Alim Proposed A Strategic Plan For EasyJet According To Its Strengths, Weaknesses and The Opportunities and Threats in The Airline Market

Longitudinal Strategic Development Study
2011
Saphie Alim, A4032674

Strategic Planning
11
Saphie Alim, A4032674 Page 0
2011
Table of contents
Executive summary ................................................................................................................................. 3 1 2 Recent strategic development history ............................................................................................ 4 Current strategic situation .............................................................................................................. 9 2.1 External Audit .......................................................................................................................... 9 Macroenvironment ......................................................................................................... 9 The Market .................................................................................................................... 11 Competition ................................................................................................................... 12
2.1.1 2.1.2 2.1.3 2.2
Internal Audit......................................................................................................................... 16 Resource Based View .................................................................................................... 16 Operating Results .......................................................................................................... 17 Value Chain Analysis ...................................................................................................... 17 Marketing mix analysis .................................................................................................. 22
2.2.1 2.2.2 2.2.3 2.2.4 2.3
SWOT Analysis ....................................................................................................................... 23 Internal analysis: strengths and weaknesses ................................................................ 23 External analysis : opportunities and threats ................................................................ 25
2.3.1 2.3.2 2.4 3
Current situation summary ................................................................................................... 26
Strategic direction for the future .................................................................................................. 29 3.1 3.2 Strategic options and variables available .............................................................................. 29 Description and evaluation of selected strategic options ..................................................... 31 Strategic option 1: Expanding into new segments ........................................................ 31 Strategic option 2: Modernisation of brand image ...................................................... 32 Strategic option 3: IT Development............................................................................... 33 Strategic option 4: Customer service improvement ..................................................... 34 Strategic option 5: Offering complementary services................................................... 36
3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3
Strategic thrust and objectives.............................................................................................. 36 Strategic objectives ....................................................................................................... 37 Critical issues ................................................................................................................. 38 Business mission review and descriptive strategic statement ...................................... 38 Core strategy ................................................................................................................. 39
3.3.1 3.3.2 3.3.3 3.3.4
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3.3.5 3.4 3.5 3.6
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Marketing mix decisions ................................................................................................ 42
Budget ................................................................................................................................... 43 Organisation and Implementation ........................................................................................ 44 Control ................................................................................................................................... 44
Conclusion ............................................................................................................................................. 45 Appendix................................................................................................................................................ 45 Appendix 1: Airline market growth ................................................................................................... 45 Appendix 2: Forecast and financial details ........................................................................................ 46 4 2010 Half Year Results ................................................................................................................... 46 Appendix 3: Targeted market segments ........................................................................................... 47 References ............................................................................................................................................. 49
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Longitudinal Strategic Development Study Executive summary
2011
EasyJet is the second no-frills airline in Europe. It uses low-cost fares as an incentive to appeal to price-conscious passengers and business consumers. Its strategy is based on low-cost model (cost leadership): the model consists of eliminating unnecessary costs and non-value added services, offering minimal frills and focusing essentially on pricing as well as turning flights around 25 minutes. The rationale behind this strategy is to provide a quick service and charge travellers for every extra, including snacks on board, handbags, food, check-in and priority boarding. The expected outcome is to keep operating costs as low as possible. However, given the increasing competition and the saturated aviation market, EasyJet can no longer rely solely on cost cutting. In fact, cost efficiency is not a sustainable strategy. In todays fast-paced market, the low-cost airline needs to implement new strategic choices to stay ahead of the competition. According to Kim and Mauborgne (2005), a good strategic choice must help achieve competitive advantage through being different; Hooley et al. (2007) supports this point of view when they argue that a good strategic choice must also help deliver a unique value added to the customer, coupled with a clear and viable view of how to position yourself uniquely in your industry. A successful strategy requires a strong correlation between companys activities, vision, values and its customers needs. In fact, there should be high consistency between its corporate strategy and the market demand (Chernev and Kotler, 2008). Key strengths include demand-based and dynamic pricing, cost efficiency, few frills and fast turnaround times aircraft. Weaknesses are lack of customer retention policy and focus on customers value, low level of customer service and the focus on cost cutting essentially. Furthermore, EasyJet has no specific unique selling proposition and has to deal with it biggest competitors strengths: Ryanair offers the lowest prices in low-cost airlines market. This marketing plan highlights five opportunities: higher demand for low fares flights, recession, increase in the value of corporate social responsibility in the marketplace, advanced new technologies development and withdrawal of full services from regional market to international market. Five threats are also addressed: fluctuation in fuel prices, fast-paced and competitive market, natural disasters, low-cost airlines image and increase in carbon dioxide gases in the air due to aircrafts consumption. Thus, our strategic choices will firstly concentrate on building long-term relationship with customers and improving customer service throughout product development. Secondly, we will focus on expanding into new segments as well as environmental issues and promises throughout product development. This report will focus on where EasyJet is now, where EasyJet is going and how EasyJet will managed to get there on the level of both its corporate strategy and its strategic choices. In order to suggest clear recommendations to EasyJet, we have divided this report into three major sections. Firstly, we will describe EasyJets recent past, its genesis and the major events that occurred within its business since its inception in 1995. Furthermore, its current situation will be discussed, that is, the operational policies that EasyJet adopted to support its strategy of becoming a cost leader, and our third part will concentrate on the most appropriate strategies that need to be implemented by EasyJet on the basis of foregoing internal and external analysis.
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1 Recent strategic development history

