Keywords: ryanair pestle, ryanair five forces
1. 0 Introduction
Organisations need to determine clear commercial strategies to be able to gain full competitive advantages. This objective article is to carry out an in-depth analysis of the both internal and exterior surroundings of Ryanair by using the strategic models. Ryanair is an inexpensive passenger airline that operates brief haul between Ireland, UK and Continental Europe (Gill, 2005). The analyses are essential for the company to improve its competitive strategies and also achieve its organisational aims. This will fulfill Porter (1996) theory that organisations need to continually assess their strategies in order to boost their business operations (Richard Lynch, 2000)
2. 0 The analysis of low-cost airline environment and industry
There a wide range of strategic models that can be used to analyse an organisation's interior and external surroundings (Richard Lynch, 2000). This includes PEST, SWOT, Value Chain, Porter's five pushes, Porter's common model etc. For the intended purpose of this report, the correct tools would be utilized in order to recognize the problems and issues that are confronting Ryanair and discover lasting solutions through the introduction of appropriate strategies.
2. 1 Environment analysis of Ryanair using PESTLE model
(P)olitical factors affecting Ryanair's operations
Political situation in the Middle East is triggering a hike in fuel costs and high maintenance costs which has effects on Ryanair's good deal strategy (Penelope Butcher et al, 2005). Other political factors including terrorists' activities have prompted Ryanair to increase its security options in that way increasing high costs. It has undesireable effects and impact on its good deal objective.
The changes in federal policies including the enforcement of climate change charges on airlines is affecting Ryanair' business strategies (Penelope Butcher et al, 2005). The European Union (EU) abolished the duty free sales which damaged the amounts of tourist individuals (Scholes et al, 2005). In February 2004, the European union ruled that Ryanair has been getting state subsidies because of its base international airport at Charleroi Air port and this led to the repayment between 2. 5 million to 7million to the local administration (Scholes et al, 2005). The EU also devised new guidelines to hide overbooking of plane tickets and automatic reimbursement for cancelled plane tickets (Scholes et al, 2005).
(E)conomic factors that influences Ryanair operations and strategies
Fuel price increases: The continuous increase in the price tag on fuels has made it difficult to meet it low cost target (Penelope Butcher et al, 2005). The increase in air-flights price has made individuals to seek alternate cheaper means of transportation such as rail therefore leading to loss of earnings.
Fluctuating currencies: The instability in the price of US us dollars, Euro and the British isles Pound has effects on the business functions of Ryanair because Ryanair engages in Fuel hedging which could lead to high business hazards.
Potential economic tough economy and downturn: economic recession has already established adverse influence on the airline industry anticipated to a decrease in the number of travelers.
(S)ocial/cultural factors effecting Ryanair business environments
Aging populations: Ageing populations travel less and also factors such as 'cocooning impact' have prevented passengers from traveling i. e. terrorist activities countries like Afghanistan, Iraq, Pakistan etc (Penelope Butcher et al, 2005)
Low cost strategy/wider demography: Less expensive of fares provided by Ryanair means that they appeal to wider demography of consumer
The enlargement of European union: The European union has increased the number of passengers venturing across European countries and been been upsurge in business travels will lead to more customers' basic.
(T)echnological factors affecting Ryanair business environments.
Wireless technology expansion: The introduction of internet has increase online sales of air ticket and it is now used for online checking in
Information and communication development: technical trends such as training video conferencing, instant messaging, and mobile communications has resulted in less travelling for business travelers.
Other improvements: such as high-speed trains i. e. Euro celebrity will lead to a decrease in air passengers and it'll affect air passengers
(L)egal factors
Many new EU laws and regulations and regulations have influenced the procedures of Ryanair air. Other new EU lawful restrictions which have legal rulings that are influencing the businesses of Ryanair include overbooked traveler compensation, cancelled air travel compensation and other laws.
(E)nvironmental factors
The campaign of environmental sustainability by the regulatory, governmental and non-governmental company has resulted in the introduction of other charges on the airline. These include carbon emission charges, environment change cover charges etc. Environmentally friendly factor in addition has lead to the launch of voluntary carbon-offset charge from the airlines to the passengers.
2. 2 Environmental analysis of Ryanair using Michael Porter's five forces
The first pushes is applied to Ryan air and Porter (1996) identified five forces specifically; threat of new entrants, the energy of buyers, the power of suppliers, the risk of substitutes, and competitive rivalry.
Threats of new entrants: New entrants security by EU rules- Many new rivals such as BMI, Easy Aircraft and other Western airlines are being covered by the EU regulations and price legislation according to Western european Union101 article 86 regarding competition and good trade.
There are obstacles to entry that are encountered by Ryanair in the past but many of these obstacles have been reduced because of the increase in regional and secondary international airports that are extremely profitable for Ryanair business functions because the airports are less congested.
