The Environmental Case Analysis Of Ryanair Commerce Essay

The Environmental Case Analysis Of Ryanair Commerce Essay In an organisation the most important feature is its strategy, because strategy is the feature which gives the means to the firm to be successful. This is an effective long-term method to conduct an organisation to reach its objectives and goals to stay put on its competitive edge The scope of this essay is to consult the strategic analysis of environment and the industry together with the companys present strategic choices, and also it is requested to recommend new strategic initiatives and areas for improving strategy implementation for the senior management team of Ryanair. This is conducted with the use of six strategic models (SWOT, PESTLE, Porters Five Forces, Strategic groups, Value Chain and VRIO) that are recommended to be used to analyse the internal and external environment of the company. Each model will be taken in to deliberation and discussed carefully to highlight what had begin the case for the negative perception and the positive perception of both the customers and the companies towards its growth and sustainability Therefore this case study will be analysed to pin point on what should be done for the future strategic management of the company. Out of all the low fare airlines in the European industry Ryanair takes the lead. This airline however is from Ireland and its head office is situated in Dublin. London Stansted Airport in UK is its main operational base. Ryanair is named as the largest low cost carrier and the is the third largest airline in the account of passenger numbers. To offer- secure, cost competitive and efficient in services in the aviation hauling and to retain their employees dedication and devotion to fulfil the objectives of the industry, to maintain minimum standard of on time performance rate while complying will all application regulations and to sustain an environments where dignity and family values are being utilized. Objectives To achieve revenue growth annually To aim on having a bigger market share To have a better customer service than their rival companies To have a stronger business image Reputations with clients than rivals To be recognized as a leader among airline industries To compete in the global market To have a stable competitive advantage (Marivic .B 2009) 3.0 Micro environment analysis (Internal analysis) Organisations create worth of customer value being measured by a product performance characterises and by the credits which customers are willing to pay, by utilizing the capabilities and resources that are found internally and reaching the demand of standard global competition . These particular collection of capabilities and resources which gives the exclusive advantages to the organisation are therefore measured as core competencies Carpenter, Bauer, Erdogan (2009) 3.1 SWOT analysis (Strength and Weaknesses) Strengths The lowest cost in contrast to all the other LCC in Europe The low cost leadership had made it stand out from the arena of LCC industry in Europe The worlds most profitable airline According to the case Ryanair was the most profitable airline in the world on the basis of its operating and net profit margin, on per airline and passenger basis. Brand recognition It is claimed according to the case that Ryanairs website was the largest travel website in Europe and the fifth most recognized brand in Google The attitude of No frill Low fare To overcome the weakness of low passengers the airline restyled the system with this attitude Compared to other LCC airlines Ryanair has the most passengers 42 million passengers in 2007 Most amount of bases with most amount of aircrafts According to the case study Ryanair has flown from 16 bases with over 100 new Boeing 737-800 ordering further 138 new air crafts doubling the size Highest control in the EU low cost market 29.9% from the entire Low cost market Being the youngest fleet of all the major airlines in the EU Replacing its fleet of old aircrafts with new, more eco friendly aircrafts, minimizing the average age of its fleet to 2.4 years. Weaknesses Wheelchair chargers Bad reputation and ethical issues reflected when ryanair charged 18 pounds to use a wheelchair and in response to the protest it reduced the charge to 50 cents wheelchair toll on every passenger ticket Poor service quality The little legroom and unfriendly staff being the worst part of Ryanairs know-how Extra charge for food and luggages Carryon luggages being limited and making them check in bags allowing the passengers to walk in with minimum of hold luggage Bad relationship with the pilots Ryanair has bullied pilots to force them to agree to new contracts wherer they would have to pay 15,000 francs for retraining on new aircrafts if they left the airline. Airports in the suburbs Away from the main city make the customers inconvenient Negative response by the passengers for the additional services According to the case not all ancillary services initiatives were successful in 2005, passengers were resistance to pay additional amount because they thought it is not a worthwhile investment for a short flight. 3.2 The Value chain Infrastructure of the firm Around Europe Ryanair has 16 bases having the main bases in Stanstead and Dublin. The chargers of Ryanair airports are low due to its use of airports that are significantly away from the congested main airports. As adaptation for surcharges are not included for fuel they have to cut costs of on other ways with implementing chargers for the use of wheelchairs ,food and extra luggages. Ryanair having one type of aircrafts (boeing 737) they only have to train the pilots to fly thos particular plane hence can cut down costs as they do not have to be sent to various courses.The hierachial structure of Ryanair is very effective as the managers have to report to the CEO to make decision from the information given. Human Resource management Having the employees sleep in the bases and not having them stay in hotels has made Ryanair reduce costs. Ryanair can make future plans since they have a good roster for most of their workers having 4 days on and 3 days off. Technological development Online booking was introduced by Ryanair for the first time and thus they became eligible to reduce their costs. Self-check service enabling to the passengers was also introduced too thus Ryanair was able to reduce staff