EasyJet Company’s Key Issues

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Table of Contents

Introduction
Key Problems and Critical Issues
SWOT Analysis
McKinsey Seven 7S Framework for easyJet
Driving Forces
Environmental Scanning
Where Is Easy Jet Today
Evaluation of Range of Alternative Courses of Action
Recommendation and Conclusion
Works Cited

Introduction

The purpose of this report is to define key problems and critical issues of easyJet, discuss McKinsey’s 7S framework, analyse driving forces, external environment and the position of the company comparing with competitors.

Key Problems and Critical Issues

This company has to consider both internal and external problems, for instance, the management of this company faced challenges to control internal management system and implement a strategic plan like motivate the employees, changed the status from private to public, use subcontractors, maintain a relationship with directors and customers.

However, a reporter Sunday Times investigated availability of its low fares and stated that easyJet theoretically asked low price, but practically the customers have to pay more while the price of the services depends on many factors including time factors (earlier flight was much more expensive), taxation policy, unrealistic decision of the management and so on.

SWOT Analysis

Strengths	Weaknesses
Strong brand image in the airline industry; It has enough financial capability to expand business in a new route; Outstanding customer service; Online service and e-commerce facilities; Easyjet is able to offset high fuel costs; Loyal customer base	Decrease profit for the global recession high remuneration to their employees and directors; Unusual crisis, for example, IT security and fraud risk,
Opportunities	Threats
It has the opportunity to become a market leader in the low-cost aviation industry; Increase the number of routes Long-term objectives to build a strong position in short-haul route while the low-cost market could grow by as much as 300% by 2004;	Extreme competition from other low-cost carriers and Europe’s major carriers; Internal challenges for entry of potent new competitors; Legal barriers and environmental problem;

Table 1: SWOT analysis of easyJet

Source: Self-generated

McKinsey Seven 7S Framework for easyJet

Strategy: The core organizational strategy of the company is to offer highly competitive fares and sustain in the market by competing with existing and new carriers;
Systems: the management system has considered both manual and technological factors; however, easyJet is fully equipped with IT facilities;
Shared Values: It consists of three essential elements culture, believes and values; easyJet has organized several programs like workshops, and simulations to explain its objectives and develop a good relationship with employees and other shareholders;
Skills: To develop the employee’s performance, it arranged training while it has many young and relatively inexperienced employees;
Style: Stelios was a charismatic leader who struggled to shape the business though he followed the autocratic leadership style to implement major decision;
Staffs: Retention of the employees is the problem while competitors recruit the employees of easyJet providing a higher salary, for instance, British Airways hired away its lawyer providing £500,000 per year;
Structure: easyJet follows a comparatively complicated organizational structure where CEO controlled managers of all departments along with subcontractors, outside vendors.

Driving Forces

It is notable that although there are certain deficiencies among the workforce of easyJet, its internal-forces are still quite impressive because of expertise and proficiency of the top management and the CEO (although the CEO is somewhat authoritarian and does not bother much about directors’ advises); so, the forthcoming position of easyJet could be optimistic; however, the external forces are analysed below:

Bargaining Power of Suppliers: the key suppliers like Boeing and Airbus have moderate to high bargaining powers
Bargaining Power of Customers: the customers in this industry respond greatly to raising fares as their switching costs are relatively low
New Entrants: the barriers to enter the market are vast amounts of capital investments and strict laws, which makes it tough for new entrants to start-up and sustain
Threat of Substitutes: there are high threats of substitutes
Competitive Rivalry: there are strong rivalry from other low-cost carriers

Analysis of Statute Vs Competition:

To protect the flag carriers and national businesses, most countries enacted laws to prevent competition; nevertheless, in 1992, the EU passed legislation to deregulate the industry, which meant that all businesses faced extreme rivalry.

Enactment of such statute became a huge problem for luxurious and expensive flag carriers like British Airways, because people now had a choice to travel by low-cost carriers like easyJet, go, or Ryanair; consequently the competition in the industry became very intense; conversely, low-cost carriers from different European nations started competing by offering economical prices to attract customers.

Environmental Scanning

Political Factors

Governmental policies like unfriendly taxation or enactment of unfair autocratic laws may pose problems for the players; however, the EU ensures that such actions are prevented and the member states are compliant with the EU-laws.

Economic Factors

The industry is recovering after the global financial crisis and new opportunities are generated for low-cost carriers like easyJet and Ryanair

Socio-Cultural Factors

The market players of the industry have incorporated their own corporate social responsibility guidelines in order to make sure that they are conducting ethical businesses and contributing to communities.

Technological Factor

The aviation industry is heavily reliant on the uses of technology and so the market players need to keep up with technological advancements in operations and new aircraft models.

Environmental Factor

The European aviation industry needs to strictly comply with all the environmental laws and make sure that the emission of CFCs is lower; moreover, companies like easyJet need to use fuel-efficient engines.

Legal Factors

Legislation plays a major role in the industry; in the 1990s, the European airline industry was greatly regulated, and individual nations wanted to protect their flag carriers; however, in 1992, the EU passed law to deregulate the industry, which meant that all airline businesses were open to competition; as a result, easyJet now experiences free market competition.

Where Is Easy Jet Today

Whilst 60 out of 80 carriers (which were established in the same decade) are already bankrupted, easyJet is still in a leading position in the industry; moreover, today, deregulation provided easyJet access to new routes, strengthening its position financially, for example, it has about 100 scheduled flights each day using a fleet of 20 Boeing 737s and serving 26 destination.

Evaluation of Range of Alternative Courses of Action

Alternative Solutions	Evaluation Criteria for Strategic Alternatives
Adopt a situational approach of leadership	This report recommends easyJet to consider situational leadership style instead of autocratic approach as it does not follow any specific style of leadership rather leader takes a decision considering present position of the company Stelio had taken the majority of the decision as per his knowledge and ethics; therefore, he not intended to refund the customer and said his finance directors that you were pulling my hair out, which reduced the perception of the customers and demoralize the management team; It would be possible to increase market share in the European short-haul routes; This policy complied with the vision of easyJet
Restructuring Pricing Strategy including refund policy	It would help the company to create a strong customer base in certain markets; so, by offering further low fares, easyJet could capture more market share Revenues may decrease anytime due to adverse economic condition; therefore, the restructuring pricing strategy would provide a backup, so that the customers remain loyal even after diminishing purchasing powers Operating at economies of scale could be one of easyJet’s core competencies, so, capacity utilization development by reducing production cost would assist the company to offer low price The growth of the industry could be reduced due to the Eurozone crisis; so, reforming pricing strategy is the only solution to sustain as a market leader Adopting this strategy has minimal financial risk; however, the European Commission could impose fines for breaking competition law in the EU zone
Improve motivation and focus on staff retention	Advisors team feared Stelio’s entrepreneurial management style and they believed that CEO should change his approach to motivate the employees; thus, strategy complied with the vision of the company; To retain employees, they need to provide competitive remuneration along with facilities; Implementation of this strategy may create any serious financial problem; The CEO and top-management should appreciate a good idea of other members;

Table 2: Strategic Alternatives

Source: Self-generated

Recommendation and Conclusion

After evaluating the alternative courses of action, it could be said that the best recommendation for the company would be to implement the alternative of adopting a situational approach of leadership so that the business can better perform in certain areas, as suggested in the above evaluations. However, easyJet should remain cautious in undertaking strategies and in decision-making to make sure that there is an active revenue generation even during the Eurozone crisis.

Works Cited

Branson, Richard. The Web’s Favourite Airline. 2000, International Institute for Management, Switzerland

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