Management Essay
Critically Assess the Opportunities and Threats Facing Easyjet in light of its On-going Expansion
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written to a Masters Level
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essay length: 4045 words
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harvard referenced
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Critically Assess the Opportunities and Threats Facing Easyjet in light of its On-going Expansion
1.0 Its On-Going Expansion
From conception, Easyjet chose to grow organically, simply relying on market growth and reinvesting surplus profits for future expansion. This strong growth was possible as Easyjet’s business model had a good ‘strategic fit’ to both their industry and external environment. On the basis of air de-regulation and growing use of e-business / commerce (See table 1 in case), their business model allowed them to dramatically reduce fares compared with competitors, adding significant value and securing them a competitive foothold in the airlines market.
For an organisation to be economically effective, there needs to be a matching process between the organisation’s strategy and its structure: this is the concept of strategic fit.’ Lynch, (1997) Pg. 646.
More recently, Easyjet has begun to favour acquisition and diversification as a means of achieving fast growth, principal examples being…
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The horizontal merger with BA’s low-cost subsidiary, Go.
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The future option to purchase BA’s German division for conversion into a low-fares carrier.
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Attempts at corporate level diversification strategies into car rental and Internet cafes.
This change in strategy carries a number of advantages for Easyjet when attempting to manage their business activities, for example…
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To rapidly expand a companies market share.
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To achieve greater operational efficiency in the form of economies of scale and scope.[1]
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To increase a firms market power.
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To reduce uncertainty in both the internal and external industry environments.
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To quickly obtain core competencies or unique resources in new or existing areas of business.
Summarised from Sloman & Sutcliffe, (2004) Pg. 301 & 304.
1.1 Easyjet’s Current Market Standing
The case highlights how the UK market is ‘thought to be nearing the saturation stage of its life-cycle.’ This has important implications when assessing the business environment. Klepper (1997) Pg. 147 – 148 asserts that in a maturing market, growth will slow resulting in a shakeout of weaker companies. This will in turn lead to increasing competition between remaining rivals as they begin to compete for one another’s existing market shares. The case states…
‘So far no-frills carriers haven’t competed much on the same routes. As they do I’d expect to see some consolidation or a couple of failures.’ ...
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