Strategic Management Analysis Of Ryanair Essay.

Ryanair is Europe’s favourite airline, carrying 131m p.a. on more than 1,800 daily flights from 86 bases, connecting over 200 destinations in 33 countries on a fleet of over 400 Boeing 737 aircraft, with a further 300 Boeing 737’s on order, which will enable Ryanair to lower fares and grow traffic to 200m p.a. by FY24.

Ryanair has a team of more than 12,000 highly skilled aviation professionals delivering Europe’s No.1 on-time performance, and an industry leading 32 year safety record.

In 2017, Ryanair became the first European airline to have carried over 1 billion customers.

Source: https://www.ryanair.com/gb/en/useful-info/about-ryanair/about-us

Using strategic management models and theories, critically evaluate the strategic situation of Ryanair

To enable Ryanair to keep a competitive advantage, propose a clear and logical strategic plan that will link findings (from task one) to recommendations and achieve the strategic objectives of the organisation.

Task two should include:

You are required to assess the audit findings (from task 1 of this assignment) and from this, develop a robust, justified strategic plan. 

Implementation of the strategic plan and control issues (monitoring performance) must be explored with ongoing critical analysis of the tools of analysis and numerical aspects of decision making as part of the strategic planning process.

Macro Environment Analysis of Ryanair using STEEPLE

For any business to achieve its goals, the management will have to come up with a method in which will be a driving force in their firm to meet the intended objective. The report will analyze using Ryanair airline. Ryanair is Europe’s favorite airline and has been in existence since 1984 offering its customers with low cost fare. It is an Irish airline. The company aims at boosting its sales and increase its competitive advantage. Strategic management is one of the mechanism the management use to achieve its goal (Vellas, 2016, p. 10). The report aims the use of the strategic management theories and models, to critically analyze at demonstrating the strategic planning process of Ryanair firm regarding its Strategic situation.

Ryanair is one of the developing firm in the airline's industry in Europe, which offer cheaper travel fare compared to other airline firms, is faced with economic, technological, political and legal and environmental factor (Viswanathan et al. 2014, p. 20). These factors may be of importance to the firm or a challenge to the firm. The factors determine the success of any firm either directly or indirectly.

 Every business strives to give the best product to their customers. The company with a better reputation on the market can compete with its rivals as it has its loyal customers. To win the loyalty of customers in the airline industry, you have to guarantee the security of customers from attack from disease and terror attacks. The other social factor is how the employee of the companies in the airline industry treat their customers.

Ryanair airline employees treat its customers politely and are also a hospital. The act encourages the customers to opt to travel using Ryanair as the employees are to cater for their needs. Secondly, the Ryanair is one of the airlines that charges low  fare compared to other airlines. It has also enabled Ryanair to have a more significant number of customers thus allowing it to grow in the past few Years.

Due to changes in technology every day, the airline industry has drastically changed.  As a result of this, many business activities are carried out without having to travel. For example, the use of video conferences has discouraged the traveling of business persons who could have opted to move through air transport.  Technological changes have also improved the airline industry by helping the firm in the industry to serve their customers to the best. In the case of Ryanair, it is possible to book for the flight, check the time of departure and price charged using the mobile phone through the internet. The Ryanair uses modern technology whereby it offers services such an entertainment during the flight such as audio song and music. The airline has also included the advanced software and equipment in the planes to cater for the needs of the customers.

The economic state of any given country has an impact on the performance of the airline industry. It is because when the economy of a given country is doing good, it means that the business activities are performing better and the lifestyles of the citizens improve meaning they will able to use air transport as their mode of transportation. Ryanair airport is suited in Europe where the economic state of countries is better compared to other countries in developing countries. It enables the Ryanair airline to have ready customers that will allow the airline to lower its transportation free across Europe. In the case of an economic crisis, small firms such as Ryanair are less affected by the crisis compared to a large firm in the industry.

Social-cultural Factors

There has been increased awareness about the need for conserving our environment mostly in the transport sector. Several bodies have been brought up to help in preserving the environment. Eu emission trading schemes help in protecting the environment from the emission of carbon (IV) oxide. The firm involved in emitting the gas in the air has to support the government in reducing the gas in the atmosphere. As a result, the Ryanair has to reduce the amount of gas its planes emit to conserve the environment.

