The air power industry of Europe has undergone major alterations within the past few old ages, particularly the low budget air hoses which have faced intense competition in the recent yesteryear.
Ryanair has been highly successful in viing within this industry and has become the cost leader, sing uninterrupted cost decreases in its service proviso.Ryanair, founded in 1985 by The Ryan Family, has emerged as one of the most successful and profitable low cost and low menu air hose bearers in Europe. Deriving land from the Deregulation of the air hose industry in Europe in 1991, it has been able to continuously turn through its low cost scheme.At present, the European budget air hose industry is traveling through extremist alterations in growing in viing with the co- rivals.
This would present a major menace to Ryanair ‘s mark of duplicating its growing by 2012. Furthermore, it has besides expanded its service capacity and now faces the state of affairs of understanding how the environment and demand will turn out to be in the hereafter.Therefore, an Environmental Analysis has been in topographic point, conducted by the URJ Management Consultancy to analyse the external environment factors that can impact the public presentation of our company.
The Airline industry and the internal place of Ryanair have besides been critically evaluated to get a valuable penetration into the uncertainness of the environment in which the company has been runing. Analytic tools such as PESTEL, SWOT, VRIO, Porter ‘s five forces, Strategic Groups and Value concatenation analysis have been used for this intent.Based on the environmental analysis, this study provides indispensable recommendations and schemes that are critical for the direction of Ryanair, to follow a competitory advantage in the hereafter.
We, the URJ Management Consultancy are specialized in supplying Strategic Management audience for assorted sectors in the concern universe. As per the petition of the direction of Ryanair, we have been allocated with the undertaking of carry oning a confer withing service for future strategic direction of Ryanair. In our undertaking, we critically conduct a strategic analysis on the External Environment of Ryanair, placing the issues that could originate in the environment together with the industry analysis and the current place of the company.With the expertness that we obtained through the research on the Aviation industry, we would be able to successfully carry on this proposed study. At the terminal of the study, we present to the direction of Ryanair, the possible schemes available for them and urge new enterprises for the senior direction of Ryanair to better scheme execution.
3.1 MACRO ENVIRONMENTAL ANALYSIS
RyanAir presently functions in a concern environment which is characterized by high uncertainness and volatility. Therefore, a immense impact is placed upon by the environing environment on the operation and scheme of Ryan air. Conversely, the schemes and activities carried out by Ryan air besides act upon the environment it operates within. The PESTEL theoretical account is used to analyse the environment in which RyanAir is runing.
1 PESTEL FRAMEWORK
Expansion of the European Union
The formation of EU, has been extremely advantageous for Ryanair, because of the decreased barriers of going around the member states.
Governments of states may back up their ain flagship bearers and neglect chances for Ryanair. The shareholding of the Irish authorities in one of Ryan air ‘s chief rival flights, Aer Lingus is a major menace to Ryanair, since there is a high possibility that the authorities would back up Aer Lingus in its activities and oppose RyanAir ‘s acitivities.
Menace of Terrorist Attacks on the Airplanes
From the calamity of September 11th 2001, increased security steps have been imposed upon the air hose industry and airdromes, to guarantee the safety of the riders. The recent incident of the Nigerian terrorist adolescent seeking to blow up a US North West Airlines flight has increased the concern of possible Terrorist menaces every bit good. These incidents together with the addition in body-checks have reduced the figure of riders going within Europe with the fright of menace to their lives.
Due to the security menace to riders and the flight, the insurance companies have besides significantly increased their Insurance policy costs.
Increased charges at Airports
The authorities of Ireland is increasing charges of their sub-Airports, which increases Ryanair ‘s costs, as it chiefly functions through these sub Airports.
Tourism, a beginning of premier gross for the authorities
The authoritiess of the EU Nations are concerned about hiking touristry in their states. Therefore, they might move in favor of air hoses such as Ryanair which bring in a big volume of foreign circulars ( Edmondson, 2008 )
Rising Fuel Monetary values
During the last few old ages, the fuel monetary values have skyrocketed, doing the cost of flight service provided to riders to lift. Since, Ryanair maps with their low- menus policy, they have to bear these costs, since they have limited ability to reassign the fuel cost hiking to the rider menus.
Volatility in Foreign Currencies
Since there is a high volatility in the exchange rates of the Euro, US Dollar and other currencies, there is a high hazard of foreign income worsening when the US Dollar is deprecating or when the Euro is appreciating.In this instance, Ryanair has to fudge the hazards of the local currency depreciating, while fudging may besides be unprofitable if the local currency depreciates.
