Vital Aspects Of Ryanairs Business Model And Its Business Strategy Business Essay

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This report focuses on vital aspects of Ryanair's business model and its business strategy which led a small airline started by a family into one of Europe's wide spread and highly significant airline. First thing that comes to mind when thinking of any business is how to deal with competition in such a tough and competitive business environment. Largely the question of how to achieve sustainability in the business and how to make it appealing and unique from the rest needs to be answered, to achieve sustainability and uniqueness in today's tough business environment, bullet proof yet dynamic set of business 'strategies' need to be thought of and implemented at the correct time. (O'Higgins, 2009)

The word 'strategies' mean a course or direction a business needs to set its course for achieving an industry advantage over its rivals by acclimatizing itself with the accessible possessions . The proof of Ryanair's business strategy success lies in the fact that they managed to provide low fare services to its customers, while gaining profits and also maintained a satisfactory service level which converted into a steady increase in the number of passengers. Ryanair also concentrated on generating revenue through auxiliary service provisioning, there strategy of replacing old aircraft with new more efficient aircraft helped then cut fuel costs while also reducing their carbon foot print. In today's environment conscious business world, a greener image translates into direct increase in revenue (O'Higgins, 2009).

In order to spot a suitable strategy for a certain business, the external and internals factors which directly or indirectly affect the business have to analyze. All these methods of increasing the revenue depict the nature of Ryanair's business strategy which is mainly focused on the growth and amplification of the airline and its revenue. (O'Higgins, 2009)

Introduction

Ryan air was founded in 1985 by the Ryan family to provide scheduled passenger airline services between Ireland and the UK as an alternative to the state monopoly carries Aer Lingus. Initially, Ryan Air was a full service conventional airline with two classes of seating, leasing three different types of aircraft. (Fottrell and Quentin, 2004)

The company began to introduce a low cost operating model in the early 1990s. Ryan air operates 74 aircraft including 41 Boeing 737-800 "next generation aircraft, the Company offers approximately 475 scheduled flights per day serving 84 locations in the U.K., Ireland and continental Europe. Offering widely-available low fares, Ryan air carried more than 23 million

Passengers during 2004. Major achievements for the company include overtaking Easy jet to become Europe's largest airline in terms of passengers as well as overtaking British Airway's UK/Europe traffic. (O'Cuilleanain, 2004)

Ryanair's Strategic business model was based on the successful southwest Airline (based in Texas), the model being to supply a low costs and no frills travel service. Through the course of its history Ryanair has come under a lot of criticism from its opponents and customers but that hasn't hindered Ryanair's development in the air travel industry. It has now transformed from a family owned and operated business to one of Europe's flagship low fare airlines, with more than sixteen destinations across Europe and in excess of a hundred and thirty three routes (Ken, 2009).

SWOT Analysis

Strengths

Ryanair gets big credit for being known as the first low-cost, no frills airline of Europe, this converts into the toughest selling point the company has. The company which started with just fifty seven staff and a single turboprop aircraft, carrying as estimated of five thousand passengers on the route between London and Ireland in 1985. Within a years time they over took premium carriers like British airways, with there high fare service for the same London-Dublin route. From that point onwards Ryanair's low fare strategy earned them a swift boost in market share.

This 'low costs, no frills' strategy paved way to a multiplication of passengers and an spreading out of operations, the minuscule number of fifty seven staff jumped to three thousand and four hundred, Ryanair's passenger volume also shot to over thirty five million .

The air transport deregulation by the EU assisted in further expanding operations as they were now able to initiate routes to continental Europe in 1997, 18 new routes transporting over 3 million passengers. In 1999 Ryanair was awarded as the Airline of the Year by the Irish Air Transport Users Committee, in 2001 while the other established airlines experienced losses and tough competition, Ryanair being a low-cost airline achieved a whopping 26 percent margin in operating costs thus increasing in profitability by not just a small degree. In the same year it broke all records and overtook British Airways by making 4.9 billion Euros or 45 percent more then the 20 times bigger airline in terms of revenue. (Ryanair.com, 2006)

Weaknesses

Although the company has increased its customer base and its low cost operations strategy, the company does lack in management as its does suffer from losses of its money. Pressing mechanisms were employed to deal with such weaknesses. This sort of cost reduction strategy is based on five main aspects like

Fleet commonality

Contracting out services

Airport charges and route policies

Managed staff costs

Productivity and managed marketing costs

Despite of its strategies Ryanair suffers from some other problems which translate into its weaknesses. How Ryanair handles its customers is of some issue, it's reported that Ryanair adds hidden taxes and other charges, somewhat limited customer services and misguiding adverts. These points have resulted in the spread of bad word for the airline, also the airline suffers from lack of quality assurance and lacks in the strategic decision making in the human resource areas, and all this accumulate to create a negative image of the brand, and makes it suffer.