These are factors that the firms have no control over them. The firm has to work per these factors and strive to meet its objective. The political system of a given country determines its relationship with other nation in the world. The airline industry is affected by the political relationship between its government and other nations (Pereira and Caetano 2015, p. 75). For example, if the government in which the airline comes from has a good relationship with other countries, it will be simpler to trade in this nation. Ryanair firm operates in Europe where many countries are in good terms with each other; this has enabled the Ryanair to grow and become the first airline in Europe to have transported one billion passengers in Europe.

Most airlines tend to be the flagship and are abide by the political policies of their countries where the government oversees the activities of the firm. But this is not the case in Europe the government in this countries do not monopolize the airline industry (Phillips and Moutinho 2014, p. 97). The operation enables small firms such as Ryanair to grow in the industry and become one of the cheapest airlines to board in Europe.

There has been an introduction of IATA which is the international air traffic agency which set rules and regulations to be followed to control flights across the world. The IATA control the issues of airport ownership which every airline has to follow.

These are factors such as morality, behavior, duties integrity and what favors the company. Ethical factors which affect Ryanair insider trading, discrimination of workers, and executive pay. There are different ethical issues that can determine the progress of the company such as sustainability, working conditions, regulatory compliance and many more.

Analysis of the micro environment in Ryanair airline using Porters Five Forces

Ryanair airline has been buying its aircraft and equipment from Boeing, but recently the firm has opted to buy from Comac which is a rival firm of Boeing. It is a result of better aircraft from Comac compared to Boeing as the Comac a Chinese jet manufacturer aircraft has many numbers of seats in the planes, with increased efficiency as a result of energy consumption. It shows how the Ryanair airline has more significant bargaining power compared to its main supplier, Boeing.

 Ryanair customer’s experiences better bargaining power as swapping to another airline is simple without no added expenses.  

 Substitute services and products are a significant threat to any firm. Air transport has little risk regarding a substitute (Nasehi, Allahyari, and Zebardast 2017, p. 5).  The only substitute threat that air transport have is high-speed trains which are not entirely developed in most of the regions.

Technological Factors

Ryanair experiences the threat of substitute from sea transport, railway network, car rental firms, and coach transport. But Ryanair can compete with them as it charges little compared to other means of transportation.

This treat relates to the ease of entering into the industry and being able to compete effectively with the existing firm (Poister 2010, p. 102). The threat of new entrants is minimal for Ryanair due to the significant barrier associated with entry into the airline sector which includes capital requirements, economies of scale and many others. The level of competition makes it difficult for a new firm to join the airline sector.

Ryanair has a more significant advantage over its rival airlines due to its low-fare policy across Europe and a good number of loyal customers across Europe (Porter 1979, p. 103). It is a result of good reputation and customers in Europe as their employee are polite and more than willing to help their customers (Tran et al. 2015, p. 3). It has also expanded short-haul flight destination across Europe to cater the needs of every customer.

Analysis of the internal environment of Ryanair using the McKinsey 7S Framework

The 7-s models are evident in Ryanair where they have been put in practice to enable the firm to achieve its intended goal. It has allowed Ryanair to accomplish its goal of being the cheapest airline in Europe this is evident in the following scenarios.

Strategy - The Ryan air core objective was to be one of the cheapest air hosen in Europe. The firm worked genuinely toward their goal, and eventually, they did achieve their goal by becoming a low budget air hose which gave them a modest advantage over their rivals.

Structure- Every sector in the Ryanair organization reports to the CEO who is Michael O’Leary. It helps in ensuring that there is a small management construction that enables transparency. The management in this form guarantees enhanced performance in the firm, and any query can reach to the top management as first-hand information.

Systems and shared values-  Having experienced and better employees in frontline will maximize the carrying out firm activities. The CEO of Ryanair acts as the role model in the company thus encouraging workers to work better thus raising the revenue of the business.

