RESEARCH PAPER ON BUSINESS ENVIRONMENT: EASY JET
Easy jet is a British airline based at Lurton Airport. It began its operations in 1995 as a two-route airline. Since then it has grown to be recognized as one of Britain’s largest airline. This classification is based on number of passengers it handles and the level of sophistication of its equipment and airplanes combined with its excellent services. It is one of the airlines credited with revolutionizing the air business in Europe. This is because of its low-cost strategy that became appealing to the customers within a short period while also the airline made great profits. Easy jet has experienced growth within a short duration of time despite the challenging environment within which it operates not least the competition it faces from the more established British Airways. Against all odds, it has turned out to prove that proper strategic planning coupled with the will to implement the plan are key factors for the success of any business. (Leary, 2002)
This paper focuses on the business environment within which Easy jet operates. The business environment is broadly categorized into two, the external environment and the internal environment. The external environment refers to those factors that the company cannot control. These factors are beyond the control of even the top hierarchy of the company but they tend to affect the company’s operations in one way or another. These factors include Socio-cultural, Demographic, Economic Technological and Political/Legal factors. These factors will always tend to force the company to change its strategic plan any time they change. These factors have had a great impact in molding the past, present and future of Easy jet airline. They are also referred to as macro-environment business factors.
The second classification is the internal factors. These factors shape the organization from within it. They are controlled from within the company and they relate to all aspects within the jurisdiction of the airline in this case. They include factors such as personnel, facilities organizational structures and functional means such as marketing.
It is important to note that these factor, both internal and external have a great impact on the operations and functions of the airline. The factors are discussed below to reflect on how they have affected or influenced the business environment that Easy jet has operated and continues to operate in.
Internal business environments are the factors, which lie within the control of the management. These are factors over which decisions have are made regarding the way an airline conducts its businesses. Internal environmental factors tend to have a direct impact on the functioning of the business, and are mainly controllable. These factors include personnel, physical facilities, organizational structures and the functional means such as marketing to suit the environment.
In consideration of the airline industry, this research was keen on evaluating the various factors that affect the functioning of these airlines with a specific interest with Easy jet. in understanding the internal environment of a firm, I evaluated the following parameters and the impact they had to easy jets internal environment;
Value system;
This is influenced by the founders of the firm and the people at the top of the organization. Easy jet for instance was founded by Stelios Haji-ioannou in 1995 and within two years was regarded as the model low-cost airline in Europe. The tremendous growth observed by the airline in this sector can be attributed to the values held by its founder. The owner of the airline comes across as a highly ambitious individual with an enterprising attitude. This personality is a key factor in determining the way he conducts his business transactions. This attitude is an attribute the Easy jet venture has benefitted from. During the signing of the contract for the acquisition of 12 brand new Boeing 737s in 1997, as he signed the contract, Stelios steadied his shaking hand. The words of Sir Richard Branson, chair of virgin Atlantic airline, flashed through his mind, the safest way to become a millionaire is to start as a billionaire and invest in the airline industry. (Sull, 1999) This shows an instance where the owner put everything on the line and gambled on their capacity to earn returns for his firm, owing to its small size, and considering the competition posed by other big airlines such as KLM and British airways. A clear growth targets also guided the creation of Easy jet where guarantees were provided to the clients on the expected levels of service they were to expect from the airline. Easy Jet, through its founder, announced the commitment by the airline to triple the size of its fleet from six to eighteen airplanes within a span of two years. (Sull, 1999). The declaration was made on expectations of growth and on a backdrop of sound planning and execution strategies. These factors lay at the control of the value the investor sought from the airline, and the direction he wanted the airline to head.
