The way an organization is able to manage the operations and the management of the employees in the organization decides the future of the organization. The report will look into the internal and the external management of Ryanair. The strategies that are being used in the organization and the outside to manage the competitors will be discussed in the report. After the discussion of the internal and the external market conditions, the recommended strategies will be discussed. The present strategies of the organization will be discussed and further discussion will be done on whether the present strategies will be retained or better strategies could be implemented in the organization.
The core competencies, the strategic capabilities and the competitive advantage of an organization are interdependent on each other (Kuratko, Hornsby and Covin 2014). Once the strategic capabilities and the core competencies of the organization are being set, it will help them to develop the competitive advantage of the organization in the external market (Ludwig 2014).
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Strength Low cost airlines help them to provide low cost tickets to the customers They have 1600 routes in all over Europe that helps them to serve a huge number passengers |
Weakness They do not give value-added services to the customers and hence, have not been able to fare properly in polls, awards and surveys. The profit for Ryanair is based on seasons. They have high income during summer but have a low income during winters |
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Opportunity Ryanair has redesigned the websites so that they are able to communicate well with the customers. They have developed services for the business travelers that have enhanced the business |
Threat Ryanair has faced issues where the competitors have tried to tarnish the image of the company by saying that they compromise on safety as they give tickets at a lesser price. |
The main objective of Ryanair is to provide the customers with low-fare passenger airlines. It aims at making continuous improvements and keeps on giving low-fare services to the customers (Ryanair.com 2017). They aim at reducing the operational cost and enhance the operational excellence of the company. The idea of Ryanair will help them in ranging to a wide variety of market. The major competencies of Ryanair are:
The idea to serve a number of destinations and variety of routes help Ryanair to build their core competency and eventually helps in developing a competitive advantage of the company in the external market of the United Kingdom (Hill, Jones and Schilling 2014).
The competency of Ryanair lies in the strategy that has been set by the airline company. They give point-to-point service and concentrate on short-haul route (Trend 2017). They provide their services by keeping in mind the travel destinations, major places where the population is more and the regional airports. The customers can keep a check on the fares of the airlines through various price comparison sites (Johnston and Marshall 2016). Once the customers will see that the short haul flights will be lighter on the topic, they will choose only those flights over the long haul flights (Nagano, Stefanovitz and Vick 2014).
As Ryanair aims at providing flights for short distances, hence, they are being able to provide a number of flights in the continent of Europe. They do not follow the hub-and-spoke service that is being followed by other airlines company. They follow point-to-point service. Even though the hub-and-spoke service is mainly used by other airlines that help the companies to give facilities like connecting passenger service, transit passenger assistance cost and baggage transfers. Ryanair saves the cost in these services and increases the number of flights at a cheaper rate. Even though, other airlines give the services to the customers, they balance the services charging more from the customers. On the contrary, Ryanair has built a different strategy. They know that customer will be attracted if they get the flight tickets at an affordable price (Griffin 2013). The average turnaround time for Ryanair is 25 minutes. As it is flying more number if flight operates at short distances, they are able to run two more flights within a 60-minute turnaround time. The turnaround time affects the company positively. It is able to earn €4.4million for one aircraft in one year.
The strategic capability of Ryanair also lies in the fact that they a aim at keeping the process simple. They have cut on the cost and by reducing the value added services and they have made a clear offer to the customers. They have mainly focused on those people who need to travel for business purposes and have to travel in other place and coming back on the same day. They have dedicated their flights for theirs set market. In this way, they are being able to garner more profit as they have kept no hidden costs for the customers have been able to win trust of the customers (Jackson, Schuler and Jiang 2014).
The resources of Ryanair come from the intelligent operations of the flights. They are being able to develop on their financial resources by proper planning and business strategy (Booth 2015). They do not give any extra services like baggage transfers and services for connecting passengers. They give the passengers short flights and increase the number of flights. In this way, they are being able to attract more passengers and run more number of flights and eventually they grow their financial resources (Botha, Kourie and Snyman 2014). The financial resources also come from the Ryan family that includes Thomas Anthony “Tony” Ryan, Liam Lonergan and Christy Ryan and, the creditors, the investors and the shareholders.
The human resources of Ryanair is worth mentioning. The management team who are working under the leadership of Michael O’Leary. Michael O’Leary has a good understanding the southwest model. He has use the model to transform the operations of Ryanair and it has been able to run the low-cost airlines. He was the one who directed the company remove the non-value added operations and help the customers to take the flights at a lower rate. He aimed at giving equal amount of resources to the cabin crew, pilot, engineers and the ground staffs. In this way, the employees in the organization are happy and they are able to perform well in the organization. Proper distribution of the resources for the employees helps the company to build a strong human resource in the organization (Olsen 2015). Ryanair currently has more than 2700 employees in the organization.
