Challenges Of Corporate Strategy And Operations Management Commerce Essay

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Strategy can be defined as the direction and scope over the long period of a corporation, which meet stakeholder expectations by matching its resources to its champing environment and in particular its marketplace, consumers or clients. There have three main level strategies in an organization and these are corporate, business and functional strategy.

Corporate level strategy can be called highest level strategy, expressed as a statement of an organization mission who provides long range guidance for the whole organization. Service operations management is concerned with delivering service to the consumers or users of the service. This is the term that is used to cover the activities, decisions and responsibilities to operations managers is service organizations. Service means many different things in many different contexts. The word "service" is used to describe around 80 percent of economic activity in developed nations, including for instance: retail and hospitality service, corporate legal service, banking service, social service, television and radio service, even massage service. So, we can define service as the combination of customers and experiences delivered to and received by a customer. (Robert Johnson, Graham Clark 2008, page- 3, 4, 5, 10). In case of Ryanair Company, some research in he field of service are given bellow.

3.1 OPERATION STRATEGY

Strategy can be seen to exist at the corporate, business and fundamental levels of the organization. Operations may provide the organization with the basis for its competitive advantage. The five basis operations performance objectives are quality, speed, dependability, flexibility and cost. The performance objectives allow an operation to measure its performance in achieving strategic goals. Mass customization is an attempt to combine high variety and high volume of output in order to provide the customer with customization products at a relatively low price. Ryanair followed a strategy of cost focus. The airline served a class of flyers who looked for functional and efficient service rather than luxury. It did not aim to satisfy all sections of the market. The airline's operation policies supported its strategy of cost focus. Ryanair flew a fleet comprising entirely of Boeing 737S. This focus on standardization was a key feature in keeping the costs of the air line law, thus allowing it to offer low fears.

3.2 PROCESS TYPES AND LAYOUT DESIGN

Process types of service can be classified mainly in three categories- professional service, service shop and mass service. Again, an alternative service process type definition is shop, factory, professional and mass. However, each process type should be match to a particular volume and variety of output to minimize cost. Ryanair process type can be keep in the process of mass service. With a low variety and high volume these mass service processes are operated. To individual customers needs and limited contact between the customers and the people providing the service, there will be little customization of the service. Ryanair travel fares were lower and it hoped to attract price conscious passengers and business travelers who often used alternative transportation.

Comparison of Ryanair fare with other LCCs and Scheduled Airlines

Airlines

Av. Fare

% >Ryanair

Low Ryanair

€41

-

High easyJet

62

52%

Air Berlin

87

133%

Iberia

141

244%

Alitalia

186

353%

Air france

220

437%

Luthansaaa

220

437%

British Airways

268

553%

Source: www.ryanair.com, Ryanair Investor Day- 4 October 2005, Andrew Greasley, Second Edition, Oct 2009.

As a mass service of Ryanair, they increases seats in there aircraft compared to full service anilines. Snakes served during flights and other auxiliary services were changed for and made optional.

Layout design concerns the physical placement of resources such as equipment and storage facilities. In a service, layout design is the arrangement of facilities. Fixed position, process, cell and product are the four basic layout types. In this field, Ryanair had done some activities such as, to reduce aircrafts buying costs, Ryanair had initially decided to buy used aircraft of a single type and as first step, as of March 31, 2004, it purchased Boeing 737-200 aircraft which were 11 to 17 years old and its fleet had an average age of 23 years from 1994 to 1998. (Andrew Greasley, Second Edition, Oct 2009.Page- 65).

3.3FACALITY DESIGN

Facility design is one of the operation strategies where location decision, capacity planning and supplying etc are involved and these are one of the key strategic decisions facing an organization. Ryanair began flying at 15- seats Bandeirante on scheduled routes between Ireland and UK in June 1985. (Web page: Ryanair Holdings Plc). In 1986, Ryanair got permission for another route. With two routes in operation, the airline carried 82000 passengers. Next year in 1987, they again enlarge their networks with other flight routes and they decided to extend Ryanair to the rest of Europe in 1990. Ryaiair opened new routes to six new European Union members' states after 1st May 2004 and finally the carried passengers by Raynair increased from 25 million to 35 million between 2004 and 2005. (Andrew Greasley, Second Edition, Oct 2009.Page- 60).

