Economic Systems In Allocating Resources Effectively Business Essay

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Ryanair is a low cost airlines company in the UK which was established in 1985. In the primary years, there were only 57 staffs and 5000 passengers with only one route to use. They always tried to keep their prices low and give the highest service with this low price for the passengers. Gradually, the business becomes the most popular airlines company in UK according to an online survey conducted by Google. Year by year, their number of passengers and routes are increasing significantly. By the year of 2000-2001, the number of passengers was 10 million; the number of employees was more than 1500 with routes in 56 cities in 13 European countries. Though Ryanair is doing business successfully, they have many problems with their cost structures. They use many marketing strategy for the betterment of their services. Ryanair is considered as the most punctual airline between Dublin and London.

The paper will cover the main purposes of an organization like Ryanair; there will be discussion of pricing policies, government policies, global factors, different market structures etc. with the view of Ryanair.

Task 1

Q1 (a) Purpose of different types of Organizations including Ryanair

There are different types of activities in our business world. Different people have to do different things. Thus, various types of business are run by people. But there are main three types of businesses, like- Public sector organizations, Private sector organizations and Voluntary sector organizations. Their purposes are also different from each other as their sectors are different (Bean, 2009).

The purposes of the public sector organizations:

Public service is the main concern of the public sector organizations; their purpose is to provide the best service at any cost.

Utilize the scarce resources to maximize the country's productivity.

The purposes of the private sector organizations:

Maximize profit


Increase market share

Maximize sales

The purposes of the voluntary sector organizations:

To help different disabled people

Make their life easy

The purposes of Ryanair:

As a private sector organization, the purpose of the Ryanair is very much similar to the purposes of the private companies. Ryanair has some specific purposes:

Giving service at a lower cost

Grab the market share

Provide service to the maximum passengers

Q1 (b) The objectives Ryanair is meeting of its stakeholders

Ryanair always tries to meet the needs and objectives of their firm. The company is now the second largest airlines company in the United Kingdom. They need to satisfy the stakeholders in obtaining their objectives and gaining the performance in executing the strategies (Button, 2004). The main objectives of Ryanair are:

Keeping low fares for the passengers

Enhancing the service for the customers

Keeping punctuality in the boarding and flight

Maintaining low operating cost

Controlling aircraft equipment cost

Increase personnel productivity

Lower customer service cost

Control airport access fees

Using internet as a crucial tool

Enhancement of communication

Focusing on the growth

Q1 (c) Responsibilities of Ryanair and the strategies employed to meet them

The main responsibility of Ryanair is to maintain the main goal of the business which is to provide a no frills service with low fares designed to stimulate demand. At the time, it did not aim to offer the lowest fare on the market. Ryanair has used many strategies to meet the responsibilities they have. Earlier, it was only the cost reduction tendency but now it has converted to cost leadership strategies. For applying these strategies, the managers need to study the market very closely, analyze the competitors' strategies, evaluate the value propositions etc (Johnson et al., 2005)

However, Ryanair used different strategies including-

Cost reduction strategy

Porter's Generic Strategy

Cost leadership strategy

Focus- differentiation strategy

Expansion strategy

Q1 (d) Suitable strategies for Ryanair

In the situation of the Ryanair, TQM (Total Quality Management) can be used as a perfect strategy.

Total Quality Management is a planned procedure for satisfying internal and external customers and suppliers by integrating the business environment, continuous improvement, and come through with advancement, growth, and safeguarding the cycles while changing organizational culture. Furthermore, TQM is an array of management system throughout the organization, geared to ensure that the organization to continuously attain or surpass customer requirements. TQM places strong focus on process measurement and controls as means of continuous improvement (Hayes et al., 2005).

Task 2

Q2 (a) Economic systems in allocating resources effectively

Economic systems are compiled with many processes of organizing and motivating labor, producing, distributing and circulating of the human resources. Productivity is must to use the resources effectively. The method of production and the other things are depended on the different economic systems.

