Assessment Of Strategic Capabilities: A Case Study Of Ryanair

VRIO Analysis

The purpose of this report is to identify the strategic capability of an airline company originated in Dublin, Ireland, named as Ryanair, which has been practicing management operations in airline business since 1984. This airline company has been considered under European budget airline industry, which enables the passengers to board in exchange of less money comparing to other airlines, although, they might include charges for food-beverages, preferable seat allocations and baggage. People tend to confuse ‘low cost carrier’ airlines with region based airline companies, which deal with short journeys without providing any on air service. However, the concept of European budget airline is to offer customers low budget deals for increasing sales as well as charges for extra services are capable of collecting the share of profit in most of the cases. As far as the case study is concerned, it has been observed, that being the first ever company to apply this strategy and even being the largest successful low budget airlines, Ryanair is facing challenges while implementing strategies under a competitive business culture. The strategies are not responsive enough when a situation of economic recession has arrived (Sarilgan 2016).

In order to fulfil the agenda, this report aims to analyse internal strategic capabilities and probable limitations due to lack of organisational potential, with the help of VRIO analysis model. A SWOT analysis will present an internal evaluation of certain factors of the airline company and again TOWS analysis will assist to understand the company potential to implement strategies for benefit and its position in the market. A model of change management will be included to describe how Ryanair has been maintaining a continuous process of innovation and revising values, strategies and objectives in order to cope with the transformable business scenario. According to Albers et al. (2017), considering the contemporary market environment, strategic recommendations will be developed, not only that towards the end of this report an overview of the case will be attached to gain a distinct perception over the matter.

This framework works as a tool to evaluate an organisation’s internal resources and strategic capabilities to develop an understanding whether those factors can contribute in the process of gaining a sustainable competitive advantage within the industry. The author of this analysis model introduced four aspects, which have been judged in order to find out the potential of the resources. The concept of VRIO is combination of four aspects, such as, valuable resources, which are rare too and non-imitable or too costly to imitate for the competitors. A firm should be organized enough in terms of work process, policies and hierarchical structure to make the best use of its resources.

Following the market trend of low-cost services, Ryanair experienced immense success. In fact, they were nominated under ‘World’s favourite Airline’ as they carried more international passengers than any other airline brand(). Despite carrying highest number of passengers the company experienced huge loss and faced several challenges towards the end of 1990, therefore, strategies are proved to be inactive or questionable in the backdrop of dynamic business environment, which includes incidents of economic recession or fluctuation of fuel price. As described in VRIO analysis model, whether Ryanair is capable of utilizing the opportunities with the help of its resources or not that should be evaluated first.

TOWS Analysis

With the purpose of delivering efficient services to the customers better than rival airlines, Ryanair has eliminated several procedures from operation list, which were not required in the first place. The management did the market research in detail and understood, the more they would focus on customers’ preferences they can create a safe space in the midst of competition (Ghapanchi, Wohlin and Aurum 2014). Revising policies and procedure works as a critical factor as far as competition is concerned. As described in, Alamdari and Fagan (2017), considering the market trend of low cost services, it had to develop both the physical and human resource to add value and gain competitive advantage.

