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Ryanair, founded in 1985, is an Irish low-cost airline. The airline’s head office is based at Dublin Airport whereas its main operational bases are at London Stansted Airport and Dublin Airport. Ryanair operates approximately 300 Boeing 737-800 aircraft on more than 1,100 routes around Morocco and Europe from 46 bases. The airline offers scheduled cargo and passenger services to many destinations among other services as baggage handling, maintenance of punctual arrivals and departures amongst other significant services. The company’s and vision is of being the major low cost passenger carrier in Europe and push on tourism and build an efficient business respectively. Ryanair airline has a responsibility of delivering individuals and tourists to their destination with much satisfaction.

The efficient external environment characterized by stable political and economic environment in the European Union and in the United Kingdom, rapid technological growth and a favourable socio-cultural environment has enabled the company to thrive in the airline industry. Furthermore, the industry environment characterized by low threat of new entrants, low buyer and supplier power has also favored the company greatly. In addition, high competition rivalry and existence of substitutes has enable Ryanair to formulate strategies in order to be attractive in the eyes of the customers. In terms of financial performance, Ryanair has been performing very well since its establishment in 1985. The company’s financial performance has been because of its strengths and core competencies, which has made Ryanair to establish itself in the market. Such factors including low cost airline, better customer service, ensuring safety and quality are some of the features, which has led to the financial growth of the company.

The company’s competitive strategy is built on the provision of services and products at low costs compared to the competitor. Furthermore, the company has become a focuser as it concentrated on a narrow client segment including the United Kingdom and Irish travelers and businesspersons who could not afford key airlines. Moreover, the employment of acquisition and organic growth as methods of development has enabled the company to be successful in the market. In order to ensure a continual growth, the company can consider operating as a high cost carrier in order to compete with larger airlines such as British Airways.

Introduction

Ryanair, founded in 1985, is an Irish low-cost airline (Sascha, 2008). The airline’s head office is based at Dublin Airport whereas its main operational bases are at London Stansted Airport and Dublin Airport (Higgins, 2006). Ryanair operates approximately 300 Boeing 737-800 aircraft on more than 1,100 routes around Morocco and Europe from 46 bases (Sascha, 2008). Ryanair airline has been characterized by the effectiveness of low-cost business model, rapid expansion and an outcome of the year 1997 deregulation of the aviation industry in Europe. The airline operates across the European Union since 1992 when a deregulation of the European airline industry gave right to carriers from one European Union country to operate programmed services to other European Union states. Ryanair has 44 European bases and has significant presence in Italy, Germany, Spain, Poland, and the United Kingdom amongst other European states (Ryanair, 2008). The airlines biggest market is the United Kingdom and it contains Ryanair’s largest base. Its three biggest British bases encompass Liverpool, London-Stansted, and East Midlands airports (Sascha, 2008). The airline offers transport services to its customers at affordable costs.

Products and Services

Ryanair competitive services and products have made the airline to be recognized in business for a long time. The airline offers scheduled cargo and passenger services to many destinations and furthermore, the airline provides lesser standards of service and low priced products for shorter flights (Denholm, 2006). Furthermore, the company offers such services as baggage handling, maintenance of punctual arrivals and departures amongst other significant services (Denholm, 2006). 

Mission

In all airlines, the key mission is to deliver their passengers safety, but Ryanair was able to attract tourists to travel due to their responsibility of making air travel inexpensive, convenient and simple form of transport across the globe. Ryanair airline believes that being a low cost airline will attract and encourage persons to fly more as it will be affordable to all individuals (Sascha, 2008).

Vision

Ryanair has a vision of a globe whereby fare may drop to much lower rates in order to bring the steady traffic of tourists and businesspersons to their regions (Siobhán, 2007). The airlines broader vision is to push on tourism and build an efficient business. It is apparent that, pushing the fares down is not an easy task especially in the airline industry and this indicates a key challenge for the airline to maintain its vision and mission in enhancing tourism.

Corporate Social Responsibility

Ryanair airline has a responsibility of delivering individuals and tourists to their destination with much satisfaction (Siobhán, 2007). The satisfaction of the clients is based both on the efficiency of the air transport and the affordability of tickets.

