Strategic Management And Analysis Of Ryanair

Resources of Ryanair

Discuss about the Organisational Capabilities Management Interface.

Strategic management is associated with the implementation and formulation of the objectives and initiatives taken by the organisation’s senior management based on the strategic capabilities and the resources and the external and internal environments. As stated by Robson (2015), strategic management formulates the objectives, analyses the internal organisation and the competitive environment.

Ryanair started its operation in 1985 and it is an Irish low-cost airline. Ryanair currently has the fleet size of 465 and it covers more than 220 destinations. Ryanair has it headquarter in Dublin and it was the largest European airline for the scheduled passengers in 2016. Ryanair has more than 400 aircrafts Boeing 737-800 and the current revenue of the organisation is 800 and the current revenue of the organisation is €7.151 billion (Ryanair.com 2018). Ryanair has been featured by the rapid expansion, success of the low-cost model and result of the deregulation. Apart from Ryanair, the European market has low-cost Airlines like Easy Jet, Aer Lingus, Smart Wings, Air Baltic and Condor.

In this report, Ryanair is chosen to show the strategic management and the purpose of the report is to assess the strategic capabilities of the company in recommending the organisation. VRIO analysis is done at the very beginning with a key internal strategic analysis of Ryanair and SWOT analysis is conducted to show the internal and external strategic factors. In addition TOWS analysis helps to find the options for strategies. Moreover, Kurt Lewin’s change management model is explained with a diagram. In the final section, the strategic recommendations of Ryanair are developed in light of the analysis and SFA evaluation of recommendations is presented.

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Financial resources	At present, Ryanair has the operating income of € 1.667 billion and net income of the organisation is € 1.145b billion. Operating income of Ryanair has been increased by 2% in last two years and adjusted profit after tax has been increased by 6% (Williams 2018). Investors of Ryanair Holdings are large and these are included Fidelity, Baillie Gifford, HSBC Holdings PLC and Standard Life. Adjusted EPS (Earning Per Share) was 92 in the year 2016 and it became 106 in the year 2017.
Organisational resources	Organisational resources of Ryanair are the firm’s formal reporting structure, formal planning and coordinating systems. Ryanair follows a centralised functional structure with main decisions is taken in Ireland. Functional heads report directly to Michael O’Leary and Ryanair’s international strategy reflects its centralisation with extensive structures, systems, resources and processes from headquarter. In Europe, there are 57 bases.
Physical resources	Physical resources of the organisation Ryanair are assembly, storage, building and aircraft. Ryanair owns more than 400 aircraft with Boeing 737-800 and it has a single 737-700 which is used primarily for the charter aircraft (Ryanair.com 2018). Headquarter office in Dublin and the secondary airports are included with physical resources.
Technological resources	In the airline industry; technological resources are the copyrights and trademarks. In addition, Ryanair introduced compensation for the passengers and it started the online booking policy and flight cancellation and denied or delayed boarding. Ryanair’s digital revolution has made the booking even easier.
Intangible Resources
Human resources	In the year 2017, Ryanair had more than 12,400 employees and O’Leary makes arrangement for the employees training sessions. However, trainees are charged with hefty fees for the training sessions. Ryanair has small numbers of core employees as maximum numbers if employees are outsourced for non-core activities.
Reputational resources	Ryanair has the skills, able and talented employees who work for the organisation. Pilots of the organisation are skilled. Ryanair had strong brand awareness and it made its reputation through low-cost tickets. Ryanair has a good customer base that is loyal to the organisation.

Table 1: Resources of Ryanair

(Source: Self-developed)

Valuable: Value of the resources puts emphasis to meet the expectations and needs of the customers. The resources of Ryanair are valuable as it can reduce the operation cost and it enables the management to run the low-price business model (Shaw 2017). Ryanair combines government subsidies and it provides values to the millions of customers.

Rare: Ryanair has short-hauled airline and Ryanair has subsidies from the government. O’Leary’s leadership skill is another key feature of the organisation. Ryanair only uses one type of aircraft which enables the organisation to lower the operational cost. Ryanair uses secondary airports which reduces the cost also (Simon et al. 2016).

