Ryanair is an Irish airline which was founded in the year 1984 having its headquarters situated in Dublin, Ireland. The primary operations of Ryanair are based at London Stansted and Dublin airports. In the year 2016, Ryanair was considered as one of the largest airline of Europe by scheduled passengers flown and created a record of carrying more international passengers as compared to other airlines. The characterization of this airline is made on the basis of its rapid expansion resulted by deregulation of the aviation industry in the year 1997 in Europe and the victory of its low- cost business model. 37 countries in Africa (Morocco), Europe and the Middle East (Jordon and Israel) are served by the route networks of Ryanair (Malighetti, Paleari & Redondi, 2009).
The European aviation market suffered from the impact of Brexit and by giving due consideration to rising oil prices, overcapacity and high competition, it was decided to minimize the structural costs for the purpose of gaining success across the sector. Ryanair and EasyJet belonged to the European budget airlines industry and remained in a strong position in the year 2017.
This report focuses on the internal environmental analysis and evaluation of the strategic options adopted by Ryanair by making VRIO analysis, SWOT and TOWS analysis of the company and proposing effective change management theories and methods. This report also provides strategic recommendations based on the analysis made along with the overall evaluation of the recommendations in terms of suitability, feasibility and acceptability.
For the evaluation of the strategic options adopted by the company, it is important that the internal strategic capabilities of Ryanair should be analyzed. This analysis will identify the key internal strength and weaknesses of Ryanair from the SWOT analysis of the airlines. This will be achieved by making the examination of resources and competencies for Ryanair by way of applying VRIO model and analyzing the way in which the business functions are performing within the organization.
The resources of the organization can be organizational, reputation, physical, intellectual, financial and technological. The resources and capabilities of Ryanair are portrayed by way of the following analysis.
VRIO model has been deployed for Ryanair for the purpose of figuring out whether the resources of Ryanair can be translated into competitive advantages or not. The abbreviation VRIO stands for value, rareness, imitability and organization.
Value (V) – value emphasizes whether the deployment of the resources is possible to be made for the purpose of meeting the needs and expectations of the customers. Lowest price is capable to be delivered by Ryanair after combining the airport charge reductions, government subsidies and low- price business model (Barrett, 2016).
Rareness (R) – only Ryanair has airport charge reduction and government subsidies in the short- haul budget airline business. Such resource is not possessed by its other direct competitors such as EasyJet. This, in turn, makes the airport charge reduction and government subsidies by Ryanair valuable and rare. On the other hand, the basis motive behind providing such features to Ryanair is due to its ability of attracting the customers and its secondary routes. In this way, it helps the secondary airports in their quick development. This resource is rare and hard to be transferred (Knott, 2015).
Imitability (I) – a big cost advantage is owned by Ryanair when compared with other airlines. The operations of Ryanair are conducted in such a manner such that the airline is able to provide transport services at low cost to the customers. Moreover, this resource can also be barely imitated or transferred (Hill, Jones & Schilling, 2014).
Organization (O) – a good use of the resources and capabilities is made by Ryanair in order to offer lowest cost to the customers. The competitive advantage has been built up as a result of effective marketing and operating strategies along with effective CEO and strong management team.
|
Strategic Capability |
Resource or Competency? |
Value? |
Rarity? |
Inimitability? |
Organizational Support? |
|
Low Cost Culture |
Resource |
Yes |
No |
Yes |
No |
|
Leadership |
Competency |
Yes |
Yes |
Yes |
Yes |
|
New Fleet |
Competency |
Yes |
No |
No |
Yes |
|
No Frills Strategy |
Resource |
Yes |
No |
No |
Yes |
SWOT Analysis
SWOT analysis of an organization provides the strengths, weaknesses, opportunities and threats based on its internal and external factors. Following is the SWOT analysis of Ryanair.
Strengths- the ability of Ryanair of providing air travel services to the customers at lowest process is one of its key strengths. Moreover, higher rates of fast turnaround times and on- time departures is provided by Ryanair as it operates from less congested airports. Furthermore, the strong marketing model along with the use of cheap labor also constitutes the strength of Ryanair (Rothaermel, 2015).
Weaknesses- the provision relating to short haul air services acts as the major weakness of Ryanair as it is easy to be replaced by various other means of transportation such as water, rail and road. Another weakness is the inability to maintain constant profits for the airlines. In other words, Ryanair suffers from fluctuations in profits and this is due to the reason of repeated changes in the fuel prices. Also, the customer service and the working conditions of Ryanair are very poor. This is publicizing a bad public image for the airlines (Alderighi, Nicolini & Piga, 2015).
Opportunities- Ryanair has a number of opportunities if it enters into diversification and provides other channels making profits from excess luggage bookings, hotels and travel insurance. A number of airports in the western European countries are being underutilized due to the reason of concentration of national airlines on hub airports thereby providing further opportunities for Ryanair. These opportunities will lead Ryanair to expand its market. It can also adopt modern technology on the website so that the customers can feel an ease in accessing the site (Lawton, 2017).