The physical resources of the organization include the aircraft fleets (350 aircrafts)
the secondary airports and the headquarters of the organization (Kuratko, Hornsby and Covin 2014).
The headquarter of Ryanair is located in Swords that is a suburb Dublin, Ireland.
The competitive advantage of Ryanair lies in the fact that they keep their operations simple. They use Boeing 737, which is the most common aircraft. They would be able to maintain the fleet properly as the parts will be easily available (Ludwig 2014). They would not have to import the parts, which will .lower the cost of manufacturing (Hill, Jones and Schilling 2014). If there is any issue in the flight, it will be solved instantly, as the parts will be readily available in the market (Johnston and Marshall 2016).
Ryanair contracts out the services. Except the Dublin airport, the company outsources the actives like ticketing, aircraft handling, ticketing and other functions to third parties. As a result, they are able to get better rates and yearly contracts from the third parties (Nagano, Stefanovitz and Vick 2014). When under the contract, they are able to carry out operations at a fixed price, as even if there is increase in the cost, it would not have affected the company (Griffin 2013). In addition to this, they would not have to handle to the issues like employee relations, disputes in the organization and the responsibilities of the employee present industry (Jackson, Schuler and Jiang 2014).
A number of charges are being applied on an airlines company when it operates in an airport. Some of the charges that are being applied are aircraft parking fees, noise surcharges, passenger-loading fees and the landing fees. The airports that are more congested, the more will be the fees in the organization (Booth 2015). Ryanair chooses airports that are located in regional destinations, the secondary airports so that those places will be less congested, and the fees will be less for Ryanair. In this way, Ryanair will be able to decrease the cost and will be able to better business out of the operations.
They keep their marketing cost of the organization is kept at bay. They do not keep any extra agent who will travel to market the services of the company (Botha, Kourie and Snyman 2014). In this way, reduce the cost that will be required to give to the sales agent. They mainly take help of media to market the products. They take help of newspapers, televisions, the website of the company and the radio to market the products (Olsen 2015).
The environment in which an organization works is termed as the external market. The external market consists of the economic and political conditions of a place, the types of competitors and demands and the needs of the customers.
The global airline industry is consistent and growing at a steep rate. The revenge earned from the airline industry has doubled in the past decade. According to the International Air Transport Association (IATA) the revenue in the year, 2014 was $746 billion in 2014, which was US$369 billion in 2004 (Strategyand.pwc.com 2015).
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Political |
The increased pressure of the Trade Unions have influenced the operations of Ryanair and urging them to increase the cost of tickets |
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Economic |
Incidents like recession have affected the travelling capacity of the customers |
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Social |
The customers are more inclined to low prices. they compare the airfares and then choose to travel |
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Technological |
Technological advancements have helped the organization to improve the efficiency on fuel utilization |
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Environmental |
Pressure has been created on the airlines to reduce their carbon emissions due to increased awareness for the environment |
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Legal |
The European Union is against giving subsidies to the airlines industry |
The European Union has been able to create one of the strongest aviation industries. There ha been a creation of single European Union aviation market, which has led to a development of European Union’s external aviation policy (Mobility and Transport 2017). The supervision of European Union has been able to give one of the world’s safest and secure international air transports to the customers.
This five forces model of Porter will help in analyzing the macro environment of the Ryanair Company. The main elements of the model are as following:
The aircraft producers are divided in to two major companies in the world that are Boeing and Airbus. Ryanair has the possession of Boeing 737-800 and the inaugural flight was in the year 1997. The aircraft had made a strong impact since it was launched and was considered as the Next Generation Model in 2002. The success of the aircraft solely depended on Ryanair as it had a partnership with the company, which led to a decrease in the cost of the mechanics and the pilots for the company.
Airports act as a bargaining power for the company as they try to avoid the airports that have a strong competition with other airline services. The company tries to maintain their focus on those airports, which offers competitive cost to all the aircraft carriers. The company tries to control the price of fuel, which is directly linked to the price of oil through hedging (Moreno-Izquierdo, Ramon-Rodriguez and Perles-Ribes 2016).
The ancillary services that are provided by the company have a low bargaining power as it provides the customers with on-board merchandise, food sales and beverages, advertising and rail and bus tickets. The company does not use any travel agents as it uses the techniques of direct marketing to maintain its current and existing customers, which helps in reducing the costs of the company.
