One of the European's cheapest short haul airlines is Ryanair Holdings Plc. Grown from being family possessed to a open public listed company. Using its dominant C. E. O, Michael O'Leary turned out his unmatched leadership features by introducing no frill business to Ryanair. The Ryanair culture enabled it to stay profitable (except for year concluded March 2009 when it made a loss of â169. 17million) in the surroundings where big industry players like BA are merging (merged with Iberia in 2009 2009) browsing for success and other airlines are forced out of business (Albatros Airways).
Ryanair has adequate resources and capacities which range from cash and cash equal to human resources and not forgetting its continuously growing fleet of Boeing 737-800. Ryanair is enjoying concessionary charges by use of secondary airports. The culture of cost consciousness helped the airline to bring cost low and hence revenue maximisation.
Currently Ryanair encounters competition from Easy Jet and other airlines it stocks similar routes with. However, Ryanair prides itself to be highly liquid with cash reserves amounting to â 1, 583 million (2009 financial statements). The current strategy of being cost leadership might not exactly be sustained permanently since it could be easily copied by competition and wane its success capability.
Several strategic alternatives are available to Ryanair are; merger and acquisition, market development, alliances, diversification, and consolidation. Within this report and according to the company's capacities and other examination considered, diversification strategy has been suggested. But the strategy is risk, a proper business appraisal must be done to justify risk and comes back. The strategy really helps to spread dangers and at the same time income maximisation.
It is which means singular responsibility of Ryanair management who are tasked with fiduciary duties to convince the shareholders with landmark business case for diversification. For as long the principles addition is envisaged in this strategy, management should consider it on the behalf of most stakeholders worried.
In part fulfilment of the requirements leading to the honor of MBA in Task Management by College or university of Wales, I'll produce a strategic report based on Ryanair Holdings Plc.
The survey will consider the external environment affecting Ryanair, resources and functions available to the business, its proper situation, the proper choice open to the company and finally a proper decisions and recommended technique for Ryanair that it can follow to gratify its stakeholders profitably.
Ryanair is in a nutshell haul Western Aviation Industry is the industry. Its competitors are Aer Lingus, easy Jet and then talk about but a few. Ryanair is the key subsidiary of Ryanair Holdings Plc. Ryanair's main business is to fly passengers to its 150 places, like any other business, Ryanair strive to satisfy customer using its market offering profitably hence the business opened up ancillary services to the customers.
Ryanair tries you should possible to avoid incurring loss, Michael O'Leary was quoted expressing "I am alert them that if they don't get off their backsides and reach a package we will cancel requests and change course" (Evening Standard, Monday 2 November 2009). This alert message was delivered ahead the anticipated loss in the next 50 percent. Ryanair has "eye reserved for future years direction''.
External research will focus on the factors whose and you will be analysed at three levels which are macro-environment, the industry environment and value systems and business lovers.
2. 1 The macro-environment (See appendix 1)
Terrorism is a threat not only to Ryanair but even other air lines. Around the 25TH of December 2009, there is a botched invasion on Amsterdam- Detroit bound aeroplane. Just what a failed Christmas party for Al-Qaida! A Nigerian man linked to Al-Qaida wanted to explode Delta airline plane. The occurrence of terrorism has since led to increased security bank checks and further investment funds in security equipment. This has influenced Ryanair's turnaround time and ultimately damaged its sales income adversely. We have been told in the past (2006), Ryanair cancelled 279 flights in light of terrorism episodes. The income and profits related to these flights were lost; this resulted in Ryanair incurring reduction in revenue then.
Recession has afflicted Ryanair negatively. People have low disposable income thus less people using air as a means of travel. Furthermore, Ryanair has to slash its fares down to support inflation and recession. Folks have found train as a direct substitute to flights especially for short distances.
Unpredictable fuel price increase afflicted Ryanair since it hadn't hedged against such raises. Profit margins have been damaged negatively as this increase could not be passed on to the already "mourning and groaning customers".
The increased volume of wheelchair passenger (disabled) taken at discounted fee means that Ryanair will be burning off out money. But at the same time it's a sign of social corporate and business responsibility of Ryanair which all commercial bodies are requested to show.
Introduction of internet allowed Ryanair customer to reserve online and at the same time to do on-line check-in. This resulted in fasts turnaround time because customers should come with their published boarding passes on your day of trip.
