Strategic planning and strategic direction are non stray events or processs but are ongoing and inter related activities within the organisation ( Viljoen and Dann, 2003, p.16 ) .
The intent of this study is to analyse the external and internal environment of Europe ‘s largest low menus air hose, Ryanair. Ryanair ‘s schemes have been successful therefore far ; nevertheless Ryanair is face with many troubles in its internal and external environment. Ryanair is happening it harder to maintain the menus at a low monetary value due to assorted forces in the environment. Ryanair managed to turn the economic down bend and the background of the European air hose industry into a positive thing for the organisation under the counsel of its CEO Mr Michael O’Leary. Ryanair was modeled after taking US bearer Southwest air hoses. Ryanair introduced the construct of low menus air hoses in Europe. Ryanair is the market leader in the industry and this study consists of how Ryanair can keep its top place in the market and increase its market portion by buying Aer Lingus. This analysis consists of two major constituents.
External environment analysis- the external analysis will be conducted by utilizing a PESTLE analysis to analyse the macro environment. The industry analysis will be conducted utilizing the Porters 5 forces theoretical account.
Internal Environmental analysis – a value concatenation analysis and a VRIO model will be conducted to analyse Ryanair ‘s internal environment.
It is of import to maintain in head that the strategic program is non ever wholly successful and that there is no ‘one best procedure ‘ for constructing scheme in an administration ( Viljoen and Dann, 2003, p.41 ) . Furthermore, both environments will be put into a SWOT analysis in order to place the strengths, failings of the organisation and the chances and menaces that the environment will convey in. The aim of this study is to steer Ryanair and demo them a way in order to run into their organisational aim for the following 5 old ages and at the same clip keeping market portion and lower monetary values. The recommendations will be stated utilizing assorted theoretical accounts and theories discussed in this unit.
2.0 External Environment Analysis
2.1 Macro Environment Analysis
2.1.1 PESTEL Analysis ( Appendix 1 )
Political and Legal, Social, Economic, Environmental factors are factors that straight influence and impact the organisation. These factors can non be controlled by the direction of the organisation so it is of import to analyse the alterations in these factors prior to doing any strategic determinations in the organisation. These factors can be analyzed by carry oning a PESTEL analysis. The PESTEL analysis for Ryanair is as follows.
Political and Legal Factors
New regulations and ordinances on client compensation policies can impact Ryanair ‘s regular operations and add more costs to the organisation. Airport air hose charges are on the rise and this will impact Ryanair by increasing its costs. Ancillary grosss might cut down due to the new compensation policies being introduced. Security steps imposed at all airdromes due to terrorist menaces will be an added disbursal and incommodiousness to Ryanair and its clients. Air traffic will go on to increase with a rate of 7 % if the European political economic system continues to head towards the way it is heading at the minute. Ryanair has no proper trade brotherhoods and they are continually criticized by the trade brotherhoods, authorities and their clients due to misdirecting advertisement.
The promise that fuel surcharges will non be collected from the clients adds more force per unit area to Ryanair because of the fuel monetary values keeps increasing and will maintain increasing in the hereafter. Since the fuel is measured if US dollars, the bead in the US dollar in the currency exchange rate will besides pay a function at Ryanair. As a positive we could state that the fleet of aircrafts that Ryanair has are more fuel efficient and has a larger seating capacity. This will do compensate for the increasing costs.
Many people in Europe are going nevertheless their chief concern is to acquire from A to B. many concern travellers are willing to pass money and travel on low budget air hoses because of the frequent handiness and the fact that air travel is the fastest. Many households and leisure travellers still tend to wing on large air hoses because of the baggage capacity that is allowed during travel. The buying power of the people is good and they are still willing to pass their money and travel by air. Business travel has increased in the EU due to the betterment in the economic system and people are going more. Alternative manners of transits are besides used by the populace. However the air hose industry has speed as a plus point and will ever be in front of the other manners of transit.
With the addition in competition there will be more technological discovery and the air hose industry will be faced with new ways of making things. Environmental concerns and new in flight amusement and cyberspace will be a few illustrations of what the clients will be looking for when doing their determination. Larger aircrafts will hold more infinite for leg room and baggage and will necessitate less fuel due to the new intercrossed engines. Booking of tickets will be all online and this will cut down distribution costs. Since Ryanair already has an online engagement system it is of import that they expand it and assist clients buy e-tickets and besides do it easier for clients to check-in baggage.