EasyJet is one of the EasyGroup subsidiaries that was founded in 1995 by Stelios Haji-Loannou who is the owner the whole Group. EasyJet is a European low-cost airline which uses low fares as an incentive to appeal to price-conscious customers segments namely leisure consumers, those who travel for family reasons and entrepreneurs of small firms. It totally ignored the large market of business passengers. The companys main base is Luton airport that is around 30 minutes by road from North London and 28 minutes away from Liverpool Street railway station. EasyJet, which is portrayed as the most successful subsidiary of EasyGroup, essentially operates within 4 routes in the UK (from Luton to Glasgow, Belfast, Edinburgh and Liverpool) when it started operations in november 1995. The firm began with 2 leased aircrafts (boeing 737-200) and 16 reservation agents. Southwest airlines, the world market leader in low-cost carriers, has been a major inspiration for EasyJet business strategy that cost leadership based on low-cost model; this means no in-flight frills, point-to-point short-haul travel, fast turnaround time, significant aircraft utilisation, direct sales, price-conscious passengers and extensive sub-contracting. From 1995 to 1997, EasyJet strategic priorities were safety, punctuality and low costs so as to maximise margins. Firstly, it promised to ensure safety through highly secure travel to its passengers based on an efficient flight management system and data. Secondly, it ensured reliability and consistency through an impressive record of ontime departure and arrival. EasyJets 1997 annual report revealed that roughly 95% its flights arrived at destination within 20 minutes of scheduled time, a record only equally by British Airways (BA). Thirdly, EasyJet aimed to offer the lowest fares in the low-cost airlines market. Thus, it was using one type of aircraft in order to lower maintenance costs. EasyJet was also offering competitive prices with a no-frills service so as to reduce customer service as minimum as possible. For instance, there were no free drinks, meals or assigned seats for passengers like in the full-fare airlines. There were also no compensation or guarantee transfers for delays; similarly, there were no compensation for loss or damage of baggage. Unlike traditional airlines such as British Airways that concentrated on hub-and-spoke traffic, EasyJet focused on point-to-point flights. Additionally, EasyJet used secondary airports to eliminate unnecessary costs. EasyJet used Luton airport as major hub since it is close to central London and charged lower airport fees than Londons main airports (Heathrow and Gatwick). Another point worth mentioning here is EasyJets core capabilities such as flexibility, speed and efficiency which appealed to customers. Most of its operations were outsourced; it maximised paperless operations: telephone booking was essentially used for reservation as well as ticketless check-in to minimise waste. Subcontractors were responsible for check-ins and helpdesk. Not only did this help reduce distribution costs but also improved efficiency. Finally, EasyJet offered no business class seats in order to maximise its aircrafts capacity, this emphasises the efficient use of its airplanes.
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In 1998, the demand was increasing and EasyJet opened a second hub in Liverpool as Luton airport was no longer large enough to satisfy the growing demand. This year marked the first turning point in EasyJets growth; the company was widely portrayed as the model low-cost European airline. Its number of passengers increased by 98.4 % from 30,000 in 1995 to 1,880,000 in 1998 as a result of EasyJet efficiency. EasyJet doubled its routes and henceforth operated within 12 routes; it expanded its areas of activity from 2 to 5 countries (The UK, France, Spain, Netherlands and Switzerland). Additionally, the EasyJet staff significantly increased and consisted of 133 reservation agents, 45 managers and administrators as well as 90 pilots and cabin crew. It also owned a fleet of 6 Boeing 737-300s which enabled its business to grow substantially increasing its flights frequency (20-minute turnaround times instead of 27 minutes). EasJet can therefore achieve extra rotations on the highfrequency routes, thereby considerably improving both labour and aircrafts productivity. Furthermore, EasyJet flew its Boeing 737s for 11 hours a day, 4 hours longer than British Airways. EasyJets pilots flew 900 hours a year that represents 50% more than BA pilots. Finally, the low-cost airline painted its aircrafts in bright orange creating a strong corporate identity based on orange culture so as to raise its brand awareness among potential customers. Internally, this visual identity enabled the company to strengthen its corporate and organisational culture developing a kind of EasyLand for its staff members with a very flat management structure which eliminates wasteful layers of management. All these create a pleased working environment for employees. This helped EasyJet increase its popularity both in the UK and in Europe as a whole.
Therefore, it became a major competitor to flag carriers as well as existing no-frills airlines like Debonair and Virgin Express and subsequently, EasyJet was bound to be a significant threat for Ryanair, the leader of low-cost carriers in Europe. Despite its inferior number of aircrafts as Saphie Alim, A4032674 Page 5
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compared to its biggest rival Ryanair, EasyJet remained competitive due to its attractive prices and its capacity (148 seats).
Comparison between the main no frills airlines in Europe
Source:http://ftp.utalca.cl/profesores/pfuentes/CC2/Material_Dinamica/Tema3/S5/Morecroft_Cp_6 /easyJet%20Case/easyJet%20article%20by%20Don%20Sull.pdf
The flagship of the year 1998 was in April when EasyJet developed its website making booking available over the internet. This was much cheaper and faster than telephone booking for both EasyJet and its customers. 1998 also marked the internet and digital marketing booming. Thus, EasyJet started offering discounts to customers online as customers seemed to be more interested ereservation than telephone booking. After its launch, the website accounted for 38% of ticket sales with 1,000 sales in the first month and 800,000 bookings by August 1999. As easyJet's brand awareness grew, so have passenger numbers: from a mere 1,880,000 in 1998 to a respectable Saphie Alim, A4032674 Page 6
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5,996,000 by the end of September 2000. This is an increase of 68%. This fast-paced growth of demand led EasyJet to increase its online discount to 2.50 for a single trip: it was the highest level of permanent discount offered by an airline carrier in the airline market. During this period, profits have grown to 22.1 million and revenues reached 263.7 million. By September 2000, online tickets sales reached 85% of total sales and EasyJet became the pioneer that broke the mould as its website was considered as the most attractive site and the model of the airline industry. In addition, EasyJet was at the forefront of the use of the internet for virtual ticketing achieving most of its sales on its website. Not only did this online sales strategy help EasyJet reduce costs, but it also enhanced the service efficiency as the check-in could be quicker. The year 2000 also marked a turning point in EasyJet strategic development history. After its nearest rival Ryanair which took over Buzz, EasyJet bought one of its major competitors, Go, with whom it had been engaged in a fierce price war on certain routes. The strategic rationale behind this acquisition of Go was not only to eliminate a major rival, but also to purchase market share in a fast-paced and challenging marketplace where there are economies of scale. Accordingly, EasyJets market share increased by 60% in 2002 making it the largest low-cost carrier in Europe. By 2004, over 93% of all sales were online making EasyJet one of the biggest internet retailers worlwide. EasyJets annual customers grew up by 75% from 5,996,000 in 2000 to 24,300,000 in 2004. As a result, the capacity use significantly increased. The capacity use refers to the rate of bought revenue passenger kilometres (RPK) to available seat kilometres (ASK). The airline industrys statistics demonstrated in 2004 80.9% for Ryanair, 84.5% for EasyJet, but only 74% for Lufthansa and 73% for British Airways. Its focused strategy on IT helped the company stay ahead of the competition. Another point worth noting here is the significant impact of IT model on EasyJet performance and its strategy as a whole. 98% of EasyJet bookings are made on the internet. Therefore, the firm has reinforced its IT model strategy throughout partnerships with prestigious companies like Microsoft, Savvis and Sopra Group. For instance, EasyJet collaborates with Sopra Group since 2004; they created a new low-cost IT development model which sets EasyJet apart from its competitors the model is innovative and unique in its approach to delivery. The rationale behind this innovation is to implement greater integrated teamworking. Sopra Group helps EasyJet ensure development and maintenance of its main database which consists of customer information management, flight references as well as bookings. Sopra Group also helps the company enhance its maintenance of the check-in and departure systems. In addition, it strengthens its e-booking system which is vital to its efficient running as e-reservation is an integral part of EasyJets operating model. E-reservation system determines the performance of EasyJet because if this system failed, staff members would have to use manual processes which may require employees to spend more time to achieve tasks. This could hinder companys growth leading to considerable flight delays and customer dissatisfaction and inconvenience.
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EasyJets past strategies have significantly yet positively influenced its current situation. Its growing success in Europe has enabled EasyJet to expand its activity in North Africa (Morocco, Tunisia, Egypt) from 2006 to 2011. He has also expanded its customer base operating a modern and expanding fleet intensively on competitive routes to address the mass market as a whole. Business travelers have become its core target audience. EasyJets business model based on IT development, no frills, commitment to safety, a dynamic reverse pricing system, ticketless and paperless operations have rapidly enhanced its activity highlighting its cost cutting and efficiency. The way the internet has been incorporated into the EasyJet business model has totally boosted the companys operation giving it a sustainable competitive edge as well as a strong reputation. Furthermore, the collaboration between EasyJet and Sopra has created a substantial value to EasyJets IT business model. In fact, Sopra has enhanced EasyJets software delivery process in terms of speed, agility and cost-effectiveness. This externalisation of the low-cost IT model maintenance is profitable for the company. Sopra is now in charge of EasyJets e-mail and paperless management applications. This has enabled EasyJet to lower considerably the cost of issuing, processing and distributing. EasyJet can therefore manage the supply and demand of business services more effectively whilst remaining competitive. This enables the low-cost airline to increase both commitment and involvement of its team and to focus on its core business. Today, exploiting specialist skills and partnering with third parties in order to extend the core-in house team is a key part of this fast-paced growing EasyJets strategy in the highly challenging aviation market. Moreover, EasyJet has consistently shaped its operation to reach potential customers; the company has harnessed passengers needs and has managed to anticipate customers demand and preferences. Since its inception in 1995, EasyJet embraced the paperless office concept that simplified its operations. As an illustration, its management and administration are based on IT systems which can be accessed through secure servers from anywhere in the world ensuring more effective dissemination of information. This also enables greater flexibility and efficiency in EasyJets running. It has also based its ticket sales online, offering discounts exclusively on the website to attract customers and to encourage impulse purchase. Not only are the offered prices lower than those of the competitors, but fares are also quoted one way. This suggests that the best price for the most convenient flight may be obtained both ways, optimising the round-trip cost for the traveler. To increase its reputation, EasyJet is progressively becoming a green airline. It is engaged in Saphie Alim, A4032674 Page 8
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environmental issues; it also aims to reduce its carbon emission through the use of efficient jumbo jets as well as carbon offsetting. Today, EasyJet is widely recognised as the second low-cost carrier in Europe after Ryanair with 50 million passengers per year. In May 2011, it bought its 200th aircraft; it currently operates on over 550 routes across 30 countries. Whilst Ryanair operates on leisure routes to uncongested and secondary airports where the level of competition is very low, EasyJet tends to focus on primary airports offering higher frequency service so as to compete with traditional airlines like British Airways. The question as which of the two low-cost carriers is the market leader has become a constant controversial debate in Europe.
2 Current strategic situation

