Strategic analysis of Ryanair

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1 Mergers and acquisitions Many businesses have the intention of growing more than their current size but often times they don’t know what direction to take to grow as they desire. In order to gain market share and to
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increase bottom line results like revenue and profitability companies like Ryanair may seek to pursue either of a merger or an acquisition strategy. Mergers take place when two different companies come together to become a single unit (Caroline, 2007). In this type of situation both parties may choose to adopt a new name and they may combine their names so as to retain a measure of their previous identify. The merger could be between a big firm and a small firm or it may be between two small firms or it may be between two big firms. Often times the sizes of two companies coming together may be different. Difference in size may also be as a result of revenue capacity of each party. One party may have more access to revenue, facilities, technology and experienced personnel. In either case, mergers often require the management of both parties to consider their cultural differences, differences in asset base and differences in number of employees. These differences often constitute lots of barriers to the successful implementation of the goals and objectives of the merger and it is highly important to carry out a comprehensive analysis of the project before embarking on it. Acquisition on the other hand often takes place when a bigger firm seeking to gain more market share decides to acquire a smaller firm. For example Ryanair acquired Buzz airline and retained just 10 out of its 24 routes, and only 170 out of its 670 staffs. The two firms were operate based on an agreement in the MOU (Memorandum of Understanding). Acquisition is a very risky process because of the implication the success or failure of the process often has on the image of the bigger company (Stuart, 2007). Acquisition often begins with an assessment of the potential target of acquisition. Analysis could involve carrying out a financial analysis of the potential target to ascertain the position of the company and the impact the relationship will have on the long term survival of the new venture. Some of the risks involved in this process are the potential for the merger and acquisition to fail. For example Ryanair thought that they would make profit from their
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The customers of the first company ultimately become the customers of the second company.acquisition of Buzz at the end of 2004. So in a way the two companies are combining their competences for better performances. This was exactly what happened with Ryanairs acquisition of Buzz when they doubled Buzz’s customer base from 2 million to 4 million. Mergers and acquisitions often increase the technological strength of an organization. Alliance on its own stands for the coming together of two or three individuals of entities. So in effect there is a combination of customer strength which results into larger customer base for the new relationship. Strategic alliance Many strategic management authors and writers have identified strategic alliance as one of the means of achieving competitive advantage in an industry (Pearson and Robinson. This was the situation with Buzz. A strategic alliance is a voluntary formal agreement between two or more parties to pool resources to achieve a common set of objectives that meet critical needs 3 . On many occasions it may result into workers’ retrenchment because the new management cannot accommodate the large number of employees in the target organization. Mergers and acquisitions are also capable of increasing the customer base of the newly formed company. It consumes a lot of management efforts. 2. Mergers and acquisition are not always successful. 2005). when Ryanair did not accept all of their staffs. Meetings and deliberations and series of evaluations are carried out before making decisions on the right kind of company to merge with or to acquire. The same definition can be applied to business by viewing strategic alliance as the business relationship that exists between two or more organizations for the purpose of advancing the interests of all parties involved. The technological strength of the first company is always at the disposal of the other. Mergers and acquisitions are often cost –intensive and time consuming.

while remaining independent entities. This suggests that the identity of either of the parties remains unchanged. licensing. clusters. innovation networks. distribution relationships. There are many types of alliances. equity investments. This can greatly contribute to the process of knowledge sharing and knowledge transfer which ultimately influences research and development.. the technological competence of all parties involved are combined to achieve the stated goals and objectives. many or more companies are getting involved in strategic alliances. memorandums of understanding. Technology contributes greatly to a firm’s ability to attain competitive advantage. Strategic alliances can also enable participating companies to break the competitive strength of a leading competitor. Economies of scale occurs when an organization or many organizations reduce costs to large volume purchases or through large volume investment. partnership frameworks. franchising. joint ventures. Strategic alliance between two or more parties contributes to increase in market share as well as a larger customer base. Strategic alliance allows both parties involved to have access to either party’s technology. action sets. industrial standards groups. but in a bid to take advantage of the strengths of all parties involved to achieve a particular objective. and consequently when two or more firms decide to come together. cooperatives. One of the key reasons for entering into strategic alliance is to reduce operational costs through economies of scale. it becomes easier to increase product quality. research and development consortiums. etc. By combining the market prowess of all participating companies. Strategic alliance also grants access to the knowledge capital of all participating companies. reduce cycle time and to offer more differentiated product and services to clients which can ultimately attract more customers in the market. For Ryannair the type of alliance to be employed depends on the nature of the needs of both parties involved as well as the goals and objectives of all participating companies 4 . subcontracting (outsourcing). letters of intent.

