Strategy Identification and Implementation of Ryanair

irline which started 1985 by Ryan family (Ryanair website). From its start followed the example of Southwest Airlines introduced the low cost concept in Europe and became market leader in the low-cost airline market by consequently saving costs. It’s an Irish airline with head office in Dublin and its biggest operational base at London Stansted Airport in the UK (“Ryanair Europe’s greenest airline” n.d).Ryanair’s has grown steadily to now in the most environmentally friendly way by investing in the latest aircraft and engine technologies which have reduced fuel burn and CO2 emissions and the implementation of certain operational and commercial decisions.

For this Ryanair’s strategy identification and implementation report need to consider undertaking the following analyses and activities which are;

Identification of Ryanair’s current strategy and provision of its justifications.

Evaluate the appropriateness of its organizational structure and systems including control systems on its strategy implementation.

Examine the appropriateness of the leadership style used in implementing the strategy

Make recommendations for Ryanair to improve its strategy implementation.

Ryanair’s main current strategy is to provide low cost fares for the passengers and it is mainly controlled by Minimized marketing cost, low customer facilities, fleet commonality, and outsourced services advertisement managing staff at a lower cost. Ryanair’s organisational structure is a Functional structure & its leadership style is an effective characteristic style.

Through the Ryanair strategy identification and implementation analysis unproductive strategic decisions have been identified and finally report has been concluded & suggested the recommendations to develop Ryanair’s strategy in the future.

(2.0) Introduction

This report is based on the case provided; “Ryanair – the low-fairs Airline” which was written by Eleanor O’Higgins, University College Dublin, Republic of Ireland in 2007.

Ryanair is the first of all founded low cost scheduled passenger airlines in Europe. Starting in 1985 it followed the example of Southwest Airlines introduced the low cost concept in Europe and became market leader in the low-cost airline market by consequently saving costs. 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 Million in 2006 with a net profitability of about 10 % (Ryanair Report 2007).

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According to the case the report has critically evaluated the strategy of Ryanair against the Ryanair’s structure, systems & leadership style. For this evaluation as a member of the management consulting firm I have provided a strategic analysis of identification of Ryanair’s current strategy and provisions of its justifications, evaluation of the appropriateness of Ryanair’s organizational structure and systems on its strategy implementation, Examination of appropriateness of Ryanair’s leadership style used in implementing the strategy & recommended implementations need to improve its strategy using appropriate theoretical models, tools and techniques from this document to the senior management team of Ryanair.

The analysis has been done by using significant theories such as Value Chain Analysis, SWOT analysis, Porter’s Generic Strategy, 7 major forces given by Hubbard such as Capability, Environment, Systems, Structure, Culture, Leadership and People & organisational structures etc. from the knowledge on Ryanair. Through the Ryanair strategy identification and implementation analysis unproductive strategic decisions have been identified and finally suggest the recommendations to develop Ryanair’s competitive gain in the future.

The analysis of this report was done with the support of the provided case information, Ryanair website, using first report materials, industry related information from academic books, journals, websites, and other publicly available secondary data sources.

(3.0) current Strategy of Ryanair

Ryanair is a global airline which provides scheduled passenger airline services between Ireland and the United Kingdom. It is Europe’s first and largest law fares airline which started 1985 by Ryan family (Ryanair website). Today it is the World’s favorite airline with 41 bases and 1100+ low fare routes across 26 countries, connecting 153 destinations. Also it operates a fleet of 232 new Boeing 737-800 aircraft with firm orders for a further 82 new aircraft. In order to achieve its long term Vision Ryanair has set appropriate mission, a set of goals and objectives. The set of Objectives itself represent that Ryanair currently has main strategy to offer low fares/cost reduction.

Vision

Ryanair’s CEO, Michael O’Leary has a vision of a world where the fare could drop to nothing as local communities would subsidize the airline to bring a steady traffic of business people and tourists to their region. (Ryanair Report, 1997)

Aim

Ryanair aim is to offer low fares that generate increased passenger traffic with a continuous focus on cost-containment and operating efficiencies. (Morato, R. 2008).