3.4 CAPACITY

Capacity is another valuable terms in operations management which is not just about the providing customers with services or goods in the amount of requested but involves providing them at the time they are requested to. "Capacity planning and control" is a term of setting capacity to meet the demands of the organizations, use a strategic approach using measuring demand, measuring capacity, reconciling capacity and demand and evaluating the alternatives and making a choice. Ryanair was fielding 40 flights a day in 1988. That flight timetables were arranged in such way, the passenger had got their flexible flight what they wanted and in the mid- 1990s, Ryanair was carrying mare than two million passengers a year. (Web page: Ryanair Holdings Plc). Finally, in 2008, Ryanair has been carrying about 60 million numbers of passengers. A diagram is showing the number of passengers Ryanair carried between the years 1985 to 2008 is given below.

Source: Web page: Ryan air passenger numbers update to include 2008, Web site: http://en.wikipedia.org/wiki/File:Ryanair_pax_fig.JPG

3.5 LOGISTICS.

Logistics means having the right things, at the right place, at the right time. Logistics is the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of comforting to customer requirements. (Council of Logistics Management, 12 Feb 98). Ryanair was looking forward to expanding on the European continent as it was becoming a popular tourist destination. The network expansion it had planned would require more aircraft, human resources and agreements with airport authorities and governments. The incidents of terrorism in UK and Europe resulted in increased security measures on all UK outbound flights in 2006. It cancelled 279 flights and refunded 2.7 million euros. The airline industry has always been susceptible to changes around it and the last few years have thrown many obstacles in its path. From the outbreak of Foot and Mouth in the UK to the SARS epidemic in Asia, from the terrorist attacks of 9/11 to the War in Iraq, all of which caused a global economic downturn, the industry has had a torrid few years and most of the major airlines have been running at a loss. Income elasticity of demand for air transport is high meaning a small decrease in GDP will cause a disproportionately larger decline in flying. Also with stricter ruling on state aid the major airlines have well and truly suffered leaving huge gaps of opportunity for the smaller low-cost airlines. (Seminar elaboration and Business Plan: Ryanair Plc.27 April 2004). It expanded its network to 20 new routes touching Dublin and was expecting to add 113 new routes in 2007. In total, it had 16 bases, 351 routes and 107 aircraft as of September 2006. (Ryanair's Annual Report 2006, Andrew Greasley, Second Edition, Oct 2009.Page- 68).

3.6 SUPPLY CHAIN MANAGEMENT

A company has much kind of activities. This kind of activities moves materials from suppliers, through operations to customers. If this activities set in a series, then it can called as a supply chain. Supply chain management is used to refer to the management of the flow of materials through the entire supply chain. 1991 has recorded significant traffic growth in the period following Ryanair's commencement of service, with Ryanair capturing the largest portion of such growth on each such route. Although a variety of factors contributed to this increase in air passenger traffic, including the relative strength of the Irish, U.K. and European economies, management believes that the most significant factor across all its European routes in such growth has been Ryanair's low-fares service. (Seminar elaboration and Business Plan: Ryanair Plc.27 April 2004). Ryanair's supply chain management is consisting of its services provided like beverages, food and merchandise, hotel booking and vehicle rentals for its passengers. Such as, on its aircraft and also through its websites it sold bus and air tickets. It also had a contract with the Hertz Corporation for automobile related services and car retails. They supply that service through their operations from that corporation to the passengers. They also had the service of debit and credit card payments for the benefits of passengers.

