Case Study EasyJet Essays

Case Study EasyJet Essays Case Study EasyJet Essay Case Study EasyJet Essay Essay Topic: Easy Marketing This report will consist of an analysis of EasyJets macro and micro marketing environment. Macro-environmental factors include; political, economical, social and technological changes to the environment, i.e. the external marketing environment. The micro-environmental factors on the other hand include groups of people directly affected by the companys decision; for example; stakeholders, competitors, intermediaries and customers, i.e. the internal marketing environment. Using these I will then go on to conduct a SWOT analysis. A SWOT analysis will enable me to look EasyJets strengths, weaknesses, opportunities and threats and in turn allow me make strategic recommendations for the future. In order to help do this, the report will be based on collected and analysed data about EasyJet and will look in depth and analyse what this means to Tesco as a European conglomerate. Background to EasyJet EasyJet was launched in November 1995 by a Greek called Haji-Ioannou with a fleet of two Boeing 737-300 flying from London to Glasgow and Scotland. Today it operates with 72 aircraft, offering 125 routes from 39 European destinations. The defining way that EasyJet was able to establish itself into such a successful airline is largely due to its base concept of offering a low cost, no-frills service. It believed that as the demand for short-haul air transport was price-elastic, reducing prices would mean more people would fly. This might be a reason why EasyJet was able to undercut its rivals as traditionally airline concepts are based on the fact that airline traffic grows in line with the economy and that cutting prices will only lead to a decrease in revenues. EasyJets revenue in 1998 was  £77 million and in 2006 this figure had risen to 1,619.7 i(easyJet.com) EasyJet keeps costs low by eliminating the unnecessary costs and frills associated with traditional airlines. This is don e by through numerous methods: use of the internet to reduce distribution costs, maximise the utilisation of substantial assets, ticketless travel, no free lunch, efficient use of airports and paperless operations. Easyjet.com is the main brand name ii(keynote.com) and its 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 we will develop our people and establish lasting relationships with our suppliers. (easyjet.com) EasyJet is now the UKs leading low-cost airline and the second-largest in Europe after Ryanair. It continues to facilitate its strategy of growth, for example, with the addition of the Airbus and GB airways at a cost of  £103.5 million iii(news.bbc.co.uk), currently it looks like it will just go from strength to strength? EasyJets external marketing environment (STEP analysis) In order to conduct a STEP analysis, firms need to review the environment in which they operate. The following factors play a major role in the airline industry today i.e. political-legal, economic, socio-cultural and technological. Social Factors Whilst being a dominant low-cost airline, and the second largest in Europe, EasyJet has not won over all members of the public. Currently the French and German community are proving a problem. This is because there is a general reluctance to use credit cards over the phone and Internet. (Hattee J. (2000).) Currently 95% of all tickets are sold over the internet iv(easyJet.com). The idea of cheap flights generally appeals to the public. However, the promotion of prices through for example newspapers and Teletext that are unrepresentative of the actual cost on another day/time, are likely to deter or antagonise customers. It has actually been in the news recently that airlines such as EasyJet should only advertise prices that show the actual cost i.e. includes all taxes etc, a ploy used before to draw in customers. Technological Factors EasyJet is faced with balancing technological advancements, for example, the use of the internet on distribution and cost synergies from industry consolidation, and the risk of rising costs and competitive pricing. EasyJet was one of the first airlines to embrace the opportunity of the Internet when it sold its first seat online in April 1998. Now approximately 95 % of all seats are sold over the Internet, making easyJet one of Europes biggest Internet retailers. v(easyjet.com) Technological developments in the field of e-commerce and aircraft manufacture are vital in allowing EasyJet to maintain an advantage over its competitors. EasyJet now offers paperless operations as the management and administration of the company is undertaken entirely on IT systems which can be accessed through secure servers anywhere in the world enabling huge flexibility in the running of the airline. Also passengers instead of receiving tickets now get emails containing there travel details and booking reference online. This has greatly reduced the costs of issuing, distributing, processing and reconciling millions of tickets each year. vi(easyJet.com) Economic Factors There are likely to be increases in fuel costs, congestion and other environmental restrictions. The risk of terrorism is likely to have an impact on insurance costs i.e. they will go up and the system of security implemented i.e. much greater/more alert. Globalisation should continue to boost traffic in the long-term and the introduction of the single currency in Europe is likely to bring more business to EasyJet as Europe becomes more integrated. Stelios Haji-Ioannou, the founder of low-cost airline easyJet, believes that the euro has reduced the currency risks of running a business in Europe and that must lower costs and hence prices for consumers. vii( www.time.com) Political-legal Factors The political environment