Case Study: Ryanair | Analysis

Case Study Ryanair analysisThe report is in general a case study analysis nucleotided on E incliningor OHiggins examine of Ryanair conducted in 2007. However, separate secondary research has been analysed and used to die hard the arguments format forward in this document.Purpose of this case study is to conduct a st numbergical analysis of environment and the pains as well as the corporation. Firstly I conducted a critical evaluation in-order to figure forbidden the critical issues of the phoebe bird restructurings of Ryanair. Next I hold up conducted an environmental discern to analyse the external and internal environment of the organization. Then I took my vigilance to carry-out a SWOT analysis in-order to identify the strengths, weaknesses, opportunities and holy terrors of the family that would shape the private-enterprise(a) advantage of Ryanair.In sorder to justify my argument I bothow be using strategic management models and theories such as, PESTEL anal ysis,Poters 5 top executives model,Market segmentation analysis,Strategic pigeonholing model, Value ambit analysis etc.. After concluding the analysis I impart deliver my recomm curiosityation for Ryanair.Overview of the Comp bothRyanair get downed in year 1985 with whole 57 mental faculty members and with one 15 seater turboprop mat from the sulfur of east of Ireland to London-Gatwick which carried 5000 passengers on one route. In 1986, inspired from the story of the ships keep bon ton go after the big guys for a slice of the action and end up smashing theor British demeanor trends elevated-pitched f be cartel on the capital of Ireland-London route. The faculty extendd from mere 57 to 120 staff members and the plane carried for about 82,000 passengers on deuce routes. In 1989, the union employed 350 staff and their average maximum passengers increased to 600,000. In 1990-1991, the friendship has 700,000 passengers.However, despite of the increase of passengers, t he partnership is not so good in managing bell that the smart set has lose its money. A in the buff management team is brought in to diversity it out and re-launch as a upset fares or no frills flight path, close to modelling the Southwest Airlines model in the U.S. And in 1994, Ryanair bought its branch Boeing 737 aircraft which carried allplace 1.5 gazillion passengers. In 1995, Ryanair is the biggest passenger carrier on Dublin-London route, the largest Irish flight path on every route being operate and carried 2.25 million passengers in the year.In 1997, the EU air transport deregulation entirelyowed the airline for the counterbalance magazine to pioneer up reinvigorated routes to Continental Europe with everywhere 3 million passengers on 18 routes carried. Ryanair launched receiptss to Stockholm, Oslo, Paris and capital of Belgium and took time out to float Ryanair plc on Dublin and NASDAQ Stock ex modifications. The corporation was awarded as Airline of th e Year in 1999 by the Irish Air Transport Users Committee.In 2000, they inform the launch of 10 brand-new European routes for the summer 2000 after much deliberation and watching others burning money. The company has also jump onto the lucre with the launch of their new online booking range and in just 3 months the site is taking everywhere 50,000 bookings a week. By 2001 there are to a greater extent than 1500 employees working for Ryanair and more than than 10 million passengers are carried to 56 cities in 13 European countries. The company has opened Frankfurt-Hahn in 2002 as their second continental European base and announce a long term partnership with Boeing which allow chat the company acquiring up to 150 new Boeing 737-800 series aircraft all all over an eight year period from 2002-2010.The booking in their web accounts crap increased to 94% which has probably has something to do with opening another 26 routes. In year 2003, the company is characterised by rapid expansion and the start the year by announcing that the company has ordered an join onitional 100 new Boeing 737-800 series aircraft to facilitate the rapid European growth plans. They acquired Buss from KL M in April and re-launched 13 buss routes in May. In February they opened their first base in Italy at Milan-Bergamo and launched their Stockholm base in Sweden with half-dozen new European routes. In all 60 new routes are added throughout 2003 to bring the company a total of 127 routes. By 2004, the company is put forwardd as the most popular airline on the web by Google and they launched their 10thand 11th bases in Rome Ciampino and Barcelona Girona and continue to add more routes to their al fast extensive network. The company has also passed out British Airways to become the UKs favourite airline in United Kingdom and throughout Europe. slender IssuesAlthough the company had encountered different problems, specifically in line with its damage structures, the company had been equal to survive and grow in the marketplace. Ryanair implement different marketing scheme to patch up the company survive in the competition and to be satisfactory to gain competitive localize in the airline market. It is said that the company was regarded recently as the most punctual airline between Dublin and London. And because of the schema of the diligence, Ryanair is now accepted as the second largest airline in United Kingdom and Europes largest depressed-fares airline having a network of over 57 routes in 11 countries and served by a overhaul of 31 Boeing 737-200 and -800 aircraft with over 1,400 staffs and personnel.In order to position itself in the marketplace the company incessantly concent judge on driving own its bes to offer the net fares manageable and remain reachable. In addition, Ryanair offer minimum standards of attend to and very low prices for point-to-point, short haul flights. The goal of Ryanair is to meet the needs oftravellingat th e lowest price. The Critical Success Factors (CSFs) are as follows in airline industry the strategic focus of having the lowest prices, being reliable within the marketplace, comfort and service and frequency.It is noted that low- constitute companies concentrate on this first critical advantage factor by trying to offer the lowest prices. Although Ryanair has root outd extras such as in-flight meals, advanced seat assignment, free drinks and other services, it still prioritises features which remain essential to its target market. Such features include frequent departures, advance reservations, baggage handling and consistent on-time services.