• Developing and maintaining infrastructure can be a key resource of an organisation within the service industry. The company tend to rely on fleets, which are 2.5 years old on average and come with a commitment of providing enhanced space and safety to the customers. Extremely efficient services related to every fleet, allow the company to gain profit, although the cost of purchasing and managing different types of numerous equipment, developing the skill of human resource and operations are included. The management gives cent percent priority to safety and maintenance of infrastructure in order to make customers realise that why they should choose Ryanair over anything else. It works as one of the crucial factors, if the theories of  Barros and Couto (2013) can be followed, which enables them to match with the expectations of the Europeans, and gives them pleasure of success.
• It is the most important factor to have efficient human resource for executing regular operations flawlessly. According to Wittman (2014), Skilled and well-trained workforce and their sense of responsibility are one of the main reasons of success of any organisation. In order to assure high quality service Ryanair recruits well-trained employees who will be committed towards the organizational goals (Rajaguru 2016). The management does not encourage the practice of joining trade union or something of that sort among employees yet to cut short  the labour cost, they consistently motivate them with incentives to be more productive. In occasional cases, organisation cannot assure the quality of human resource; Ryanair decided not to take any chances and started to offer designation related training before recruitment in return of monetary expenses. The process of training continues if they feel employees are not capable of satisfying the customers (David Mc 2013). Therefore, a consistent practice of resource development and innovation can be found which determine success.
• There are a certain number of hidden factors, which help an organisation to gain competitive edge, are related to company’s marketing strategy and the procedure of implementation. Here the significance of being the first European low-budget carrier makes sense. Ryanair believes to keep lower maintenance cost by arranging direct flights, prefers less populated secondary airports for destination. Moreover, excellent teamwork and process do not allow delay unless there is any case of emergency. The resource is the strategy of maintaining the key charges low for the actual service while they apply high charges on additional services of food-beverages, on air movie or headphones to increase profit. They felt, elimination of these services would help them to keep handling cost lower and if customer wants the service, let them purchase. Customers seek for the better service even if they have to pay a little high. In this case, customers are satisfied with their committed nature and this strategy directly assist the airline company in terms of winning over the competitors and establishing a sustainable relationship with customers.

VRIO analysis concentrates on resources that adds value to the brand and works as an influencing factor towards attaining competitive edge. Ryanair’s strategy of budget airline is undoubtedly unique as far as contemporary business scenario is concerned and it helped them to attain an exposure along with rapid growth. Therefore, these resources can be considered as valuable. However, the question arises whether those resources are easily imitable or not. If the rivals are capable of imitating or introducing similar strategies then the resources cannot be considered as rare anymore. In this context, the role of competitors is important because following low budget strategy, several airlines like Air lingus and Easyjet directly confronted them in the field of competition. Therefore, it failed to satisfy the parameter of rare and non-imitable, though it is hard to imitate dedication of employees and management as well as infrastructure. Although, the efficiency of workforce cannot be imitated easily. It can be assumed from their manner of working that the company maintains an organised work culture, which enables them to capture the value of existing resources.

SWOT analysis model refers to one of the most trustworthy internal analysis of any business organisation, which is seeking for growth and competitive exposure in the market (Jasiulewicz-Kaczmarek 2016). The analysis report will be structured in order to explore the new opportunities in the market and recover the threats of competitors, based on the Ryanair’s strength and weakness.

Strengths	Weakness
1) Since the year of 1985, Ryanair has been operating business under airline industry as Ireland’s first budget airline and based on the both effective operational and marketing strategy they experienced great success and rapid growth. Keeping the main service, which is ticket price within the reach of the massive European population they eliminated extra on air services from offerings instead made them chargeable if required by the passengers. Moreover, there were charges for preferable seat allocations and check-in luggage. Although, ticket prices were low, the company found the smartest way to make profit out of these additional dealings. The management has been applying this policy as a core strategy of the firm in order to be competitively successful. 2) As most of the fleets (more than 200 destinations along with 1800 routes covering around 33 countries) deal with direct, short distance destinations, people find this airline convenient to travel (Fageda and Perdiguero 2014). 3) Besides, the style of business practice, skilled workforce, advanced infrastructure and a consistency of innovating new ways to gain profit add strength to their brand name.	1) Although, the management has a practice of recruiting skilled and efficient candidates, it has been seen that they do not deal with the matter of employee satisfaction seriously. They do not allow any practice of unionism within the organisation. However, differences of opinion has been spotted among the employees regarding this matter. The company wants dedication and flexibility from them, which exceed its level occasionally. 2) The airline company has an offensive reputation in the market as advertisements and publicity stunts always create a controversy. They have a practice of humiliating other companies directly via advertisement. Their so-called publicity stunts involve rumours, as the customers have to pay for every washroom visit on board or stunt of using picture of Spanish queen in their advertisement. Therefore, it can be said that instead of gaining the advantage of marketing strategy negative publicity has spread. 3) The management lacks the capability of taking pragmatic decisions. As they are thinking of fleet expansion without considering dynamic business scenario (Bilotkach, Gaggero and Piga 2015).
Opportunities	Threats
1) As Ryanair has already experienced success and possesses both the monetary and human resources, they can think of international expansion instead of going for a fleet expansion. Although, negative publicity has been spread, yet customers appreciate their service within the budget. Based on the brand name they have opportunity to expand business across Asia and other favourable continents. 2) Opportunity of raising the price of additional on board services is present. 3) There are issues of customer loyalty though, yet if they can make effective changes and adopt innovation based on customer preferences as described in Budd et al. (2014), there is opportunity for betterment.	1) One of the major threats is emergence of new airlines with the same low budget policy. In order to gain a safe space amidst of such competitive environment if Ryanair does not feel to revise the policies and introduce innovative ideas then in future there is a chance of strategy failure (Francis, Humphreys and Aicken 2017). 2) It has been noticed that budget airlines confronts with several challenges under external crisis. For instance, recession in Europe or the fluctuation of fuel price. The company may suffer if management would not think for alternatives. 3) As Ryanair carries highest volume of both the national and international passengers as per the report of Clewlow, Sussman and Balakrishnan (2014), they are on the verge of fleet expansion according to that. However, the decision is not pragmatic, as the external environmental factors possess dynamic characteristics. Due to that if target market decreases in size, the company might experience major financial disturbance.

