Question One: Using either Porter’s generic strategies or the Strategy Clock, analyze the current strategy of EasyJet.
EasyJet, an economical airline providing budget-friendly air travel to its consumers, operates across 34 countries and caters to 153 airports worldwide. The analysis of EasyJet’s present strategy is provided using Porter’s generic strategies or the Strategy Clock as reference tools.
The strategies are known as Porter’s generic come in handy to detect a corporation’s edge over its competitors. These tactics encompass three distinctive approaches: cost leadership, differentiation, and focus. Cost leadership requires reducing expenses incurred during production so that product pricing can be lowered accordingly. On the other hand, with the Differentiation method, businesses look towards creating an unusual or unparalleled service/product compared to others operating within their market niche to stand out from the competition. Focusing would mean going after the segmentation of markets by targeting specific groups/niches rather than catering to everyone.
Currently, EasyJet follows a business approach that prioritizes cost-effective leadership. The company strives to provide affordable air travel solutions by cutting production costs and optimizing fuel usage, among other focus areas. To attain this goal, it has acquired modern aircraft with high energy proficiency standards to minimize gasoline purchase expenditures. Additionally, through the reduction of turnover times and an increase in daily flights from airport terminals, EasyJet is proactively working towards offering better value than its competitors, attracting more budget-conscious customers who still want convenience while airplane travel.
The competitive position held by EasyJet is a result of their successful implementation of a cost leadership strategy. This strategic approach has enabled them to achieve an advantageous standing within the airline industry, as evidenced by their ability to provide lower fares than competitors – thus appealing specifically to price-sensitive customers. Additionally, with a widespread presence across multiple European countries and airports, they have established strong brand awareness, cultivating loyalty among its customer base.
To wrap up, it can be inferred that EasyJet currently utilizes the cost leadership strategy to secure a competitive position within the airline industry. By prioritizing reduced costs across multiple dimensions, including fuel efficiency, airport charges, and strategic aircraft utilization practices, they can offer lower fares than competing airlines, which appeal significantly to price-conscious customers. As a result of this particular methodology employed by Easy Jet, there has been an established receptiveness from consumers for their brand, and more appropriately so – customer loyalty is maintained effectively as well.
Question Two: Conduct a PESTEL analysis for EasyJet. Evaluate which PESTEL factors are driving changes in the company’s strategic choices.
Political factors
EasyJet is susceptible to political factors, which can influence its operating expenses, taxation, and regulations regarding security measures. Recently, a surge in rules over airport charges and taxes has increased costs for this airline company. At the same time, negotiations surrounding Brexit pose a risk factor by potentially restricting access to specific European markets. In addition, any instability within some countries may limit opportunities for operations within such areas by EasyJet Company affecting its marketability and well-being.
Economic factors
The concept of financial components encompasses the economic circumstances that could impact a corporation, such as price escalations, currency values, and development. The airline industry is quite vulnerable to such situations because they influence air travel demand; downturns are among them. As a result of the recent recession caused by the COVID-19 pandemic’s sway over economies worldwide, EasyJet faced severe setbacks concerning its business since it resulted in reduced enthusiasm towards flight travel leading to reorganization measures and governmental subsidies. Also noteworthy are foreign exchange outcomes, which significantly affect purchasing fuel against the American dollar resulting in fluctuations via gas expenses for operations carried out under EasyJet’s wing correspondingly (EasyJet Annual Report 2022).
