Apply Porter's Five Forces Model to easyJet Feedback Sheet This task asked you to apply Porter's Five Forces model to analyse the competitive environment of easyJet. NB Given the nature of the competitive environment, the relative strength of the forces may differ over time – with some factors changing altogether. It is important that such analysis is undertaken regularly to ensure it reflects the current situation. We will now consider each of the forces in turn. • Rivalry among existing firms in the market There is considerable rivalry in the airline industry between new and more established businesses. Competition is strong between the budget providers, but is also an important force between easyJet and larger “flag carriers” such as Air France and Lufthansa on short haul routes (where price may be more critical) Switching costs are low – it is not difficult to change airlines (although routes flown may dictate consumer behaviour). In the airline business, particularly on long haul routes, price is only one competitive factor – quality of service and added value both differentiate the products strongly. easyGroup (the brand owner of easy), as a relatively new company, has a vision to “develop Europe’s leading value brand into a global force. We will paint the world orange!” Their strategy cites “taking on the big boys” which suggests strong rivalry. • Threat of new entrants coming into the market The threat for easyJet of new entrants stems mostly from rival budget airlines flying short haul. Capital requirements are high to establish an airline, and there are already signs that the market is becoming saturated (which may lead to an eventual market rationalisation). easyJet already enjoys economies of scale and therefore has a cost advantage over any new entrant. The brand is well known and highly publicised, again, something which a new entrant would struggle to replicate. • The power of suppliers Perhaps one of the most significant issues for easyJet would be availability of routes to fly and airport charges (eg landing charges etc). Both factors have a significant impact on their ability to trade. • The power of buyers or customers Buyers have significant power in the market as there are usually a number of carriers operating a route. The power of consumers rises where the market is particularly price sensitive (as this is the key competitive focus of easyJet). Thus, an alternative low-cost airline flying the same route at a similar price poses a threat. In cases such as these, it is often scheduling which plays a major part in their decision making process. Price is the key differentiating factor for easyJet – it does not generally try to compete with higher cost airlines who are aiming to attract Business and First Class passengers with added comfort, facilities etc. easyJet markets itself as the “no-frills airline”. • The threat of substitute products or services Whilst there is little threat of a substitute form of transport for an airline on most routes, in cases such as flights to Paris or domestic inland routes, for example, alternatives such as train and ferry services pose a degree of threat. Time and cost are likely to be the determinants of the degree of threat present. Overall, this force could be assessed as being low. To conclude: As Porter points out, the degree of competition is determined by the relative strengths of these forces. Overall, we could assess that there are a number of forces which are strong, however it is important to point out that within the budget market, easyJet’s position is currently strong enough to offset most of the threats identified.
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