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PM303 Strategic Management

Published : 20-Sep,2021  |  Views : 10

Question:

In a statement to the London Stock Exchange in the aftermath of the Brexit vote, EasyJet said the company had been preparing for this eventuality in the lead up to the referendum vote and has been working on a number of options that will allow it to continue flying in all of its . As such the company has opened talks with EU member states' aviation regulators about relocating its headquarters from the UK. This prospect of moving its legal HQ reinforces the fact that leaving the EU will have an impact on its corporate structure. EasyJet employs roughly 1,000 people at its Luton base, in functions such as finance, IT and marketing - separate to the staffs who work on its operations at the Bedfordshire airport.

The airline is now expected to review all 27 of the remaining member states before holding further discussions with a number of them about the possible terms of an Air Operator Certificates (AOC) with a view to making a decision later this year.

You have been hired by EasyJet as a consultant to develop a business level strategic plan for relocating its headquarters from the UK into an EU member state (Choose a country and city). You are expected to write a report to summarise your research findings on the given tasks below:
 
Tasks 
1. Critically analyse the external environment and industry competition in the new EU member state you are recommending. This should include competition within the new EU member state as well as competition resulting from relocating to the new EU member state.
2. Using relevant frameworks, critically discuss EasyJet’s resources and competencies as well as how they can be utilised in gaining competitive advantage upon relocation to the new EU member
state. 
3. Critically evaluate whether EasyJet can continue with its current vision and mission statements in the new EU member state. Reframe the vision statement and the mission statement of EasyJet for the new strategic change if required. 
4. In light of the analysis conducted in Task 1, 2 and 3, construct a SWOT analysis of EasyJet and recommend changes (providing justifications) to its current business-level strategy if required.
changes are not required, provide justifications for retaining the current strategy. 
5. As a part of the assessment, all students should answer the Employability Skills Self-Assessment Survey in Week 1 and 10.

Answer:

Introduction:

This study deals with an airline company named as EasyJet (Easyjet.com 2017). In this particular assignment, proper emphasis has been given on how EasyJet had prepared for leading up to the referendum vote as well as working upon number of options that allows it continually flying in its entire marketplace. The current segment analyzes the external environment as well as industry competition in the new EU member state. The study explains the external environmental analysis of EasyJet through use of PEST analysis and Porter five forces model. The present study discusses resources and capabilities of EasyJet and gain competitive advantage upon relocation to the new EU member state. Furthermore, the study evaluates with the current vision and mission statement in the new EU member states for the new strategic change as and when necessary. In addition, the next segment constructs SWOT analysis of EasyJet and recommending changes after providing justification to its present business level strategy as and when required (Wheelen and Hunger 2017).

Critically analyze the external environment and industry competition in the new EU member state

On critical analysis, it is noted that the external environment as well as industry competition in the new member state in countries such as Germany.

Political or legal issues 

Liberalizing the European airline industry 

It is noted that the airline industry has been widely affected by political regulation based on operations as well as for ownership of airlines that was partially owned by the national governments (Stead and Stead 2013). It is further argued that regulations based on the concept and air transport as a public utility especially from civil aviation for being economical, social, political and legal. The European Union has laid down strict control on state aid for discouraging governments from supporting national flag carriers with state subsidies. It becomes difficult for ruling because European Union is determined for increasing the level of competition in the airline industry as well as model for using regional airports has been beneficiary to the consumers through low prices for attracting large amount of passengers or tourists (Easyjet.com 2017).

The European Union has passed legislation that mainly focuses to improve rights for passengers travelling from new EU member state such as Germany. With regard to airlines, the EU is mainly targeting the practice of overbooking. The practice is effective where many customers rely on full service airlines in case of business passengers who ask for flexible tickets and show up for a reserved flight because of limited capacity of aircraft. The airlines need to re-schedule the flight for the customer for giving refunds and paying their food as well as lodging until the subsequent possible flight (Rothaermel 2015).

