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When organisations endeavour to become renowned in the business field with the objectives they can entirely and successfully settle in to in the market place circumstances by using porter's generic strategies that improve their competitiveness. Porter's generic strategies compile with three main strategies they are
Cost leadership Strategy
Is where a business, manage and organize its value adding to become the lowest cost producer of a product within an industry.
Is persuading the customers that the relevant product is superior to the rest of the products that are produced by the competitors in the market and the value is added with the uniqueness of the product or service.
Cost focus Strategy
Is aiming at a segment of a market for a product rather than at the whole market or many markets in the industry and the success is hidden with the product strength tailor to a relatively narrow market segment that is know by the organisation
According to the Ryanair case and with the analysis of the porters generic startegies it is evident that Ryanair can be discussed under two of the strategies. They are cost leadership Startegy and cost focus strategy
Cost leadership strategy is evident in Ryanair with its offer of lowest cost of fare than its competitors in the airline industry. In addition to that Ryanair is also using the cost focus strategy as it contemplate on a narrow consumer segment which include UK and Irish business people or travellers who cannot afford to travel in major airlines.
However the Cost focus strategy is being used to demonstrate the firms most characteristics. The no frill strategy keeps the cost down in maintaining the airline. From the product or service no frill and extras are removed to directly approach the low cost. There are two reasons in sustainable cost advantage which can be seen as a goal and firstly it seems to be the expected customer services and offerings by the competitors cannot be easily stopped. Secondly the facilities and operations of competitors cannot easily be changed as they are designed for such services. The competitive scope is narrow target since it's a niche market product and competitive advantage is Lower cost which comes up to cost focus as a conclusion
Figure 1: Source: Porter (1985)
This can be further proven with the statement from the case study Ryanair had stuck closely to the low cost/low-fares model. Ever decreasing costs was Ryanairs mathra.
3.0 Justification by the value chain activities
The Marketing activities of Ryanair has given a significant balance to the success of the company and operational
The Ryanairs within and around activates can be described through its Value chain analysis. Which are further analysed through its relation to competitive strength of low cost. Thus each activity of each value is evaluated with its service. The customers are willing to pay only if the service is given to its lowest price. Poter however argues that to manage the linkage and the ability to perform particular activates is the linkage between the activates of competitive advantage.
In value chain activities porter distinguishers between the primary activities and selective activities. The cost focus strategy directly concerns with the creation of the product which can be grouped in to five main areas operations, inbound logistics, services and marketing and sales. Each of these activities helps the cost focus strategy to be efficient and effective. And there are four main support activities technology development, procurement, Human resource management and infrastructure which are supporting as the narrow target for cost focus.
The core competencies that Ryanair bestow is the varied routes and destinations which increase their market share and this is one of the major core competencies for Ryanair to remain competitive advantage with the cost focus strategy. Furthermore Ryanair had made competitive advantage through its Operations by setting off to check out all the planes and equipments by the pilots and the airports used are not very congested and by only making a point to point trips together with Marketing and sales Having the biggest website in Europe and having large advertising boards made them increase in sales and marketing. However the attempt of introducing the entertainment facility onto flights where customers had to pay more was failed as people refused to pay due to short journeys thus this had made the justification of cost focus through the value chain activities clearly.
Figure 3 Velu,Choi,Ongalo,Chernikova (2008)
Explained in details in the (appendix 1)
4.0 The current organisational structure
The structure of an organisation is the way in which activities are arranged. (Hubbard. Rice. Beamish 2008) According to the case study Ryanair has a very functional organisational structure where Michal O' Leary is the CEO of the company. The functional departments is the way in which the functional structure of the company groups people together to complete an organised company, this includes purchasing, accounts, production, sales and marketing. And the managers or the directors normally run this structure however in Ryanair the CEO is part of the management and he is working with his managers following a centralized structure a top down approach is used as he takes all the decisions as refusing to recognize trade unions and having a performance base system and the employees work full working hours with providing poor working conditions the employees are band from using company electricity to charge their own mobile phones.
