The Impact of Business Environment Factors on EasyJet's Performance

This report provides a comprehensive analysis of EasyJet's business environment, examining key factors influencing its operations and performance. It begins by exploring the market structure of the UK airline industry, specifically focusing on the oligopolistic nature and its implications for EasyJet. The report then delves into the economic forces impacting the airline, including demand and supply dynamics, income levels, inflation, and foreign exchange rates, detailing their effects on EasyJet's business. Furthermore, the analysis assesses the impact of significant external factors such as Brexit and the COVID-19 pandemic on EasyJet's operations, financial performance, and strategic decisions. The report concludes with recommendations based on the analysis, offering insights for EasyJet to navigate the complexities of the contemporary business environment.

CONTEMPORARY
BUSINESS ENVIRONMENT

Abstract
Business environment refers to factors that surround a business organisation and these
factors have very important impact on organisation and its functioning. This report have
discussed business environment of EasyJet. Concerned with this, several points have been
discussed in this report and this include market structure of UK in which EasyJet operates.
Followed by this economic factors affecting EasyJet were also discussed in report. Economic
factors that affect EasyJet include demand and supply, income level, inflation rate and several
other factors. Later impact of Brexit on EasyJet was also discussed. Followed by this, impact of
Covid-19 on EasyJet was also discussed in report.

Table of Contents
1. INTRODUCTION.......................................................................................................................3
2. DISCUSSION AND ANALYSIS...............................................................................................3
2.1 Market structure of UK in the concept of EasyJet.................................................................3
2.2 Economic forces of UK and their impact on EasyJet............................................................5
2.3 Impact of Brexit on the business of EasyJet..........................................................................8
2.4 Impact of Covid over EasyJet................................................................................................9
3. CONCLUSION..........................................................................................................................12
4. RECOMMENDATIONS...........................................................................................................12
5. REFERENCES............................................................................................................................1

1. INTRODUCTION
Business environment is one of the important term that every company have to consider
before initiating their working operation and making the plan for future strategies. Business
environment refers to the environment in which every company have to survive and operate their
working (Rao, 2021). Any changes in this will have to be carefully analysed and accordingly
implemented by every company in order to survive in the market. Covid pandemic is one of the
biggest environmental change that has threatened the entire world. Every business and industry is
being affected by this pandemic. EasyJet one of the airline industry is also greatly affected due to
this pandemic. Its business is almost reached the stage of stoppage. It has also incurred major
financial loss due to this Covid situation. This report will study about the concept of market
structure of UK. In addition, this report also contain various elements and forces of business
environment along with their impact that could affect EasyJet and its working.
2. DISCUSSION AND ANALYSIS
2.1 Market structure of UK in the concept of EasyJet
Market structure:
It refers to the structure of the market which could either be competitive and non-
competitive. It makes the companies differentiate in terms of good or services that is being sold
by them in the market (Mongey, 2017).
Types of market structure:
Perfect competition:
It refers to that market structure in which there are large number of producers or
companies with no influence over the price. All firms produce the same products. This means
that these firms are price taker not the maker (Azevedo and Gottlieb, 2017). Under this form of
structure no single firm is having the power to determine the price or market force.
Monopolistic:
Under this form of market structure there are large number of buyers and sellers but the
product of each producer is different from each other. Also, the prices under this form of
structure can be changed and charged differently by different seller (A Guide to Types of Market
Structures, 2017). Due to variety of products customers have no knowledge about every product.
Oligopoly:

It refers to that market structure in which few firm will lead and rule the entire market.
Entry is strictly restricted in this form of market. These few firms have full control over the
market (Ara, Ghosh and Zhang, 2017). This structure come into existence when few big
companies will agrees to form a strong bond in which no other companies will be allowed to
enter into the market.
Market structure of UK:
In UK the market structure is generally followed as oligopoly. This means that in UK
there is a great influence of big companies who lead and run the entire market. In the field of
airline industry also, oligopoly structure is being followed. This means that it is very difficult for
any new company to enter into market, as there are strong entry barriers in the market.
As EasyJet belongs to airline industry so it is very essential for it to have an analysis of
market structure in which it operates its business. As due to oligopoly structure, major airline
including British Airways and Air France rule the market along with very small number of
competitors. Whatever pricing is being decided by these companies will lead the market and
every small companies will have to follow that pricing structure. In addition, of that EasyJet is
also one of the biggest airline of UK having large number of customers. Since under oligopoly
structure there is no strong influence of small companies so it would not be wrong to said that
EasyJet have no strong market power. This means that it has more strength towards the market
that it can lead the market.
The reason behind the existence of oligopoly market structure in UK is the market
situation wherein the market is being leaded by few companies that are the market leader. Since
in UK there are many big firms which make the whole market to be governed by them and as a
result emerge as a oligopoly market structure.
2.2 Economic forces of UK and their impact on EasyJet
There are various economic forces in UK that have impact over the EasyJet. Out of them some
are:
Demand and supply:
These are the important component of economic system of UK. As no economic system
can be existed without these elements. There is a direct relationship between demand and supply.
This mean that along with raising in demand the supply will also raise (Balleer and et.al., 2020).