Mission Statement

Ryanair will become Europe′s most profitable lowest cost airline by rolling out our proven `low-fare-no-frills′ service in all markets in which we operate, to the benefit of our passengers, people and shareholders. (Mayer, 2007)

Objectives

Ryanair’s main objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fare service (Ryanair 2007).

The other objectives that Ryanair try to achieve by 2012 are as follows. (Mayer, 2007)

Increasing the market share of low cost segment equal to 40%

To double the yearly passenger transportation to $80millin by 2012

Annual profit to be quadrupled equal to 1,230billion in 2010

Make Online booking the primary base of distribution

Ryanair has an effective strategic position at present and its main critical key success factor is providing the lowest fares to the passengers as mentioned above. This low cost strategy is been part of Ryanair through following the operations in a lowest cost. The current low cost procedures are mainly on Minimized marketing cost, low customer facilities, fleet commonality, and outsourced services advertisement managing staff at a lower cost.

(3.1) Ryanair Low Cost Strategy

Minimized Marketing Cost and other facilities

Ryanair has implemented different marketing strategies to attract the target market and to survive in the market. As a result Ryanair has gained a competitive position in the industry.

In house advertising

Michael O’Leary promotes himself internationally

No preferred seats

Managed Staff Cost

Recruiting only experienced pilots. This reduces training cost.

Performance based pay structure

Fleet Commonality – only one kind of plane

Low maintenance cost

Low training cost

Ability to schedule aircrafts effectively

Low Cost Policies & Aircraft Charges

Using secondary and regional airports

No agency commission as there is no any use of travel agents

Direct Marketing methods to attract customers

Outsourcing Services

Contract with Hertz car rental and hotels

Ticketing and aircraft handling

Please refer Appendix 01, 02 & 03 for the key elements which make up Ryanair’s strategy, value analysis and SWOT analysis.

(3.2) Does the Ryanair plan to Grow?

Ryanair introduced its first routes to continental Europe in the spring of 1997 and now serves a total of 62 continental destinations. Therefore it believes that there will be a opportunities for continued growth by Initiating additional routes from the U.K. or Ireland to other locations in continental Europe that are currently served by higher cost, higher-fare carriers, increasing the frequency of service on its existing routes, starting new domestic routes within EU countries, Considering possible acquisitions that may become available in the future, connecting airports within its existing route network and establishing more new bases in continental Europe. Also I can clearly say that Ryanair plans to grow as in the case they trying to acquire AerLingus.

(3.3) what products and services do they plan to provide?

Ryanair offers a variety of ancillary services and other revenue generating services including on-board merchandise, beverage and food sales, accommodation reservation services, advertising, travel insurance, car rentals and rail and bus tickets. Ryanair distributes car rentals, accommodation services and travel insurance through both its website and its traditional telephone reservation offices.

(3.4) what customer and geographic markets does it plan to service?

Customer Service

Ryanair’s another strategy is to deliver the best customer service performance. According to the case Ryanair has achieved better punctuality, fewer lost bags and fewer cancellations. Ryanair accomplished those by strongly focusing on the customer services and by operating from uncongested airports.

Frequent Point to Point Flights on Short Haul Routes

Ryanair provides frequent point to point service on short haul routes to secondary and regional airports in and around major population centers and travel destinations. Secondary and regional airports usually do not maintain slot requirements or other operating restrictions that can increase operating expenses and limit the number of allowed take offs and landings. Only flying short-haul routes allows Ryanair to offer frequent service while reducing the necessity to provide “frill” services which expected by customers on longer flights and faster turnaround times are a key element in Ryanair’s efforts to maximize aircraft utilization. Furthermore Point to point flying let Ryanair to avoid the costs of providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. This is one of the key differences between Ryanair and other airlines.

(3.5) what generic strategy does it plan to follow to position itself uniquely against competitors?