Overall, it can be seen that the bargaining power of the suppliers are low as they depend on the success of the company. The company does not have any travel agent so they depend on brand recognition. The company needs to sell its ancillary services so that the company can earn extra revenues. The bargaining power of the customers is high, as they tend to shift to other airline industries if they find cheap airfares. The threat of new entrants in the market is high because of the huge capital base of the rival companies. They can enter the market and can hamper the sales of Ryanair. The threat of substitutes is also high, as the rival companies that will enter the market will try to attract the customers by giving them offers that will be lower than the other existing companies in the European market.
The generic strategy of the company is cost leadership. It is one of the leaders in keeping the cost low in the airlines industry with respect to building and maintaining equipments, cost of labor and the working culture within the company. These factors help in keeping the costs on a lower side for the company. The value chain activities of the company is one of the major sources that helps in giving them an advantage over the cost-cutting techniques. It is one of the important tools to analyze the competitive advantage as it helps the company to exploit all the major resources that would help in keeping the costs low (Rothaermel 2015).
The most important feature with respect to the strategies in the European airlines market is that the market lacks in segmenting the domestic and the international customers. Thus, it makes it difficult to operate in the market with a pre-planned strategy such as price packages and other services as the market keeps on changing on a regular basis. This has helped the small budget airlines to gain extra profits in the European markets (Mack 2013).
The reduction in cost is a continuous requirement, which helps in making excess profits for the airplane companies. The most important item that will help in curtailing the cost will be to manage the cost of labor and the introduction of e-commerce so that the customers can generate tickets online automatically. These will help the company to employ less number of labors in their organization. The variables that are associated with price are a strong source of competition among the airlines industry and the strategies are tactical in nature (Grant 2016).
The increasing competition amongst the low budget airlines in the European market is a matter of concern. The product differentiation can be used as a strategy so that it helps the company to be different from the competitors. The recognition of the brand also helps in building a competitive advantage amongst the low cost airlines and this is a major priority for Ryanair Company (Alstete and Meyer 2013).
The big names in the airline industry compete by offering meals in the flights and entertainment of the highest quality, which gives them an advantage that cannot be matched by others. These advantages are not possible in the European countries as the distances in the flights are very short and the pricing of the ticket is what matters to the customers the most (Dale 2016).
The generic strategy will help in giving the company a competitive advantage over others by making the company sustainable in nature. This sustainability can be achieved if rival companies cannot imitate the strategies that have been taken up by Ryanair (Caputo and Borbely 2016). It will help in creation of value in the services that will be impossible for the competitors to match. The company focuses on one strategy that is price leadership, which may be unsustainable in the future because if they want to grow their business than the strategy will become secondary in nature and the company will need a new strategy in replacement of it (Thompson et al. 2013).
The three ways in which the company can create competitive advantage are through cost leadership, differentiation and focus. The following resources help Ryanair to maintain a competitive advantage over other firms. Firstly, the brand is recognized throughout the country and has a large customer base due to this reason. The Research and Development (R&D) team of the company has achieved great innovations in their technological and manufacturing process. The introduction of a new revenue model has helped the company to reduce its cost significantly. The company also focuses strongly on differentiation as it involves the domestic and leisure passengers in the market as well (Thomas 2015).
It can be recommended for Ryanair that it needs to improve its oil hedging strategy and the trading practices with respect to currency. The international currency and oil market is volatile in nature and there is an increased chance of rise in the oil prices due to the terrorist activities that is prevalent in the modern world. The improvement in the hedging practices will help the company to combat with the increase in the oil prices in the future. The trade practices with respect to oil are done in dollars and the revenue of the company is through Euros, which leaves the company at the mercy of the currency market. The company needs to change its policy so that it can procure the oil in the common exchange currency that is US Dollars.
The company also needs to change its strategy in improving the perception of the customers. The customers enjoy the low prices that are offered by the company, as it is one of the key factors, which helps the company to earn profits. The increase in the competition has led to a switch in the customers, as the customers are preferring the companies that will provide the cheapest air fares. This has led to a poor perceived quality amongst the customers with respect to the services that are offered by the company.
The company needs to market the ancillary products during the flight hours, as it will help in increasing the profits of the company. The company needs to advertise in a better way in their official websites about the ancillary services that it provides so that the customers will become aware of it.
Conclusion
After going through the operations and the management of Ryanair, it can be concluded that the strategy of Ryanair is clear and specific. They have eliminated the value-added services and lowered the cost of the tickets for the customers. It has been able to create a strong competitive advantage in the market. They are running multiple numbers of flights in a given time as gain better business. Ryanair has tied up with the Boeing, which is the most common fleet operating in the market. However, Ryanair will have to keep on improving their services as the customers will always be looking for better services. Various airlines companies are present in the market and they have to enhance their competencies to stay ahead of the competitors.
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