the maturity stage and the decline stage (Kotler and Armstrong. As more customers purchase the products and services. Strategic alliance is not always successful. vision. This is so since market share is a representation of the number of customers purchasing a product. lack of trust and conflicts could contribute to the failure of strategic alliance. 3. 2006). incompatible culture. inability to share risks. There are some products that are currently generating revenue for the company while some others are still trying to penetrate the market. and when revenue increase. Product portfolio is a term used in business and management to describe the total number of business an organization is engaged in. the growth stage. The 5 . Typically all products have a lifecycle which is broken into the introduction stage. cash obviously increase. mission and objectives.in the alliance. A though evaluation of these issues is important to the success of any form of alliance initiative. present level of capabilities. The scope of the alliance as well as the selection of the target firms is also highly crucial to the success of the program. Ryanair has not been engaged in any form of alliance based on the information in the cases. The growth share matrix: Ansoff (1987) matrix represents the four possible product portfolio of a business. Some other categories of products have penetrated the market but because of many other competitors in the market. business model. Alliances cannot be not be successfully achieved without the critical evaluation of the participating firm’s strategy. incompatible objectives. Sometimes poor communication. The basic assumption of the BCG matrix is that an increase in market share would result to an increase in cash for a business. so do revenues increase. Not all products in a firm’s portfolio are in the same stage of the product lifecycle. The BCG matrix was designed by the Boston Consulting Group (BCG) in the USA to identify four types of products in a firm’s portfolio in terms of market growth and market share. sales and revenue are not at their best.

The BCG matrix is a good model to assess all the products in a firm’s portfolio and to examine their contribution to the business in terms of market growth rate and market share. The stars generate a lot of cash which is similar to a cash cow but they also consume a lot of cash. Strategy development Strategy development emanates from the process of assessing the internal and external situation of a firm. They are often characterised by high market share in a low growth market. The cash cow represents products that generate relatively stable level of cash. There are four types of products on the matrix.second assumption is that a growing market requires investment in assets in order to expand capacity. Over two-thirds of the company revenue comes from this. If a star maintains its existing market share. 4. The internal situation is usually assessed through the use of the SWOT analysis. with time it will become a cash cow. car rentals and hotel bookings represent the stars.Ryanair has no product in the class of dogs. Question marks are still growing and are capable of consuming large amount of cash. The strengths and the weaknesses focus on the real internal capabilities and drawbacks of the 6 . In order to accommodate the growth in demand the hotel must of a necessity build more rooms or expand its existing facility. The dogs typically have a low market share and a low growth rate. At Ryanair. Money is often tied up to products that are dogs. Cash cows enable the organization to develop other businesses with a steady flow of cash from another product source. For example Ryanairs cash cow is its no-frill flight. more clients begin to visit the hotel more than the number of available rooms. For example a Hotel which has 20 rooms in a particular suburb suddenly begins a massive advertising campaign and as a result. They don’t generate or produce a large amount of cash. the ancillary services which are the sales of travel insurance. The question mark has the potential to gain market share and become a star.

Here no formal planning takes place. These writers say that a firm may either approach strategy development from an emergent point of view. strategy evaluation. But many authors and writers have identified several strategy development frameworks. and at the end of the process target results are measured with actual results. 7 . strategy implementation and strategy control. An example given in the case was the adoption of the Southwest airlines operating strategy by Ryanair. it was clear that a fresh management team came was set up for the process. Porter divided this analysis into two by focusing on the primary activities of a firm and its support activities. a set of strategic options will begin to emerge relative to the preliminary analysis carried out. then the implementation process begins. feasibility and acceptability) frameworks as another option to evaluate the appropriateness of an option. in order to identify gaps and problems in the implementation process. Once the option is evaluated and it has been successfully approved by the executive management of the company. and the stakeholders’ objectives of the firms. return on equity etc. return on investment. Often times targets are set. The true position of the firm would then emerge and by identifying the vision statements. 1990). The generated options are evaluated through many financial methods like the benefit cost ration. The external analysis is also usually called a macro-environmental analysis and it is normally carried out by applying a PESTLE and five forces analysis to an industry where a firm operates (Ginter and Duncan. Pearson and Robinson (2005) identified the SFA (suitability.company while the opportunities and threats are outward focused. and the last stage of the process is to set control measures in order to measure the degree to which the strategy implementation process meets with target. Strategy development process is often divided into four stages: generation of options. The value chain analysis developed by Porter (1985) is another tool for evaluating a firm’s internal capability. Although the case did not discuss the details of the entire process. mission statements.