Ryanair faced competition from traditional carriers such as Aer Lingus and British Airways, other discount carriers such as easyJet, and charter airlines that focused on package tours. Please refer Appendix 04 & Appendix 05.

(3.6) what position does it plan to hold in the future?

From its scrappy beginnings as an upstart Ryanair had become a world aviation leader. It had accomplished this in the face of severe competition from established players and new discount operators with industry wide shocks that put several competitors out of business. In the future within 5 years Ryanair desire to;

Increase the market share of low cost segment equal to 40%

To double the yearly passenger transportation to $80millin by 2012

Annual profit to be quadrupled equal to 1,230billion in 2010

Make Online booking the primary base of distribution

As O’Leary indicated in 2007 to launch a new long-haul airline, RyanAtlantic in 2009

According to the Michael O’Leary Ryanair expect to be the “world’s highest profit low cost airline” in the future.

(4.0) Ryanair’s Structure & Systems

Organisational structure is the way in which activities are arranged in an organisation. Ryanair has a Traditional Functional structure with functional heads reporting direct to CEO as draw in the below chart. Please refer Appendix 06 to advantages and disadvantages of functional structure

CEO – Michael O’Leary

Chairman of Board

Director

Director

Director

Director

Director

Director

CFO

Legal & Secretary

Engineering

COO

Flight Operations & Ground Operations

Human Resources

Commercial Revenue

Customer Service

Pilot

(The Official Board.com, 2010)

Furthermore Ryanair follows an international Strategy which is a centralized business concept, extensive transfer of structures, systems, processers and resources from the headquarters to locations abroad. (Holtbrügge &Wiedemann, 2009)

Ryanair’s Leadership Style

Since 1985 to now it has grown massively into one of the Europe’s largest low fare carrier. In 1990 the company suffered a £20 million loss and was forced to completely restructure and a new management team was brought in headed by Michael O’Leary who made major changes to the airline. Ryanair restructured itself and became a low-fares, no -frills carrier. After the next few years Ryan air significantly slashed its fares further and managed to open up many new routes. Despite the airlines huge success with Michael O’Leary’s control he himself has come under scrutiny resulting in both praise and criticism for both him as a leader and his management style.

Also when considering a leader there are three main characteristics of leader which are;

must have a strongly held vision

must be able to communicate that vision

must be able to convert the vision into reality

When it comes to the O’Leary he has a clear vision for Ryanair and has communicated it within the organization very well. As far as the vision has turned into a reality as Ryanair has grown and achieved profits as Europe’s biggest and favourite no frills airline. Therefore O’Leary possesses characteristics for a leader.

As in the case Ryanair won various international awards such as best managed airline in 2001 and O’Leary was awarded in 2004 as the European Businessman of the year by Fortune Magazine. Furthermore O’Leary named as one of 25 European Business Stars who are expected to make a difference by Financial Times and in 2005 he was ranked 18th among the world’s most respected business leaders. Also present and former staff has praised O’Leary’s Leadership style. O’Leary is publicity seeking antics have earned him a high profile but also his outspokenness has brought him into the public eye. In addition he has introduced an atypical corporate culture through his brash leadership style and his fearless approach to entering new territory.

According to the all above mentioned facts I can say Ryanair management and its CEO O’Leary have an effective, highly task and people oriented charismatic leadership style.

Recommendation.

The whole analysis has summarized both pluses and minuses in the company. Through examining the Ryanair’s current strategy the following recommendation could be illustrates. Following strategies can be used to decrease the weaknesses and avoid threats of the company and improve its competitive upgrading.

Customer Relationship Management – In the service sector most important is the satisfaction of the customers. Due to poor facilities and ancillary services Ryanair has lost their customer relationship. In SWOT analysis also customer relations are mentioned as a weakness. Therefore Ryanair may improve their customer service by designing a better service system that can deliver good service with low cost, better training frontline employees, monitoring the target market needs, wants and values rather than making the assumption that offering the lowest fare is the only incentive. Therefore, a strong CRM strategy should be implemented to minimize the weaknesses of the company.