2.1 External Audit
This section points out current market trends that are worth looking into since they are likely to have an impact on our strategic choices in the future. They should therefore be accorded great interest and taken into consideration for a successful definition of our objectives and critical implementation of our new strategies (Brassington, Pettitt, 2006).
2.1.1
Macroenvironment
Politico-legal factors As we plan to turn the world Orange, we must be aware of political and legal factors. For instance, the growing competition in the market leads to greater difficulties to obtain incentives from local communities. Terrorism can also cause psychological shock and fear of flying. A prime example of this is anti-police riots which took place in Tottenham (North London) on 6th August 2011. The EU East-enlargement should also be taken into consideration as it may create new opportunities for emerging countries and develop subsequently business and traffic in Europe as a whole. In fact, the sense of insecurity has increased due the threat of terrorism in the past. EasyJet should therefore implement effective security measures to reinforce customer confidence and maintain competitive edge. Another point worth noting here is that Open Skies Agreements have increased the opportunity for EasyJet and its competitors to transport aircrafts from the EU and US.
Economic factors Economic changes may affect our operating results (costs, forecast sales and profit). For instance, fluctuation in fuel prices which involves a rise in oil prices will increase costs production and Saphie Alim, A4032674 Page 9
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consumers may subsequently pay more. There is a strong likelihood that fuel costs will increase each year worldwide. These fluctuations coupled with exchange rates will affect EasyJets cost base. Moreover, the cartel is likely to have a negative impact on oil prices due to instability in the Middle East where we have a significant presence. Another point worth mentioning here is demand elasticity which increase sales as travelling is portrayed as a luxurious good and the higher the demand, the better our expansion. Recession is also a key aspect since it has an impact on consumers buying behaviour. Many customers are eager to save money during this period. Both people and businesses are cost-conscious. Therefore, there is high price sensitivity in the marketplace and this may be an opportunity for EasyJet to attract price-sensitive travellers by offering low fares. Furthermore, the fear of recession is likely to affect business travellers purchase decision as they may become a little suspicious about their travel expenses. This may slightly affect EasyJets sales.
Socio-cultural factors People are travelling more than ever due to globalisation effects. This may influence our sales. Additionally, depending on where they come from, people appear to be more demanding regarding quality and convenience. Similarly, they tend to become more suspicious about cheap flights prospection on magazines or the internet. This is owing to the final price (including taxes) which is generally much higher than the original price prospected to draw express attention of priceconscious travellers. Our communications must consequently be consistent. Furthermore, the National Statistics Online (2010) demonstrated that the UK has an aging population. Therefore, there is a potential opportunity for growth as older generation may have more time to spend on leisure activities such as travelling. Moreover, the next Olympic Games will be held in London in 2012. This is an international and attractive event which may generate a lot of profit for EasyJet as the Olympics are well-noted worldwide.
Technological and competitive factors Advanced technologies are an opportunity for us as they could help us develop our online marketing (booking, check-in). Paradoxically, the information becomes uncontrollable; competitors are offering similar services and the prices discrepancy on the Internet become easier. That means EasyJet must keep an eye on its competitors prices, EasyJets managers should focus on an outside-in perspective. In a globalised and challenging marketplace, we must always remain proactive by being constantly on the lookout for latest technologies (e-commerce, aircraft manufacture). The expected outcome is to gain a competitive advantage and to capitalise our technical know-how. Another negative consequence of advanced technologies is that they can lead to reduction in the amount of business travel as companies are minimising costs by using alternative means of communication such as teleconferencing.
Ecological factors The value of Corporate Social Responsibility (CSR) has increased. In todays world, companies are likely to be widely recognised when they invest in environmental issues and respect the highest Saphie Alim, A4032674 Page 10
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standards of social and ethical behaviour. Therefore, adopting a green airline vision may be in full compliance with the market tendency since environmental ethic is on the verge to become the catchword worldwide. Evidence has shown that environmental damage and air pollution have become serious issues leading to health problems and affecting work efficiency of individuals. This is a consequence of substantial fuel consumption and harmful gases emission. EasyJet thus have to reduce our carbon emission. It is clear that companies that encourage environments protection are perceived as bringing prosperity, growth and sustainability.
2.1.2
The Market
In Europe, the airline market includes three main types of carriers: full-service or network carriers (Britisk airways), low-cost airlines (EasyJet) and charter carriers or regional airlines (Lot Polish Airlines). There are three major segments of customers in this sector: price-conscious business passengers, non-business passengers and quality-conscious business passengers. Passenger growth in the European short-haul market is expected to continue at 4% per annum, mostly in point to point business and leisure travel. Regarding routes, there are long routes and short routes. The European market could be represented like this:
The European market
Source:http://ftp.utalca.cl/profesores/pfuentes/CC2/Material_Dinamica/Tema3/S5/Morecroft_Cp_6 /easyJet%20Case/easyJet%20article%20by%20Don%20Sull.pdf
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No-frill airlines market is expanding progressively since 2000 (see appendix 1 p. 46). This market is led by Ryanair, EasyJet and Flybe that are using aggressive advertising techniques and pricing to penetrate the market and appeal to price-conscious business travellers. The worldwide market leader of low-cost airlines is Southwest Airlines in the United States. There is a clear trend towards growing economic volatility that creates greater uncertainty about future growth of no-frills carriers. Nonetheless, the low-cost airlines market is thriving (see appendix 1 p. 46). Although that economic instability may have adverse effects on low-cost airlines growth, their expansion has significantly affected yet positively the whole airline market. It has been estimated that their European market share is likely to rise slightly from 25 % to 35 % by 2020 establishing themselves on a long-term basis (Kentleton, 2010). Not only is low-cost carrier market portrayed as having a promising future, but it is also claimed that the sector is bound to be the dominant form of travel in Europe in the next decade. Price-conscious passengers are increasingly attracted by low-cost airlines tickets despite being aware of the price variation according to charges and taxes. Nevertheless, the sector is facing challenges in developing new routes and sustaining its growth.
2.1.3
Competition
Porters five forces are required to analyse competition properly.
The threat of substitutes
Rail services
New high-speed trains in Europe coupled with high-speed rail linkages between major European cities (Paris, Brussels, Lille, London) are gradually being developed. This also includes the channel tunnel linking the UK with France. These rail services are increasingly close to replace air travel owing to the low price advantage and the relatively equal route duration that they offer. Nonetheless, EasyJet manages to challenge rail services thanks to its cost advantage; it is most often twice cheaper than Eurostar. To face this growing competition, EasyJet constantly offers online promotions with ridiculous prices so as to capture customers attention. On the other hand, railway services namely Eurostar (London-Paris) may be a threat as they offer some advantages that EasyJet cannot afford. Eurostar is said to be more comfortable and flexible than EasyJet, especially regarding baggage number, size and weight. Its seats are also more comfortable than the EasyJet ones. Furthermore, Eurostar offers two classes (first and second class for passengers) unlike EasyJet which proposes one single class. Accordingly, business passengers may sometimes choose Eurostar for this little prestige rather than EasyJet. Another advantage that railways services offer is that railway stations can be easily accessed from airports as they are well localised. This makes railways services more convenient for customers as they do not have to travel Saphie Alim, A4032674 Page 12
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long distances to get to city centres. The only drawback of railway services is that they are more time consuming.
Vehicles
Travelling by car or bus can be cheaper; this can also allow customers more flexibility and control over their journey. However, it is clear that it would be more time consuming. For instance, travelling by bus with Eurolines from London to Paris takes 18 hours whereas with EasyJet it would only be 1h30 min. In addition, distances are usually too huge on international routes; it is therefore difficult for vehicles to be an alternative mode of transport.
The threat of new entrants
The low-cost carrier market in the UK appears to be close to saturation. Nowadays, around 200 carriers compete in the European short-haul aviation market and the four leaders including EasyJet, represents roughly 60% of seats flown with the rest of the market. Low-cost business model is easy to copy, that encourages new entrants expansion.
Industry barrier
The airline industry requires expensive equipment and facilities. An airline company needs to have high capital or good credit rating to buy aircrafts. Therefore, the initial cost of investment is high and subsequently, the cost of entry as well. In addition, the potential entrant should have sufficient working capital to cover its liabilities (aircrafts costs, airports taxes, cost of advertising campaigns).
Low-fare barrier
The current low-fare operators offer considerable first-mover advantages such as access to capital, market knowledge and operational experience. Notwithstanding these advantages, barriers remain high in the aviation market as the competition is constantly growing and it is still difficult for organisations to manage their finances. Interestingly, of the 56 airline companies launched in 1995, 17 went bankrupt in their first year (European Management Journal, 1999). This emphasises how difficult it is for airlines to survive economically.
Bargaining power of suppliers (moderate)
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Boeing and Airbus are the major airplanes manufacturers. Easyjet mainly deals with Airbus. However, relying on one manufacturer only (Airbus) may be a risk if the supplier fails to deliver on time for example or other suppliers offer lower prices.
Aircrafts suppliers
Since its inception in 1995, EasyJet has increased its airplanes from only two to 200 aircrafts today. This includes 129 aircrafts of Airbus A319, 33 aircrafts of Boeing 737-700 and 38 of Boeing 737-300. Since 2003, evidence has shown that the airline industry does not thrive. Therefore, this deal is highly profitable for the suppliers. Given the importance of this business for suppliers, the bargaining power of suppliers can be considered as lower than EasyJets one which deals with two suppliers and can therefore benefit from favourable prices.
Petrol suppliers
Petrol is a core material in the airline industry. Its price has significantly been inflated due to the Iraq war. Nowadays, cost of petrol has become higher than ever. However, EasyJets annual report 2010 shows that the low-cost airline has not really been affected by this inflationary pressure. The bargaining power of petrol suppliers can therefore be deemed moderate.
Airport
EasyJets main airport is Luton Airport, its base. The airline parking is still expensive but EasyJet ensures it gets preferential tariffs so as to remain consistent with its business model that values cost efficiency. The bargaining power of supplier is moderate here.
Bargaining power of buyers No matter how expensive are tickets, consumers are buying as EasyJets targets are essentially price conscious consumers who are always seeking for the lowest prices. Therefore, they are attracted by EasyJet tickets, especially on the internet where prices are much cheaper.
International customer base
Today, EasyJets website is available in 18 different languages. This makes it accessible for all customers worldwide. This extensive geographic coverage coupled with excellent customer assistance online have helped EasyJet retain its customers regardless their location.
Low fares
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With EasyJet, the earlier you book, the lesser you pay. This philosophy coupled with high demand elasticity in the aviation market make EasyJet constantly appealing to customers. Furthermore, the low-cost airline is increasingly considered as much more value for money than its rival Ryanair; its customer service is widely portrayed as better than Ryanairs one.
Price awareness
Nowadays, with advanced new technologies, it has become easier for customers to compare prices. Since there is a slight difference in prices between low-cost airlines, customers can easily switch from one airline to another influenced by price differences. This can be both detrimental to EasyJet and beneficial for the firm.
Rivalry among existing firms (moderate)
Position in the market
Globally, the leader of low-cost carrier airlines is Southwest Airlines in the USA. But the main low-cost carrier airlines that are operating from and to the UK are: EasyJet Flybe Ryanair Bmibaby
EasyJet is the second low-cost airline in Europe. Since 1998, Ryanair is the most profitable low-cost carrier airline in Europe. He keeps its leadership thanks to its competitive prices, offering the lowest prices in the market1. An essential part of its success is also due to its strategy to reduce costs. A prime example of this is the choice of Ryanair to fly mainly to far secondary airports to lower costs despite passengers complaints and unlike its biggest rival EasyJet. In fact, EasyJets direct and closest competitor is Ryanair as they are both using the same business model Furthermore, an increasing number of intermediaries (like Thomas Cook, Flight centre) propose chartered flights and various packages (hotel+booking+safari tours) at competitive prices.
Competition between EasyJet and traditional airlines
British Airways and other international carriers out of the UK (Air France, SM Brussels) are rivals as well but on a lower scale as they target different market segments such as wealthy individuals and high income earners. When booked earlier, passengers can get much cheaper tickets with those companies that offer a higher quality of service compare to low-cost airlines.
1
Rynair offers promotional prices periodically. It sells seats on selected and attractive destinations for 1 only to increase its market share and stay ahead of the competition.
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2.2 Internal Audit
2.2.1 Resource Based View
2011
Resources
Threshold resources
Competencies
Threshold competencies
Tangible
-Fast-turnaround times (flights every 20 -EasyJet consists of 200 aircrafts and operates on minutes) over 550 routes across 30 countries. -Cost efficiency (no frills, minimal service, cutting costs) Intangible -Partnerships with well-known IT companies such as Sopra Group, Microsoft. -Reliable suppliers (Airbus, Boeing) - Deals with Geneva airport allows EasyJet to exploit an EU open skies agreement with Switzerland Unique resources -Paperless operations to minimise wastage and costs -Safety is at the top of EasyJets priorities -On time performance Core competencies -First UK airline to develop such an attractive website, first airline company to provide only online promotions -Pioneer in online booking
Tangible
-Use of primary airports unlike its rival Ryanair which exclusively utilises secondary airports.
Intangible
-Strong corporate orange culture -Widely recognised especially in the UK -Increasing brand awareness -International customer database
-EasyJet is widely considered as the best example of a modern airline. This is due to its successful IT business model (online sales and promotions).
Despite the concern of EasyJet on safety, it is widely believed that one of the fears about low cost airlines is that they are most likely to compromise on safety for the sake of cutting costs. The British Airline Pilots Association maintained that low cost airlines pilots can be tempted to cut corners to achieve flight timetables. This perception of low-cost airline is a major issue of image for EasyJet which should cope with so as to maintain its strong reputation. If EasyJet fails to ensure customers about safety, this may dramatically affect its brand name reputation.
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2.2.2 Operating Results
2011
Despite an increase in operating costs (4.3%)2 in 2010, EasyJet has achieved a remarkable performance compare to 2009. It has reinforced its position in short-haul travel aviation increasing its market share from 6.5% to 7.6%. Additionally, its total revenue per seat grew by 5.1% capacity measured in seat flown. EasyJet also managed to lower its underlying pre-tax loss increasing its cashflow by 283 million to 1,358 million (see appendix 2 p. 46).
2.2.3
Value Chain Analysis
Porter (1985) described the value chain as a strategic tool that explains how products are transformed so as to create and develop more value than the sum of values created by all the single activities. The rationale behind this chain is to optimise added value and to classify activities as well as the value they create in different categories. We can apply this model to EasyJets activities.
Firm infrastruture
Human Resources Management
Second airline in Europe, EasyJet has a strong brand awareness and reputation especially in Europe. Its reputation is increasingly growing as it is expanding its business into emerging market (Morocco, Egypt). This helps increase its brand name reputation. Its business model is based on low-cost model which values cost efficiency. EasyJets customer service is criticised by customers who maintain that customer assistance can still be improved. Customers perception (low prices perceived as low quality). EasyJet mainly recruits young people. They must be casually dressed to promote EasyJets corporate culture. Job application online, EasyJet encourages diversity, it also consider its workforce as a key driver behind its
EasyJet [online]: http://2010annualreport.easyjet.com/files/pdf/Full_Report_easyJet_AR10.pdf
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success. Therefore, it considerably invests in personal development to increase involvement and commitment of the team work. Employees benefit from training programs, coaching and mentoring to constantly improve their skills and their knowledge. Customers are still unsatisfied with EasyJet customer service. This suggests that EasyJets staff needs to enhance their performance and behaviour. Use of advanced EasyJet has new technologies. launched Right Constant Now Service in improvements of its order to IT business model enhance so as to deliver online higher quality customer service and achieve assistance. greater This system performance. enables Since 1998, EasyJet customers to has enhanced its ask questions online service and in their own 95% of bookings are languages and made on the to receive internet today. This instant shows the answers. effectiveness of this
2011
Technology development
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channel. Today, EasyJet is perceived as the most modern airline in Europe as its webside is said to be the most attractive of all airlines websites. Airbus and Boeing are the essential suppliers of EasyJet. EasyJet also deals with external companies such as Sopra and Microsoft to ensure the maintenance of its IT business model (emailing, online reservations, customer base, CRM) Recycling, reusing, reducing, Corporate social responsibility, Reduction of carbon emission and fuel consumption through the launch of EcoJet. EasyJet has also launched a number of programs to enhance relationships with its suppliers. It has led role-reversal exercises, frequent workshops and simulations with sub-contractors to clarify EasyJets values, missions and expectations to sub-contractors. Additionally, EasyJet has designed an
2011
Procurement
EasyJet is mainly located at Luton Airport but also has bases in Manchester and Liverpool. For instance, Liverpool allows the low-cost airline to gain access into the lucrative North of England market and is becoming a growing centre of activity for easyJet. Flights can now be taken from Liverpool to Nice, Amsterdam and Belfast.
Discounts and frequent promotions online to appeal to price conscious customers, National and international campaigns which increases brand recognition, Green initiatives (EcoJet), Partnerships with the most prestigious IT companies such as Microsoft or Sopra Group. EasyJet telephone number is promoted widely, so that customers can benefit from EasyJets assistance quicker.
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innovative system in order to measure and evaluate suppliers performance. Not only are subcontractors assessed on quantitative criteria (e.g. percentage of on-time flights), but also on qualitative factors such as their understanding of EasyJet concept. The rationale behind this assessment process is to determine the suppliers reward throughout rigorous rating matrix. This creates value and competitive edge to its business activity as suppliers may become more involved, proactive and productive.
2011
Strenghts
The boarding system as well as booking are innovative. Ticketless and paperless operations
EasyJet essentially offers interesting discounts online, Given the UK
Refreshment in flight, Automation and standardisation of service that make it faster Page 20