(Ryanair vision,mission,goals and objects has been elborated in addendum 01External Environmental AnalysisBy using a PESTEL Analysis we s whoremonger the macro environmental factors that would order the performance of an organization. It is often used to generate market ideas and product ideas. tender Analysis of Ryainair(P)olitical/(L)e galChange of government/policyRyanair amaze been involved in various legal disputes with governments both in this country and the EU regarding their seam deals with aerodromes and airline regulatory bodiesPolitical changes in countries where they fork out routes to (could also be affected by above point)Governments in countries they fly to may support their own flagship carrierLocal councils objecting to noise and new runways being create as in pastGovernments looking to increase tourism susceptibility welcome Ryanair and therefore act in their favour.(E)conomicPotential economic recession, Irelands frugality has already been stated as growing however this may absolutely change.Because of above main customers wouldnt fly for line of descent as would be cost cuttingEnergy and fuel costs are cause of dubietyEconomic change within countries they fly to or would apply to open new routes to, for example war with Iraq has shut off any hope of tourism there for the foreseeable fut ure and other factors such as SARS (OHiggins, 2004) and more recently, Bird Flu.(S)ocialBecause of economic growth at the arcminute it has become normal to fly away for holidays therefore market has spread out and new opportunities for tourism have opened in previously inconsiderate countries.Business trips, although Ryanair do not offer luxury they are maybe more draw and quarterive because little cost to a company fashion they can travel more frequently.Lower costs means attract a wider demographic of consumer(T)echnologicalMain threat to business market is motion picture conferencingTo a lesser extent VOIPOnline check-in, self service check in at airportOHiggins, (2004) discusses that Ryanair actually have a fleet of in general Boeng 737s which are one of the best known and used commercial aircraft. Thus, the company is able to obtain spares and maintenance services on favorable monetary grade thanks to economies of scale, limit costs of staff procreation and offer t ractability in scheduling aircraft and crew assignments(E)nvironmentUsing more environmentally- friendly aircraft. tune represents 2.6 per cent of carbon emission in the EU and airline industry should pay environmental taxes for the contribution they make to global warming.Deploying more effectual aircraft that use less fuel and produce less pollution.Industry AnalysisIndustry can effects improvementability and the competitive positions of members. To identify it we can use,Market SegmentationRyanair lay claim to their market segment by stating they were Europes first no frills airline, www.ryanair.com. Ryanair have make strategic decisions based on increasing their competitive edge, the main one becoming involved in attracting customers at both ends of their routes. Haberberg and Rieple , support this by showing that Ryanairs key origin of revenue from as far back as a go ago has been in enticing passengers from France, Italy and Scandinavia. This has had the advantage of incre asing their market divvy up as well as the added bonus of creating a well recognised brand name across Europe.Competitive AdvantagesTheir main competitors are carriers including easyJet, BMI baby, FlyBe and ThomsonFly all of who try to attract potential customers by emphasizing their low cost tickets. This makes the competition in this market segment fierce as in order to offer the lowest fares, costs must also be kept to a minimum. The well discussed fact that Ryanair possesses a more than approbatory relationship with airport operators has benefited the carrier in a time of industry growth and aggressive pricing. The carrier continues to pay little or no costs despite being the focus of the EU military commission in February 2004, which ruled that Ryanair had been receiving illegal state subsidies for its base airport at publicly-owned Charleroi Airport, OHiggins (2004).Ryanair and the airport in question defended themselves by declaring they paid a fee for every customer and t herefore complied with the EU state aid rules. OHiggins (2004) claims that Michael OLearys main argument was that the state aid rules allow the Wallonian government to stimulate traffic at an unused airport facility in exactly the same way that every private airport reduces its charges it if wishes to grow its business. However, although these decisions by the EU Commission went against Ryanair, it also made them even more of a household name across the EU. The free furtherance was an added bonus, as well as the position Ryanair took, of being almost a savior of the lesser known airports, take them trade and tourism and then being persecuted for it.Porters Five Forces ModelPorters louver forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and th erefore attractiveness of a market. attractive feature in this context refers to the overall industry