Societal factors
Increased demand for cost-effective airlines like EasyJet resulted from variations in consumer travel habits. The organization accentuated budget-friendly air-travel options while actively extending its flight network. Increasing awareness around environmental concerns led to an increased emphasis on ecological sustainability; through investing in fuel-efficient planes and implementing carbon-offset programs, EasyJet addressed such shifting priorities with adequate measures accordingly furnished by their avails as appropriate actions became due diligence so demands thereof were met suitably by this enterprise ensuring that they remained committed towards eco-friendliness. Despite ever-changing market pressures, which accompanied underlying shifts felt across industry landscapes at large on account of analogous factors impacting these spaces wherein even intangible effects impacted outcomes noticeably elucidating said changes perceptibly affecting business decisions significantly over time. Thus representing adaptations necessary within enterprises while navigating complex situations encountered along operational journeys filled with myriad challenges manifesting unpredictably at various intervals throughout organizational lifecycles. Seeking sustainable solution propositions fitting emerging problems whose resolutions required detailed considerations subsequently resulting into well-calibrated responses formulated adroitly based upon relevant insights harvested via astute observations gleaned from ongoing situational assessments conducted regularly, thereupon proactively guarding against foreseeable consequences arising during implementation phases safeguarding preferred outcomes according primacy duly assigned to it collectively attesting resilience demonstrated thereby showcasing commitment articulated displaying leadership associated fortified being reinforced consistently.
Technology
Breakthroughs in technology allowed EasyJet to simplify its day-to-day operations and improve patrons’ experience, allowing for increased satisfaction levels among clients. The enterprise implemented self-check-in kiosks along with mobile boarding passes, consequently leading to decreased check-in waiting periods which uplifted customer gratification ratings and further enhanced their overall travel comfortability. Furthermore, investing in contemporary aircraft-related technologies aided EasyJet in reducing fuel costs while simultaneously diminishing emission rates produced during flights flown under its routes covered comparatively over time, respectively.
Environmental Factors
One of the principal contributors to carbon emissions is airlines. EasyJet has taken numerous measures to reduce their effect on the environment by investing in fuel-efficient planes, initiating programs to offset carbon emissions, and diminishing single-use plastic waste (EasyJet plc, 2022). Furthermore, concerns about the planet’s well-being also foster a shift towards sustainable travel options as consumers’ preferences change with increased awareness about environmental conservation practices.
Legal Elements
EasyJet adheres to multiple legal regulations, such as those for safety procedures, labor standards, or antitrust statutes. In recent years, the aviation sector has been facing amplified public observation on aspects associated with its security policies; this development translated into increased expenses for airlines like EasyJet. Labor laws could also impact a company’s functioning – disagreements between employees and management officials could lead to interruptions in business operations being carried out by the said organization. The airline industry is bound under antitrust laws that oversee pricing methodologies and competition strategies used within it.
Question Three: Choose ONE Strategic Management Accounting (SMA) practice covered in the module and evaluate how adopting such practice can help EasyJet implement and measure its strategic priorities.
Employing the various approaches and fundamental concepts grounded in accounting management, Strategic Management Accounting (SMA) plays a crucial role as an asset that delivers relevant financial and non-financial data regarding backing up strategic choices. Companies that desire harmony between their business schemes and fiscal administration must embrace SMA methods. One company that can benefit from implementing SMA practices is EasyJet— an economical European airline seeking improved strategic choices, performance measurement system enhancements, and achieving its aims. Adopting one particular practice in SMA can aid EasyJet with executing or evaluating its strategic objectives effectively while ensuring consistent measurement results are achieved throughout this process.
Activity-Based Costing (ABC) is a calculation technique that assigns expenses to goods and services based on the actions involved in driving their costs. The method recognizes the substantial resource consumption difference among activities, which are essential for producing products or providing specific service types with varying needs of resources (Akgün et al., 2023). ABC aims to ensure an accurate understanding of production’s actual expense by adequately identifying valued operations and covering these identified values regarding incurred charges. EasyJet can enhance its decision-making process concerning pricing decisions, product mix strategies, and outsourcing determinations upon being enlightened about manufacturing costing specifics via such strategy-employed calculations’ information provision capacities.
The execution of ABC at EasyJet would require the undertaking of several specified actions.
