Ryanair Case Evaluation Article Management Essay

This report will provide a strategic research of Ryanair by looking at the business's current proper position, undertaking an internal and exterior environmental analysis, providing a detailed analysis of various strategic options, and eventually providing a advice for future years strategy of Ryanair.

Ryan air was the first budget air travel in European countries; Ryanair is the World's favorite flight with 37 bases and 950+ low fare routes across 26 countries, hooking up 150 areas. Ryanair manages a fleet of 210 new Boeing 737-800 airplane with firm requests for a further 102 new plane (before taking profile of planned disposals), which is delivered over another 2. 5 years. Ryanair presently uses a team of more than 7, 000 people and expects to carry approximately 66 million travellers in the current fiscal 12 months.

External Analysis

The exterior environment contains wide environmental factors that impact to a greater or lesser degree on virtually all organisations.

The PESTEL construction may be used to identify how future tendencies in the political, economic, social, technical, environmental and legal surroundings might impose on group. The PESTEL analysis provides the broad data that to identify key drivers of change. These key motorists may be used to construct situations of possible futures. Situations consider how strategies might need to change with respect to the different ways where the business environment might change

PESTEL Analysis

The PESTEL framework provides a extensive list of influences on the possible success or inability of particular strategies. PESTEL stands for political, economic, interpersonal, technical, environmental and legal. Political highlights the role of government authorities.

Porters 5 makes Analysis

Porters five pushes platform constitute an industry's composition. The industry framework research with the five makes platform can be of value to organisations. It can offer a useful starting place for strategic evaluation even where profit criteria may not apply: generally in most parts of the public sector, each one of the five forces has its equivalents. As well as assessing the appeal of a business or sector, the five forces can help established an agenda for actions on the many 'pinch-points' they identify. Porter's essential note is the fact that where these five pushes are high, then business are not attractive to compete in. you will see too much competition and too much pressure, to permit reasonable revenue.

Below we can easily see the porter's five forces analysis being conducted for Ryanair to be able to check on market industry appeal.

Threat of new entrants

High capital investment required

Labour and gas intensive industry

Restricted slots

Flight authorization required

Threat of substitutes

Low brand commitment of customers

Low switching costs for customers

Availability of other settings of transport; car, train etc.

Bargaining power of buyers

Buyers are 'price sensitive'

Low turning costs to other airlines

Transparency on price and services provided

Customers aren't buying large volumes

Bargaining power of suppliers

Only 2 a/c manufacturers - Boeing/Airbus

Switching costs are high (mechanics/pilots would need to be maintained)

Price of aviation gas immediately related to olive oil costs

Competitive rivalry

Cost advantages can be copied

Low differentiation factors; especially prices

Limited road availability

High risk of substitutes

Threats to industry profitability

Competitive force

Low

Medium

High

Threat of substitutes

Threat of new entrants

Competitive rivalry

Bargaining electric power of suppliers

Bargaining power of buyers

Unless they are able to find some way of changing this example, this looks like a very troublesome industry to survive in. Maybe they'll need to specialize in a sector of the marketplace that's secured from many of these forces, or find a related business that's in a stronger position.

Critical Success Factors

Threshold Features

On time journey departures

Available seats for all passengers

Appropriate protection measures

Minimum staffing levels met

Secure baggage handling

Cheap air fares

Differentiators

Food and drink provision

Seat arrangement

After deal services

Good customer service

Entertainment on board

Extra legroom

Reclining seats

Loyalty benefits schemes

Internal Analysis

To develop a successful strategy, the internal strategic capacities of Ryanair must also be recognized. This section will concentrate on identifying the key internal advantages and weaknesses (from SWOT). This will be achieved by examining the resources and competencies for Ryanair, applying the VRIO model to these resources and looking at the performance of various business functions within the company.

An organisation's resources can be Physical, Reputation, Organisational, Financial, Intellectual and Technological (Johnson et al, 2004), the table below shows the entire level of Ryanair's resources and functions and only the key factors will be attracted upon here.

