Carrying out an environmental analysis could be argued as being a crucial step to assessing internal and external factors, as well as market information, in order to evaluate a business’s strengths and weaknesses for successful operations (Ball & McCulloch, 1999). The focus of this essay is to asses these environmental factors for the airline EasyJet, an international business. EasyJet is a budget airline which operates under a low-cost carrier model, this means they can offer cheap competitive prices for passengers by removing certain comforts and services resulting in a cheaper price (Alamdari & Fagan, 2005).
Globalisation is one of the factors that will impact EasyJet. There are three types of globalisation that all play a part in this which are political, economic and cultural globalisation (Basu, 2008). Political globalisation relates to country and state governments co-operation and sanctions that affect trade, production and services. For example, the tax and tariffs businesses must pay that will affect profitability (Steger, 2003). Political globalisation has affected budget airlines recently, with the UK governments EU referendum leading to Brexit. The EU referendum and Brexit has seen the sterling rates fall 10% against the dollar and more than 12% against the euro. The decline in sterling left the budget airline Monarch paying £50m a year more for its fuel and aircrafts, which is an airlines biggest cost (Topham, 2017).
This is one of the factors that eventually lead Monarch into administration, showing just how much environmental factors like political globalisation can affect a business and why it’s important to consider them before carrying out business operations of any sort. British holidaymakers were also deterred from travelling by the weak pound and flight tickets reduced to increase demand which lost budget airlines money and profit (Topham, 2017). Uncertainty around Brexit, including fundamental questions over whether British carriers will still have the right to operate freely in Europe, is said to have deterred potential buyers from rescuing Monarch as well (Topham, 2017). So, the UK government had a significant impact on Monarchs fall.
Economic globalisation refers to the interconnectedness through trade, transportation and the exchange of resources (Mohr, 2017). The division of labour for manufacturing all sorts of products has changed massively due to globalisation (Button, 2008). Each various part of plane manufacturing process is mostly carried out in a different country, depending on which country is more skilled or holds an absolute advantage and which country has the cheapest manufacturing cost (Harrington, 2013). However, with the continuing demand to cut the costs and carbon emissions, aircraft manufacturing companies are increasingly pressured to reduce development costs and improve the operating efficiency of the aircrafts (UKEssays, 2015). The outsourcing of labour in engineering services is playing a key role, enabling manufacturers to keep lower costs without compromising the quality (UKEssays, 2015).
Although, in some less developed countries where labour is cheap, human rights might be compromised since they are not developed enough yet for the government to have them as a necessity (FIDH, 2018). This can result in child labour, unsafe working conditions and low pay for workers (CrashCourse, 2015). If this is discovered it can seriously affect a business’s reputation swaying consumers away from the company (CrashCourse, 2015). The sustainability of resources is also a key issue in the manufacturing process, with the increase in travel contributing to the oil crisis. Alternatively, oil demand has decreased over recent months around 2017 to 2018 for assorted reasons, such as strong economic growth leading to alternative fuel options (Times, 2017). This has led to a massive drop in oil prices leading to airlines generating more income. Airlines have been criticized for not dropping prices due to this. On the other hand, Since the aviation industry has been suffering in these recent months as previously stated, Companies like EasyJet will need to increase profit, and this is one way to achieve it.
Cultural globalisation relates to countries sharing ideas and information to one another (CrashCourse, 2012). People are advertised and attracted by unfamiliar places that are now accessible due to globalisation of the aviation industry and current low demand and travel costs means people will travel there (Czaika & Haas, 2014). However, this has led to things like increased population sizes, deforestation and death to wildlife. For example, more airports compromise land and more tourists make locals try to create more produce and souvenirs (369aml, 2011). Safety of passengers is another huge risk since a less developed country will not have the same wealth, laws and education as a developed country. This can all lead to a bad company reputation (CrashCourse, 2015). Cultural globalisation affected Starbucks in Italy, after having huge worldwide success they moved to corner the market in Italy, but the country has stopped Starbucks opening time and time again since coffee drinking is embodied in Italians culture, (having traditional coffee like expresso in small local cafes) Starbucks didn’t succeed, showing natives can go against globalisation if it threatens their culture (BBC, 2016). The same could be said for air travel increasing tourism in unfamiliar places.
Globalisation overall has led to a significant increase of movement of people travelling all over the world for all sorts of reasons (CrashCourse, 2012). The reduced cost of travelling which budget airlines have been a huge part of has led people being able to afford travel at a low cost. The demand for travel is increasing rapidly which means the budget airlines like EasyJet have a service which is in high demand. That along with the reducing cost of planes, increased capacity of passengers on planes and more fuel-efficient planes adding to these positive factors (EasyJet, 2018). However, environmental issues should be analysed to keep moving forward. Global warming, sustainability, pollution, the economy, politics, tax and much more can impact this industry due to globalisation (Brooks, Weatherston, & Wilkinson, 2011). The macro environment plays a big part in this and a lot of it is out of a business’s control, so analysis is crucial for the present and future of a business.