3.7 PROCESS DESIGN

Process design can be considered as at the level of individual activities within manufacturing and service process, operations, marketing, finance and at the level of process across organizations in the supply chain. Ryanair, to reach to the place where it can lead the whole airline companies as a low cost airline company, designed its process in a separate way. To achieve this, it positioned aggressively as a low cost airline, had shown a profitable performance by implementing innovative strategies like common aircraft fleet, contracting onlineticket booking, network expansion to secondary airport and third party contracts, marketing and branding, increasing productivity, providing ancillary services for additional revenue, took challenges, emphasized on fuel costs, faced competitions with other low cost carriers in Europe, faced with risk expansion and many others.

3.8 QUALITY AND PERFORMANCE

Quality is a particular challenge for service organizations in that both the tangible and intangible aspects of the service must meet quality standards in order to earn repeat customers. It is one of the five performance objectives of operation management. There have five kinds based qualities such as, product based, user based, operations based, and value based and transcendent based. Ryanair not only focused on the cost of air tickets, it also focused on the quality of the aircrafts it bought. It also focused on the price conscious passengers and business travelers who often used alternative transportation. Performance dimension engages choosing both the events that will be used to recognize where developments should take place and also to determine if improvement has taken place after change has been implemented. (Andrew Greasley, Second Edition, Oct 2009.Page- 527). Ryanair tried its best to provide passengers all kind of service including low cost, available flights, automobile and car rental service and so many to reach to its goal. Finally, had done performance best and gained and became popular, worldwide, low cost and full service airlines in the Europe.

4. ADD VALUE OF RYANAIR

Ryanair Company, with its low cost ticket played a vital role in the field of airline service. With other companies if compared Ryanair then there have many difference which made Ryanair one of the best companies with low cost and cheaper flight. Ryanair followed a strategy of cost focus. The airline served a class of flyers who looked for functional and efficient service rather than luxury. It did not aim to satisfy all sections of the market. The airline's operation policies supported its strategy of cost focus. Ryanair flew a fleet comprising entirely of Boeing 737S. This focus on standardization was a key feature in keeping the costs of the air line law, thus allowing it to offer low fears. Ryanair followed a strategy of cost focus. The airline served a class of flyers who looked for functional and efficient service rather than luxury. It did not aim to satisfy all sections of the market. The airline's operation policies supported its strategy of cost focus. Ryanair flew a fleet comprising entirely of Boeing 737S. This focus on standardization was a key feature in keeping the costs of the air line law, thus allowing it to offer low fears. Ryanair began flying at 15- seats Bandeirante on scheduled routes between Ireland and UK in June 1985. (Web page: Ryanair Holdings Plc). As analysis of SWOT, Ryanair's strengths are given bellow.

• Brand name: Ryanair through its 14 years in the LCC market has developed a very well recognized brand name.

• Benefits from low airport charges: These aid the low cost base Ryanair benefits from.

• Has first mover advantage on regional airports (e.g. Charleroi): Acts as a barrier to entry

• Internet site (94% bookings) www.ryanair.com: Lowers the cost of distribution as over the phone bookings are more costly. Eliminates the need of travel agents

• High seat density:

5 Q3 2004 report, Ryanair

• All Boeing aircraft: A uniform fleet saves on maintenance and training costs

• High Service performance: Punctual, high rate of flight completion, low baggage loss, these give a good image of the company's reliability.

• Modernized fleet which leads to less expensive maintenance: Will become more uniform with only one model (737-800), also newer planes will require less maintenance.

• High aircraft utilization: Ryanair flies its planes for longer thus generating more revenue from its assets.

• Fuel and other risks hedging.

• Small headquarters: Low on overheads (Seminar elaboration and Business Plan: Ryanair Plc.27 April 2004).In 1986, Ryanair got permission for another route. With two routes in operation, the airline carried 82000 passengers. Ryanair was looking forward to expanding on the European continent as it was becoming a popular tourist destination. The network expansion it had planned would require more aircraft, human resources and agreements with airport authorities and governments. Ryanair not only focused on the cost of air tickets, it also focused on the quality of the aircrafts it bought. It also focused on the price conscious passengers and business travelers who often used alternative transportation. These short of things is including with the add value of Ryanair.