The initial step in EasyJet’s cost determination entails identifying activities that catalyze such costs. These undertakings are diverse and comprise fueling, aircraft leasing, marketing expenses, crew remuneration fees, and landing charges alongside maintenance outlay. Designating each activity into various categories is essential to determine its place within unit-level operations or at a higher level, including product-based and facility-oriented ones. From this regard, it transpires that factors germane to flights like refueling would be classified amid unitary actions since they directly influence flight numbers. At the same time, other intricacies linked with operative facets relevant across several levels, such as advertising, constitute an example best allocated under property-linked aspects due to whatever relevance mandated by operating scale rather than direct correlation towards operational specificity.
As part of the second step, it becomes vital for EasyJet to apportion costs towards different activities. In order to achieve this goal, each flight would need an assignment of its respective activity cost based on consumption rates associated with that specific activity. For example, fueling expenses should be allocated according to how much fuel the aircraft consumes during a given operation time frame. At the same time, crew salaries must correspondingly reflect wages earned per the number of personnel required onboard every flight mission.
The third step entails calculating the expenses of every flight, whereby EasyJet would sum up all activities allocated to each journey. This calculation method is instrumental in determining the comprehensive cost incurred during production and aids strategic decision-making by providing an accurate picture of costs for each flight.
EasyJet can receive various advantages by implementing Activity-Based Costing (ABC). The adoption of such a system enables EasyJet to reap several benefits.
ABC possesses the capacity to assist EasyJet in determining the precise cost of producing every flight, including all related operations that contribute towards such costs. This evaluation would enable EasyJet to make improved pricing decisions by setting prices that reflect each flight’s accurate production expenses. Additionally, through this data analysis provided by ABC, flights not yielding profits could be identified and either have their respective costing adjusted or phased out entirely from future scheduling considerations for optimization purposes.
ABC can aid EasyJet in its quest for better product mix decisions by illuminating which flights reap a higher profit return. If they discover that specific trips produce a more substantial margin of earnings than others, resources may be reallocated accordingly toward those tours (EasyJet plc, 2022). Likewise, when faced with less profitable destinations where margins are thin or absent altogether, two potential outcomes emerge as solutions – either discontinue them indefinitely or restructure prices so operations remain feasible. Financial viability is maintained at an acceptable level.
ABC’s advanced outsourcing strategies have the potential to augment EasyJet’s organizational structure significantly. By leveraging this service, they may pinpoint peripheral activities and subsequently outsource those operations to third-party contractors with specialized expertise who can perform these tasks more effectively for minimal expenditure.
Activity-based costing (ABC) has the potential to assist EasyJet beyond executing cost leadership and differentiation tactics by enhancing resource allocation and decision-making procedures. ABC’s precise monetary data could empower informed verdicts regarding pricing models, service provisions, products, or investments in progressive technology and processes at EasyJet.
As a demonstration, with the aid of ABC analysis, EasyJet has the faculty to decide upon authentic expenses required for rendering specific services or establishing certain routes. Inclusive in this cost determination are all associated activities that constitute part of providing such service or operating that route. Being informed through these statistics is meritorious. It empowers EasyJet to make wise decisions regarding pricing mechanisms and assess each route’s profitability while identifying prospects where costs could decrease, or efficiency can improve correspondingly.
Furthermore, implementing activity-based costing (ABC) can assist EasyJet in pinpointing what activities are driving costs. This insight will allow them to make informed decisions on investments toward innovative processes and technologies that may improve operational efficiencies. For example, ABC could highlight how loading and unloading baggage is a primary cost driver for ground handling operations; consequently, EasyJet could consider investing in new baggage management systems capable of expediting this process, leading to decreased expenses overall with increased satisfaction among their customers.
Incorporating ABC into its operations enhances EasyJet’s decision-making and enables the airline to manage its resources more efficiently. By furnishing precise cost data, EasyJet can optimize resource allocation towards lucrative ventures and abstain from expending assets on less profitable ones (Blocher et al., 2019). The consequential outcome is an overall progression in profitability for EasyJet, which will further function as a catalyst for achieving strategic objectives with greater efficiency.