Furthermore Ryanair use of fuel-efficient Boeing 737-800 with high carrying capacity.
The recent snowing (January 2010) in UK has led to cancellation of planes leading to loss of earnings to Ryanair hence lack of revenue.
Investment in the latest air art and engine unit has empowered Ryanair to reduce carbon emission since the Boeing 737-800 has less fuel burn. This move towards such planes added favorably to the consciousness of Ryanair towards the surroundings and hence building a good picture in the image of environmental campaigners.
The EU regulation targeted at customer compensation will increase costs for Ryanair since Ryanair it's proud of itself to be cost efficacy air collection. Industry wide, there will be a loss of â 200m each year.
Ryanair does not operate in vacuum. The industry is very competitive, with players like English Airways, Aer Lingus and many more. The main competition for Ryanair is Aer Lingus, but Ryanair demonstrated to have covered this competition by offering low fares to its customers. The competitive rivalry is medium.
Railways carry is a threat since Ryanair operates brief haul routes, furthermore, Ryanair discourage hold- on luggage. Traveller with carry-on luggage will prefer travelling by teach to traveling by Ryanair. Again the hazard is medium to low.
The increase in passenger by 19% in August 2009 against 5. 78m in August of 2008 implies the less electric power the clients have with regards to the services offered by Ryanair. Ryanair, through its low priced model, customers find themselves without option by to fly with low fare air travel. The energy of buyers here's low.
The industry where Ryanair functions, demand large outlay, this helps it be difficult for new entrants in to the industry. Risk on new entrants can categorised as low to medium. See appendix 1 as well.
To sustain the reduced cost model, Ryanair benefited a whole lot in its value network. Internet scheduling together with internet check-in lower cost tremendously. Travel agents were removed (direct reservation) in a bet that observed Ryanair increasing its revenue margin. Sales for the entire year concluded 31/03/09 rose by 8. 4% above that of 2008.
No services are given free of charge by Ryanair to its customers. All services like foods are given at an extra cost to the client, exception is given for the use of toilets only. Again, removal of such services which do not increase income explains why Ryanair is a cost leader.
Ryanair use its fleet of aeroplanes than leased ones. This allowed Ryanair to increase its profit levels since own airplane are cheap to run given its short life span of 2. 4 years. Leased planes attract a high lease charges given their high maintenance costs.
A fee levied by Ryanair on several carry-on baggage coupled by on-line check-in makes their functions effectiveness. Furthermore, turnaround time becomes faster hence increased routes offered by each airplane.
The adoption and use of Boeing 737-800, whose holding capacity is high, resulted in benefits accruing to Ryanair like, increased load factor, low fuel ingestion and less environmental costs.
Ryanair is known to be using extra and regional international airports which can be cheap. This again indicate how strategically conscious is Ryanair running a business spouse selection with the view of bringing down costs.
The potential by Ryanair to secure and assured way to obtain its fleet from Boeing without immediate repayment of cash up front puts the airline at an edge. Cash flow is the air and profit is the blood.
Other value network factors why Ryanair is prosperous are: in-house marketing, advertising on airplanes and outsourcing of services at international airports.
Refer to appendix 4
Which company can compete without valuable resources? Ryanair pride itself of experiencing modern aircrafts, Boeing 737-800 whose benefits are mentioned above. Growing fleet to 200 aircrafts by 2009, show the pivotal role enjoyed by aircrafts as sources of no direct swap to this business.
In 2009, Ryanair has more than 150 flight routes, with bulk routes from London-Stansted basic. Increased airports provide a increased catchment area and therefore increased passengers. Passengers taken by Ryanair in 2008 stood at 58. 5million. This increase might have been directly or indirectly caused the upsurge in the number of airports serviced by Ryanair.
Cash is the life blood of the business, Ryanair has â 1, 987 million as at 31/03/09 in cash and in a nutshell term investments. A corporation with such resources stand a higher chance when it comes to negotiations of loans from the finance institutions. Such big amounts of cash available give a higher credit rating by lenders. Furthermore, Ryanair can simply meet its future unbudgeted responsibilities without recourse to arrears funds.