Threats- Major threats are faced by Ryanair from the rules and regulations formulated by the government and other airport authorities which results in affecting and distorting the operations of Ryanair along with leading to the subsequent reduction in profits. Such reduction is due to the reason of global economic financial crisis. Threats are also faced from the competitors who may act as the substitute transportation if Ryanair will not meet the requirement of the customers on time (Barney, 2017).
|
Strengths (INTERNAL) |
Weaknesses (INTERNAL) |
||
|
· Strong brand image and bargaining power in airport deals · Larger market share · Maximum aircraft utilization as a result of new fleets · Innovative and aggressive leadership (O’ Connell & Williams, 2016) |
· Poor customer relations · Low understanding with employees · Misleading advertisements regarding destinations and ticket fares · Customers deterred by gambling and in- flight mobile phones (Ims & Pedersen, 2015) |
||
|
Opportunities (EXTERNAL) |
Threats (EXTERNAL) |
||
|
· Growth in European air travel industry · Recession made it a fine choice for the customers · Withdrawal of traditional companies from less traffic intense points |
· Greater proposition value required by upper middle class economy travellers · Terrorism · Fluctuating currency issues and increasing oil market prices · Impending regulations for environment protection |
TOWS analysis is used as a tool for the purpose of generating, comparing and selecting strategies. It makes a trade- off between the external and internal factors. Strengths and weaknesses comprise the internal factors while opportunities and threats comprise the external factors. The TOWS strategies are Strength/ Opportunity (SO). Weakness/ Opportunity (W/O), Strength / Threat (ST) and Weakness/ Threat (WT).
|
Internal Factors |
|||
|
External Factors |
Strengths (S) |
Weaknesses (W) |
|
|
Opportunities (O) |
Strengths/ Opportunities (SO) · Market expansion of Ryanair with lowest fares · Performance of environmental friendly activity and promotes a ‘green’ image · Cross selling of ancillary products on the official website of Ryanair. |
Weaknesses/ Opportunities (WO) · The website of Ryanair has a feedback and complaint section on which replies are received by the customers · Ryanair maintains continuous dialogue with the labor unions (Akamavi, Mohamed, Pellmann & Xu, 2015) |
|
|
Threats (T) |
Strengths/ Threats (ST) · New aircrafts are purchased from time to time for the purpose of keeping emission costs low and providing competitive prices to the customers · Rising fares (Mason & Morrison, 2008) · Promoting ‘green’ image |
Weaknesses/ Threats (WT) · Focusing on complaints made by the customers · Focusing on safety issues · Employing more staff so that the pressure on the employees can be reduced (Graham, 2013). |
The adoption of change management theories by Ryanair could have assisted it in ensuring transformational change. Such change management methods would have heled in the creation of climate for change and then engaging and enabling Ryanair for the implementation and sustainability of change.
There are chances that the initiative fails at earlier stages leading to wastage of huge investments and time. For this transformational change in Ryanair, this would have diverted the energies towards the change management process (Wheelen, Hunger, Hoffman & Bamford, 2017). John P. Kotter’s eight steps to successful change model and theory have been used in this case.
After detailed analyses and approval from the management, some of the energies get wasted and are unable of contributing towards the transformational change. Such approvals take longer time and rarely secure any agreement and results in resistance. Change is therefore sustained only by urgency. Ryanair need to generate a sense of urgency regarding the intention of cutting down the prices for the purpose of attracting the customers. This theory further provides that change is necessary for Ryanair in order to have competitive advantage over the competitors in the market. When this requirement will be made a priority, no resistance will be shown by the management and other authorities.
Right people will be brought together in Ryanair with the help of creation of sense of urgency in the organization. The guiding team needs to focus on its aim of becoming a low fare airline of Europe and a no- frills carrier by adopting the model of Southwest Airlines (Kotter & Cohen, 2014). The management team will bear the responsibility of portraying trust and commitment while performing the job. Right skills, creditability and leadership capacity will be required for the fulfillment of this process. Michael O’ Leary in this case will lead the management team for towards the transformational change. He will bring full commitment among the members of the team towards the project related to change (Ethiraj, Gambardella & Helfat, 2018).
Right vision will also be required by Ryanair in order to make it more probable. The vision was required to be framed by Ryanair in a manner which could help defying the industry trends. When vision will be created by Ryanair, it will be easier to bring people together and making them works in a particular direction (Leong, Hew, Lee & Ooi, 2015). Michael O’ Leary need to create a vision or sense of direction for the purpose of facilitating change. Contribution of each and every member of the organization is necessary for the fulfillment of this process. He needs to create eye- catching and compelling situations in order to make it easier for other members of the team to see the problems and offer effective solutions. Detailed analyses will not be able to provide effective solutions which are possible in case of creation of vision. Here vision will be to offer low fares to the customers and bring effective management in the costs of Ryanair. Then he need to plan the strategy with the help of which the vision can be achieved easily (Diaconu, 2012).