PESTLE analysis allows a business to create a logical and comprehensive picture of any business environment (Brooks, Weatherston, & Wilkinson, 2011). EasyJet should use a PESTLE analysis as a framework to gain more insight on the different environmental factors showing more complexity, uncertainty and accuracy upon analysis. PESTLE stands for political, economic, social, technological, competitive, legal and ecological (CIM, 2018). Some of these factors are micro environmental meaning to some extent they are within EasyJet’s control, such as meeting fuel efficiency targets or plane safety standards. While some of these are macro environmental, meaning they are in the wider world and are out of the company’s control such as problems with the economy or political challenges (Ball & McCulloch, 1999).
Since globalisation mostly covers a macro environmental issues it links into a couple of factors part of PESTLE such as political, economic and ecological (environmental). it would be better to focus on the parts of PESTLE that are micro environmental. However, when doing a PESTLE analysis, all factors should still be examined. Social is one that relates to both micro and macro environments. It can relate too health consciousness which is an issue with any sort of travel since all sorts of different illnesses can be passed around on the plane as well as from country to country as people travel (CIM, 2018). It can also affect the staff on board comprising their own health. Staffing is a factor all as well, career attitudes, motivation, successful running of operations and customer service all play a vital role in EasyJet’s business (CIM, 2018). Staff handling is within their control, so they will need to make sure things are running smoothly with their staff since the staff are running the enterprise day to day.
Technological factors should also be considered, as discussed previously technology has changed the way planes are created which has lead for some positive improvements to the aviation industry. Modern technology also changes the way things are marketed as well though. This means EasyJet needs to evaluate new technological ways when communicating with the target market, such as using social media. Without doing this marketing will be affected and a lack of presence on modern technologies will decrease the company’s awareness and presence, leading to a fall in consumers (Adexpresso, 2017). Legal issues should also be addressed by EasyJet making sure they are sticking to things like health and safety, equal opportunity, advertising standards and consumer rights laws. A PESTLE analysis should be undertaken to asses these things and used as a prelude to a more strategically orientated technique like a SWOT analysis, when strengths and weaknesses are identified.
SWOT analysis is a framework in which you can discover a clear strategy for your businesses. In the case of EasyJet, they can use SWOT analysis to discover their strengths, weaknesses, opportunities and threats (MindTools, 2017). Rationalist approaches argue strategic planning should be undertaken, suggesting that businesses monitor their own environment as well as the outside environment to asses’ strengths and weaknesses which might facilitate the exploitation of environmental opportunities as well as avoid environmental threats (Brooks, Weatherston, & Wilkinson, 2011).
By looking at EasyJet’s goals, objectives and strategy it clearly outlines what direction the company wants to go moving to the future. They outline plans such as having a strong position at Europe’s leading airports (EasyJet, 2018). Which is a very achievable goal for them since they are the second biggest budget airline within Europe (Productions, 2016). They also outline their strengths such as being able to give customers affordable travel by having many seats per aircraft, a point-to-point destination model and younger planes increasing fuel efficiency as well as them needing less maintenance (EasyJet, 2018). They have a favourable economic framework, following a low-cost carrier model which is good for consumers and their own business costs. Low-cost airlines were in high public demand, so they cornered the market which was previously non-existent before the establishment of themselves and Ryanair in 1995 (Productions, 2016).
Budget airlines have been most successful throughout Europe despite being available globally. This is due to a huge decrease in price from standard airlines, for example US budget airlines can give 10% or 20% discounts while in Europe they can afford to give people half or even two thirds off the traditional airline costs (Productions, 2016). This gives them a greater opportunity throughout Europe, which is where their goals are based around. Weaknesses and threats have already been identified previously but again EasyJet would examine all factors if conducting a SWOT analysis.
Due to so many other budget airlines experiencing problems as stated previously, EasyJet may be able to hold a monopoly over the competition since they will outlive them. While it might not be a ‘pure’ monopoly, consumers will have a limited choice of budget airlines almost forcing them into having to use EasyJet over the other competition, which at this point either has low recognition or is experiencing problems of some sort which will turn away consumers (Economics, 2017). Monarch and Ryanair’s cancelations and other assorted problems for example is something many consumers will remember negatively, and people will create faulty generalizations. This has been proven in Schemata Theory and faulty generalizations will be made even if the instance was only once or twice, turning people away as their cognitive shortcuts will stereotype these airlines as bad even if the airlines sort their individual issues out (Fornell, 1995).
In conclusion, EasyJet are currently experiencing financial growth with increased stock market shares and an increase in customers (Powley, 2017). The company’s shares rose more than 6 per cent (Powley, 2017) and EasyJet’s passenger numbers also grew by almost 10% in 2017 to 81 million (Cox, 2018). A forecast for 2018 is also showing a 10 per cent increase in passenger numbers for the year, to around 129 million (Cox, 2018). This recent success came after a fall in competitive pressures of Monarch and Air Berlin. As well as, the cut in capacity at Ryanair in the wake of the pilot roster and strike problems (Cox, 2018). However, the fall of their rivals could mean that one day their business might experience the same issues as the other budget airlines and fall as well. By using an environmental analysis report they can figure out a strategy that other airlines haven’t, to avoid challenges their rivals have dealt with and keep their business running successfully.