Essay Example: New Venture Strategies for EasyJet

Can’t imagine your life without planes? Then this sample essay is just for you!

The person of company’s owners is a significant factor in the company’s activity and success. The owner has very important rights: to define the realms for his venture’s activity, to dispose its capital, to employ the workers, particularly it concerns the employment of directors or managers.

The responsibilities of the owner are to keep his enterprise on living, in other words, to eliminate the possibility of bankrupt, to maintain the employers and to present the company on the market. It is important, because the owners of the actions and other “valuable papers” of the company are in fact the owners of enterprise, and like each another property, the company is lead by them. MBI (Management Buyin) and MBO (Management Buyout) are the forms of stakeholders organising, and what is more important, this isn’t a simple dispensation of actions between some people or organisations, but it is the strict division of stakeholders, what defines much the further company’s activity.
aircraft picture

The issue of choice between MBI and MBO is principal for such reasons. The top stakeholders groups usually define the direction of the enterprise’s activity, and they are the indispensable elements for the creating of the company. The stakeholders give their capital to some people, who organises the production process, but the real owners of the enterprise are the stakeholders[1]. The importance of such mean of company’s organisation raises, because in the contemporary world a single person is unable to create a strong, famous enterprise-giant, though the human progress, the cooperation of all the world population and the forming of world community requires such a companies[2].

The stakeholders may be divided on the single persons and some organisations; usually their activity is closely concerned to the company, which stakes they take. However in the era, when there are so many links between absolutely different economic (and political) subjects, there is no need to be the professional doctor for possessing the medical company – it is more important to possess the capital and be ready to invest it.

Firstly we must investigate the common features, positive and negative aspects of MBI and MBO. Management Buyin has such advantages (from the company’s point of view):

1)  it allows to find big sums of capital (the managers of one enterprise can possess less money, than businessmen from outside) for the company’s development;

2)  it minimise the risk of bankrupting – the managers invest almost all their money, and they have no more capital, which can be useful in extra-situations, and the stakeholders invest only a part from all their property, and they have another money for extra-cases;

3)  Strategic reasons – the vendor may not wish competitors to be in control;

4)  Confidentiality – the vendor may not wish to let competitors have access to sensitive information that would be disclosed during a trade sale process.

The advantages of MBI are disadvantages of MBO. Both these forms of management concern the same points, but each one has different answer to the same challenges. Both MBO and MBI are the systems, so that we can’t eliminate some features of this system, otherwise it will lose its sense. That’s why when we speak about advantages of one form, we must take into consideration that another form of management has the disadvantages in these positions. So, the negative features of MBO are the absences of the positive trends, described higher. And vice versa, the negative positions in MBI are opposite to the positive features of MBO.

So, let us turn to them:

1)  when the managers are the owners of the company, where they work, their interest in growth of incomes and company’s development is higher, than in MBI system – actually, they rally understand, that they are working on their own benefit;

2)  the managers always know, what capital they possess, so that they can manage the company effectively;

3)  the process of making decisions is rather simple – there is no need to hold the council of stakeholders, from one hand, and from another, the managers are sole to make the decisions and to embody them, so that the management is easy and flexible;

4)  the income is concentrated in the hands of managers, and the possibility of its elimination from the company’s developing process is low;

5)  the owner-manager always knows the problems of company and ways of its solving.

The biggest problem is the impossibility of combining the best and most convenient features from different systems into one form of management. However after defining the positive and negative points in MBO and MBI we must turn to EasyJet Company. In principle, it will be useful to study the properties of this company as well as the contemporary situation on the European market of plane transporting.

The growth of quantity of passengers (on 39,6% for two last years – from 6,7 mln per year to 9,3 mln per year), the growth of load factor (on 1,1 %), the introducing of 5 new routes in this year draw the increasing of value of company’s action[3]. By the way, from the year of its foundation (1998) the capital and passengers turn in 6 times (from 15 points to 90), and the last year this index was 25 %[4]. Hence, there are more capitalists, ready to invest their money in this company that is the position on the benefit of MBI system.

From other hand, the financing of the company fell from 764 mln Euros to 692 mln, or on 9%[5]. It may be explained by the common decreasing of the passenger’s quantity in the air of Europe in this year, because the report about 2003 doesn’t include the summer period, when the level of load factor is much higher. Another point is that the airline-online company always has a limit of developing, because there is a competition in this area, especially in Europe. It must be admitted, that EasyJet has less capital and passengers, as British airlines of French airlines, for example, so that it needs much subsidiary resources for the equal competition with these companies.

The prospects of EasyJet are, from one hand, rather perspective, and from another, they are limited, so that there is no need to apply a large capital for its developing. It would be better to develop gradually. The strong and more powerful competitors eliminate the possibility of fast developing. The accumulation of large capital is the main advantage of MBI system, but it is impossible to use this opportunity, that’s why the MBI system is less suitable for EasyJet, than MBO. From another hand, the airline companies require high quality specialists in its management, their role is big, and the situation, where the managers are simultaneously the owners of the company, increases much the interest in effective work, what is very important for EasyJet as well as for every other airline company in Europe.

List of notes:

[1] Galkin V. (1998) “Stakeholders for international business management“.

[2] Frank S. Zarb (2000) “School of business. Stakeholders and their role in company’s management”.

[3] EasyJet plc FY 2003 Interim Results.

[4]The same source.

[5]The same source.

Another resources used:

  1. EasyJet plc Interim Report from March 31 2003.
  2. EasyJet plc Interim Report from March 31 2002.
  3. EasyJet plc Annual Report and Accounts 2002.
  4. EasyJet plc Annual Report and Accounts 2001.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>