Expand to more known routes – Ryanair must look to other operating bases to expand their network. Although there is not the same demand outside there is still sufficient demand to make a considerable profit. Also there are many possible routes still not served by low-cost carriers. Ryanair can also open routes where the competition is a more expensive for traditional carrier while attracting customers with the cheaper no-frills option.

Look at large leisure and private travel market – Ryanair is only focused towards low cost passengers but there are customers who used airlines for their private and leisure travels which gives chance to make a significant profit. Also when it comes to low cost it hide the quality of the service. Therefore Ryanair can expand their market to new segments.

(7.0) Conclusion

All over the report primarily concentrate on the case provided “Ryanair – The Low Fares Airline” and evaluating the identification of strategy & implementations that can be done to the organizational strategic gaps and the report highlights some of the key strategies of the organization.

Ryanair is the most favorable low fare airline in the Europe and with this they have been successful all the way so far. But now I can conclude from the above analysis that Ryanair have to implement their current strategy not for only winning the low fare strategy but gaining a stable position in the value segment and in new non-European markets.

References

David, F. R. (2005). Strategic Management (10th Ed.). NJ:Prentice hall

Fletcher, J. (2003). Strategic Management Ш study guide and plan. Edith Cowan University.

Holtbrügge, D & Wiedemann, K, (2009). Cross-Border Configuration of Airlines’ Value Activities. A Comparative Study of the Airlines’ Lufthansa and Ryanair Retrieved June 02, 2010, from: http://isss.uni-leipzig.de/index.php/Download-document/107-ISSS-2009-Holtbruegge-Wiedemann.html

Mayer, S. (2007). Ryanair and its low cost flights in Europe. University of the Sunshine Coast Queensland (Business Faculty). Retrieved May 23, 2010, from: http://www.grin.com/e-book/87815/ryanair-and-its-low-cost-flights-in-europe

Robil, Today’s Airline Industry – Ryanair Against British Airways (BA), Retrieved from May 27, 2010, from: http://fliiby.com/file/837674/8910dr0blw.html

The Official Board.com, (2010). Ryanair, Retrieved June 01, 2010, from: http://www.theofficialboard.com/org-chart/ryanair-holdings

Ryanair case study, Retrieved from May 27, 2010, from:

http://www.docstoc.com/docs/26265928/Ryanair-Case-Study

(9.0) APPENDIX

Appendix 01

The key elements that make up Ryanair Strategy are;

Low Fares – Ryanair main strategy is to establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanding offerings of its low-fares service. These low fares are used to stimulate demand to target fare conscious leisure and business travelers who might otherwise not travelled at all or use other methods of transportations such as cars or trains. Ryanair sells it seats on a one-way basis which came into effect in November 2001. Normally Ryanair’s competitors do not operate a one-way pricing policy. Ryanair sets its fares on the basis of the demand for particular flights and by reference to the period remaining to the scheduled date of departure. 70% of seats on a flight are sold at the minimum available fare assigned for the route and once these are filled the price per seat rises. This policy is very useful to show Ryanair’s low fare image.

Customer Service – Ryanair’s another strategy is to deliver the best customer service performance. According to the case Ryanair has achieved better punctuality, fewer lost bags and fewer cancellations. Ryanair accomplished those by strongly focusing on the customer services and by operating from uncongested airports.

Frequent Point to Point Flights on Short Haul Routes – Ryanair provides frequent point to point service on short haul routes to secondary and regional airports in and around major population centers and travel destinations. Secondary and regional airports usually do not maintain slot requirements or other operating restrictions that can increase operating expenses and limit the number of allowed take-offs and landings. Only flying short-haul routes allows Ryanair to offer frequent service while reducing the necessity to provide “frill” services which expected by customers on longer flights and faster turnaround times are a key element in Ryanair’s efforts to maximize aircraft utilization. Furthermore Point to point flying let Ryanair to avoid the costs of providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. This is one of the key differences between Ryanair and other airlines.