Another school of thought has agreed to have a combination of both approaches where some degree of planning are introduced to emergent strategy so that the whole process benefits from the values in an emergent approach. financial perspective. customer perspective. and it also benefits from the values of planning. In general the balanced scorecard is a strategic planning and management system that is used extensively in business and industry. and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization. This process is often time consuming but it eliminates the risks and uncertainties involved in the development of strategies. government. two Harvard University Professors. This tool is generally for evaluating the internal position of an organization. The balanced score card This model was developed by Kaplan and Norton. According to the authors.Strategies are developed in response to the needs and issues at hand. In both situation strategy development is not an easy process. The balanced scorecard has evolved from its 8 . improve internal and external communications. and innovation and learning perspective. a balanced scorecard enables a firm to identify its current level of performance and the performance indices for such performance relative to its internal processes. 5. 2001 crisis in the US forces Ryanair to adopt an emergent strategy by renegotiating its contract with Boeing. and monitor organization performance against strategic goals. planning in any managerial activity cannot be ignored. But other researchers feel that planning strategies slows down the process of implementation as many people would be involved in making decisions and conducting evaluations. Another framework for strategy development is to go through rigorous planning and evaluation as stated above. The September 11. Many writers have argued in favour of adopting a planned strategy development approach because according to them. It is time and resource consuming.

According to them. operational expenses. revenue stream. organizations which are constantly offering their staffs well tailored training programs aimed at improving their knowledge of work processes. and types of products and services offered to the 9 . after sales support service. 2000). are definitely going to be more competitive on the long run than many others who don’t t do that. and senior management use this to determine courses of actions. It provides a framework that not only provides performance measurements. volumes of customers.early use as a simple performance measurement framework to a full strategic planning and management system. It enables executives to truly execute their strategies. Often times management focuses on these measures more than other more objective measures that reveal the true position of things in the organization. Financial perspective focuses on measuring the performance of an organization with key financial ratios. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis (Taylor and Every. Learning and growth is very crucial to an organization’s survival. The management of Ryanair has used the financial measures to assess the performance of the business since it started. liquidity and other financial measures of performance. The customer perspective focuses on the customer service orientation of a firm as measured by the number of customer complaints. A firm’s current position is often tied to its profitability. but helps planners identify what should be done and measured. return on equity and investments. Many organization development authors have related learning and development with competitive advantage. Yearly profit and loss statements are released. The learning and growth perspective focuses on employee training and development programs in the organization as a means of creating an environment of learning where knowledge will be shared and all cadres of employees will work at the required level of skill and expertise to meet the company’s goals and objectives.

network based. Laurie Mullins.W Taylor and Henry Fayol factory workers were treated as machines. the lines of authority. There was no focus on relationship of training of employees to increase their productivity.customers. Organization structure In historical times during the era of Max Weber. Organization structure has therefore focused on the arrangement of working relationships in organizations. 6. product quality. sales figure. and the overall decision making process of the organization (Daft. The internal business process perspective focuses on the core measures of business performance in an organization which are market share. These measures are determined by the management of the firm in response to the key success factors of the business. Each of these types of structures represents different level of management 10 . and more flexibility in new product development. there is the product based. virtual based. and multi-divisional structural model of organizations. The balanced score card approach has been used by many organizations for many years and it is still relevant for many business applications and performance evaluations. delivery efficiency. pricing systems etc. division based. The arrangement of the organization focused on long and hierarchical level of decision making. F. There is the simple and functional type of organization structure. Chander etc have identified some common organization structure models which fit into many organizations. There was a boss-subordinate level of relationship and there was a high level of bureaucracy. Customers’ perception about a firm is an indicator of the current overall business performance of the firm. 2007). Modern day organizations have however changed their perspectives because of the prevailing volatile and dynamic business environment which requires faster response times. Many organization management writers like Richard Daft. horizontal based.