Generation of variety of information is projected by the transformational change. Ryanair can effectively manage the transformational change only when the need for change is communicated to each individual who are capable of helping in bringing the change into action. This is due to the fact that there are many circumstances when people fail to recognize the need for change. When the manner of communication will be kept simple and to the point, people will be capable of understanding the exact meaning of the message communicated and will effectively address the distrust, anger and anxieties of people (Njoya & Niemeier, 2011).
The next step in the process is to empower action. This is due to the fact that in many circumstances, dis- empowering the manager often acts as one of the biggest barriers to change. Ryanair can encourage the individuals within the organization to offer suggestions regarding how the transformational change can be facilitated without making much efforts. Dis- empowerment also concerns the organization by way of affecting polices, structure and processes. Ryanair can bring change by building self- confidence and optimism in each and every aspect of the organization. Along with it, the achievements should be recognized and rewarded from time to time (Castillo- Manzano, Lopez- Valpuesta & Pedregal, 2012).
Ryanair has to make a large- scale organizational change which, in turn, requires a sense of achievement, momentum and optimism. Therefore, the requirement arises to achieve the results as quick as possible. Ryanair will be able to serve four essential purposes with the help of short- term wins including feedback regarding the validity of strategies and vision, recognition an encouragement for those who work hard, building faith in the change project and taking away power from cynics (Dobruszkes, Givoni & Vowles, 2017).
Radical transformation of business is possible only when continuation is maintained wave after wave and there is no stoppage till the time the vision is converted into reality (Kotter & Cohen, 2015). Ryanair needs to create situations and structures with the help of which people can be empowered to deal with problems and take risks without any fear of reprisal. Ryanair also needs to focus on the removal of structural obstacles by way of giving enough power to people so that they can bring innovative solutions to the management along with solutions with the help of which problems can be easily solved. Michael O’ Leary also need to ensure that the sense of urgency is also maintained throughout the change process. In case it is lost, people will get easily tired of change and will convince themselves that no further efforts are required to made.
Change is required to be embedded in the culture of the organization. Making it stick is regarding achievement of quick tangible results, tying of results to new behaviors, offering visible positions to people acting in accordance with the norms, reinforcement of new culture through coaching and training and not giving up until needed results and behavior is achieved.
Certain strategic recommendations have been made on the basis of analysis made in this assignment. Ryanair is still focusing on addressing customer complaints in order to make the clients happy. This is due to the fact that it is suffering from certain human resource direction issues. Therefore, it is recommended that labor brotherhoods should be acknowledged. This will offer Ryanair a way to become people oriented through which better relationships can be maintained with employees and development will be promoted. When employees will show commitment towards their work, it will become easier to achieve success in very less time.
Furthermore, it is also recommended that Ryanair should also maintain adequate focus on better client service while minimizing the cost. This is possible by providing better development options to the employees so that they give their best at the workplace. They should also be given a quality direction so that through a total quality management (TQM).
Suitability- suitability helps in the examination of strategy regarding its ability of addressing the most essential elements of strategic position of Ryanair. In this report, the suitability of the recommendation is analyzed. The use of Kotler’s model provide the steps to bring transformational change. This will help in coping with the changes in oil prices. Also, this model will help in dealing with recession and keeping the prices low. Competition and challenges of the operating environment can also be addressed with Ryanair’s strategy (Creaton, 2014).
Feasibility- the model will be analyzed in the feasibility portion by examining whether Ryanair has the required abilities, resources and aptitudes for the implementation of strategy. Forecasting and analyses of cash flows will provide the financial feasibility for undertaking the transformational change.
Acceptability- Acceptability is concerned with performance expected from the strategy which is examined on the basis of two factors namely risk and return. Risk of the strategy will be measured on the basis of liquidity and leverage of the company. Shareholders value and financial ratios will also be evaluated. The profitability of Ryanair suffered from a decline due to investments made in expansion plans and new aircraft. As far as the shareholders’ value is concerned, this strategy is expected to perform well (Afuah, 2014).
Conclusion
Therefore, it can be concluded that Ryanair operates in a highly competitive industry as a budget airlines which is also challenged by a number of changes in the external environment. Ryanair is developing strategies through which it can respond strategic alliances, price competition and global financial conditions. Ryanair is also finding innovative ways for minimizing costs, increasing profits, achieving global reach and offering new services. This report assisted in discovering the strengths, weaknesses, opportunities and threats. Its strategies target the enhancement of its existing strengths and exploitation of opportunities available in the market. Therefore, strategic capabilities are required to be build up by Ryanair so that it can take advantage of its financial strength and achieve sustainable competitive advantage.
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