Ultimately, EasyJet can significantly benefit from implementing activity-based costing as it enables them to precisely measure and enact their strategic objectives. By leveraging ABC’s ability to provide accurate cost information, streamline decision-making processes, and optimize resource allocation efforts – they will be able to make informed choices regarding product offerings and service rates/fees charged for services rendered or consumed while also improving customer satisfaction levels through heightened quality standards maintained throughout operations. Additionally, this approach allows them further opportunities to pursue differentiation strategies while establishing market leadership in pricing competitiveness and enhancing profit margins.
ABC’s provision of enhanced performance measurement to EasyJet can yield substantial benefits. By implementing superior systems, metrics, and methodologies, ABC can assist EasyJet in optimizing its operations, thus enabling them to achieve exceptional results. By utilizing more sophisticated means for evaluating data and outcomes across an array of sectors, including finance, marketing, and customer service, they would enable greater visibility into critical areas that require attention, leading ultimately to improved enterprise-wide decision-making processes at all levels within the organization from top-level executives down to lower rungs on managerial hierarchy ladder.
Question Four: In EasyJet’s Annual Reports 2022, the company states: “Sustainability is important to us, and we are creating a positive impact today and taking action to pioneer a sustainable future for travel” (p.10). Critically discuss the extent of integration of sustainability concerns into EasyJet’s business and corporate strategy.
EasyJet has been expressive regarding its dedication to maintaining ecological balance and implemented a range of measures to limit pollution. For instance, the airline invested in fuel-efficient aircraft and various techniques employed during flights to scale down their consumption of non-renewable resources. Furthermore, EasyJet introduced an electric taxiing system that substantially limited emissions released into the atmosphere while conducting ground operations (EasyJet Annual Report 2022).
In addition, EasyJet has established lofty ecological objectives. Specifically, by the year 2022, they aim to abate their carbon output per passenger kilometer by ten percent and eventually attain net-zero carbon emissions throughout all of their operations within a timeframe of thirty years from now. Following this commitment, the corporation asserts its developed sustainability strategy, which endeavors to generate favorable outcomes for society and environmental welfare while simultaneously providing sustained value for investors in the official document “EasyJet Annual Report 2022”.
However, it is essential to critically assess the extent of integrating sustainability concerns into EasyJet’s business and corporate strategy. An aspect that causes worry is the dependence of airlines on non-renewable fossil fuels, which represents a fundamental origin of discharges of greenhouse gases within the aviation sector. Though EasyJet has implemented procedures to curtail fuel consumption and greenhouse gas emissions, it still needs to embrace other fuel types, such as biofuels. Implementing these substitutes could result in a noteworthy reduction in the ecological impact originating from air travel. Moreover, EasyJet’s methodology to attain its goal of eradicating carbon emissions by 2050 needs to be clarified. This quandary arises from the constraints within present technologies and an indistinct policy structure that could support a shift towards a low-carbon aerodynamics sector.
An additional concern pertains to the need for more information regarding EasyJet’s sustainability performance and influence. Although the corporation declares its attempts and objectives on topics related to sustainable development in its annual reports, it refrains from sharing comprehensive details regarding statistics such as carbon footprint, water usage intensity, and refuse production alongside other vital indicators. This challenges stakeholders who intend to evaluate how successful EasyJet’s strategy is regarding environmental impact or social responsibility. At the same time, it makes it arduous for them to have an effectual means of holding the company accountable for these two areas mentioned above.
References
Akgün, M., Katanalp, B., Can, A. V., & Kıvraklar, M. K. (2023). Adapting the activity-based costing method for water footprint accounting. Journal of Cleaner Production, 400, 136691.
Blocher, E. J., Stout, D. E., Juras, P. E., & Smith, S. (2019). Cost Management (A Strategic Emphasis) 8e. McGraw-Hill Education.
EasyJet plc. (2022). About us. https://www.easyjet.com/en/about-us
EasyJet plc. (2022). Annual report and accounts 2021. https://corporate.easyjet.com/investors/reports-and-presentations/2022
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