Cost film editing policy of Business houses
With the recession in topographic point, concern organisations all over Europe are focussed towards cutting costs. This step makes them cut costs on air travel for concern delegates who normally travel in Business Class of chief watercourse bearers, who in bend will wing in low cost air passages such as Ryanair.
The universe fiscal crisis which struck in 2007 has caused tremendous diminution in the consumer disbursement and their disposable income. This will take to a high impact on travellers cutting down their vacation going ( Thomas, 2004 ) .But, this could besides be good to RyanAir, since the economic downswing can pull riders who travel in high menu air hoses to RyanAir.
Customer Attitude Towards Ryanair
Few client groups are possessed with the attitude that Ryanair is a inexpensive air passage meant for low terminal clients and perceive that the services offered by Ryanair are low in quality.
Criticisms of misbehavior on Ryanair
Unfriendly and self-satisfied staff together with studies of unequal preparation and security steps was reported through the media and web studies.
It made consumers perceive that Ryanair lacked focal point on Business Ethics. Ailments of hapless intervention of clients, disposal and wheelchair charges besides created a negative image on Ryanair.
The precedence that people provide to leisure and touristry has increased and their penchant is for travel and venture throughout the Earth. This lifestyle alteration has created a major chance for Ryanair ( Martin, 2003 ) .
Refusal of Trade brotherhood activities and hapless on the job conditions
There is much concern about RyanAir non leting its pilots to organize trade brotherhoods and ailments on hapless on the job conditions for workers. This has created a bad public image in the European Community.
Growth In Internet Technology
The extremist development in the Internet has changed the manner in which concern is conducted.
Particularly for the Airline industry, where there was a demand for agents to associate the riders with the Airways has been eliminated with the morning of online engagement services. Ryanair is good known for its Online engagement web site ( Largest in Europe ) .
Developments in the Electronic Communications Technology
The chief menace for the air hose industry has been the development of picture conferencing. The necessity for Businessmens to go around the Earth to run into their clients have been eliminated with the usage of picture conferencing installations and VOIP ‘s which help them conference with their clients while being at place ( Martin, 2003 ) .
New Modes of Transportation
Electronic Trains have become a immense popularity over the old ages. It can turn upto the degree of going an indirect rival to RyanAir within the European part. Besides, faster autos and route transit in the hereafter would intend riders to switch from air going.
Web Based Check Immigration and Naturalization Services
Ryan Air presently operates an on-line check-in and ego service cheque in at the airdromes which is a usage of Web engineering to cut down costs.
The lifting consciousness on planetary heating and clime alteration
World leaders have begun to demo much concern on planetary heating and have proved that much of the C emanation is from the air hoses industry. Therefore, high environmental revenue enhancements are charged on the air hose industry.
Besides, Carbon recognition policies have been implemented by Governments ( “ Ryanair and the environment ” , n.d. ) .
Environment Friendly Airlines
In order to cut down the C emanation and fuel ingestion, the demand has arisen for more efficient bearers to cut down the impact on the environment. Though it ‘s a dearly-won step, cost nest eggs could be gained in footings of lower fuel ingestion and decreased environment Taxes. Ryanair late purchased environmental friendly air hoses which reduced its fuel and C emanation by more than 50 % .
Other unexpected Environmental Incidents
Diseases distributing around the Earth, such as the Bird grippe, SARS, Swine Flu together with future diseases that may distribute will do riders avoid going to other states.
Besides, natural environment catastrophes such as the Iceland Volcano eruption which disrupted flights winging to Europe are a possible menace for air hoses ( Thomas, 2004 ) .
The Torahs established for extinguishing monopolistic behaviour have made Ryanair unable to get rivals such as Aer Lingus, because of the charges against it that it is be aftering to extinguish low cost challengers. Besides the allegation over Ryanair on competitory and deceptive advertisement has been scrutinized over the old ages.
New EU Regulations
New EU Regulations have been brought about on restricting Pilot winging hours and compensation for incommodiousness cause to riders. The cost of compensation could travel upto a‚¬200mn, which could take to immense net income cuts for Ryanair.
Legal instance against UK authorities
Ryanair have been involved in assorted legal differences with authoritiess both in this state and the EU sing their concern trades with airdromes and air hose regulative organic structures
Litigation over landing charges
Ryanair was besides accused of an illegal reception of province assistance from publically owned Charlerol Airport.
2 Industry Analysis
3.2.1 Porter ‘s Five Forces
The model developed by Michael Porter is used to analyse the competitory environment in which Ryanair is runing.