Based on its strength and weakness, Ryanair’s opportunity and threat has been identified as of now. However, based on its threat and opportunity, the company’s weakness and strength will be evaluated. TOWS analysis will deliver a perception that to which extent Ryanair can improvise norms to explore the opportunities along with that whether it can overcome threats based on its strength.

Twos analysis model helps a business organisation to identify various strategic options. The company can develop an understanding of market opportunity based on its strength as well as find out ideas to deal with the flaws. As far as external factors are concerned, as per Singh and Sushil, (2013), recognising the opportunity the organisation try to improve areas of weakness along with that they try to eliminate the probable threats.

Threat

Opportunity

· Emergence of new airlines with the same budget friendly policy is a threat to Ryanair. · Being a budget friendly airline, Ryanair may not provide the same offer around the year due to economic crisis. However, if they want to continue with the same it may harm their internal financial balance. · There is an issue of customer loyalty with the organisation occasionally, as people feel that except the ticket price, the charges for additional services are high (Akamavi et al. 2015).

· Based on its success and resources Ryanair can overcome the threats by international expansion where the concept of budget airline has not yet explored. In this way, they can recover the threats, as they know well how to keep the handling charges low. · Issues of customer loyalty may be is there occasionally, yet it cannot be denied that the airline carries highest volume of international passengers. Opportunity of revising low fare policy or the scope experiment is present considering the volume of customers.

Weakness

Strength

· The entire structure of the organisation is customer and profit oriented. Therefore, employee satisfaction hampers occasionally. Employees are bound to the schedule and least entertained with other interest except the organization. It disturbs their physical and mental balance and it can be a cause behind unsatisfied human resource. · Impact of consistent negative publicity, controversy of advertisement can be considered as weakness and it can affect the customer loyalty as well.

· Strict management is also necessary if the organisation is looking for better future based on its operational excellence. They recruit skilled and knowledgeable employees just to make sure the efficient service. Organisation does not entertain unionism, which makes the employees more productive and engaged to work only. · Although, marketing strategies via advertisement is not a pleasant experience for them still there is a proverb that publicity is never negative its makes either something popular or nothing at all. The result can be seen when highest volume of international passengers have trusted Ryanair to travel.