Imitability: Other airlines spend much money in operation and Ryanair was the first that used the resources to make a low-cost airline. The resources and strategies of Ryanair are hardly imitable as it needs a long time to transfer.

VRIO analysis of Ryanair

Organisation: Ryanair makes valid use of the resources as well as capabilities which deliver the lowest cost and price. Michael O’Leary organised all the strategies and marketing to deploy the success competitive advantage.

	Valuable	Rare	Imitability	Organisation	Competitive advantage
Technological expertise	Yes	No	Yes	Yes	Sustained competitive advantage
Quality	Yes	No	No	No	Competitive advantage
Qualified employees	Yes	No	Yes	Yes	Partial competitive advantage
Reputation	Yes	Yes	No	Yes	Competitive advantage
Corporate partnership	No	Yes	Yes	No	Partial competitive advantage
Leadership	Yes	Yes	No	Yes	Sustained competitive advantage

Table 2: VRIO analysis of Ryanair

(Source: Self-developed)

As stated by Norman (2017), the strategic capability is the ability of the business to successfully employ strategies which allow the business to survive and increase the value over time. Michael O’Leary has the capability to transform inputs into outputs. Ryanair’s capacity is to deploy the tangible and intangible resources which are the combination of the organisation’s strategies to have a competitive advantage. Ryanair earned strategic capabilities through online booking, ticketless boarding, one class travel, flying to secondary airports, unallocated seats, no frills, refund policy, corporate partnership, no cargo services, bargaining power, new aircraft, owns own fleet, hedge fuel risk, outsourcing of the services and operations denominated in Euro.

he new fleet, technological innovation, corporate partnership and financial growth are needed for Ryanair to meet the necessary requirements to compete in the market as these capabilities are the qualifiers. On the other side, Ryanair needs to critically underpin competitive advantage which other airlines cannot imitate. Low-cost ticket booking and leadership of O’Leary is the winner in the market. Ryanair faces issue sensing the threats in the European market and it made a partnership with many of other firms. The strategic capabilities of Ryanair fail to differentiate the business from the competitors and the employees’ behaviour is unfavourable (Lofsten 2016).

Strengths:

1. Ryanair was the first low-cost airline which was started in Europe and the organisation has the strength to accumulate expertise in the industry. Ryanair is the second largest airline in Europe after Lufthansa, transporting more passengers to the European market. Therefore, it implies that Ryanair has a strong presence in the European market and it can defence against competitors’ firms.
2. Ryanair management rapidly expands the business as it has 57 bases and more than 400 Boeing 237-800 aircraft. This expansion of the operation helps the business to make a position in the market and it has increased the market dominance.
3. Ryanair follows the low-cost model and it helps to increase the market share. Ryanair wants to capture the majority of market share through the low-cost model.
4. Ryanair uses the new fleet and the aircraft of Ryanair are quiet which help to build a positive image in the industry (Belobaba et al. 2015). Ryanair uses this strategy as the Corporate Social Responsibility of the organisation.
5. Ryanair uses the secondary airports, extensive online ticket booking and Ryanair takes ‘no frill’ strategy which helps the organisation to lower the price.

Weaknesses

1. Ryanair has been growing each year since the time of establishment and its reputation is spreading far from only Europe. However, Ryanair faces the issue of poor customer service, unfair pricing practices and tricky service agreement. Ryanair has ancillary services policies; however, Ryanair does not come up with actual pricing policies (ambiguous baggage).
2. Ryanair faces the issue of seasonal fluctuations and Ryanair may face the concern of economic performance. Low-cost airlines are selected by leisure traveller and the organisation faces the issue of sudden reduction of the demand.
3. Ryanair does not diversify itself in the complementary segments which can increase through the airline exposure. Ryanair has a good market share in the European market; however, a recent report shows that the main growth is in the UK and Ireland market (Borenstein and Rose 2014).
4. Ryanair wants to reduce the numbers of employees to lower the operation cost. Ryanair has the poor relationship with the employees and it is the loophole of the business.