External Environment

The analysis of external environment will focus on the main factors affecting the level of industry attractiveness and environmental stability for Ryanair airline. This will include a PESTEL and a Porters Five forces analysis. PESTEL is simply a framework that classifies environmental influences as political, economic, social, technological, legal, global, demographic and environmental (Campbell et al., 2002). The application of pestle analysis is useful for business and marketing planning, strategic planning, research reports and product development.

Political

The political environment of Europe has played a significant role in the success of the Ryanair. Studies have proved that the region’s political scene has been very favourable. This is evidenced by the fact that the United Kingdom and states in the European Union have made agreements, which facilitate trade amongst countries particularly in linkage to the aviation sector. As a result of these agreements, Ryanair has been opened up to the world, and in addition, they have offered ready markets for the Ryanair Airline Company (Denholm, 2006).

The success of the company can also be linked to the peaceful environment in the European Union and the United Kingdom. It is evident that, peace has prevailed in the European Union due to political stability. This has not only seen the growth of the airline industry, but also many businesses in the region have succeeded (Denholm, 2006). It is evident that, a stable political environment results to an effective economic environment.

Economic

The European Union has cultivated its economy at a very high speed (booming economy). Evidently, most of the states in the European Union have become much stronger in terms of economic growth which has developed at a considerable rate subsequently affecting individuals overall income. This implies that, many people are earning more income per capita and as a result, they can pay for air transport. This can be linked to the steady growth of the Ryanair in the past years. Markets are modifying quickly and governments in the European Union are restructuring their economic policies in order to suit the airline industry (Siobhán, 2007). The general economic stability, stable currencies, and international competitiveness form a basis for the growth and success of the company (Siobhán, 2004). However, the company can be affected adequately by a depressed economy, making it to change its marketing strategies, which may at times be unfavorable to its success (Capon, 2008).

Social

Evidently, Ryanair operates in a country that is characterized by many employees who often demand for high reimbursement. Comparing states in the European continent (Ireland) with countries in the Asian Pacific (United Arab Emirates), it is evident that there is considerable variation in the costs of labor as the former employs approximately 38% of its operating expenses as workers remuneration whilst the latter (UAE) uses only 8% of its operating expenses for the same (Calder, 2002). This means that the company has to use effective strategies in order to be successful in the market. Such a strategy is the fact that it is a low cost airline thus; it attracts more persons and tourists to travel with it.

Technological

The contemporary society has been characterized by rapid technological growth. This has affected many companies and the airline industry is not an exception. It is apparent that companies should combine new and existing technologies in order to respond to the increasing technological development (Campbell et al., 2002). Furthermore, firms that were employing technology to gain competitive advantage over their rivals must look for other means presently in order to remain successful. The advancement in technology has also affected the company positively. Through the internet and especially the social sites, Ryanair Airline can be able to advertise itself adequately especially to the target customers (Campbell et al., 2002).

Environmental

As part of corporate social responsibility, and in order to gain a good corporate image, Airline companies must adopt strategies to ensure environmental protection. This encompasses adopting better disposal and recycling techniques. Furthermore, the companies can engage in projects, which may include tree planting in order to contribute to environmental sustainability (Campbell et al., 2002).

Porters Five Forces

Threat of New Entrants

This is the degree to which entry barriers to the business exists (Porter, 2008). It is apparent that entering into the airline industry is not a simple task. This is contributed by the high costs of entering into the industry and high government regulations. It is evident that starting an airline company is not similar to buying a bus and putting it in the highway (Butler and Keller, 2000). For this reason, Ryanair is in a better position from facing competition from new market entrants (Butler and Keller, 2000). However, the company should utilize efficient strategies to ensure that it competes effectively with the existing rivals.

Power of Buyers

In the Airline industry, the bargaining power of buyers is very low as there are numerous buyers and all are very significant to the company. Generally, the bargaining power of buyers in the airline industry is affected by existent of homogenous products, high switching costs and large volume of customers (Directory, 2007). Questions may arise among customers as to whether the seats in one particular airline are more comfortable compared to others; evidently, no unless customers are considering luxury liner.

