Essay about Easyjet- Principles of Operations Management
1609 WordsJan 19th, 20117 Pages
The essay will firstly introduce the organisation easyJet. Secondly the essay will explain about how easyJet uses its operation strategies and its competitive priorities. Finally the essay will discuss the most important operation decision and explain it further in detail. easyJet is a well known low-cost airline which operates in several European countries and has been founded by serial entrepreneur Sir Stelios Haji-Ioannou in 1995. easyJet undertook intensive research of a United States owned low-cost airline ‘Southwest Airline’. Most of the concepts for easyJet were adopted from Southwest airline; however easyJet added its own touch which reduced operating costs even further. EasyJet was strategically located at London's Luton airport.…show more content…
When it comes to providing low cost there are many different strategies easyJet use which help lower its expenses. These strategies are e.g. using the internet for online booking, which reduces distribution costs, it makes an effort to utilise as many aircrafts as possible and making sure the aircrafts are full as possible and flying as much as possible. Another strategy is ticketless travel which reduces the cost printing and other cost related to it. The organisation also reduces cost by not offering free meal during the flight, applying paperless operations as most of their paper work is done online e.g. filing of paper based customer information does not have to be stored in secure places, using economies of scale to lower expenses e.g. buying aircraft , fuel and food all in bulk. Efficient use of airports making sure enough planes are turning over customers, also if the aircrafts are in the hangers and not in service they are still paying the fee to lease the space from the airport authorities. And another good strategy is having few levels of management where they do not have to pay high salary to highly skilled staff.
Capacity and forecasting is important operation decisions for easyJet as this creates and identifies activities within and outside the business to gain its greatest profitability .This approach allows easyJet to develop a cost per seat model comparison with competitor airlines. Seats are sold accordingly. Seat prices
Easyjet Cost Strategy Essay
Stelios's avowed intention in entering into the budget airline industry was to take on any business that was potentially profitable. From the figures available, easyJet is successfully completing its founder's ambition with turnover increasing by 67% in 1997-1998, gross profit margin increasing from 15 -20% and with a 2.3M profit before taxation being achieved. Meeting these overall aims was made possible by a set of strategies and the achievement of a system that corresponded to key success factors in the budget sector of the airline industry.
Cost advantage strategies
Among easyJet's strategic choices in terms of reducing operating costs were the following:
· No on-board catering except for snacks at additional cost
· This allowed for fewer cabin crew
· No business class seats, thus maximising the aircraft's capacity
· Use of regional airports with lower airport charges.
· Thus quicker turnaround and maximum use of assets made allowing an above average n° flights per day
· Young employees thus lower wage costs.
· Direct marketing, use of the Internet, cutting out travel agents and thus saving on commission.
Taking the list point by point, does this strategy succeed in cutting costs and providing service in line with what customers want? To what extent does the cost cutting strategy fit with its environment?
· Absence of catering: short hauls, catering not necessary. It allows for faster turnaround. It is linked to shaping customers' expectations. Stelios's strategy is logical: he compares taking a plane to taking a bus. It is consistent that there should be no catering if the whole process is speeded up and if the event of taking a plane is more banal.
· Absence of business class: this gains seats and maximizes capacity, but the difficulty is to attract business customers by some other means. Many private business people who are frequent fliers on short hauls do not need the comfort of business class, but they require flexibility. Though easyJet does not provide the same kind of flexibility as business class in traditional airlines, it is possible to change flights for a premium of £10, plus the difference in price. Punctuality is a priority.
· Absence of ticketing and use of regional airports: both of these strategies are successful in reducing turnaround, allowing more intensive use of aircraft.
· Outsourcing: this provides flexibility and reduces the investment in assets. However, by 1999 it becomes clear that certain key functions being performed by subcontractors are escaping the control of easyJet, leading to underperformance and having a detrimental impact in terms of customer service and marketing.
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