The theoretical account of Porter ‘s Five forces for Ryanair is included in Appendix 1.
Menace of New Entrants – Centrist
Menace of entry analyses the menace that new entrants may come in the industry and decrease the returns of established companies ( Hubbard and Beamish, 2008 ) . Since the Airline industry was deregulated in 1997, there was a high potency for new Airlines to come in the industry. However, the low monetary value scheme followed by Ryanair Acts of the Apostless as a barrier to entry, doing it unaffordable for new comers to supply services at that monetary value, particularly because the costs they would incur would transcend the monetary value provided by Ryanair. Besides, because the capital investing required is highly high, most new entrants do non prefer winging around Europe.In the instance of Ryanair, a strong trade name individuality built over the old ages would necessitate any possible new entrant to outlay monolithic sunk costs in advertisement to vie on a flat playing field. Restricted slots which are available at local airdromes and the high hazards involved with the air power industry besides act as barriers to entry for new entrants ( Botten, 2009 ) . It is reported that around 50 Airlines have gone belly-up or acquired over the past few old ages.
Dickering Power of Suppliers – Low
There are merely two aeroplane providers throughout the universe, viz. Boeing and Airbus. The shift costs for RyanAir between these companies are highly high. But it can non be construed that since there are merely two participants in the market, the bargaining power of them are high.
Ryanair has been involved in long term traffics and maintains a really healthy relationship with the chief aeroplane provider, Boeing.The bomber Airports which provide the landing installation to Ryanair have n’t much of a say, because they are dependent on the high gross earned from Ryanair and besides they do n’t hold much alternate manners of air hose income.
In footings of fuel supply, Ryanair has less control over the providers, because the fuel monetary value is controlled by universe trade and the Middle Eastern states who dominate the fuel market.
Dickering Power of Customers – High
There are many determiners to the power possessed by purchasers in the air hose industry. The dickering power of clients seems to be highly high, as the clients are monetary value sensitive and rapidly respond to little monetary value hikings. Even though the costs of Ryanair escalate, they are left with the place of keeping their current low menu, because the monetary value hiking can non be passed on to the clients.The shift costs of clients to other flights are really low and the clients are non really trade name loyal to RyanAir, which gives a higher bargaining power to the clients. For low cost bearers, the shift costs may be found by merely snaping on a challenger ‘s web site.
The fact that most low cost bearers sell their place via the cyberspace means that any monetary value disagreements can be found really easy ( Grant, 2008 ) . Since, the services provided by rivals like EasyJet are non much of a difference to that of Ryanair, allows the clients to easy switch from them.
Menace of Substitute Products – Low
The menace of replacement comes in three chief signifiers to Ryanair which are route, rail and to a lesser extent, the boat service. But, if there are important developments in route transit, rapid vehicles and electronic trains, high competition could break out in the Aviation industry.Rail service would be the greatest menace, as it offers an first-class Continental service around the major metropoliss of Europe that Ryanair fly to. Rail travel has several advantages over air in footings of the fact that they can be more localised and more accessible but one must digest a longer journey besides.
Another, less obvious menace comes in the signifier of planetary communications. As engineering develops there may be less of a demand to physically run into with people, as concern meetings could take topographic point via picture conferencing ( Thompson, 2003 ) .The low shift costs for clients between the options, increase the menace of replacements.
Rivalry among bing Firms – High
Presently, high competition prevails within the Aviation industry with about 50 air hose service suppliers. Although many of them are focussed towards Long Haul flights, there is a specific group of direct rivals who cater to the same monetary value sensitive clients who demand for short draw flights for a lower monetary value. These rivals compete based on monetary value, even though RyanAir is the Price Leader in the industry.
Although there are merely few rivals who compete on monetary value similar to Ryanair, there is high competition when sing the air power industry as a whole. The high issue barriers that exist in selling off the planes and equipments for industry participants make them go on to vie in the market.
3.2.2 Strategic Group Analysis
“ High priced- Long Haul flights merely ”
Air France KLM
PalmAirBritish Air passagesLufthansaCzech AirlinesBody mass index
Monetary value scope
“ Low priced- Short Haul flights merely ”
Short & A ; Long Haul
This Strategic Group Analysis segments the air hose industry based on the scheme of ticket pricing and the distance of the flights of the member air hoses. A strategic group refers to the group of houses in the industry, following the same or similar scheme along the strategic dimensions ( Grant, 2008 ) .