The strategic implementation of Ryanair is discusses below using the strategic implementation model and the 7 S model to link the strategy with the organisational effectiveness. 7 S model (Appendix 2)
Figure 2 Hubbard (2008)
The capabilities which Ryanair uses as skills to bring its resources to stand are No frill. Lowest airfare rates, large brand awareness, Innovative strategies on cost cutting, focus on particular market segment and large brand awareness and innovating strategies on cost cutting.
Staff- For competitive advantage employees is believed to be a source. The skills through traing and knowledge and abilities of employees supply to the success of Ryanair
Shareholders- The profit distribution is participated by the shareholders
Customers- In exchange for wants and requirements customers fly Ryanair making the customers the source of the organisations earnings
Ryanair renders point to point services and cutting airport charges to maintain the leadership position in the low cost sector. Acquiring other companies to maintain its leadership position is another part of strategic intent of the organisation.
The informal communication with competitor's i.e. dressed up like St. Patrick and Pope to communicate emphasis on his style of management.
The organisational culture of Ryanair is powerful at the preliminary implementation of change management. Nevertheless the CEO or the managers must have the ability and leadership effectiveness to change the process in Ryanair.
The process of aligning an organizations people and culture with change strategy is defined as changed management. Dawson (2003) and thus change is a process then the organisational culture is powerless against leadership. Even though the culture is very strong it can still be controlled and changed depending on the type of leadership imposed.
The organisational culture however shapes the management, and most importantly the shared value of Ryanair which is working towards one goal of making profits through cost reduction and customer satisfaction.
The system which runs in Ryanair is the control system where an aggressive style of management can be seen through the CEO , he is empathising on the low cost management with the make use of flat management hierarchy and it suitably gives a competitive and reliable service. After having implemented the knowhow about the Southwest model O'Leary clearly kept his mind on the drastic way of focusing completely on cost cutting and looked forward for innovative ways to achieve the best.
Miceal O'Leary made rules and regulations in an authoritarian way and worked towards a bureaucratic management style. Also he had made the system as a goal oriented firm to bring more efficiency to the service Ryanair.
The control system of Ryanair undergoes with its benchmarking
According to the case study Ryanair is performing as the market leader of the industry and this it proves that Ryanair can be taken as a benchmark. The entire aircraft has a huge amount of capacity to load and they operate on a very high profit margin and further in addition they have the online booking and check in facilities, highest number of employees, cargo services and low fare charges proving the power of the benchmark. In conclusion Ryanairs success in different organisational levels highlights Ryanair itself is a bench mark for the industry.
A standpoint of competition can be seen through the based resources which show the resources and capabilities value that interchange in a market force. As a source of competitive advantage the resource allocation and capability is developed when the market and the environment establishers peripheral pressures and restrictions.(Boone and Ganeshan pp. 283-284)
In a fast moving environment technology innovations together with other strategies most likely to be copied, yet one thing that cannot be copied and that is the human resource that bring the competitive advantage to the company
5.0 The balanced scorecard framework (Appendix 3)
The balanced scorecard is a framework that firms can use to verify that they have established both strategic and financial controls to assess their performance
The operational and the net profit margin of Ryanair indicate that it is the most profitable airline in the world, per airplane and per- passenger basis. Air transport world (2006)
The value for money perspective gives customer satisfaction as Ryanair is customer's first choice bringing in high level of repeat business to the company with brand loyalty. And switching behavior is low compared to other low cost carriers. Customers are also satisfied with the flying destinations as Ryanair has 127 flying out destinations. Also passengers who are affected by the cancellations must be offered a refund as the new EU regulation which again comes to customer satisfaction.
