Case Study
Executive Summary
EasyJet is a European leading low-cost airline which established in November 1995. In 1998, easyJet achieved the first profit in its brief history. The success can be attributed to adopting an efficient management model, keeping high levels of customers’ willingness to pay and creating brand awareness. This article analyses the structure of the Europe airline industry and the attractiveness of the industry in the later 1990s according to Porter’s five competitive forces model. It also considers the sources of easyJet’s competitive advantage in the aspects of differentiation and costs. Moreover, recommendations have been given to the specific case.
The structure of the industry in which easyJet competes
According to the Structure – Conduct – Performance Model, the start point for strategic analysis must be the understanding of the industry structure. In the case situation, as the European airline industry had been highly regulated in December 1992, the barriers to entry had a considerable reduction. The deregulation legislation allowed any European carrier flying to any destination demanded. Many new airlines were created and provided the low-cost service to travelers, quoted one commentator’s description ‘the cost of two hardback books’. These characteristics differentiated the low-cost airline service from other expensive airlines and other transport facilities such as rail service. However, the number of sellers and buyers did not increase dramatically after the deregulation in the European industry, comparing with the US market. For example, in 1999, there are only about 4% of passengers in Europe traveled with a low-cost airline, but 24% in the US. In terms of the costs, the industry experts indicated that the cost of operating an airline in Europe was approximately 40% greater than in the US (Kumar, 2001).
The attractiveness of the industry in the late 1990s
The attractiveness of the industry is determined by its structure, which can
EasyJet is a European leading low-cost airline which established in November 1995. In 1998, easyJet achieved the first profit in its brief history. The success can be attributed to adopting an efficient management model, keeping high levels of customers’ willingness to pay and creating brand awareness. This article analyses the structure of the Europe airline industry and the attractiveness of the industry in the later 1990s according to Porter’s five competitive forces model. It also considers the sources of easyJet’s competitive advantage in the aspects of differentiation and costs. Moreover, recommendations have been given to the specific case.
The structure of the industry in which easyJet competes
According to the Structure – Conduct – Performance Model, the start point for strategic analysis must be the understanding of the industry structure. In the case situation, as the European airline industry had been highly regulated in December 1992, the barriers to entry had a considerable reduction. The deregulation legislation allowed any European carrier flying to any destination demanded. Many new airlines were created and provided the low-cost service to travelers, quoted one commentator’s description ‘the cost of two hardback books’. These characteristics differentiated the low-cost airline service from other expensive airlines and other transport facilities such as rail service. However, the number of sellers and buyers did not increase dramatically after the deregulation in the European industry, comparing with the US market. For example, in 1999, there are only about 4% of passengers in Europe traveled with a low-cost airline, but 24% in the US. In terms of the costs, the industry experts indicated that the cost of operating an airline in Europe was approximately 40% greater than in the US (Kumar, 2001).
The attractiveness of the industry in the late 1990s
The attractiveness of the industry is determined by its structure, which can
References: Kumar, N. and Rogers, B. (2001) 'easyJet: The Web 's Favourite Airline. IMD-3-0873. Porter, M. E. (1980) Competitive Strategy, New York: Free Press (pp. 3-33). Porter, M. E. (1996) 'What is strategy? ' Harvard Business Review November-December: 61-73.