Introduction
Business environment is define as all those factors that affect a company’s operations, and also includes customers, competitors, stakeholders, suppliers, industry trends, regulations, other government activities, social and economic factors and technological developments or shortly as the external forces influencing the business decisions. No any organisation exists in a vacuum.
Ryan Air is a airlines company which is set up by Ryan family of Ireland with a share capital of just £1 and staff of 25 in 1985. Ryan air is the World’s favourite airline with 41 bases and 1100+ low fare routes across 26 countries, connecting 153 destinations. Ryan air operates a fleet of 232 new Boeing 737-800 aircraft with firm orders for a further 82 new aircraft (before taking account of planned disposals), which will be delivered over the next 2.5 years. Ryan air currently has a team of more than 7,000 people and expects to carry approximately 73 million passengers in fiscal year 2010/11. It is the Europe’s first and largest low fare airlines.
“We make money with falling air fares. And we make stinking piles of money with rising air fares…it’s scary”- Michael O’Leary, chief executive of Ryan air (in year 2000). Ryan Air is low cost airlines which has make its base by hitting 1st time in its publicity material by the price and that was very clearly core of its business strategy. Ryan Air does one thing and one thing only, but in doing so sets an almost buccaneering tone, readily taking on authorities such as EU over competition policy and the British Airport Authorities over charging practices.
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Answer number 1
Every company has its vision, mission, goals, philosophy to be in the top of the business or simply we can also say to make a profit as much as it can.
Vision is define as a image of the future that an organization is aiming to achieve. Ryan Air vision is to committed to ensure that all consumers to take advantage of it’s low fares. Their policy is to increase the number of vision impaired customers able to travel with them. Mission is define as a company’s function, markets and competitive advantages; a short written statement of our business goals and philosophy. A Ryan Air mission statement defines what an organisation is, why it exists, its reason for being. The company believes that any worthwhile passenger service commitment must involve a commitment on both pricing and punctuality, that’s why Ryan Air is committed to publishing Customer Service Statics each month which confirm that Ryan Air position for Customer Service is in number 1 with unbeatable prices and punctuality. Its mission is based on the betterment of the customer. Company offer low fares at all time and on all route is also one of the mission of the company.
Simply Ryan Air philosophy is just giving customer a service and made huge profit i.e. “smile, charge and serve”. They don’t care about the passenger’s baggage, security, health, food, water and cleanliness of a plane. Their theme is passengers pay money, they buy a tickets and Ryan Air doesn’t care. Ryan Air fair is cheaper although their dream is to made higher profit. Ryan Air does not care about its cabin crew and just takes the most they possibly can squeeze out of them. After a twelve hour day without a break, they don’t have the energy to be nice to passengers. Ryan Air start valuing what they do because without them passengers could not fly. Ryan Air able to offer cheaper flights and to obtain a great profit margin.
Ryan air future plan is to cut costs in no window blinds, no reclining seats, leather seats, Velcro headrests, carry-on luggage. Because of low-cost carrier market expansion, it will probably slow significantly in the next years as new opportunities become more limited. When growth slows, labour costs will continue to rise for the low-cost carriers, in all likelihood reducing the advantage they once enjoyed. Ryan Air’s domination in the low-price market segment will continue but to become the biggest player it will have to expand into more popular routes which will entail better service and good customer relations. Competitions with other established modes of transport in the low price segment will intensify in certain regions.
Rapid growth of secondary airports will definitely increase noise pollution and carbon emissions in remote areas which is an environmental hazard. Hence Ryanair has to combat it with pro-nature conservation moves. It is already the leader in the lower price segment, but would have to cater to the rapidly growing value segment for total domination in the economy segment. The value segment constitute travelers interested to optimize time, comfort and price. Competitors like easyJet, Air Berlin, Basic Air, BMIBaby are catering to the Value market segment and have established slots at some primary airports and providing basic cost effective services. Ryanair’s showing in stock markets and also facilitate quicker expansion into value-oriented market segments without comprising its top position in the low-price segment.