Internal business process
The cross functional coordination should be implemented to increase efficiency of the internal operations. This is done carefully by the CEO of the company as he stuck closely to the low cost /low fares model. Having the mathra of ever decreasing cost with profits and he constantly adapted the model to the European arena and changing circumstances. The low cost gives value for their customers and high profit gives value to their shareholders bringing satisfaction to both the parties.
Learning and growth
This creates the climate that supports change, innovation and growth with the concern of its efforts. Ryanair offered good news to its investors as Ryanair had diliverd 12% growth in net profit with 27% increase in passenger revenue.
6.0 Leadership styles
When implementing the strategy to Ryanair it is a must to use the appropriate leadership style thus the general leadership styles are explained to find out which is the most appropriate.
Transactional Leadership styles
Transactional leaderships style basically discuss about the how the employees obay the commands of the employer and the punishments and rewards they get for following and not following the orders. The payments done to the employees are only based on the work they have done and no more than that.
However this leadership style cannot be seen in Ryanair as they had bullied pilots to force them to agree on the new contracts and also Ryanair manages was judged to have given false evidence in court.
Transformational Leadership style
The true leadership comes with their ability to inspire their subordinates with having a continuously shared vision of the future and this passion should be passed to the team to build a stronger bond between the employees and him. Their main focus is to look after idea s and add value to them so that they will have sustainable advantages as an outcome. Mr. O'Leary being expected to be a business star by the Financial Times makes people follow him as an inspirational character. He can also get things done with enthusiasm this is evident with the facts given as he is a genius in his ability to motivate and energise people. He had thus transformed the airline within 20 years to become the largest airline in Europe from a single plane.
However his knowledge ,commitment ,skills of using the southwest model in an appropriate way and charisma had being a motivation for the employees as well as to the competitors which will give an outcome of his leadership style being linked to Charismatic leaderships style proving that transformational leaders are often charismatic.
Charismatic leadership style
Micheal O'Leary's character itself is a very vibrant and compelling one. His central focused business model of cost reduction with a profit has made him a renowned character in the airline industry. His vision was achieved through masterful leadership. He retained his narrow cost focus niche strategy by carefully dividing the cost among passengers in a form of low fares.
His charismatic leadership style further came to action with him being personified by the newspapers as the brash of new Irish business elite and as the marketing brain in 2005. Furthermore he was ranked 18th among the worlds most respected business leaders in a financial Times poll.
His publicity activities have earned him a high profile when he wore an army uniform and went in a tank to easyjet declaring war on competition and having the slogan of Arrividerci Alitalia when opening a hub in Milan bergamo. And to promote ticket offers he wore as St. Patrick and the Pope. He had also made the investors very happy and even directors credit him for opening up the era of inexpensive air travel. His out spoken ability is another characteristic of his leadership style where people believed him as a figure of public debate this brought in a negative aspect to his character and some people thought he was an irresponsible person as he later became an irritating character. However his Transformational and charismatic leadership had made Ryanair flourish with success even with some negative responses.
7.0 The key success factors
Based on the outcome of the analysis Ryanair completes all key success factors. They are elaborated as follows.
Ryanair is well managed and responsive to market change this is evident through it being the most profitable airline in Europe. It has thus made a new change in the market as the strategic focus of having the lowest price, being reliable within the market place and high frequency narrow target niche market.
It was successful in making low fares as Micheal O'Leary learnt the trick of passing cost among the passengers for low fare items.
And one major success factor of Ryanair is it having no frill culture filling the organisation i.e. the head of for Ryanair in Dublin is small and functional compared to British airways a major flag career in England.
Moreover the success is evident when Ryanair became the number one airline in UK and the bigger airlines not noticing it until it became a challenge to them and simply by ignoring it at first made it difficult for them to compete now.
8.0 Recommendations to improve strategic implementation.
Mergers and Acquisitions
In this new decade mergers and acquisitions has become one of the most important corporate-level strategy. Having this strategy is significant to an organisation as it helps to the success and the growth of Ryanair. The continuous growth of Ryanair it is expected that the company would buy other companies like Buzz.