that help EasyJet minimise wastage and costs. This also makes the service faster. More seats to improve airplanes capacity, EasyJet also provides a secure online booking that encourages customers to purchase their tickets online. Seats are not comfortable, customers are constantly complaining.
2011
aging and more population, this effective. can be detrimental to older people.
Poor customer service, Customers complaints and dissatisfaction, EasyJet claims to be a no-frills airline, therefore, the service is considerably minimised. Outbound logistics Marketing and Sales Service
Weaknesses
Inbound Logistics
Operations
This value chain highlights how EasyJet has produced an efficient system of delivering customer benefits while integrating the major elements of the value chain. Furthermore, it points out EasyJets core competencies that help it gain competitive edge over its competitors. This value chain also helps us identify the interrelationship between the different components of the value chain. A prime example of this is that EasyJets no-frills airline is reinforced by integrating the inbound logistics (more seats on the plane) with operations (paperless operation hence fast boarding), with outbound logistics (airport locations), with marketing (online promotions, staff dressed casually with EasyJets uniforms) as well as service (in-flight refreshments). This value chain also helps EasyJet emphasise its consistency whilst consolidating its market position. The expected outcome is naturally to meet
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2011
customers needs and the growing market demands. Finally, this value chain also underlines EasyJets weaknesses. This will help us further suggest recommendations to the low-cost airline.
2.2.4
Marketing mix analysis
Product
Few frills: EasyJet keeps costs down by charging passengers for every extra and offering few frills. Diversification and brand stretching: EasyJet offers also complementary servies such as car hire and accomodation on its website and customers can access to EasyGroup3 websites. Efficient jumbo jets: this is used in order to lower huge emissions of carbon and reduce fuel costs. One class: no business class seats to lower costs
Price
Reverse pricing system: the earlier customers book, the cheaper are the prices. Dynamic and demand pricing model: constant prices adjustments according to demand, flight dates and date of booking. EasyJet also cuts price temporary up to 50 % (promotional prices to avoid procrastination) to generate impulse purchase and create excitement. The stronger the demand, the higher the prices. Differentiated pricing: each segment of customers pays different prices for the same product or service. The company sets the price according to each groups behaviour and needs (Kotler et al., 2009). EasyJet suggests discounts for business travellers and tickets booked on the internet. Efficient jumbo jets: this is used in order to lower huge emissions of carbon and reduce fuel costs. Value for money: EasyJet do its best to offset the quality of the service its prices. Cost efficiency: due to its willing to lower it costs, EasyJet offers minimal frills and charges for every extra like priority boarding or snack board.
Promotion
Aggressive advertising techniques: it has a bright and dynamic colour (orange) and catchy slogan: Come on, lets fly, the webs favourite airline. Moreover, its website is said to be one of the well-organised websites of low-cost carrier airlines. It is attractive and painted on plane. All its information is available on the website. Aggressive promotional sales on the internet: EasyJet offers discounts periodically to customers, especially during off peak period. For instance, they sell tickets at 9,99 to attract prince-conscious travellers. In addition, it offers incentives to passengers who want to book
EasyJet is part of EasyGroup which is composed of EasyBus, EasyHotel and EasyCar.
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2011
their tickets two months earlier: they can only book them online. The rationale behind this is to attract customers on their website since the internet is increasingly portrayed as the fourth power in todays world.
Place
Online reservation system: according to Brassington and Pettitt (2006), over 95% of booking are made online. EasyJet uses a direct marketing through the internet. The website is available in 15 different languages encouraging far greater flexibility and service efficiency than telemarketing could achieve as roughly seven e-mail bookings can be handled per second. The online Telephone booking: it is over 5% of booking. Customers mainly use telephone when they are dissatisfied and they want to complain or change their dates.
2.3 SWOT Analysis

The main purpose of SWOT analysis is to identify the key strengths and weaknesses within EasyJet, and help the company deal with the challenge of facing opportunities and threats in the marketplace. Wood (2010) also highlights the value of using SWOT analysis when he asserts that it enables to balance strengths and weaknesses. In addition, Wood (2010) adds that it anticipates threats and uses strengths to compensate weaknesses and threats.
2.3.1
Internal analysis: strengths and weaknesses
Strengths Weaknesses 125 airports (mainly major airports) and Brand name and cost strategy: easy to 29 countries copy Brand awareness Has little or no scope outside Europe Dynamic and demand-based pricing Ryanair is much cheaper strategy, differentiated pricing Rely too much on price A sustainable e-business : website (24/7 Has no customer retention policy internet booking) Minimal services and no flexibility Few frills No focus on customers satisfaction and Environmental leadership customer service (satisfaction Carbon offsetting questionnaires of 2010 show that customers are considerably dissatisfied Efficient jumbo jets by the service. They complain about Fast turnaround times for aircrafts delay management and poor customer service.
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Strenghts
Brand awareness: EasyJet is part of EasyGroup which is composed of EasyBus, EasyHotel and EasyCar. Its brand name is popular in the UK. It has a bright and dynamic colour (orange) and catchy slogan: Come on, lets fly. Dynamic and demand-based pricing strategy: there are constant prices adjustments on the internet according to demand, flight dates and date of booking. EasyJet also cuts price temporary up to 50 % (promotional prices online to avoid procrastination) to generate impulse purchase and create excitement. The stronger the demand, the higher the prices. EasyJet has a reverse pricing system: the earlier customers book, the cheaper are the prices. Differentiated pricing: each segment of customers pays different prices for the same product or service. The company sets the price according to each groups behaviour and needs. (Kotler et al., 2009) A sustainable e-business: its website is said to be the well-organised websites of low-cost carrier airlines. It is attractive and painted on plane. All its information is available on the website. Furthermore, booking and checking can be done on the internet: it is faster and beneficial for both the company and customers. Few frills: EasyJet keeps costs down by charging passengers for every extra and offering few frills Environmental leadership: Active member of the EU Emissions Trading Scheme (since 2003) which encourages companies to be more carbon efficient by reducing emissions significantly and banning dirty as well as old aircrafts. Simultaneously, EasyJet is supporting air traffic control in Europe as a whole, promoting its efficiency. It has an environmental code and campaigning for a greener future for aviation. The rationale behind this is to become environmentally efficient both on the ground and in the air. Carbon offsetting: with EcoJet, they balance the effect of the carbon emission from flights by encouraging certified projects such as Perlabi Hydroelectric in Ecuador4. They buy credits from this project which has been certified and essentially supported by United Nations Framework Convention. He has managed to lower the administrative costs of its carbon offsetting thanks to this scheme. Efficient jumbo jets: this is used in order to lower huge emissions of carbon and reduce fuel costs. EasyJet was designed to cut CO2 emission by 50 % in 20155. Fast turnaround times for aircrafts: this is an efficient system which increases flights frequency. For many destinations, EasyJet now offers frequencies better than British Airways. Higher frequencies mean low-cost airlines become more attractive to business travellers who are finally a significant and key proportion of passengers for EasyJet.
Weaknesses
Has little or no scope outside Europe: this is a huge drawback if EasyJet is willing to expand globally.
4 5
EasyJet [online]: http://www.easyjet.com/asp/en/book/index.asp?lang=en EasyJet [online]: http://www.easyjet.com/asp/en/book/index.asp?lang=en
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Ryanair is much cheaper: Ryanairs fares start from 0,99 to 1 while EasyJet ones start from 8,99 to 9. Ryanairs average price is roughly 40 whereas EasyJet ones is around 60 (excluding taxes and charges). Low level of customer service: the after-sales service is particularly mediocre and need to be significantly improved. Rely too much on price: in a customer focused market, relying solely on pricing may be a dramatic mistake and increasing the risk of failure in a company business. Developing other marketing strategies such as customers loyalty or enhancing customer service efficiency are to be core requirements in todays world. Minimal services and no flexibility: changing the tickets time or day (because of time or other unexpected factors) are often more expensive than the original ticket price. Buying a new ticket is cheaper than modifying an existing ticket. This leads to customers dissatisfaction, complaints and hassle.
2.3.2
External analysis : opportunities and threats
Opportunities Threats Low-cost carrier market growth Natural disaster Recession Fast-paced and competitive market environment Increase in the value of corporate social responsibility Terrorism Higher demand for travels from Fluctuation in fuel prices and travel European countries to the UK taxes Withdrawal of full services from regional Aircrafts increase carbon dioxide gases market to international market in the air Demand elasticity Growing interest for corporate social responsibility (see External Audit, Substantial increase in short haul travels Ecological factors) Emerging markets (Asia) Market saturation Advanced new technologies
Opportunities
Low-cost carrier market growth: despite an uncertain future, the low-cost carrier market is thriving. The expansion of low-cost airlines has significantly affected yet positively the whole airline market. It has been estimated that their European market share will be expanded from 15 % to 25 % by 2020 establishing themselves on a long-term basis (Smiddy, 2010). Not only is low-cost carrier market portrayed as having a promising future, but it is also claimed that low-cost airlines are bound to be the dominant form of travel in Europe in the next decade. Recession and the airline market growth: many customers are eager to save money during this period. Both people and businesses are cost-conscious. Therefore, there is high price Page 25
2011
sensitivity in the marketplace and this may be an opportunity for EasyJet to attract pricesensitive travellers by offering low fares. Higher demand for travels from European countries to the UK owing to market movements: this is said to be one of the consequences of the weakening of the pound against the euro. Withdrawal of full-service airlines from regional market to international market: Fullservice airlines like British Airways are likely to withdraw from the regional market to concentrate on more profitable long-haul routes leaving the market to the low-cost operators6. The demand is elastic: since travelling is portrayed as a luxurious good. Advanced new technologies: This is an opportunity for EasyJet as it could develop and enhance its IT business model.
Threats
Brand image: low-cost airlines are said to be providing a low level of service and customer care. Customers perception about these airlines is not positive at all. Natural disaster: this may lead to long delays or flight cancellations. For instance, the volcanic ash cloud over Europe in April 2010 leads to many delays. EasyJet had to offer compensations or refunds and deal with customers dissatisfaction. The company lost roughly $ 200 in a day. Fast-paced and competitive market environment: the low-cost carrier market is a promising and saturated market where competition is likely to intensify in the next decades with new entrants, substitutes, market movements and existing organisations. Competitors are offering similar services and the prices comparison can be done easily on the Internet. There are also alternatives and cheaper modes of transport. An illustration of this is the bus company Eurolines and the rail companies such as Eurostar and Thalys (cheaper when tickets are booked earlier). People prefer them also as they stop in the town center unlike low-cost airlines which stop sometimes so far away from city centres. Some people may use their own cars. Terrorism: it can cause psychological shock and fear of flying. For instance, anti-police riots which took place in Tottenham (North London) on 6th August 2011. Fluctuation in fuel prices and travel taxes: a rise in oil prices will increase costs production and consumers may subsequently pay more. There is a strong likelihood that fuel costs will increase each year worldwide. Moreover, the cartel is likely to have a negative impact on oil prices due to instability in the Middle East. Finally, increased travel taxes may affect the ability to offer the lowest fares.
2.4 Current situation summary

