1. INTRODUCTION
Ryanair is an Irish airline rivalling in European low priced short haul air travel industry. They are simply one of the key players within the forex market with the jersey of cost leadership and a perspective of soaring at the least expensive rates to any of their destination. 'if you think it is cheaper anywhere else, we will provide you with a refund'-Micheal O'Leary, These are possibly the most profitable.
This record undertakes an in depth strategic evaluation of Ryanair against the backdrop of an changing global air travel sector impacted considerably by the financial and economical markets' problems. It talks about Ryanair's current strategy and who and exactly how of the management of this strategy. It identifies how the business functions influences on the carrier's customer relationships and leaderships in regards to to being truly a cost innovator.
It also endeavors to give a quick evaluation of Ryanair's financial framework as well as an environmental analysis of the Western european airline short haul industry and how this affects Ryanair.
2. STRATEGIC POSITION.
This is shown using tools like:
- PESTLE evaluation for the macroenvorit,
- Porter's five pushes for the industry structure
- Resources and capabilities. Opportunities and risks of the SWOT analysis developed by Albert Humphrey for the examination of Ryanair's external factors
2. 1PESTLE Analysis
Quite a number of the factors can be reviewed but has been written in this paper in an order of goal.
PESTLE Factors |
Comments |
|
Political |
EU directives prohibit immediate subsidies by governments with their airlines as they work to establish a level-playing field one of the region's airlines (Charalambous, 2009). This approach was driven by political trends, as various countries were eager to truly have a level-playing field over the EU, not only in the flight sector but also in other various and relevant sectors in their countries. |
|
Economic |
The global flight sector is currently experiencing downfall in passenger travel and also have seen falling earnings and also compounded by passengers making bookings at the previous minutes because of their travel and slipping ticket prices (Walters, 2009). For the buyer, the monetary downturn has impacted the spending of people and families, and this has mirrored in the lower airline travel being done by consumers (Blake, 2009). |
|
Socio-cultural |
Consumers behaviour towards travel has altered largely recently as the high cost of travel in comparison to other modes of transportation has made consumers more observant and aware not only of other transfer alternatives but results consumers demanding lower cost of travel from airlines. (Flanagan, 2008). This style was frustrated by the financial and economic downturn which includes made consumers manage their finances more meticulously given the uncertainties that the environment holds. Consumers will be likely to keep to follow this development as poorer economical outlook continues soon. But, a substantial improvement in the self confidence in the markets will lead consumers back to utilising air travel travel again. |
|
Technological |
There were technological improvements in the airlines sector particularly those associated with improved petrol efficiencies of airlines (Harvey, 2008). In just as much as they may be considerably costly at the time of investing or upgrading, they are anticipated to generate considerable cost improvements that would be worth it These advancements, though beneficial would not be looked at priorities in the current environment where appreciable amounts of airlines are battling to meet their traveler forecasts and revenue focuses on, and are publishing large losses in their financial results. |
|
Legal |
The directives stated in the politics factor will be implemented in this element in specific countries over the European Union to ensure that it's strictly honored by each of the members |
|
Environmental |
These issues have been a key concentration for the global flight sector lately as there's been increased demand for airlines to do their talk about in bringing down the impact of the utilization of airplanes on the surroundings and the carbon footprint (Harvey, 2008). Ryanair has been one of the targeted airlines quite simply due to large numbers of flights that it creates every day. This is due to their business design which calls for having their planes in the air for almost all of the time. This is as opposed to the goals of environmental awareness for Ryanair to minimise the impact of the carbon footprint on the surroundings. In as much as environmental issues are important in the airline sector, this might take a back seating as other stakeholders will give attention to more pressing issues like the viability of the airlines. |
This analysis proved that there are a number of advancements impacting the flight industry globally and also some others affecting the Western european air travel industry specifically.
2. 2INDUSTRY Framework
The Michael Porter's Five Forces of competition will be utilized to analyse the Western short haul airline industry. This analysis shows as well the changing affects in the sector with the key developments resulting in actions for every single factor that were deemed unthinkable only a few months back.
