1. Why has Ryanair been successful thus far?
2. Is Ryanair's strategy sustainable?
3. Would you recommend any changes to Ryanair's approach in changing environmental circumstances?
4. Did the Aer Lingus bid make strategic sense? Explain.
Factors contributing to Ryanair's unprecedented success
The airlines industry has emerged as one of the major ones of the world in the recent times and the industry greatly banks on the need of the individuals to travel from one location to another and that too at a relatively lesser amount of time (Nagle and Müller 2017). However, there are various important factors that these airlines companies need to take into effective consideration like the cost of the fuels, tariff charges and others (Grant 2016). These are some of the major reasons which have compelled many airlines companies of the world to either reduce the area of their operation in the recent times or shut down completely (Grant 2016). However, this is not the case with the Irish airlines company Ryanair which inspite of all these factors have been able to gain a significant amount of success in the recent times.
The company Ryanair was established in the year 1984 and has its headquarters at Dublin, Ireland (Ryanair.com 2018). The company is not only known as the one of the major low-cost airline of the world but at the same time as the first low-cost airline of the world as well (Grant 2017). The concerned company inspite of the hostile airline business market has been able to gain a significant amount of success as well as revenue in the recent times and this is totally represented by the financial performance and also the diverse destination services that it offers to the customers of the present times (Grant 2017). The company in 2010 was ranked as the largest airlines company of the world by International Air Transport Association in terms of the number of customers that it received which was more than 67 million for the same year (Ryanair.com 2018). This was in direct contradiction to the global recession that the world was facing at that particular point of time. For example, at this point of time there was an enhancement in the revenue earned by the company by 2% to €2,988, the company increased the air tariff growth by almost 200% in addition to the 11% growth rate of the ancillary sales offered by the company. The net result of this particular fact was that the gross revenue earned by the company for the 2010 increased from €535 million to €2.8 billion.
There are various factors which have contributed in a significant manner towards the unprecedented success attained by the concerned company. The company at the time of foundation rightly analyzed the airlines business market and came to the conclusion that the only way it could sustain itself in the industry was not to outrival its competitors in terms of quality but in terms of quantity (Caputo and Borbely 2016). It was with this particular objective that the company adopted the concept of cost leadership for the services that they provided to the customers (Gubenko and Ksenofontova 2015). Furthermore, the company at the same time understood the fact that the four major demands of the customers from the airlines industry were: cost effectiveness, no delays, no misplacement of luggage and finally lesser number of cancellations (Gubenko and Ksenofontova 2015). At the same time the company realized the fact that the majority of the customers did not care much about the kind of services or the treatment that they received inside the airplanes as long as the above mentioned four parameters were being met (Klophaus, Conrady and Fichert 2012). It is a reflection of this particular fact that the company removed all the frills as well as special services from their airplanes and just focused on charging the customers as low a price as possible.
Why cost leadership worked for Ryanair
The leadership provided by Michael O’Leary is also another factor which helped the concerned company to gain a significant amount of success and that too within a very short time (Klophaus, Conrady and Fichert 2012). It is significant to note that under his leadership the concerned company in order to overcome the loss that the company would face by reducing the price of the tickets took the help of diverse methods to recover the same like the ancillary sales, merchandise sales, extra charges for reserved seats and various others (Chiu, Liu and Tu 2016). Furthermore, unlike the other companies the organization under discussion did not believed in spending money on promotional activities rather they tried to capitalize on the negative news pieces written about them for the process of promotion (Chiu, Liu and Tu 2016). All these factors have contributed in a significant manner towards the success attained by the company.
