Environmental Industrial And Company Analysis Commerce Essay

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We "Unity consultants" are a management consultancy firm which operates in Ireland for the past 50 years. Unity consultants were well known in the industry for its excellent consultancy service provided. Unity consultants have accompanied many companies to success and many entrepreneurs in the process of growth.

Ryan air is a low fare, first budget air line service which was established in Ireland in 1985 with a staff of 25 and a 15 seat air craft, and had only 5000 passengers in the beginning year. Currently Ryan air has 4,200 employees and a fleet of 120 air craft's and carries 35 million passengers annually.

The sole purpose of this report is to provide environmental, industrial and company analysis for Ryanair. We will be presenting strategic choices, recommend initiatives and areas for improving strategy implementation for the senior management team of Ryanair.

Based on the analysis done by Unity Consultants we could say that the industry is unstable and risky (Industry analysis).The Ryanair management team must take extreme care when making major decisions. Based on the macro environmental analysis the expansion of number of airports will not be an advantage for Ryanair because every airline company would make use of the opportunity, so Ryanair will face a high completion. Based on the internal analysis we advise Ryanair to keep margins without affecting their profits. We assure the following analysis will help Ryanair to make better decisions and implement a new strategy which will make Ryanair shine in the air line industry.

Table of Contents

1. Introduction

In the present global market one of the most profits earning industry is the airline industry. Out of this industry the low fare budget airline gains a massive profit. Ryanair is the first budget airline in Europe which came up with an innovative business model "Low fare- no frill airlines". This was a new concept of flying for the customers.

This was a totally new product for the customers, no frills, no food, no drinks, no spacious seats, no travel agencies bookings, but a very low price. This was called as the "low cost revolution" (Doganis, 2001)

Ryanair was started by the Ryan family in 1985 in Ireland with 57 workers and just one 15-seated turboprop plane, fly from south east of Ireland to London-Gatwick., Currently the company is headquartered in Dublin, Ireland, employs about 4,200 people, operates with a fleet size of 120 Boeing 737-800, carries approximately 35 Million passengers a year and had a turnover of 1,692.5 Mio in 2006 with a net profit-ability of about 10 % (Ryanair Report, 2007).

Today's airline industry presents a different picture than it did prior to the events of September 11, 2001 (9/11), with more passengers flying low-cost carriers, fewer empty seats, and a smaller workforce. Apparently, after 9/11 the biggest change was seen at "Airline Industry" in business sector. Some companies started offering what other companies ceased and also some of them could see the potential in using market niches that the other companies aborted or did not consider profitable. Best example for that is Ryanair. After 9/11 they added capacity, purchased 50 new aircrafts. They cancelled only 16 of 1,800 scheduled flights the week after. They did some seat promotions.

Ryanair is now the largest low cost airline in Great Britain and Europe and has modeled its operations on the very successful Southwest Airlines Low Cost Leadership model. Currently the European airline industry is facing a backdrop and a burgeoning budget sector. The critical issue is, whether Ryanair could face these external, internal and industry environmental threats and succeed in achieving its goals and objectives. provide environmental, industrial and company analysis for Ryanair. We will be presenting strategic choices, recommend initiatives and areas for improving strategy implementation for the senior management team of Ryanair

2. Critical issues

Ryanair operates the first low cost passenger airlines in Europe. Starting in 1985 Ryanair followed the example of Southwest Air-lines, introduced the low cost concept in Europe and became market leader in the low-cost air-line market by consequently saving costs.

Ryanair steps forward with a vision "to firmly establish as Europe's low fare scheduled passenger airline through continued improvements and expand offerings of its low fare services" (Ryanair Report, 1997). And a mission to become Europe′s most profitable lowest cost airline by rolling out the proven `low-fare-no-frills′ service in all markets in which we operate, to the benefit of our passengers, people, and shareholders (Ryanair Report, 1997). And also the Ryanair team works hard towards achieving their company vision.

As the airline which has the highest number of passengers Ryanair's goal is to continuously improve and expanded offerings of its low-fare service to firmly establish itself as Europe′s leading low-fares scheduled passenger airline.

Ryanair's objectives up to year 2012 is to raise the market share within the low cost sector up to 40%, to have a fleet of 200 airplanes in 2012, to double the annual passenger transportation to 80 million by2012, to eliminate the rest of the costly call centers, to base the distribution only on online booking, to quadruple its annual profit up to €1,230 billion in 2012.

Currently the European airline industry is facing a backdrop and a burgeoning budget sector. The critical issue is, whether Ryanair could face these external, internal and industry environmental threats and succeed in achieving its goals and objectives.