The disadvantage is that it lacks flexibility and innovation and workers under this type of structure would not be able to express themselves. and there are other unit managers under him. An environment of low creativity and low level of innovation due to high rigid structures and bureaucracies is highly detrimental to the sustainability of an organization. The Ryan family headed the company. The other types of structure are found in many other organizations and they also have different expressions at different situation. Organization structure has a strong influence on the ability of a firm to remain innovative.interests and they offer different level of benefits to the users (Patricia and Cornelia. Ryanair air is still functional in its organization structure. 2007). Innovation is built on a high level of flexibility in a firm. 11 . For example a simple and functional structure is often found in very small scale organizations which are often entrepreneurial based. This creates a strong sense of specialization in the firm because workers are focused on a particular line of product for a long time. At this point in time. 1997). Ryanairs structure was simple and functional when it started. Some of the more recent organization structure types are the virtual. Since it is certain that the current level of competition will not reduce. There is a very high level of centralisation of authority and the bureaucratic structure of this type of organization is also very strong. The more flexible decision making process is the greater the chances of developing new products and services through collaborative contributions from staffs and management (Mullins. A product based structure arranges departments and functions around different products in the organization. The advantage of this type of structure is that it is much easier to make decisions since only one or very few individuals are involved in the decision making process. Michel O Leary has been the CEO. it is also right to say that those firms with very high level of flexibility will be the ones to survive on a longer time than the rigid ones. network and horizontal organization types which are found in many IT based firms.

directing. Leadership inspires. The authoritarian approach is a bit similar to the autocratic in that it 12 . autocratic. inspirational. organizing. Management had been defined by its five primary functions which are: planning. The autocratic leadership style works well in a bureaucratic set up where there are hierarchies and several lines of authority. This style is strongly encouraging to followers and it can improve their level of productivity since they are assured of the fact that their opinion is important to the wellbeing of the organization. motivates and influences followers to achieve a task they were not willing or motivated to achieve initially. A participative leadership style is described as the cooperative style where the leader involves followers in the decision making process. Many organization management authors have identified several styles of leadership. There are the participative. The Ryan family provided leadership responsibilities over the affairs of the company from inception. It does not support innovation and creativity and the leader uses command and control as the major traits. authoritarian. But these functions are not completely favourably disposed to modern organizations. Many firms engage in intensive employee training programs on leadership just to equip staffs and most especially the senior management with leadership skills. The list is longer than this but this has been chosen to reflect some of the examples of leadership and their role in enabling both management and workers to achieve goals and objectives. But a major drawback here is that it slows down the process of decision making and consumes a lot of management time. commanding and controlling. transformational. 2007). and engages them in several deliberations before decisions are made.7. situational and transactional styles. Leadership Many management writers have argued that there are striking differences between leadership and management (Mullins.

especially when the owners of these businesses have a desire to grow and become successful. 8. This type of approach is not flexible because it suggests that if followers are not mentally or physically ready to undertake a task. The inspirational leadership approach is very similar to the transformational approach because its main objective is to inspire employees or followers to achieve corporate goals and objectives as designed by the management of an organization.does not encourage creativity and innovation since the leader uses more of personal authority in making followers to respond to instructions aimed at executing work activities. the leader cannot initiate a move to undertake that task. Michael Leary. The transactional leadership approach focuses on an exchange relationship between a leader and the followers. Employees are more motivated and inspired under a transformational leader.. the Ryanairs CEO fits the role of a transformational leader because of its inspiring influence on the staffs in the company. The leader tries to establish a transaction between followers in a give and take relationship before work activities can be initiated. The transformational approach is concerned with inspiring followers. The same opinion is relevant in businesses and operations in organizations. Change management Change has been described as the only permanent thing in life. Change is about moving from a level of performance to 13 . The situational leadership approach focuses on gauging the readiness of followers by a leader before engaging them in the performance of work activities. This approach is quite common but it is not the best source of providing inspiration to followers and it is not applicable in all situations. and the result is increased productivity. It is one of the most discussed approach because of the significant contribution is makes in the execution of goals and objectives.