There are three main economic systems which are practiced in the different nations throughout the world. These systems are: Free market system, centrally planned system and mixed market system (Ackley, 2003).

Free market economic system:

In the free market economic system the government intervention is very low. All the economic resources are managed privately. The supply, demand and capability are the three criteria which are decided by the activities regarding to the pricing decisions. Free market system helps the public to make a better choice of purchasing.

Centrally planned economy system:

Here government takes all the decisions in regarding the allocating of the resources and the distribution of the production. In addition, government runs all the internal and external businesses, take all the pricing decisions. The main purpose of the centrally planned economy system is to improve the lifestyle of the mass people.

Mixed economy system:

This is the mixture of all the systems above. The main idea of this system is that both capitalism and socialism are present in this system. Nowadays, majority of the nations are practicing this economic system. Here, both private and public sectors are inspired to make production with the resources available. Many developed countries including USA, UK, Russia and China are practicing this system.

Q2 (b) Impact of fiscal and monetary policy on business organizations

According to Jhingan, monetary policy is the usage of money supply to determining all the expenditures and measures the economic activities in a country. When there is shortage of money supply the government has to re-plan the monetary policy (Jhingan, 2005).

According to Ackley, fiscal policy is used to measure and spend the government expenditures and taxation system to maintain the economic activities of a country (Ackley, 2003).

The impact of the monetary and the fiscal policy in an economy is very much obvious. These impacts can be following:

The frequent expenditure of the government has impact on the economy's output.

The capital expenditure of the government has impact on the output.

The level of economic activities is affected by the tax revenue earnings.

The level of economic activities is also influenced by the money supply.

There is significant impact on the level of output by the collective government expenditure, earnings on tax revenue, public borrowing and money supply.

There are several techniques for fiscal policies. The certain economy must find the appropriate techniques for the betterment of the economy. The techniques can be:





The most appropriate technique in the normal situation for a government is the taxation.

Q2 (c) Evaluation of the impact of competition policy and other regulatory mechanisms on the activities of Ryanair:

When Ryanair was established the giant airways company British Airways was the only popular airline in the UK. And it was the sign of luxury. Ryanair has come into the market for the middle class passengers with a low fare and grab the attraction of a big portion of people. After establishing, they were the only low fare airline company but gradually many others started to enter into this business. The most popular is EasyJet. EasyJet airline is also based on the low fare policy. So, the competition started between them. The authority of Ryanair must think about the competition and consider it seriously. They planned reform their activities again and maintain the quality of the services. As a result, the competition has made impact on the industry and the quality is enhanced day by day (Larch et al., 2009).

Task 3

Q3 (a) How market structures determine the pricing and output decisions of businesses

There are various market structures in the different economies. Therefore, the pricing and the output decisions are made. Generally, pricing and output decisions are interdependent. But in case of perfectly competitive market they can merely influence each other because only one firm is very tiny in the comparison to the whole market to influence the pricing decision. In this situation, the firm has to take the price given and decide the amount it wants to produce (Kotler et al., 2005).

In case of Ryanair, it is a competitive market. Ryanair can change the price level within the limitation because if they raise the price inappropriately they will lose the demand.

Pricing strategy for a newly launched airlines

For a newly launched airlines company, the most appropriate strategy will be the Cost Leadership Strategy. Because of the presence of some luxurious airlines like British Airways, it will be hard to build a position in the customers mind. Nowadays, tourism is very much popular throughout the world. The limited income people also want to roam around the world. So, there is an ample opportunity to grab the market with lower price with best service (Button, 2004).

For example- after emerging the low fare airline the roaming tendency of the people is increased in the last two decades. So, it is a highly potential market.

Q3 (b) Market forces shape organizational responses

Market forces are the interactions between demand and supply in a market. On the other hand, organizational responses are the reactions of any company to a certain economic circumstances. It is very important that how well an organization can react with the different economic conditions because it has a direct impact on the organization. The organization needs to conduct market analysis and research for reacting accordingly and positively. If a company analyzes and researches the market well, it will be able to supply the products according to the quantity demanded and thus the resources will be used appropriately (Boone and Kurtz, 2007).