Internet has empowered Ryanair to lower down its scheduling and check-in costs, so because of this of this, Ryanair's repository is of vital importance to its leading edge. Technology used in their database performs a key role as well. Without internet technology and dedicated repository Ryanair will not have achieved faster turnaround time which later resulted in reduced costs. Ryanair's website is reported to be the major travel website in Europe.
For any organisation to succeed economically or socially, it should have some components of competences. Ryanair has establish itself a good performance record among its peer budget airlines because of its outstanding attributes which can be associated with cost slicing where necessary.
The contribution of the personnel and specifically of Michael O'Leary is of great immense to the success of Ryanair. ''Michael's genius is his ability to motivate and energise people. . . '' said Tim Jeans, ex - Sales and Marketing Director of Ryanair. It's clear from the statement how talented is Michael and his ability to diffuse skills to his staff. Not mentioning Michael's capability to secure proper investments like Boeing 737-800 and anticipate future effect on the organisation's revenue it will be fool difficult to do so.
Ryanair were able to increase airports served to 150 in 2009 2009. Upsurge in airports goes in hand in hand with increased capabilities and skill to control and maintain those airports to the mutual benefit of the business and stakeholders. Furthermore, Ryanair dominated extra airports which cost less than primary airports. This strategy provides goal congruence to its goals of being a cost leadership. Moreso, Ryanair dominated some routes, in a single example, MyTravelLite plying Dublin - Birmingham route was required to withdraw.
The potential by Ryanair to reduce administrative costs from â17. 7m in 2008 to â12. 75m in '09 2009 without affecting the service delivery level shows how in a position is the company in driving a vehicle its costs down.
The measure of passengers to available seats (fill factor) declined by 0. 2% in 2006. This might have been brought on by 2% increase in average passenger fare.
Brand understanding and recognition enjoyed a role. Customers' associated low fares with Ryanair and truly speaking Ryanair offer these low fares. Ryanair managed to send clear concept about its market offering (travel) to the mark segment of the market. Promotion mix that covered tv and print advert run by Ryanair promoted its brand knowing of low fares and no frills airline. See appendix 2.
The successful execution of low-fare model by Ryanair in these trying times of recession which includes seen companies like Albatros Airways ( low-cost airline once based in Albania, Tiran but sealed down in 2006 anticipated to unpaid airport terminal and air traffic control fees) concluding down, it's a clear signal how educated and team working is the Ryanair management and personnel. To quote Michael, ''. . . The difficult little is to sell the cheapest airfares and make earnings. . . '' Ryanair is charging low airfares but still make profits except in '09 2009 where loss were recorded due to the recession. Ryanair outperformed its competition see the table below:
easy Jet: FY (2009)
Return on equity
Net Revenue Margin
Source: Ryanair & easy Jet websites 17/11/09, websites in bibliography below.
In addition to its main business, Ryanair offer ancillary activities without jeopardising its primary business. These ancillary activities include surplus baggage charges, in-flight sales and car local rental services. The income from ancillary activities is increasing faster (35. 74%) and sales from scheduled income rose by 27. 1% in the same year (2006). The business enterprise acumen provides strong business synergy which has received Ryanair a name among world renowned air lines like Uk Airways. For more info see appendix 2.
Given the rate of action and implementation of strategies by Ryanair, you can conclude that there is flat structure set up. Decisions at Ryanair are made and implemented very quickly frame. Attribute of a set composition are dominant at Ryanair. Give the dynamic of the operating environment in the aviation industry; there is a need that management take action on time and even coming up with contingency measures.
How things are done this is actually the culture. Just how things or activities are done maybe formal or informal. Ryanair's culture is apparently characterised by generally informal one. Staff is prohibited to charge cell phones at the job as these portions to electricity theft.
The most prominent culture of Ryanair is cost containment. Ryanair is known to be a no frill airline as this is aimed at cutting down charges for unnecessary activities and when required by customer, it allures a charge.
The way the strategies are discharged, indicate that Ryanair's culture is inserted in its strategies. All decisions taken by Ryanair are earmarked at cost minimization.
Activities that are value subtraction to Ryanair are not taken aboard. Such activities will only be considered when the beneficial is prepared to cover them to accomplish a compromising point. Ryanair demand customers for any refreshments provided up to speed. Other value addition activities used by Ryanair include: use of secondary cheap airports, immediate scheduling and check-in, direct flights and charging for more than one carry-on luggage.