profitability. Porters five forces model has been in full elaborated more on adjunct 02Threat of substitutes is medium for Ryanair and is basically in the form of land,travel. Barganing power of buyer is high as low budget air travel is almost a commodity right away and carriers are many. Buyer are well informed at prices and deals via internet and other mediums. Barganing power of the suppliers as Ryanair with its large scale holds the power to drop suppliers and demand better basis, especially to cut cost.Threat of new entrants is medium- as enthral to tarvel industry needs special licenses etc as well as high capital investments.Existing Rivalry is high with Ryanair competing against national carriers as well as low budget carriers for their share of market. Overall the industry witch Ryanair in is of medium attractiveness.Strategic Group AnalysisThe mensurate of strateg ic sort out analysis as a tool for understanding industry kinetics and structure. Studing strategic groups, but that the analysis can help a firm in effort to understand the industry in which it competes and to identify its most relevant competitors.Internal Environmental AnalysisResourcesThere are two kind of resources, tangible and intangible again movin further it can be categarise as financial, human, physiological resources.Physical Resiurces and Human Resources has been fully elaborated more on Apendix 03Financial ResourcesIn the low cost structured airline industry Ryanair was the highest profit making airline.(ratioes has been fully elaborated on Appendix 04)Value Chain AnalysisAn analysis of an organisations resources can include its financial, physical, human, quick-witted and reputational resources. In the deployment of these resources, it is also cardinal to understand the competences and core competences of an organization. Porters (1985) value chain concept is an important part of this process.Ryanair sacrosanctly manages and forms relationships with various suppliers e.g. Boeing and food/beverages etc, to mark off goods are received of requirement standards and on time in-order to add value throughout its value chain In addition to this by forming strong relationships with Boeing, they are able to obtain spares and maintenance on favorable terms decrease costs, thus offering lower prices to passengers and safer flights (adding value). In-order to add substantial value for its service by providing low-fares, they closely monitors relationships with airports around Europe, so they proffer subsidies to the airliner in order for them to provide low-fares and seen as adding greater value for customers. Furthermore they have agreed with these airports to provide storage hubs as to when a plane enters these sites its mechanically refueled and beverage/duty free products are reloaded at negotiable prices reducing costs and quicker turnaround ti ming is achieved, thus seen as adding value. For the airliner to provide low-fares to consumers it contracts staff for aircraft handling, ticketing and baggage handling to third parties at competitive rates as well as engine repairs and heavy maintenances of its aircrafts. Thus reduces betoken exposure to employee relationships and disputes reducing costs all through value chain.Additionally, to add greater value for customer, the aircraft staff e.g. pilot, cabin-crew, they holds close relationships, giving the right training making them competent enough to feel confident to answer on flight questions. The airliner has a commission placed for its aircraft crew linked with the gross revenue of duty-paid goods (rewarding mechanisms).Thus close management with aircraft crew ensures good labors turnover reducing the threat of staff being absent for flights, thus seen as adding value for customers.(more on Appendix 05)SWOT Analysis of RyanairFactorWays which factor applies to Ryanair(S) trengths selling strong branding and reputation, aggressive price strategy.Low be imputable to airport operator deals.Reputation as biggest budget airline.Lots of publicity due to OLeary and controversial issues.Air Transport World magazine announced that Ryanair was the most profitable air line in the world.2006 Annual Report, Ryanair desinged itself as the Worlds Favourite Airline.(W)eaknessesCash tied up in purchase of new planes.Entire company based on European low cost airline market.Shock profit warnings may have used silver reserves and weakened fiscal structureRefusal to back down over issues such as EU CommissionPoor employee relations contribute dependance on the CEO Michel O Leary(O)pportunitiesPossible new routes, in the buff planes = larger capacity.Advertising space on website and planes, more revenue supranational Airline colloboratedEU expansion(T)hreatsCompetitors BMI baby, Easyjet, ThomsonFly.Economic recession would mean less disposable income.EU Commission co uld put restrictions on company if do not adhere to state aid rulesSubsitute transpotation equivalent car and high speed trains.Fluctuatioans in fuel pricesConclusionOn the whole Ryanair count to be following a strategy which works for them. They are ostensibly aware of their business environment and understand the importance of monitoring it as they took advantage of the opening in the market when they restyled themselves over a ten dollar bill ago.However they need to be aware that this environment is constantly unfirm and evolving and therefore maintaining a close eye on it and being ready to adapt to any changes should be a fundamental part of their strategy.passportRyanairs aim to keep fares low, mainly by not introducing fuel surcharges. Actions like this, which were of course highly publicised, ensure Ryanair is constantly attracting customers.Part of Ryanairs success is made possible by the fact they are such a lean company, both in the way they operate and the services they offer. OHiggins (2004) claims