Stakeholders are the people who are affected by or can affect the activities of the firm. There are three types of stakeholders – internal, connected and external. Internal stakeholders are those who have formal, official, or contractual relationship with the organization. Simply we can say internal stakeholders are those people who are day to day connected with the company. The connected stakeholders are those person who are sometime connected within the company. The external stakeholders are other societal groups who are affected by the activities of the firm. And in another words person who are not directly connected with the company until s/he do some mistake. This section identifies the major stakeholders of Ryan Air and how they are important to the firm.
The stakeholders of Ryan Air are:
Shareholders
Shareholders are person who have shares in the company. The shareholders participate in distribution of additional stock offerings, profits, assets on liquidation, inspection of company books, election of board of directors and other rights established in the contract with the firm.
Employees
Employees are believed to be a source of competitive advantage. The employees’ skills, knowledge and abilities give contribution in the success of the organization. In return, the employees expect economic, social and psychological satisfaction in the place of employment. The employees expect to share in extreme benefits, freedom to join union and participate in collective bargaining, individual freedom in offering up their services through an employment contract.
Customers
The customers are the source of the firm’s earnings. The customers purchase the firm’s products and services in exchange with satisfaction of needs, wants and requirements.
Suppliers
The suppliers are part of the firm’s value chain. In exchange with the suppliers products, services or expertise the firm is expected to be a source of business and facilitate a professional relationship in contracting for, purchasing, and receiving goods and services.
Competitors
competitors are also important stakeholders. They expect the company to observe the norms of competitive conduct established by society and industry.
Governments
the national government and other governmental departments are important stakeholders that have direct impact on the firm’s strategies. The government expect the firm to pay taxes, to adhere to the letter and intent of public policy dealing with the requirements of fair and free competition; discharge of legal obligations.
Local Communities
the local communities are also important stakeholders. The firm needs to participate in community affairs and to provide regular employment and support to the local government.
Answer 2
Internal environment
As shown in the figure, Ryan air also have internal and external factors which affect in the progress or the developing of the company. Internal are those factors which are a position audit, or situational audit as it is sometimes called, is the global term used to describe an analysis of the internal environment of an organisation. it is a techniques which are brought together to give a total picture of the organisation and its capabilities. A market leader Ryan air in the intra-European low-cost airline where market is closed-packed with Easyjet and also followed by Air Berlin. Its main strength is the big financial reserves. The saving and the airline’s profitability enable it to survive in a rainy day( crisis) or fight in price flights. In this regard Ryan air has kept its low cost because of outsourcing services to the operators. Ryan air’s main target customers are people within Europe who mostly travel for private purpose. An increasing part of the customers purchase their flight tickets either on the airline′s website on their own rather than they authorize travel agency to book for them.
External environment
Because of European political situation and the economy continuity to grow, air traffic might increase dramatically with the high rate some while the purchasing power if the Ryan air is good and the people want to spend their money. Furthermore, people become more considerable in the price function in their expenditure, which increases competition in the market and as a cost effective operator profits from, Ryan air is over there. Beside the growing demand for air travel, falling ticket prices and an increasing customer acceptance for flying create more demand for air travel.
I would like to use PEST analysis to analyze macro environment. PEST analysis stands as political, economic, social and technical factors that made Ryan air airlines. Economic conditions affect Ryan air; it might be difficult or easy to be successful and profitable at any time because it affects cost and capital availability of demand. The economic conditions influence both the timing and relative success of particular strategies. While economic conditions and government policy are closely related, they both influence a number of other environmental forces that can affect organizations. Organizations should be aware of demographics changes as the structure of the population by ages, prosperity, regions, numbers working and so on can have an important bearing on demand as a whole and on demand for particular products and services. Technology is widely recognised by various literatures on strategic management as part of the organization and the industry part of the model as it is used for the creation of competitive advantage. Technology external to the industry can also be captures and used, and this again can be influenced by government support and encouragement. New technology could provide a useful input, in both manufacturing and service industries.
