Posted at 11.14.2018
"Ryanair will not publish a formal vision or mission statement, but in accordance with Jack port Welchs advice, "Strategy, then, is merely finding the big aha and placing a broad way. . . " Michael O'Leary's extensive direction, communicated in public areas statements, is to simply continue being the largest LOW PRICED Innovator in the Western airline industry also to hold 73 million travellers in the fiscal yr 2010/11. Utilizing this perspective is a function of many individual techniques, including an absolute dedication to low priced performance in every element of the value chain, quick gate turnarounds, nonunion functions, performance-based incentive payment plans, standardization using one type of plane, and flying (in most cases) to secondary airports, which gives significant cost savings for Ryanair. "
The targets and structure of this report will consist of four main portions which will enable a strategic direction to be advised to Ryan air:
To research in to the current proper position of Ryan Airways.
To critically analyse Ryan Airways' interior and exterior environment.
To design an array of strategic options utilising the internal and exterior analysis
To measure the best suited option for Ryan Airways and discuss implementation
As everyone in this world prefer for the reduced cost airlines and many airlines do have implemented this strategy and also have been a growth. In bigger marketplaces, premium airlines have disadvantage over the low cost airlines are that high grade airlines won't get their costs to a spot where they can make money at low fares. One of these low priced airlines is the Ryan Air which is an Irish air travel company and the first low-cost flight.
In July 1985, Ryanair has started their procedure between Waterford in the southeast of Ireland and London's Gatwick airport terminal. Catlan, Declan and Shane Ryan are the three founding shareholders of Ryanair. The basic idea was to offer low-cost no-frills services between Ireland and London. Now, Ryanair have made their position in its field, being "Britain's favorite airline". Ryan air presently has a team of more than 7, 000 people and expects to carry around 73 million passengers in fiscal calendar year 2010/11.
The tactical position of any organisations is evaluated by certain factors which are included below along with the environmental analysis which is implemented later.
To the market segment Ryan Air claimed that these were 'Europe's first no frills air travel'. Because of their increasing competitive edge, Ryanair made the strategic decisions to attract customers at both ends of the routes. Haberberg and Rieple (2001) reinforced Ryanair by tempting people from France, Italy and Scandinavia. This got increased their market talk about as well as added the benefit of creating a well recognised brand name across Europe.
"Where the aim has been described beforehand and the key elements have been developed before the strategy commences is a prescriptive commercial strategy where as an emergent corporate and business strategy is one whose last goal is unclear and whose elements are developed during the course of its life, as the strategy proceeds". Lynch (2000)
As is shown above by Lynch (2000) both recognized strategy models are extremely different, however they are the two prominent strategy approaches as explained by Dennis Foster in his lecture on Controlling Tactical Change (2006).
So it is safe to discover that Ryan air will not follow either of the strategy. All together, however certain aspects or functions make up the carrier but also for an organisation of Ryanair's size different parts could have different goals and objectives underneath a primary umbrella strategy for the company.
For example, Ryan air would follow the prescriptive model for any planning performed for the new routes or planes as the target could have been defined beforehand and elements such as financing will have had to own been arranged before any purchasing moves ahead.
On the other hands working out and development will follow the emergent strategies where elements can be uncovered along the way for example if staff needed more health and safety training then the training program could be redirected.
The Ryan air as already stated comes after neither of the tactical approach religiously but possesses a technique which is unique to their company, which has recognized their needs and objectives. However their method of tactical management isn't unique in itself as nearly all organisations will tailor strategies to suit their business' own personality.
As the amount of low-cost carriers is continuing to grow, these airlines have begun to contend with one another. The main rivals of the Ryan air are providers including Easy Plane, BMIbaby, Soar Be and Thomson Fly who by emphasising their low cost tickets try to attract customers. This makes your competition in this market segment brutal as in order to own most affordable fares, costs must be maintained to a minimum.
Despite the occurrence of other low priced airlines in European countries, Ryan air continues to maintain its management of the lowest cost air travel in European countries. The benefit of this company is its capability to operate a vehicle down the price as most affordable fares at the same time are profitable. That is done through:
The airline's fleet uses the solitary type of plane consisting of Boeing 737, which reduce the training and servicing cost. This sort of aircraft is often used.
To reduce their costing and providing good customer support, Ryanair contracts out of services like baggage handling, ticketing, plane handling, and other functions to third parties. But firm have maintained their employees and services on the Dublin Air port, this is actually the exception. By doing contract out of services, company can obtain competitive rates and multiyear agreements at permanent prices, limiting exposure to cost increase. It also helps Ryanair's to employee tasks and potential disputes.