VRIO Analysis

Based on the above resources can Ryanair develop its center competence, which a competitive edge is possible. To be able to figure out whether the above resources can be translated into competitive advantages of Ryanair, the VRIO model can be deployed.

V-value. This emphasizes that if the resources are being able to be deployed to meet up with the needs and expectations of customers. Merging the government subsidies, airport charge reductions and its low-price business model, Ryanair can deliver the lowest price, which draws in an incredible number of customers.

R-rareness. Inside the short-haul budget airline business, only Ryanair has authorities subsidies and airport charge lowering. Other competitors, especially its best and most immediate competition: EasyJet, do not have that source. This makes Ryanair's federal government subsidies and airport terminal charge reduction rare and valuable. On the other hand, the government subsidies and air-port charge reduction receive to Ryanair is because its secondary routes and capacity to entice customers. Thus, it can help secondary airports develop quickly and bring much more tourists and use for municipality. Consequently, the resource is hardly transferred.

I-imitability. Apparently, it could be seen through the truth that Ryanair, compared with airlines without the resource mentioned previously, owns a major cost advantage. And this resource, as stated in the last paragraph, is hardly moved or imitated.

O-organization. Based on the case, Ryanair makes good use of its various resources and features to deliver the lowest cost and most affordable price efficiently. The strong management team and effective CEO, its effective operating strategy and online marketing strategy all make the deployment of its resources successful, on which its competitive benefits is made up.

In bottom line, Ryanair exploit its resources and functions successfully to keep up the cost authority and provide the cheapest price to customers, which is also its competitive benefit.

Valuable?

Rare?

Imitable?

Exploited by business?

Competitive implication?

Physical

Yes

No

Yes

Yes

Sustainable competitive advantage

Reputational

No/Yes

Yes

Yes

No

Competitive parity

Organizational

Yes

Yes

Yes

Yes

Sustainable competitive advantage

Financial

Yes

No

Yes

No

Competitive parity

Intellectual

Yes

Yes

Yes

Yes

Sustainable competitive advantage

Technological

No/Yes

no

No

Yes

Competitive parity

Key Competencies:

Good brand awareness - Michael O' Leary has a strong presence in the general public eye which includes increases knowing of Ryanair across Europe, "O'Leary's publicity seeking antics earned him a higher profile" (O'Higgins, 2004:13). Even though some of the press has been negative towards Michael O'Leary, he has plainly transformed around the airline and is recognized as having a good command style.

Organisational framework using regional and secondary airports permits favourable fee

negotiations, quick turnaround times, low delay/cancellation statistics. HR set up allows for

flexible staff contracts, often to save time and reduce Ryanair's risk to disputes.

Standardisation of plane permits limited quantity of designers, quick turnaround times,

and quick access to inventory, which keep your charges down.

Financial Stableness one of few airlines with a high net margin of 28. 4% in 2003, compared to 8% for Aer Lingus and 3% for EasyJet, market capitalisation possessed produced from 397million (1997) to 4. 74billion (2004), high cash and liquid reserves of 1, 060, 218, 000.

Strong management team - Michael O'Leary inextricably associated with the success of Ryanair which is often acknowledged as turning the flight around solo handedly. Voted one of the "Top 25 Business Personalities by the Financial Times in 2004" (O'Higgins, 2004) and airline has triumphed in various accolades, including Best Managed Air travel.

Ansoff's Matrix

The Ansoff's Development matrix is an instrument that helps businesses determine their product and market development strategy.

Ansoff's product/market growth matrix shows that a business' efforts to grow depend on whether it market segments new or existing products in new or existing markets.

