Easy Jet Plc. Strategic Analysis

Easy Jet Plc. Strategic Analysis

easyJet PLC is a low-cost airline carrier that serves a mainly European customer base. Since its start, the company has grown significantly, even through times of economic hardship and escalating fuel prices. A strategic analysis of the company reveals that it has significant strengths in areas such as the economy and market position. Economic factors play an especially important role, as the recent recession created an unprecedented opportunity for the carrier to serve an ever-growing market.

Strategic analysis

Strengths

One of easyJet's most significant strengths is its network development. According to Nieuwsbank (2008), this is one of the carriers main differentiators in the market it serves. This means that strong relations are created with major airports in markets such as London, Geneva and Paris. This makes the carrier highly appealing a large customer base.

At the same time, easyJet's management strategy focuses on optimizing its routes, while underperforming routes are closed.

According to the carrier's annual report of 2009 (easyJet, 2009), the company had a presence in 37 of Europe's top airports, while it maintains a presence on 45 of the top 100 European routes. In total, the company has 422 routes, a presence in 114 airports and 27 countries.

The airline's main strength is its ability to maintain low costs by offering a no-frills service to customers, as well as paying lower than market wages to its employees.

Weaknesses

One of the weaknesses of easyJet is that, despite its significant presence at major airports, its main departure airport remains Luton (Stirmedia, 2005). The result of this is customer inconvenience, as London residents wishing to make use of the service need to travel to Luton. EasyJet has no presence at London Heathrow airport.

Another potential weakness is Internet booking. Although many people do have the technology to access Internet booking, some potential customers do not. For a low-cost airline, this is an important consideration, as many of their customers are among the less affluent and might therefore not be able to afford luxuries such as the Internet in their homes.

Finally, the no-frills service might not be palatable for all potential customers. The fact that easyJet has no business class and does not serve food during its flights could have an impact on potential customer decisions to make use of the service.

Opportunities

The opportunity for low-cost airlines have always been many, but they are particularly so in the current economic climate. According to Karivate (2004), this opportunity was first created by the deregulation on airlines. The traditionally high airfares of bigger airlines created a market opportunity for low-cost carriers to enter the market. EasyJet has done so with significant prowess.

Today, easyJet is one of the strongest and most favored in its market. It has further opportunity for market expansion, precisely because of its major strengths. Furthermore, the company can even use its key weakness as a springboard for expansion to create more departure points across the UK and Europe.

Threats

The most significant threat easyJet faces is the economy and the concomitant rise in fuel prices. Excessively high prices for fuel will force the airline to either raise its fare prices or lower its wages. Both of these risk eventualities such as strikes, which would significantly impact services, or a loss of potential customers (Stirmedia, 2005).

Another threat is increasing competition. New entrants could result in a loss of current benefits such as low fee support at airports. At the same time, however, new entrants are not significantly numerous, as the market is very expensive to enter. Existing competitors in the low-fare market are numerous, although many of them are struggling in an economy that is forcing travel prices increasingly higher.

This is evident in reports such as the one by Rothman (2009), indicating that airlines were struggling in the economic downturn. A handful of exceptions to the struggle were mentioned, of which easyJet was one.

Pricing Strategy

EasyJet's low prices are its most powerful weapon (Stirmedia, 2005). Its market position is therefore significantly strong because of this. The company's focus on efficiency in terms of strategy, pricing and routes have made it one of the leaders in its market. Indeed, the growth of the airline has shown that the main consideration for customers in choosing airlines is price rather than the type of additional services they receive on board.

Political, Economic, Social and Technological Factors

Political factors that could affect easyJet's operations include employment laws. The company is paying its employers less than the market average for traditional airlines (Karivate, 2004). A risk could be created should government regulations change to force these wages higher.

As mentioned above, economic factors play a major role in the industry today. Because easyJet offers lower fares, customers affected by the economic downturn chose it in favor of traditional airlines. Furthermore, the company's economic prowess is such that it is able to withstand factors such as fuel cost increases (Hasell, 2009).

In terms of social factors, easyJet focuses upon safety as a top priority for its personnel and customers (easyJet, 2009). Safety is ensured in terms of a safety management system that ensures the maintenance of equipment and aircraft is optimal. Flight and cabin crews are kept up-to-date on safety features at all times.