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Extended Business Project BTEC Level 5

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  • Level: Undergraduate/College
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INTRODUCTION

The airline industry is one of the fastest-growing sectors in the present business environment or in the global market. The present report is in the context of WizzAir which is a Hungarian low-cost airline headquartered in Budapest. The purpose of this report is to understand various factors such as external and internal factors that affect the overall functioning and performance of the airline company. The study will also focus on methods used by WizzAir to develop an effective strategy for gaining competitive advantages in the market. Furthermore, the report will also provide beneficial recommendations in order to achieve success and to sustain in a competitive global market.

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BACKGROUND OF WIZZAIR

WizzAir was launched in June 2003 when six individuals with high airline experience and track records joined Jozsef Varadi who is the chief executive officer of the company. It became a registered airline company all ready to fly. WizzAit is a low-cost Hungarian airline which is also known as WizzAir Hungary Ltd. presently it offers more than 500 routes from almost 27 bases in various regions such as Lublin, Poznan, Katowice in Poland, Debrecen and Budapest in Hungary, Varna and Sofia in Bulgaria, etc. The company is a value-oriented airline that focuses on innovation throughout the way of a customer's journey. WizzAir is endlessly looking for potential opportunities in order to provide low-cost air transport and expand its network of destinations. The company offers flights to a mix of primary, secondary and regional airports providing fast and friendly customer services at low cost.

STRATEGIC POSITION OF WIZZAIR

In order to determine the current strategic position of WizzAir, both the internal and external environment will be analyzed. Competitive advantage has been considered in relation to the business strategies. A number of strategies are applied by WizzAir in order to gain competitive advantages in the market. These strategies are affected by many types of elements in the internal as well as external business environment. It is essential for each and every organization to gain competitive advantages as it helps sustain an impressive position in the market. 

Internal Analysis - SWOT

In order to analyze the internal business environment and factors inside the company SWOT analysis can be used. These factors are affecting or influencing overall functioning as well as the performance of WizzAir

Strengths

  1. It has very low unit cost -According to the CAPA CASK database, WizzAir has the second lowest unit cost among all European airlines. Along with Pegasus and Ryanair, WizzAir is categorized as one of the three low-cost airlines in Europe. The main element behind this low level of cost per available seat kilometre is a very effective business model focusing on high labour productivity, secondary airports and high average aircraft utilization.
    Cost per available seat kilometre vs. avg journey length
  1. Low fares - Due to the low-cost unit, WizzAir is easily able to offer low-fare air transport to their customers along with maintaining their profitability.
  2. Leading market share in the chosen market - In the year 2014, WizzAIr was the fifth-largest LCC by passenger numbers and 4th largest by ASKs in Europe. According to OAG statistics for the week of October 2015, the company is the biggest airline regarding seats between Western Europe and Central or Eastern Europe ahead of Ryanair Airlines.
    Leading airlines

Weaknesses

  1. Seasonal earning - WizzAir is highly dependent on the months of summer, the company is earning high profits in the summer season as more passengers travel in summer vacations to meet their friends and family.
  2. WizzAir is operating with lower frequencies as compared to its competitors.

Opportunities

  1. WizzAir has high opportunities to grow in Central or Eastern Europe, this target market of the company offers potential growth opportunities for many reasons. The first region is that Eastern Europe is less developed as compared to the Western region and hence, its GDP growth rate is high. Secondly, the growth in the economy and transportation links with Western Europe is increasing because of the expansion of the European Union in order to include various countries in Eastern Europe in recent years.
  • Threats
  1. Ryanair is a great competitor for WizzAir, although the airline is leading by seats overall in the target market Ryanair often leads in nations where they both operate or compete. Therefore, it is a major threat for WizzAir as competitors can minimise their profit or market share.
  2. External events - The airline company can be negatively affected by various external activities or events occurring in the environment such as volcanic ash disruption and earthquakes. These natural and geopolitical events can affect the overall functioning or performance of the airline company.

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External Analysis of WizzAir

Each and every organisation is also influenced by various elements outside its internal business environment, these elements are known as the External factors. The external factors are highly affecting WizzAir's business functions or activities which can be identified by effective external analysis tool such as Porter's five forces analysis as mentioned below -

