The study at hand analytically evaluates external environment of the company Ryanair and strategic position of the same using PESTEL analysis. This study elucidates in detail about wider macro factors of the UK as well as European business environment setting that potentially exerts impact on overall performance along with strategic activities of Ryanair. Also, this study also explicates in detail regarding micro environment of the company within which the company function and applies the Porter’s Five Forces Framework for assessment of overall assessment of the entire industry to inform business strategy. Furthermore, utilizing appropriate change management theory, this study analyses the way strategic change can be managed in the Ryanair and way commitment can be attained.
PESTEL Analysis (Macro environmental analysis)
Ryanair is considered to be the first low budget airline. There are several reasons for the overall success of the company Ryanair, however, the most prominent facets include low cost prices of ticket and simple convenience to fly to majority of destinations in mainly Europe.
PESTEL analysis is worried about environmental influence on a business. In essence, it is an effective manner of summarising overall external business environment in which a business functions. Even though exact illustrations are unknown of the future regulations governing air traffic between UK as well as other EU nations, in case contracts fail to make certain restriction free flights between UK along with EU. In particular, these political results could lessen EU airline access to the market of UK. The company Ryanair is essentially an airline that is registered in the nation Ireland (Wheelen et al. 2017). This is because the airline maintains comparatively huge bases in particularly UK, undesirable Brexit results can negatively exert influence not just on Ryanair but also on low cost operations of airlines in particularly the UK.
Political:
In essence, there is a pressure of trade unions particularly in the aircraft segment and the government can either promote else wise lessen costs. Kash et al. (2014) suggests that governments have presented novel and effective solutions. For instance, levels of security at airports and this can cost airlines to enhance costs in service in particularly security segment. Again, EU expansion is also an important political factor that can affect operations of the firm Ryanair. Given the fact that more novel nations are operating for novel airlines, different new routes are created at diverse airports (Piercy 2016). Also, different nations have novel taxes along with different policies of taxation, this can alter the level of efficacy of the entire industry. Essentially, tourism has augmented and is said to work in support of smaller airline corporations.
Economic:
Economic recession has necessarily left individuals unemployed. In essence, fewer individuals are travelling in business class and there is existence of a threat of novel alternatives. For instance, there is existence of trains of higher speed. Also, there is enhancement in taxes, rates of interest, and increase in prices of oils together with increase in costs of fuel as well as energy (Cameron and Green 2015). It is inevitable to mention that in case a recession occurs in the UK after the same entirely leaves from the EU, earning capacity of low cost airlines in the market of UK shall decrease (since there exists a close relation between economic performance as long as UK based airlines have the ability to reposition its foundation in the EU (for capturing potential opportunities of growth), the low cost aircraft industry might perhaps be able to handle the economic uncertainty invoked by Brexit.
Social:
In essence, individuals might perhaps be anxious or else frightened to fly owing to the 9/11 attacks. Owing to existence of recession, lesser number of individuals is going to vacations that in turn can affect the business of Ryanair. Alterations in trends of consumers and attitudes are also said to affect social aspects (Berry and Green 2016). Expansion of the low cost airline is predominantly attributable to overall growth in disposable earnings of mainly the middle class and the associated lifestyle alteration that characterise the Generation Y travellers can essentially afford different short number of trips every years. In comparison to the prior generation travellers, the generation Y travellers have different anticipations. Millennial anticipate a comparatively higher level of customer service without the need of disbursing the premium amount and normally value the airlines that deliver advanced technological solutions for the purpose of handling itineraries.
Technological:
The government is disbursing on ethical research, renewable research along with levels of carbon emissions (Berry and Green 2016). There are novel discoveries as well as developments, for example, sales on internet along with on-line check and many others. Also, there exist noise control levels that also exert influence on technological aspects of the firm. Furthermore, global warming is also said to exert impact on the technological facets of the firm (Goetsch and Davis 2014). With regard to social alterations taking place in the airline industry, there is growing substantiation that only the airlines will survive that have the capability to assimilate digital channel into their specific distributions along with marketing strategies.