Ryanair's position can be best understood in the following paragraphs:
Financial Ryanair is healthy with cash and cash equivalents of â 1, 986 million, which sets it in a competitive position to obtain opportunities as they come. Furthermore, such amounts of cash can help the organisation to meet future uncertain responsibility. Keeping such cash may also mean that the business it isn't resourceful.
Committed personnel especially Michael O'Leary makes Ryanair to continues afloat given the existing recession which has spelt doom in other organisations. Michael stood the criticism from many even from the press. His figure gives self-confidence to the stakeholders.
Ryanair own its fleet of aircrafts. This boosts profit since there will be few bills to pay when compared with easy Jet which leases its fleet and compensates lease renting.
Direct sales of tickets contributed to the upsurge in revenue since providers' costs have been eliminated.
Concentration on short haul flights makes Ryanair prone to entrants of a fresh player offering same services as Ryanair hence leading the sales of Ryanair into doldrums leading jeopardising of Ryanair's profitability.
Poor customer support may bring about the loss of customer which might subsequently lead to lowered sales. In one incident, Ryanair priced £18 to carry a man with cerebral palsy to use a wheel chair. Customers who aren't price delicate but service sensitive may prefer to fly with other airlines with better customer support. Just lately Ryanair has been brand name as the worst airline for people (Metro, November 24, 2009)
Coverage of main metropolitan areas hinders sales growth from customers who might want to fly to bigger towns with Ryanair.
Ryanair can decide to merger for example with EasyJet such that it can lessen your competition and at the same focus the resources hence increasing sales. Furthermore, Ryanair may also acquire other small air travel using its available cash and provide long haul flights. Its business portfolio will be enhanced and sales expansion maybe realised for the advantage of the shareholders and even for the future growth.
Diversification is another opportunity available to Ryanair. This diversification can be considered a related diversification so that it will not stretch the sources of the organisation. The likely choice may be to project into buses procedure and /or theme parks. The ultimate effect will be more sales and value addition to the organisation.
In any business, competition might not exactly be ruled out. Ryanair faces stiff competition from EasyJet, Uk Airways and so many more airlines. The result of competition is that, expenses boosts through advertising and also you can find customer damage to the competitor. All these may lead to reduced earnings and low sales respectively.
Security takes on an important role in repairing business confidence. There may be threat of terrorism whose negative result will be to slow turnaround time credited to body increased queries and hence reduce sales.
Mergers of airlines like Lufthansa and Austrian airlines may pose a menace to Ryanair. These airlines may intend to run the same routes and provide the same airfares with better customer support to that of Ryanair. Ryanair may lose customers resulting in reduced sales. In addition profit may decrease as well credited to increased costs in marketing campaign in bet to struggle competition.
Increase in aviation energy may reduce earnings levels. In March 2007 fuel prices travelled up to $74 from $73 in October 2006 per barrel. Ryanair did not pass this increase to customer but however it affected its earnings negatively since there was no price or money rate hedge.
In 2006, Ryanair got pending litigation situations among them was; unlawful receipt of â4m. The negative result of this case will mean that Ryanair will have to repay the â 4m. The repayment of this amount will certainly reduce profit and even turning the carrier into reporting loss and hence negatively affecting stakeholder self-assurance.
The increased quantity of disabled passengers with wheelchair carried by Ryanair at below normal fare has resulted in a loss of income amounting to (37-25) x 83, 333 = â 99, 996 in 2006 by themselves. If such passengers in other airlines they are really asked to pay the full fare, Ryanair in future will probably lose more income due to increased passenger of similar disability.
Ryanair has several proper choices available to it that can be followed for the intended purpose of business growth. Listed below are available:
This proper choice is open to Ryanair. Ryanair can decide to remain within the existing market and providing the same services. For this to work, Ryanair will have to defend its market from new entrants so that it will remain viable. Defending the marketplace for Ryanair will involve the following;
Ryanair will be asked to spend money on marketing blend activities especially sales promotion. Giving discounts on do it again customers, buy one get one free (BOGOF) marketing technique and royalty credit cards. Such marketing activities will hold on to customers and at exactly the same time keeping away competition for some time.
Other kinds of marketing combine that Ryanair may take are: Promotion of corporate image of the company through undertaking advertisements about the nice side organisation. Information to include information like consistency of Ryanair fleet, personnel determination to customers and immediate flights managed by the company.