As in the case of UK if the demad regarding the low cost airline will raise then the business of
EasyJet will also raise because it is a provider of low fare airline services. Likewise, in case if the
supply of low fare airline companies will raise then this will again put impact over the EasyJet in
terms of affecting its business along with rising in competition. This means that fluctuation in
demand and supply in the market of UK will have direct impact over the company in terms of its
raise and fall in sales of its business.
Income level:
It is also an important component of economic factor. This is concerned with the level of
income of the customers. This means that if the income of the customer will raise then the
business of the EasyJet would be affected in negative terms. This is because EasyJet being a
provider of low fare airline services will be affected with the rise in the level of income of
consumers. The reason behind such opposite reaction is: as the income of the customer will raise
then they will instead of choosing low fare airline will shift their demand towards the luxury of
high cost airline. This will lead to have an impact over the business of EasyJet. However in case
of those who have not travelled through airline the demand and sale of those customers will
boost the business of EasyJet because they would now afford the tickets and as a result the
business will raise.
Inflation rate:
This is also an important economic factor which have a direct impact over every
company including EasyJet too. As during the time of inflation everything got costly and as a
result of that the sales and the profit of the business of the EasyJet would being affected. It will
also have an operational impact too. This means that with the rising inflation rate the cost of fuel
and operating cost would also raise (Vejdělek, 2020). And as a result of that the coast of
operation of the EasyJet would being affected in the form of raising the cost.
Forex rate:
It refers to foreign exchange rate. As if the rate of foreign exchange will be raise then it
makes the import of those products become expensive that is being required in the operation of
the EasyJet. This can also be understood as a low exchange rate of the country will raise its
export in comparison of import (Cherunilam, 2020). However, in case of forex fluctuation the
impact over the EasyJet would be equitable.
Taxes:

`Taxes are also an important component of economic environment. An higher imposition
of taxes or raising the rate of taxes will directly affect the company and their profits (Dumont,
2017). This means that there is inverse relation between the company and the rate of taxes. This
means that along with rising the tax rate the business of the EasYJet would be affected in terms
of affection over the profit percentage. Likewise, a low rate of interest will help the business in
terms of earning high profits.
Recession:
Like inflation a recession in the economy will also have an impact over the company and
its business. During the time of recession demand slows down, credit conditions tighten up,
economic environment become uncertain and many more (Kehoe, Midrigan and Pastorino,
2018). Since, if these factors are being affected due to recession then the business of the EasyJet
is also being affected simultaneously. This means that if customer will have no money then how
they will afford to have a travelling in airline. As in recession the flow of money in the market
also go-slow down which will directly puts impact over the EasyJet and its business in terms of
perusing low sales.
Rate of employment:
This is also an important element of the economic factor of UK. This is also having a
direct impact over the business of the EasyJet. This is because along with raising the rate of
employment more employees will be ready to work or need of work. So company can easily hire
the best employees for their business. In the same way its cost regarding the searching of
employees or paying higher wages or remuneration will also be reduced (Downie, 2021).
Interest rate:
This is considered as an important element of economic environment where a small
fluctuation in the rate of interest will have a direct impact over the company and their business.
This can also be understood as if the rate of interest raise then every company which is depended
on loans as a source of fund will be affected in the form of non-availability of funds or finding
difficulties in the arrangement of funds (Paul, 2020).
2.3 Impact of Brexit on the business of EasyJet
Political force:

It is one of the important element of contemporary business environment. It includes all
those changes which is concerned with changes in rules and regulations, or political situation of
the country. It is very essential to study this force by every company because of its severe impact
over the business and its activities. Brexit is one of the major political change of UK that has
affected the economy as well as various companies of UK (Bloom, 2019).
Brexit:
It is one of the most the biggest political change occurred in UK that has changed the
entire functioning of almost every industry. As per agreement of Brexit the trade relation
between UK and European Union (EU) has stopped and banned. In simple words it refers to
withdrawal of UK from European Union (Clarke, 2017). It has raised the taxes as well as trade
restriction among both the nations.
Impact of Brexit on EasyJet:
Brexit is one of the biggest political change that has greatly affected every company of
UK including EasyJet. It has restricted the movement of flights between UK and EU. As it is a
part of political force of business environment so it is very essential to study this force before
planning future strategies and operation of the business of the company. Since, Brexit has shaken
the entire economy of UK in terms of occurrence of financial losses along with trade barriers.
Almost every airline company including EasyJet has been majorly affected due to Brexit. As per
Brexit restrictions is being imposed over trade relation between EU and UK so as a result of that
movement of goods by airways has also being affected. Due to Brexit restriction, those
companies who deal with the movement of goods had been badly affected (Rutgersson, 2019).
Due to Brexit and its associated change and restrictions, EasyJet had incurred a heavy financial
loss. Since, majority of trade and air traffic that UK got is from EU only so along with Brexit
everything has been affected. Many flights of EasyJet got cancelled and impacted.
Due to reducing air traffic between UK and EU, almost every airline company got
severely affected. They had incurred serious financial loss. Since, EasyJet operate its series of
fleets to the countries of EU which were also affected due to Brexit. Due to imposition of
restriction in air movement now the flights of EasyJet instead of meeting the entire trip is being
partially completing the flight. This has created problems to its customer's in the form of
changing the flights and as a result of that its sales is continuously decreasing (Minford, 2019).
Due to lowering sales ratio, EasyJet is being suffering from high financial losses.

2.4 Impact of Covid over EasyJet
Impact of Covid on EsyJet:
It has not only affected and influenced a single industry but almost every sector, every
company has been affected with the Covid pandemic. It is a part of environmental forces of
business environment. With the outburst of Covid pandemic every country is being equally
affected. Among all the industries, airline sector is one which is being badly and majorly
impacted due to Covid pandemic. It had got affected in the form of continuous deceased in the
demand of fleets or reducing air traffic. Covid pandemic has lead many small airline company to
be reached at the stage of closure of their business (He and Harris, 2020). Since, airline sector
contributes a major share in the economy of the UK but along with the restriction of Covid the
entire economy of UK has also being affected.
Since Covid and its consequences in the form of lock down has worked like putting a
barrier over the airline sector. Covid and its restriction has stopped the employment and business
of EasyJet which has created a big financial loss to it. As EasyJet is one of the most successful
airline industry of UK which is running at a good pace. But due to Covid pandemic it as beard
the first financial loss of its entire journey. As this sector is again related to tourism industry, so
due to restriction over tourism activities, business of EasyJet got major effect. In addition, of
tourist, traffic of local customers also got down. As due to Covid pandemic people got caught in
their houses. Also, due to various restriction the movement of people also stopped which has
directly influenced airline sector.
Government has also imposed various rules and regulation regarding health and hygiene
of people. Due to such awareness and regulations now companies have to take adequate safety
and hygiene measures which has directly raised their expenses in the form of raising cost (Mason
and Hruskova, 2021). As cost has been raising continuously which again affected EasyJet
because along with rising cost it is not being getting appropriate air traffic by which cost can be
meet up. So it is also creating a financial loss for it.
In addition, of that Covid has also brought many changes in the rules and policies of
every country including way of operating the business, raised the rate of raw material, increased
rate of unemployment and many more. Thus, it would not be wrong to said that Covid and its
impact has affected almost every factor concerning with business environment including