Five Forces |
Comments |
|
Entry Barriers |
The major barriers to entry are the large capital and interactions over the global air travel sector to develop the network plan (Ionides, 2008). I could claim that the entrance barriers actually just became even more powerful with the poor performance of the sector due to the economic local climate and the challenging times that the players in the sector are facing. |
|
Buyer Power |
The key buyers are the individual consumers and also the travel companies. Across these groups of buyers, the energy would seem to have increased in accordance with previous situations. The key reason for this is the reduced demand from these groups of potential buyers (McCartney, 2009A; McCartney, 2009B). Based on this, the buyer electric power has increased, as much lower prices will be in demand versus previous years. |
|
Supplier Power |
Supplier power has decreased in accordance with the influence of the other factors. For instance, airlines have been prepared to reduce the task force considerably therefore of the dropping passenger figures. Nevertheless, research has shown that the airlines which work carefully with its workers (e. g. Lufthansa) perform better versus its opponents which have a comparatively adversarial approach to the management of its employees (e. g. English Airways) and so have an edge (Creedy, 2009A). It is interesting compared to that in this time around of hardship for various stakeholders in the global air travel sector, it appears that different parties are working closely with one another with regard to survival |
|
Threat of Substitutes |
There is an increased threat of substitutes. These come from (1) alternative settings of vehicles, and (2) alternate activities resulting in lower flight travel. The alternative modes of transport can only have an impact on destinations where alternative modes of vehicles exist and also where it does not become too tense or inconvenient for the traveller e. g, between your UK and continental European countries. Across these region, alternatives modes of transportation can be found, and travel time is not too abnormal to make it unacceptable (Anselmo, 2008A). The substitute activities that bring about lower demand for air travel travel include people and individuals deciding to go to destinations that do not require air travel. In the UK, a large amount of young families have opted to remain within the UK instead of travelling to continental European countries for getaways and weekends (Dick, 2009). |
|
Industry Rivalry |
The industry is expected to continue to see increased rivalry as the rivals try to get the progressively more limited quantity of passengers. (Betts, 2008). Rivalry is powered by the decreased demand for travel which led some airlines to lower prices and today compete almost immediately with the low-cost companies such as Ryanair. |
The competitive position is seen to be high and will continue to do so as the players have put in their investments for the planes and infrastructure and wouldn't normally manage these in different ways in order to operate a vehicle returns.
2. 3 Value systems and business partners
As for the value chain of Ryanair, their associations with suppliers provide it with the merit to provide its low-cost strategy. Key suppliers include amidst others:
- its work force delivering the assistance to its customers: working intentionally within the guidelines of Ryanair to provide its low-cost model to the consumers.
- the international airports where Ryanair runs in: the government airports work tightly with Ryanair in ensuring an agreement that benefits both Ryanair and also the local community where Ryanair lands in.
- the provider of its airplanes and other equipment : the dealer of its airplanes and equipment work with Ryanair to customise their fleet for Ryanair to provide their basic low-cost service model to vacationers.
3. RESOURCES AND CAPABILITIES
3. 1Strategic capabilities
Their major capacity is their capability to manage their
low-cost business model
and continue steadily to operate within the parameters placed by this model (Wallace, 2009). . In the context of reduced demand for travel by consumers, its low-cost model has placed the business extremely well. Ryanair has an benefit over other airlines which are just now adapting to a lower-cost model to complement the requirements of the sector due to customers demand and what they are willing to pay for.
As part of the low-cost business design, Ryanair relies on a strong, accomplished and efficient work force that delivers the assistance guaranteed to customers within the price style of Ryanair. This is an area that cannot enable replicating the low-cost style of Ryanair, especially as staff cost is significant in the air travel sector as well as gasoline cost.
3. 2 Key success factors
The critical success factors for Ryanair have been their:
- ability to provide their low-cost business model,
- capability to use and coordinate strongly with their suppliers through their gifted work force
- ability to stay consistent with their stated business design and strategy.
