Introduction
The airline industry faces tremendous threats from global economic performance, terrorism, airline merges, and prices of oil; despite the challenges, Ryaniar Airline Company has to come up with strategic management policies to ensure it grows its market base and remain competitive.
Best policies of the company entail exploiting its strength to take advantage of opportunities offered by fast globalizing world and control, reduce, or manage adverse industrial threats, politics, social dynamics, and economic instabilities1.
This paper, using strategic management tools and theoretical models analyses current business strategies as adopted by the Ryaniar; at the end the report will make recommendations on the best way forward for the company.
Brief History of the company
Ryaniar Airlines was founded in 1985 as an alternative to Irish state airlines; the founders of the company are Tony Ryan family, the initial route operated by the company was that between Ireland and the United Kingdom. At incorporation, the company had leased three conventional types of airplanes with the aim of being a full conventional airline.
By 2009, the company had grown to have 199 Boeing 737-800 planes with an employment base of 7000 employees; in the same year, the company was believed to have had operation base in over 26 countries. The company’s head quarters are situated at Dublin Airport; the company has over 1,100 routes across Europe and Morocco and conducts its business from 45 bases.
In 2009, the company was the largest airline company in the entire Europe respected for its efficient low cost services. To remain competitive, Ryaniar Airlines needs to make strategic alliances moves that will assist collaboration of its service with other airline companies operating in areas that it does not have a licenses2.
Reasons that have made the company successful so far
Ryaniar Airlines management recognizes the use of information available in the market and internal information; the information is used to drive the business in the company. To analyze the market and derive a competitive advantage, the company undertakes regular internal and external audits.
In 2009, the company’s management was recognized by an international award for the best managed airline (2009 FT _Arcelor Mittal Boldness in Business Award); the award also recognized efforts that the company has undertaken to diversify its business to North American market.
Diversification is another approach that it has adopted; other than focusing on domestic industry alone, the company has extended its services to Caribbean countries, African, European, and American markets. The reason behind diversification is to tap a large market and enjoy economies of scale one of attributes used by low cost airlines. Good customer service and technological development are other strategies implemented3.
The airline has put on measures that ensure that there is increased efficiency in its operations. It employs a Six Sigma management procedure where it aims at creating efficiency in its processes. It detects defects in various areas and addresses them before they paralyze the entire company. In freight industry fuel cost takes the highest proportion of costs, the company has bought fuel efficient jets with an average of four years.
Staff has also been taught how to multitask and still maintain a high customer service. The company has a freelance culture where staffs are given the freedom to express their feeling and make recommendations they would like done on the processes. After each fright an officer in charge is supposed to give an analysis of any issue that they may have encountered when in the freight.
These are the basis that is used for making decisions in the airline. Ryaniar Airlines has a reliable workforce where they pay them well that they are able to tape the best talents and recruits in the sector; with such a team, the company is able to operate effectively and make decisions that are effective4.
The strategy of Ryanair
Corporate level strategy
The Company’s main vision and mission is to be leader in the airline industry in the world; it aims at being an innovative company that respects its human capital needs; the company can be applauded for its efforts to keep in touch with its mission and vision.
The company believes in corporate governance and ethical business and aims at doing ethical businesses; it has adopted current technology to endure that it offers high-class services with minimal pollution of the environment.
One of the company’s corporate structure innovativeness was seen in 1990 when it emerged as the first low cost company in Europe with a style similar to that of Southwest Airlines; with the move lead by Michael O’Leary saw the company be registered on the Dublin Stock Exchange. The listing furthers the strategy of the company as it offers cheaper means that the company adopts to get finances for its various operations.
The company has a vision of caring for our employees and stakeholders as it grows its business to higher heights; the company understands that it can only remain competitive and profitable if it is sensitive of its employees needs and giving adequate returns to its shareholders.
When employee’s issues are looked into, the company attracts high caliber staffs that are innovative and highly motivated for the good of the company. the company has attained its employee mission agenda to the level that crews and other airline experts look forward to work in the company.
As far as attaining of its corporate goals are concerned, the company is doing relatively well; it has remained competitive and a choice of many people; it also has high wage rates above the industry rate a factor that has made the company competitive in attracting quality, talented and focused staffs. The company has a no-dividends policy where it uses the retained earnings as a cheap method of getting finances for its operations5.
Business-level strategy
Ryanair has a hub-and-spoke business strategy, where it takes advantage of the existing business environment to come up with policies that improve its global business. The company’s strategy is highly responsive to any changes in world economies and improves its services with the wave of change.
The company business strategy is built on hard-to-emulate mix of a well through geographic location, visional management, embedded in an ambitious and dedicated work force; the approach to business ensures that the company constantly develops new processes, ways of operations and products to fit the changing population needs.