3. Analysis

3.1 External analysis

PESTLE analysis can be used to analyze the external environment for companies which will help to identify their strategies. PESTLE analysis covers 6 factors which are Political, Economical, Technological, Legal and Environmental.

3.1.1 PESTEL (Appendix 2)

Political Factors

Government latest move on security measurement of airline service will be an effect on Ryanair and it will increase the cost of Ryanair.

The tax rate and tax policies are different from one country to another country; therefore it will affect Ryanair when deciding the price, it might be fluctuate from one country to another country.

When countries develop the tourism sector it will definitely benefit Ryanair, because their giving low fare rates, hence this will reduce the cost of travelling for the tourist.

Though Ryanair is operating within the Europe, but some countries will support only their national airline rather that supporting low fare airline like Ryanair.

Economic Factors

One of the main threats for the airline industry is the increase of fuel price, since Ryanair is a budgeted airline when there is price increase it increase the fare, this might create a negative perception to the customers

Since it operates in the Europe the depreciation of US dollars will also effect badly

The rise of airport handling charges also increases the fare of Ryanair

Social Factors

After the 9/11 attack people fear flying, and they prefer the land route, this affect the whole airline industry in Europe

Another factor is that during the recession time people are not willing to spend time on leisure or holydays this also affects the airline industry badly

Technological Factor

Logical factor has a major impact on the airline industry, after the internet use the competition has grown to the great extend, the perfect example is the online booking system, the online booking system has created high completion in the airline industry, this would affect Ryanair, because if a customer does not get a place in Ryanair he/she will simply switch to another airline.

In Europe the introduction of high speed train system has greatly affected the airline industry, and people wish to travel in the due to safety and also cheap than travelling in airline.

Legal Factor

The legal aspect of the airline industry is very much strict than other service providers the following are some of the issues that has to be considered by airlines

Privatizing of airline industry

Illegal subsidies from airports

Competition laws in aviation industry

Allegations of misleading advertisement

Regulations about Carbon emission level

Environmental Factor

Airline industry has the highest responsibility to save the environment and not to pollute the globe. The following factors has to taken highest priority to successfully operate the airline, failure to take caution of the following factors would add an extra burden for the airlines.

Noise level controls

Global warming issues in terms of the heat produced when travels in the sky

Green house gas effect (Carbon emission level)

CSR (Corporate Social Responsibilities) Policy

3.1.2 Porters diamond (Appendix 3)

Firm Strategy, Structure and Rivalry

Environmentally concerned.

Entrants of other Low Cost Carriers.

Demand conditions

Demand is increasing for Low fares air travel.

Related and supporting industries

Car hire, Hotels, Travel insurance ,Baggage tracing, Free city guides, Ticketing, Aircraft handling ,Airport coach and other services.

Factor conditions

Technological advancement.

3.1.3 Strategic drivers (Appendix 4)

3.2 Industry analysis

3.2.1 Porters 5 forcers (Appendix 5)

The industry analysis can be analyzed using Porter's five force model, the five forces are Bargaining power of suppliers, bargaining power of customers, new entrance, threat of substitutes and, competitive rivalry.

Bargaining Power of Suppliers

Boeing is the main supplier of Ryanair, and they have the bargaining power over Ryanair, therefore switching costs from one supplier to the other is high because all mechanics and pilots would have to be retrained. All the aviation are directly influenced by the price of fuel, therefore the bargaining power oil suppliers and fuel suppliers are high or no bargaining power over them. The bargaining power of regional airports have little bargaining power due to the fact that they heavily depend on airlines, this is an advantage for Ryanair to reduce the cost, but bigger airports, where Ryanair's competitors operate, have greater bargaining power, this might increases the cost of Ryanair when bigger airports increases their fare.

Bargaining Power of Customers

Customers are considered to be price sensitive and majority of the consumers try to fly in budgeted airline or economic class, therefore if a company offer higher rate one on each other there is a high chance that people will switch to another airline, and in recent there are so many airline which provide low fare airline service therefore the customer bargaining power is very much high. Loyalty cannot be expected when there is a low rate airline compete with one on another, hence the bargaining power of customers are very much higher in airline industry.

New Entrants

There are some considerable amounts of barriers for new entrance to the airline industry, after the 9/11 attack EU is more concern about the airline service security system, this security system creates high entry barrier for newcomers. Further the capital investment is very high when it comes to airline service therefore many people or companies afford such capital investment.

