Business Model Examination of Easygroup\'s External Environment

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Examination of easyGroup's External Environment

Often, achieving competitive edge in an industry has less to do with a company's specialized set of resources, its innovative processes or its unique branding identity and has far more to do with its capacity to recognize needs in the market and find ways to satisfy them. Such is to say that where competitive edge is typically regarded as something attributable to the internal qualities of an organization, sometimes competitive edge may be devised simply by observing the market, identifying its biggest voids and filling these in a strategically sound matter. These externalities are most responsible for the competitive edge sought by easyGroup, purveyor of the no-frills, low-cost airline easyJet and aspiring purveyor of a business called easyCinema that would feature many of the same qualities applied in a different industry.

For easyGroup, the decision to create the business segment in question emerged from a sense of the need for a cheap consumer option in a marketplace lacking any significant price alternatives. Indeed, easyGroup would observe a rising demand amongst British film-going audiences for a more price-effective way to enjoy an evening at the theatre. The fact that no such option existed, easyGroup believed, was the result of a market inefficiency that could be resolved with the presence of a forward-thinking firm. According to the present case study, "the group's CEO, serial entrepreneur Stelios Haji-Inannou, aimed to replicate the success of easyJet, the low cost airline that he had established in 1995, by creating a similar no-frills concept in the cinema industry. The millionaire businessman's stand was, 'Nobody has tried to do this and I am told covert practices abound that prevent cinemas cutting prices. Current prices are far too high -- they put people off going to the cinema.'" (Doz, p. 57)

Here, the CEO of easyGroup described a set of externalities created by the marketplace as informing his company's decision toward the new venture. Particularly, Haji-Ioannou points out that there did not exist a market precedent, either failed or successful, for a low-cost cinema experience. This is an externality that suggests a great deal of entry-room for newly positioned competitors. Haji-Ioannou would imply that easyGroup's experience at creating a low-cost alternative in the airline industry had prepared it uniquely to exploit this entry-room. Haji-Ioannou also indicates that the pricing for regular cinema experiences has become so prohibitively high as to discourage consumer spending in this area. Such is to say that there is not only an absence of any competitor attempting the no-frills strategy for cinema marketing, but that there is also a clearly emergent consumer desire that no firm has yet capitalized upon.

It also bears noting that certain acts of industry collusion seem to be implied by Haji-Ioannou's comments. This idea of 'covert practices' suggests that most of the larger cinema companies are engaged in something of a price-fixing scheme that prevents any real open competition on pricing and therefore prevents the consumer from helping to shape his or her own experiences. As an industry outsider, easyGroup is postured perfectly to undermine this distortion of market behavior.