concerns the role of the government and the extent to which it intervenes in an economy. Political issues, such as the threat of ongoing war in the Middle East, and more recently issues in South America have driven up oil prices. They have also been going up due to the threat of a cold winter. As a result this reflects on the cost of aviation fuel. Whilst these political factors have a direct impact on the economy, such as increasing fuel costs, increased congestion, environmental restrictions, higher security, and insurance, they are intrinsically linked with social-cultural effects i.e. impacting upon the attitudes towards air travel. Due to terrorist attacks such as September 11th, airlines such as British airways have stopped flights to certain countries (particularly in the middle- east), in fear of another attack. This has had a domino effect whereby it has caused a political stir, with Britains believing that they maybe the next victims of a terrorist attack. Airlines have lost a lot of money as they are no longer going to certain destinations. I believe the implication of certain security measures have also had an influential effect on customers. As ordered by the Transportation Security Administration, new security screening went into effect due to the foiled British terror attacks. The primary restriction was the carrying-on of liquids or gels including beverages, shampoos, sun tan lotions, toothpaste and hair gel. Passengers were permitted to have baby formula and/or breast milk, prescription medicine with a name matching that of the traveller, and non-prescription medicines. Any beverages purchased past the security checkpoint must be consumed prior to boarding any aircraft. Philip Fanara, Jr., Ph.D. CFA, from the department of finance, insurance, and international business, expresses his view that airlines may lose some customers due to the new regulations being an inconvenience. viii(www.thehilltoponline.com) EasyJets internal marketing environment Competitive analysis EasyJet faces stiff competition from airlines such as Ryanair, BMIbaby, MyTravelLite and Buzz. Virgin Express, Hapag Lloyd Express, Germanwings and Air Berlin already are or might become competitors as a result of future expansion plans. Ryanair (EasyJets main competitor) is the only one of these companies so far to have succeeded and shown a continuous annual profit. In September 2006 it made  £235 million and in September 2007 the figure had risen to 291 million, a 24% increase. ix(www.ryanair.com) Suppliers EasyJet currently has two suppliers, Boeing and Airbus. An important part of easyJets strategy is to operate a modern fleet and based on the current business model, requires easyJet to acquire a significant number of further aircraft whilst achieving a low total fleet operating cost. Between 2003 and 2007 there were 12 aircraft deliveries under the Boeing contract. However, 120 aircraft deliveries were made under the Airbus contract in this same period. x(www.easyjet.com) Airbus was looked more favorably upon as it offered significantly better value than Boeing, the Airbus Contract enables it to purchase Airbus A319 aircraft at a price approximately a third per seat below the price for the Boeing 737-700 aircraft delivered to it under the Boeing Contract in August 2002. Other factors included fact that the Airbus had agreed to provide extensive support to the Company, especially with regard to training for easyJets pilots, cabin crew and maintenance personnel. Also, Airbus has put arrangements in place in keeping with low cost operation i.e. Airbus A319 aircraft maintenance will not exceed the cost of maintenance for its Boeing 737-700 aircraft. xi(EasyJet.com) Media The media have provided a link between the airline EasyJet and the public. Press releases portraying special deals and new routes available Im sure have proved beneficial to EasyJet in terms of attracting new customers. For example, deals of the week are advertised which are ideal for those on a budget who need some inspiration when looking for a holiday destination or for those looking for a last minute getaway at an affordable pricexii(www.easyjet.com) and also routes, easyJet to launch flights to Jersey!EasyJet, Europes leading low-fares airline, today announced it will launch two new routes to Jersey from Liverpool and London Luton next spring, with daily flights commencing on 31 March and 21 April respectively. xiii(www.easyjet.com) Press is generally good for EasyJet. Environmentalists With the number of flights leaving the UK set to double or triple by 2030, environmentalists have put airlines at the centre of the debate on global warming, a development that could lead to restrictions being imposed on the industry. The Conservatives have unveiled their `Greener Skies proposals. Among the suggestions are the introduction of VAT on fuel for domestic flights and higher tax rates for frequent flyers. xiv(www.keynote.co.uk) Customers Travel is now a priority for todays consumers, however the youth market needs addressing. The outlook for consumer expenditure looks extremely healthy, which will continue to sustain leisure spending. With holidays and additional short breaks now the UKs top two expenditure priorities (23% and 22% respectively), this multiple trip culture has become so ingrained that it will require a major downturn to change this. In Mintels Holiday Lifestyles Responsible Tourism UK, Leisure Horizons January 2007, some 22% of respondents stated that even the disappearance of low fares would fail to change their habits. The 25-44-year-olds are currently the core low-cost market and despite the budget connotations, the no-frills market is actually driven by the wealthier socio-economic groups splashing out on multiple trips.xv(http://academic.mintel.com)