Environmental concerns will be a major challenge that Ryanair is confronting and will hold to confront in the hereafter. There are high concerns about the environment and pollution in Europe and the European Commission are enforcing environment revenue enhancement on each and every flight that inters Europe. It is called the EU Emissions Trading System ( EU-ETS ) . These revenue enhancements will do it harder for the air hose industry to maintain their ticket monetary values low. However, Ryanair has a fleet of better fuel consuming and more environmental friendly aircrafts and it will be easier for Ryanair to maintain its monetary values at a lower monetary value than the competition.
2.2 Industry Analysis
2.2.1 Porter ‘s five forces Model ( Appendix 2 )
Understanding the kineticss of rivals within an industry is critical for several grounds. First, it can assist to measure the possible chances for your venture, peculiarly of import if you are come ining this industry as a new participant ( http: //articles.bplans.com/business/porters-five-forces/119 )
Menace of new entry
Many big air hoses are get downing to come in the low menus air hose market because of the high demand for such air hoses. Many people want to acquire from A to B for the cheapest monetary value so they decide on Ryanair. Since this is an industry that ‘s on the rise more and more new and bing air hoses will come in the market. However, Ryanair has the upper manus due to its experience in the low menus air hose industry. When competition from air hoses such as Easyjet, Air Berlin and FlyBE rises Ryanair will hold to alter their schemes one time more due to the competition. Service criterions will increase and costs will increase in clip to come due to many environmental factors discussed above.
Menace of replacements
All manners of transit can be identified as replacements. However, we consider the most of import replacements as the ferry system, Eurostar and the common vehicle. These replacements have their ain advantages and disadvantages. Time, baggage infinite and cost are the nucleus factors that will act upon the traveller. The fastest nevertheless more dearly-won transit method would be through an aeroplane. But luggage infinite is low. Eurostar is the 2nd fastest nevertheless does be more than a auto or a ferry. Ferry system will give the client more infinite nevertheless its clip factor is low. A vehicle will give mean infinite and low cost but yet once more it causes incommodiousness and it is slow. So Ryanair need non worry about excessively many replacements come ining the market other than the Eurostar which is presently viing with the air hose industry
Dickering power of the Supplier
As competition rises and more people start being more environmentally friendly new environmental friendly aircrafts will be required. As fuel monetary values increase the providers are forced to fabricate more environmentally friendly aircrafts and more fuel efficient 1s. New ordinances and policies brought in by the authoritiess do non let the providers to be able to hold much of a bargaining power. So we could state that the providers dickering power is low.
Dickering power of the Customer
Ryanair has the lowest menus and has the largest figure of riders in the universe which means that everyone uses it. This besides means that the clients dickering power is low because of the low monetary value set by Ryanair. The clients are non able to take a higher quality of service because there is none of that kind. If the client wants better service they will hold to pay more in order to have it or take another bearer. This makes it easier for Ryanair and it reduces costs.
Competition among the competition
Since people need to go no affair what there is ever traveling to be a demand for the low menus air hoses in Europe. Ryanair has an advantage chiefly because they are the market leader in Europe and has potency of suppressing universe. Travelers are looking for the cheapest monetary value and the demand is increasing. This will convey new air hoses and make a high competition. Buying over a rival is a manner that Ryanair has been able to increase its market portion and cut down the competition. Taking these facts into consideration we could state that the competition among the competition is high.
3.0 Internal Environment Analysis
3.1 VRIO Framework
“ VRIO model is a good tool to analyze the internal environment of a house. It stands for four inquiries one must inquire about a resource or capableness to find its competitory potency ” these four inquiries are ” . ( Barney and Hesterly 2006 ) the four inquiries are of Value, Rarity, Imitability and Organization and the four inquiries will be applied to Financial, Intangible, Tangible and Human resources.
Ryanairs fiscal backup is high by being able to gain a fiscal modesty of 2 billion Euros and being able to increase their net incomes by 20 % . The ability to hold hard currency in manus is non something that can be imitated by the competition. It ‘s really rare that organisations are able to hold such strong fundss. The grounds for Ryanair to hold such strong fundss are chiefly due to the minimal cost construction they have used.
