Introduction And Background To Easyjet Management Essay
The purpose of this report is to evaluate the low budget, short-haul airline, easyJet. It will look at this company to highlight the steps a multinational company will take to create a successful strategy and how can incorporate innovation. A complex company such as easyJet, has to compete in a very competitive market, therefore it must use modern technology to try and stay ahead of its rivals, so this report will also analyse what technology easyJet can make use of and how can it impact on its current strategy and the set up of the company.
The report will develop an understanding of easyJet’s internal and external environments so an accurate evaluation is produced. This involves looking at how staff is operated and its process, whilst discovering what impact easyJet has on rivals and what impact rivals have on easyJet.
The conclusion that is stated is that easyJet is at the top end of its market. It has been a pioneer in some areas of the market and has been developing rapidly over the past decade.
Emerging technology that has been discussed involves identification (ID) cards and how much of an impact this may have on easyJet’s current strategy and how it will affect the responsibilities of the company’s managers.
1.0 – Introduction
The purpose of this report is to critically evaluate the strategic position of easyJet and propose how emerging technology may impact on the future position of the organisation. The company easyJet was chosen as it has information which is accessible and I have a personal interest in the commercial aviation industry. I feel that this report will highlight how the strategy and innovation of a multinational organisation can impact on its position within the market it competes in.
2.0 – Background
The airline company, easyJet is a low-cost budget airline which operates mainly within the European aviation markets. Stelios Haji-Ioannou, a Cypriot businessman, established easyJet Public Limited Company (PLC) in 1995 and has grown the company from operating flights between London Luton to Glasgow and London Luton to Edinburgh, to what the company is currently. Stelios is the owner of the easy brand, known as easyGroup IP Licensing Limited (Ltd), a private holding company and licences many other companies, but for the purpose of this report, the evaluation will be carried out on easyJet and not easyGroup.
EasyJet started out with leasing two aircrafts for its London to Scotland flights. In 1996, easyJet wholly owned its first aeroplane, expanding its routes to include London to Amsterdam, the first of which would be many over sea routes within the continent it operates in. At the end of the 1990s, easyJet saw itself gain a website online even though it would take a further two years before online bookings could be made by customers. EasyJet bought out a main competitor in Go, which was British Airways challenge to easyJet in the Low Cost Budget Airline sector. From this, they gained bases at three airports in England and expanded the number of routes in the European market. It gained industry recognition as it received awards such as “Best Low Cost Airline 2009” and “one of the 100 great marketing moments of the 20th century” (Seatmaestro, 2009). Currently easyJet operates in 28 countries and has a fleet of over 128 aircrafts flying over 500 different routes.
Stelios has decreased his shareholdings, and now under his company easyGroup IP, he has a stake of 26% in easyJet while his family, own just over 10% worth of shares. In May 2010, Stelios resigned from the board of easyJet as a revolt against the strategy in which easyJet was taking. A row broke out between easyGroup and the board of easyJet which concluded in October 2010 following a High Court case. Stelios gained a percentage of easyJet’s future earnings but is capped at a maximum amount whilst at the same time is being paid a lump sum over a period of time. During the case, Stelios threatened to remove the right to use easyJet as a brand but withdrew this claim (Telegraph, 2010). Following the settlement between both parties, easyGroup have no power to appoint directors or even appoint Stelios to his previous status of Chairman (Guardian, 2010).
Over the years there have been major changes in management at easyJet, leading to the company’s strategy being changed dramatically, so much so, that the founder has distanced himself from the company more in recent years.
3.0 – Current Strategic Position of easyJet
In this section, three different areas will be analysed and by using proven strategic indicators; they will help to determine the current strategic position of easyJet.
3.1 – Internal Environment Analysis
The mission statement of easyJet will be looked at in order to fully understand what the internal environment analysis means to the company. The mission set by easy jet 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 we will develop our people and establish lasting relationships with our suppliers’.
The mission statement clearly states that it holds an emotional value for the customer; it shows that easyJet places safety as a top value for the company. It wants to give the customer ‘good value’; the company realises the needs of customers. They understand that a happy customer could be a repeated customer. The social values of easyJet targets the company’s suppliers as it aims to ‘establish lasting relationships’ and create strong group of staff by pushing them to be the best of their abilities. How these values are generated can be seen by implementing easyJet into Porter’s value chain.
Infrastructure of easyJet
Human Resource Management Margin
Inbound Operations Outbound and Margin
Logistics Logistics Sales
A strategic success is a measure on how the whole company behaves and how people and processes integrate together to bring a competitive product. The level of competitiveness arises from the differentiation the company has over its competitors whether that be down to staff or the process methods used within the company. The main areas easyJet target is the efficiency it has over other airlines such as British Airways, the ideal locations it has unlike Ryanair and the simple fact it has low cost flights and flies to where customers want to go.
