The CLC business strategy assignment discuss about the business strategy which might be beneficial to EasyJet in future years with current situation analysis.
a) Mission, Vision, Goals, Objectives and Core Competencies followed in EasyJet
Mission – A mission is the purpose of any organization which the organization uses to serve its stakeholders. It is the main reason for the existence of the company. The mission of EasyJet is to provide its customer efficient service in terms of point to point, On-Time service, to make sure that the customers are safe, to deliver quality product and service at prices which are easily affordable by maximum people, help their employees to develop themselves and build long lasting and healthy relationship with their suppliers (Kilburn, 2003).
Vision- - A vision are those set of tools which are formed by the company to have a clear picture in which direction to move forward. Vision of any company can be arbitrary in nature but it drives the company to move forward in accomplishing its goals. The vision of EasyJet is to be the best airline in the world in terms of low –price flights and great customer satisfaction.
Objectives – These are targets set by the company to reach in few years to come. Objectives are check-points which are set by the company in its pursuit to accomplish its vision. Objectives can be tangible or intangible in nature. The objective of EasyJet is gain more and more customers in near future, improve their On-Time performance, to improve on their customer services by introducing new and better offers and to make sure that their daily operations are carried out in environmental friendly way with minimum pollution as possible (Gillen, 2004).
Goals – Goals are short term targets basically for a period of half yearly or yearly which are set for each employee in the company as well as for the company as a whole so that company’s performance can be measured. The goal of EasyJet is to improve their On-Time performance by 5% in the next year, to introduce 20 new fuel efficient aircraft based on the latest technology in the market. To make frequency of flights can be increased and number of routes can be increased to provide wider range of service to its customers.
Core-competencies- Core competencies are those factors which distinguish a company from its competitors which are engaged in similar kind of business. The core values which drives the company and which defines the identity of the company are called core competencies of the company. The core competency of EasyJet is its flexibility to channelize its resource to meet customer needs and the low price range along with advertising and promotion with discount coupons offered to online users have been one of the reasons, the company is known for.
b) Issues involved with strategic planning in context of EasyJet
The company uses various techniques and tools to forecast their revenue which help them decide how much resource is required and where to channelize their resource so as to meet their goals. For example –EasyJet in order to meet the ever-rising customer demands, need to buy new aircrafts, hire new employees, make sure that maximum people are loaded as per the capacity of the aircraft as well as coordination with different airports to get clearance as soon as the flight reaches the destination so that punctuality is maintained. Thus, how much aircraft to buy, how much human resource to hire and new ways to make sure relationship with airport staff and coordination is done properly are all part of strategic planning.
However, strategic planning of EasyJet suffers because of some key issues. These are:
Firstly, EasyJet faces tough challenges with its competitors who keep on introducing new ideas and techniques to attract customers. Thus, the company loses its existing customers which make it difficult to plan a strategy based on its current hold over the market.
Secondly, EasyJet, being a low-budget company tries its best to make sure price of flights are the lowest. The various cost cutting ways effects the human resource management of the company and the employee relations are not at the best in EasyJet. The company suffered a lot in 2010 due to high exit percentage of employee which demand the company to hire new employee which was both time taking and also demand lot of investment and hindered strategic planning of the company to great extent.
Thirdly, Fluctuations in the prices of energy- Aircraft exhaust fuel at great pace. A single flight uses gallons of fuel and thus even small fluctuation in price of fuel can affect the tour operations and targets of the company to considerable extent. Thus, one main issue with strategic planning are the ever-fluctuating prices of fuel which makes it difficult for EasyJet to forecast how much revenue can be generated in the next month, quarter, half-year or yearly (Garrigos-Simon, 2010).
Lastly, EasyJet flies in various countries and therefore has to follow the rules and regulations followed in all these countries. Any change to the political factors in any country where EasyJet has its operation makes it difficult for the company to lay down these changes while formulating a business strategy. For example, any change in taxation system in a country may also have significant effect on the profit margins of the company and affects strategic planning as these factors are assumed to be kept constant while formulating a business strategy.
c) Explain various planning techniques used by EasyJet
The best technique used by EasyJet for planning purpose is using Ansoff matrix. The Ansoff matrix based on product and market can be classified into four categories (Meyer, 2004). These are:
- Market Penetration: This stage is characterized by selling of existing product to existing market. EasyJet should make sure that their strategy remains flexible so that existing customers remain intact with the company.
- Market Development: EasyJet should look to expand its business and should try to implement its current business strategy and existing service to new customers. This process is known as market Development.
- Product Development: EasyJet should also look to improve its current service by offering new services to the existing population of its customers. The company can start providing free snacks and food during flight time to add value.