The business strategy of the company can be seen in 2009 when the company was named as “world Favorite Airline” company and was ranked to have the highest number of customers in the international scenes.
The airline industry is having a number of competitors as well as consumers who have diverse needs; the customers can be classified as low cost customers, business class and executives.
The company business strategy has two approaches; there are planes that represent each class, and some jumbo planes that can accommodate the three classes of people in one plane. The approach helps the company have a wide range of customers who consume its service6.
The company has embarked on quality customer service and aims at improving the experience that customer gets every time he or she uses the services; some of the services include online checking, online booking, online gambling, and ancillary services like in-flight beverages, foods and merchandise sales.
Other than the freights, through its website it has recognized and recommended some travel insurances, car rentals and accommodations that its customers can use effectively; the approach improves the company’s business further. The part of ancillary services in 2009 used the company’s 20.3% revenue which was higher from 18% in 2008; the high expenditure shows how the company values its customers7.
Recommendations in the wave of changing business environmental
To remain competitive in the changing business Ryaniar Airlines has some strategic moves that it can implement to improve its operations rate; the strategies can only be attained with the collaboration of management, staffs and other stakeholders; the following policies/strategic can assist the company improve its production further:
Adopting Blue-Ocean strategies/moving away from Red Ocean Strategy
The airline industry has elements of “red Business” strategy, under the strategy, companies make policies in the efforts to outsmart their competitors and ensure they have a large command of the market. Such polices have to follow certain presumed set rules and regulations as well as some that have been documented.
With the rise in competition, Ryaniar Airlines should invest in strategies that make competition irrelevant to its business despite its existence; Blue Ocean strategy is a management tool that invests in attaining simultaneous achievements through service differentiation and establishing of new market.
Although Ryaniar Airlines management structure has assisted the company to attain great success, the role of research and development strategy should be more reinforced to offer the much needed quality information that can assist the management make strategic decisions.
Blue Ocean management approaches believes that a company can be able to command growing incomes, revenues and profits if it is able to tap uncontested market places or offer services that are high competitive compared with those offered by their competitors. The method takes the form of refocusing the direction of a company and move from strategies that move from head-to-head competition8.
With current globalization, there are some countries that have not been fully tapped; they include developing countries as well as some developed countries where demand for air transport is higher. Some of the countries that the countries should look into include Southern Sudan, Afghanistan, Kenya, and Rwanda; the above countries are restructuring their economies and have potential of growing the company’s business further.
To be able to attain success in the business environment, the company should learn the mechanisms of Blue Ocean strategy; the first strategy that the company should use is value innovation through service differentiation and low cost9.
Under the Blue Ocean policy, the company should ensure that its operations fall in the strategy canvas of Blue Ocean; the canvas has four main corners: elimination-reduction-rises- and creates.
Under the framework of elimination, the company should analyze the available routes and ensure that every route has been utilized maximally; in the case there are some areas that are not profitable, the company can as well stop operating in the areas. Some of the areas that Ryaniar Airlines should reduce business are in those areas that have head-to-head competition.
Under the framework of reduction, the company should undertake an analysis of the benefits it delivers from a certain area; the company should ensure that any additional business in the area does not lead to marginal cost to the company. Under this policy, the company should ensure it operates at it best in all routes10.
The Aer Lingus Bid
According to Michael, the decision to buy shares of Aer Lingus and buy them at a large portion was unthought-of decision that took the form of aggressiveness. The facts of the matter were that the company bought the shares at the wave of global financial crisis so the business at the time was challenged by the economic situation of the world.
It only took less than one week for the management to settle down on a 25.2% stake at Aer Lingus which was further raised to 29.8% before the end of the flotation. The decision and the time framework that it took shows that it was not well researched thus the chances of failure were high.
Two years down the line, the company shareholding value in Aer Lingus had depreciated from 407.2 million dollars (the purchase cost) to 79.7 million dollars.
In current business environments, when making an acquisition or a merger, the management should undertake a cost benefit analysis to establish whether the intended merger would benefit the companies involved or not. This fact seems too had been ignored when the bid was made.
Despite the shortcoming that the company got from the bid, looking at the same from a different perspective, the Ryanair made strategic sense as it aimed at dominating the market for its own strategic benefit; the bid could probably lead to better pricing on freights which is in line with the company’s business approach.
The bid also could be seen as beneficial when cost effect of the contract is weighed; the bid could mean that the companies’ combines their efforts to cost minimize for their own good as they increase sales11.