Power of Suppliers

Usually, the bargaining power of suppliers is affected by switching costs, supplier concentration and size, and uniqueness of resources supplied. In the airline industry, the supply business is largely dominated by Airbus and Boeing; as a result, there is very low competition amongst suppliers. In addition, the probability of vertical integration by a supplier is very low.

Availability of Substitutes

It is apparent that maintainable competitive advantage is the key to success for any company. The emergence of a substitute product to the market threatens the company in that it significantly lessens the competitive advantage of that firm. Although the availability of substitutes is high, it however depends with various factors. For instance, for regional airlines, people can opt to use other means such as rail or road transport, however, for international airlines; the threat of substitute is low. Whilst determining this, various factors including money, time, convenience and personal preference in air travel should be considered.

Competitive Rivalry

This measures competition levels amongst the existing firms. It is apparent that, when there is high competition in a certain industry, firms in that industry enjoys low returns due to the high competition costs (Campbell et al, 2002). This can be very unfavorable for the firms especially during the times of economic instability. Evidently, there is high competition in the airline industry. Ryanair has to compete with other major players in the industry and this means that companies have to use effective strategies in order to overcome such a competition and remain successful in the market (Campbell et al., 2002).

Company Financial Performance

In terms of financial performance, Ryanair has been performing very well since its establishment in 1985. The company’s financial performance has been as a result of its strengths and core competencies which has made Ryanair to establish itself in the market. Such factors including low cost airline, better customer service, ensuring safety and quality are some of the features, which has led to the financial growth of the company (Ruddock, 2007). Furthermore, formulation of better strategies, company’s competitive advantage and the use of an effective business model has also made the company to thrive in the market and emerge successful. In the recent years, Ryanair records an annual growth of 25 percent every year and has a mission of being the major low cost passenger carrier in Europe. The company’s net profit however, dropped by 27 percent in the last quarter of 2007. The table below shows a two-year result of Ryanair.

Full Year Results

Mar 31, 2009

Mar 31, 2010

% Change

Passengers

     58.6m

    66.5m

 +14%

Revenue

      €2,942m

 €2,988m

   +2%

Adjusted Profit/(Loss) after Tax (Note 1)

    €105m

             €319m

+204%

Adjusted Basic EPS(euro cent)(Note 1)

        7.10     

               21.59

+204%

The use of ratios such as sales, operating profit, liquidity, solvency and gearing can offer a meaningful explanation of a company financial performance and financial strength, especially in comparison with other companies in the same industry.

Competitive Strategy

Competitive strategy of Ryanair will be analyzed based on the porter’s generic strategy framework and resource based framework. There are various generic strategies that can be employed by businesses including differentiation, cost leadership, integrated cost differentiation/leadership, and focused cost leadership (Smith, 2002). These generic strategies assist firms in establishing and exploiting a competitive advantage. Ryanair uses differentiation strategy, cost leadership and focused differentiation. Cost leadership strategy is founded upon a company managing and organizing its value adding activities to make sure that it is the lowest cost producer or offer of a product or service within an industry. Differentiation strategy on the other hand is founded upon persuading clients that the company’s products or services are superior compared to those of the competitors.

The value added by the exclusivity of the service or product may permit the firm to charge a premium price for it (Capon, 2008).  Alternatively, focus differentiation strategy is designed for a market segment for a service instead for many markets or the entire market. Ryanair makes use of these three generic strategies. For instance, the airline provides its services and products at low costs compared to the competitor. Alternatively, the company has become a focuser as it concentrated on a narrow client segment including the United Kingdom and Irish travelers and businesspersons who could not afford key airlines.

In terms of resource based, Ryanair has employed expansion strategy, which has enabled it to position itself in the market. Since it began operating, Ryanair has been launching new routes. Furthermore, its acquisition of Buzz in 2003 enabled the company to get instant access to eleven novel French regional airports and furthermore, made Ryanair to be the leading airline operating at London Stansted Airport (Siobhán, 2004).

Strategic Direction of Development

Strategic direction can be delineated as a course of actions undertaken by a company, which results to the attainment of goals and objectives of an organization strategy. Ryanair airline follows various strategic directions in order to remain successful in the market. Some of these strategic directions include low fares, customer service, focused criteria for growth and commitment to quality maintenance and safety (Ruddock, 2007).