Management structure and nature
The structure of the organization also plays a part in the way decisions are made in an organization and ultimately its performance. The complexity in making decisions can arise due to a large decision making structure such as where a decision made by the management has to be ratified by the shareholders. this long decision making process inconveniences the business in its push for quick closing of deals to employ temporary economies such as improved working conditions and an improved economy. The ability of a firm to have its decisions ratified and implemented within a short period gives it a competitive advantage over rivals. Easy Jet being a private company enjoys a small power structure and as such makes and ratifies its decisions much faster in comparison with other big airlines such as KLM and British airways. The small structure of Easy Jet made it easier to make and implement decisions in comparison to other airlines which dominated the airlines industry in Europe. The airlines industry in Europe has been historically dominated by national flag carriers, which are government regulated and dominated their domestic markets. The idea that he imported to Europe, of low cost flights with no meals being offered, no travel agents and high aircraft utilization were existing models that had been successfully implemented in the United States. Since easy jet was starting from scratch with only one individual to make the decision, once the idea was acquired, the only impediment was implementation. The bigger airlines in contrast had to make feasibility studies and wait for a myriad of decision makers to approve the idea as suitable to invest in. the airline industry is greatly helped by the ability of the airline to have streamlined management owing to its highly competitive nature where opportunities are missed in a matter of hours and days.
Finances
Easy jet commenced its operations on a relatively small budget in consideration of the field venture. The resources held by its competitors such as KLM and British Airways posed a great threat to its development in the new routes it sought to venture in. The attempt by Easy Jet to venture into the Amsterdam for instance was met with a direct and aggressive response from KLM where KLM slashed its prices to match those of Easy Jet. This move by KLM was not sustainable nor was it profitable but only intended to force Easy Jet out of the Amsterdam route. The loses it incurred on this route were offset by the profits generated in other routes. Easy jet on the other hand could not sustain its operations on that route with such anticompetitive tactics being employed by KLM remaining in force. Stelios admitted in public that Easy Jet could not sustain its operations in the Amsterdam route for a further six months with KLM sustaining their current prices (Sull, 1999). The Easy Jet flights from Amsterdam to London were usually empty generating serious losses. The availability of funds to a firm in the airline industry is crucial in ensuring that the firm is able to respond to competition moves in the market.
The media
Media in business implies all the means that affect public opinion concerning the business. Media can influence both positive and negative reviews for a business depending with the media policy a company employs. Easy Jet through its founder Stelios showed a good media strategy in dealing with the uncompetitive strategies employed by KLM. After instituting legal proceedings against KLM, Stelios, accompanied by the media, marched to the KLM headquarters delivering 1000 letters from customers who were disappointed with the way KLM was conducting its business. The employed this situation to create bad press for KLM while also getting good reviews for his company. The presence of Easy Jet in the media was an important strategy to Easy Jet towards familiarizing clients of their presence as an alternative airline to that destination. The manipulation of media by businesses has the main intention of influencing public view on the company or on the competitors (Riggs, 2007)
External Environment/ Macro-environment
- Economic Factors:
Despite the success story of Easy let in the airline sector the company has faced several challenges caused by the very unpredictable economic climate. Most notably has been the increasing cost of fuel at extremely high rate. The company has been forced to increase its flight charges from time to time. This has really affected its operations and caused anxiety among the customers who will not easily understand how prices keep on changing from time to time. Despite this challenge Easy jet has developed a perfect plan to counter this issue of unpredictable and ever increasing fuel prices. One strategy has been to ensure strong partnership with fuel producing companies so that they are able to supply fuel at to them at reasonable prices even when the prices in the global market are extremely high. (Mercer, 1998)The strength to negotiate with such companies and form such partnerships has been largely because Easy jet boasts many airplanes and handles many flights on a daily basis. It is therefore paramount for any fuel producing company to retain such a customer like Easy jet who consumes large volumes of fuel on a daily basis by offering such incentives. On the other hand, recession in the world all over and Europe in general where it operates most of its flights has negatively affected the airline’s operations. It has been forced at times to reduce the number of flights to various destinations or even cancel them when the returns are deemed to be poor or causing losses. Despite the above challenges, Easy jet’s growth is largely attributed to the presence of an ever-growing market and economy in Britain.