EasyJet is the second company in the low-cost airlines sector in Europe. EasyJet has a selling orientation marketing strategy which is essentially based on pricing. Furthermore, the company focuses on offering few frills to lower costs and expanding its route network especially in Europe. It
6
EasyJet [online] : http://2010annualreport.easyjet.com/files/pdf/Full_Report_easyJet_AR10.pdf
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2011
has the ambition to be the largest no-frills airline in the continent. What sets it apart from the Market leader Ryanair is that it mainly targets business consumers and provides better customer service. In a growing and saturated market, it can be clearly seen that the company is well positioned although competition is likely to increase. Mc Call (2011), EasyJets chief executive supports this statement when she asserts that their network not only ensures that EasyJet is well positioned to capture leisure traffic but also will enable easyJet to continue to build its share of the 18 billion per annum European short-haul air travel market. However, cost leadership is not a sustainable strategy if EasyJet aims to become the market leader consolidating its position, improving its market share and establishing itself in a long-term basis. This approach also becomes a considerable drawback when customers associate price with quality. In addition, focusing solely either on pricing or lowering costs may be a dramatic mistake as the market is constantly moving owing to the threat of new entrants that can create price war, changing in customers needs and the likelihood of market followers. Another point worth mentioning here is the lack of a unique selling proposition in the marketing mix which subsequently deserves some improvements. EasyJet offers nothing that Ryanair is not providing yet. Therefore, we need to implement new strategic choices to remain competitive and viable in the future.
Analysis Tool PESTEL
Key findings -Advanced new technologies development -Recession and economic crisis -Growing interest for environmental issues -Internet expansion and increased use of this channel -Dissatisfied customers -Advanced new technologies development -Lack of customer retention -Growing competition in the market -Cost efficiency -No frills, ensure safety
Strategic implications -Focus on new technologies development and environmental issues -Focus on customer value to create competitive advantage
SWOT
-Implementation of loyalty schemes -Differentiation and diversification to gain an edge over competitors
Resource Based View
Value Chain
Porters five forces
-Low cost reputation (negative image) -IT Development -Strong partnerships -Ryanair , the biggest competitor -Moderate bargaining power of suppliers -Moderate bargaining power of
-Differentiation and diversification to gain an edge over competitors as customers needs and preferences are constantly changing -Reinforce its brand reputation -Develop its IT business model to ensure customers expectations and needs are met -Reinforce relationship with customers -Diversification and differentiation to stay ahead of the competition
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buyers -High threat of substitutes -Lower operating costs and higher liquidity -Reasonable working capital
2011
Financial analysis
-Investment resources are available -Possibility to take risks and develop new projects
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Longitudinal Strategic Development Study 3 Strategic direction for the future

3.1 Strategic options and variables available
2011
The table below gives a brief description of each strategic choice and classifies them within Ansoffs matrix. The selection process will be achieved through a preliminary analysis will helps us score each strategic option using a number of defined performance indicators.
Figure 1: Strategic choices
Ansoff strategies Market penetration
Strategic options 1. Expanding into new segments 1. Modernisation of brand image
Explanation Expanding into students segment which appears to be high price sensitive consumers The rationale behind this is to gain market share and to consolidate EasyJets brand awareness Introduction of internet access on flight to increase customer value Reinforcing partnership with IT companies, improving CRM and the current IT model Delivering high level of customer service in an attempt to develop customers loyalty and to gain a competitive edge Joint-venture with Flybe in order to extend its growth in Europe, to increase productivity, to share risks with Flybe and to gain new technological knowledge Developing new routes and creating new destinations in emerging markets, focusing on areas having a strong growth potential such as Asia. This strategy may help EasyJet extend its brand awareness worldwide. Providing complementary services such as hotel, car with Easy Group subsidiaries namely EasyCar or EasyHotel Page 29
Product development
2. IT Development
3. Customer service improvement
4. Joint-venture
Market development
5. Expansion of operations in new emerging markets (Asia)
Diversification
6. Offering complementary services

7. Diversify into other modes of transport
2011
Introduction of substitutes services such as rail so as to sustain competitive edge
According to Porter (1995), it is crucial that an organisation has a clear sense of its distinctiveness. That is why choosing the right strategy represents a key challenge in business. To make the final decision about our strategic choices, we have selected 5 major criteria. The equities in the table are weighted on the basis of a score based on the internal and external analysis of EasyJet. For a project to be acceptable and considered as profitable, it should obtain a minimum score of 20/25. This will lead to the removal of options that are not deemed consistent with EasyJet values leaving the most suitable strategies to be further analysed for consideration.
Figure 2: Strategic choices evaluation
Criteria of evaluation
Strategic options 1. Expanding into new segments 2. Modernisation of brand image 3. IT Development 4. Customer service improvement 5. Joint-venture 6. Expansion of operations in new emerging markets (Asia) 7. Offering complementary services 8. Diversify into other modes of transport
Do EasyJet have the financial resources? 0=No 3=Feasible 5=Yes
Effect on brand image 0=Bad 3=Mediu m or no effect 5=Positive
Effect on capabilities 0=Negative 3=Medium 5=Positive
Coherence with the current strategy 0=No 3=Not really 5=Yes
Level of risk involved 5=Low 3=Mediu m 0=High
Score
Accept for further consideration
=Yes =No
5 5 3 3 3 3
5 5 5 5 3 5
5 3 5 5 3 5
5 5 5 5 5 5
3 3 3 5 0 0
23 21 21 23 14 18

X X
5 3
5 3
5 3
5 3
5 0
25 12
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3.2 Description and evaluation of selected strategic options
2011
Based on the appraisal report performed in figures 1 and 2, the six most viable strategic options will now be critically discussed in terms of suitability, acceptability and feasibility. The rationale behind this is to evaluate the compatibility of each strategic choice with EasyJets core competencies, corporate culture, values and mission. At the end of this analysis, we should be able to see if those strategic choices may give sustainable competitive edge to EasyJet and if they build on strengths or remedy weaknesses whilst meeting stakeholders expectations.
3.2.1
Strategic option 1: Expanding into new segments
Brief outline: Expanding into students segment may help EasyJet challenge Ryanairs market share growth and thereby gain a competitive advantage.
Suitability The companys history shows that this strategy aligns with the existing EasyJets business model to improve customer experience. Ryanairs success suggests a need for EasyJet to develop a new strategy as so as to remain competitive, to differentiate itself and thereby to develop a competitive edge since currently no competitor targets this segment. Students are portrayed as one of the most price-sensitive segments. Therefore, this may be a profitable segment for EasyJet to exploit. Stakeholders may view this strategy as innovative and challenging to face the competition.
Support strategy?
Acceptability The benefit should be profitable through brand image improvement and market expansion. EasyJet could enhance its brand awareness. EasyJet has sufficient financial resources to target this segment which are mainly attracted by discounts and promotions. They are currently perceived as the heaviest users of the internet and tend to be drawn to this exciting medium. Given the effectiveness of its efficient IT model, there is a strong likelihood EasyJet will succeed in this market segment.
Support strategy?
Feasibility
Support strategy? Page 31

The time frame to develop this strategy is measurable and achievable. EasyJet has resource allocation to implement it as there is no immediate urgency or threat in the market as analysed previously (SWOT, PESTEL and Porters 5 forces). The brand reputation, the expertise and the firms capabilities can ensure the success of this strategy. Nonetheless, it is clear that this strategy involves few risks, even if they appear to be low.
2011

