Strategic Business Analysis Of Ryanair
Strategic Business Analysis Of Ryanair
Executive Summary
This strategic business analysis develops Ryan Air’s long term vision and the environmental implications surrounding the company and its strategies to counter the implications. A scrutiny of the future threats and possibilities also accompanies the analysis. In addition, the business analysis also demonstrates how Ryanair exhibits its capability through employment of its internal resource power to handle the impact of competition in the market and other challenges that accrue to from the changes in the external and internal environments. Ryanair was established in 1985 by the Ryan family as a passenger airline services provider. The passenger volumes increased toward the end of 1990 despite the market turbulence that had rocked the airline industry and Ryanair in particular which saw a high turnover in the top management of the company. The internal environment of the company also changed substantially when the CEO Michael O’Leary made a strategic decision to acquire its chief competitor in the market industry, Aer Lingus. And this proposition came when Ryanair had already acquired 19.2 % of the shares of the legacy national carrier.
In 2004 Ryanair took a market orientation which involved segmenting the market in terms of the income bracket and lifestyle. This was a tactic move to attract a wider base of the market in the European marketplace. The main stakeholders in the firm consist of the staff members who are responsible for the tactical decision making in the company and carrying out the company’s strategic objectives. The airline’s customers also form a very important part of the environment in which the company operates since the very customers determine how the airline makes its decisions; both strategic and tactical. For instance, when Ryanair introduced the price-based market segmentation, it basically meant to capture the customers across the income board. This is therefore a good use and application of the information a company has concerning the target market. Knowledge of the target market goes hand in hand with the Ryanair’s long-term mission of stakeholder satisfaction.
Environmental Analysis of Ryanair
1.Government Regulation and the political influence
The domestic governments in Europe together with the European Union have played a major role in the regulation of the airline industry in the region. Nevertheless, there has been a move toward more deregulated industry since 1980’s when the industry was liberalized through signing of bilateral agreement between the UK and Ireland. During the same period, the European Union got down to liberalization of the industry and put in an array of liberalization measures to be consistently applied within the territories of the Union. This liberalization therefore broke the monopolistic operation of the monopoly carrier; Aer Lingus. The liberalization by the EU made it possible for any airline to operate anywhere within the boundaries of the European Union without the worry of facing any restriction.
The government regulation and those of the European Union plays a major role and has great implications to the operation of Ryanair’s internal environment. Such areas that the regulation has had an impact are the flight hours of a pilot. The European Union has regulations which limit the flight hours of a pilot and this is a measure to put a check on the accidents which could result from dangerous fatigue of the pilot. Ryan complied with this regulation by maximizing on the crew productivity and time-off through tailored roasters to prevent dangerous fatigue on the part of the crew members.
The extent to which the government and other political authorities can affect the operation of the business was exhibited in 2006 when the European authorities announced to set up an in-depth inquiry into the offer in which Ryanair had proposed a merger intent with Aer Lingus. At this moment, Ryanair had 25.2% interest in the Aer Lingus and it disclosed that it would wait for the European Commission to clear the issue so that it could make a further offer. Thus, the decision made by the legal system has an immense impact in the ability of Ryanair to make a decision or execute a decision already made. For this case, the view by the European Commission was that Ryanair was engaging itself in competitive misgivings.
In early 20005 the EU effected a new regulation in the airline industry which was meant to reduce inconveniencing passengers through delays or cancellations and denied boarding. This regulation required that passengers be compensated for such inconveniences. In the absence of such compensation, the affected passenger must be accorded the free care and necessary while waiting for the rerouted flight. Thus if the airline cancels a passenger travel it must carter for such necessities as refreshments and accommodation. Otherwise, if the company cancels a customer flight then it might end up paying €600 to the passenger in terms of financial compensation.
2.General Macro-environment
This macro-environment describes all the factors that have an influence in the airline company and which the company has no direct control of whatsoever. Although the government regulation and political factor discussed above also fall under the macro-environment for the Ryanair, other factors are the wider social factors and the economic factors. The airline industry is very much affected by the changes that take place within the environment and at proximity level; these changes have had an impact on Ryanair as an airline service provider. In addition, several rapid and dramatic changes have taken place in the airline market environment in the past decades. The changes are either brought about by the industry-wide paradigm shift of the contemporary marketplace or the competitive pressures of the market at large. Ryanair boasts as the industry’s largest and most successful low fair airline in Europe. One of its major target markets is the leisure travel consumers and visiting friends and relatives.