Hosting occasions like tennis tournaments also may help Ryanair to stay in the same market with the same market offering.
Market offering ( Product/service)
Remaining profit practical in competition infested market requires also the adjustment to the market offering. Ryanair may improve its service by offering free light foods onto it planes.
The consolidation strategy is apparently financial feasible, since Ryanair has â 1. 6 million in cash and cash equivalents, but however, how about the issue of no frills? I would recommend a cost gain examination must be completed first. Also the business enterprise acumen of Michael O'Leary and his staff can make consolidation strategy a success.
Ryanair management will probably accept this plan if it results increased range of customers with increased sales earnings and at the same time help to battle competition.
Consolidation as a technique is likely never to be appropriate to Ryanair since Ryanair runs with no frills.
For Ryanair to multiply its risk, diversification is the appropriate strategy to take. Ryanair will able to move into new market with a fresh product. However, risk and benifits research should precede your choice. See appendix 3 and section 6 below.
Ryanair may provide existing product into the new market for example traveling to Africa and Asia. Since Ryanair doesn't have understanding of the new market, cost benefits will be difficult to realize and hence the choice becomes unsuitable.
The availability of cash and recruiting makes the choice feasible. Also there appears to be fewer obstacles to entry into Africa and Asia. Accessibility into new market usually leads to competitor retaliation and therefore escalates the costs to Ryanair. Culture change in conditions low cost model in the new market poses as a risk and hence making the option unacceptable.
To sustain the business and build competitive barriers, product development and /or product changes may be pursued by Ryanair. Such new products will be wanted to the prevailing market. Product development for Ryanair will entail offering business course services.
Operationally, a small business class service will not provide synergy and match the current low cost business model, rendering the option to appear less appropriate. Feasibility, resources can be found, but do the business have competences to execute the new product profitably since?
As the culture of Ryanair is geared towards low cost business model, stakeholders are likely to envisage more risk than benefits in the new product and therefore, they tend not to accept this program.
The previously listed growth approaches for Ryanair may be achieved in another of the following ways: mergers and acquisition, joint ventures, organic growth, tactical alliances and franchise. For even more justification see appendix 5.
There is a common declaring that should go like; ''never put your eggs in a single container''. Ryanair resources may be likened to eggs and neither do management nor shareholders want to reduce these resources. Therefore, I would recommend unrelated diversification technique for the company to be used to meet its stakeholders profitably.
Unrelated diversification will dsicover Ryanair moving away from its existing market, products and value systems and value chains. Under this method, Ryanair will get into retailing business (clothes, FMCG) for example in Asia, Africa and Americas.
Such development strategy provides the following advantages to Ryanair;
Risk disperse: the failing in other business profile won't spell a doom to the organisation as other portfolio can make up for that.
Steady income flows: Flight business has off and top times making the cash moves fluctuates and hence diversification in retail business (FMCG) will give secure cash inflows to the company.
Relatively affordable: The actual fact that Ryanair is not the first mover in that market, most of the business enterprise models will have been examined and attempted already. Ryanair will just enhance to be able to improve the business models to get a competitive border.
It is of paramount importance that the shortfalls of diversification are taken to the interest of Ryanair and they are: No benefits will move between your two businesses given that they do not share the same value sites and value chain. Each business will have its value network and value string because of distinctions in business activities.
Business expansion comes with cost in research and development, marketing and management. The envisaged diversification here's no exception to this. Such cost will certainly reduce the organisation's success in the short run.
I further recommend acquisition as a development option for accomplishment of the progress strategy. Ryanair may acquire an already existing and set up business in Africa, Americas or Asia.
Acquisition gives Ryanair rate realisation of the diversification strategy as commercial and business models will be in existence (developed by market pioneers). The money reserves available to Ryanair can be used to meet the capital outlay to keep the strategy in action.
For diversification to succeed, the following should be studied into account;
Ryanair should think about the sources of finance to fund this unrelated diversification. Presently Ryanair have large sums of cash available, these cash may be used begin. Given the effect that companies remain nursing from financial meltdown, financial lenders are hesitant to extend lending options to the organisation.
Development road is important as it allows the realisation of management's actions. Available routes must be analysed and the perfect taken aboard. Within this situation, acquisition has been considered to offer the desired benefits.