Legal
The legal challenges encountered by the European airline orients around Brexit referendum. Further, economic as well as political uncertainty of particularly the UK, details regarding aviation regulations of the upcoming period are said to be unknown. In case of the Brexit scenario, airlines having flights between EU nations and of UK necessarily is subject to different restrictions that might perhaps lessen demand for mainly air travelling between countries of UK and nations of EU (Carnall 2018). The contemporary commentary reflected that suspending different flights is probable outcome in case of EU and UK decision makers fails to reach legal accord on this matter (founded on decision of Ryanair to gradually diversify from the UK, there is a certain pessimism in the segment, anticipating the hard Brexit state of affairs).
Environmental:
The most recent concern for the segment is that waves of heat are becoming a recurrent phenomenon (temperature increasing above the temperature of ground operations of aircraft). Airlines might have the need to ask for an alternative operations stratagem for adjusting to climate alterations (Islam and Ali 2017). Even when Ryanair is utilizing a modern along with fuel efficient aircraft fleet, there is increasing distress concerning contributions of low cost airlines to emission of carbon.
Five Forces Framework (Micro environmental analysis)
Michael Porter in his book on competitive strategy recognized five forces that essentially establish the framework for competition indicating the causes of lucrative in the segment. As per Rothaermel (2015), recognizing five different forces establish overall potential of profit in industry. In case if the five different forces are enormously intense and particularly in segments, namely hotels as well as airlines, then for that corporation to attain positive returns on firm’s investment can be considered to be very difficult. Porter’s five forces comprises of threats that are generated by power of suppliers, power of buyers, overall intensity of particularly rivalry between different competitors, varied substitute products and probable new entrants (Galliers and Leidner 2014).
Porter’s Five Forces
(Sources: Lewis et al. 2016)
Threat of New Entrants:
It is a difficult to enter low fares segment when there is a cost leader like Ryanair. In a bid to compete in the stiffly competitive market of Europe, it is important to have high barriers of entry, namely, capital necessities, price along with accessibility to different distribution channels to institute higher economies of scale (Obonyo and Kerongo 2015). In the end, threats of new entrants for the Ryanair can be said to be low.
Bargaining Power of Buyers
There is said to be higher power of bargaining of buyers as switching to diverse airline can be said to be straightforward and effortless (Pugh 2016). There is no requirement for additional expends. Essentially, instances of budget airlines include Virgin Express, Aer Lingus as well as EasyJet. In particular, in case of cost leadership stratagem, each and every purchaser has the intention to take up important position. The primary issue is that there is a significant increase in the total number of competitors participating in the process of offering cheap prices.
Threat of Substitutes
As rightly mentioned by Doppelt (2017), substitutes namely, sea transport, transport via rail road, rent a car corporation are necessarily the services that create value for clientele. In essence, train services can be considered to be most notable with respect to threats for airlines as other substitutes can be considered to be extremely pricey. Fundamentally, Europe is popularly known for well-established network of rail road, particularly “EuRail” that helps in connecting west, central as well as southern part of essentially Europe (Hill et al. 2014). However, the chief barrier between airlines is necessarily the barrier time. Travelling to a specific destination with a plane is said to take fewer time than with travelling with a train. Essentially, these facets for particularly trains lead to higher level of transaction as well as opportunity costs. It can be hereby said that threats of substitutes for particularly Ryanair is essentially low.
Bargaining Power of Suppliers
Wheelen et al. (2017) suggest that there exists high power of bargaining in this specific segment. There are primarily two important aircraft producers operating in Europe namely Boeing as well as Airbus. In itself, overall power of bargaining of suppliers can be considered to be high as costs of switching are essentially high and this implies that higher capital investments along with training pilots from the start is necessary (Herrmann and Nadkarni 2014). The primary supplier of the firm Ryanair is Boeing, although the company can modify and alter their suppliers owing to positive streams of cash, for instance, Ryanair intended to buy Airbus aircrafts, but afterwards cancelled the scheme and ordered for 200 novel Boeing aircrafts during the year 2014
Intensity of rivalry between rivals
Overall intensity of rivalry between rivals is said to be at medium level although threat of entry is said to be high with total numbers of competitors have increasing and trying to copy strategy of Ryanair of cost leadership (Elmes and Barry 2017). The company orders as a leader of budget airline segment. The development of this airline segment is said to be justifiable as barely 30% of market share of budget airline takes part in airline segment. In essence, there is a little opportunity of probable difficulty for the company Ryanair trying to widen their stratagem.