and cost. Having the youngest fleets in the EU made Ryanair reduced in costs for the new airplanes. Procurement Ryanair only providing a service and having to outsource the material they need. in addition to that they have to buy fuel and equipment collectively with leasing planes. Inbound logistics Out sourcing of handling services is very common fir a business like this I.e. cleaning service, food, medical services and security/safety. Operations Before setting off it is a must to check out all the planes and equipments by the pilots and the airports used are not very congested and only make point to point trips Marketing and sales Having the biggest website in Europe and having large advertising boards made them increase in sales and marketing. However the attempt of introducing the entertainment facility onto flights where customers had to pay more was failed as people refused to pay due to short journeys Service Having tried to keep the fleet up-to-date and letting the staff go on course once a year to improve their knowledge and making sure they know all the new regulations made Ryanair powerful on services as well. 3.3 VRIO Analysis Resources and capabilities can be regard as things that an organization own. It is essential to narrow down and clarify the core competencies to understand the meaning of the different organizational performances. If an organizations resource and capabilities are valuable, rare, inimitable and organized then it will direct to a sustainable competitive advantage. The internal analysis can thus be analyzed through this base of VRIO framework. Carpenter. M, Bauer. T, Erdogan .B (2009) Analysis of the case Recourses Valuable Rare Inimitability Organized Competitive Implication (1) Human Resources No No No No Competitive disadvantage (2) Finance Resources Yes Yes Yes Yes Sustainable competitive advantage (3) Tangible assets Yes No No Yes Competitive Parity (4) Intangible assets Yes Yes Yes Yes Sustainable competitive advantage (Table 1) The human resource of Ryanair is a competitive disadvantage as it highlights on bad relationship with pilots therefore it is not valuable it is not rare it is inimitable and it is not organized as it is not effectively arranged and deployed in the market. The Finance resources of Ryanair is valuable, it is rare, it cannot be imitated by other airlines and it is well organised and effectively arranged in the market thus it is a sustainable competitive advantage. The tangible assets of Ryanair i.e. the airplane types etc are valuable but they are not rare they can find them anywhere and the planes are imitable as any other company could have the same kind of flights. They are very well organized with the youngest planes and eco friendly with better airlines to come in to the firm in the future. Thus it has a competitive parity. The intangible assets of Ryanair especially the brand recognition are valuable they are rare and they are inimitable and they also effectively help the organisation to be organized. Thus it is a sustainable competitive advantage. 4.0 External analysis 4.1 SWOT analysis (Opportunities and Threats) Opportunities Sales increases due to credit crunch As a result of the recent recession the credit crunch made the sales increase as many customers wanted to reduce their costs. Can join the long haul market penetration by the possibility of taking over Aer Lingus As the result of losing the bid Miceal OLeary assumed that Aer Lingus can be bought over as it has no long term future. Most routes are being clear as other carriers start withdrawing As the clash increased with the routes of Ryanair other airlines such as My Travel Light are avoiding the routes all together. Threats Threats due to accidents If an accident happen in a LCC airline it will Marjory affect the firm as there are a very high percentage of significant reduce in demand Attacks of terrorists Attacks like 9/11 will reduce the demand for airlines. Increasing fuel price Ryanair limiting its ability to pass on increased costs to the passengers of low fare placing extra fare on the carriers as a policy to find cost saving in other spheres of its operations leading Ryanair for hedging. Possibility of taxation introduction Due to global warming there can be a environmental taxation Increased competition from developing countries Easyjet having and extra skyttax star For website booking and customer support Ryanair scored 1/5 in nine of the 16 criterias. (Bitterwallet nd) 4.2 The PESTLE analytical technique (Figure 1) The Macro Environmental analysis, What makes a good leader? Political One of the significant advantages to Ryanair is its political environment as the majority of its procedures are controlled within Europe. This region maintains political stability and it was a fact that we all knew. Even when there is government instability Ryanair does not experience issues as an apprehension regarding passenger volumes or flight destinations Economic For the airlines industry the increment of fuel price caused a major problem they had to cut corners if they did not hedge to accumulate cost on other areas. There can be seen a fall in demand for the flights due to the recent economic crisis. Hence job cuts increased and customers have low disposable income blocking them to spend on vacations. However this could be an advantage for other cheaper airline industries as there are people who are still able to afford a vacation as they are looking for lower cost alternatives. Social This factor has generally impacted Ryanairs business strategy. The prediction of Buyer behavior are becoming gradually more complex to forecast as loyalty are being shifted by the modern consumers from one brand to anther due to the differentiation of price and lack of basic buyer reliability. In addition to that the increasing competition among carriers with low cost fare is resulting in consumers mentally in which carrier to choose when traveling within Europe destinations. Technological The modern era is advance in technology which means that the entire industry is under change with more eco friendly and efficient. Online booking is one major improvement Ryanair has technological wise having the most visited travel website in Europe together with the fifth most recognized brand on Google Legal The heavily regulated industry with laws that are constantly adapting to new changers by not allowing liquid in the customers carry on luggages bring the legal aspect of Ryanair in to action. The new laws that implies to airline industries are the laws that are put across the industries to be more environmentally friendly. This will thus lead to companies fight ting to reduce carbon emission and make the industry less harmful to the environment to meet the terms of EU regulations. Environmental The external environment of Ryanair is somewhat stable. Nevertheless understanding the consumer behavior is Ryanairs biggest problem together with utilizing marketing applications to improve entire buyer patronage and sales performance. 