Opportunities

With its present management system and the strengths it posses, Ryanair still has superior prospects to explore and to keep up with the opposition in the European airline industry when taking into consideration the provisioning of a better quality of service standard, while maintaining its key focus on low cost and no frills service to its customers.

Another opportunity that should be looked into is the exploration of the trends of the frequent flyers and their demands so to market in a way to capture them and determination of the latest trends in airline management. The nonstop schemes of the airline in broadening the horizons of its income sources also unlock fresh openings to craft the business strong enough to not only deal with the competition but rather overtake it. (Dane, 2010)

Threats

Working in one of the most aggressive and fast business environment, the European airline industry, Ryanair counters the certain risk of firm rivalry. For a business to thrive in international competition, it needs a constant plan to be on the look out for new ideas and the development of new products with a greater appeal to the customers than its rivals are offering. The development of new products and the business development have to be extremely efficient and competent; however this on its own will not make sure of its competitiveness. The growth of Ryanair's operations to additional areas means fine-tuning to the trade policies and the local political situations. Meeting the active needs and demands of customers is a challenge to Ryanair's management. Additionally end user behavior and approval in regards to the service or product procurement is also a risk. A Failure or a risk of losing manageability is feared if the company stays to be a vertically integrated corporation. Also technological advancements are always something to follow and keep a close track off as a failure to not foresee and invest in some upcoming technology can lead to adverse affects in the years to come. (Quinn, 2004)

Future Strategy and Recommendations

Mergers and Accusations

One of the most significant corporate-level strategies of this decade is the mergers and accusations of different firms and companies. These strategies are vital to support the development of the organization and its sustainability in today's business environment.

If the current growth trend continues then same way Ryanair will be expected to acquire other smaller companies, which supports its main operation in anyway, this will allow it further improve on its current capabilities and attain a firm competitive advantage. (Ryanair.com, 2010)

Strategic Human Resource Management

Ryanair's dedication to providing low-cost airfares have caused a fair share of its problems, a first being the undermining by Ryanair of its processes and services, of course low fares directly translates to lower operating costs, which are at many times achieved at the expense of overlooking or all together avoiding activities that might not directly be considered productive. The human resources department has suffered from this overlook as its direct involvement in the company's core operations of providing air travel seems weak, but lack of concentration on HR policies and the under development of its HR department, has led to the common and expected issue. It's felt by its people that the company does not seem to value its people. (Denholm, 2006)

In recent years the belief in a company's human resource departments have increased and now it's considered a significant foundation of competitive edge. The company's resource or its people are main source of sustainable competitive advantage. In a dynamic environment where technological changes and other tactics and strategies are quickly adopted by the competition, the human resource of an organization can play a pivotal role in bringing the sustainable competitive advantage.

Marketing Plan Strategies

Ryanair should come up with a detailed marketing plan, which should be inline with its strategic moves in the market. Its always felt that Ryanair has not invested enough in its marketing and the promotion of its services, instead they have always relied on the low-fares to attract consumers to themselves, although this strategy has been working for them and it seems that will continue to work for them but as the competition in the low-fare airline travel market has increased over time, mainly following of Ryanair's success and also the global economy being in a state of dismay. (Baker and Michael. 2008)

Almost everywhere cost cutting is one of the most upfront concerns, and business travel is a big cost for every company. So to attract even the business class to a low-fare air travel concept Ryanair has to develop a full fledge marketing strategy. Ryanair also has to concentrate on its value promotion to maintain the competitive advantage among its opponents and will need to center more on its main competencies that allow Ryanair to sensibly and astutely design appropriate airline operations with in the coverage of their marketing network. (Baker and Michael. 2008)

Michael O'Leary

Michael O'Leary, an Irishman, was born March 20, 1961, near Kanturk, County Cork, Ireland; in 1983 he graduated from Trinity with a four year bachelor's degree in business (Eamon, 2007).