- external recognitions
In delivering this model, Ryanair maintained their approach even in the face of rising fuel prices (Ryanair, 2009). The recent year shows how Ryanair handles their business with their consumers. They control their cost basic well amidst looking for choice revenue resources to have the ability to generate additional earnings to offset increased costs from the impact of the petrol prices.
In working with their suppliers, Ryanair exhibited that the best way to excel in the sector is to ensure that suppliers are also reaping the great things about doing business with Ryanair (Wallace, 2009). There is a two-way romantic relationship.
Whether the current environment remains or the prospect becomes more favourable, Ryanair is put to capture the large area of the consumer demand for air travel with their destinations
The success of Ryanair can even be seen from external recognitions. In Dec 2008, Ryanair was included in the set of Britain's Most Respected Companies (BMAC), the first time it turned out contained in the list (Management Today, 2008). Over the past years, Ryanair's CEO, Michael O'Leary, has been contained in the list of the 30 Most Respected CEOs of Barron's, a worldwide list of CEOs mentioned for "doing outstanding careers of keeping their companies out of trouble and on course through conservative financial management, a solid focus on the client and relentless technology" (Barron's, 2009).
4. IMPLICATIONS OF STRATEGIC POSITIONING
Dennis Foster (2006) mentioned in his lecture on Controlling Strategic Change thatchange is a 'people centered process'. This means that both personnel and customers will have implications on Ryanair's tactical placement and any changes they make to it. As recognized in the authority portion of the report there's a good workingatmosphere and romantic relationship between O'Leary and his employees.
Cavendish (2006) argues that 'Ryanair's profits last year obviously included almost two million flights that were booked by people who never revealed up'. While this is wonderful for Ryanair from a financial viewpoint, it does not mirror good will to them from a customer relations aspect and could have an impact on their position and strategy. Ryanair's recent trouble profit wise certainly could have acquired implications ontheir proper positioning as they might have had to re-evaluate their strategy.
The following stand indicates the styles over the relevant strength and weaknesses produced from their center competencies factors in shopping for Ryan airs resources and features
SWOT Factors |
Comments |
|
Strengths |
Ryanair's business design is their major power. In the current environment where travellers are trying to find the cheapest cost option to travel, Ryanair continues to provide customers with airline travel as a substitute that is worth considering (Moorcroft, 2009). Quite unusually, the existing economic crisis in addition has helped Ryanair increase their market show in the sector as customers have relocated to lower-cost airlines to control their various costs of travel and this has helped gas the continued expansion of Ryanair despite the crisis, and in addition has helped position Ryanair to continue to see tactical progress initiatives in the sector (Brothers, 2008; Creedy, 2009B). Ryanair has developed strong romantic relationships with various stakeholders. They know about the value of working with their stakeholders to provide the required services to consumers (McDonald, 2007). That is a key durability of Ryanair. |
|
Weaknesses |
Ryanair is basically a European airline even though it has the most significant number of plane tickets internationally among the world's global airlines (Done, 2009). Thus, its income are undiversified in terms of regions, and therefore any impact on the European air travel market has a substantial effect on the performance considerably plus much more in accordance with other airlines which have geographically diverse income sources. |
The above strength and weaknesses confirmed that there are a considerable number of opportunities designed for Ryanair. However; this would need to be carefully investigated given the importance of existing threats in the sector.
5. STRATEGIC CHOICE
In an industry where news of poor shows has been seen generally on the front page of newspapers since the start of financial and economical markets' problems, the performance of Ryanair has been a tremendous positive reports to the industry as they have faced the troubles due to the crisis. Ryanair continues to benefit from the turmoil as the consumers swap to lessen cost travel alternatives (Milmo, 2008).
However, the lower revenues produced and the slipping number of individuals has still impacted the business enterprise as Ryanair announced losses for the first time since 1997, and expect that there may be further challenges soon (Bhargava, 2008). In a recently available announcement of results, "Ryanair, Europe's major low fare airlines today, released a Q3 lack of EUR102m, (in comparison to a income of EUR35m in previous year's Q3), as average fares fell by 9% to EUR34, fuel costs increased by 71% to EUR328m, profits rose by 6% to EUR604. 5m, as traffic grew 13% to 14m, as more consumers transition to Ryanair's low fares from high fare opponents" (RNS, 2009).