Threat of Substitutes

Since it is a low fare budgeted airline the loyalty level of customers are very much low than comparing to other luxury service providing companies, and also there are some other companies providing low fare airline service, therefore the there is a high level of threat of substitutes. Further Ryanair is have unfriendly customer relationship, it is a common issue by every passenger of Ryanair, hence there are so many other airlines customers might switch other airlines, because there is no switching cost for customers. In addition within the Europe there are other modes of transport, e.g. Eurostar, TGV, Eurolines, Ferries, and Cars etc.

Competitive Rivalry

In this airline service the most cost advantages can be copied immediately because the service is more visible to everyone since it is operating only in Europe. Low levels of existing rivalry as the two major low-cost airlines have avoided direct headto head competition by choosing different routes to serve, However if any company does decide to compete on the same basis as Ryanair there willbe heavy pressure on prices, margins, and hence on profitability, and also there is not much differentiation between services only the price is the main differentiating factor.

3.2.2 Strategic grouping (Appendix 6)

3.3 Internal analysis

3.3.1 Barney's framework (Appendix 7)

3.3.2 Value chain analysis (Appendix 8)

4. External environmental analysis

5. Internal environmental analysis

6. SWOT analysis (Appendix 10)

6.1 Strength

Ryanair has a well recognized brand name for the past 20 years and 94% of the bookings are done through e-booking this reduces the cost of having travel agents. Ryanair is considered to be financially stable, based on exhibit 2 in the case study; Ryanair has 107 air craft's and 16 bases which helps them to cover many part of the Europe. Ryanair's website is the largest travel website in the Europe and Ryanair website is the most viewed website in Google; this shows the amount of passengers who are interested to travel in Ryanair.

6.2 Weakness

Presently Ryanair is considered as the least favourite airline in the world due to the fact the they do not provide adequate customer service, this perception leads to unsatisfactory among passengers, there is an often complain among passengers who travel from Ryanair is that they lose their luggage's very often, this is due to the fact, the process was not handled efficiently and staff are not trained to handle the process with caution, and also most all of their service are outsourced, hence there is a chance of losing luggage. Ryanair staffs are considered to be very unfriendly and there is a common issue that the process always delays.

6.3 Opportunity

Though there are some negative aspects of Ryanair, it has the largest customer network around 34.9m, when comparing to their other major competitors, it has the opportunity to further expand the operation within European continent and increase the amount of customers to maximize profit. Economic slowdown and economic crisis in the world helps Ryanair to keep customers coming, due to their low fair that they provide. Economic conditions creates a global demand in the low fare air travel, this is a great advantage for Ryanair to expand their service.

6.4 Threat

Increase of fuel price is one the threat every airline is facing currently, since Ryanair is a low fare airline when the fuel price increases it affects their pricing strategy, and there is high chance that people would switch to other airline if Ryanair increases the price. 9/11 attack created an international threat for all the airline service in the globe and EU is imposing very strict rules and regulation for airline industry and security measurement. This does not allow the airline to operate independently. Environmental concerns impose new environmental tax for all the aviation; this would increase the price of Ryanair.

7. Conclusion

8. Recommendation

Based on the above external, internal and industrial analysis, it is recommended that Ryanair consider the expansion in to haul markets - specially the transatlantic routes which accounts for more than 60% of world's air travel. By moving in to this new market with its low fare strategy coupled with added service options the company can utilize its existing business with introducing complementary goods and services via its web site it's also recommended as this will allow the company to further reduce its cost base per unit of customer.

Future Strategy and Recommendations

Mergers and Acquisitions

Mergers and acquisitions have become one of the most important corporate-level strategies in the new millennium. Merger and acquisition strategies are important to firm growth and success in the 21st century. As Ryanair continues to grow it is expected that the company will acquire other companies such as Buzz, in order to improve its capabilities and acquire more competitive advantage.

Strategic Human Resource Management

Ryanair, in its commitment to low-cost airfare have sacrificed its processes and services. The human resources of the company are not seen as a potential source of competitive advantage. The company does not seem to value its people. There is a growing belief that a company's human resources are the most important source of competitive advantage. Human resources or the company's people are one source of sustainable competitive advantage. In a fast-changing environment where technological innovations and other strategies can be copied, it is the human resources that bring a sustainable competitive advantage.