3.2.2
Strategic option 2: Modernisation of brand image
Brief outline: As identified in the SWOT and PESTEL analysis, environmental issues are becoming increasingly vital in todays business world. A reactive strategy could therefore be focusing on this area so as to reinforce corporate social responsibility, consolidate brand awareness and thereby increase visibility.
Suitability This strategy may help EasyJet build a strong environmental stance that will further consolidate and enhance its brand awareness. (RBV) This would ensure that EasyJet remains the biggest low-cost airline and above all alerts to developments in promising new areas such as green view (environmental issues). In todays more environmentally aware world, most companies aim to reduce their corporate environmental footprint as consumers tend to become more environmentally-friendly. As a result, this strategy would at least ensure that EasyJets market share is not compromised if competitors adopt this strategy.
Support strategy?
Acceptability Given the importance of environmental issues nowadays (PESTEL), this strategy does not involve market risk; this suggests a low level of uncertainty. Fast-paced changes in customer preferences clearly demonstrate heightened concern for green issues. If EasyJet is committed to preserving the environment, it will be perceived as a socially responsible company and consumers may recommend it as an example. Moreover, this strategy will show the willingness and efforts of EasyJet to adapt to market demands, to identify and to meet customers needs. As the requirements of environmental regulations are constantly evolving (PESTEL), it would be beneficial for EasyJet to be the pioneer in this area like it has been concerning online booking. If it managed to move into green vision before its main competitors such as Ryanair, once again, it would be portrayed as the company that breaks the mould. This may give EasyJet a competitive edge as Saphie Alim, A4032674
Support strategy?
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environmental policies are considered as value-added activities.
2011
Feasibility Resources may be better employed elsewhere as investing in environmental issues may not increase returns. In addition, there is a strong likelihood that this will be copied by competitors as it is easy to imitate. EasyJet may thus lose its competitive advantage. EasyJet must be confident that it would be able to drive this strategy successfully as if it fails to keep its environmental promises, it would be opened to public scrutiny. This could have a negative impact on its current strong reputation. (RBV)
Support strategy?
x x
3.2.3
Strategic option 3: IT Development
Brief outline: In a fast-paced and challenging market, EasyJet needs to develop new strategies that will set it apart from its competitors. Introducing internet access on flight may help EasyJet increase its customer value. This strategy could also enable EasyJet to reinforce its partnership with IT companies whilst improving its current IT model (CRM). Suitability For the time being, no European low-cost airline offers in-flight entertainment facilities; this strategy could help EasyJet differentiate itself from competitors. This may lead to a long-term growth in the number of passengers. This strategy could be unsuitable for the firms business model as EasyJet claims to be a no-frills airline. This may sound confusing for stakeholders; EasyJet might be perceived as a company that fails to give a clear overview of the objectives. EasyJet needs to compete with other modes of transport such as Eurostar that already offer internet capabilities to passengers. By implementing this strategy, EasyJet could improve its reputation whilst maintaining its traditional values. By implementing this strategy, EasyJet can consolidate its IT business model. Sopra Group, with whom it already collaborates, can help EasyJet in optimum conditions. Support strategy?
Acceptability The delivery time of the project is suitable; the implementation take only one to three days per aircraft. The world leader of low-cost carriers Southwest airlines adopted this strategy that was successful. This strategy could help EasyJet maintain its edge in a highly competitive aviation Saphie Alim, A4032674
Support strategy?

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market. In fact, improving its IT model may help EasyJet eradicate traditional barriers which separate supplier and customer so as to achieve greater operational efficiency. Developing the IT business model may also enhance performance and productivity as suppliers and team members could work very closely together regardless of their geographical location. However, technological advances can have a negative impact on this strategy. In fact, information is likely to become uncontrollable; competitors are offering similar services and the prices discrepancy on the Internet become easier. That means we must keep an eye on our competitors prices. And this prices comparison could be detrimental to EasyJet. The company claims an average price of 45 per 600 kilometres while its rival Ryanair claims 34.
2011
Feasibility EasyJet has the slack resources needed in its technology department to implement this strategy successfully. If EasyJet fails to deploy this strategy properly, it will be subject to heavy public criticism. EasyJet is working with several prestigious IT companies such as Sopra or Microsoft that could help it achieve its goals. Furthermore, these partnerships may encourage shareholders to support EasyJet as the company has proved in the past how profitable this strategy may be if it is well implemented.
Support strategy?
3.2.4
Strategic option 4: Customer service improvement
Brief outline: The internal and external analysis highlighted recent negative feedbacks about EasyJets customer service in case of inconvenience (delays, claims). The RBV and SWOT identified EasyJets public criticisms for delay management, low level of customers care and value. EasyJets agents, especially those who are working at the airport, are said to be unpleasant and arrogant. In addition, in a fast-paced and challenging market, focusing solely on cost cutting is no longer viable. EasyJet needs to build long-term relationship with its customers in order not only to retain them, but also so as to gain an edge over competitors. Delivering higher level of customer service may help EasyJet gain a competitive edge as low-cost carriers are commonly considered to be no-frills airlines which provide minimum service to customers.
Suitability The Low-cost model is becoming easy to imitate. Most low-cost carriers are Saphie Alim, A4032674
Support strategy?
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pursuing the same model (they are delivering the same services and the same quality of service), it therefore appears to be difficult to stand out amongst the competition. This suggests the need for EasyJet to create a unique selling proposition. It might be difficult for EasyJet to change the negative image of low-cost airlines which are generally associated with low quality of service. For the time being, no low-cost airline offers high quality service and a strong loyalty scheme. If EasyJet succeed in retaining its customers and delivering superior quality of service, it could gain a competitive edge. This strategy will also allow EasyJet to justify its higher prices compared to its nearest rival Ryanair. One of the current strategies of EasyJet is to motivate employees through support and personal development. The rationale behind this is to encourage commitment and involvement. Thus, employees will be more enthusiastic and subsequently customer satisfaction will increase.
2011
Acceptability This strategy may help EasyJet rebuild customer confidence and reinforce its strong brand reputation. Skytrax (2008) argued that customer satisfaction is a key criterion of purchase decision for customers. When selecting airlines for their travel, customers usually compare the prices and refer to their experience with the airline (quality of service) as well. This means that customer service may determine customers decision. This strategy may improve customers feedbacks on EasyJets service and thereby increase the potential of high return.
Support strategy?
Feasibility The RBV highlights an international customer database holding. Such data could help EasyJet identify customers needs through critical market research. This may help EasyJet in its attempt to effectively develop its customer relation management. EasyJet has skilled and trained employees that could help achieve this strategy. The financial analysis shows us that EasyJet has enough resources to engage in such a project. This strategy may be profitable for EasyJet as one retained customer is likely to encourage loyalty of volatile customers. The advantage is that once the loyalty of those customers are won, they are able to buy tickets online without taking into account any geographical or time constraints. This strategy is therefore consistent with market demand and changes in the level and pattern of demand. Saphie Alim, A4032674
Support strategy?
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2011
3.2.5
Strategic option 5: Offering complementary services
Suitability EasyJet could cooperate with other EasyGroup subsidiaries such as EasyCar, EasyHotel. For instance, EasyCar could offer preferential rates to customers concerning parking at airports and transport (rental car) from airport to the city centre). Similarly, EasyHotel could also provide accommodation to passengers with reduced tariffs. This strategy is thus in line with EasyGroup strategy and that could reinforce both customers loyalty and stakeholders confidence.
Support strategy?
Acceptability Passengers are increasingly looking for discount packages which consist of accommodation and transport. EasyFinance could offer zero percent interest loans for EasyJet flights. For the time being, no low cost airlines provide this service. This could therefore give EasyJet an edge over competitors, especially its biggest rival Ryanair. This strategy could enhance EasyGroup visibility in Europe and worldwide, thereby increasing its audience.
Support strategy?
Feasibility EasyJet, as a subsidiary of EasyGroup, has sufficient resources (finance and capabilities) to achieve this implement successfully. Offering loans can be a difficult and delicate proposal if customers do not reimburse the loan on time. This strategy may not increase profit. Furthermore, serious delays on payments can have a dramatic impact on EasyJets financial activity. This strategy could become risky. In fact, with the growing competition and the constant market changes, the risk incurred could be higher than what we predicted in the last part.
Support strategy?
x x
3.3 Strategic thrust and objectives
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2011
Based on the analysis of the strategic options, it has been decided that before growth strategies are pursued, EasyJet should focus on defending its current market position and achieving superior quality to gain an edge over its biggest competitors. As a result, expanding into new segments (market penetration), modernisation of brand image and customer service improvement (product development) are the strategies that are considered most appropriate for implementation.
3.3.1
Strategic objectives
Our strategic approach covers two years (2011-2013) and if the strategies implemented are successful, they will be maintained. We aim to pursue a growth strategy based on the Ansoff matrix. From late 2011 to 2012, our direction will be a product development approach in order to consolidate our brand image and strengthen our relationship with customers (brand loyalty). We will target non-business consumers and business passengers. For 2013, we are planning to implement the market penetration strategy to expand our market by reaching another segment of consumers such as students which are known for their price sensitivity.
Marketing objectives
In a customer-focused marketplace, cost focus is no longer enough on its own. Given the growing lack of sustainability due to aviation market saturation, EasyJet needs to concentrate on building long-term relationship with customers. The expected outcomes are: developing customers loyalty through a good quality of service (focus on satisfaction and customer service); reinforcing brand awareness both in Europe and worldwide as evidenced by an increase in the demand (maximising brand awareness during the Olympic Games in 2012). The last objective is to implement a unique loyalty program for each consumers segments. This may help EasyJet capture market share from Ryanair by using differentiation.
Societal objectives
The primary objective is to minimise our environmental impact by recycling, reusing and reducing air pollution, huge emission of carbon as well as fuel costs. We are also planning to emphasise our environmental promises on sustainable development and green future. We aim to be portrayed as a green airline associated with environmental issues and ethical activities. We are essentially targeting business consumers and our shareholders here.
Financial objectives Page 37
2011
In this report, we are assuming that EasyJets annual report of 2011 is the same as 2010 since the report of this year is not published yet. Thus, in September 2012, we are expecting a growth in total revenue per seat, up 8.1%, following strong growth in 2011 (up 5.1%)7. Passenger numbers may be up 10% to 48.82 million from 7.9% in 2011. Furthermore, we aim to improve our gross profit margin by 11% to 13% in order to increase our return on equity to 12.7% from 8.6% in 2011. We will also enhance our margin through fuel cost reduction (roughly 130 million from 122.7 million in 2011). Finally, we are hoping to gain market share across Europe by consolidating our position in European short haul aviation as a whole. We are thus planning to increase our market share from 7.6% to 11.6%. In 2013, we intend to improve our market share from 11.6% to 13.6% and to reduce our fuel costs from 733.4 million in 2011 to 720 million in 2012.
3.3.2
Critical issues
Our biggest competitor Rynair uses cost leadership by serving secondary airports to lower costs and proposing the lowest prices in the market place. Thus, Ryanair manages to achieve high sales levels maintaining its cost advantage and staying ahead of the competition. We have to focus on customers value in order to deliver a high level service with superior performance and flexibility. We should also anticipate the demand and passengers preferences. That may help us challenge our biggest competitors and retain customers.
3.3.3
Business mission review and descriptive strategic statement
Business mission review