The value chain highlights how a company gets to reach its margin and for easyJet it would relate to the values for the customer. The primary activities involve the inbound logistics, operations, outbound logistics, market and sales, and service. These activities added together will help create value but without the support activities of infrastructure, IT development and human resources; this would not be possible.
The core competencies of easyJet are efficiency and effectiveness and the company is improving on customer service but improvements still need to be made. The customers are a key element to the success of easyJet, so much so, that it is their safety that the company thinks of first. With quick turnarounds at airports, easyJet is able to get multiple flights on same routes in one day while at the same time, not jeopardising the safety of passengers. Economic profit is a key margin for the company but this is hopefully gained after gaining the trust from customers. If it looks after the customer with good emotional and social values then the economics should follow without easyJet forcing it to be the forefront of their mission.
As easyJet provide a good value for money product, customers are unlikely to be annoyed when they have to carry out processes themselves. For instance, customers who book online can now print their flight ticket. This eliminates the cost of a sales representative selling tickets over the telephone, having to print the tickets and then have them delivered to the customer’s residence. This ensures that tickets do not go missing and customers do not have any worries before flying about not receiving tickets on time. Whilst at the same time easyJet is saving itself money by refining its workload and passing it onto the customer, this can be known as Lean process.
Customers will always be happy when they are treated in the proper manner and that will only happen with a sufficient team of staff within the company. As it says on the easyJet website, their vision states, ‘to be the best low fares airline in the world’. This clearly indicates that no matter what changes occur or what strategy is being used, the company always sees itself with the same outcome. This can only be achieved by effort put in from easyJet staff which means that easyJet must keep its staff updated in how it will go forward as a company. Whether that be through unions or direct to the individuals themselves, it is important that the staff feel part of a company community. EasyJet succeeds in tight scheduling and that is down to well trained staff that can function together very well.
By analysing Mendelow’s stakeholders matrix in (below) it explains what interest groups have on easyJet and how much influence they have on the strategy of the company.
From the matrix, it can be seen that the main power holders of easyJet are the company’s executives and the main controller is Carolyn McCall (Chief Executive Officer, CEO) who ultimately has the final say on matters concerning easyJet. In (below) McCall and her executive team can be seen.
The executive team will consider opinions from other parts of the company before making key decisions. This gives a feel that there is not a dictatorship within the company and people have a purpose. The power structure in (above) helps create the cultural web for easyJet. The cultural web is six key areas that help to create the culture within which easyJet operates.
Stories: A recent survey by Which? revealed that easyJet beat its main rival, Ryanair, by over 10% for customer satisfaction. Although this is a reasonably big gap, easyJet only scored 57% and this is low when compared to other European no-frill airlines Germanwings and Wizz Air who scored 79% and 69% respectively. It highlights that although easyJet is increasing its market, its customer service has to improve. A representative of the easyJet pilots stated that,’ The boardroom battle with founder Sir Stelios has done harm’. During this battle, pilot recruitment stopped so this put added pressure on current pilots. This hit the morale of easyJet pilots which the company had to address.
Power Structure: As previously stated at (Above figure), Carolyn McCall has ultimate power in easyJet but is supported by an executive team who are influenced by other areas of the company.
Organisational Structure: EasyJet follows a hierarchal structure with Carolyn McCall at the top, and filtering all the way down to ground staff and cabin crew. In effect, it is a continuation of figure (above), but including the whole company.
Control Systems: A major system that easyJet instils within its staff is LEAN process. This eradicates any waste, whether that be time or finically, to provide a more efficient service whilst improving turnover.
Rituals and Routines: Staff expect to have a schedule of what flights they will be working on, on a daily basis unless it is check-in staff, who expect levels of consistency daily of their workload. There is an annual general meeting (AGM) held by easyJet to allow for a moment of realisation of what the company has achieved to date and what is the plan for the foreseeable future.
Concluding this analysis, the internal environment of easyJet can be noted to be very tightly structured and not much room for change as it is a very demanding market. Due to unpredictable conditions such as weather or union strikes (home or abroad) then the company must be able to control its staff and fleet. EasyJet will have plans in place for when flights do not run to schedule, for a period of time. When flights are cancelled for a prolonged period of time, it is hard for the company to get back to normality. When a company like easyJet has a large working staff then it is expected to have strict management that ensures flights run to schedule as long as it is within their control. Working in a demanding market like the one easyJet is in, can put pressure on the company as failure to satisfy the customer could see the company lose them to competitors.
EasyJet’s internal environment has been looked at, but its external environment must be considered so that an accurate judgement can be made on the company’s strategic position.