Marketing Plan Strategies

Ryanair should has a detailed plan for its strategic moves in the market and be able to provide good customer services to the customers like by having discounted flights and value promotion to keep the competitive advantage at a stable mode within its competitors and will need to focus more on the core competencies that allow Ryanair to practically and wisely designs suitable airline operations within the bracket of their marketing network services in a market standard-based perspective. Ryanair need to be goal oriented and must not stop to rejuvenate and change their marketing plan strategies from time to time in order to re-invent the performance process upon the upgrading of rules and regulations mandated by the state. Ryanair is to overcome the lack of product differentiation and increase it that will have the ability to revive revenue generation. Operational Effectiveness

It is then recommended that Ryanair should outsources as many non-core functions as possible that may abandon peripheral services such as catering or ground handling services and can be required to perform such activities as external specialist companies defined to be independent profit centers.

9. Bibliography


10. Appendix

Appendix 1

Double loop learning model

Corporate performance


Development of strategy

Step 2

Reconstruct or develop new strategy

Step 1

Tighter controls

If unsatisfactory

Appendix 2

External Environment Analysis- PESTEL analysis


DAA' proposal of 60% increase in charges at Dublin Airport.

BAA's inefficiency and incompetence as an airport monopoly.


Rise of fuel prices up to $55 in late January 2007 and unpredictability of jet fuel cost fluctuations.

Increase in insurance costs for all commercial airlines due to 9/11 attacks.

Socio cultural

Voted as the world's least favorite airline.

Voted as best for fares(low fares)

Voted as number one for punctuality, lowest number of complaints, fewest cancellations and fewest lost baggage's.


Use of company website to promote the services offered, flight bookings and even to publish on flight timings etc…

In flight mobile service technology used.


Air line industry is likely to be taxed by 2010 for emission of green house gasses and carbon.

Be a part of emissions trading scheme that would cost up to 9 Euros per return ticket within Europe.


EU regulation to provide immediate assistance for air passengers at EU airports for flight delays, cancellation and denied boarding.

UK imposed laws for passengers to bring check-in bags.

Appendix 3

External Environment Analysis- Porter's Diamond Model

Firm Strategy, Structure and Rivalry

Environmentally concerned.

Entrants of other Low Cost Carriers.

Related and supporting industries

Car hire, Hotels, Travel insurance ,Baggage tracing, Free city guides, Ticketing, Aircraft handling ,Airport coach and other services.

Factor conditions

Technological advancement.

Demand conditions

Demand is increasing for Low fares air travel.



Appendix 4

External Environment Analysis- Strategic drivers

Market globalisation

Cost globalization

Globalization of government policies

Globalization of completion


Appendix 5

Industry Analysis- Porters 5 forces

New Entrance

Competitor Revelry




Bargaining Power of Suppliers

Boeing are RA's main suppliers

Only 2 possible suppliers of planes - Boeing and Airbus

Switching costs from one supplier to the other is high because all mechanics and pilots would have to be retrained.

Price of aviation fuel is directly related to the cost of oil (Ryanair controls these through hedging).

Regional Airports have little bargaining power as they are heavily dependent on one airline

Bigger airports, where Ryanair's competitors operate, have greater bargaining power.

Ryanair's policy is to try and avoid these airports.

Bargaining Power of Customers

Customers are price sensitive

Switching to another airline is relatively simple and is not related to high costs

Customers know about the cost of supplying the service

No loyalty

New Entrants

Some barriers to entry:

High capital investment,

Restricted slot availability makes it more difficult to find suitable airports.

Immediate price war if encroaching on existing LCC route.

Need for low cost base

Flight Authorizations

Threat of Substitutes

No brand loyalty of customers

No 'close customer relationship'

No switching costs for the customer

Other modes of transport, e.g. Euro star, TGV, Euro lines, Ferries, Cars etc.

Competitive Rivalry

The LCC market is highly competitive

Most cost advantages can be copied immediately

Low levels of existing rivalry as the two major low-cost airlines have avoided direct head to head competition by choosing different routes to serve

However if any company does decide to compete on the same basis as Ryanair there will be heavy pressure on prices, margins, and hence on profitability

Not much differentiation between services. Price is the main differentiating factor

Appendix 6

Industry Analysis- Strategic grouping model

Appendix 7

Internal Analysis- Barneys model

Appendix 8

Internal Analysis- Value chain analysis


Appendix 9

Resource based view model



Same as companies easy to substitute



Something better than the competitors and difficult to imitate and substitute





Supplier efficiency

Supplier quality

Supplier innovation

Supplier customer response





Tangible Resources

Toyota's production facilities

Technical Advancement

Intangible Resources

Ryanair's Reputation

Brand name


Technical knowledge


Accumulated learning


Price, Quality service, Reliability

Competitive advantage of Toyota

Figure 1: Resources based view if competitive advantage of TOYOTA

Non available resources