Ryanair-The Southwest of European Airlines Case Essay Example for Free

Ryanair-The Southwest of European Airlines Case EssayRyanair was founded in July 1985 by the three brothers, Catlan, Declan, and Shane Ryan, with the financial assistant of their father Tony Ryan. As a beginner commercial carrier, its operations began with 25 supply and a single 15-seat turbo-prop commuter plane surrounded by Waterford in the southeast of Ireland and Gatwick Airport, the second busiest airdrome in London after Heathrow. Later on, regulatory authorities permitted the Ryanair Airlines to baffle at least intravenous feeding flying flights a day on Dublin-London route, with more(prenominal) seating capacity. Nowadays, Ryanair, with its rapid growth, occupies the most sought smirch in its hold field, being Britains favorite airline and the oldest- busted make up air carrier in Europe.The last of my internal analysis on Ryanair is to focus on resources and capabilities as internal sources of uniqueness that allow firms to capture the competition. This analy sis is often called the resource-based view of the firm. By theory, a firm gains an gain by acquireing valuable and high-flown resources and developing the cap index to utilize these resources to drive customers toward their products and services at the expense of competitors. As a result, firms with brilliant resources and capabilities enjoy competitive advantage over other firms.Value Chain AnalysisFirms make products or house services by engaging in many different activities. The basic structure of these activities is embodied in the firms value- chain. Value-chain activities argon of two types primary activities and supportive activities. Primary activities include inbound logistics, operations, outbound logistics, grocery storeing and sales, and services. reinforcement activities include human resources, accounting and finance operations, technology, and procurement. All the activities -primary and support are potential sources of competitive advantage or disadvantage o f any firm.In Ryanair case, parts of the inbound logistics are Ryanairs low-cost deals, negotiated against promise of salient and growing volume of business. Also, they include dependency on suppliers to deliver fuel as well up as food, drinks and duty-paid products to be sold on-board they need to be stored, handled and controlled upon delivery. The other important element of the primaryactivities includes the operations. Ryanair fast reverses of 25 minutes are the partnerships core competencies. This is the most important cost advantage that enables high aircraft use of goods and services. More support departures of two more per day than competitors with few planes, attachs Ryanairs revenue. Point-to-point flights mean no interlinking with other carriers. Raynair offers direct non-stop journeys, avoiding the cost of providing through services for connecting passengers and delays cause by late arrival of connecting flights. Ryanair uses the standard model plane- Boeing 737, which nitty-gritty that company, is able to obtain spares and maintenance services on favorable terms, to limit the cost of staff training and to offer flexibility in scheduling aircraft and crew assignments. A relatively young die reduces maintenance, spare and fuel be.Also, Ryanair put resources to strengthen its core business such as satellite television, Internet service and arcade game, so the passengers can enjoy the trip. For outbound logistics, Ryanair uses isolated secondary airports, which often require further transport arrangements for customers. Also, few destinations are so geographically obscure that they cant support regular services to customer, as discernible on some Scandinavian routes for example. This limits the level of marketplace share Ryanair can achieve. EasyJet does the opposite and flies to voluminous cities, but then have to pay higher landing charges which are reflected in their higher prices. However, using regional airports saves costs as ch arges are lower, facilities cheaper and Ryanair can negotiate favorable deals. It also enables fast reverting times, and more on-time departures as the airports are less congested. 95% of Ryanairs flights are punctual compared to 88% for EasyJet.As I already mentioned, under primary activities are also marketing and sales. Ryanair considers bell ringering virtually irrelevant as it believes that price is most important to customers. This reflects on companys image which isnt always so good in the press. In contrast Southwest Airlines, contribute a banging part of their success to theirs well established brand values, and EasyJet has won awards for its brand. Ryanair invested resource to establish website for passengers. It made passengers more convenient. Spending on advertising and promotions to expand its market is reduced as most advertising takes place on the website. There promotion is also used to sell excess capacity, such