Companies share similar characteristics
Suppliers are strong if they have considerable number of customers, they are concentrated in nature and there is a significant cost of changing supplier. Suppliers of the airline industry on the other hand, have no such benefit. Suppliers are considerably many and their buyers are in equal numbers also. In fact, for low cost airline like EasyJet, suppliers’ powers are powerless especially for catering suppliers in which the two companies share similar characteristics to eliminate in-flight catering.
Kind of suppliers that have powerful influence in budget airlines are IT consultants that design and develop IT system or such budget airlines. This is because IT plays important role in helping airlines in managing huge flow of online ticketing. EasyJet develop online ticketing in its website http://www.easyjet.com/splash.asp?lang=en
In addition, EasyJet also encourage their customers to buy tickets via online reservation (e-ticketing) in order to reduce distribution costs. According to EasyJet website, currently, there are about 95 % of seats are sold over the Internet, making EasyJet to be a leader in Europe’s successful Internet retailers. The success is also caused by the vast promotion of EasyJet to book tickets, change routes, and many others through internet (EasyJet, 2006a).
Through http://www.easyjethotels.net, customers can select many kinds of best deals from hotels that have partnership with EasyJet. In the website, there is offering of cheap 3* or 4* hotels for only GBP15 per person per night.
Generally, the requirement of high capital in the industry provides entry barrier and an exit barrier for airlines. In addition, patent and technological issues do not allow just anyone to start building airlines. However, deregulation policies in the U.K. have reduced the level of entry barriers compare to previous years. The government no longer has the authority to decide who enters the businesses (‘Airline Industry’, 2001).
In addition, since any strategies of budget airlines are easily adopted by other airlines, the situation suggests that entry barriers are reduced. This is because competition will bring airline carriers into similarity. If Easyjet has strengths in on time arrival and online booking, for instances, other carrier will follow the move in order to attract passengers.