Ma in Management – Strategic Analysis Module Essay
SAA 1 – Evaluating the Suitability of EasyJet’s technique EasyJet’s existing strategy could be characterised since price/low value added (route you on the strategy clock) centering on Luton and Liverpool hubs (not the main UK airports) and concentrating on routes with little immediate competition from other airlines (which builds up elements of access and variety structured positioning). EasyJet exploited difficulties environmental modify that come from the preliminary liberalisation with the EU aircarrier market. The attractiveness on this “low cost” strategic group within the marketplace has brought in new competitors (like BA’s GO) and so the industry framework is changing. EasyJet’s decision to buy fresh aircraft and open fresh routes is visible as an attempt to pre-emptively protect and create on their current position. The deals with Geneva airport and TEA also allow them to make use of an EU “open skies” agreement with Switzerland in the event finalised making use of the same tactical approach. The strategy is essentially expanding upon existing functions in working a low cost flight. Expanding the fleet of aircraft potentially offers cost productivity advantages when it comes to economies of scale and scope across a bigger number of routes. Standardising on fresh Boeing 737-300s and 737-700s should also help minimise functional costs and also the purchase financial systems from the offer (discounts). Other regions of the worth chain are also consistent with so affordable cost way – hq at Luton airport rather than a more costly location (although not stated in the representation the HQ is muro down to the very least to reduce expenditure. Aircraft maintenance is also contracted out). Because EasyJet can be privately possessed then the significant increase in gearing implied by the financing of new aircraft is probably less unattractive to investors than is the case in the event the company was public. Ideally, it would be helpful to have more information concerning EasyJet’s current value cycle and its capacities to deliver the “low cost” approach. The top strategic concern to be resolved is the level to which all their current positioning is defensible if they will start to grow – with risks from competitor effect, perhaps from airlines recently unaffected by their strategy and the capabilities of EasyJet to provide the same proper approach about five-times the scale. SAA two – Analyzing the Acceptability of Easyjet’s strategy The risks of the fresh strategy will be related to the extent of expansion – both smartly in terms of their particular ability to deliver on a larger scale (a five-fold enlargement of operations) and fiscally in terms of the effect of long lasting gearing (loans from the banks). Their existing capabilities from this type of organization (they were one of the first in Europe) plus the potential use of equipment trust certificates to re-finance the purchase at a later time might help. You will find few specifics about the potential earnings in the example, but this kind of seems to be a great expanding sector in which EasyJet already posseses an established position. It seems to create strategic sense in terms of equally protecting all their existing location and creating the potential to take advantage of new possibilities (Switzerland) yet more information about projected traveling volumes and revenues will help in assessing both results and dangers (e. g. ROCE, NPV, payback and break-even). As a privately owned or operated airline then the number of crucial stakeholders reaches least decreased by not having shareholders, Stelios Haji-Ioannou may be the owner and chief executive. Nevertheless , the banking institutions are going to be specifically interested in the business given their particular exposure in terms of gearing – though they must be supportive featuring the earnings flows maximize as planned! Given the leanness from the organisation then your employees will likely have a powerful input. Governments are likely to be encouraging of EasyJet’s approach since it encourages competition – though some may have nearer ties to “national banner carriers” who are potential competitors. SAA 3 – Evaluating the Feasibility of EasyJet’s strategy EasyJet has built up knowledge as a powerful “low cost” airline plus the proposed approach is action of existing capabilities. The cultural web of the company is also not going to see significant changes and create complications of handling implementation. The question is whether the system can be worked out into a five-fold expansion. The expansion into Switzerland, with all the deals with Geneva airport and TEA, such as the switch to Boeing 737s, would appear to be strategically sensible given the potential “open skies” arrangement. The cha?non, with an option to acquire TEA, should also offer synergies while reducing the hazards of additional stretching the present EasyJet program. Financing is actually a major issue in this strategy – the cash movement for the aircraft deposit and long term bank loans might indicate adequate financial resources, yet conclusions depend upon an examination of this area of the deal in terms of effect on the company’s capital structure (gearing) and cash flow projections. Given the banks have got leant the bucks then some judgements can be implied but , used, this would be a vital part of the general strategy analysis.
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