The bid by Ryanair produced a lot of political and legal issues where some business executives termed the move as an unaccepted business practice; with this in mind, Ryanair should withhold any bids in the company but get other companies operation outside Europe to place their bids.
Should the company introduce long haul freights?
The financial strength that Ryanair has attained is good enough to allow it venture into long haul freights; the move can be as a mean of diversification of business or can be an extension of its strong brand name. Other than in the western countries, there are other emerging economies that have high potential for airline business; the company should consider such routes.
If the company decides to have long haul freights, it should not change its low cost approach as the area in the long distance still remains untapped12.
When comparing the competition in the European market and other parts of the world, the European market is high concentrated with airline companies offering differentiated services; in the case that Ryanair venture into long haul business, then it should ensure that it chooses though countries that have potential and are not highly invested in by domestic and other international companies.
With the purchase of Boeing 737-800, which are planes that can carry large capacity of cargo and a large number of passengers, the company can be able to operate in long distances well and maintain its cost effectiveness approach.
The human resources maintained by the company come from different nationalities and are well educated and experienced in the sector. With the two combinations, the company can be able to handle long haul business13.
Leadership model adopted by Michael O’Leary
Leadership is an important element in the success of a company; when Michael O’Leary was taken aboard the company there was transformation from a loss making company to one of the most profitable company in the airline industry within a span of ten years.
The immediate change of things was brought about by adoption of a low fare segment in the company. With the proved record, it would be important if the company was to retain Michael O’Leary as the chief executive officer but equip him with support from able human resources at different levels14.
In 2009, the management of the company received an award as the best managed company in the airlines industry; alongside the award, the company also saw as the second largest airline company in the entire world, the success so far can be attributed by the charismatic leadership adopted by the management lead by Michael O’Leary.
The management style adopted by Michael O’Leary is that of democratic nature spiced with enforced research and development team. The manager emphasizes that before making a decision, there is need to collect, interpolate, and analyze wide literature and make consultation. With such an approach to management, the company can be guaranteed of a prosperous future.
When making decisions, it is the norm of the manager to consult not only experts but also his junior employees; this creates an atmosphere of good relations and grows innovation, creativity, and invention.
When some decisions needs to be made fast, Michael O’Leary is respected for taking a stand and defending it for the good of the company, this is a strength that the company should keep. In conclusion, Michael O’Leary should be retained at the company but the management should offer him support to grow other talented manager/leaders and at the same time utilize his potential further15.
Conclusion
Ryaniar Airline Company’s success can be attributed to its effective and experienced management team, who make timely strategic decisions and alliances to enable the company diversify to different parts of the world.
With over 45 operating bases and serving over 1100 destinations, the company needs to have effective management structures to maintain its fast growth rate and stand the fiercely competition in low cost airline industry.
Other than competition, the company’s global growth is affected by economic, political, and social ideologies; despite the challenges, the company should embark on service differentiation methods and adoption of Blue Ocean strategy to stand the challenges.
Bibliography
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Footnotes
1 Mullins, Laurie. 2004. Management. Washington: Financial Times Prentice Hall.
2 Jashapara, Ashok. 2004. Knowledge management: an integrated approach. Washington: Financial Times Prentice Hall.
3 Paley, Norton. 1999. The manager’s guide to competitive marketing strategies. London: CRC Press.
4 Hooley, Graham, and Saunders John. 2003. Competitive Strategy: The Key to Marketing Strategy. New York: Prentice Hall.
5 Kourdi, Jeremy. 2009. Business Strategy: A Guide to Taking Your Business Forward. New York: Bloomberg Press.
6 Campbell, David, Edgar, David, Stonehouse, George. 2011. Business Strategy: An Introduction. London: Palgrave Macmillan.
7 Johnson, Gerry, Scholes Kevan, and Whittington, Richard. 2005. Exploring Corporate Strategy. Text
And Cases. Essex: Prentice Hall.
8 Fojt, Martin.2006. The airline industry. New York: Emerald Group Publishing.
9 Mauborgne, Kim. Blue Ocean Strategy. Harvard: Harvard Business School Press.
10 Rigas Doganis. 2001. The airline business in the twenty-first century. London: Routledge.
11 Kim, Chan. 2005. Blue Ocean Strategy. Boston: Harvard Business School Press.
12 Alessandro, Cento.2008. The Airline Industry: Challenges in the 21st Century. New York: Springer.
13 Monroe, Kent. 2003. The Pricing Strategy Audit. Cambridge: Cambridge Strategy Publications.
14 Kotabe, Masaki, and Helsen Kristiaan. 2004.Global Marketing Management. New York: John Wiley & Sons.
15 Fred, David. 2008.Strategic Management: Concepts and Cases. New Jersey: Pearson Education