as two-for-one offers, which creates market aware ness. Over 90% of bookingsare made directly, any on the website or through reservations centers.The website saves on staff costs, agents commission, while significantly contributing to growth. Travel agencies are used on a small scale as necessary when opening new routes in unknown markets. Under services, Ryanairs virtually no-frills- lower costs considerably. The company enables fast turnarounds and offers very low book prices. But with less flight attendants, usually only two per flight, compared to five for the competitors, the quality of the services drops. The philosophy of Ryanair is that for passengers the price is more important than the quality. The low quality services could damage the brand name and this could drive to business reduction.Under support activities- the procurement, the purchasing power of the company enables negotiation of favorable deals with suppliers. However, these demand large and growing volumes based on passenger numbers. Although growth is slow ed down new planes has been ordered aiming to double the flash by 2009. Ryanair keeps good buyer-supplier relationships which ensure reli top executive and low-cost procurement of services. Many functions of the company are assure out. Under human resource management, Ryanair aims to control its personnel cost by continuously improving the productivity. The staff is working under big pressure set by an overhead person and most ordinarily with feelings of dissatisfaction. The technology development factor of the support activities indicates that Ryanair uses its website (www.ryanair.com) to monitor bookings and to see how full planes are, all minute by minute. Also, the company uses its internet site as the major part of the business, which saved them about $6 one million million million a year on an average.Resource AnalysisResources and capabilities are the fundamental physiqueing blocks of a firms strategy. The resource-based view presents a perspective of competition that p ortrays the value of a resource or cap mogul as derived from the dynamic interplay of market forces. While the market and environment establish external constraints and pressures, a firms response through resource assignation and capability development take a source of competitive advantage. The resource-based perspective views a firm as an organization that has a bundle of protective resources and capabilities.Resources are genuine and intangible assets a firm uses to consume and implement its strategies.Capabilities are the skills a firm uses to bring its resources to bear. Ryanairs tangible resources include all Boeing 737 airplanes the company uses, as well as the companys headquarter building in Dublin and all other buildings the company uses. Part of the tangible resources also are all of the supplies, food, drinks and duty-paid products company holds in inventory, as well as fuel. Intangible resources block bigger part of the business. They include all the intellectual c apital, like expertise and accumulated knowledge, experience, skills, abilities and talents that every employee in Rayanair possesses. Here I could include also the companys brand recognition, customer loyalty, investors confidence and the good reputation. Charismatic temperament of the companys CEO- Michael OLeary is part of the organizational culture under the intangible resources.The capabilities of Rayanair are-The lowest airfare rates, simple processes (no frills), large brand awareness, clear offer (focuses on particular market segment), the innovative strategies on cost cutting, and quick turnaround time-Learning curve (early entrant), accumulated much knowledge/experience, outstanding marketing and PR skills of the CEO OLeary- The company ability to bargain and get beneficial deals with suppliers the efficiency and high turn-around rate, fast luggage handling and high punctuality- The ability to think strategically and assertively and to act on it acquisition of Buzz-The ex pansion of new hubs and new added routes-The ability to control and cut costs, which are crucial to survive and succeed in the industry-The ability to build and sustain brand (loyalty).Financial AnalysisRyanairs current financial objectives, strategies, policies and programs are clearly stated in their annual reports and financial statements for 2008, which I have attached in the separate file. These financial objectives seem to be concordant with Ryanairs mission, objectives, strategies, policies of low fares, as well as with internal and external environments. There was an increase in expediency after tax of 33%, which was because of 7% increase in average fairs, so profit strand was 19.66%. There was an increase in fuel costs by 50%, and staff costs rose wine32%. The operating margin decreased by 1% (to 21% from 22%), which lead to an increase in operating profit by 28% compared to 2007. Total operating revenues