Strategically, external environment should be scanned to analyse the huge benefits and risks associated with diversification in order to manoeuvre with appropriate action plan set up. It also helps to come up with appropriate structure in destination to counter the adversaries received from the surroundings. For example global warming may be discouraged by producing and marketing products which are environmental friendly.
The impact of new business in this case, the effect of diversification on the existing business should be evaluated. This is done using 'if and what' technique or circumstance building. This can help management to comprehend the overall effect of the business direction under varying environment affecting the business.
Strategic decision in amounts and calibre of workers required should also be appraised. A good mix of highly skilled middle level and staff of lower level skills should be chosen to ensure smooth running of the business enterprise.
For this strategic decision to be integrated successful, the following resources will be required;
There should be enough money to hide all start-up expenditure that will include, research and development, marketing (immediate and indirect), human resources training, capital expenses, and revenue expenditure. Currently, Ryanair has about â 2 billion which amount may need to be increased through protection under the law issue or borrowing from the bank. Given its cash position and working financial results which are financial sound, some finance institutions / financial lenders may consider Ryanair to be less risk.
Human resources play pivotal role. An excellent mix of staff calibre in terms of skills should also be considered prior to the decision of diversification is completed.
A sound marriage with other monetary players like regulators, industry planks, suppliers, environmental pressure communities, and who'll be the clients must be appreciated.
The diversification strategy should be achieved in phases so that the current operations will never be deprived of working capital. The timing of the strategy should be when the existing market reaches maturity.
Given the active of the operating environment and the current financial quagmires that have left some companies without option but to shut the entry doors to the clients, this means Ryanair should be alert and remain progressive.
Its current features and culture type offers it a leading edge in staying profitably. But also for just how long these income streams will continue? Not fully utilised resources must be made to ''sweat '' for the business so that in the event of poor performance in this industry, Ryanair will be compensated from other businesses.
Strategic possibilities to the company are numerous, but unrelated diversification is apparently the best in this scenario. Its consideration has been found to be working in the best interest of all the stakeholders concerned. Also the strategic option should be not considered as a finish to itself; it remains the fiduciary obligation of management to ensure shareholder's opportunities are safeguarded now and in the foreseeable future. How this should be done has been defined in this article and its singular responsibility again to consider timing and implications of such actions on the business.
Ryanair was in receipt of federal assistance in which it was now being asked to settle back. This could impact Ryanair adversely since the payout won't have been budgeted for. That is example of a politics factor.
Failure to discover unions can attract government's attention and could result in administration putting up methods that Ryanair are required to follow.
The restriction on the carry-on baggage by Ryanair led to reduced security check in time and therefore increased turnaround time.
Ryanair deliberately choose to use secondary airports. Environmentally, supplementary airports are less congested hence less noise pollution
Suppliers of the aircraft are not many hence giving them more ability than what can be exercised by Ryanair. Presently Ryanair buys its aeroplanes from Boeing.
Resources and capabilities
A name for Ryanair has been built through several competences and factors. The power by Ryanair to offer point-to-point flights made can be done to charge lower fares. Delays in linking are avoided and hence leading to faster turnaround time which then causes reduced costs.
On-line ticketing and check-in became proper for airline like Ryanair since it removed use of travel agencies and thus increasing income.
Other factors to take into consideration include; average years of aircraft. Ryanair has aircraft whose alternative age is very low (2. 4years). These gives advantages of using assets although it has powerful and less maintenance are likely to be carried before the plane moves from the cycle.
Appendix 3: Strategic choices available to Ryanair.
For Ryanair, related diversification will be a tactical fit since you won't demand very different capacities and value networks of the company. This is opening of hotel business and theme parks under Ryanair Leisure name in the European market (hospitality industry). This can be done through franchise like Trip Inn, Crown Plaza and so on. Ryanair customers will start associating these facilities with cheap fares made available from Ryanair. However, Ryanair must then engage into heavy marketing of these facilities so the services available and offered in these facilities will never be tantamount to Ryanair's flight were there are no frills. Ryanair can open lodges as well for a self applied catering customer so as to match it's no frills flight business.
Benefits to be derived from this choice include; distributing risk, upsurge in market talk about, synergy and economies of level.
Also Ryanair must appreciate that high returns sometimes come with high risk, strong management experience and advanced technology for market and environment monitoring must also be considered.