Economic issues 

There had been proper interactions present between the political world as well as airline industry where PEST analysis continues for highlighting the economic issues that have greater impact on industry importance (Easyjet.com 2017)

The World Economy 

It is noted that demand for air travel is categorized under very high-income elasticity where research showed two-to-one relation between demand for air travel as well as world Gross Domestic Product at the same time. Furthermore, the airline industry is very much dependent upon the world economy as well as its trade cycles. Other problem with airline industry is related to trade cycles that increase the capacity during upturns that is quite difficult and need to purchase new aircraft (Peteraf, Gamble and Thompson 2014). Nevertheless, the delivery time of an aircraft goes for several years, prop up with capacity, and sold at a significant cost due to lack of demand. Thus, long-term planning is equally essential within the airline industry as the investment in aircraft considers as a significant financial burden and predicts the development of the trade cycles in given period (Easyjet.com 2017).

Socio-cultural issues 

Change in the perception of air travel 

Air travel is considered as an expensive cost and not easily available especially for lower as well as middle class income groups. In other words, the low cost revolution made for the air travel in and across Europe that is available to the larger public through lower fares. In addition, the surge of British residents showed willingness in purchasing real estate in France that get closely linked to the rise in cheap air travel between these two destinations (Peppard and Ward 2016).

Technological issues 

The internet and videoconferencing 

There are different factors that considers as influential drivers of change in the airlines macro-environmental that give rise to technological issues. In addition, it influences the industry that explores the topic for getting an insight of information of five forces industry analysis as compared to other factors after influencing the industry (Morschett, Schramm-Klein and Zentes 2015).

Industry analysis of airline industry 

                   

Figure: Porter five forces model

(Source: Hill, Jones and Schilling 2014)

Threat of new entrants 

Airport slot availability- It is noted that there is limited access to airport slots that had been barrier to the airline industry in EU member states where national airlines had access to the best slots in the main airport hubs (Morden 2016).

Predatory pricing- It is noted that the concept of predatory behavior based on incumbents in the industry that squeezes new entrants by temporarily lower the prices for matching the new competitor or introducing prices below the levels to the new entrants that have enough capital for surviving in the price war and driving out in the marketplace (Easyjet.com 2017).

Frequent flyer programs- It is noted that frequent flyer programs consider as marketing schemes by airlines and conducts certain amount of business within the airline industry. In addition, the programs have made many customers when business travelers prefer a certain airline alliance and receives bonus flights as well as free hotel accommodation for buying a cheaper flight at other airlines (Hill and Jones 2013).

Economies of scale- It is noted that there are no significant economies of scale in relation to airlines industry after looking at the whole system. There is need for use of larger aircraft and shown where the average cost per passenger is lower than the large aircraft for increasing the load factor.

Bargaining power of suppliers 

Aircraft manufacturers- It is noted that suppliers have strong bargaining power. Airlines cannot substitute aircraft by any other products and considered essential factor for the airlines after strengthening the position of the aircraft manufacturers. Addition to that, in recent downturn in air travel over the past years, the demand for aircraft has fallen dramatically for making the bargaining position especially by the aircraft manufacturers (Goetsch and Davis 2014).

Threat of substitutes 

Alternative modes of transportation- Various researches had been conducted that had huge impact on automobiles, buses, business or corporate aviation as an alternative mode of transport through scheduled air transport (Easyjet.com 2017).

Bargaining power of buyers 

It is noted that buyers had low bargaining power in the airline industry when customers purchased flight tickets for purchasing in large quantities. In addition, recent technological developments showed that rise of internet had increased the bargaining power of consumer for searching for the cheapest fare between dozens airline (Frynas and Mellahi 2015).