In the case of Ryanair, the responses to the customers are depended on the market structure strongly. The managers must know the structures and attitudes of the market very well.

Q3 (c) How the business and cultural environments shape the behavior of Ryanair

Business environment depends on the culture practiced within the organization. According to Chorn (2001), there is a strong correlation among the organizational culture, management style and employee behavior in achieving strategic goals. Culture in the organizations is very crucial because the employees get motivation and inspiration from the organizational culture (Artemis and Anwar, 2004).

Ryanair is the company which root was in Irish culture and the influence of Irish culture is still present in the organization. This cultural environment has a great impact in the employees' mind. Ryanair has modified many practices of culture throughout the time. This culture has impact on management style. This culture is known as 'power' culture.

Task 4

Q4 (a) Importance of international trade to UK business organizations including Ryanair

International trade is selling and buying products and services beyond the nation's boundary. In this modern business age, the whole world is interdependent with each other and the interrelation is becoming stronger for international trade. In every country, international trade has a great impact in the internal businesses. In UK, the business organizations are very much related with the outer world. So, international trade has a great importance to the business sector.

In case of Ryanair, as an airline business, it has to move around the continent and will continue throughout the world. So, Ryanair has to meet many international condition of business.

Q4 (b) Impact of global factors on UK organizations including Ryanair

The global factors that can influence the businesses are political, economic, social and technological. These factors have an ample impact over the world businesses. Firstly, the world politics can hamper the business condition if there is unrest in the political sides. Secondly, the world economy can have severe impact on the businesses. If the economic condition is favorable the business is safe but in the moment of crisis, there is question about survival (Ackley, 2003). Thirdly, social impact includes religious considerations, local communities, environment, ethical considerations and cultural issues. Every single element can have impact on business like Ryanair because every business must conduct its activities within the society. Finally, technology plays a great role in the advancement of the businesses throughout the world as well as Ryanair. Without excellent technology the airline business cannot be thought.

Moreover, the global factors have direct impact on the business activities of Ryanair.

Q4 (c) Impact of policies of the European Union on UK business organizations including Ryanair

The European Union set policies which affect the businesses in the UK and also there are policies for the external parties who want to conduct business in UK (Amir-Ahmadi, 2009). Everyone internal or external must obey the rules of the EU and its currency system. The European Money Union (EMU) is a component of the policies. Every business must comply with the currency of the EMU. Similarly, Ryanair has to follow the rules of EU for running their business and transaction and everything. EU expects that all the rules will be followed by the businesses.

Impact of UK monetary policies on businesses in the times of recession

In the times of recession, UK government set the monetary policy as money can be available in a little extent and they are willing to buy products. In the recession period, the unemployment increases, income decreases and customer expenditure decreases. The duty of the UK government is to inspire the consumer to spend and invest. Generally, government set a stimulative fiscal policy, expansionary monetary policy or the combination of both. Stimulative fiscal policy suggests big government expenditure to stimulate the economy. And expansionary monetary policy is normally obtained by the central bank (Lenza et al., 2010)

The policies that government takes for the businesses in the recession are quite adequate. But it can be specified for the businesses for their survival. Government can allocate special expenditure for the businesses and the central bank also can allocate funds for the businesses as lend.

Responsibilities for managing and organizing activities related to this unit

In this unit the main discussion of our paper is the international trade and government policies for the businesses. As a manager of an airline company like Ryanair, the responsibilities can be like following-

Analyze and research the market

Know about the international trade policies

Keep knowledge about the UK monetary policies

Have the ability to take decisions in crucial moments

Have keen eyes over the world culture and factors.


Ryanair is conducting their business in a very competitive environment. They have to keep their eyes open over their competitors and the industry environment for taking perfect decisions. UK government is very much helpful for businesses like Ryanair. Day by day, Ryanair is spreading its network by increasing routes throughout the world. Their aim is to spread out as much as possible.