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...