- Diversification: Also known as substantive growth requires intense market research and high risk. The company should be well versed with market trends and changes related to its. EasyJet in the last two decades have shown that they are quick learners and can use this strategy to expand its business to medium and long distance flights.
a) Internal Audit of EasyJet
Organizational audit of EasyJet
The organizational audit is activities carried out by an organization to improve the daily operation of the company. Organizational audit refers to the internal operations carried out by the company and look to improve the way how an organization should perform. The most important tool used for organizational audit by EasyJet is to do SWOT analysis, which gives the company a good idea about how to channelize its human and capital resource:
SWOT analysis of EasyJet is discussed below (Jarach, 2009):
Strengths of EasyJet:
- Low prices compared to other short-haul routes airlines and a flexible revenue management system.
- High seat density, carrying high load and point to point service also helps the company to increase their cost per seat compared to other airlines.
- Better relationship with all the airports EasyJet has its operation in helps the company to build airport network and easily get clearance in congested airports, which helps the company in providing punctual service.
The pairing of EasyJet with 49 airports out of which 46 are primary airport makes EasyJet within the reach of maximum number of customers.
Weaknesses of EasyJet:
- Stiff competition with Ryanair who formulates new strategy to attract more customers.
- EasyJet is highly dependent on seasons for its main profit making. Summers are the best time to make profits by the company, while winters normally yield less profit to the company.
- The company should look forward to operate in medium and long-haul journeys as well.
- The company should increase its frequency by increasing the number of aircrafts.
- The company should look to find ways to further cut down on cost of travel through the use of new technology, efficient fuel consumption aircraft, etc.
- The company in 2011 had 18% passengers travelling on business trips. The company realizes that companies look forward to low-budget prices for business trips and therefore EasyJet aims to push this percentage by 25% in the next 5 years.
- EasyJet flies only at primary airports which are much costly compared to Ryanair which flies to secondary airports which are much cheaper and hence Ryanair is much cheaper compared to EasyJet.
- Employee relation management is one of the biggest threats by a low-budget airline like EasyJet. The company does not have high profit margins and therefore growth inside the company is pretty slow which results in low retention by the company.
- Fuel Price continuous increase has become one of the biggest threat the company has to face.
- Increase in the air travel tax has also resulted in less demand for air travel and resulted in loss of existing customers.
The macro-environmental approach i.e. PEST analysis by EasyJet (Mayer, 2004):
Political factors: There are always threats of wars in the Middle East which may hamper the profit margins of EasyJet. The variation in taxation system by the government of various countries also keeps a check on company’s operation. EasyJet has better opportunity to compete with British Airways as the government do not consider Air Miles scheme as a viable source of tax.
Economic factors: Increase in prices of fuel will adversely affect EasyJet business. Economic recession will result in less demand as organizations will be keen on saving their money by spending less on travel expense. However, Globalization has been a key factor in boosting the profit margins of the company. Making Euro as the single currency through-out Europe has also affected EasyJet business positively.
Social Factors: The company should look to provide free of cost snacks when on board to improve its service. The company should also make sure that they should not vary their prices by too much so that customers who have bought expensive tickets might feel cheated.
Technological Factors: EasyJet is one of the first companies to go online in terms of booking tickets and make full use of new and emerging advance technology in its day to day business to boost its profit margins. The company should look to make use of new automated tools for Customer Relationship Management to manage its customers and Supply chain Management tools to manage its suppliers.
c) Stakeholder Analysis
The various stakeholders associated with EasyJet are discussed below (Sunmade, 2008):
Owner: The owner of the company is the one who bears all the profits and losses for the company. The owner of the EasyJet is in constant pressure to make sure that the company can succeed and achieve its long term goals.
Employee: The Company needs to train its employees to develop their skills in relation to the new strategies imposed by the company. The company should also maintain its healthy employee relation to ensure less people leave their company. The company should involve its employees and consider their opinion while making any business decision.
Suppliers: EasyJet should offer proper lead time to all its suppliers so that its demand can be met in time. The suppliers should be consulted while making important business strategies, especially in relation to CSR - corporate business activities and environmental concerns.
Customer: The Company should understand the demands of its customers and also should make sure that social concerns arising from the daily operation of the company are minimized to have better customer relationship.
Investors: The Company should discuss its strategies with its investors so as to understand the viability of new initiatives. The banks and other investing organization look deep into the matter before investing and can be helpful in deciding which projects seems viable and profitable.
a) Identify and evaluate the possible alternative strategies EasyJet may adopt.
Substantive growth: EasyJet should also look forward to increase their business in medium and long haul-business. Substantive growth involves high risk involvement, however, EasyJet being a known brand, should take the risk of expanding their business to long duration flights. The company will have to change its strategy like it has to offer free of cost food on board and will have to target high-income group people, etc. According to Ansoff Matrix, this type of business strategy is known as Diversification, which means identifying new markets and selling new products and services to it. The company will require making intensive market research before going forward and continuing with this business strategy (Francis, 2007).
Limited growth: Limited Growth refers to selling of existing product and services to existing market. This strategy is termed as Market Penetration according to Ansoff matrix. EasyJet should look to maintain its current business strategy and compete with its competitors to make sure that existing customers are remaining intact with the company.