3.2 – External Environment Analysis
There are a number of methods to determine the effects the external environment has on a company’s strategic position. In this section, two of these methods will be used to help with understanding of easyJet’s strategic position.
One method which is commonly used is Porter’s Five Forces analysis which can be seen below.
Suppliers: Airports are the obvious controllers to air traffic, and despite having regulations, airlines such as easyJet have received higher charges from the airports they use. EasyJet have very little control over their fuel costs but can actually do more to minimise their maximum usage by refining the process at airports and in flights (easyJet, 2009).
Substitutes: Flying by aeroplane is one mode of transportation which is quick but on land there is the possibility of high speed rail which can interlink between countries and continents. Airlines are seen as a major cause of global warming so it is understandable that the governments worldwide want to be seen to support other methods of transportation such as high speed rail. Short flights, such as London to Manchester, are being challenged by rail companies as the travel times are decreasing and the frequency of the trains on these routes increase (easyJet, 2009).
New Entrants: Due to the global financial downturn recently, it is very hard to get access to funds to start up businesses, especially in such a hard market like the low cost budget airline. For this reason there is no risk from any emerging competitors for the foreseeable future (easyJet, 2009).
Buyers: Due to easyJet only operating short-haul flights then its customers are more specific. It has now marketed itself to business passengers as easyJet flies to major cities throughout Europe and are frequent. Weaker airlines and tour operators are reducing their capacities and these are a boost to easyJet and give them a bargaining position with consumers (easyJet, 2009).
Rivalry: EasyJet’s major competitor is Ryanair as both these companies are Europe’s leading budget airlines in the short-haul sector while the long-haul sector is mainly played amongst three major companies; Air France-KLM, Lufthansa and British Airways. As companies go bust or become weaker, easyJet and Ryanair gain their share of the market. Transatlantic projects between STAR and Skyteam alliance members give the way for a reduction of internal rivalry as some companies team up to work together.
http://2009annualreport.easyjet.com/files/pdf/easyJet_AR09.pdf (page 19)
Using this information, it helps to understand why easyJet is developing the way it is now. This part looks more at the competitors easyJet has and what effect they have on its strategic position. Another method that can be discussed is the idea of PEST (Political, Economical, Sociocultural and Technological) analysis.
Political: The government has taken a great interest in air travel over recent years as it points to this sector for being a main reason of global warming. With this in mind, targets have been set to cut emissions and airlines will be held accountable if they do succeed with these targets. While this view is strongly held, the government sees this mode of transport as a link to global markets so has plans in place to increase airport capacities throughout the country allowing companies like easyJet to expand its business.
Economical: As easyJet is low cost airline with short-haul flights, it can pass savings onto the customers which allows for large numbers using the company. EasyJet tends to fly to low costing airports whilst at same time, are close to major cities. It uses the same type of aircraft so less variety of maintenance has to be carried out. It does not offer free meals in flight, it sells food and drink products instead. Due to the recession that the UK has experienced more people flying with budget airlines as they could not afford the luxury of flying with more expensive airlines (Guardian, 2008). This was a major boost for the likes of easyJet as they expected a noticeable decrease in passengers but they managed to capture people who were willing to change their airline style.
Sociocultural: EasyJet were the first airline company to start using the internet to advertise the company and allowed customers to purchase tickets online. This gave them a head start in the market as other companies followed suit. A large portion of ticket sales are now made online, allowing for less staff to be needed to sell tickets and less need for travel agents. Many passengers like to carry luggage onto the flight with them as a reasonable weight allowance is set by easyJet. Less pressure is put on at check-ins now as less baggage is checked in and more people check in online. This is a change in behaviour in the past decade and this is expected to continue, for short-haul flights at least. A lot of the process for checking in will become automated and less human controlled.
Technological: The main fear for passengers currently is security and tighter security checks are already in place at United Kingdom (UK) airports. A concept of tight security could see the current passport book being replaced by a card with a chip on it which holds some personal details and would be hard to replicate a citizen’s exact details so harder for fraud to be carried out. Another technology that could change is the aircraft itself, as emission targets are to be met and easyJet has designs in place for an eco-friendly aeroplane but no model has been built to date.
3.3 – SWOT Analysis
The areas that have been discussed in this chapter have given an indication that easyJet uses one of its core competencies to stay at the high end of the market and that is the efficiency of the company. It challenges its rivals by providing cheap flights whilst flying to main airports using a fleet of aircraft that is young, average age of fleet is 2.3years (easyJet, 2010). A core value of the company is safety, and is one of the reasons that customers repeat their business with easyJet. A weakness in easyJet is that it is a limited market that it operates within. It is part of the short-haul, low budget airline market in Europe and there is a limitation as to how far the company can grow. Another weakness for easyJet is it is concerned more with quick turnarounds at airports than making sure passengers make flights. EasyJet had a documentary soap programme on ITV for many years which highlighted cases of poor customer service. Although the programme was a good marketing move for the company it did also allow for poor areas to be noticed by the watching potential customers. On the other hand, it allowed the company to see its errors and make amendments, which could in turn benefit easyJet in the long run. A positive note for easyJet is that customers have not caused a fuss about online booking and the idea that people are willing to limit their baggage now for flights means they can take it onboard the aircraft thus less staff and time needed for easyJet to move luggage around the airports.