Opportunities

1. In Europe, the airline industry has deregulation as it provides an opportunity for Ryanair to open the doors and grow in another continent as well. Ryanair already has the routes in Morocco, the Middle East and 37 other countries.
2. Ryanair uses advanced technologies and it can provide an opportunity to carry out and implement the customer-centric strategy and cost-cutting strategy in a more efficient way.
3. Ryanair has given an excellent financial performance and it provides a good opportunity for management to expand the business to another market.

Threats

1. Ryanair has competitors in the industry like Air Berlin, Aer Lingus, Easy Jet, Norwegian, Vueling and Wizz Air. The threat of competitors in the market is high for Ryanair.
2. External factors of Ryanair are beyond the organisational control like fuel price, currency movements and external event (Creaton 2014).
3. Continuous criticism from the media and public create challenges for Ryanair.

	Opportunities	Threats
Strengths	SO S2-O1: Ryanair has great expertise to expand the business beyond Europe to African and American regions S1-O2: The low-cost airline has a great market share in Europe and it can use the technological expertise to improve innovation in airline	ST S3-T1: Low-cost model of Ryanair is the competitive advantage against competitors in the market S5-T2: In order to survive against the odds of external factors; Ryanair takes the strategy of reducing the price for operation and it can follow the lower pricing strategy
Weaknesses	WO W1-O2: Ryanair is blamed for the poor customer service and the organisation can improve the customer service through improving technological implication.	WT W4-T3: Ryanair reduced the employees’ number as they want to lower the wage. Therefore, the organisation faces the challenges of media and public. Ryanair needs continuous advertisement and promotions.

Table 3: TOWS analysis of Ryanair

(Source: Self-developed)

Change is frequent in modern business and it is not visible always apparently. As stated by Cummings et al. (2016), today’s organisations are forced to change as the opportunities and challenges emerged from the external environment.

Lewin stated that leader within the organisations must control the power of the employees. People’s self-righteousness, complacency and stage prejudice must be removed in this unfreeze stage (Huarng and Mas-Tur 2016). Ryanair follows the centralised structure and this structure has been placed within the organisation for a while. Works which are not relevant or useful for the organisation can be still being performed by habit. In the first step of change, the organisation can accept the change which is necessary and it is involved in the breaking down of the status quo before operating in a new way. The organisations opt to change when the management figures out the declining figures for sales, poor financial results and worrying customer surveys. Ryanair did not start with profitability as it ran at loss till 1999. Ryanair started competing with British Airways breaking the duopoly in the market. Ryanair could perform the record performance due to the fall of the fuel prices. Ryanair planned the expansion strategy changing in two particular areas, linking secondary airports and offering the friendlier customer service. Ryanair first cracked the piece of business by winning the deal Boeing during April 2013 and Ryanair used end-of line economics on the current generations as leverage to secure favourable terms. There were issues in the operational and financial cases and stakeholders face critical condition.  

Strategic capabilities of Ryanair

During the unfreeze stage, Ryanair faced uncertainty and the management started to resolve the uncertainty. The employees started to believe in the management and the employees act in such ways which can support the new direction. However, this change did not come overnight. The management of Ryanair started to raise the awareness of business culture and the employees get to know about the desired company culture. In the transition stage, O’Leary took some business decisions like fleet commonality, contracting out of services, airport charges, marketing costs and staff costs and productivity. Ryanair uses single aircraft type and newest aircraft has lower operational cost. Ryanair contracted out some of the airline’s services like ticketing, baggage and aircraft handling to the third party (Kim 2016). In order to lower the operational cost, route policy has been changed by Ryanair management. Ryanair management provided generous five-year pay to the employees and pilots.

In this stage, the management wants to stabilise the new behaviour of the employees and the management may face the extreme challenge from the employees. The outward sign of the refreeze can be shown in the organisational chart and in the refreeze stage is also about internationalisation and internalise organisation. Ryanair faced the new sense of stability and employees felt confident and comfortable with the new ways of working. Equipped with the cost advantage procedure in the movement and transition sections, Ryanair was set to roll out with the new phase of growth after 2010. In the year 2013, O’Leary attended an investor event in Dublin. Ryanair advertised with low fares on the website and this led to the travel agencies angered (Grant 2017). After the deregulation, the European Commission was concerned with liberalisation as Ryanair’s low fares marked with conditions and limited with quantities of the seats. European market may continue to be characterised by high fare and Ryanair may face the excise charge and high tax.

