This factor is characterized by examining the concentration ratio of the industry. An industry with a low concentration suggests that there are lots of players in the markets and competition is in its high level. Industry that has highly concentrated suggest a situation where only a few players within the industry that control significant share of the market (Porter’s, 2004).
In the case of EasyJet, the company exists in a country that has an area with a high concentration ratio of airlines industry. This is due to global airline industry is controlled by only 10 to 20 large airlines while other smaller airlines only have very small shares of the market. Nevertheless, the competition between these 20 players is intense.
In the UK, for instances, EasyJet faces great challenge from legacy airline, British Airways that still dominate the market in addition to another low cost carrier like RyanAir and other low cost carrier in UK (Baker, 2002).
Amidst the competition with legacy airline, the British Airways, analysts consider EasyJet enters a market in the right time since the legacy airlines are loosing market shares and low cost travel services gain significant attention from the market. This is in line with Easyjet’s three core strategies, which are: ‘focus on customers’, ‘owning markets’ and ‘reducing costs’. ‘Focus on customers’ refers to corporate emphasis to maintain vision of consumer value and to design products and services accordingly (Biz/ed, 2006).
Concerning the Easyjet’s competitive advantage, Easyjet can be considered as a well-known airline among most western markets. It possesses a strong appeal toward budget travellers all over Europe. Compare to Ryanair, its number one rival in budget airline, the company has considerably different strategy in which EasyJet pricing strategy involves performing more aggressive campaigns and focus on attracting business and leisure travellers by its two main weapons, cheap prices and punctuality. In addition, the decision to perform horizontal integration with Go! In 2002 also helps EasyJet to expand its services (Biz/ed, 2006)
Substitution generally means products of another industry of other segment of an industry that could appeal customers as a replacement to our products. However, the definition expands to include similar products of our competitors also (Porter’s, 2004). In the case of budget airlines, EasyJet in the UK, there are considerable threats of substitution; they come from legacy airline like UK’s British Airways and the U.S.’s Delta and American Airlines. Also read about British airways organisational structure
Facing intense competition from other budget airline and legacy airlines, EasyJet always strive for using airports more effectively and efficiently by gaining efficiencies through rapid turnaround times and progressive landing charges agreements with airports. The company insists that reducing turnaround times by less than 30 minutes will get extra rotations on the busy routes across the Europe thus save utilisation rates of its aircraft.
Generally, the airlines have many customers from various regions and economic classes. Therefore, there is a threat that the customer has control over corporate operations. This situation suggests that the new routes based on the reasonable demands that drive airline to carry out the route.
EasyJet, for example, has rise from previously 2 routes, at the beginning of the company’s operation, into more than 217 routes across the European airports with additional 6 routes in 2006.