SWOT analysis of Ryan air
Answer 3
In a Ryan air, the market forces which affect the company are customer responsiveness, information demand and cost pressure. So many factors are challenging the nature which include rivals, economics of industries, new entrants, bargaining power of customer and suppliers and the threat of substitute services and its product. Ryan air is to improve the quality of care they can provide by giving other performance pressures they face. The wider variety of global competitors continue to flood the marketplace, the pressures to remain cost-competitive will place even greater demands on organizations and their employees to work smarter and faster.
The above figure indicate the prospect position to state the terms under which customer purchase Ryan’s product or service and there is also a high probability of new competition or substitute products then it will be difficult to be profitable. As either or both of these forces is weakened, the company’s potentiality for profitability increases.
4 factual examples of market forces of Ryan air are as follow:
- Most major airlines pay for the staff to be trained. Ryan air cabin crew has to pay £1400 each for privilege. Crew member also have to pay £25 per month to wear the uniform. By the end of the day, sometimes the toilets can hum a bit. And then aircraft cleanliness, cabin interior 78% and toilets 79 down to 71% even worse. The aircraft of Ryan air should be supposed to be underground for longer than 25 minutes between flight. In the 25 minutes turnaround is to not have aircraft cleaned in between but the 25 minutes turnaround is done for a reason it’s to keep the planes moving, if a planes sitting on the ground it’s not making money.
- In February 2004 the EC claimed the Ryanair had some illegal state aid from the Wallool Regional government in connection with its establishment of a low cost base at Brussels. Ryan appealed to the EC but the commission ignored the agreement of Ryanair’s private airports, thereby placing Charleroi at a competitive disadvantage. By the Walloon regional government requested the Ryanair to repay what the Commission had deemed illegal state aid. So as the Ryanair agreed to place the disputed funds in a joint escrow account pending the outcome of the appeal. As a result Ryanair has added planes and launched new routes from Charleroi. By following the Commission’s decision in Charleroi, other airlines have brought similar protest against Ryanair to block competition. Ryanair believes that they are the same as its agreements with privately owned airports, and therefore do not constitute state aid.
- In 2005 when the price of fuel is rising drastically by $50 per barrel, Ryan company started to take heavy treasury. But at the end of the financial year, despite being fully hedged, Ryanair’s fuel bill increased by 59% and Ryan declared they could go into 2006-7 unhedged. At the end of that financial year, despite being almost fully hedged, Ryanair’s fuel bill had still increased by 59% and O’Leary declared that he would go into 2006-7 unhedged. But the prices fly to $70 per barrel. Ryanair rush to lock in price at up to $74 a barrel. The oil prices duly fly through $70 a barrel. Ryanair rushed to lock in prices at $74 a barrel. But an oil price back to $50. At the end of last winter with an oil price approach $100 and look like it must be peaking sometime soon, Ryanair decided hedging again from April to September 2008. And finally, as a history: Ryanair’s oil hit $147 a barrel in July and $125 over 6 month makes profits during its traditionally busiest and most lucrative period. With profit margins cratering, they decided to buy September’s kerosene delivery at $129 a barrel and locked in October, November and December at $124 a barrel. The oil price exited September at $100 a barrel, and the year ended having gone below $40.
- In 2008, theRyanair plane was in the way of BudapesttoDublin, certainly forced to landing in Frankfurt after a man started choking and complained of a swollen neck on night . Medics took the man to hospital and the flight was grounded when doctors said the oil had contaminated the plane’s air conditioning system. So the rest passenger will transferred to another plane. Ryanair refused by saying somebody have put the opened jar in a compartment and leaked up in the clean aircraft. When the passenger gets ill onboard Ryan always divert to the nearest airport by asking the passenger from health and safety and the cabin crew and pilot. Domokos Szollar, head of Budapest Airport Zrt claimed Ryanair asking what make the company to serve the customer if someone carry dangerous goods which make sure they are not making sure on customer carrying safety.