Rivalry among existing firms

It is noted that rivalry among the existing firms had increased from past 15 years as market liberalization and leads to increased competition (Easyjet.com 2017). In addition, the low fare airlines lowers the prices of airfares by use of business models after focusing on price leadership and forces full service airlines for avoiding lost of market share. Competition rivalry in the low fare industry can be categorized into two parts. Rivalry between low fare airlines as well as full service airlines that creates subsidiaries for competing with the prices and offered by the former (Eden and Ackermann 2013). On the contrary, internal rivalry between low fare airlines in the most appropriate way

Critically discuss resources and competencies of EasyJet and gain competitive advantage upon relocation to the new EU member state 

Resources and key competencies 

Key success factors 

At the time of analyzing the resources and capabilities, EasyJet looks at the demand as well as competition that seem relevant (Easyjet.com 2017). Some of the sources for demand when the low prices calls for an increase in demand. In addition, safety measures considers as a point of attraction, excellent baggage delivery as well as punctuality of flights. These factors can be observed that begins with expectations of customers from every local airline. Booking over the internet can be considered as the convenient factor that was satisfactory to the customers and dealt as a success factor (Daspit et al. 2017).

Resources of EasyJet (Tangible)

Financial- EasyJet had a profound financial reserve that helps in responding speedily to gain opportunities like recent bid for the Great British Airlines (Easyjet.com 2017).  

Physical- EasyJet owns 137 aircrafts with modern as well as fuel-efficient fleet.

Technological- EasyJet makes a scale of 98% f the flights through internet. In addition, the website is technologically developed as well as updated regularly that offers customer’s easy access to booking.

Reputational- EasyJet enjoys brand recognition.

Cultural- The organizational culture at EasyJet is flexible as well as emphasis on teamwork and cooperation for the achievement of excellent results. In order to portray the results, the staff members of EasyJet are of humble nature as well as cooperative in resolving any queries. EasyJet help the crewmembers for cleaning up the plane as a measure for ensuring the place takes-off on time (Carroll, Primo and Richter 2016).

Human

Professional skills and knowledge

EasyJet have a strong management team where the mangers have complete responsibility to utilize the resources (Easyjet.com 2017).

Communication

EasyJet make effective use of subcontractors for dealing with the operations. In addition, efficient communication is essential for laying out the strategy for accomplishing operational targets. The company had undertaken innovative programs, performance rating systems as well as workshops that contribute to effective working relationships with suppliers and subcontractors (Bettis et al. 2015).

Capabilities of EasyJet

Two methods are categorized as capabilities where the functional analysis recognizes the organizational competencies relative to each of the principal practical areas of the business firm. The capabilities of EasyJet are the service rather than a production company that laid on the events and help in creating a valued end service (Bettis et al. 2016).

Various listed factors are treated as key capabilities of EasyJet and obtained from the value chain analysis (Easyjet.com 2017). This include operational efficiency of the company, marketing & sales force, efficiency in financial management and technological advancement that is selling most of the tickets through online.

Critically evaluate whether EasyJet can continue with its current vision and mission statements in the new EU member state 

EasyJet can easily continue with the existing vision and mission statement in the new EU member state. The mission statement states the aim of the company (Easyjet.com 2017). The mission statement of EasyJet is to provide customers with safe, good value as well as point-to-point air services. The airline industry provides consistent as well as reliable product and fares that appeals mainly to leisure and business markets on a range of European routes. In order to achieve the objectives, the company believes in developing people as well as establishing lasting relationships with the potential suppliers (Bettis et al. 2014).

The main objective of EasyJet is to provide low fares as well as high frequency between major European airports. In addition, customer shows interest in paying little more for the value-added proposition (Easyjet.com 2017).

EasyJet is a low-cost flight that aims at maintaining high quality of services and positions itself to its customer base as the best form of budget travel in Europe. Here, price considered the most crucial positioning factor that needs urgent attention by the airline industry. The company had kept their prices low to a minimum to allow the airline to offer at lowest as possible. During the informational age, the airline industry has access to less cost for labor as well as infrastructure and less time needed for completing the same job (Bergh et al. 2014).

