The impact of the economic environment
Demand
A business relies on customers to buy its goods and services, without customers; the business would cease to exist. Customers generally will have an infinite amount of desires but have to make choices on what to actually buy. The choices that they make are called 'demand'. Demand in the economy is the need for a product or service whether it is a luxury or a necessity. It is the amount that customers are willing to buy at. The amount of demand can be higher or lower based on the economic stability. When there is an economic growth the demand for products is extremely highly because everybody has money to spend on luxurys. However this is the opposite for an economic slump period. This is because people need their money for nessecities rather than just luxurys.
There are quite a few things that influence demand. The price of the product will influence the amount of goods that the customers buy because they can be affordable and unaffordable. It is usally a case of high prices cause customers to buy a lower quanity of products. For examples, a PS4 game usually retails at around £45.00 so customers usually buy one at a time; perhaps at a monthly rate because that is all they can afford. This is similar to EasyJet because customers tend to go on holiday no more than once or twice a year because it is all that they can afford. But if prices decreased then people would be able to afford to go more.
Affordability based on income is another factor that influences demand. If a business charges expensive prices when it operates in an area of unemployment then it won't make many sales, if any, because a lack of income means that they can't afford it. This is why EasyJet is a high demand air line because they are a low budget airline so people of different incomes can benefit from them.
Competition is also a big factor on demand. Most customers don't spend their money all in one place; they usually shop around and look for the best prices and offers. This is very common today because the internet facilitates this. If a business wants to survive and keep their products and services in demand, they have to monitor what competitors are doing in terms of deals, new products and prices. This applies to EasyJet to a large extent because they have a lot of competition and when booking a holiday, customers look carefully at their options because it can be expensive and they seek the best deal. Luckily for Easyjet, they are known for their quality of service and low prices which puts them ahead of a lot of the competition and makes them one of the most successful air lines in Europe.
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The needs and aspirations of consumers is also a big factor on demand. Businesses classify goods as 'basic needs' and 'luxuries' and will adapt their pricing and marketing according to this. But products are different for different people; an education would be viewed as a basic need in somewhere with a stable economy like the UK, but be viewed as a luxury in a 3rd world country. But overal, consumer needs are affected by things such as income levels, their views on fashion, and their age etc. It is important that companies review the aspirations and needs of customers and adapt their operations to this.
1995-2008
1995-2008 was a boom period in the economy. It was period of growth; businesses were doing well because they are being more productive due to technology and making better profits for owners. As a result of the increase in work output, wages were also increased and this caused costs of products and inflation to increase. But despite the inflation and high costs, demand was still high for a wide range of products and services. People would buy more luxury items such as holidays and their standard of living was higher.
2008-2010 Was a time of recession; this is practically the opposite to a growth period in the economy so it is actually a decline. This meant that demand for Easyjet flights was at a low,in comparison to what it was during the growth period, and this was due to a number of reasons. This period meant that businesses struggled to sell their goods and services and the decline of sales meant that the companies had to make many people redundant. Companies would then go bankrupt and many people would be quite poor due to smaller incomes and redundancy meaning that there is little money available for savings. Consumers therefore had to cut their spending on luxuries such as holidays, in Easyjet’s case, because they simply couldn’t afford them. This meant that Easyjet would have to reduce ticket prices in order to survive because customers were constantly looking for bargains. The demand for Easyjet flights was lower than it was during the growth period according to their flight reports, however it wasn’t damaged as much as you may think because Easyjet is a budget airline. During this period the demand for overall holidays were at a low because people didn't need to go on holiday as it wasn't a nessessity. This meant that EasyJet had to adapt and save money in any way that they could. This meant that they had to take precautions. An example of this was their staff reduction where in 2010 they had recorded 8000 employees which was half as many employees than in 1995 as referenced in my bibliography.
Easyjet would thrive from this because the company formed in 1995 during the growth period. They only had an airport in London because it started off as an airport firm. Easyjet started expanding by using technology to improve business. But when they first started, demand was quite low for Easyjet because they weren’t established as a brand so people didn’t recognise them as the great company that they are today. Demand was also high for Easyjet during this growth period because wages were higher so luxuries were actually affordable. The vacation and travel industry, particularly, did well from the growth period because workers would want to go on holiday because they can afford it and they believe that they deserve a holiday from working so hard. Also, other businesses doing well meant that people would book more flights for business purposes.
The growth period meant that EasyJet had to make strategic decisions so that they could take advantage of the demand in this period in order to maximise profits. These strategic decisions would be expanding by buying more aircrafts and get spaces at more airports. An example of this is how Easyjet bought their 100th plane in 2005, buying more airplanes meant that Easyjet could meet the demands of their customers by providing more flights. This was because during the time of growth, people knew that a holiday would be a safe investment for their money as they would have been financially stable. More evidence of the high demand of the boom period was that in 2008 EasyJet reported an increase in passengers by 19.5%. This was found as of
http://www.theguardian.com/business/2008/jul/08/easyjetbusiness.theairlineindustry
Demand was consistently quite high throughout the entire boom period; this was evident because the air traffic reports of Easyjet, as referenced in my bibliography, show a consistent yearly demand for Easyjet flights since it was founded.
A final factor influencing the demand for Easyjet specifically is the time of the year. Demand for holidays from Easyjet is particularly high from June to September because these summer months are when children have time off of school so people want to book holidays as they want family holidays. That's why ticket prices are expensive during this period because the demand is high.
2008-2010