Retrenchment Strategy: EasyJet should figure out those routes and seasons which results in high losses. For example the company should look to limit its supply during winter season so that the company is able to save lot of capital resource and channelize the funds in implementing new business strategy.
b) Select the best alternative strategy for EasyJet using appropriate criteria.
The best strategy which will yield high results to EasyJet is to grow their business towards medium and long-haul flights. The company has done a great job and has made a brand name as low-budget carrier airlines. However, keeping in might the long term vision of the company, it is necessary that important steps should be taken by the company to make sure that the company can shift its business model to capture complete European market.
The company should look to target high income group people. Various promotions done by the company should be keeping in mind medium and high income group people, when it comes to selling their medium and long distance airlines.
The company being famous to offer low prices should continue its effort to offer low price and flexible prices to its customers when it comes to selling tickets for long distance flight tickets.
The company should make sure that the aircraft used to fly over long distance are completely different from what are being used for short distance as the strength of Aircraft differs a lot. Thus, the company should make sure safety of customers to be its number one focus before going for new business. The company should also make sure that fuel efficient aircraft with latest technology engines are being used to gain competitive advantage to the company. High fuel efficiency will ensure cheaper prices for ticket and will attract more customers.
EasyJet is known for its Brand Value. The company has always targeted primary airports. The company should continue with its current approach while expanding its business and should make market pair with leading tourism destinations in the whole of Europe. The company can even look to start its business to some part of America and Asia so as to expand its volume world-wide.
a) Roles and Responsibilities of various stakeholders to implement this new business strategy
The roles and responsibilities of various stakeholders are discussed below:
The owner of the company should make sure that the top management ensures that all the stakeholders are involved and benefitted with the new business strategy formulated by EasyJet.
The human resource management team should look to provide better-working conditions to the employees and also give responsibilities to the employees to take business decision which will increase the motivation among the employee and brings feeling of security among the employees.
The employees should come forward to take new responsibilities the company will offer while implementing new business strategy of EasyJet to grow their business. The new strategy demands new human resource and hence the new hired employees should be used to serve existing business while more experienced employees should be used to serve the new business model and new customers.
The investors should understand the benefits the company will derive through its new policy of substantive growth. The investors should help the company to implement this new strategy by providing sufficient funds to the company. Both EasyJet’s and its investors will be benefitted with this new business model.
The suppliers should also be ready with the manufacturing of new aircraft so that they are able to supply the EasyJet with new aircraft as early as possible to make sure that new business plan starts with proper number of aircraft required to meet the demand arising from new customers.
b) Resource requirement to implement new business strategy
Some of the resource requirement to implement the new business strategy by EasyJet of growing their business to medium and long distance flights are:
The company required to increase their capital and thus need new and better investors who could provide the company with funds required to implement new strategy. As an alternative the company can also use its profits gained from their existing business to be laid down this new business model.
The company should also look to hire new human resource as the company will not be able to manage with existing work force being a service based company. Thus, new employees need to be hired.
The company also need to have more aircrafts with better strength to fly for longer durations and should be fuel efficient to ensure low operational cost as well as environment friendly flights.
The company’s demand for fuel will also increase and thus the company need to look for new supplier’s for providing fuel. Since most of the fuel is imported from middle east, the company should maintain good relations with the suppliers in middle east.
c) Timelines and timescales EasyJet should set to implement new business strategy
Some of the basic timelines that EasyJet should set to implement their new business strategy are:
The company should take a year time to analyse the market and customer demands. One year time will help the company to analyse month wise demands and gives them a fair idea about the months when the traffic is the maximum and the months, when the traffic is at its minimum.
The company based on its market research, should first plan its strategy so that the company understands how much human and capital is required. Once, this is decided the company should look to hire new employees. Hiring of new employees and training them to ensure they develop right skills to be a part of EasyJet family requires another 8-10 months’ time. Training programs also will take another 6 months to 10 months to ensure that the employees are familiar with company’s values and have learnt the required skills to serve customers better.
EasyJet after analysing their strategy should also order new fleets from its suppliers as aircraft supply is not easy and can take more than one year to supply.
Promotions play an important role in reaching out to people about the new service started by EasyJet. The company should make full attempts to broadcast ads on TV and newspapers. The company should also place promotional ads on its websites. Promotions also required considerable time and the company should keep at-least 4- 6 months for promotions. However, the process for promotion can be done parallel to hiring of new employees and demanding for new aircraft as all these things are independent in nature.
However, the final step to determine price which will involve all the investment made in gathering sufficient resources and managing them might take 1 month time as lot of data needs to be analysed and also fares offered by competitors should also be kept under check.
Thus, the company requires a period of 2 and half year to 3 years to implement their new business strategy. If EasyJet starts their process by second half of 2014, the company may be able to start its business by 2017.