that when the carrier dropped their commitment services, although they were going to be losing 500,000 of revenue a year, they decreased the turnaround time of their aircraft from 30 minutes to 25 minutes to attract more business travellers who required the punctuality.Innovativeness like this has ensured Ryanairs sustainability and will carry them forward into the future. To recommend any major changes would be to predict how the airline industry will change which ultimately cannot be foreseen. However it has been concluded that the budget airline will continue enjoying its boom, with many passengers now enjoying the short breaks away at a low price. Also the advent of new routes will bring more custom, from both departure points. If there was to be a drop in demand Ryanair would certainly suffer and subtle shifts in their strategy could be appropriate. For example offering drinks vouchers onboard for the customers next Ryanair flight might entic e more people back, or making alliances with hotel groups in order to offer a complete package, rather than just selling advertising space on their website.ReferencesFinlay, Paul (2000), Strategic Management. An Introduction to Business and unified Strategy. Pearson Education. ISBN 0 201 39827 3Haberberg, Adrian Rieple, Alison (2001), The Strategic Management of Organisations. Pearson Education Ltd, ISBN 0 130 21971 1Lynch, Richard (2000), Corporate Strategy 2nd Ed. Pearson Education Ltd, ISBN 0- 273-64303-7McManus, John, Maybe its time for Ryanair to jettison OLeary, Irish Times, 11 August 2003OHiggins, Eleanor, (2004), RyanairOHiggins, Eleanor, (2007), Ryanair the low fares airlinewww.ryanair.comwww.grin.comAppendix 01Company wadRyanairs CEO, Michael OLeary, has a vision of a world where the fare could drop to vigour as local communities would subsidize the airline to bring a fuddled traffic of business people and tourists to their region.Main AimTo firmly draw itself as l ow fares,scheduled passenger airline through continued improvements and spread out offeringsRayanairs Main ObjectiveRyanair will become Europes most profitable lowest cost airline by rolling out the proven low-fare-no-frills service in all markets in which we operate, to the benefit of our passengers, people, and shareholders (Ryanair Report, 1997).Ryanairs other objectivesGOALS AND OBJECTIVES FOR 6 age TILL 2012.To raise the market share within the low cost sector up to 40%.Fleet of 200 airplanes in 2012,To forked the annual passenger transportation to 80 million by 2012.To eliminate the rest of our costly call centersTo base the distribution only on online booking.To quadruple its annual profit up to 1,230 billion in 2012.(www.grin.com/ebook/ryanair.)Appendix 02Suppliersbarganing powerlowCompetitor Rivalry senior highThreat of new entrantsMediumThreat of SubsitutesMediumBuyers barganing powerlowHow poters 5 force analysis effect RyanairAppendix 03Physical ResourcesThe physical resources which Ryanair possess is the 196 Boeing aircrafts. The commodious heart and soul of money being spent by them on their physical resources for the maintainance. They need to keep resources proper and running to make sure that these will not harm their low cost structure. They also have the youngest fleet in whole Europe with a highly fuel good capacity.Human ResourcesHuman resources can be considered one of the most important functions of a business. The vast majority of organisations all employ staff and Ryanair is no exception especially due to their size.When the carrier was established over xx years ago they only had fifty one members of staff on their payroll. (www.ryanair.com.) With this amount of staff they have to ensure that, in order to have operations like call centres and cabin crews running smoothly, they keep their staff happy and motivated. They do this by offering incentives and a share option scheme whichallows employees to participate in the success o f the company overall.Ryanairs technical operations should mainly revolve around their aircraft as this is the core of their business. In February of remainder year they announced an order placed with Boeng for 70 firm aircraft as well as 70 options, www.ryanair.com. This means that between now and 2012 Ryanair will have 225 firm aircraft and options for another 220, allowing them to grow to over 70 million passengers per year. Due to this excellent deal negotiated by the carrier their growing amount of aircraft will not add huge amounts to depreciation costs as they will be depreciated over 23 years.Technical operations have to run smoothly for obvious reasons, if a plane scheduled to make a flight for technical problems, for example, then this will impact on all of Ryanairs operations and functions and also cause disharmony amongst theirpassengers, possibly costing them future ticket salesAppendix 04Financial RatiosNet meshing MarginNet Profit Margin (NPM) tells us how much prof it a company makes for every $1 it generates in revenue. Net profit margin indicates, when compared with GPM, how well a firm is managing its indirect costs in addition to cost of goods sold.Return On AssetsReturn on Assets (ROA) provides a view of how efficient management is at using its assets to generate earnings. ROA for all terzetto primary competitors is virtually the same. Therefore, we can say that all three companies are generating similar revenue per dollar of assets.Current RatioThe current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months arsenal turnoverInventory turnover ratio shows how many times a companys inventory is sold and replaced over a period. This should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. hither are unreasonable Inventory turnover ratios of each company. However, the inventory in the motion picture industry is not so important compared to other manufacturing companies.