Existing Products New

Existing

Markets

New

Diversification may be of two varieties: related and unrelated. Related diversification divides into backward, ahead and horizontal integration:

· Backward integration is a move towards supplier and raw material in the same overall business

· In advance integration is a move towards industry and customer

· Horizontal integration is a move into a tightly related business (Ansoff, 1965)

a) Present Product - Present Market Need

1st Option: Cancellation of airplane requests with Boeing - this might enable Ryanair to optimise its mixture of possessed and leased a/c - somewhat than buying, the company might use the assets to lease

2nd Option: Deeper penetration of the EU market -through alliances / mergers (e. g. Air Lingus), Ryanair could increase slot availability and access primary airports / routes

b) New Product - Present Market Need

1st Option: "Ryanair Executive" - business category only flights on existing routes seems attractive as the business traveller rate raises; however, cost for services increase; eventually pilot task to start on certain test - routes

2nd Option: "Season seat tickets" / "Family Greeting card" -> customer commitment / increased fill factor & avoid

overcapacity by secure booking

c) Present Product - New Market Need

1st Option: US low priced market entrance - idea seems attractive, however, it would require a specific business case analysis. As the competition among low-cost providers in America is incredibly high, it might be ideal for Ryan air to give attention to the SouthAmerican / Latin American regions checking a hub for continental American plane tickets.

d) New Product - New Market Need

1st Option: "Ryan Hotel" - run on "low-service / low cost" bases; can be booked online over

Ryan air's website; no reception - secrets will be accessible at the airport terminal; hotel situated near the airport

2nd Option: Intercontinental flight between European union and US and in doing so coming into the new US market - Air

Lingus Acquisition (?); would require different tactical focus (long-haul & frills - cost intense)

SWOT Analysis

A scan of the internal and exterior environment can be an important area of the strategic planning process. Environmental factors inner to the firm usually can be grouped as strengths (S) or weaknesses (W) and the ones external to the company can be grouped as opportunities (O) or threats (T). this research of the proper environment is known as a SWOT examination.

The SWOT analysis provides information that is helpful in matching the firms resources and capacities to the competitive environment in which it operates. Consequently it is instrumental in strategy formulation and selection.

The following diagram shows how a SWOT analysis suits into an environmental check out:

SWOT Evaluation Framework

Strengths

Weaknesses

Strong brand position and brand share

Strong profitability

Low price allowed by administration subsidies and airport discounts

Effective CEO, management team and chairman

Effective operation strategy

First mover advantage

No customer loyalty

Poor human resource management policy

Secondary routes cause inconvenience for customers

Weak worker relationship

Dependence on third pray service providers

Opportunities

Threats

Advances cost reductions

Established market share

Strong public branding

Ancillary revenue income

Use solution fuel

Technology impact on cabin service and system

Acquire competitors to expand

Diversify into car rental and hotel management

Government rules charges

New competition

Possibility of being taken over

Increased competition

Trade unions

Currency fluctuations

Increasing oil prices

Environment charges

Strategic Choices

There are numerous factors which have added to Ryanair's profitability:

Ryanair's aims, as established in its 2004 annual report, include:

- Increasing traveler traffic by 20% every year - Minimizing fares by 5% each year

- Cutting down costs by 5% each year

- Noticing a profit margin of 20% or more

To date, you'll find so many factors which have contributed to the company's profitability, including the following:

1. Cut-price bargains.

Ryanair will frequently sell a large number of seats beforehand for a nominal fee, for example, 1. 00 or less. Indeed, currently approximately 25% of passenger tickets are free, and Mr. O'Leary has a goal of eventually taking this physique to 50o by 2010. This allures immense promotion as customers scramble to log in and purchase seating. For each seat purchased, taxes and duties must also be paid, which typically total 3040. The tickets are sold on the nonrefundable basis. Because they are so cheap, many buy multiple seating to gain versatility, and the "no show" rate is therefore much higher for these kinds of tickets. Average fares reflect these cut-price deals as well as higher fares that travelers pay to secure seating on routes in higher demand.