The company Ryanair has been able to attain a considerable amount of the kind of strategies that it follows for the process of its business operations in the continent of Europe and also the other nations of the world. The excessive focus of the concerned company on the cost factor has not only enabled it drastically reduce the amount of money that the customers in the earlier times had to pay to travel from one destination to other but at the same time has also helped it reach out to a much larger customer base (DaSilva and Trkman 2014). At the same time it needs to be mentioned that the use of this particular strategy was not just a choice for the concerned organization but at the same time a necessity as well. For example, the airlines industry was already dominated or monopolized by the other business competitors of the company under discussion even before its foundation (Nagle and Müller 2017). In addition to this, the quality of services that they were providing to the customers was way higher than the standard needed for the industry. However, the major drawback of these companies was the fact that the prices that they charged from the customers was very high and at the same time the price of the fuels which they used for the airplanes was also increasing in a substantial manner (Klophaus, Conrady and Fichert 2012). It is significant to note that whereas this particular market situation was seen as a threat by the various airlines companies it was seen as an opportunity by the company under discussion here (Chiu, Liu and Tu 2016). Thus, the company reduced the cost of the tickets in a significant manner and as a matter of fact made it as low as €34.95 to get larger number of customers. However, the concerned company sought to earn the deficit in profit from the sale of various kinds of merchandise within the plane, the reservation of seats, the opportunity to carry extra luggage by paying extra and others. In addition to this, the concerned company, with the objective of becoming the low cost carrier even acquired 300 Boeing 737-800 series aircrafts so that they would be able carry more customers at one time (Chiu, Liu and Tu 2016).
Leadership of Michael O'Leary
There were various unethical practices that were used by the company to achieve the success that it attained. For example, there were complaints from various employees of the company that they were not paid adequate salary, union protests were suppressed in a brutal manner, inappropriate media campaigns and others (Chiu, Liu and Tu 2016). However, on the whole it can said that although some of the practices that the concerned company used were unethical yet the strategies that it used were not only sustainable but at the same time helped it to gain a significant amount of success.
The cost leadership strategy that the company Ryanair followed for the process of their business was not just an option for them but a necessity as well. It was with this particular objective that the concerned company focused on the concept of quantity rather than quality. It is a reflection of this particular fact that the major reason for which the concerned company are the low cost strategy which it follows and also the extremely large number of customers that it transports from one destination to another and the effective use of these strategies have in turn helped the concerned company to attain a significant amount of sustainability within the airlines industry (Creaton 2014). It is thus advisable for the company to improve the quality of the services that it is providing to the customers at the current moment since this is likely to help the concerned company to retain as well as earn the loyalty of the customers.
The company under discussion here thus needs to take into effective consideration the concept of customer experience and try to close the gap between the kind of experience that the customers expect from the company and the actual one which is being provided by the concerned company. This will require the concerned company to work on the four important areas like “cost effectiveness, no delays, no misplacement of luggage and finally lesser number of cancellations”. Furthermore, the improvement of the manner in which the customers are being treated inside the planes would also help in the process of the improvement of the prospects of the concerned company in a significant manner (Mack 2013). In addition to these, the company at the same time needs to resolve the pay issues and the other kinds of issues which it is having currently with the employees who are a part of it. Moreover, the effective use of the concept of CSR is also likely to provide various kinds of benefits to the company like the improvement of market image, positive contribution towards the cause of the planet and the environment and others.
Ryanair's unique business model
The primary factor which motivated the company Ryanair was to reduce the amount of business competition which it faced in the airlines market of the nation of Ireland. Furthermore, Aer Lingus over the years was one of the major competitors of the concerned company and thus it was only natural that the company would wish to mitigate the high level of competition which it faced in the business market (DaSilva and Trkman 2014). Moreover, the acquisition of the Aer Lingus would have at the same time enabled the concerned company to use the resources of the company for the process of its own growth which would have improved the prospects of the concerned company in a significant manner (DaSilva and Trkman 2014). In addition to these, the acquisition of the company Aer Lingus also signified the desire of the company to take into effective consideration the factor of quality as well. It is significant to note that the company Aer Lingus was known for the quality of the services that it provided to the customers whereas the company Ryanarir was known for the large number of customers that it transported from one location to another (Klophaus, Conrady and Fichert 2012). Thus, the acquisition bid can be seen as the effort on the part of the concerned company to merge both the aspects of quality as well as quantity both of which are important from the perspective of the business world.
The company however failed to take into effective consideration the diverse factors that ultimately affected the deal. For example, during the time when the deal was made the world was experiencing global recession and this was adversely affecting the various nations of the world (Gubenko and Ksenofontova 2015). The company without taking into effective consideration this particular factor went ahead with the deal and thereby ended up incurring a loss of €407.2 to €79.7 million. In addition to this, the company at the same time failed to take into effective consideration the basic fact that the two companies have been rivals for many years and thus it would be very difficult for the management teams of the two organizations to work in synchronicity with each other (Caputo and Borbely 2016). Therefore, it can be said that the idea behind the acquisition bid was a very sound one however the company failed into take into effective consideration the practical aspect of the same matter.
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