4.3 Porters Five Forcers The case study will be discussed through the porters five forces analysis. This analysis is a very powerful yet simple technique to find out where the power stays in a business. This technique is used to comprehend the strengths of the present competitive position and the future where Ryanair is willing to go in. High Medium Low High Medium Bargaining power of suppliers In the airline industry there is a small number of low fare airlines, thus it shows a high threat according to the case Ryanair is being chosen by many customers for its lowest price. However by any chance if there is a price raise customers have a high potential of switching to another brand in brief customers have no loyalty towards one brand. Which gives the result as bargaining power of the suppliers is low. Bargaining power of buyers The potential of switching to other airlines are very common with LCCs since the customers are only looking for the cheapest. Therefore if Ryanair increase the cost under any circumstance there is a possibility of losing customer. In that case its evident that buyer bargaining power is high. Rivalry of competitors As a result of slow growth in the industry most carriers find it difficult to succeed the chance of succession is limited to a few firms because of the competition for market share. The high fixed cost and low product differentiation leads to high rivalry threat. This shows with Air Ligus, GlyBe and Easyjet following the similar path of Ryanair. Substitution Threat There are many substitutes for long trip i.e. Trains Buses, cars, ferries. However one cannot compare a plane with all of the above mentioned alternatives and a plane travel faster than any of them. Therefore substitute threat is moderate. The threat of new entry Airline industry is not the easiest to enter it has a lot of barriers. Ryanair is the market leader and with the implementations of new regulations and the pressure to reduce carbon emission makes it a moderate threat of new entry to the market. 4.4 Strategic groups Quality 3 2 1 Cost According to the dimensions of quality and cost of the entire industry (Refer appendix 1) 1st group falls under the same strategic group as they have same strategy of low cost leadership. 2nd group mainly serving to the people with a moderate income levels and moderate cost therefore they have the same strategy of medium cost leadership strategy. 3rd group falls under the same strategic group, as they have the same strategy of high cost high quality. Profitability 3 2 1 Number of passengers According to the dimension of profitability and number of passengers of Budget airline industry (Refer appendix 1) 1st group falls under the same strategic group as they have low profit and lowest number of passengers 2nd group falls under the same strategic group as they have medium profitability and medium amount of passengers travelling 3rd group falls under the same strategic group as they have high profitability and the highest number of passenger 5.0 Strategic choices and the recommended strategy The strategic framework of change management This framework helps Ryanair to understand the substantial change over recent years and the importance of organisational culture to organizational analysis. It also can be used to identify the key steps that could improve the management of change. However according to the Ryanair case study management is up to a good standard and therefore change management is least important The strategic framework for advertising challengers This framework can be implemented to Ryanair as it had an incident with a customer where she was mislead by an advertisement, yet this framework is also a less important The strategic framework for Customer Relationship Management This framework is used to broaden the understanding of CRM. Negative response by the passengers for the additional services Bad relationship with the pilots Poor service quality These are some of the weaknesses Ryanairs CRM come across thus to fill the bridge of the gap between negative attitude towards Customer relationship and to make it more favourable it is a must for ryanair to focus on the CRM. If Ryanair take this strategic frame work in to action they will be able to Become The most favourable airline in the industry The most profitable budget airline The positive word of mouth The well recognized brand in the industry Moreover with Customer relationship management the internal market will be looked in to with a positive perspective when the employees are motivated and when there is a beginning for employment recognition thus employees will be treated well which will lead to an overall success of the airline 6.0 Conclusion Ryanair case study was analysed through six analytical techniques (SWOT, PESTLE, Porters five Forces, Value chain, VRIO and strategic groups). Based on the analysers the management can now understand that in order to improve the strategic implementation they must follow the strategic framework of Customer relationship management It helps to bridge the gap and to meet their objectives. Therefore when the recommended framework is implemented the vision of Ryanair can be reached easily. 7.0 Referencing Beamish. H.R, 2008 Strategic management, 3rd edition, Pearson Prentice Hall Bourgeois L.J, Duhaime.I.M, Stimpert J.L, (1999) Strategic Management: a managerial perspective, 2nd Edition, Dryden press, USA Bourgeois L.J, Duhaime.I.M, Stimpert J.L, (1999) Strategic Management: a managerial perspective, 2nd Edition, Dryden press, USA Carpenter. M, Bauer. T, Erdogan .B (March 2009), Developing strategy through internal analysis Principles of management, ,Retrived on 15th April 2010 from http://www.flatworldknowledge.com/pub/1.0/principles-management/29045 Carpenter. M, Bauer. 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