He worked for KPMG as a trainee in his early years and studies the Irish tax system. In 1985 he met Tony Ryan, founder of Ryanair, chief of GPA (Guinness Peat Aviation, leasing company) at the time. O'leary was hired by Ryan as his personal financial and tax advisor, by this time Ryanair was established but following a traditional airline business model. O'Leary was sent to study the Southwest Airlines business model.

O'Leary served as deputy chief executive of Ryanair from 1991 and 1994. He was advanced to chief executive Ryanair in 1994. Under his reign, Ryanair went further in the development of the low cost model whish originates from the Southwest Airlines (Forbes, 2006)

The unconventional business model visualized by O'Leary uses receipts from on board shopping, internet gaming, car hire and hotel bookings to substitute the ticket revenue from selling airline seats. His drastic idea put the wheels in motion for an industry-wide trend to milk more revenue from the profit-challenged airline business.

Michael O' leary has a flamboyant image and style of leadership which is responsible for the takeoff of Ryanair from a single route airline into one of europe's leading carrier, challenging the like of British Airways, his low-cost low fare strategy shook the industry and moved the traditional way of things, by giving people the choice of air travel without the usually expected high costs. The low-cost no frills airline gave people access to air travel with the choice of not availing the usual luxuries which obviously add to the cost to air travel for an individual.

O'leary is often criticized for making controversial and sometimes untrue statements to attract attention to the airline; with the concept of any publicity is good publicity. Often not true but that the concept O'leary follows. There low cost model translates naturally into every aspect of their business. (BBC News, 2010)

No-frills

There low-cost concept naturally translates into every aspect of the business, for example, the aircrafts used by Ryanair feature non-reclining leather seats, no seat-back pockets, safety cards printed seat's back and life jackets stored over head instead of below the seats, all the things that either save costs in direst pricing or allow faster turn around time by cutting cleaning time of the cabin. The aircraft also have eliminated the one toilet out of the two to make space for six more seats. (BBC News, 2004)

Customer service

Ryanair has always been a target of criticism for many characteristics of its customer service. According to The Economist; Ryanair's "cavalier treatment of passengers" had given Ryanair "a deserved reputation for nastiness" and that the airline "has become a byword for appalling customer service ... and jeering rudeness towards anyone or anything that gets in its way. (The Economist, 2007)

The poor treatment of disabled passengers has also received heavy criticism, as in 2002 the airline denied the provisioning of wheelchairs for the physically challenged passengers, Ryanair held its stance by stating that it was the airport authority's responsibility to provide the wheelchairs. Ryanair also does not re issue tickets to its passengers incase they miss the flight due to any reason, they believe that it's the passengers responsibility to get to the airport on time and on the aircraft and the airline does not entertain any such claims. These aspects of Ryanair's customer service are a matter of looking into and an area where Ryan air greatly needs to improve on despite the low-cost business model. (D R C, 2004)

Conclusion

When looking at the bigger picture its obvious to portray Ryanair as a success story, the airline has managed to grow and out grow many of the well established names in the business. They have succeeded in giving its customers lower-fares than the rest in the market without the imposition of fuel surcharges, but the company has to put a serious effort into its customer service and the customer handling. Although there number of passengers has always increased over the years, especially given the need to cut costs in every sector. The improved customer service will directly increase the number of passengers.

The analyses also show that Ryanair should develop itself into the global market and not only restrict itself to Europe. Although the success of the airline has lied in concentrating its business and focusing on routes that are super busy and consist of short hops, so the passengers can trade for a less luxurious experience for low-costs.

Ryanair's business is sustainable enough to try and enter other continents and provide the same low-cost no frills service, as places like Asia consists of more countries and businesses which are interested is lower travel costs, given the economy's state. Improvement on the customer service level has to be greatly highlighted as the airline survival and growth directly rests on its customer base and customer loyalty. Ryanair is enjoying economy of scale and has made itself into a sustainable entity; also the competition still has some catching up to do to cause trouble for the airline.

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