3.Risks and challenges
Ryanair has faced diverse challenges most of which face the whole airline industry on the global perspective. One major challenge that has faced the Ryanair in the recent past is the uncertainty that accompanies the company’s extra capacity building in creation of new passenger flight routes. The success of the new routes it created through that program would not be predicted with precise certainty. For this reason, the company has to incur extra costs to finance extra marketing and in application of such promotional activities as discounting of fares during the launch of the new routes.
Rising fuel prices are also a contributing factor to the vulnerability of the airline company as the ability to plan for such expenditures with precision becomes as good as impossible. From 2005, there was a general rise in fuel prices and if this is coupled with a low-fare policy which Ryanair used then the possibility of passing the costs to the passengers by increasing fares is limited.
In the aftermath of the 2001 terrorist attack and other terrorist attacks on airliners, the airline industry faces the uncertainty in terms of the security of the stakeholders and operators in the industry. There have been frequent predictions of possible terrorism attacks on the UK and this inflicts an added risk to the airline industry, the holiday centers hence either an extra cost in the industry or reduced booking by customers who use services like the holiday centers. Volatility of the world events have a direct bearing to the fuel costs yet these events are unpredictable hence making fuel price fluctuations inflict additional risk to the airline industry. For instance, in 2006 about 35% of the operating costs of Ryanair represented the fuel costs.
Concerns over environmental issues, specifically the issue of greenhouse gases that originate from carbon emissions have had a great attention in both the political sphere and public at large. When the focus is directed particularly at the impact of aviation in carbon emissions, the airline industry the industry is affected due to the fact that there are uncertainties that surround the possibility of change in the regulation that govern some areas in the airline industry. For instance if the emissions caused by the aviation as predicted by the Oxford University, then the possible result is an increase in the fuel prices arising from increased taxation of the commodity. One strategy that the company has put in place to deal with such an occurrence is the deployment of aircrafts that are efficient in terms of fuel consumption and limited pollution.
3.Internal Environment and Internal Strength
The industrial relations of Ryanair with its staff is weighed down due to the refusal of the company to recognize labor unions. It has also come under criticism for purportedly providing poor working conditions to the employees. In terms of customer perception, Ryanair was voted as the least favorite airline in 2006 when a poll for travelers was conducted by the TripAdvisor. In the poll, travelers who disliked the mode of operation of the airline company in terms of customer service cited unfriendly staff.
In assessing other resources and assets, the company has a larger number of serviceable flight planes as compared to the competitors. It also maintains fleet commonality so that the costs of training staff and maintaining the aircraft as low as possible. By replacing the old fleet with the new one, Ryan has been able to cost-save especially the costs that would be incurred on extra crew. Despite the fact that the company offers lo-cost flight, it has been able to gain a competitive advantage over its competitors through cost saving methods like the ones highlighted.
4.Competition
Ryanair boasts as the favorite airline service provider when it comes to offering low-cost carrier eservices in Europe. For this reason it provides services for 30% of the passengers in the European airline market. The competition is however extensive with the closest competitor in terms of low-cost service being EasyJet. Market service coverage for EasyJet is about 26% of the total European airline passengers. The amount of competition is more extensive in the UK. Apart from EasyJet, there are also other airline service providers and the fact that each takes a particular percentage of the passengers available makes the competitive forces in the market quite complicated since directing a competitive strategy at one company is not possible.
5.Analysis of strategic options for Ryanair
As seen from the above evaluation of the internal and external environment of Ryanair, a major part of the influences that impact negatively on the company are not controllable by the company. This is especially applicable when looking at the factors in the macro-environment which have an impact on the airline company. One major option that remains for Ryanair is a change of the strategic orientation of the company so that more attention is put on the long-term success rather than the short-term success.
Safety is addressed seriously to avoid incurring avoidable costs. Maintaining an internal coordinated market research is also imperative for the company to know sensitive areas of customer satisfaction. This would be helpful in maintaining the consumer preference as an important part of the airline’s operation without making the investors feel that they are being subjected to unnecessary and avoidable costs.
6.Conclusion
Despite Ryanair having done poorly in terms of the industry general score in performance, it is still capable of making greater achievements by making use of the already available strategies. It must focus more on assuring the satisfaction in service delivery and have friendly staff. Another key objective of the company should be 5to control the macro-environment thus it should ensure more effort is put in marketing. Working to establish the consumer’s desires should be among the top priority objectives as well. With these born in mind, Ryanair is capable of unleashing tremendous competitive force in the European airline industry.
Reference:
Eleanor 0’Higgins (2007) “Ryanair – the low-fares airline:” university college Dublin: Republic of Ireland