EasyJets mission statement is: 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 will develop our people and establish lasting relationship with our suppliers8.
The new mission statement will be focusing on customers satisfaction, leadership in the low-cost airlines market and environmental activities. The rationale behind this is to be perceived as a viable
7 8
EasyJet [online]: http://corporate.easyjet.com/media/latest-news/news-year-2010/11-05-10.aspx EasyJet [online]: http://www.easyjet.com/asp/en/book/index.asp?lang=en
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and modern company which considers its passengers as a priority. The secondary outcome is to promote a forward-looking strategic approach among stakeholders. According to Brassington and Pettitt (2006), the purpose of a mission statement is to point out the essence, the value and the companys ideals clarifying managements priorities for shareholders and stakeholders. The rationale behind this is to help them understand the companys vision accurately in case they are considering investing in. For managers and employees, the companys mission is a kind of guide that must motivate and lead them to successful achievements. By claiming it provides point to point air services to its travellers, EasyJet clearly highlights its business area emphasising its strategy focused on cost efficiency. Simultaneously, it underlines the type of service it intends to offer. Furthermore, the market it serves and the customers it targets are respectively mentioned with European routes and business and leisure passengers. Thus, EasyJets mission answers to three questions which are a core requirement in a good mission statement: What the company stands for?, Who will the organisation focus on as stakeholders?, What main markets will the organisation serve? Moreover, the guiding values the company intends to apply to achieve its goals can be clearly seen through safe, good value service. Finally, by stating its people and suppliers, EasyJets mission also shows it is capable of rallying employees and inspiring its stakeholders (Wood, 2010). However, this mission could be improved by adding the customers perception of the organisation, a focus on customers value that could differentiate and set the company apart from its competitors. Low fares airlines are seen as providing a low quality level of service to customers. EasyJet can position itself as the pioneer that breaks the mould. For instance, it could state we want to be recognised as, your satisfaction is our priority. Viability is also a crucial point of relevance. Is the mission statement aspirational and enduring to guide the organization into the future? EasyJets mission does not answer to this question precisely. For example, it could be expressed as We aim to be considerate as the best no-frill airline in the world making flying as affordable as coffee. Moreover, the airline industry is becoming green, people are adopting the green vision that is the catchword worldwide. Therefore, EasyJet could take advantage of this by insisting on its corporate social responsibility (its environmental code). For example, we consider striving for excellence in environmental activities as a vital behaviour for a successful and sustainable business.
Descriptive strategic statement
Focus on delivering superior quality of service to customers, create loyalty schemes to retain them while improving its IT business model to remain flexible and effective. Expand business into new segments such as students by offering competitive prices to challenge competitors while promoting environmental values to appeal to business consumers.
3.3.4
Core strategy
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Longitudinal Strategic Development Study Target market(s)
2011
Market penetration We will focus on students aged 18-25 who are travelling from/to Europe. We will have an aggressive pricing approach as they are price-sensitive and constantly seeking for promotions. For instance, during peak periods such as Easter, The Olympics 2012 or Christmas, students may be offered preferential tariffs. In fact, prices could be cut so as to challenge Ryanair and thereby gain market share. To differentiate itself from competitors, the induction of smart card can be an effective approach. EasyJet specific loyalty scheme could be proposed to students. EasyJet can issue a smart card which is compatible with its existing ticketless booking. I could offer instant rewards to students when they top up their smart card, this may offer them greater value than the purchase price. An illustration of this can be 100 miles which may be worth 120 pounds. The card could also be used by other individuals with the same last name as the cardholder. EasyJet can also propose smart card that will offer unlimited travel for frequent student travelers. For instance, if the cardholders accumulate 20,000 miles, they could make as many trips as they want within a specified period (off peak periods for example). This loyalty scheme is currently used by the Asian low-cost airline AirAsia and has been proved effective as the company has managed to increase its retention rate.
Product development We are targeting two major consumer market segments (see appendix 3 p. 48) : Non-business consumers: this group includes price-sensitive adults aged (18-25, 26-45 and 46+) who belong to middle class, with middle to high income levels. They are travelling for leisure or personal reasons from/to Europe. Low prices are their priority but they tend to become more demanding concerning customer service quality Business consumers: this group consists of price-conscious business passengers and quality business consumers who are adults aged (24-45, 46+) travelling for professional reasons from/to Europe. The first segment focuses on low fares rather than quality while the second one is more concerned about quality, safety and convenience.
We will concentrate on customers value by adapting our marketing strategies to each segments needs and behaviour (see appendix 3 p. 48). A prime example of this is our differentiated marketing approach. For quality business consumers, we will be concentrating on high level of customer service and green initiatives promotion whereas for those who are price-conscious consumers, we will use aggressive advertising techniques based on pricing. We will also retain business consumers through loyalty schemes as they have always been our most profitable target.
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Competitive advantage
EasyJet has currently no specific unique selling proposition which sets it apart from rivals despite being the only European no-frills airline which mainly serves primary airports. He has a strong presence in the leading network (European short-haul aviation) operating on the top 100 routes. Nonetheless, a particular focus on customers care and expectations as well as corporate social responsibility can be suggested. We are planning to provide an excellent level of service emphasising customers value. For instance, we will offer greater customer service assistance for online and telephone booking. The after-sales service will be quicker. Greater interest will be accorded to the service on board which will be more efficient with a higher level. The rationale behind this is to be perceived as the company that breaks the mould since low-cost airlines are portrayed as offering the lowest level of service and making profits companies. In addition, we will launch a unique loyalty scheme to retain our loyal consumers, especially business passengers. Membership loyalty cards Golden EasyMiles will be proposed to business travelers. The card will be free of charge; they will only need to give their details to obtain the card and open their account. The more they travel, the greater the reward. Gifts will be received according to miles. Consumers who travel regularly will obtain more points. For special events such as Christmas, Labour Day or birthday, we will offer extra bonuses to consumers. Every transaction with EasyJet including (priority boarding, snack on board and other extra) will give miles to consumers. The premise behind this scheme is to allow consumers to accumulate the maximum points to receive gifts. Gifts will vary from household items, electronic to free trips, flight rewards and reward shop (discounts in certain well-known shops). Generous passengers will be given the opportunity to offer their miles to underprivileged children in orphanages and hospitals. Furthermore, EasyJet should have the same policy everywhere. At the moment, in certain countries, both EasyJet and Ryanair charge passengers who print their boarding card at the airport. This service can be free of charge. Moreover, EasyJet could keep promoting intensively its green vision among business travelers. It should continue positioning itself as a green airline that encourages carbon offsetting and air pollution reduction through different incentives (new aircrafts design based on green vision with EcoJet, partnerships, research and development). The rationale behind this is to provide sales assistance, superior problem-solving, convenience and superior brand personality to customers. That will strengthen our corporate social responsibility as well as our customers reliability.
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3.3.5 Marketing mix decisions
2011
The 4Ps will cover the coming year and 2013.
Product
Two of our main objectives consist on reinforcing our brand awareness and offering higher level of service. Therefore, the emphasis will be put on:
Jumbo jets: help EasyJet lower fuel consumption and gases emission. New designs and brand: green aircrafts designed by EasyJet with EcoJet to highlight its positioning as a green airline. Quality and performance: higher level of service will be delivered to passengers. The focus will be on customers value. Loyalty schemes: membership cards will be launched to retain business consumers loyalty
Promotion To achieve our societal and financial objectives, we will also need to insist on: Consolidating brand awareness through environmental activities and EasyGreen campaign: EasyJet could develop partnerships with green companies and launch green campaigns. It can take advantage from the Olympics in 2012 to increase its reputation emphasising its green vision and enlarging its public to people outside the UK. It can use aggressive advertising techniques on its website and direct marketing (emailing, sms).The premise behind this is to appeal to companies whose staff is used to travel with EasyJet. Those companies are likely to improve their image if EasyJet become associated with environmental initiatives. Therefore, business consumers will start identifying themselves to EasyJet adopting the being green attitude. It could also invest more on Research and Development ( 30 000). CRM: Cause Related Marketing will help EasyJet highlight its positioning as a caring line by collecting foreign currency on board and donation on its website for less fortunate children (charities). Through this program, EasyJet could attempt gathering celebrities as well for charities events and ethical activities thereby appealing to its stakeholders and giving its passengers a psychological sense of well-being. London Olympic and Paralympic Games (from 21st July to 9 september 2012): EasyJet could cut prices for early bookings (2 months earlier). The lowest price could start from 5.99 instead of 9.99. Communication on new loyalty cards: Golden EasyMiles Cathy logo dynamic slogan: Its easyJet being green Page 42
2011
Price
The initial pricing system will be maintained (see ) with an emphasis during the Olympics. Prices will be increased aggressively in order to improve sales and generate profits reaching 13% gross profit margin as stated in our financial objectives. There will be two major changes:
EasyJet will give choice to customers: they could either print their boarding card before or at the airport. The service will be free of charge. 15% discount for students (from 2013) to attract them as there are price-sensitive. Flexibility: passengers will henceforth have the right to change their dates of travel up to three days before departure. This modification will be free of charge except if the passenger does not respect the given deadline.
Place Online booking: EasyJet will continue booking on the internet by emphasising more on customer service quality. Telephone booking: the level of the service will be improved as well.
The main objectives of our new marketing mix are to provide superior quality and performance (added value to passengers), to anticipate customers needs quicker than rivals and to build longterm relationship with customers. We aim to be better, faster and closer. These elements have been critically described to provide a measurable outcome.
3.4 Budget
The budget will be the same as the one in 2011. We will only modify Research and Development budget (R&D). This year, we will invest 30 000 for R&D. As we will recruit 4 interns, the personnel
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budget will thus increase. Each intern student will be paid 600 per month (see annual report 2010)9. We will also increase marketing/communication budget from 90 000 to 100 000 in order to optimise our advertising campaigns during the Olympic Games.
3.5 Organisation and Implementation