ANSWER 4(a)
It is very concerned about the importance of international trade and global markets on Ryan Air. Here management promotion include system in a managers to international posts. The managers requirements is to ensure that it can learn new languages, adapt to succession and develop specialised decision making skills. Corporate governance explain and provide understanding of the relevance of maintaining good business relationship especially among global corporation where culture orientation and political standpoint provide distinction among participating bodies. The concept of corporate governance enhances the confidence of foreign investors, thus promoting competitive market play and improving economic condition. Considering the high level of population density and the continuous enlargement of the EU, the market of the airline industry is quite large and with a high potential to grow. In 1999, the growth rate in the European market is one and a half times that in the American market and there are still several intra-European international routes with potential for new operators. The predominant airlines in the market are the big national carriers, like Air France, British Airways and Lufthansa, but there are already many new budget airlines with Ryanair and easyJet as the famous ones, but also Virgin Express, Debonair, KLMuk, Go and Air One. However the competitive rivalry between those two groups stays moderate, while it is quite high within each group, which will be explained more detailed later applying Porter′s Five Forces model.
Furthermore there are differences between the customers of the two groups, the mature airlines and the budget airlines, which also explains the rather low rivalry between them. The low fares airlines concentrate predominantly on budget conscious leisure and business travellers who are not customers of the more expensive airlines because they have otherwise used alternative forms of transportation or might not have travelled at all. In contrast national carriers′ customers are rather interested in "frills" which are not offered by the budget airlines like in-flight meals, advance seat assignment, cargo services and other amenities.
4(b)
In the airline industry, flights are considered as products which seem to be quite differentiated between mature and budget airlines, but within the budget sector of the "no frills" airlines, the products are more homogeneous concerning the services the passenger buys, and only differ in prices.
That development in the European airline industry was only possible because of the deregulation and the liberalisation policy of the EU started in 1997. But in 1999, the regulatory influences of the EU can still be seen in many sectors of the industry. Getting and keeping the air operator licence is not easy and requires complying with all EU regulations concerning especially the maintenance of the used aircrafts, hushkitting, and continuous air traffic controls. Furthermore, EU regulatory authority interdicts ground handling monopolies at European airports and forbids the airports to offer differential deals to different airline operators. And finally the abolition of duty free shopping within the European Union from July 1999 will cause heavy losses for all airlines, losses of revenue and of incentive to flight attendance, but also losses due to increased landing charges announced by the airports.
Additional to the restrictions of the EU, the European airline industry suffers from specific problems like the relatively shorter distances on intra-European routes, comparing to the USA, which causes higher expenses on a per "Available Seat Mile" basis. Moreover the airports and skies of Europe are more congested than in the USA, which forces new entrants into smaller airports far away from large metropolitan cities.
But in spite of all these problems, the European airline industry seems to be very profitable with regard on the positive, relatively high profits earned by the mature airlines, like British Airways, as well as by budget airlines, like Ryanair.1
In order to escape the competition and to improve their profitability, national carriers tend to form alliances among themselves or with smaller airlines, even with budget airlines. According to the case study, by 2010, the airline industry could consist of a maximum of four groupings of national airlines. This would change, of course, the competitive situation, which looks as follows in 1999, applying Porter′s Five Forces Framework.
As it has already been mentioned above, the rivalry between existing mature airlines and budget airlines is low because of quite different flight offers and different customers, but also because established airlines concentrate on primary congested airports while budget airlines operate on secondary airports. However the competition within the budget sector is very high because of quite similar "no frills" flights only sometimes different in price.
Conclusions
Ryanair is the only airline that has been completely focusing on Low Price segment and with the creation of this segment has shown staggering growth rates of 30% and more. Combined with an excellently executed low cost business model and high profitability, Ryanair will emerge as one of the clear winners from future market consolidations.
The key challenge for Ryanair in the next couple of years therefore is developing a successful strategy for not only winning the war in the Low Price segment but gaining a solid position in the Value segment and in new non-European markets.
“If vision is ill formed, mission statements will be vague and goal achievement hard to measure.”
Management and organizational behaviour laurie j. Mullins. Edexcel 7th edition)