- Bargaining ability of suppliers
In the flight industry, the plane suppliers are two major players Boeing of the united states and Airbus (European Consortium). There has been great competition between Boeing and Airbus which includes averted price correcting and thus creates advantages of the airlines. In 2002, Ryanair set up a Dutch auction between Boeing and Airbus, and Boeing gained the auction predicated on the actual fact that it offers better savings to Ryanair (Stanley, 2005).
- The electricity of buyers
The customers are usually more associated with lower costs and the internet has been used to exploit this. The strong desire for customer loyalty because of low switching costs is affecting Ryanair negatively.
- Threat of substitutes
Alternative systems of transportation
The choice systems of travelling affect the market of airlines businesses such as Ryanair. These include:
- Bus services such as Euro lines which may have a European network of street transport (Penelope Butcher et al, 2005)
- Rail services including Euro Legend is making a stiffer competitive environment for Ryanair.
- Videoconferencing: Technology such as video-conferencing, web-mail, etc. have reduced the need for face-to-face conferences. This has greatly affected the turnout of business travellers.
Rivalry among existing companies - Ryan Air has many rivals including BMI baby, MytravelLite, Easy Aircraft, and Hype. This competition has influenced Ryanair's markets (Penelope Butcher et al, 2005)
The examination of the fives forces of porter and the PESTLE analysis show that Ryanair business environment is dominated by stiff competition that happen to be affecting its procedures. This has led to the introduction of new competitive strategies by the CEO. The strategies are completely customer focused, based on providing low and competitive prices, excellent quality services and less operational charges on travellers as will be talked about below.
3. 0 The examination of the proper capability of Ryanair and the identification of the key talents and weaknesses
(S)trengths of Ryanair
Low cost due to its 'no-frills' approach
High financial ability- Ryanair has good financial ability that has a great effect on its finances and its own ability to tolerate increasing legislations and unfavourable economical conditions such as energy price increase, unstable foreign exchange markets etc. (Ryanair corporate report, 2010)
Good Customer Service- Ryanair's strategy is to provide the best customer service performance among its competition. Based on Connection of Euro Airlines reports and its particular published reports, Ryanair has achieved highest punctuality, fewer lost suitcases and fewer cancellations because it runs from low congested international airports.
Good technological bottom part - By utilising the power of It such as internet, in January 2000, Ryanair modified its host reservation system from the BABS (Uk Airways Arranging System) to a fresh system called Flightspeed, which it functions under a 10 time hosting agreement with Accenture Open Skies ("Available Skies").
High promotion: because of its chief executive Michael O' Leary's controversial issues
High financial ability: see Appendix 1
(W)eaknesses of Ryanair
Legislative problems with authorities - Ryanair has been employed in legislative issues with the Airline regulators and the EU commission.
Secondary and provincial airports - The use of secondary and regional international airports by Ryanair has adverse effects on the travellers who spend more money to access the cities. Over time customers may find this as big trouble.
Prone to bad press - Ryanair is perceived as arrogant and the slightest occurrence gets a lot of press coverage.
Niche market - Restricted expansion possibility
3. 3 Ryanair strategic functions: value string and primary competences
Low fares: The provision of low fare air seat tickets by Ryanair is the strategy to be able to get full market management. The reduced fares stimulate demand and the targets are business and leisure vacationers.
Ryanair's recurrent Point-to-Point Plane tickets on Short-Haul Routes. Ryanair provides frequent point-to-point service on short-haul routes to supplementary and regional airports in and around major populace centres and travel locations has a major effect on the individuals who are enthusiastic to take brief flights with their destination
Low Functioning Costs: Ryanair achieves its low operating costs by working in supplementary and regional international airports where there are low congestion and less airport terminal charges (Gill, 2005)
Maximising and Utilising and the utilization of the web and other technologies: Ryanair has been using the internet technologies to improve its sales through online sales and the renting of its own servers for operations (Gill, 2005). This has led to a rise in its sales figures as shown in the bill of the company.
Improvement of operations by offering ancillary services: Ryanair provides ancillary services such as hotels, car accommodations, in-flight sales of drinks, hostel accommodations, internet services and holiday bookings to be able to increase its sales and customer base. These services have increased the competitive placement of the business over its main competitors such as BMI baby, easy Jet etc.
Contracting out of services.
Ryanair only taken care of its own staff and services at Dublin Air port, aircraft handling, ticketing, baggage handling and other functions had been contracted out to third parties (Gill, 2005).
4. 0 Conclusion
Ryanair is an established European flight that has gained competitive advantages over its competition through the execution of appropriate commercial, business, marketing strategies. The application of low operational costs discussed such as use of regional and secondary airports, client satisfaction and good deal strategies have all made Ryanair an extremely competitive flight that will continue steadily to dominate the market. While its external environment has became highly competitive rather than very conducive to business, it appears that Ryanair strategic capacities have helped to build and maintain its success.
