This case is about easyGroups efforts to diversify. The company established itself as a low-cost, no-frills carrier that focused on managing yield in the airline industry.
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Extending the "easy" Business Model: What Should easyGroup do Next? Teaching Note Introduction This case is about easyGroup's efforts to diversify. The company established itself as a low-cost, no-frills carrier that focused on managing yield in the airline industry. In some ways, easyJet was the Southwest Airlines of Europe: the first successful low-cost carrier. easyGroup has tried to transfer this business model to both the rental car and internet café businesses. In this case, it is considering entry into the UK movie theatre industry. This case offers students the opportunity to apply the diversification concepts in chapter 9. Particularly, it allows students to assess what it means to have a coherent diversification strategy. Secondarily, it also exposes students to Stelios Haji-Ioannou, a successful serial entrepreneur and to an international business context. Study Questions 1. Why was easyGroup successful with easyJet? 2. What is your assessment of easyGroup's diversification strategy? Do you expect easyGroup to be successful in internet cafes and rental cars? Why or why not? 3. Should easyGroup enter the cinema business? If so, how? Teaching Plan 1. Discussion of easyGroup's history and early diversification efforts (15-20 minutes) 2. Discussion of the easy formula as a core competence (20-30 minutes)
2. Customers typically must be willing to buy in advance (i.e. over the Internet). 3. It is also that the model works better with a mass market. * No-frills value proposition: The easyGroup model generally focuses on price sensitive customers are willing to forego amenities in order to get a better price. For example, easyInternetcafe abandoned things such as printing and serving coffee in the interest of keeping things simple and lowering costs. * Yield Management: This is tightly connected to the price elasticity point above, but it is a philosophy that depends on specific yield management skills. * Low-cost service delivery: This involves a systematic effort to reduce costs through simplicity, a focus on no-frills service, labor reduction, and using technology. * Learning and flexibility: In both the easyCar and easyInternetcafe, easyGroup's was very fast to try different adaptations. * Leveraging the easy brand * Avoid powerful low-cost competitors: easyGroup made a concerted effort to enter businesses where the competition was committed to a business model different to the easy low-cost, no-frills model. In airlines, they faced European competitors that had traditionally focused on providing a high quality in-flight experience and a full array of services. In rental cars, the competition was complacent and not used to competing aggressively on price (and probably cost as well).
* Leveraging the easy Brand / Avoiding Low-cost Competitors: Both of these advantages do appear to transfer well to easyCinema. Some of the concerns above, however, suggest that this part of the formula may not be as valuable as in airlines or rental cars. Recommendations and Conclusion Would you invest in easyCinemas? Students will probably conclude that cinemas are not an ideal fit for the easyGroup model although there may be a few that will argue to the contrary. If not cinemas, then what should easyGroup try next? What fits the model? I finish with some brainstorming on this point. Some possibilities are budget hotels, cruises, golf courses, etc. The key point here is to identify opportunities that fit the easy business model. To conclude, I like to focus on the dangers of over-extending on how we define the scope of where our core competences will apply and the need to be rigorous in applying core competence logic. What looks good at a broad concept level (i.e. easyCinema) often is not as attractive once we specifically examine the value of the resources and capabilities in the new market. ?? ?? ?? ?? Case 3-5 Part III 4 Copyright (c)2010 Pearson Education, Inc. publishing as Prentice Hall 1 Copyright (c)2010 Pearson Education, Inc. publishing as Prentice Hall
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