Following the Strategic Planning of Ryanair
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Published: Mon, 5 Dec 2016
Ryanair is an Irish airline competing in the fairly recent development of the European budget airline industry. Ryanair was founded in 1985 by Tony Ryan. They started their flights from Waterford and Dublin to London. Michael O’Leary is the current chief executive of the company who was the financial controller when company started their business. They are one of the key players within the market and perhaps the most profitable.
Europe’s leading low-fares scheduled passenger airline.
Ryanair lay claim to their market segment by stating they were ‘Europe’s first
no frills airline'( www.ryanair.com). Ryanair have made strategic decisions based on
increasing their competitive edge, the main one becoming involved in attracting
customers at both ends of their routes. Most experts support this by showing that Ryanair key source of revenue from as far back as a decade ago has been in enticing passengers from France, Italy and Scandinavia. This has had the advantage of increasing their market share as well as the added bonus of creating a well recognised brand name across Europe.
Prescriptive, Emergent or something unique?
‘A prescriptive corporate strategy is one where the objective has been defined in advance and the main elements have been developed before the strategy commences….an emergent corporate strategy is one whose final objective is unclear and whose elements are developed during the course of its life, as the strategy proceeds’. Lynch (2000).
It is safe to recognise straight away that Ryanair does not sit uniformly with either strategy. However certain aspects or functions could certainly adhere to one or the other as these are sections that make up the carrier as a whole and for an organisation of Ryanair’s size different parts would have different aims and objectives underneath a main umbrella strategy for the organisation. For example any planning undertaken by Ryanair for new routes or planes would follow the prescriptive model as the objective would have been defined beforehand and elements such as finance will have had to have been agreed before any purchasing goes ahead. Ryanair, as already stated, follows neither strategic approach religiously and possesses a strategy unique to their organisation, which has identified their needs and objectives. However their approach to strategic management isn’t unique in itself as the majority of organisations will tailor strategies to suit their business’ own individuality.
Their main competitors are carriers including EasyJet, BMI baby, FlyBe and ThomsonFly all of who try to attract potential customers by emphasising their low cost tickets. This makes the competition in this market segment fierce as in order to offer the lowest fares, costs must also be kept to a minimum.
Strategy for achieving gaols and objective
Good customer services.
Taking benefit of internet.
Frequent flights on short haul routes.
Low operating costs, addressing aircraft and equipment, personnel productivity, customer service costs and airport access fees.
Commitment to safety and quality maintenance.
Cost Reduction Strategy:
To achieve the goal of Europe’s leading low-fares scheduled passenger airline and having a competitive position in the airline market Ryanair use cost reduction strategy. These cost reduction strategy stays good on five main things like airport charges and route policies, commonality, contracting out services, managed staff costs. For this company has used only one kind of plane which help in less cost for staff training, facility of obtaining spares and maintenance services etc. Ryanair uses Boeing 737, which has given them opportunity to gain capacity and reduce the average age of fleet.
The next step or factor under the cost reduction strategy is contracting out services. By doing this aircraft handling, ticketing, handling and other functions are contracted to third parties by Ryanair. In order to limit their expenses, engine and other heavy maintenance are also contracted out and the staff of Ryanair also carries out routine maintenance.
Another main point of cost reduction strategy of the company is in terms of airport charges and route policies. Ryanair has made a sensible choice of dealing with extra and regional airports where the traffic is not jammed and fees are comparably less. Since Ryanair is a true bonus for such airport the airline company has a bargaining power which enables it getting beneficial access fees. Ryanair provides only a point-to-point-service so it has no cost concerning connecting passengers. Also, the company pays special focus to on time departures because it means maximising aircraft utilisation.
Managing staff cost and productivity is another factor used for reducing cost for Ryanair. In this way the company pays its staff on modest salary but has made a performance related pay style which appetite employees to maximise the numbers of sectors flown daily, this way Ryanair controls both the productivity and keep staff cost down. In the end managing marketing cost is another factor that makes a company reduces its costs. Ryanair mainly advertises in its website with its logo ‘Ryanair.com, the Low-fare Airline’ (www.ryanair.com). It also advertises in UK and Irish newspapers, on television and on radio.
Key Success factors of Ryanair:
Supplier Boeing discounts.
European union scattering out.
Michael O’Leary as Backbone.
Core Values of Ryanair:
The core value of Ryanair is to reduce the price as low as they can so that customer can easily buy it. Basically Ryanair believes in ‘NO frill strategy’
Ryanair is the other word for success. Ryanair is providing low fares to its customer without transferring any fuel surcharges to its customer but it should also think on giving quality value to its customer.
Strategy Planning of Skybus
Skybus was founded in 2004 in USA. Skybus strategy was model same as highly successful, ultra low-cost European airline Ryanair. Ken Giles and John Weikle were the main founders of Skybus. Ken Giles has also worked for Southwest Airlines as Director of Operations. Skybus began their flights in May 2007 after they had received approval from US Department of Transportation and Federal Aviation Administration (FAA). Skybus first flights were from Columbus International Airport.
Information: Photograph of aircraft N522VA, leased from Virgin America by Skybus Airlines. Picture taken March 23, 2007.
Author: Derek Rust.
Skybus strategy was to run low cost carriers in USA. Skybus introduced a no-frill business model which was somewhat similar to Ryanair. They sold tickets on very low prices as low as $10 each way but messengers has to pay for any extra comfort like priority seating, food or drink, checked baggage etc. Skybus markets no frills policy as a customization opportunity: customer can ‘control exactly what they pay for. You can customize your experience and fly the way you like’
Eliminating extras is not only way to cut costs, however Skybus employs a number of other strategies to keep costs and price down. Skybus automate everything including ticketing and check-in at the airport to cut costs on employees, travel agents, and other operational expenses. They do not even got any customer service number everything is done online. Skybus uses secondary airports to keep planes running on time for much less.
Even though cutting costs on airline and at the airport are beneficial but the biggest expense for any airline is its fleet and if they can control and manage that expense then there are very good chances of success. Skybus fleet when they start was made up of 7 Airbus A319 and 65 aircraft order (total retail value of $3.7 billion) which was to be delivered in next one to two years.
SWOT analysis is used to find out the Strengths, Weakness, Opportunities and Threats involved in any company strategy and its business.
SWOT Analysis of Ryanair:
Ways which factor applies to RyanAir
The low cost leadership.
Very much aggressive pricing strategy.
Pioneer in the low cost airlines.
Advantage in the gain of market share.
Strong reputation in public.
High load capacity aircraft.
Employee relation is very poor.
Customer relation was volatile.
Total dependence on the CEO Michael O’Leary.
Tied up cash with the purchase of new aircraft.
Possible new routes.
New promotional plans.
Can go globally.
Competitors- BMIbaby, Easyjet,ThomsonFly.
Entry of new players in the industry.
Increase in fuel prices.
SWOT Analysis of Skybus:
Ways in which it affect Skybus.
First mover in market.
Competition is low.
Experienced Directors and staff.
Very heavy investments.
Less attractive employer.
Customer relation was volatile
Can lead the market.
New promotional plan.
Possible new routes.
High fuel prices.
Volatile dynamics of airline industry.
Increased competition can lead to price wars.
Less staff retain ability.
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