increased by 32%. Maintenance costs increased by 12%, marketin g and distribution costs increased by 71%, and aircraft rental costs increased by 23%. (Ryanair Holdings PLC, 2007).From this financial analysis, I could conclude that costs are increasing, but profit is also increasing leading to gains in the company. The statements are calculated in Euros, and there could be some differences based on the floating Euro/US Dollar exchange rates. In addition, this financial analysis supports Ryanairs past and pending strategic decisions, based on being a low fare air carrier. Ryanairs profit margin in 2007 is 19.66%, compared to EasyJet with 8.47% (2007), Air Lingus with 8.19% (2007) and British Airways with 5.48% (2007). If most companies in the corresponding industry report decrease in profits, Ryanairs financial performance indicates that the company is in competitive advantage. (Ryanair Holdings PLC, 2007)Analysis of Strengths and WeaknessesStrengths and weaknesses are the major internal characteristics of firms, derived from the SWOT analysis. Firms within an industry generally have different strengths and weaknesses, and those differences often have a strong bearing on which firms win competitive interactions.Ryanair strengths are-Brand name Ryanair through its 24 years in the Low Cost Carrier (LCC) market has developed a very well recognized brand name.-Benefits from low airport charges These aid the low cost base Ryanair benefits from.-Has first suggester advantage on regional airports (e.g. Charleroi) Acts as a barrier to entry-Internet site (94% bookings) www.ryanair.com Lowers the cost of distribution as over the phone bookings are more costly. Eliminates the need of travel agents.-High seat density.-All Boeing aircraft A uniform fleet saves on maintenance and training costs.-Fast turn-around.-High Service performance Punctual, high rate of flight completion, low luggage loss, which give a good image of the companys reliability.-Modernized fleet which leads to less expensive maintenance Will become more uniform w ith only one model (Boeing 737-800), also newer planes will require less maintenance.-High aircraft utilization Ryanair flies its planes for longer thus generating more revenue from its assets.-Fuel and other risks hedging.-Small headquarters-Point to point flights No hub and spoke, lowers cost as no through services requiredRyanair weaknesses are-Prone to bad press Rayanair is perceived as arrogant and the slightest accompanying with the scandal commercial gets a lot of press coverage.-Niche market Restricted expansion possibility.-Distance of some regional airports from advertised destination Over time customers may find this a big inconvenience.-Poor service Ryanair decreased the number of flight attendants per flight, which decreased the service quality.-Ryanair is extremely sensitive to changes in charges (increase in fair value)In finis I would like briefly to summarize the strengths and weaknesses I mentioned above. Ryanair carries out its routine checks and repairs on its aircraft using its own engineers which means that some maintenance costs are included in the staff cost. Also the company has cost advantage, because of its ability to achieve 25 minutes turnarounds and therefore can run two more flights a day in its schedule than rivals such as British Airways.Their use of secondary airports means that they are able tonegotiate deals with the airports, in contrast to larger airlines unwilling to split their operations between two or more airports. Ryanair does not pay dividends to its shareholders. All profit is reinvested back into the business, which means a higher profit margin. Ryanair is unable to expand its home market industry, because of airport taxes. Passengers having their own luggage carried at their own risk could mean a loss of reputation if any major scandal is to exceed in terms of loss of luggage. Increasing its fleet could mean that it might incur more losses. originThompson, A.A., Strickland, A.J., Gamble, J.E. (2008), Crafting executing strategyThe quest for competitive advantage. Boston McGraw- Hill Irwin.Ryanair Holding PLC, (2007). The Worlds Favorite Airline. Retrieved May 20, 2009,from Ryanair electronic network Sitehttp//www.ryanair.com/site/about/invest/docs/2007/070920annualreport.pdfRyanair Holding PLC, (2007). Strategy. Retrieved May 20, 2009,from Ryanair Web Sitehttp//www.ryanair.com/site/about/invest/docs/Strategy.pdfGoogle (2009). Ryanair Holdings plc (Public, ISE RYA). Retrieved May 20, 2009, from Google Finance Web site http//www.finance.google.com/finance?q=ISERYALavarack, M P. M. Brown. (1992) Benchmarking Learning from Best Practice. employment Studies, Vol 5, No.2.Thompson, J. L. (1997) Strategic Management. International Thompson Press London.Carpenter, M.A. and Sanders, W.G. Strategic Management A Dynamic Perspective Concepts and Cases, 2nd edition. velocity Saddle River, NJ Pearson Prentice Hall, 2009