MKIB351 GLOBAL STRATEGIC MANAGEMENT ASSIGNMENT
Posted: January 5th, 2023
MKIB351 GLOBAL STRATEGIC MANAGEMENT ASSIGNMENT
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MKIB351 Global Strategic Management Assignment
Introduction
EasyJet positions itself as a low-cost multinational company in the airline sector (Koenigsberg, Muller & Vilcassim 2004). The multinational enterprise operates both local and international schedule services in more than 900 routes in at least 30 nations (EasyJet 2020). The company works closely with its affiliates such as Easy Jet Europe, EasyJet Switzerland, and EasyJet UK to serve customers effectively, fast, and efficiently (Saez-Martinez et al. 2016). The group has made tremendous steps since its foundation in 1995, and its positioning as an affordable brands puts it ahead of its competitors (Sull et al. 1999). The group pays attention to cost-leadership as a technique for gaining competitive advantage, and believes that the approach requires adequate planning and efficiency to realize the best outcome (EasyJet 2020). Even though it may be difficult to steer the firm to great heights while charging lower rates, EasyJet has proved to be a great planner in this area, and continues to develop promising plans for current and future operations (EasyJet 2020). Its resilience to maintain the leading position gives it the vigour to progress despite the stiff competition in the sector. The study pays considerable attention to the factors that influence the activities of EasyJet in the external environment, and explores how the firm tries to adapt to these issues. The Porter’s five force analysis serves as a suitable framework for analysing the external factors impacting on EasyJet because it provides the chance to explore various factors ranging from the influence of buyers and to the impact other operators in the sector. Despite the tremendous growth EasyJet has recorded over the years, the group recorded substantial loss in 2020 due to the COVID 19 outbreak. The study explores how the health crisis has resulted in severe outcomes that could have negative long-term effects, especially if the management does not react fast towards the matter. The report highlights how the health crisis forced the firm to withdraw a considerable number of fleet from operation. It had to reduce the number of workers to maintain a few people that the company can manage with ease. The pandemic pushed EasyJet to consider alternative ways of generating revenue to keep it going at a time when nearly all flights were cancelled and most of the aircraft grounded. The study illustrates how EasyJet needs to identify possible opportunities from the catastrophe and take measures that would save it from witnessing more damage. The team while entering into strategic alliances with other firms need to consider the merits and demerits associated with the option before proceeding with implementation. The research supports the formation of strategic alliances with other firms because the benefits outweigh the limitations. The paper recommends the need to improve quality services while following the guidelines of global frameworks that give clear directives on quality management. The firm may have to establish strategic alliances with other operators in the sector and improve its level of quality to maintain its leading position in the airline sector and to withstand future threats.
The MNE Environment
Prior to the health crisis, EasyJet’s major sector, airline, was characterised by stiff competition, and was influenced by other forces in the macro environment. The Porter’s five force model helps to understand how the external environment impact on EasyJet. One of the factors that impact on the company is threat of new entrants. However, this threat remained low because of the high costs associated with entering the area (EasyJet 2020). EasyJet always enact measures to avert the possible adverse effects the threat of new entrants may present. For example, the company continues to innovate new practices, products and services. The management understands that developing new and innovative products play a vital role in bringing new buyers to the firm, but also give old buyers a reason to purchase the company’s products and services (EasyJet 2020). The group works to maintain its position and to overcome the potential effects of new entrants by building its capacity and adequately investing on research and development (EasyJet 2020). Consequently, not many players would want to enter a sector where influential firms such as EasyJet define the standards quite often.
EasyJet focuses on other factors of the Porter’s model that have considerable impact on its operations. The other factors that impact on the company are buyer and supplier bargaining powers. It is only possible to sell at higher prices when the consumers’ bargaining power is not high (Baburaj & Narayanan 2016). However, higher supplier bargaining power may also compel the firm to sell at relatively higher prices (Baburaj & Narayanan 2016). Baburaj and Narayanan (2016) inform that nearly all firms in the travel and leisure sector purchase raw materials from various suppliers. Powerful and prominent suppliers tend to utilize their strong negotiating prowess to set higher prices from their purchasers. Thus, the overall effect of stronger supplier bargaining power is that it reduces the general profitability of a company (Baburaj & Narayanan 2016). The company reacts to address the issues emanating from dealing with suppliers and the rate that they charge by establishing appropriate supply chain with numerous suppliers, and trying with product design utilising dissimilar materials so that the rates escalate of one raw material then the firm can change to another. The group also tries to deal with the bargaining power of suppliers by forming ties with a group of committed vendors whose operations largely depend upon EasyJet (EasyJet 2020). At the same time, the group understands that purchasers are usually a demanding lot, because while they would want to get want meets their desires and interests, they may not be willing to pay high amount for the product or service. The situation places considerable pressure on EasyJet revenue generation in the long run (EasyJet 2020). The more powerful and smaller the consumer base is for the airline, the elevated the bargaining power of the buyers and stronger their capacity to seek higher offers and discounts. The group takes a number of factors to tackle the issues introduced by the bargaining power of purchasers. It strives to establish a larger base of buyers to minimise bargaining power of customers, and to provide the company the chance to streamline production activities and sales (EasyJet 2020). Also, the company constantly innovates new products and services because it believes that introducing new products will minimise the withdrawal of existing purchasers (EasyJet 2020). The other factor that influence how EasyJet performs its operations is threat of substitute products such as transport by cars, motorbikes, and trucks (EasyJet 2020). The threat could affect generation, especially if the other operators use appealing marketing techniques (Baburaj & Narayanan 2016).