This option appears to be suited to Ryanair since it satisfies its urge for food for progress and at the same time goes its current business from its almost saturated marketplaces.
Diversification is likely to be accepted by Ryanair as long the return outweighs the risk element. The info on risk /return may be found after carrying out some calculations like payback period, internal rate of come back (IRR) and ROI from forecast financial assertions. Furthermore, once influential shareholders like Michael O' Leary (5% of shares) recognize, the strategy will probably proceed.
Strategic guidelines ( Ansoff Matrix)
-increase market share
. sample the market through offering the
. change the product
product at low/high price.
. protect its market share
. get customer feedback
. carry out market research
. hotels &theme parks
. offer discounts
. use same resources &capabilities
. open up fashion shops
. start supermarkets
Is Michael O'Leary a liability or source of information to Ryanair? Given his capacity in making sure Ryanair remains profitable, Michael O'Leary is not really a liability. In '09 2009, a loss of â169. 7m was recorded with positive cashflow of â1, 583 million. The financial damage did not affect the normal functions of the business since there are cash reserves available. Behind Michael O'Leary, there are also other customers of personnel who are also valuable resources to the success of Ryanair.
In 2006, passengers per staff stood at 11, 351. This is a clear indication that Ryanair 's customer bottom keeps growing from 10, 596 passengers per staff in 2005. With out a growing customer bottom part, Ryanair will be making loss given its low fare strategy. Low fare strategy must be complemented with lot of customers.
Ryanair can decide to merge with competitors like Easy Aircraft. Both airlines will be working jointly. This may not be suitable since there may very well be opportunity of culture crush. However, competence and level of economies are likely to result due to merger. It is likely that the move may be accepted given that earnings may increase hence come back for the shareholders. This choice is feasible since Ryanair has both financial and recruiting available.
Acquisition as a selection may prove favourable to Ryanair since in the past it has attempted to acquire AerLingus without success. Ryanair by acquisition of an extended haul carrier, it'll be as well acquiring a readymade business model in the case that this acquires AerLingus, it'll end up having both short and long haul flights.
Although, acquisition poses the same menace to culture crush as mergers, Ryanair may pursue it as a result of strong business feel and high profit and therefore it's suitable to Ryanair.
The acquisition method may be satisfactory to Ryanair management and the past attempt by Ryanair to obtain AerLingus has been found with scepticism from Ryanair shareholders. Over time such move is likely to add worth to Ryanair especially with the improvement in recession occasions. Management may be well put to make acquisition decision as long such benefits may flow to shareholders as well.
The method is feasible to Ryanair because they have got reserves of cash and cash equivalents which are not totally utilised and Ryanair has been mulling this move of development recently. There is also advantages of Ryanair's functions and both threshold and primary competences can be found within the organisation (make reference to the above sections on resources and capacities).
Ryanair can use its accumulated resources which include cash reserves and committed staff to build up organically. Organic progress can maintain the proper execution of using the maintained income/cash to boost the scale of procedure. Examples may include increasing the fleet (Ryanair happens to be doing this), increasing destination flown, offering ancillary activities (Ryanair is also presently carrying this out) and increasing landing slots.
This option is best suited in the event were acquisition and mergers are not available or suited. Ryanair is finding it hard to obtain AerLingus, because of this of this, organic and natural development may be looked at as the option available.
Organic development may be easily accepted because there is no culture crush and the control of the business is not diluted. As long it provides value to the existing composition of Ryanair, stakeholders encourage it.
Financially and in terms of human resources, organic development is possible to Ryanair. The data that Michael has in conditions of business management is of paramount importance to the success of the strategy. Option of cash on hand signifies how feasible this strategy to the organisation is.
Shared resources sometimes become cheaper when they are bought in volume and sometimes, alliances make commercial powerful. There are many types of alliances. By far the most ideal for Ryanair is joint venture because it retains its autonomy and independence.
Strategic alliances are likely to be accepted since risk is diluted and at the same its low risk strategy presenting high returns for shareholders. The strategy is also suited since to Ryanair because it will enhance its competences and it will demand fewer expenses in terms of arranging it running. Alternatively given that the potential risks of losing assets to somebody are higher, its acceptability may be questionable.
Forming an alliance will not require much resources be it financial or human resources. Given the resources in both areas Ryanair has, it makes the option feasible.