The advancements easyJet can make are two ways. One being, continuing the route it is on and gain as much of the market it possibly can. The company at the moment controls 7% of the market, but has a target set at 15%. Within the near future it hopes to capture 10% (BBC, 2010).
The company is ambitious and expects to be a leader in the market. Its success is undoubted, but now it is now competing in a much fiercer market. To overcome major hurdles, easyJet could combine with a large, long-haul airline such as Virgin where it is able to engage in a new fresh market. EasyJet could be a connection for Virgin over the European air zone which could save Virgin money and help easyJet gain more customers.
3.4 – Strategic Position
EasyJet finds itself in a position that it is at the top end of the market it competes in and that is down to its innovative ideas, core competencies, values and a clear vision. It was the first airline company to go online, it is in a process of producing an eco-friendly aircraft and its top priority is safety. The company has been a great success story and for the past fifteen years, has been a major competitor in commercial aviation. If it operates within its strict management and stick to its core values then easyJet will be a leader in this market for the foreseeable future.
4.0 – Emerging Technology
4.1 – ID Cards
The chairman of Travel Counsellors, David Speakman states, “Check-in is causing delays and airlines should address that. The whole airport experience is bad.” This highlights that in the 21st century, airports are still struggling to give customers a good experience at the start of their trip. Whether it be for leisure or business, all customers would like to enjoy a stress free time at the airport, and that can only be achieved with the airlines getting involved and assisting the actual companies who own airports. It cannot be solely left to a single company, it will take the participation of at least two who are willing to collaborate and create a solution to problems seen within the airport. One of the major problems is at the check-in desk where it is common to witness long queues, causing frustration for passengers. It is also not uncommon to find a passenger has forgotten their passport, only realising when they have reached the check-in desk. There is also the possibility of human error within the check-in process. Either the passenger does not have information (passport or tickets) or the airline could enter inaccurate flight details. Identification (ID) Cards could eliminate the problems that occur.
Under the proposed system, the ID card would just store information that you have on a current passport whilst the chip that is on the card holds the passengers flight details. No invasion of other personal information is used within the process.
With this in mind, this could be an emerging technology of the future. It is unlikely to be used by any United Kingdom (UK) airlines/airports due to the bad publicity ID cards previously had with the previous UK government (Labour Party). Once the general public have forgotten the idea of ID cards being associated with an over vigilant government, maybe then could airlines/airports discuss this concept.
4.2 – Implementing ID Cards
ID Cards could be brought in by having individual airline check-points throughout the airport to enforce the company’s passengers to swipe their ID card so security and the airline themselves know where passengers are and erase any possibility of passengers missing flights. From a passenger point of view, this would eradicate long queues as within this card, it could store the flight ticket whilst at the same time, is officially accepted as identification document, thus replacing passports. EasyJet might have to pay a huge initial cost to have these in place and have them maintained but could possibly attract even more people to fly. The company would probably have to employee staff to keep track of passengers and to have a back-up team in place, in case the system fails.
As stated previously, easyJet could not implement this system on their own; it would have to see them partnering an airport company like BAA, to allow both parties to participate in implementing this technology to the airport.
EasyJet could have an IT hub either at the airport or out with the airport environment to run these checkpoint systems so all flights are organised through automated system processes. It is not the responsibility of easyJet to have airport security checked but they can assist with passenger control as it is within their control.
4.3 – Impact of ID Cards
The concept of these cards could see more people flying and this is an opportunity for easyJet to increase its passenger numbers and increase profits. Queues could be created at checkpoints, especially if some fail. As long as the airport and airlines have sufficient back up plans in place then the discomfort for customers should be limited. Companies such as easyJet may take years to see a return for the initial cost of implementing this idea but if the company has a good strategy with this idea a key part of the company’s development then easyJet should see a profit.
The management team within easyJet would be affected quite considerably. Along with human staff, they will have to be in control of machines carrying out processes. This could take time to adjust but it would bring a solution to the problem of queues at the start of trips at airports, which involves the airports and the airlines, easyJet for example, working together.
5.0 – Conclusion
This report has critically evaluated the strategic position of easyJet whilst at the same time looked at the impact emerging technology may have on this position. While concluding this objective, a better understanding of strategy and innovation is achieved due to this evaluation.