5. IMPROVEMENT NEED TO RYANAIR

Ryanair, with a great strength of reputation in airline and as a low fear airline company, has some lacking. Every company has their lacking in their different kinds of department. It also can consider as weakness. However, Ryanair' weakness is not very grave. One of the weaknesses is prone to bad press where Ryanair is apparent as conceited and the smallest amount occurrence gets a lot of press coverage. Again in the field of niche market it has possibility of restricted expansion. Distance of some regional airports from advertised destination is another one where over time customers may find this a big inconvenience. It has also the poor service of people skills. Ryanair is extremely sensitive to changes in charges by increase in fare value. But still Ryanair has chance to improve its condition. Like, the company should enlarge their network around EU and open a lot of new destinations. It has still potential to capture market share and Ryanair should make the LCC market share more than double. It should make benefits from less exposure to geopolitical risks as only really operates in Europe. Economic slowdown actually helps Ryanair like changes in corporate culture, 'steals' customers from traditional carriers as they seek lower fares. Ryanair should remove its barriers to entry, should be high capital investment. Restricted slot availability makes it more difficult to find suitable airports which should be develop. It should concern in the immediate price war if encroaching on existing LCC route. It also need for low cost base, should provide flight authorisations and so on.

In order to do this several options must be taken into account. The options Ryanair have are as follows:

1. Increase the Frequency of Existing Routes: If Ryanair were to increase the frequency on some of their routes they could effectively steal some of the passengers from the traditional carrier's thus increasing market share.

2. Open New Routes in Europe: Ryanair can also open routes where the competition is a more expensive traditional carrier thus attracting customers with the cheaper, no-frills option.

3. Develop Its Smaller Continental Operating Bases: With the low-cost market from London saturated, Ryanair must look to their other operating bases to expand their network. Dublin, Brussels, Hahn, etc… can all be developed. Although there is not the same demand outside of London there is still sufficient demand to make a sizable profit.

4. Expand into Central/Eastern Europe: Eastern Europe is fast becoming a hotspot for tourists and a business traveler alike due to the continuing expansion of the E.U. Ryanair however doesn't serve any of these popular destinations. Other low-cost airlines have set up there already, such as Sky Europe, but not all routes have been exhausted. There is still plenty of opportunity in this area.

5. Expand into North Africa: By offering truly low cost flights to these destinations Ryanair could easily capture this market share. Its aim is should be seek out and start negotiations with potential airports in these countries.

6. Customer Service Overhaul: Ryanair has had a remarkable track record for its 'tangible' customer service; however the perception of the 'softer' side of its customer service has not always been good with much bad press. With this in mind Ryanair, while maintaining its strict rules and regulations, must make an adjustment in this area.

7. Continue to find ways of reducing costs: Although Ryanair has the lowest cost base of any of its competitors; the Company should continue to lower its cost base as it grows albeit at a lower pace.

8. Ryanair 100% online: Ryanair will continue to use the internet as its primary point of sale. Over the next 5 years the aim should be have 100% of bookings via the internet so as to eliminate the costly call centers.

6. CONCLUSION

To have the largest amount of routes and the lowest fares of any European Airline without cooperating its business model; to do better than every other carrier on all fronts including quality of service. Ryanair also aspires to uphold a high level of growth. Ryanair's strategy up to date has been the key factor in its huge success. So to that end they would intend to carry on applying all of these strategies for the foreseeable future. As has been seen in the past in the United States there is only room for one or two major players in the low-cost airline industry. But now there have many players and one of the hardest competitor is Ryanair. The assignment shows vast differences between the best and worst cases where I can conclude that the industry is volatile and risky. The analysis shows that the industry is very complex and thus management must take extreme care when making any decision. Rising airport and handling charges will not have a serious impact on Ryanair's long term development as they affect all players in the industry and make it more difficult for them to compete with Ryanair. Therefore margins can be kept constant without affecting profits.

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