  1. The threats of new entrants - The companies require a high investment in order to enter on airline industry, WizzAir remarkably brought huge capital while entering into business (Williams and et.al, 2017) But the airline industry is a highly profitable sector in the present market therefore a high number of new companies are entering into airline industry which is a great threat for WizzAir, In order to ensure the profitability and sustainability it is important for the company to develop effective strategies for gaining competitive advantages in the market.
  2. Bargaining power of the Buyers - Customers are observed to be the most competitive forces as they have the power to decrease the prices with regards to demanding high quality and more services, Customers also have the tendency to increase market competition. The power of every group of buyers is dependent highly on various characteristics of the market position and situation. Passengers in business class play a vital role in strategic decisions due to the amount of money they spend, they are potential customers for the airline company thus they can highly affect the strategies, functioning and prices of the company. The buyers are responsible for business success in each and every sector, it customers can switch to various other options in the market or industry.
  3. Bargaining power of suppliers - Suppliers also play an important role in the overall functioning or performance of an organisation. They highly affect the pricing strategy of the company as suppliers influence the cost of production. WizzAir's major suppliers are Airbus and Boing which are providing various resources as well as high-quality aircraft to the company. Therefore, they can highly influence the cost of the company and can affect the profitability of airlines. Various other suppliers in the industry can also affect WizzAir's strategic decisions by changing the price of supplied goods or services. These changes in the resources or supplied goods highly influence the quality of the services, fares and profit generation of the company. WizzAir needs to consider the types of suppliers it has and try to find effective alternatives for reducing the power of suppliers and their impact on the airline's performance.
  4. Threat of substitutes - This factor is additionally an important element as it can change the choice of purchasers to switch to another supplier with comparable items and services. Despite the fact that air travel is one of the effective, fast and modern methods of transportation, individuals can likewise utilize preparation, transport or auto keeping in mind the end goal to achieve the wanted goal. The level of this quality is specifically dependent on substantial variables that include cash, time, or individual taste and inclination. A key component is viewed as the exchange taking a toll as customers can without much of a stretch utilise diverse sorts of transplantation. WizzAir comprehends the need of travellers to have in excess of one option and is putting forth unique services, for example, leases, auto rentals, and visit bundles, perspectives that bolster its development and notoriety.
  5. The rivalry between existing contenders - In the airline business, each and every company utilizes a distinctive strategy with a specific end goal to pick up fame, to fortify the situation in the market and to build customer loyalty (Belobaba and et.al, 2015). Other techniques are utilized, value, methodologies, advertising efforts, or including services for customers are the most utilized once. The carrier industry can end up unstable in the circumstance of activity in a market that has a high number of aircraft. WizzAir chose to forfeit the benefit keeping in mind the end goal to ceaselessly extend. The business is continually set apart from the container in the middle of players as each carrier tends to pick up pieces of the overall industry from each other. For purchasers, it is anything but difficult to switch contingent upon cost and comfort. For this reason, the level of competition increases consistently.

Recommendations and Conclusions

The above report analysed that although the airline industry is highly growing and developing in the present market, it has huge competition or rivalry. Many companies are entering the airline industry with new and innovative techniques or strategies but with the help of a low-cost strategy, WizzAir has successfully achieved an impressive position in the European airline industry. The company needs to ensure that it sustains the leading position and profitability of the market, competition is increasing at a huge rate. Therefore, the company needs to develop more effective and beneficial strategies for competing in the market, the most beneficial method to sustain an impressive position in the market is to focus on expanding the market share. The airlines should invest in increasing is market reach or enter into new markets which can help in gaining more customers which can lead to increased profitability. The other improvement should be made in the quality of services provided to the customers, high quality services are very important for obtaining customer satisfaction. In order to satisfy the changing needs and demands of customers or passengers it is essential for WizzAir to bring innovative and creative changes in the services offered to them. The company should introduce various new services such as free luggage carrier, entertainment elements at the airports etc. This will help the airline company to attract more customers and build a strong position in the airline industry. The report identified that the airline company also faces a major threat from the power of suppliers. In order to deal with this threat or issue WizzAir needs to ensure that it finds and connects with a wide range of suppliers in the global market for supplying goods or services so that the company can switch their suppliers when they increase their cost or prices. The suppliers can greatly influence the cost of production, importing goods from a supplier with low prices can directly reduce the cost of production for the airline company. WizzAir needs to consider all the above factors to sustain its position in the airline industry as well as achieve further growth and development.

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REFERENCES

  • Belobaba, P., Odoni, A. and Barnhart, C. eds., 2015. The global airline industry. John Wiley & Sons.
  • Williams, G., 2017. The airline industry and the impact of deregulation. Routledge.
  • Smits, R., 2018. A research to the influence of failure severity on customer satisfaction and loyalty. Does failure type influence the impact on the customer in the airline industry(Master's thesis, Open Universiteit Nederland)
  • Ford, J.B., Paparoidamis, N. and Chumpitaz, R., 2015. Service quality, customer satisfaction, value and loyalty: An empirical investigation of the airline services industry. In The Sustainable Global Marketplace (pp. 187-187). Springer, Cham.
  • Mellat-Parast, M., Golmohammadi, D., McFadden, K.L. and Miller, J.W., 2015. Linking business strategy to service failures and financial performance: Empirical evidence from the US domestic airline industry. Journal of Operations Management,38, pp.14-24.
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