- Demographic factors:
The large population of Britain and especially London where Easy jet hosts it s headquarters has been a big bonus to the company. The large population has ensured the airline has a constant supply of customers for both inland and international flights. The inland flights have in fact been a great boost to the revolution that Easy jet has experienced. These internal flights within Britain have cushioned the airline from the effects of economic crisis such as recession, which sometimes force the company to cancel or reduce flights overseas. These internal flights therefore ensure the company remains afloat even in hard economic times as they are assured of internal flights due to their reasonable charges. It is therefore evident that with such a large population at its exposal, Easy jet has been able to grow and expand courtesy of this constant customer base. (Mercer, 1998)
- Political/legal factors:
Easy jet began its operations in 1995 at a time when there was political stability in Britain. During this time, Britain had proper political and legal structures to promote local investors. Low energy prices regulated by the government coupled with low interest rates for loans were among the policies the government had stet to facilitate growth of local industries. Onwards and with the extremely fast growing Britain economy, there have been no serious political or legal threats the company has faced in its existence. This has ensured that the company remains within its strategic plan while also ensuring that the company enjoys a very peaceful political climate that is crucial for any business. (Hanlon, 2008)
- Technological factors:
Easy jet has thrived at a time when technological advancement was on a steady rise. It has therefore grown with the technology and incorporated any new technology within its operations without necessarily changing much of its infrastructure. In fact has a reputation of having all its operations both management and administration being undertaken on IT systems. These operations enjoy very secure servers that have been protected by modern security systems and applications. This has made its services accessible formal over the world and hence improving its flexibility, which is a key factor in business. (Leary, 2002)
- Social-cultural factors:
The success story of Easy jet can be attributed to the changing lifestyles of the people of Britain and Europe in general in the mid-nineties. During this time, people were now realizing the need for efficiency and class together with fashion. (Booysen, 2002) This emergence of a population that embraced change was vital to the immense growth Easy jet has had. People were feeling the need for more comfortable lifestyles and were toying with the idea of using internal flights frequently but the airlines at the time were charging exorbitant prices. At this time, Easy jet emerged with very fair prices. The inevitable change of lifestyles people were willing to take had already been set rolling by the emergence of Easy Jet.
Organizational strategies employed by Easy Jet in its expansionist programme
An organization is said to employ organizational strategy where analysis into the market is done. The findings of the analysis are then modified and the firm formulates a plan for its own unique strategy of entry into the market. The third and the final phase of the strategy is the implementation phase where the ideas are implemented in the market and their applicability evaluated by the market. Easy Jet was founded after its founder, Stelios flew an Athens-London Virgin Atlantic flight where the idea of a low cost airline intrigued him. Later though, the Southwest Airline model convinced Stelios that he had found the correct model for a European low budget airline. The strategy focused on using one type of aircraft, point to point short haul travel, no in flight meals, rapid turnaround time and very high aircraft utilization. This strategy was informed by the study of the European airline operators, and the realization that the air space was not served by a low budget airline. By introducing a low cost platform, Easy jet was sure to outdo the competition in by offering competitive pricing models between routes, which would have cost more in other airways.
Easy jet’s organizational competencies
Easy jet has achieved its success on a platform of satisfying the customer in all areas of its operations and putting more consideration on maintaining and growing its customer base. It has associated itself with low-cost flight that has been a key factor in maintaining the client base. Easy jet has also a strong marketing team that has enabled the airline to win awards of recognition for their efforts, which has largely been contributed by its vibrant marketing strategy. In 2010, the company worn the award for the ‘Best Low Cost Airline in 2009’ and the 100 great marketing moments of the 20th century" (Booysen, 2002) award.
Other Pertinent Issues
In recent years especially since the founder, Stelios of the easy Group IP Company sold part of the shares to other investors, there have been several management issues. In 2010, Stellios resigned from the board to protest the strategy Easy jet was taking a protest that was dragged all the way to the high Court. These issues coupled with frequent changes in management have led to a change in the company’s strategy over time. This has severely dented the company’s image and affected its service delivery power.
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