Ryanair serves 2000 daily flights from its 85 bases and it mainly connects 216 destinations in 37 countries (Ryanair.com 2018). Ryanair mainly serves in European countries, Morocco and small Asian parts. Therefore, Ryanair has the opportunity to grow the business in core Asian countries like the Indian subcontinent, China and Australian regions. In addition, Ryanair has not explored in US regions and Latin American countries as well. Ryanair Has 430 Boeing 737 aircraft and its low fair strategies will help the organisation to grow in different regions.

TOWS analysis of Ryanair

Ryanair does not have a good public image as customer experience is not good for some customers. Ryanair can improve the customer experience by communicating with the customers early and Ryanair can hire the staffs who like to serve regularly. The management of the organisation should create something premium which lies between the extreme first class and economy. Ryanair provides extra leg space on the flights and it provides quality food during the flights.

Before developing the clear insight into the preferences of the customers; the organisation needs to understand who the major competitors are. In addition, Ryanair needs to an advertisement through social media, using the online platform and on the print media. These promotions will increase the brand value of the organisation and the customers will get to know about recent offers and discounts given by Ryanair. Ryanair gives self-service solutions and it provides check-in progress and it offers an exclusive menu with in-flight entertainment.

 Ryanair becomes digital travel leader as it has started using the pioneering technology with unwavering professionalism. In addition, Ryanair may push its technology to use Blockchain as it is associated with crypto-currency. Blockchain mainly provides secure digital ledger of agreements and transaction. Ryanair may use Robotics technology as Robots will be more customer-facing and it will be helpful in an operational role. 

	Suitability	Feasibility	Acceptability
Expanding the business	Ryanair can expand the business in North and South American countries and Asian countries. It will help Ryanair to increase market share and profitability.	For Ryanair, expansion of business will be feasible as it will help Ryanair to reach new customers and Ryanair can influence the marketplace.	For Ryanair, it will be acceptable as O’Leary will get a chance to put more money into the business and it will match the growth strategy of Ryanair.
Improving technologies and innovations	Ryanair is the low-cost airline and improving the technologies will help Ryanair to lower the operational cost. The customers will have the better experience.	For Ryanair, the technological innovation is feasible as it provides higher profit to the organisation.	It is acceptable for Ryanair as it provides fast access to the information. Using the internet, technological advances can help the customers to access more data.
Continuous advertisements and promotions	Ryanair will do the promotions as the customers will see the brand name always and it will make brand loyalty of the organisation.	This strategy will be feasible as it will create new content and communication opportunity.	This strategy will be acceptable as it will drive the customers’ decision making. Promotions always earn business.
Improving customer service	Ryanair’s focus on the improved customer service will be suitable for it as it can improve the revenue and boost the customer loyalty.	Ryanair can achieve this improvement through the use of technology and online training personalisation and flexibility.	This strategy will be acceptable as it can enhance the brand image and it will boost the customer loyalty.

Conclusion

It has been noticed that Ryanair possesses proper resources which have provided a competitive advantage for the organisation. The CEO, Michael O’Leary implements proper culture which the awareness and desire for the change of the organisation. Ryanair has taken the strategies like lower operational cost, lower ticket fares, a single type of aircraft, secondary airports and they try to build the support through securing the early adopters. Ryanair claims that it has segmented the market by stating itself Europe’s first no-frills airline’ and its competitive edge lies in the lower price for short-hauled distance. The change management strategy of Ryanair includes the operational strategy of the organisation which leads to lower expenses in running the aircraft. Ryanair has been criticised for the poor customer service as it charges extra for heavy passengers and luggage. Therefore, Ryanair needs to improve customer service, innovation with technologies and promotional strategies. In addition, Ryanair can expand the business in Asia, North and South American countries with this low-cost strategy.

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