Harmonizing to the categorization of Strategic groups carried out on the participants in the European air power industry, it is clear that the chief direct rivals of Ryanair would be “ the low fare- short draw ” flight suppliers such as Easy Jet, FlyBe, Germanwings and Sterling who cater to the same monetary value sensitive client group.Ryanair need non concentrate much on the Long Haul-high priced air hoses, since they would merely present a minimum menace to Ryanair. But, RyanAir is a menace to the “ Short Haul-high priced Airlines ” during times of economic recession.
There is a possible chance for RyanAir to travel into ‘Long Haul-low cost flight services ‘ every bit good, since there are merely a few rivals supplying long haul services at a lower cost. In the hereafter, if competition intensifies within the bing group, RyanAir could make up one’s mind whether to remain and vie within the same group or re-position itself as a “ long haul-low menu ” air hose and displacement from the bing short draw market to the long draw market.It is imperative to observe that the growing of subsidiary manners of transit available such as Trains and autos which provide short draw services at lower monetary values can go a possible menace to Ryanair in the hereafter ( Donald, 2005 ) .
3.3 Internal Analysis
The resource based position of an organisation argues that the resources and strategic capablenesss that a company possesses enable the company to derive a competitory advantage ( Botten, 2009 )
3.1 Strategic Resource and Capability analysis
Necessary Resources & A ; Capabilities
These are the resources and capablenesss, an air hose company should possess in order to vie in the industry. Since these are necessities that all participants need to have, a competitory advantage could non be generated from them.One of the chief necessary resources that Ryanair holds are the 103 Boeing 737 aircrafts and the 138 aircrafts ordered for the approaching six old ages. The well trained staff, pecuniary resources, strong direction and trade name individuality are besides the necessary resources that Ryanair holds. The necessary capablenesss that Ryanair possesses in order to vie in the market would be the dependability of the service, satisfactory client service, safety and seasonableness of service.
Strategic Resources & A ; Capabilities
The VRIO model is used to place whether the resources and capablenesss that Ryanair possesses are strategic Resources and capablenesss which lead to competitory advantage ( Grant, 2008 ) .
Refer Appendix 3 for the VRIO Framework.Harmonizing to the VRIO analysis, the strategic resources or the nucleus competences that lead Ryanair to a sustainable competitory advantage are the fleet of environmental friendly aero planes, Leadership of Michael O ‘ Leary and the effectual strategic be aftering procedure of the direction of Ryanair.The strategic capablenesss of Ryanair would be the uninterrupted cost decrease, the low menu indictable capableness and the strong relationship with the Airport hubs.
3.3.2 Resource and Capability analysis utilizing Porter ‘s Value concatenation Model
The resource and capableness analysis conducted through the value concatenation analysis has been included in Appendix 4 of this assignment.
3.4 SWOT Analysis
The SWOT analysis provides a situational analysis in footings of how a company is working at the present state of affairs. The SWOT analysis of Ryanair will enable the company to take strategic determinations which aim to bring forth a good tantrum between the company ‘s resource capableness and its external environment ( Thompson, 2001 )The SWOT analysis of Ryanair has been included in Appendix 5.
From the environmental analysis carried out on Ryanair, it is clear that the company is working in a extremely unsure environment. Defensive actions have to be planned to menaces such as authorities intercession and deceptive unfavorable judgments on the company that could distribute around in the community.Based on the Industry analysis, it could be said that Ryanair has to concentrate good on direct rivals ‘ activities and schemes, particularly, the indirect competition that could originate from alternate manners of transit. As the cost leader, they should take the ‘first mover advantage ‘ over its rivals.
It should watch out for extremist monetary value cuts of its direct rivals such as Easyjet and Aer Lingus.From the Internal Analysis, it is recommended that RyanAir builds on its trade name image and the strategic capableness of low cost proviso moreover, together with the usage of Technological promotion and continuously better without tackling the quality of the service.
As per the petition of the direction of Ryanair, URJ Management Consultancy was able to successfully carry on the external, industry and internal environment analysis of Ryanair. The study identified the factors in the external environment that affect the public presentation of Ryanair, such as the Political, Environmental, Social and Technological elements which were possible factors in the success of the company.The industry analysis on the competitory place of Ryanair besides gave valuable penetration into the rivals ‘ activities and schemes. In the study, we analyzed the internal factors of our client on facets such as Strengths, Resources and capablenesss and identified how value for clients was created through the concatenation of activities carried out at Ryanair.
Finally, based on our analysis, we provided possible recommendations on what Ryanair has to put to death towards strategic direction in the hereafter.