Low Operating Costs – Ryanair’s operating costs are lowest among the any of European scheduled passenger airline. They maintain and reduce expenses through aircraft equipment costs, personnel productivity, customer service costs and airport access and handling costs.

Aircraft Equipment Costs:

Ryanair’s initial strategy for controlling aircraft acquisition costs was to purchase used aircraft of a single type, however this no longer became viable as in the case Ryanair started to purchase new Boeing 737-800 “next generation” aircraft. The 737-800s represent the latest generation of Boeing’s 737 aircraft and share certain basic attributes in common with Ryanair’s current fleet. Although Ryanair’s acquisition of the 737-800s has already increase the size of its fleet and due to this its aircraft equipment and related costs also increased but purchasing aircraft from a single manufacturer enables it to limit the costs associated with personnel training, maintenance and the purchase and storage of spare parts as well as affording greater flexibility in the scheduling of crews and equipment. Furthermore Ryanair management trusts that the terms of the Boeing contracts are very favourable to Ryanair.

Personnel Productivity:

Remuneration for employees emphasizes productivity based pay incentives, including commissions for onboard sales of products for flight attendants and payments based on the number of hours or sectors flown by pilots and cabin crew personnel within limits set by industry standards or regulations fixing maximum working hours as well as participation in Ryanair’s valuable stock option programs. Ryanair’s average pay per employee for the year compares favorably to its competitors such as easyJet, Aer Lingus, British Airways.

Customer Service Costs:

Ryanair has entered into agreements with third party contractors at certain airports for passenger and aircraft handling, ticketing and other services that management believes can be more cost efficiently provided by third parties. The development of its own reservations centre and internet booking facility has allowed Ryanair to eliminate travel agent commissions.

Airport Access Fees:

Ryanair attempts to control airport access and service charges by focusing on airports that offer competitive cost terms. Management believes that Ryanair’s record of delivering a consistently high volume of passenger traffic growth at many of these airports has allowed it to negotiate favourable contracts with such airports for access to their facilities.

Maximizing the use of the Internet – Ryanair converted its host reservation system during year 2000 from the British Airways Booking System to a new system hosted by Accenture open skies. As part of the implementation of the new reservation system open Skies developed an internet booking facility called Skylights. This Skylights system allows internet users to access Ryanair’s host reservation system and to make and pay for confirmed reservations in real time through Ryanair’s Ryanair.com website. Since the launch of the Skylights system Ryanair has heavily promoted its website through newspaper, radio and television advertising. As a result internet bookings have grown rapidly. It is also a great asset in terms of producing ancillary revenues.

Commitment to Safety and Quality Maintenance – Ryanair’s promise to safety is a primary priority of the Company and its management. This promise begins with the hiring and training of Ryanair’s pilots, cabin crews and maintenance personnel and includes a policy of maintaining its aircraft in accordance with the highest European airline industry standards. Ryanair has not had a single incident involving major injury to passengers or flight crew in its operating history. Routine aircraft maintenance and repairs is carried out in house while currently contracting heavy airframe maintenance and engine overhaul services to contractors. Also these contractors provide similar services to other airlines such as British Airways and Aer Lingus.

Enhancement of Operating Results through Ancillary Services – Ryanair offers a variety of ancillary services and other revenue generating services including on-board merchandise, beverage and food sales, accommodation reservation services, advertising, travel insurance, car rentals and rail and bus tickets. Ryanair distributes car rentals, accommodation services and travel insurance through both its website and its traditional telephone reservation offices. These services allow Ryanair to increase sales through the internet while reducing costs.

Focused Criteria for Growth – Ryanair’s expansion of service to Europe and building its success in the Ireland and U.K. market intends to follow a manageable growth plan targeting specific markets.

Source: http://www.ryanair.com/doc/investor/Strategy.pdf

Appendix 02

Value Chain Analysis.

