Ryanair is among the largest low-cost airlines in Europe founded by Christopher Ryan in 1984 (Bloomberg, 2018). In order to gain a competitive advantage, the airline offers convenience and low-cost flights. The paper objective is to discuss strategic management theories and models to analyze Ryanair strategic situation. It will critically examine external and internal environments influencing organizational strategy and objectives.
Harvard Business Review (TB0537-PDF-ENG)
January 01, 2018
Case questions answered:
- Using strategic management models and theories, critically evaluate the strategic situation of Ryanair.
- To enable Ryanair to keep a competitive advantage, propose a clear and logical strategic plan that will link findings (from task one) to recommendations, and achieve the strategic objectives of the organization.
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Case answers for Ryanair: Can a Leopard Change Its Spots?
Ryanair is among the largest low-cost airlines in Europe founded by Christopher Ryan in 1984 (Bloomberg, 2018). The company operates in 37 countries with over 220 destinations, about 450 fleet size with its route network connecting Europe, the Middle East, and Africa. In the 2018 fiscal year, Ryanair served about 130.3 million customers (Ryanair, 2018).
The airline offers ancillary services such as non-flight scheduled, travel insurance, internet-related airline, and markets accommodation services. Ryanair (2018) demonstrates that the airline has over 14000 employees with a 7.6% revenue growth between 2017 and 2018 fiscal years. Ryanair recorded net-income of €1.5 billion and €19.6 billion market capitalization (Ryanair, 2018).
In order to gain a competitive advantage, the airline offers convenience and low-cost flights. The paper objective is to discuss strategic management theories and models to analyze Ryanair strategic situation. It will critically examine external and internal environments influencing organizational strategy and objectives.
1. Task 1
Ryanair must examine both micro and macro-environment to ascertain market trends that present opportunities to improve competitive advantage and potential threats to their marketing strategies. To understand the business environment, the company needs to evaluate external and internal forces using management approaches such as SWOT analysis, McKinsey 7-S Framework, Steeple, and Porters 5 Forces (Evans, 2015). The layers of the business environments are outlined in the diagram below.
Figure 1: source Johnson et al. 2011
a. Ryanair STEEPLE analysis
According to Evans (2015), social environment analysis focuses on understanding social changes and potential impacts on industry and businesses. The key factors of considerations are demography, beliefs, attitudes, and values as well as social structure. Globalization has heightened labor international mobility resulting in more demand for low-cost airline services. Airline consumers’ attitude is influenced by airline ticket prices, with most passengers preferring low-cost.
In addition, social classes and education levels impact the demand for Ryanair services. Middle-class lifestyle changes and disposable income exert forces on low-cost airline expansion. Comparing previous generational travelers, millennials demand high customer service levels without having to pay premium prices and focus on advanced technology airlines (Barton et al., 2013).
Demographic factors such as the percentage of retired people in a population influence the demand for air travel. The number of retired people in Europe is increasing. David and Gelfeld (2015), travel research shows that approximately 99% of Baby Boomer’s passengers in 2016 anticipated leisure travels.
Technology environment analysis entails understanding the impact of technology changes on business activities including information, operation process, and communication (Evans, 2015). Computer reservation systems are some of the technologies transforming Ryanair airline.
In addition, Global distribution Systems offer real-time connectivity between travel products, retail sellers, and travel inventory suppliers which is electronic commerce enhancing travel experience (Buhalis, 2003). Through the internet and mobile apps, consumers are able to book flights. The increasing use of social media has facilitated customer engagement and retention.
Economic environment analysis involves macro-economy elements such as monetary and fiscal policies that influence consumers and business operations (Evans, 2015). Tax rates, exchange rates, inflation, and employment rate have an impact on Ryanair operations. The decline of pound value after Brexit affected the demand of airlines.
In addition, operation costs increase with an increase in fuel prices which is supplemented by a decrease in the number of leisure travelers. Airline operations are affected by taxes levied by destination governments. The UK has the highest Air Passenger Duty in the EU (O’Shea, 2018).
The green environment issue, global climate change, and noise pollution are some of the environmental factors affecting Ryanair. As explained by Graham (2013), public tolerance of noise generated by aircraft has diminished leading to measures on noise abatement being implemented in most airports.
Airplanes produce greenhouse gases such as water vapor and carbon dioxide which has led to climate change and global warming (Graham, 2013). For that reason, airlines are forced to implement ways to reduce air pollution and increase sustainability through eco-labeling and acquiring carbon-emission permits.
Political environments are factors under the influence of the government including economic policy, regulations, and legislation. Political stability has a major impact on airline operations. Ryanair operates in countries within the Eurozone. The political climate of the countries is peaceful.
The UK political stability value within the 1996 and 2017 period has been 0.49 points ranked 80th position in the global political-stability index (World Bank, 2018). Political situations in regions such as the Middle East countries which are part of the Ryanair base need close monitoring because they often experience instability.
The legal framework for Ryanair is likely to be affected by the Brexit referendum. There is a likelihood that EU countries will implement restrictions that could affect air travel demand within their routes.
In addition, Ryanair is likely to lose its European routes due to Brexit if they fail to relocate their headquarters (Kilpatrick, 2017). Other regulations to consider in markets they operate in include labor laws, health and safety laws, consumer protection, and intellectual property laws.
Passenger safety is a major ethical consideration that affects airline operations. Ryanair ethical factors must focus on…