The fleets of Beong 737 jets are the chief touchable plus that Ryanair acquires. These aircrafts are manufactured to be more environmental friendly and to hold low C emanations. Some rivals have the fundss to buy these jets but can non hold the same fleet which is over 200 jets. Competition will hold to hold big finance modesty in order to buy these aircrafts. Ryanair has managed to hold all 200 of these aeroplanes and holding a short lifetime for the aeroplanes make certain that they are in front of the game.
This is where Ryanair has non been able to execute. Negative trade name image and holding being voted as the least favorable air hose is aching the organisation. Ryanairs direction will hold to take necessary stairss to make trade name consciousness and construct a better trade name name. Rivals have their ain trade name name and have no purpose of copying others. Intangible resources are non managed right at Ryanair.
Ryanair has employees from 25 nationalities. With over 4000 employees in the organisation direction have the chance to planetary and linguistic communication barriers will non be an issue. Many organisations have employees from many nationalities. Imitating could be done because it does non cost rivals high degrees gather employees. Ryanair carry on first-class Human resources by keeping proper rolls for employees and by holding specific hours for pilots.
3.2 Value Chain Analysis ( Appendix 3 )
ExaminationA of theA value chainA of anA enterpriseA toA ascertainA how much and at whichA phase valueA is added to itsA goodsA and/orA services, and how it can be increased to heighten the merchandise distinction. ( http: //www.businessdictionary.com/definition/value-chain-analysis.html )
By the value concatenation analysis the organisation will be able to acknowledge its cardinal point and its chief countries of competitory advantage when it comes to implementing the organisation ‘s schemes. Therefore in the diagram ( appendix ) it is shown how Ryanair could improvize on its competitory advantage every bit good as the current competences they have which will be utile in order to confront the competition from the rival air lines.
Harmonizing to Porter ‘s value concatenation analysis, Ryanair ‘s substructure is in a good province and is in favour of Ryan air and its competitory advantage.
The Human Resources of Ryanair is at a low criterion in order to maintain low disbursals due to low air menus charged from the riders. Therefore this is a failing and will necessitate to be improved in order to derive competitory advantage.
The Technological developments has greatly improved resulting in an addition of buying of tickets and on-line engagements have expanded the client base due to convenience, which is besides a fact taken into competitory advantage.
Procurement degree could be increased if fall ining together with Aer Lingus and price reductions for Boeing planes and holding the ability to be the best budget air hose in Europe. Since gross revenues and selling is done in private with a lesser cost and keeping quality of service.
Inbound logistics which includes preparation of crew, staff, pilots and fuel being supplied at a lower rate consequences in diminishing cost for Ryanair. Operationss are entirely supplying the service of transit and nil else. Outbound logistics provided with trusty and punctual transit service. Selling and Gross saless chiefly through media and promotion and through the website being able to make the mark market efficaciously. Supplying services through restricted resources in order to keep the criterions every bit good as maintain the budget depression.
4.0 SWOT ( Appendix 4 )
SWOT is the abbreviation for strengths, failings, chances, and menaces. These four factors provide a model which an organisation can utilize to carry on a structured analysis of its operations ( hypertext transfer protocol: //management.about.com/cs/generalmanagement/g/swot.htm )
Michael O’Leary obtaining 19.2 % portions of Aer Lingus ensuing in being the dominant stockholder and success for the past old ages.
Ryanair being the largest air hose in whole of Europe is known to be the largest international rider air hose which has initiated and implemented the low cost concern scheme along with it.
The root cause for the enlargement of Ryanair is its fleet of transcending 200 aircraft operating over 1000 paths across Europe, and will go on to spread out its fleet to more than 292 aircraft by the twelvemonth 2012.
Majority of the part of Ryanair ‘s gross is known to be generated through accessory gross through agenda services of non-flight.
Ryanair ‘s ability to bear down the riders the lowest rates compared to competitor air hoses due to non bear downing the fuel surcharge from the riders.
Having fiscal militias of over 2 billion euro ‘s and operates the newest, greenest and quietest fleet of air trade with a life span per aircraft sums to an norm of 2.4 old ages.
In order to suit a big figure of client to supply an effectual web site in order to convey about convenience and efficiency.
The handicapped to a great extent and below the belt charged for particular attention and attending.
Supplying hapless client service and being criticized taking to heavy client dissatisfaction
Limited leg infinite, limited baggage infinite and excess charge for more than one measure of baggage per rider, inefficient staff and crew, flight holds, high insurance costs, upseting in-flight services.
Not punctual in paying Shareholder Dividends.