Ansoff’s Growth Vector

Low fares

  • Aimed at stimulating demand especially from fare-conscious business and leisure travelers.
  • Operating on one-way pricing policy.

 

 

Customer service

  • Delivering excellent customer service performance.
  • Operating from uncongested airports and focusing on execution of services.

Focused criteria for growth

  • Establishing its effectiveness in the United Kingdom market
  • Instigating more routes from the United Kingdom to other locations served by higher fare carriers
  • Starting novel domestic routes in the European Union states
  • Creating more novel bases in Europe.

 

Commitment to quality maintenance and safety

  • Employing and training Ryanair’s cabin crews, pilots and maintenance staffs.
  • Following the European airline industry standards for maintenance.

It is apparent that for the company to remain successful in the market, it has to follow the above named strategies. The use of low fares is aimed at stimulating demand especially from fare-conscious business and leisure travelers (Siobhán, 2007). Furthermore, ensuring better customer service and the company’s commitment to quality maintenance and safety will allow Ryanair to establish itself in the market place. Moreover, this offers the company a competitive advantage over its competitors. In general, these three strategic directions lead to the company’s strategy of Focused criteria for growth. With a favourable external environment, the company can be able to establish itself in the United Kingdom and European market, which will further its growth resulting to better company performance. In addition, the possibility of the competitor copying the company’s strategies will also be limited; as this is a major challenge, which Ryanair has experienced.

Methods of Development

There are various methods of development that can be used by companies in order to grow. Such methods include strategic alliances, mergers/acquisitions, and organic growth. Currently, Ryanair has considered acquisitions and organic growth with an aim of growing. Ryanair has focused criteria for growth. The company believes that one way of attaining growth is through considering probable acquisitions available. In 2003, the company acquired Buzz. Its acquisition of Buzz in 2003 enabled the company to get instant access to eleven novel French regional airports and furthermore, made Ryanair to be the leading airline operating at London Stansted Airport (Siobhán, 2004). This, despite improving the company’s profitability and widening its market, it was a way of eliminating a competitor in the market thus; Ryanair would persist to dominate the market (Ruddock, 2007). Acquisition is of great benefit as the company is already in existence, and well known to the customers. However, in case a company has a bad reputation, the company acquiring it may suffer the consequences. Nevertheless, this was not the case for Ryanair and although Buzz had two structural issues including expensive congested airports and expensive fleet, the company deemed that those problems could be solved within 12 months.

Another method of development employed by Ryanair is organic growth. The company has already preferred organic growth since its establishment. Through the employment of various strategies and the company’s core competencies, Ryanair has been able to experience a rapid growth and this is evidenced by the increment in passenger numbers from 5000 passengers in 1985 to 73,553,580 passengers in 2010. Ryanair also employs it strengths in order to grow. The fact that it is a low cost carrier, focuses on better customer service, operates on a one way pricing policy and ensures the maintenance of quality and safety have helped the company to grow rapidly over the past years (Sacha, 2008). The use of organic growth as a method of development is very beneficial compared to other methods. This is evidenced by the fact that a company employs its strengths and core competencies and formulates better strategies, which will ensure continuous growth (Siobhán, 2007). 

Conclusions and Recommendations

Since its establishment, Ryanair has experienced a rapid growth both in the number of passengers and in terms of revenues and profitability. Ryanair airline follows various strategic directions in order to remain successful in the market. Some of these strategic directions include low fares, customer service, focused criteria for growth and commitment to quality maintenance and safety.  This has given the company a competitive advantage and thus has been able to remain competitive in the market.

In future, the company may consider operating as a high cost airline as this will give it an opportunity to compete with other larger airlines such as the British Airways. The company can emerge successful as long as it applies effective marketing and business strategies and be able to compete efficiently in the market. Furthermore, Ryanair may consider establishing itself in other countries outside the European continent, as this will also widen its geographical market. By doing this, the firms’ profitability level will drastically increase, thus enhancing its short and long-term sustainability in these regions. It is evident that, most successful firms are those, which adopt an international dimension and choose to diversify in other regions across the world. This will also save and protect the company incase of any instability or disaster in one region.

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