political, legal, economic and various other (COVID-19’S IMPACT ON THE AIRLINE
INDUSTRY: THE NEW REALITY, 2021). As these all factors are affected and result of that these
forces got evolved so this has again direct impact over all the companies and business including
EasyJet too. So, it will be right to say that Covid has imposed major impact over different
environmental forces which has again impacted directly over the EasyJet and other companies in
the form of facing financial losses, making changes in business operation in terms of compliance
of changing policies and rules.
Future impact:
However in case of future impact regarding Covid over the EasyJet would emerge in the
form of raising opportunities of employment as well as sales. This means that as tourist and
passengers are being bound due to covid restriction, and they are not being able to travel (Forster
and et.al., 2020). But in the future course of action the travelling business will rise and boost that
will directly affect EasyJet in terms of raising its sales proportions and profit percentages. Also
as a post covid impact the employment opportunities will also raise that will make avail the
employees to the EasyJet so that it would not be wrong to said that in comparison of pre and post
covid impact the business of the EasyJet would only grow and develop.
3. CONCLUSION
From the above report it is inferred that making of any plan or strategies regarding the
future is highly influenced and affected by the market structure as well as business environment.
So it is very important that every company have to analyse this environment before initiating
their further business and operate their business. Any changes in the factors of business
environment including political or economic and environmental changes have to be carefully
analysed by every company including EasyJet so that it will not severely impact over the
business of companies. In addition, of this, importance and impact of market structure is also
being understood in this report that how it helps in framing of future plans and policies of the
companies. Thus, it can be concluded that analysis of market structure, and careful study of
elements related to business environment will helps the EasyJet to overcome its financial loss
and run its business operation.

4. RECOMMENDATIONS
Covid-19 has created several barriers and challenges for aviation industry and this have
had significant impact on Easy Jet. In order to deal with challenges and overcome impact of
Covid-19 it is recommended that strong emphasis is placed on hygiene and safety measures. This
means in times of Covid-19 safety is biggest concern and also need of people and this is why
considering safety first approach will help Easy Jet in dealing with impact of Covid-19.
Along with safety of passengers Easy Jet should also ensure safety of employees in
organisation. This is because effective functioning of organisation is mainly dependent on
employees and this is why their safety and well-being should be ensured by organisation.
Along with this, it is recommended that an approach of long term cost reduction should
be adopted by Easy Jet in which its cost is less for long time. This is because Covid-19 has a
long term impact on organisation. Other than this, financial losses that Easy Jet has incurred they
are also likely to affect Easy Jet for long time.
It is recommended that Easy Jet develop collaboration with government because with
help of government it will be able to start and increase airline operations in other countries which
were stopped because of Covid-19.

5. REFERENCES
Books and journals
Ara, T., Ghosh, A. and Zhang, H., 2017. Tariffs, Vertical Oligopoly, and Market Structure.
RIETI.
Azevedo, E.M. and Gottlieb, D., 2017. Perfect competition in markets with adverse
selection. Econometrica.85(1). pp.67-105.
Balleer, and et.al., 2020. Demand or supply? Price adjustment during the Covid-19 pandemic.
Bloom, and et.al., 2019. The impact of Brexit on UK firms (No. w26218). National Bureau of
Economic Research.
Cherunilam, F., 2020. International business. PHI Learning Pvt. Ltd..
Clarke, and et.al., 2017. Brexit. Cambridge University Press.
Downie, J., 2021. Notes on the Basic Economic Forces Affecting Interpreting.
Dumont, M., 2017. Assessing the policy mix of public support to business R&D. Research
Policy. 46(10). pp.1851-1862.
Forster, and et.al., 2020. Current and future global climate impacts resulting from COVID-
19. Nature Climate Change. 10(10). pp.913-919.
He, H. and Harris, L., 2020. The impact of Covid-19 pandemic on corporate social responsibility
and marketing philosophy. Journal of Business Research.116. pp.176-182.
Kehoe, P.J., Midrigan, V. and Pastorino, E., 2018. Evolution of modern business cycle models:
Accounting for the great recession. Journal of Economic Perspectives. 32(3). pp.141-66.
Mason, C. and Hruskova, M., 2021. The impact of COVID-19 on entrepreneurial ecosystems.
In Productivity and the Pandemic.Edward Elgar Publishing.
Minford, P., 2019. The effects of Brexit on the UK economy(No. E2019/1). Cardiff Economics
Working Papers.
Mongey, S., 2017. Market structure and monetary non-neutrality. Job market paper. http://www.
simonmongey.
com/uploads/6/5/6/6/65665741/mongey_market_structure_monetary_nonneutrality_dra
ft. Pdf.
Paul, S., 2020. The Economic Forces Behind Labor Income Share: Empirics. In Labor Income
Share (pp. 191-249). Palgrave Macmillan, Singapore.
Rao, S., 2021. International business environment. Himalaya Publishing House.
Vejdělek, R., 2020. Inflation Targeting vs. Price-Level targeting and their impact on real
business.
Online references
A Guide to Types of Market Structures., 2017. [Online]. Available through
<https://online.aurora.edu/types-of-market-structures/>
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