People often resist change in organizations out of fear. 2008). Organizations decide to introduce change in response to the highly dynamic global business environment which requires that businesses create the necessary flexibility to accommodate customers` changing demands (Malcolm. Since the forces of demands and supply keep changing then it is highly important for an organization seeking to become sustainable to embrace change. To ensure that a change program is successful a change management team is always set up to work through the process of change and to carry out a comprehensive analysis of the entire program.a desired level of performance. and the change in the management team was another change program. People also resist change out of ignorance. and under the nature of change there are the incremental and big bang choices for the organization to make. They are not sure if their present positions will be retained or if their wages will be reduced as a result of a new technology or a new human resource director. 2008). Change is executed from two dimensions of the extent of change and the nature of the change. These are often called the barriers to change or why people resist change. The acquisition of Buzz was a change process. Ryanair has been involved in several change projects according to the case. If the organization is contemplating a big bang approach to change where they want to create or introduce something new but time is really a big constraint. So out of fear they begin to work in opposite directions to the objectives of the change. Organizations don’t embark on change just anyhow. When workers are not well informed about the benefits of a change program they tend to be repulsive towards the change agents and this has the potential to result in failure of the change program. and it can be expressed in any form depending on the initiative of the change initiators (Matthew. Certain factors make the introduction of change to be very difficult. then they have to decide if they want 14 . Under the extent of change there are the realignment and transformation choices for organizations to make.

It is also important to determine the quality standards and performance of products and services from the perspective of the customer and to identify all key resources for the launching of the new 15 . Change can be an increase in market share. and if the company wishes to embark on an incremental change program where they want to conduct a comprehensive analysis of the firm`s current situation. 9.the extent of change to be a realignment of a transformation. The Ryan family began the Ryanair business as an entrepreneurial project. and all the phases described here resemble some of the challenges and issues Ryanair faced. This framework has been designed to assist organizations in being effectively guided through their process of change in a systematic manner that will utilize their resources as efficiently as possible and at the same time the goals and objectives of the change program will be achieved. It is different from existing product or service lines that are modified by an intending individual or a corporate organization. then they will have to choose between a reconstruction approach or a revolution approach. There are generally four stages of entrepreneurial growth as described by Johnson and Scholes (2008). Typical issues here are the determination of the exact target market to which product and service offerings will be focused. The first stage is the start up or the introduction phase. Change management is an ongoing program that many organizations permanently engage in and it is the link between their current position and a future position. it can be an expansion of existing structure or the recruitment of more staffs. Stages of entrepreneurial growth Entrepreneurship focuses on the establishment of a new product or service through a novel idea.At this phase the goal is to penetrate the market with a particular product or service offering that has been developed through the NPD (new product development) process.

Finance issues appear in the form of capital requirements to execute all aspects of the new product and service. but most entrepreneurs don’t wait until things degenerate to that level before introducing new brands of products and services. At this stage the owners of the business would be concerned with the introduction of new products and service either by introducing an entirely new brand of products or by innovating on the existing brand. Management issues here can be in the form of financial management. Here the assumption is that the entrepreneur has successfully secured capital and other crucial resources for the successful launching of the product and the product has been targeted to a particular market and sales are already coming in. 16 . Typical challenges in this stage are finances and infrastructure. HR management. and often times this process becomes so difficult to facilitate. and it may be possible for the entrepreneur to consider the option of employing more people relative to the size and income of the company. Sometimes the option may be to seek for market development with the same line of product and services. and marketing management. Exit occurs when the business begins to make losses and the only option is to pull out of the business. Growth is the next stage in the process. Most entrepreneur resort to borrowing money from banks and financial institutions in order overcome this problem. Effective management of this process is the main source of concern at this stage. Maturity occurs when the product has reached the largest share of the market and sales have remained the same for a relatively long period of time. The next stage is then the maturity of the products and services in the market place.products. At this level the main goal would be to increase product and service market share which in turn will be reflected in increased revenue and profitability for the business. If the entrepreneur does not introduce a new product after the maturity stage is reached then the next stage is an exit out of the market.