2. Point-to-point plane tickets.

Each way is a mini-business device. Capacity is customized to match demand regarding to computer-simulated models. In case a option is unprofitable, it can merely be cut from the agenda. Passengers might not exactly buy connecting plane tickets so must check in for each Ryanair flight independently. This reduces the firm's responsibility in case of a delay and reduces cases of lost baggage.

3. Plane tickets to secondary international airports.

By avoiding the large hubs, Ryanair is able to negotiate reduced landing charges. There is the added benefit for lower congestion at such international airports. This enables the plane to complete the voyage in the shortest possible time. The disadvantage to passengers is that sometimes these airports are found in locations definately not the intended destination. For example, the business flies to Frankfurt-Hahn, not Frankfurt, which is 100 kilometers away. Asy states, "For the price-sensitive customers, distance is no issue. "'

4. Quick turnaround.

Ryanair aircraft are expected to land and remove again from an air-port inside 25 minutes. This is merely possible because they travel into secondary airports. This enables the firm to maximize the amount of flights each day.

5. No overnighting of personnel.

By flying point to point, a Ryanair planes ends the day where it started. Which means that crew can return to their homes, and expensive hotel expenses and per diems are avoided.

6. Internet bookings.

The firm offers over 97% of its seat tickets via the Internet at its website, ryanair. com, which is currently the most popular European travel site. This slashes out travel agent commission rate costs (averaging roughly 10% of the ticket cost) and provides the air travel maximum control over scheduling and capacity. Moreover, it funnels customers towards other services such as car hire and rail tickets, for which Ryanair gathers a commission rate itself. O'Leary is not bashful about this substantial source of cost benefits and profits, having stated, "Screw the travel agent. Take the [agencies] out and take them. What have they done for people over time?"'

7. One category.

Ryanair does not offer passengers the choice of business and overall economy class, eliminating the requirement for food to be delivered to the airplane when it lands, thus facilitating low turnaround times. In addition, offering only one category of service furthers the purpose of providing low fares, that your company thinks is the ultimate in customer service. Relating to its traveler service and least expensive fares charter, "Ryanair believes that any passenger service commitment must involve a committed action on pricing and punctuality, and really should not be limited to less important aspects of 'service' which is the usual excuse the high fare airlines use for charging high air fares. "'

8. One aeroplanes type.

The company flies Boeing 737 planes specifically. This reduces maintenance training costs and allows for bulk buying of free parts. The strong budget of the company allowed it to buy lots of the aircraft that were canceled by incumbent airlines. These new airplanes are more fuel efficient and also have a higher traveler capacity. As of the end of fiscal 2004, the business had fully hedged fuel prices through September 2004, but were largely unhedged thereafter. Eventually, the business hedged its gas through the finish of fiscal 2006 at US$49 per barrel, while market prices topped US$70 per barrel. Additionally, the company has bought winglets that will be retrofitted on all plane, that will reduce fuel burn up by approximately 2. 5%, which results in savings of around US$10, 000-14, 000 per aircraft per month.

9. Staff costs and bonuses.

Because the plane that Ryanair pilots journey are new, the organization boasts that their pilots' experience is of value to the competition. Therefore, it charges pilots for training, the cost of which is earned back again by the pilots through years of service. Pilots have financial bonuses for simple landings, not really much for traveler comfort but for reduced maintenance costs. Also, the airline will not provide food or drinks free of charge but possesses items for sale on each air travel. Journey attendants are paid a commission rate based on the full total of beverage and other sales in airfare.

Monitoring of the Plan

Monitoring can help us determine which of your marketing strategies are workable and which are not. Monitoring will basically involve;

Tracking and assessing customers.

Surveying and interviewing regular users for feedback about why they find our services important.

Conclusion

Ryan Air has emerged in the modern times as the most powerful low fare carrier in European countries. The record has recognized the factors resulting in Ryan Airs success tale until 2003, however, it also represents future troubles on the flight industry and exactly how Ryan air will be able - by altering its business strategy- to support its competitive position.

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