Rated as the World ‘s least favourite air hose in 2006.
Vacating of Michael O’Leary.
Inconvenience to riders as they do n’t run to some of the chief airdromes situated in the metropolis country.
Misleading advertisement construing that Ryanair being speedy than Eurostar.
Bing the first low menu air hose in Europe.
Fewer oppositions are come ining the industry due to the deregulating of the air industry.
Estimated rider growing for following twelvemonth is 24 million which is from 30 % to 35 % .
Within a period of 4 old ages Ryanair could cut down the short draw flight menus and alternatively increase long haul flights and pull more riders.
Ryanair holding the chance to be the prima European bearer by 2010 raise the market portion by 40 % and minimise cost.
Competition for low cost menu air lines increasing every bit good as different manners of transit which will replace Ryanair, such as Ferry services and Euro star etc.
Insurance costs increasing due to terrorist disturbances and riders choosing to utilize safer manners of transit such as train and coach.
Menaces due T being called as least favourite air line and confronting assorted allegation.
Criticism through populace and media for a rider being charged for utilizing a wheelchair and hapless client service.
Violating the environment due to carbon emanations and the authorities supercharging hence charged 9 Euros for pollution for each return air menu in Europe.
The undermentioned recommendations are proposed in order to keep Ryan air ‘s prima place in the low menu budget air hose industry. These recommendations will assist Ryan to run into its ends set away and to keep and spread out its market portion.
To unite with Aer Lingus because it will be good in the long tally though it wont be in the short tally.
Increase Ryan air ‘s advertisement and publicity runs in order to pull more riders and demoing them the advantages they could derive in comparing to other budget air hoses. With the rise of competition Ryan ‘s air should increase the consciousness of them and offer more quality services in order to derive competitory advantage.
Offer attractive bundles for low rates and increase the leg infinite since more aircraft are being utilised for operations.
Introduce trueness plans to riders who use Ryan air often in order to convey approximately trade name trueness and client satisfaction.
Tax refunds to be provided for flights which would be cancelled which will increase consciousness through word of oral cavity being the strongest signifier of promotion.
Shareholder dividends to be paid duly and present wellness and safety criterions.
Train Ryan air ‘s staff and cabin crew in order to supply better client service in order to maintain satisfied clients who will urge Ryan air to others.
In order to hold efficient and effectual operations Ryan air should spread out a strategic program of spread outing into other countries and markets.
This study has given me the chance to analyse the internal and external environment of Ryan air. The findings have presented Ryan air with more information about the industry that it is be aftering to spread out in. Even though Ryan air is the market leader in the low menus air hose industry it is faced with political, legal, societal, environmental, technological and economic factors that will alter how Ryan air does concern. It will be hard for Ryan air to keep its low menus as disbursals are on the rise.
The menace of new entries to the industry is high and we can see big air hoses come ining the low menus industry due to its high demand and low costs. The client ‘s chief demand is to acquire from A to B rapidly for a low cost. The Eurostar is the closest replacement for the aeroplane and it might do a menace in the hereafter. Customers have less bargaining power because of the low menus that Ryanair has set. Competition will ever be on the rise but will non be able to be a major menace to Ryanair because no other air hose can fit the increasing fleet of Ryan air and no other rival can fit the cost effectual scheme that Ryanair obtains in the close hereafter.
It is of import that Ryanair stays in line with their aims, mission and vision. Ryanair has an advantage due to the fact that they are the market leader in the industry by a big spread.
Ryanair is on the right path on run intoing its ends for the following 5 old ages. The purchasing over of Aer Lingus will spread out its market portion in the low menus air hose industry in Europe. It has the possible to spread out into other continents and be a planetary leader in the air hose industry.
Viljoen J. and Dann S. ( 2003 ) Strategic Management, 4th Edition, Prentice Hall, Malaysia.
Porter ‘s 5 forces, Retrieved on17th April 2010 ;
hypertext transfer protocol: //articles.bplans.com/business/porters-five-forces/119
VRIO Framework, Retrieved on 18th April 2010 ;
Barney and Hesterly 2006
Value Chain Analysis, Retrieved on 21st April 2010 ;
hypertext transfer protocol: //www.businessdictionary.com/definition/value-chain-analysis.html
SWOT Analysis, Retrieved on 23rd April 2010 ;
hypertext transfer protocol: //management.about.com/cs/generalmanagement/g/swot.htm