SWOT analysis of EasyJet and recommending changes to its current business level strategy 

Strengths

Weakness

EasyJet is a low cost fare airlines

Low cost overheads

Online booking

Rapid turnaround times

No frills

Reliability

Punctuality

Brand name- easy to remember and company slogan

Competitive advantage- quality customer service and flies to main airports

Lack of strategies- retain and expand

Under utilization of resources (Easyjet.com 2017)

Dependence on two models of aircraft

Temporary advantage in e-tailing

Highly sensitive to additional charges

Opportunities

Threats

Predicted growth

Immigration

Recent expansion of European Union

Mature airline market

Environmental- Terrorism and war threats

Technological- Business meetings held through video-conferencing (Barney 2014)

Political- Currency fluctuations, limited fuel hedging policy and increased environmental taxes

Economic- natural limits, dependence on third-party aircraft and competition from other airlines.

Recommendations: 

It is recommended that EasyJet should promote as well as exploit more of associated services like EasyFinance as well as EasyHotel. The company should be proposing a travel kit that has access to all the services with a lower global cost. It is where the shuttle system needs to enhance towards getting access to airports and link with the hotel partnership with the company. EasyJet need to develop a new loyal policy that helps customers to jump the queue. It is needed for developing a card system that allows cumulating points for having access to several vouchers and discounts at the same time. It is required for highlighting the fact where EasyJet is treated as a green airline for attracting more people and broadening target customers. EasyJet need to position itself in a sector that is intermediary by nature. The company needs to attract people who wants cheap tickets who belong to the leisure sector as well as one asking for more service in the business sector by paying extra fees in the most appropriate way.

Conclusion: 

At the end of the study, it is concluded that EasyJet is the challenger of the aerial low-cost market behind the other British companies. In recent times, EasyJet is one of the essential airlines that have strong reputation and brand recognition. Most of the customers use it when the flights of EasyJet considered being cheapest in the airline market. EasyJet faced intense competition after dealing with both direct as well as indirect competitors. Furthermore, EasyJet focus upon cost leadership strategy as well as differentiation strategy. EasyJet make improvements in its activity for overcoming the competition. It is needed for EasyJet for getting involved in sequence of boarding for minimizing level of obstruction. In addition, the company needs to implement full refund for cancellations within a time span of 24 hours. It abolishes cancellation fee, psychological comfort for getting peace of mind, businesspersons for meeting the time changes, backpackers for minimizing unforeseen circumstances like political situations as well as weather conditions.

Reference:

Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson Higher Ed.

Bergh, D.D., Connelly, B.L., Ketchen, D.J. and Shannon, L.M., 2014. Signalling theory and equilibrium in strategic management research: An assessment and a research agenda. Journal of Management Studies, 51(8), pp.1334-1360.

Bettis, R., Gambardella, A., Helfat, C. and Mitchell, W., 2014. Quantitative empirical analysis in strategic management. Strategic Management Journal, 35(7), pp.949-953.

Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-261.

Bettis, R.A., Gambardella, A., Helfat, C. and Mitchell, W., 2015. Qualitative empirical research in strategic management. Strategic Management Journal, 36(5), pp.637-639.

Carroll, R.J., Primo, D.M. and Richter, B.K., 2016. Using item response theory to improve measurement in strategic management research: An application to corporate social responsibility. Strategic Management Journal, 37(1), pp.66-85.

Daspit, J.J., Chrisman, J.J., Sharma, P., Pearson, A.W. and Long, R.G., 2017. A Strategic Management Perspective of the Family Firm: Past Trends, New Insights, and Future Directions. Journal of Managerial Issues, 29(1), pp.6-29.

Easyjet.com. 2017. EasyJet.com. [online] Available at: http://www.easyjet.com [Accessed 22 Jul. 2017].

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Hill, C.W. and Jones, G.R., 2013. Strategic management theory. South-Western/Cengage Learning.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Morden, T., 2016. Principles of strategic management. Routledge.

Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management. Springer.

Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. John Wiley & Sons.

Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The quest for competitive advantage. McGraw-Hill Education.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.

Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.

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