Lewin’s Force Field Model can be considered to be a significant contribution to the particular theory of management of change. This is an important part of strategic management that attempts to make certain that a business concern reacts to the business environment in which the same functions (Kash et al. 2014). Lewin’s evaluation can be utilized for the purpose of examining overall balance of power in Ryanair engaged in a specific issue, identification of important stakeholders on the specific issue, recognition of opponents and allies and identification of the way to exert influence on target groups. Forces that drive change in the organization are essentially the forces for change and this comprises of
Internal forces for change
– A general sense that the business of Ryanair can perform in a better way
-Desire to enhance profitability along with other performance dimensions
-Requirement to rearrange to augment overall efficacy along with competitiveness of Ryanair
-Natural ageing and decrease in business (for instane, machineries of the firm, products of the company) (Piercy 2016)
-Disagreement between different segments of Ryanair
-The requirement for higher flexibility in framework of the organization
-Concerns as regards ineffectual communication, de-motivation else wise poor business associations
External change forces
-Enhanced demand for higher levels of quality of offerings
-Uncertain economic state of affairs
-Stiff competition
-Higher input costs
-Political significance
-Ethics as well as social values
-Technological factors (Cameron and Green 2015)
-Inadequacy of natural resources
-Altering nature as well as composition of the entire workforce
-Legislation and taxation
Restraining forces (making change harder)
-In spite of potential positive results, change is almost always resisted (Berry and Green 2016). A certain degree of resistance can be said to be normal as change can be considered to be disruptive and stressful. Some of the restraining forces in the firm Ryanair comprises of parochial interests of self, habits, misunderstanding of the requirement for purpose of specific change, low level of tolerance of change, varied analysis of the situation, economic implications, fear regarding the unknown.
Lewin’s change management model
(Source: Hornstein 2015)
In this case, varied analysis of situations and different circumstances acts as a restraining factor (Goetsch and Davis 2014). There are many who are of the view that there is obsessive concentration on reducing cost enables it become one of the largest airline of Ryanair, running more scheduled international passengers past year than any other airline, shareholders criticized that the reputation of the company for poor service for customers was restricting room for overall rate of growth (Carnall 2018). Analysis reflects the fact that fears regarding unknown results ensuing from adoption of novel technologies are a restraining factor that resists change. Also, the company intends to enhance customer service for enhancement of satisfaction of their customers and it does not involve higher amount of costs.
Summary and conclusion
The above study helps in gaining deep insight analysing business of Ryanair operates using PESTEL analysis, Porter’s Five Forces Analysis, Lewin’s Change Management Analysis among many other strategic tools. The outcomes of the analysis reveal the fact that there is little room for the company to broaden the strategy and there are certain issues with regard to business environment that need to be addressed. The level of security, regulations for security and regulations of taxation in different nations are said to affect operations of the firm. Therefore, the above needs to be addressed keeping in mind different factors of business environment. Again, analysis of environment also reflects the fact that operations of the company Ryanair gets affected by the economic recession and the resultant low disposable income and unemployment. Therefore, the company can continue its present scheme of maintaining cost leadership and present cost effective services. This is because the cost effective aircraft firm might possibly be able to manage the recessionary effects better and stiff levels of competition. However, expansion of low cost aircraft is mainly attributable to overall rate of growth in disposable income of particularly the middle class and the related lifestyle changes. Therefore, the management of the firm can also adopt the expansion strategy for enhancement of sales along with overall development. Also, Ryanair is using a modern together with fuel effective aircraft fleet, despite this, there is increasing concern regarding escalating levels of emissions. Therefore, it is imperative on the part of the management of Ryanair to devise effective environment friendly mechanisms of operations for the purpose of reduction of carbon footprint.
References
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