Staff and skill-  Any firm strives to hire the right employee who will attempt to achieve the business goal (Evans, Stonehouse and Campbell 2012, p. 4). The CEO of Ryanair is one of the staff who works to his best to encourage workers, and he hires the right kind of employee with competency. The skill of the employee is important for the success of any business. The Ryanair ensures that their employees are per the expectation of the customers (Dobbs 2014, p. 33). The employees undergo training to acquire the necessary                                                         A SWOT analysis of Ryanair

Ryanair’s Strength

Low fare

Leading 32 Years safety records.

Ryanair Weakness

Seasonality of earning.

Ryanair’s earning is seasonal with its best month where it makes a massive profit during the summer, and great loses during the winter. It hinders the growth of the company as some of the benefits earned in summer are used to compensate for the loss during the winter seasons.

Economic Factors

Ryanair improved its website by re-designing its website by making it better and attractive. The company also introduced its new mobile application that enable its customers to access the firm services using their mobile phones.

Introduction of New planes

The Ryanair ordered 100 Boeing and the firm has a plan of buying another 100 Boeing 737 MAX200 aircraft which are to be delivered by year 2019 which has more seats compare by the current 77-800 fleet which has 189 seats compared to Boeing 737 MAX200 aircraft which has 197 seats. This will enable the firm meet its goal of lowering its price in the next ten years.

The company has kept a better record as none of its plane has been involved in a serious accident. But there has been criticism from the media that the company only concentrate in the lowering its fare than concentrating in improving its security in reducing the chances of accident occurring.

Ryanair could be grounded to and fro Europe if should be hard Brexit

Challenges facing Ryanair

The Seasonality of earning is a significant weakness or challenge facing the Ryanair Company (Shepherd and Günter 2010, p. 120).

Criticism from the media.

Employees frequent strikes

1. Proposed objectives for Ryanair Airline Company.

Weaknesses or challenges hinder companies from performing well and making an improvement on these weaknesses means that the performance of companies will become better (Karadakis, Kaplanidou, and Karlis 2010, p. 170). Like any other company, Ryanair Company faces different challenges which need to be addressed by the management.

1. To extend the business to west Africa where winter impact is minimal by the end of 2019.
2. By the end of 2019 Ryanair should buy new 100 Boeing 737 max200 aircraft which has more seat in order to help work towards its objective of leading in low-cost fare.
3. The company plans to enact its operating outcomes by use of ancillary services and also focus on development.

For any business to be successful in its operations, it has to come with a strategic choice or procedure that will enable it to carry its business in a different approach to allow it to maximize profit mostly when the business current strategic option is not working per the expectation of its management (Belton 2017, p. 10).

2. The recommended strategic option for Ryanair is to extend business to Africa where there is no winter. Airlines to Africa where the impact of winter is minimal and will enable the company to reduce its losses during winter. Extending to African countries means that the company will be able to make sales all the time. Africa has no winter season and this means that there is no one time that the sales will go down due the effects of climatic changes.

3. Different strategies developed by companies determine the performance of the company. It is important to develop strategies that can favor development and advancement in the existing structures (Baum 2016, p. 10). The company’s main challenge is how to make complement the losses which it undergoes during the winter season (Grant 2017, p. 3). Ryanair therefore has a duty to develop a strategy that can boost its sales during this season hence reducing the losses.

Ryanair Airline Company has a challenge of its earning because it’s seasonal during the summer when it makes a lot of profit but just to be disappointed by huge losses during the winter. Another challenge that the Ryanair faces is its low fare charges that it charges its customers. (Edgell. 2016, p. 9) Sometimes the revenue earned is not enough to carry out its operations successfully. It is therefore evident that charging low prizes for the flights can lead to losses in the company and the only way to reduce such losses is by developing the best strategy which can help in solving this problem (Soteriou, and Coccossis, 2010, p. 192). The following are options that Ryanair can use to maximize their profits:

Environmental Factors

The pay technique is a method that firm uses to be able to raise its revenue. It is possible where the firm is with good terms with its employees who will agree on the firm freeze their salary for a given period (Theobald 2012, p. 3). The Ryanair should freeze their employee pay mostly during the winter where it experiences enormous loses. It will enable the firm to maintains its flight and cater for emergencies during this time. It will allow the Ryanair to have enough revenue during the winter.