Ryanairs adopted the Southwest airline model but the strategy would have failed if the company had not changed its management. then it is bound to fail. Consequently many strategic management authors have identified structure and culture as two critical elements for enabling strategic success. Information technology enhances the process of acquiring information and disseminating it. 2006). 2002). It is the people that actually work with the strategy and if they show lack of commitment to the successful implementation of the strategy. Many strategic management authors have indicated the need to be wary of the excitement of a well formulated strategy which may be dampened by the failure of the strategy at the implementation process. Information technology enables strategies to be implemented successfully by providing timely information to the organization. IT software is also used in implementing strategic options. Four other factors can contribute to the success of a well formulated strategy. People are the greatest assets to the success of any given strategy. Enabling strategic success The success of strategies is at the onus of the management of the organization. It has been proven many times that information technology is a source of competitive advantage for organizations. The first of them is having the right people around in the organization that will be committed to the cause of the strategy. Finance is another very critical resource that 17 . One of the reasons that contribute to the failure of strategies at the implementation phase is the lack of an appropriate organization structure and culture that can guarantee the institutionalisation of the strategy (Ghobadian and O Regan.10. and improved on its customer service in all spects. Information also plays a very vital role in ensuring that strategies become successful. To avoid this problem many organizations go through a rigorous process of formulating their strategy and they apply the same type of rigour to ensure that it is well implemented. Strategy formulation does not translate to successful strategy implementation (Grant.

a computer system. 11. financial resources are still required to obtain other resources which are required t o execute the goals and objectives of the strategic options. and finance. SWOT analysis This is a tool that is normally used to assess the internal performance of an organization. Successful strategy formulation does not translate to successful implementation. Campbell and Houston. Internal assessment is important when attempting to develop a strategic direction for an organization. 2002). It has also been proven that technology is a source of competitive advantage (David. and it is highly recommended that corporate leaders embrace this idea in creating the right environment to ensure the successful implementation of strategic initiatives through the provision of appropriate resources. Achieving strategic success is crucial to the success of the corporate goals of an organization since corporate goals and objectives are normally aligned to the strategic direction of the firm. software. Strategy cannot be executed without the appropriate technology in place. 18 . technology. Most strategic options require financial analysis to evaluate their suitability. Technology can even be a process. All of these should be synthesised under the right culture and structure in the organization. personnel. With these in place.enables strategic success. and even after they have been selected. the risks of strategic failure are very limited. Technology is also very crucial to the success of strategies. telecommunication devices and any other type devices that aid work activities in an organization. Probably after human resources is the importance of finance.

The company has also invested a lot of funds in purchasing many planes. Ryannair opportunities exist all over Europe. or it suggests that employees are not happy and are looking out to other places for employment. The strength of an organization represents its core competences. and the leadership of an organization often develop strategies to take advantage of opportunities and to turn them to strengths. Opportunities may exist within a country or without. The threats to an organization are external as 19 . it suggests that either the company is not performing well and it has to consequently lay off its staff on a regular basis. The company has bought over a couple of other poorly performing airlines in Belgium and in the UK and this has repositioned the organization as a larger no frills airline within a short period of time.Internal analysis reveals the weaknesses. The company often concentrates its actions on these areas so that with time it can be turned to strength. 2005). For example Ryanair has been adjudged as one of the most successful short haul airline in Europe. As far back as 2003 the company had five different CEOs within a short period of time. It represents those areas with the greatest level of achievement which differentiate it from its competitors. strengths in the organization and the opportunities and threats confronting it externally (Pearson and Robinson. The main strengths of the organization are its ability to offer low fares to customers and to fly as frequently as possible between several European cities. so in effect the company has one of the largest numbers of fleets in the low cost carrier industry. The weaknesses of an organization are the areas of relatively poor performance. Ryannair has not been hugely successful with its management team. The opportunities of an organization are those areas that have not been explored but with a strong potential for success for the company. The company`s main strengths also exist in its ability to offer exceptional customer service to customers in the UK and around the European union. When the turnover rate (rate at which employees leave an organization) of a company is high.

well. The economic climate is also changing. Many governments in different countries keep changing policies and laws which invariably impact on the ability of the company to operate successfully in these countries. Other threats to the successful performance of a business are economic and political. and FlyBe has also entered the market making it more difficult for Ryannair to make enough profits. PESTLE is usually applied to the study of the external influences capable of negatively influencing the ability of an organization to achieve its objectives. External analysis using PESTLE Ryannair operates in a very unstable business environment. This has a lot of impact on the ability of a company to attract 20 . 12. These influences are generally outside of the control of the organization unlike the strengths and weaknesses. BMI. Since taxes are paid from the revenue generated. attitudes and values of customers in different countries. Ryannair has been taken to court many times and this has cost the company a lot of funds. Many competitors like Easy Jet. and the effect if it was a spill over to the European airline industry with increased focus on security which led to reduced customers` interest as a result of perceived risks in air flight. Ryannair has also been affected by the recent global credit crunch which hit almost all developed nations in the last 3-5 years. The government regulates the activities of airlines through various legislations and procedures. The corporation tax being levied against companies in the UK and in other parts of the world is capable of limiting the abilities of these companies to make enough profit as they so wish. Social issues may represent the culture. They focus on those factors that may influence the ability of the organization of achieving its long term goals and objectives. The political climate in which Ryannair operates is so unstable. There are social issues affecting an industry as well. Ryannair had been affected by the September 11 terrorists attack on the US.

