry characterised by a high fixed-cost structure and increasing competition àIf direct head-to-head competition becomes a reality then the budget airline with the lowest cost structure may be the only survivor. In contrast to a differentiation strategy where there may be several winners, a low cost strategy is more likely to lead to a single winner. àThe issue of growth and having the right people at each stage
easyJet mission statement: To provide our customers with safe, good value, point to point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this we will develop our people and establish lasting relationships with our suppliers. To provide our customers with safe, good value, point to point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this we will develop our people and establish lasting relationships with our suppliers.