Strategic Planning in the Travel and Tourism Industry. Case Study Ryanair


Academic Paper, 2018
19 Pages, Grade: 78.00

Excerpt

Table of Contents

Introduction

PART I A Situational Analysis
Socio-cultural Factors
Technological Factors
Economic Factors
Environmental Factors
Political Factors
Legal Factors
Ethical Factors

Micro-Environment Porters Five Forces
Bargaining Power of Suppliers
Bargaining Power of Customers
Threats from New Entrants
Threats from Substitutes

A Competitor Analysis
Strategy
Structure
Systems
Shared Values
Style
Staff
Skills
Strength
Weaknesses
Opportunity
Threats
Key Challenges Facing Ryanair

PART II Objectives linked to Audit Findings

Strategic Options for Ryanair

Strategic Recommendation

Action Plan

Conclusion and Recommendations

References

Introduction

Ryanair was first established in 1985 by Tony Ryan, Liam Lonergan, and Christopher Ryan. Initially, the flight started with a small carrying capacity but gradually expanded following the development of conducive operational environment. In particular, this was following the deregulation of international flight rules un the EU region, which permitted international routes between two countries provided that the involved players had an agreement (Gillen, and Lall, 2014). In particular, Ryanair experienced tremendous growth in 1992, following the deregulation of the airline industry in the EU. This company seized the opportunity to expand and overtook the British Airways and Aer Lingus in 1995. A successful IPO in 1997 saw Ryanair increase the amount of capital for expansion, which saw it acquire 45 new Boeing jets (Casadesus-Masanell and Ricart, 2010).

Ryanair also exploited the technological advancements in 2000 by launching a website and ensured more than three quarters of its bookings were made via the company’s website. Nonetheless, Ryanair recorded significant degree of financial losses in 2003 for the first time in a decade. This was followed by quick interventions which saw Ryanair explore new routes especially in the Eastern Europe. Notably, Ryanair’s growth has been impressive over the last few decades especially between 1985 and 2011 (Adler et al., 2017). However, the airline company has experienced turbulent forces in the last few decades as illustrated by financial losses reported in 2003, and recently in 2009 (Acar and Karabulak, 2015). In this regards, this report seeks to develop a strategic plan for Ryanair to enable it gain a competitive advantage, and sustain its growth in the midst of emerging and unique challenges in the operational environment.

PART IA Situational Analysis

Macro-Environment

Socio-cultural Factors

There exist several socio-cultural factors that are likely to affect Ryanair profitability and growth. Health issues and population growth are likely to alter the performance of Ryanair. Population growth coupled with a rapid increase of travelling lifestyles and perceptions will positively impact on the organisational growth (McCarthy 2015). The perception towards luxury class affects the luxury services. currently, Ryanair has not invested on luxury suites and packages. Therefore, an increase of business trips may alter the company’s profitability (Berman, 2015). Lack of customer loyalty is also a major social factor affecting Ryanair. Nonetheless, Ryanair is considered a low budget airline, which means it will continue to attract middle and low income earners in the contemporary market.

Technological Factors

Businesses are predisposed to develop unique operation systems. Ryanair’s primary supplier is Boeing, which has a policy of less carbon emission, noise pollution, and increased operational efficiency. Besides, maintaining good relationships in online services is paramount for the industry (Suau‐Sanchez et al., 2016). The efficiency of technological application in online services is paramount in Ryanair. Besides, all countries are predisposed to have unique aviation and safety regulations, which may affect Ryanair’s operations in other countries or regions across the globe.

Economic Factors

These factors often affect the purchasing power of the consumers and airline operations and may include inflation, economic growth, capital cost, currency exchange rates, inflations rates, and bank interest rates. These factors may impact positively or negatively to the airline industry, depending on the host country economic factors (Thomas, 2015). High standards of living in a country translates to increased airline travel arrangements as consumers seek to pursue different holiday destinations. Fluctuating fuel prices also affect the consumer purchasing power.

Environmental Factors

Airline industries are prone to environmental factors such as natural disasters. In particular, Iceland Volcano ash is one of the major factors affecting flights schedules in the European region. This may lead to massive losses to airline organisations operating in this region. Furthermore, environmental regulations such as carbon emission and noise pollution are fundamental issues that may influence the profitability of Ryanair (Contractor, 2015).

Political Factors

These include government regulations such as employment law, political stability trade restrictions, political studies, environmental law and taxation policies. Ryanair is prone to government along with taxation policies. Brexit is one of the major political issue affecting the airline industry (Morrell, 2016). Besides, the inauguration of a new government or party following an election in the UK is also likely to affect the business policies affecting the operation of the airline industry. For instance, the desire to acquire a stake in Aer Lingus airline but these desires have been halted by the European commission as Ryanair controls about 80% of the flights between the Ireland and the UK (Caputo and Borbely, 2016).

Legal Factors

Immigration laws and regulations are some of the major legal barrier in the airline industry. Immigration legal restrictions determine the number of people travelling to certain destinations. International aviation safety rules may affect Ryanair operations (Dobruszkes et al., 2017).