Finally, competition from competing firms such as Virgin Atlantic, Eastern Airways, British Airways, and BA CityFlyer among others (EasyJet 2020). All these competitors require EasyJet to apply customer-appealing techniques to remain influential. Baburaj and Narayanan (2016) contend that if the competition among the4 existing operators is stiff, then it will lower prices and reduce the overall rate of revenue generation of the sector. The firm because of serving in an area where rivalry is high, it must be cautious, lest the threat affect long-term profitability (EasyJet 2020). The corporation adopts various measures to mitigate the possible adverse effects of intense rivalry in the sector. It builds sustainability and focuses on differentiation. The company believes that building its scale so that it can reach more destinations provides it with a suitable opportunity to increase its level of competition and position in the global market (EasyJet 2020). By examining all the five competitive forces, the company can achieve a complete overview of what influences the profitability of the airline (EasyJet 2020). The management can learn game-changing practices and trends early enough and quickly react to take advantage of emerging and available opportunities. At the same time, failing to act could cause severe effects that may take longer to address before the company regains track.
The MNE and the Global Pandemic
The COVID 19 pandemic is having global effects on businesses. Many corporations are facing considerable challenges, including disruption of the supply chain, reduction of revenue, disruption of business practices because of restrictions placed on international traveling and measures to maintain worker safety. Findings by IBISWorld (2021), McKinsey & Company (2020), and Muchlinski (2020) indicate that the health crisis is unleashing a new wave of changes for businesses. Firms have experienced increased hardships in completing existing contractual obligations and the function of the unanticipated conditions that inhibit companies from fulfilling contracts (Albonico & Mladenov (2020); Saurav et al. 2020). Organizations have tampered with ideal employment relationships in the way they had to lay off many employees while making many other changes in an attempt to adjust to the ravaging effects of the health crisis (Milliken 2020; OECD 2020). EssayJet is an example of the many companies that encounters key challenges as a result of the health crisis.
Report by Kollewe and Topham (2020) and Preez (2020) describe how EssayJet recorded a 1.3 billion pounds entire-year loss, which is the first in the twenty five years it has served in the sector (BBC News 2020). Slotnick (2020) describes how almost immediately news of the pandemic became prevalent in the final stages of January 2020, travel demand to many parts of Asia from other parts of the world dropped. Even before the containment measure was enacted across the world, airline firms started to immensely restrict flights to China, and other parts in Asia as COVID 19-related apprehensions led travelers to avoid visiting the region (Slotnick 2020). Within weeks of quick spread, however, it became evident that flights to Asia were not the only areas to witness dropped demands. As the virus moved into Europe, followed by the Americas and then Africa, passenger demand fell across the entire sector (Slotnick 2020). People were speculating trips anywhere away from their locality, and trying as much as possible to avoid anything to do with air travel, considering possible close association with other people, some of whom could already be infected with the virus. Notably, consumers were also postponing buying tickets for future travel, because of the uncertainties surrounding the crisis (Slotnick 2020). All these events that happened so fast affected EasyJet, which had to miss out on revenue generation because of the restricted movements.
EsayJet suffered other consequences related to COVID 19 spread, which affected its activities significantly. The facility was forced to cut the number of its staff by more than 29%, resulting in more than 4475 redundancies (Russell 2020). The shortage of workers meant that other areas that the company does not regard as vital had to cease operations while some workers multitask (Rao 2020). In addition, EasyJet was forced to close three of its stations in Newcastle, Stansted, and Southend, although Newcastle and Stansted still hold some few functions for inbound flights.
The tough conditions presented by COVID 19 has left EasyJet and other operators in the sector with no option but to seek for external assistance with the hope that this would help them to evade the adverse effects of the pandemic. However, the option may not be promising because Makortoff and Topham (2020) describe how although the government had announced that it would give a rescue packages to operators, the promise has not come to realisation. A taskforce was selected to look into the matter and its chair – Grant Shapps, UK transport secretary, said that its department is yet to submit a report to the Prime Minister on why the initiative takes so long to materialise. Furthermore, operators in the sector are hopeful that the government will heed to their calls and suggest rapid airport and pre-departure testing as ways of eradicating or minimising the quarantine period, which implies that most returning travelers must isolate themselves for at least 14 days (Makortoff &Topham 2020). Studies by regulating body, IATA, indicate that quarantine regulations are almost a serious obstacle as a direct travel restriction (Makortoff &Topham 2020). Shapps and his team thinks that they will be able to find amicable solutions.