For example Ryannair as an organization may be influenced by a sudden change in the technological requirement of a particular model of plane. 13 Generic strategies of Ryannair Michael Porter developed this framework and the idea for this was that all organizations seeking to become competitive must identify one of three strategies and may decide to follow that 21 . flying of plane and the generation and distribution of energy through several sources. There are also a lot of environmental issue confronting an organization.the largest portion of the market in terms of its share. The Kyoto protocol in Japan was an accord where many organizations came together to register their support for the massive reduction of their carbon dioxide emissions. The release of these gases comes from a lot of operations which include manufacturing. Ryannair and the other competitors in the industry have a duty to ensure they protect the environment both as a corporate social responsibility duty. customer order processing facilities and the rest of them. it is highly important to assess these requirements and to ensure that all key stakeholders in an organization are aware of the requirements and its consequences. It is not possible to operate an aircraft with the acquisition of several computerised equipments. The company may be constrained to buy up this technology and this may at a huge cost to the company. software. Many government regulations now make it mandatory for organizations to reduce their carbon dioxide emission to a very minimum level or otherwise risk being fined. There are also many legal requirements that confront an organization and in the process of carrying out an external analysis. Technology is another area where companies make extra effort to be well informed. and as requirement to conform to government regulations and policies. driving. The airline industry is particularly technology dependent.

The result has been favourable for the company over the years. Another strong feature of the low cost strategy that was adopted by Southwest airlines which Ryannair copied is the complete elimination of frills and other related services onboard. 1999). Low cost generic strategy may not work well with product differentiation. the company will keep making profit since profit is always the difference between revenue and costs. Low cost generic strategies concentrate the attention of the firm to cost minimization at all levels in the organization. Being a low cost is a relative state to other competitors. since it is really difficult to pursue a differentiation strategy without incurring a measure of costs. The company has focused its business activities on the European customer segment and has combined this with a low cost strategic approach. It is possible to combine a focus strategy with cost leadership as Ryannair has done over the years. The idea is that when costs are at the least and revenue keeps increasing relative to costs. 1980 & 1985). For example Ryannair`s CEO 22 . and when it is possible to obtain resources cheaper than competitors.direction in a generic form for the achievement of their goals and objectives (Porter. then product and service prices may be used as a strategic weapon to attract customers (Balogun and Hope. to a focus strategy and then to a product differentiation strategy. In the Ryannair industry. According to Porter. And the result was that profit began to grow. Each of these approaches is capable of developing advantage for an organization. a firm may choose from being a cost-leader. This enabled the company to charge the minimum fare required for them to generate enough operating revenue. For example Ryannair has invested millions of pounds in operational expenses in the company despite its low cost approach to strategy. Being a low cost leader does not always mean that production can be achieved with a low cost. The company will source raw materials from the cheapest suppliers and it will do everything possible to cut costs to the barest minimum. the low cost generic approach has been adopted as the generic style to strategy.

The idea is that if further cost reductions can be achieved through better resource utilization practices in the company. 2nd Edn. Corporate Strategy. Exploring Strategic Change. London: Penguin Balogun J and Hope Hailey V (1999). References Ansoff I (1987). this may translate to reduction in flight tickets and this may give the company a competitive advantage over the other airlines in the industry. Ryannair has operated this model successfully over the years but it is not certain whether the strategy is sustainable enough for the company or it would attempt to adopt typical traditional airlines strategy in the nearest future. The decision is for the management to examine their short term and long term strategy and to take necessary actions when the situation arises. Prentice Hall. Pearson Education Ltd 23 .is contemplating a further reduction on the price of tickets as a direct implication of the company`s desire to keep reducing costs by all possible means.

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