• S-O:As it has been repeatedly stated, Ryanair has experienced a rapid growth and possesses an extremely skilled and effective human resource; opportunities of expansion can be explored. Entire organisation believes in serving the customers well within their budget, though sometimes customer loyalty is questionable yet it can be said where service is efficient they would not mind to pay higher for additional services if the price will increase (Wittman 2014).
• S-T:Resources obtained by the airline is efficient enough to compete with the new companies’ workforce. New companies can come up with same policies yet it is difficult for them to imitate the working process and dedication of the workforce.
• W-O: Though the decision of fleet expansion is not pragmatic enough, yet opportunities of profit and boarding more passengers at a time are there. Their publicity stunts may have negative characteristics yet ends up making them more popular among the customers.
• W-T: There is lack of innovation as far as strategies are concerned. As threat of existing and new companies with the same strategy is present in the market, Ryanair has to depend on their service and workforce to retain the customers (Hinterhuber and Liozu 2017). Decision of fleet expansion is not pragmatic. It can drive the company towards monetary loss if the business scenario changes its nature economically in near future.

Change management theory deals with a management, which is in need of changing the structure for betterment. According to Lewin’s change management model, as it has been addressed in Cummings, Bridgman and Brown (2016), in order to change the scenario a company should unfreeze the existing practices then they should execute new policies, propose strategies or develop human resource. Finally, the strategies demand to be refreeze means, ways should be found regarding sustaining the changes whatever have been made with the purpose of accomplishing the goals.

• Ryanair has been practicing the policies of low-budget fare since the day of its debut. Emergence of new companies with same strategy may weaken their policy. From that perspective if managers consider the emergency of the situation, propose innovative ways of customer retention, and sustain the practice of justified fare with occasional discounts, company will not face issues at the time of environmental or economic change. Check-in charges and policies are bothering the customers, realising that if management can introduce web-check in process, then Ryanair can save money by not employing anyone for that designation.
• International expansion can be an effective strategic way to increase their market share. Variations in execution, considering customers’ opinion can help to recognise certain hidden opportunities, which were not realised before. Their new policy should be to attract premium customers rather than only focusing on mass interest (Leong et al.2015).
• While performing the change, it can take a huge time to execute or adopt with the new system. Managers should be cautious during this period and a pragmatic thought process is necessary in order to take actions under critical situation like losing customer loyalty or confusion among human resource regarding the new operations.
• With the purpose of making change and sustaining that Ryanair should develop and train their workforce accordingly, effective interpersonal communication can be helpful while developing such practices via electronic mode as well (Lee and Worthington 2014). The structured system with satisfied employees and customers can lead towards excellence.

1. As discussed in VRIO and TWOS analysis, in order to overcome threat of competitors, not only operational excellence and service matter but also idea of business expansion as well as introducing innovative policies can be helpful.
2. At the time of framing marketing strategy and advertisement ideas management should be careful about not publishing any controversial content.

• Change of management practices and work procedure is needed as per dynamic environmental requirement (Langley et al.2013).

1. Executing different ways of communication employee integrity has to be maintained. Occasional training will be helpful if management wants to make strategic changes within the organisation.
2. Improvising technological aspects related to operation like providing online tickets as per Escobar-Rodríguez and Carvajal-Trujillo (2014), will make the process easier, more global and acceptable to new premium customers.

SWOT Analysis

In order to frame new strategies it is important to consider the organisation’s strength and weakness. Skilled workforce has the capability to adopt with transformation whereas financial resource can help them to welcome change and expansion the business.

Customers’ perception cannot be changed overnight, the efficiency and behaviour of crewmembers is determinant factor in terms of accepting the new procedure (Orasanu 2017).  As one of the biggest stakeholder, customers may reject their change of procedures and new services. On the other hand, it can attract more elite customers to travel with them.

Strategic recommendations are made based on the VRIO and TOWS analysis, which means those have been framed already considering the both the financial and capability of human resources according to the study of Hamel and Prahalad (2013). Recommendations are within the company’s reach and if the management plan wisely it will not be difficult to achieve.

Conclusion

The primary interest of this report was to seek strategic opportunities of Irish airline Ryanair. In order to do that certain market analysis models have been considered, hence it can be concluded that the company experienced rapid growth yet did not improvise innovative ideas to make the process sustainable. In order to gain long-term profitable position in the dynamic market situation it should adopt a management full of new concepts to achieve a competitive edge. A list of strategic recommendations has been prepared, expectation is their current resource and capability will assist the, to accomplish the organisational goal and sustainability.

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