Possible Opportunities
However, the pandemic provides some opportunities that EssayJet can exploit to improve its operations. For example, the organizational leadership is confident that the firm is well positioned to venture into the market during this summer (Kollewe &Topham 2020). The group’s management said that the holiday bookings for the 2021 summer are significantly higher of those at the same period in the past years (Kollewe &Topham 2020). The team leadership attributes the huge demand to the many travelers who had booked again using tickets from cancelled journeys in 2020. The company’s management predict that that the leisure and short-haul routes that comprise the airline’s network are largely anticipated to recover more rapidly than business and long-haul trips (Kollewe &Topham 2020).
Potential Ways to Deal with the Challenges and to Utilise Available Opportunities
A possible option for EasyJet is to form strategic alliances and networks. Forming strategic alliances and networks is a possible alternative if the team is certain that the approach would create value. Therefore, the management must know the benefits and demerits associated with entering into mergers and acquisitions. Kinderis and Jucevicius (2013) inform that cooperation among different firms has been in place for a long time. Kinderis and Jucevicius (2013) argue that it was easier to create new businesses through appropriate teamwork among different establishments, alliances, and activities. Mergers and acquisitions is a widely practiced phenomenon bearing in mind that businesses have been entering into strategic alliances for more than one hundred years, and during recent years the number of those has substantially expanded. Kinderis and Jucevicius (2013) describe how strategic alliances became a favourite option for many organisations from the start of 1970s until the final parts of the 1990s. One benefit for forming strategic alliances with other operators either in the field or in other areas is that it helps to strengthen power in order to achieve mutual gain, benefits, and long-term competitiveness in the local and global markets. It is easier to achieve this objective by entering into a voluntary agreement with the participating firm. For example, EasyJet would want to be clear on contentious issues such as division or exchange of products and service or technology development before actualising the deal. Entering into strategic alliances provide EasyJet with a chance to experience increased efficiency in performance and to reach synergy effect, whereby both companies work as a joint entity with minimum obstacles. In addition, getting the chance to modify business practices provide a suitable chance to minimise duplication of activities and expenses. In addition, the company experiences more opportunity to foster efficiency improvement. Entering into a strategic alliance provides EasyJet with an appropriate opportunity to achieve stability. Kinderis and Jucevicius (2013) assert that businesses enter into strategic alliance with the aim of establishing a cooperation strategy. It is easier to avoid uncertainty when working as a team, and firms get the chance to forecast and assimilate resources effectively.
Entering into strategic alliances present several other benefits to EasyJet, which makes the approach worth trying. The alternative provides the chance to achieve asymmetry, whereby a key motivating factor for forming the pact is to eradicate any gaps in organisational operations. Forming strategic alliances provide the chance to achieve efficiency such that it is easier to enter into more lucrative and advantageous deals. Efficiency is a vital factor in business and factor that would allow the group to record increased performance and better outcome, and the group should work foster anything that may allow it to become efficient (Culpan 2008). It is also easier to abide by the legal provisions in the local and foreign markets by forming strategic alliances. Kinderis and Jucevicius (2013) believe that corporations establish strategic alliances with the objective of improving their reputation and encouraging other firms to collaborate. Elmuti and Kathawala (2001) give the example of some leading firms that have thrived in their operational areas because of the strategic alliances that they form with other like-minded firms.
The company must consider the possible demerits associated with strategic alliances to be sure that leaders adopt the appropriate decisions. The management must understand that entering into strategic ties is subject to fail if the company chooses the wrong or inappropriate partners (Muthoka & Oduor 2014). Such a scenario may happen if EasyJet does not take time to assess the capabilities of its selected partners, and if the organisation lacks enough information about possible partners. The other possible limitations that could derail the implementation of the technique, include high costs of negotiation and coordination, possibilities of partner opportunism, and risks of creating room for competition (Cuellar et al. 2011). Thus, it is imperative to consider the possible limitations of forming strategic alliance before applying the option.
Another possible option for achieving better strategic positioning at a time when the facility and many others are recording poor outcomes because of the health crisis is maintaining quality. Even though the approach is not rare and is imitable, it presents substantial values that may help the company build value (Bartik et al. 2020). The enterprise must acknowledge that it is easier to attract more customers despite the health crisis by offering quality services. Buyers are willing to pay more when they feel that they get the best quality (E-Alam 2020; Manroe & Dodds 1998; Shirai 2014). The group can improve its quality by observing some international regulations such as ISO 9001, which is globally acknowledged as an effective quality management system (ISO 2020; Ilkay & Aslan 2012; Pantouvakis et al. 2013). However, it may be impossible to achieve the desired outcome without improving the level of quality production.
Conclusion
EasyJet is one of the many multinational enterprises that have suffered adverse effects of COVID 19, a situation that may compel the firm to embrace other mitigating measures. The company was forced to cope with reduced revenues, and incident that resulted in millions of loss for the first time in history. EasyJet can embrace several options that would help it to fit into the new setting. EasyJet may form a strategic alliance with other companies to enjoy the benefits that come with applying the technique. The company can improve its present condition by focusing on superior quality that attract more buyers.
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