Strategic Human Resource management
In its loyalty to low cost air fare Ryanair has forgo its processes and services. Speaking of competitive advantage the human resource of the company is not seen as a potential source. The people of the company are not being valued as expected. The increased belief of company's human resource management is its competitive advantage. To reach a sustainable competitive advantage it is a must for an organisation to have human resource management. In an environment that changes rapidly where technology and other innovative strategies are copied it is human resource management that brings the sustainable competitive advantage.
Marketing Plan Strategy
A detailed plan is required for Ryanair as a good strategic move in the market and it should focus on CRM to prove good services to the customers. I.e. Discount flights and value promotions to stabilize competitive advantage within its competitors. Furthermore Ryanair should focus more on the core competencies that gives a chance for Ryanair to virtually and sensibly design appropriate airline operations in the industry. Ryanair should be goal orientated and must not stop to renew and change their marketing strategies. If Ryanair has the ability to overcome the product differentiation it will lead to restore revenue generation
The non core functions of Ryanair should be out sourced in order to have an operational effectiveness, such as services like catering or ground handling services.
9.0 The gap analysis
The gap between what a firm must do to compete and what it is currently doing represent a strategic gap and strengths and weaknesses says what a firm can do and opportunities and threats explains what the firm must do . (Explained in details Appendix 4)
Based on strategic capabilities an organisation can identify its knowledge gap of what the firm must know to execute its strategy and what it does know. In order to bridge these gaps the above mentioned recommendations can be implemented.
Figure 3: Zack (1999)
Ryanair case study was further analysed through 7 analytical techniques (Porter s generic strategy Value chain activities, Strategic implementation model with 7 s model, Balanced score card, Leadership style, Key success factors and gap analysis).
Based on the analyses the management can now understand that in order to improve the strategic implementation they must follow Mergers and Acquisitions, Strategic Human Resource management, Operational Effectiveness, Marketing Plan Strategy. If these recommendations are followed then the company can be stronger than before and it can remain as such for a long period of time.
Therefore the recommendations are applicable for Ryanair to improve its sustainability in the current market system.
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Infrastructure of the firm
Around Europe Ryanair has 16 bases having the main bases in Stanstead and Dublin. The chargers of Ryanair airports are low due to its use of airports that are significantly away from the congested main airports. As adaptation for surcharges are not included for fuel they have to cut costs of on other ways with implementing chargers for the use of wheelchairs ,food and extra luggage's. Ryanair having one type of aircrafts (boeing 737) they only have to train the pilots to fly those particular plane hence can cut down costs as they do not have to be sent to various courses. The hierarchical structure of Ryanair is very effective as the managers have to report to the CEO to make decision from the information given.
Human Resource management
Having the employees sleep in the bases and not having them stay in hotels has made Ryanair reduce costs. Ryanair can make future plans since they have a good roster for most of their workers having 4 days on and 3 days off.
Online booking was introduced by Ryanair for the first time and thus they became eligible to reduce their costs. Self-check service enabling to the passengers was also introduced too thus Ryanair was able to reduce staff and cost. Having the youngest fleets in the EU made Ryanair reduced in costs for the new airplanes.
Ryanair only providing a service and having to outsource the material they need. in addition to that they have to buy fuel and equipment collectively with leasing planes.
Out sourcing of handling services is very common fir a business like this
I.e. cleaning service, food, medical services and security/safety.
Before setting off it is a must to check out all the planes and equipments by the pilots and the airports used are not very congested and only make point to point trips
Marketing and sales
Having the biggest website in Europe and having large advertising boards made them increase in sales and marketing. However the attempt of introducing the entertainment facility onto flights where customers had to pay more was failed as people refused to pay due to short journeys
Having tried to keep the fleet up-to-date and letting the staff go on course once a year to improve their knowledge and making sure they know all the new regulations made Ryanair powerful on services as well.
Source: Mc Kinsey's 7 S model