James Millett, EasJets head of digital Chief executive Carolyn McCall will be responsible for our marketing strategies implementation and decisions. They will be assisted by the head of brand and the head of marketing and communications. These two managers will be in charge of campaigns organisation and sales promotion. Four interns will analyse our operating results in order to control performance and quality.
3.6 Control
Given the crucial importance of the strategic choices and the challenge of meeting the goals, a proper screening of performance is a core requirement. We will have to ensure that our initial objectives have been achieved. A key part of this is an evaluation of our strategic choices through assessment tools. The rationale behind this is to ensure that performance does match objectives. We will implement short-term control and long-term control. Short-term control will include:
Costs analysis (monthly and annually) Cash flow evaluation (monthly and annually) Sales profits (monthly and annually) Research and development, image as green and socially responsible airline (twice-yearly) Customer service and loyalty schemes assessment through short questionnaires of satisfactions (on a monthly basis) Recycling, reusing and reducing (air pollution and fuel costs) on a quarterly basis. Operating results: evaluation of gross profit margin, total revenue per seat, return on equity, passengers numbers (quarterly and annually) Market share (annually)
We are planning to recruit 4 trainees in 2012 from september to March 2013 to work on control and performance. The control will be on performance criteria. A weight will be arbitrary assigned to each criterion. Finally, we will give a score to each element. An illustration of this is the table below:
Performance Criterion Market share Profit margin Competitive advantage Customer satisfaction Project risk
9
Weight 30 20 15 30 5
Score /10 /10 /10 /10 /10
EasyJet [online] : http://2010annualreport.easyjet.com/files/pdf/Full_Report_easyJet_AR10.pdf
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Weaknesses of marketing plan implementation will hence be identified and we will suggest recommendations to face them. Strategies will also be proposed to anticipate potential issues.
Conclusion
Throughout the overall report, a clear conclusion can be drawn. This report has shown how well EasyJet has done and is doing since its inception in 1995. However, EasyJet can no longer rely on its past success which was essentially based on cost leadership given the increasing competition and the saturation in the market which hinders sustainability. In addition, the market is constantly evolving: consumers needs and expectations are changing and advanced new technologies are booming while environmental issues tend to become the catchword worldwide. Therefore, it is to be hoped that EasyJet will implement the five recommended strategies so as to differentiate its activity and thereby gain an edge over its biggest competitors. Porters generic model can be criticised here since it maintained that a company should follow one strategy whilst nowadays, with the growing competition, most companies pursue two or three strategies simultaneously to remain competitive. This is the case of EasyJet which aims to stand out from the competition through differentiation in addition to its cost leadership strategy.
Appendix
Appendix 1: Airline market growth
The average growth of the market over the past 20 years has been 4.5% per annum. In the past year, overall capacity in the European short-haul market grew by 4.2%. Total passengers numbers across low-cost carriers in 2010 jumped 15.7% to 639.6 million, while passenger load factor grew nearly three points to 79.7%. Profits also took a turn for the better during 2010 with operating profits from nearly 30 top low-cost carriers worldwide doubling to reach $4.2 billion over the previous year (Dunn, 2011). Despite the recent recession, no-frill airlines continue growing. There is a clear indication that major low-cost airlines worldwide have performed well since 2000. Their profitability tends to increase.
Intra European passenger airline market share, 2000-2010 Saphie Alim, A4032674 Page 45
2011
Source : AEA IATA Mercer analysis.
Appendix 2: Forecast and financial details

4 2010 Half Year Results easyJet performance continues to strengthen Results at a glance 2010 1,170.7 (78.7) (78.7) (6.7) (4.4) 2009 1,032.8 (129.8) (116.5) (12.6) (7.4) (20.4) Change 13.3% 39.4% 32.4% 5.8ppt 3.0ppt
Total revenue ( million) Loss before tax underlying ( million) 1 Loss before tax - reported ( million) Pre tax margin underlying (%) 1 Return on equity (%)
Basic EPS - reported (pence)
(13.9)
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Appendix 3: Targeted market segments

Targeted segment: Saphie Alim, A4032674 Characteristics and needs Our approach Page 47

Non-Business passengers Aged 18-25, 26-45 and 46+, men and women with middle to high income levels
2011
- Price-conscious passengers who are more concerned by low prices than quality and comfort. They are looking for the lowest prices and safety. They tend to become increasingly demanding concerning customer service quality. They are generally travelling from/to Western Europe. - They are traveling for leisure (tourism) or personal reasons. - They have low expectations and they are familiar with the internet Business consumers They require high level of customer service, reliability, convenience and Price-conscious and frequent flights. Safety and destinations quality business are also their key concern. consumers
- Cutting prices periodically and offering care and a high level of customer service. - Being considered as making flying as affordable as a cup of tea.
- Turning flights around 30 minutes and offering a high level of service. - Promoting green vision to develop brand awareness, sensitising them to our environmental initiatives and corporate social responsibility. - Loyalty schemes will be launched to retain them. For quality business consumers, the emphasis will be put on loyalty schemes and high level of customer service.
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Longitudinal Strategic Development Study References Books
2011
Blackwell, R., Miniard W., Engel, J., 2005, Consumer behavior. 10th editition. New-York: Paperback, p. 27. Brassington, F., Pettitt S., 2006, Principles of Marketing: Enhanced media edition, 4th edition. Pearson Education Limited, pp. 859-1008. Chernev, A., Kotler, P., 2008, Strategic Marketing Management. 3rd edition. Pearson, pp. 16-259. Coulter, M., 2005, Strategic Management in Action, 3rd edition. London: FT Prentice Hall, pp. 49-255. Hooley, G., Saunders, J., Piercy, N., Nicoulaud, B., 2007, Marketing Strategy and Competitive Positioning, 4th edition. South-Western College Pub, pp. 45-345. Jobber, J., 2001, Principles and Practice of Marketing. 3rd Edition. London: McGraw-Hill International, pp. 394-450. Johnson, G., Scholes, K., Exploring strategy, 9th edition. London: FT Prentice Hall, pp. 69-455. Kim, C., Mauborgne, R., 2005, Blue Ocean Strategy: How to create uncontested market space and make competition irrelevant, 1st edition. Press, pp. 40-153. Murphy, C., 2005, Competitive intelligence: gathering, analyzing and putting it to work. New South Wales: Hardback, p. 49. Porter, M., 1996, Competitive strategy: techniques for analyzing industries and competitors. Cambridge: Free Press, pp. 58-67. Woods B. M., 2010, Essential Guide to Marketing Planning. 2nd edition. London: Pearson, pp. 34-59.
Websites
Georges, C., 2011, EasyJet boss outlines development opportunities for carrier. [online] (26th May 2011) Available at: http://www.routesonline.com/news/29/breaking-news/112547/easyjet-boss-outlinesdevelopment-opportunities-for-carrier/ [Accessed 18 october 2011]. James, M., 2010, EasyJet case study. [online] (16th January 2010) Available at: http://www.avyg86.dsl.pipex.com/bsys/Case%20EasyJet.pdf [Accessed 16 october 2011]. Kentleton, R., 2010, 2010 half year results. [online] (11th May 2010) Available at: http://corporate.easyjet.com/media/latest-news/news-year-2010/11-05-10.aspx Saphie Alim, A4032674 Page 49

[Accessed 19 october 2011].
2011
King, L., 2010, EasyJet targets improved CRM system as profits fly high. [online] (28th September 2010) Available at : http://www.cio.co.uk/news/3249566/easyjet-targets-improved-crm-system-as-profitsfly-high/ [Accessed 27 october 2011]. Kotter, C., 2008, Leading airline set to transform customer experience with powerful travel portal. [online] (28th September 2010) Available at:
http://www.microsoft.com/casestudies/Case_Study_Detail.aspx?CaseStudyID=4000001604
[Accessed 18 october 2011]. Mc Call, C., 2010, Annual report and accounts 2010. [online] (28th September 2010) Available at : http://2010annualreport.easyjet.com/files/pdf/Full_Report_easyJet_AR10.pdf [Accessed 19 october 2011]. Sopra Group, 2011, Sopra Group gives flight to EasyJets new low-cost IT development model. [online] (25th November 2010) Available at : hhttp://www.sopragroup.com/page.php?menu_mnemo=NEWS2&lang_code=EN&content_id=18271 [Accessed 22 october 2011].
Magazines
Sull, D., 2009, European Management Journal, EasyJets $500 Million gamble, April, pp.20-39. Johnson, B., 2011, Marketing Week, EasyJet readies marketing team for European challenge, 26 May, p. 17. Parsons, R., 2011, Marketing Week, EasyJet hit by fuel and duty costs, 10 May, p. 12.
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Alim Proposed A Strategic Plan For EasyJet According To Its Strengths, Weaknesses and The Opportunities and Threats in The Airline Market

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Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Longitudinal Strategic Development Study

2.1.1 2.1.2 2.1.3 2.2

2.2.1 2.2.2 2.2.3 2.2.4 2.3

2.3.1 2.3.2 2.4 3

Current situation summary ................................................................................................... 26

3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3

3.3.1 3.3.2 3.3.3 3.3.4

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Marketing mix decisions ................................................................................................ 42

Saphie Alim, A4032674

Longitudinal Strategic Development Study Executive summary

Saphie Alim, A4032674

Longitudinal Strategic Development Study

1 Recent strategic development history

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Longitudinal Strategic Development Study

Comparison between the main no frills airlines in Europe

Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Longitudinal Strategic Development Study

2 Current strategic situation

Longitudinal Strategic Development Study

Longitudinal Strategic Development Study

The European market

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Porters five forces are required to analyse competition properly.

The threat of substitutes

Longitudinal Strategic Development Study

The threat of new entrants

Bargaining power of suppliers (moderate)

Saphie Alim, A4032674

Longitudinal Strategic Development Study

International customer base

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Rivalry among existing firms (moderate)

Position in the market

Competition between EasyJet and traditional airlines

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Value Chain Analysis

Human Resources Management

EasyJet [online]: http://2010annualreport.easyjet.com/files/pdf/Full_Report_easyJet_AR10.pdf

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

EasyJet essentially offers interesting discounts online, Given the UK

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Saphie Alim, A4032674

Longitudinal Strategic Development Study

Marketing mix analysis

EasyJet is part of EasyGroup which is composed of EasyBus, EasyHotel and EasyCar.