Ibs Easyjet Strategy

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1. Analyze the structure of the industry in which easyJet competes. How attractive was the industry in the late 1990s? In accordance with Michael Porter’s Five Forces Mode (1980), the competition analysis of European Airline Industry comprises: 1. Potential entrance or the threat of new competitors’ entry, 2. The threat of substitutes, 3. The bargaining power of buyers, 4. The bargaining of sellers and 5. The degree of rivalry between existing competitors or monopoly. Michael Porter’s five forces model is aim to identify the attractiveness of industry as well as determine the long run industry profitability. 1. Potential Entrants Potential entrance is the degree of new entrance to an industry. It depends on the industry barriers to entry. If the potential entrance is high, it may lead to increase the degree of industry competition. The industry attractiveness therefore is less due to low profitability (Tutor2u, n.d.). There are number factors of barrier to entry however the key barriers to entry can include: * Economics of scale * Production differentiation * Capital requirements * Customer switching costs * Access to industry distribution channels * Government policies (eNote, 2012) a. Economic scale: European airline industry has achieved economic scale in which it creates a barrier of entry that the new entrants have to compete on a large scale (eNote, 2012). In order to compete to the existing competitors, easyJet offered low fares by minimizing cost as much as they can. easyJet’s low fare strategy focuses on offering airfare without meal service and business class seating. Moreover, easyJet also encouraged Internet sales to reduce the business operation cost generated by hiring reservation agents (Kumar, N & Rogers, B 2000). b.
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