The value chain approach was developed by Michael Porter in the 1980 (Lynch 2003). Value chain analysis is the examination of the value chain of an enterprise to determine how much and at which stage value is added to its goods and/or services and how it can be increased to enhance Competitive advantage. The value chain is consisted of primary & supportive activities which add value directly and indirectly respectively. The diagram below clearly demonstrates the Ryanair’s core activities and this allow assessing the effectiveness and efficiency of the operations. Therefore a powerful carry-out of these operations will direct Ryanair to create a competitive advantage through adding value to the customer satisfaction.

Supportive Activities

Infrastructure

Minimum Corporate HQ

Human Resources Management

Low cost training

Limited Crew

Management control

In – house

Performance contracts

Technology & Development

Internet

Internet information

Integrated Systems

Low tech marketing

Internet sales

N/A

Procurement

Boeing discounts

Alliances

Outsourced

Private

Low cost

Primary Activities

Quality training

Low cost suppliers

Airport agreement

No frills

Low cost

Quick turnaround

Reliable service

Low cost promotions

Free publicity

Internet Sales

Limited resources

High productivity

Basic low cost

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

Source: http://www.slideshare.net/The_E_group/Ryanair-Study-version-7

Primary Activities

Inbound logistics – Inflow of materials for production is called as inbound logistics. Since Ryanair is a service organization, the main components of inbound logistics would be the human resource of the company (pilots, air hostess) machineries (Plains and other equipments) supplies as in fuel and other gases or oils and methods including the proceedings and other systems aligned with the service.

Operations – These are the activities related to the production of products and services. (Porter, 1985) The overall procedure of Ryanair is carried out with a low cost strategy. Secondly the processes aligned with the flights such as safety functions when accidents take place. The processes that assist environmental concerns and other processes that relate with transportation stand for the overall operational process of Ryanair. Running the operations to the minimum cost will overstress the on the whole performance of Ryanair that will leads to a competitive advantage through proving a low price service.

Outbound logistics – These are all the actions concerned with distributing the final product or service to the customers. Here Ryanair doesn’t poses outbound logistics as it only offer a customer satisfaction through providing transportation services.

Marketing and sales – This functional area essentially analyses the needs and wants of clients and is responsible for creating awareness among the target audience of the company about the firm’s products and services. Ryanair use many techniques for marketing and Sales to set up an effective communication such as they try to make internet sales as their main source of bookings by 2012.

Services – Customer satisfaction is merely the success in the service sector. There is often a need to provide services like pre-installation or after-sales service before or after the sale of the product or service. However recent surveys of Ryanair indicate a low level of customer satisfaction. Ryanair follow a “no frills” services to make the fares lowest possible. As a result consumers sometimes meet up with circumstances where most necessary services are not offered.

Support Activities

Firm Infrastructure – This includes planning and control systems, such as finance, accounting marketing and corporate strategy etc.

Human Resource Management – This area is concerned with recruiting, training, motivating and rewarding the workforce of the company and it is more and more becoming an important way of attaining sustainable competitive advantage According to the Ryanair their HR carries all the employees of Ryanair; all the employees of administration and management.

Technology Development – This is concerned with technological innovation, training and knowledge that are crucial for most companies today in order to survive. Therefore adoption to technology changes is important to survive in the market. Ryanair has introduced an internet for check-in and further services are provided through its website.

Procurements – This is responsible for acquiring the materials that are necessary for the company’s processes. A well-organized procurement department should be able to obtain the highest quality goods at the lowest prices. Here Air crafts and fuel is the main sources of procurements at Ryanair. Well skilled and knowledgeable experts are required in purchasing.

All the primary and supportive activities represent the organizational behaviors that create value to the customers therefore Ryanair should take necessary actions to integrate all the primary and secondary activities.

Appendix 03

SWOT Analysis

The SWOT analysis given below is to help Ryanair to achieve their mission and objectives by capitalizing on opportunities using their strengths and reducing their weaknesses and threats.

Strengths –

Ryanair is the 1st to launch low cost flights in Europe and has continuously maintained the low fare policy.

They have a strong brand image and strong bargaining power in airport deals.

Aggressive and Innovative leadership (CEO- Mr. Michael O’Leary).

Larger market s