As the international airport includes landing fees, passenger loading fees, aircraft auto parking fees and noise surcharges so in order to lessen this Ryan air flies to many regional or secondary airports in a point to point model rather than traditional model. This model will further allows the flight to provide lower fares due to the lower getting and handling costs.
A performance related pay framework was accompanied by the firm in order to control worker reimbursement costs although the company provides lower labor costs, but based on their performance the employees can earn additional pay.
Ryan air uses newspapers, radio, television and its website as their main advertising tools and reduces the marketplace cost by slicing the rates on commission payment to the travel agent.
The external environment awareness is necessary for the success within the air travel industry, this section seeks to highlight the position of the industry, in particular looking at rivals and evaluating Ryan's capability to meet current and future troubles.
PESTLE examination means analysis of Political, Economical, public, Technology, Legal and Environment factors. These are the six main macro external factors. We are able to consider these factors to be able to understand Ryanair's future external and opportunities.
Heavy regulation (AEA, 2009).
Compliance is vital if Ryan would like to continue functions.
Increased security scheduled to past terrorist threats (DFT, 2008).
Sufficient security options should be in spot to ensure consumer assurance and competitive advantages is maintained.
Global economic crisis:World progress is projected to just over 2 percent in '09 2009 (IMF, 2008). Pound weakens especially from the Euro.
Possible decrease in the amount of business travel as companies are chopping costs and using choice method of communication such as teleconferencing.
Oil prices: declined by 50 % since their peak retreating to 2007 levels. Drop in petrol price = strengthening of the dollars (IMF, 2008)
Fluctuations in engine oil prices and exchange rates will straight have an effect on Ryan's cost base.
UK consumer spending found its sharpest decline for 13 years between July and Sept 2008 (Channel 4, 2008).
More intense competition
The UK has an aging human population (see appendix 3) (Country wide Information Online, 2008).
Potential chance of growth as old generations hasmore time to invest on leisure activities such as international travel.
Increasing unemployment (Kollewe and Sager, 2008).
Increased bargaining ability as an employer.
A recent review uncovered that 34% of online consumers intend to use price-comparison sites more in '09 2009 (NMA, 2009).
Increased consumer understanding and therefore bargaining electricity.
Online reservation services and check-in is becoming increasingly utilized by the flight industry.
Ryan must be sure that they stay up to date with these technical advances whilst preventing becoming overly reliant, as this may isolate certain consumer market segments (i. e. older people) who don't feel safe using such technology.
Noise pollution handles, and energy utilization regulates (DFT, 2008).
New legislation (e. g. Local climate Change Costs) enforcing tighter environmental rules may increase functional costs each year.
Limited land as well as for growing international airports - Development is difficult at Heathrow as it could result in a damage in the London's Green belt area. (BBC News 2006)
Limited capacity=>utilization of capacity.
Consumers are becoming increasingly 'inexperienced' and even more aware of the environmental impact with their actions.
Failure to look at a built-in environmental strategy may lead to a detrimental influence on the Ryan's reputation and income.
Cancellations of plane tickets and lack of baggage (Route 4, 2008).
Such ethical issues could have a detrimental effect on reputation if still left unresolved.
Recognition of trade unions and professional action e. g. Cabin Staff strikes.
Good employee relations are crucial if Ryan needs to avoid industrial action and interrupted functions.
Open Skies Contract (AEA, 2009)
Opportunity for Ryan and its own competitors to widely transport aircraft between your EU and US.
In the airline industry, competition is very cruel especially after market meltdown in 2008. Because of recession companies are battling to keep up their position as well battling to make it through in the air travel industry. But we can also see these threats into opportunities. Ryanair has modified these risks into opportunities as becoming the most suitable company to gain advantages in the airlines industry. Which means this is one of the answers to the questions related to their future strategy and their position's of the future competition
The main characteristics of the reduced cost airlines companies are minimizing their cost as minimal as they can without reducing their customer support. It may be just one-side of them is their low fares.
One of the primary strategies in Ryanair airline is not a frills such as free food or any air-mile deals. They prefer only Boeing 737-800 plane and their aircrafts seat density is very high. The bookings of the airlines are created through internet so there are no sales commissions plus they earn large amount.
Porters have their main five-core aspect which we can show in the given number:
As Ryanair is mainly low cost flight, therefore their customers are highly price very sensitive especially during the recession times so that it will be super easy for customers to improve their airlines. On this era customer's understanding of cost of service is highly and Ryan air will not provide customer commitment but the bargaining electricity of customer is suprisingly low. Still Ryan air can maintain the cheapest airline in every Europe spots.
As there are lots of obstacles to the entrance and the administrative centre committed to this sector is very high so you should take the flight authorizations. Additionally it is very hard to be new in air travel industry as it will be hard to find the suitable international airports for flights. It will also be difficult to have a devote current competition. Ryan air will not be damaged by any risks by new entrants. Even the prevailing companies are changing their strategy or reducing their tickets price it will not impact Ryan air (Lufthansa).