Ryanair's strong position on the market has allowed it to go after inorganic activities regardless of the financial and economic markets' crisis and even in the face of a challenging environment for the air travel industry. While almost all of the players in this sector will likely pursue the decreasing of costs to handling its procedures, Ryanair continues to surprise experts and investors as well.
Ryanair continues to pursue its fascination with Aer Lingus. An integral reason for the eye of Ryanair in Aer Lingus is the fact that it owns a substantial part(29%) of the air travel and is concerned about the indegent performance of the airline and the impact it is wearing the worthiness of Ryanair's shareholdings (Hancock, 2008).
In approximately these opportunities are present for Ryanair. The global airline industry happens to be facing a huge number of dangers which may be hindrances to attaining these opportunities. Some of which will be the fluctuating US$ exchange rate and the fuel prices. These hazards have avoided airlines from realising a stable stream of cash flow in recent intervals with a considerable amount of time being allocated to management, with some going after to hedge, the changing value of the US$ and also the volatile petrol and fuel prices (Anselmo, 2008B). Another menace is the continued recession seen in the major economies which is still playing an impact on the reduced travel of air travel people with substitutes for air travel seeing increased quantities.
6. STRATEGIC DECISION AND Advised STRATEGY
Goingforward, Ryanair can continue being positioned as a niche cost head in the global flight sector by seeking the opportunities that presently exist and also handling the weaknesses which exist within the company. By so doing, Ryanair can record the demand from consumers of low-cost travel and also position it to weather any more difficulties on the market that may be limited and then specific regions where Ryanair operates in. For low-cost companies in particular, an integral threat is the move of full-service airlines in to the business design of service providers such as Ryanair and easy Aircraft given the demand of passengers for lower-cost travel (Furlonger, 2009). This is only going to improve the competition in the sector overall and, in particular, in the low-cost portion of the marketplace.
Ryanair's Innovativeness has ensured its sustainability and can carry
them forward in to the future.
To recommend any major changes would be to predict how the airline industry will change which ultimately can't be foreseen. However, the following decisions can be considered
- the advancement of new routes provides more customers, from both departure points.
- a refined change in their strategy could be appropriate. For example offering refreshments vouchers onboard for the customer's next flight might entice more people back
CRITICAL REFLECTION
If there is anything i gained upon this course. It is the simple fact that it not clear cut, but is made up of lots of complementary and opposing universities of thought. Inside the paper above, i'll like to reflect particularly on the restriction of almost all of the ideas i learnt.
Although, they are seen as the bedrock of tactical planning. Not much emphasis is laid on the leadership, culture, power and politics along the way of strategy formulation in expanding and analyzing organizational strategies. As seen in the tactical audit of Ryanair using at least 6models of proper theories and i can count just how many times the energy and politics were mentioned in around Michael O'Leary was pointed out. The emphasis in strategic planning models is more on the surroundings, profits and deficits, customers, opponents and growth.
Even though SP consists of all business functions in an organisation, i could say that it's done from the top. As a matter of fact, most decisions made are from the very best. I question why there exists then little focus on the energy and politics within Ryanair.
Should the present CEO be substituted, what will the future hold for this company. This may happen eventually as retirement life will come some day. I speculate what the power play is similar to in this company. I understand the places that the carrier flies to, I understand the strengths and weaknesses, i also have a clear idea of its competition, customers, and suppliers. But there is no model allowing me to spend time looking into politics in Ryanair, Imagine if the strategic advice i made will be damaged by politics within the company, maybe predicated on the non-public interest of key people on the plank of ryanair.
The present CEO wasn't even investigated with such details but also for his fame when confronted with the multimedia, maybe there was nothing that focuses on him.
In the nearest future, businesses will be all about people and you will see great pressure on models like PESTLE, SWOT, and the loves. The 7s' platform by Mckinsey could be an alternative solution or on top of that an integral tool in those days because it focuses on the people and their techniques. A critical perception into people in an organisation gives room for the study of the politics and ability play inside a well structured organisation.