Ethical Factors

Business ethics deal with morality issues such as norms, values, and beliefs in commercial undertakings. Ryanair maintains an open door policy, which is designed to accommodate major complaints, concerns, issues, or questions affecting the company. The policy is replicated at all levels of management throughout the Ryanair’s undertakings (Holloway, 2017).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Source (Peace. 2016)

Micro-Environment Porters Five Forces

Bargaining Power of Suppliers

Boeing is the chief supplier of various spare parts and air carriers to Ryanair Airline. With a reducing demand on aircraft, Boeing’s bargaining power is gradually reducing in the market. Most regional airports largely depend on one airline. This gives Ryanair and other competing companies a better position to bargaining for their significance and role in the regional airlines (Hinterhuber and Liozu, 2014). Threats linked to suppliers, ranges from low to moderate.

Bargaining Power of Customers

Customers are always price conscious and are likely to lean on airline services that offer competitive prices for quality services. Besides, the cost of switching from one airline to another is virtually insignificant, which influence the lack of loyalty among the consumers. The threats of bargaining power from the consumers is very high (Da Silva and Trkman, 2014).

Threats from New Entrants

Starting an airline company requires high capital investments, which acts as a major barrier to new entrants. Rigid legal and political factors also complicate the process of entering this market niche. Thus, the threat of new entrants is relatively low (Graham, 2016).

Threats from Substitutes

The absence of customer loyalty makes it easy for the consumers to substitute Ryanair with other companies as there are no extra costs of switching from one services provider to another. Other transportation means such as cars, euro lines, ferries along with Euro trans pose a significant degree of substitution threats (Montgomery, 2012).

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Source (Dudovskiy. 2012)

A Competitor Analysis

Easy Jet is perhaps the major competitor facing Ryanair. Even though has also adopted a low cost strategy, the company enjoys massive customer base in the UK, Italy and Germany. The company has recently acquired Monarch and is also projecting to update about 30 aircrafts from Air Berlin. This shows that the company is gradually expanding its customer base, which will also increase the level of competition due to stronger financial competence. Easy Jet is expected to update the position or places reserved for Monarch, which will result to an increased capacity (Malighetti et al., 2015).

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Figure 3: Source (O'Driscoll 2014)

McKinsey 7-S Framework

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Figure 4: Source (Mind Tools, 2017)

Strategy

Ryanair is currently focused on offering low cost flights to the market. This shows that a low cost strategy is the primary strategy of the Ryanair. Investing or improving the low cost flight strategy shows that Ryanair can gain a competitive advantage over its competitors (O’Connell and Williams, 2015).

Structure

The contemporary structure of the Ryanair is headed from a centralised location by a chief executive officer. This suggests that it has an organisational structure, which could increase the level of transparency and efficiency, if the company is well managed (Balmer and Gray, 2012).

Systems

Enhanced frontline employees is paramount in improving operational efficiency. This allows the employees to handle major situations arising from customer relations. Embracing price sensitivity among the clients puts Ryanair in a competitive position in the regional and global market.

Shared Values

The Core values are influenced by the organisational culture. As a low budget organisation, catering and other basic needs during the flight should adhere to these needs and also reflect the overall values of the company.

Style

The contemporary leadership style adopted by Ryanair has made the organisation one of the leading carriers in the European Region. It is based on a centralised structure, which gives the CEO, Michael O’Leary, immense powers to make decisions that affect the entire company.

Staff

Better trained and professional development efforts are paramount in enhancing the productivity of the employees. This improves operational efficiency as the employees seek to provide efficient skills. Ryanair employees are currently unionised, which gives them a better and collective bargaining power against the employee (Gillen, and Lall, 2014). This means that their welfares are protected and secured. However, Ryanair has experienced persistent battles with the workforce, particularly from the pilot associations due to labour, internal and external factors.

Skills

Skills and competencies appear to be the leading leadership aspects of this company. Notably, a strong financial position accounts for one of the major driving factors influencing Ryanair. The cost leadership appears to be the most prominent skills influencing Ryanair’s success.

SWOT Analysis

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Figure 5:sourced from Constant, 2013

Strength

The primary strength characterising Ryanair is a strong brand name. with a fifteen years of experience, Ryanair has developed a strong brand and reputation in the LCC market. It also enjoys low airport changes, which makes it possible for sustaining low cost strategy. As previously mentioned, all aircrafts are sourced from the Boeing (Balmer and Gray, 2012). This illustrates that Ryanair has uniform fleet, which reduces the cost of training and technical expenses during maintenance. A high service performance, which is characterised by in time delivery, low baggage loss and a high degree of flight completion within the stipulated time has given Ryanair a good reputation in the market (Malighetti et al., 2015). Ryanair has a small headquarters, which reduces administration costs as a result of small offices. Other strengths are point to point services and a high aircraft utilization.

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Excerpt out of 19 pages

Details

Title
Strategic Planning in the Travel and Tourism Industry. Case Study Ryanair
Course
LRPM
Grade
78.00
Author
Year
2018
Pages
19
Catalog Number
V428638
ISBN (eBook)
9783668749870
ISBN (Book)
9783668749887
File size
965 KB
Language
English
Tags
strategic, planning, travel, tourism, industry, case, study, ryanair
Quote paper
Leonard Kahungu (Author), 2018, Strategic Planning in the Travel and Tourism Industry. Case Study Ryanair, Munich, GRIN Verlag, https://www.grin.com/document/428638

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