This mechanism will enable the Ryanair Company to save revenue to maintain their company and be able to deliver services to its customer effectively. The firm should strive to have more significant power of bargaining compared to its supplier to choose which supplier to work with which will result in buying better planes at a lower price.

Ryanair only has invested in Europe and North Africa which limits its revenue making just in Europe and North Africa. The company should plan to spend more in Africa where there is a ready market, and few airlines companies are involved. It will raise its revenue, and it will aid to curb losses experienced during the winter.  It will enable the company to grow and be able to meet the needs of customers such as improved security and safety of customers by buying better planes (Graham 2016, p. 229).

Action plan on how to implement the above options

i. To free employee pay

It is a severe issue to release employee pay in any organization. For Ryanair to succeed in freeing its employee pay, it has to come up with a way that will be favorable to an employee who in some instances may disagree with the firm decision of freezing their pay (Nagle and Müller 2017, p. 34). The Ryanair should offer start by having a good relationship with its employees.  It is achieved by having a better working condition of workers and having a better form of communication within the organization (Costinot, Rodríguez-Clare, and Werning, 2016, p. 234).  Better common will enable the firm to win the attention of its employees. Theorists argue that motivation is very important for employee’s performance. Paying employees is very important because they will feel motivated and will always work well knowing that they will receive salaries and other benefits after providing their services.  The firm can also offer advance loans to employees during its peaks seasons to ensure that during the off peaks seasons it will have less to pay to the employee (Masanell and Ricart 2010, p. 209). It will enable the firm to have enough resource during the loss-making seasons.

ii To buy cheaper planes

The Ryanair airlines should consider buying cheaper planes to save on its revenue to be able to compete in the market with its rivals. The Ryanair should approach several companies for manufacturing planes and buy from those who are selling cheaper. It can be done through sourcing for different companies which sell aero planes so that the firm can determine the best seller (Grundy 2006, p. 213). According to business analysts, sourcing for the best seller can help the firm to get the best prizes but they will have to look at the quality of planes they buy (Bull 2016, p. 20). It will enable the firm to save much on its revenue during the loss-making seasons mostly during the winter.

Political Factors

iii. To invest in other countries in the world

The Ryanair should try to spend in other countries which ready market with a more significant population which will raise its revenue. The firm should approach different countries to be allowed to have their planes operating in this regions. The Ryanair should work according to the rules and regulations of the state (Magretta 2011, p. 22). The company should develop a plan on how it can venture into other countries so that it can eliminate the problem of having low market for its services at certain times. According to this paper, the company usually have low sales during the winter seasons but it can invest in other countries such as Africa where winter does not exist. In such a way the company will not have to make losses during winter because people will still be consuming the services in Africa.

4. Recommendations on how to monitor the performance of the strategic plan

Ryanair is one of the growing companies in Europe with more possibilities of growing bigger. To achieve growth in the firm, the management eliminate issues facing the company such as poor services to customers and issues to do with management (Swanson and Edgell 2013, p. 34). To eliminate these issues, the Ryanair Company uses different methods to monitor its performance:

Six sigma is a method used by the company to measure the success of different projects. Six Sigma method involves rigorous training of advocates to equip them with expertise and knowledge to increase program success. The process also observes, improves and recognizes current processes. Checklist is another thing that Ryanair may use monitor its performance. The checklist includes things that the company should do to increase its performance and looking at them will allow the company’s manager to monitor performance easily. Then benchmarking can be used to measure the cost, quality of services and products or productivity associated with the set plans. The tool can be useful in monitoring performance and proper recommendations may be given to improve affected areas.

Conclusion

As discussed in this paper there are different factors which affect the business environment. Porter’s five forces describes some of these factors in details and other factors are also described in this paper. The paper also shows that functional management strategies should be in line with the strategic management policies. In such a way the company will be able to work towards a common goal which will enhance the achievement of success. The paper also has a lot of data on the planning methods used in tourism environments meaning that the information can be helpful to businesses in tourism and transportation industries. We have noted that companies like Ryanair face different challenges but they also have strengths they can major on so that they can perform well in the market.

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