One of the main dangers of substitutes for Ryanair is Brand loyalty. As there is no brand devotion for the clients then customers can move to another airline without the hesitations and you will see no turning cost for the customers. So Ryanair has to overcome these kinds of threats by preserving their brand devotion with their customers.
As the market is highly competitive, Ryan air's advantages can be copied. In European countries it had been seen that there surely is an agreement made between Ryan air and Easyjet that never to compete face to face. However if any company decide to be competitive on the same basis as Ryanair it'll be highly critical for Ryanair. This will make Ryan air with heavy pressure on prices, margins, and hence lead to success.
In "The Substance of Competitive Strategy" publication Bowman created his "Strategy Clock". He points out the company's competitive position in comparison with their rivals. Corresponding to him cost and differentiation is real advantage of companies. You will discover eight options in his strategy clock which are:
Low cost and low added value is the first option and Cost Innovator is second which has the chance of price warfare and low margin. Third option is the combine option of first and second option i. e. cross types option. Reinvestment in the 3rd option is the basic difference between second and third which in essence deal with low priced but not the cheapest price. Differentiation is the fourth option nut differentiation is highly considered in fifth option. It recognized value to a 'particular section' warranting a premium price.
Remaining three options are failing. In 6th option value is standard but price is increased and conditions are not good even very bad in 7th option because price is increased but with the low value. Last option is the key responsible for reducing their market share i. e. low value has a typical price.
During last ten years, Ryanair possessed achieved a remarkable changes which has flabbergasted its rivals. The expansion of the firm has risen up within brief time period with the strategy of low fares, without frills and punctuality in trip services which is their high earnings.
In high level competition there should be efficient strategy so as to gain advantages combined with the profit. Ryanair's strategy can be located at different options in Bowman's Strategy Clock at different period of times. But most of them can be put between options 1 to 5. Ryanair's never had failing in Bowman's Clock part. Mainly, nowadays Ryanair is put between options 1-2 at clock which is approximately low price. Ryanair is the best suitable example of this program as they secure their price and present higher appreciated services.
Three and they will be strongest company in your competition. Virgin airlines follow cross strategy and in my opinion it is the most preferable strategy to be implemented in the clock. Ryanair will be the best company if it changes their lowest price strategy with standard services.
Marketing - strong branding and reputation, extreme price strategy.
Low costing anticipated to airport terminal operator offers.
Reputation as biggest budget flight.
Lots of publicity credited to O'Leary and
Cash tangled up in purchase of new planes.
Entire company based on European low cost flight market.
Shock profit warnings may have used cash reserves and weakened fiscal
Refusal to back down over issues such as EU Commission
Possible new routes,
New planes = greater capacity.
Advertising space on website and planes, more revenue
Competitors - BMI baby, Easy plane,
Economic recession means less
EU Payment could put restrictions
on company if do not stick to state
One of the most important corporate-level strategies is mergers and acquisitions in the new millennium as it's important for the company development and success. It really is expected from Ryanair to acquire other companies to be able to boost its capabilities and find more competitive gain.
Ryanair, have sacrified its services and functions due to dedication to low- cost airfare. To be a potential source of competitive advantage, human resources are not seen this is the company does not appear to value its customers. It is believed that the company's human resources will be the way to obtain competitive advantages therefore human resources or the company's people are one way to obtain sustainable competitive benefit. As we realize in this period of fast changing environment the technological innovations and other strategies can be copied there recruiting will bring sustainable competitive advantages.
In order to provide good customer services such as providing reduced plane tickets and value campaign the firm should has an in depth arrange for its strategic techniques in the market to keep the competitive gain at a stable mode within its opponents and can need to focus more on the center competencies that allow Ryanair to basically and prudently designs suitable flight operations within the bracket of their marketing network services in market standard-based point of view. Ryanair shouldn't stop to change their marketing strategies or rejuvenate from time to time, they must be goal oriented to be able to re-invent the performance process after the upgrading of rules and regulations mandated by the state of hawaii. To be able to renew revenue generation Ryanair need to defeat having less product differentiation.
In order to be defined as an independent income centres it is then advised that Ryanair should outsources as much non-core functions as you can which can get away from peripheral services such as wedding caterers or earth handling services.
Based on the above research, it is strongly suggested that Ryanair should think about the expansion in to haul market segments - specially the transatlantic routes which makes up about more than 60% of world's flights. Therefore moving in to this new haul market which includes low fare strategy along with added service options. And in addition by launching complementary goods and services through its sites, the company can utilize its existing business as this will allow company to reduce its cost bottom part per device of customers.