Budgeted Airlines In The Airline Industry Management Essay

This report in-depth analyzes the European airline Industry and reports the challenges the budgeted airline faces in the industry and especially for Ryanair. Here it shows how structure, system, leadership, culture & environment focus in order to see Ryanair’s position and growth in the low cost market. It clearly states the Ryanair’s current strategy and identifying its long term strategy. The Business Plan ranges from an industry analysis to an internal financial capability. An integrate understanding of the functioning of the company in terms of human and technical operations, leadership, customer relationship and financial structure.

This material critically analyses the internal functioning to create viable strategic positioning and discus any approach changes of Ryanair for its improved sustainability. It refers its capability, structure, system, leadership, culture, people and environment in the low cost European market. The analysis has been done by using some major theories such as 7s matrix, balance score card, double loop learning of Ryanair, ansoff matrix and culture web.

Accordingly, this material primarily analyses the current business strategies of Ryanair to understand the nature of their operations. Subsequently, conducts a PESTEL analysis, Porter’s five forces and value chain analysis to understand the environment of Ryanair, drivers of profit in the industry at present and the future and financial analysis. In addition to balance score card analysis also has been done to understand finance situation in the context of Ryanair and to evaluate its performance.

Finally, this report will recommend the recommendations where it’s applicable. The analysis of this report was complete with the support of the case information provided and through industry related information from academic books, journals, websites and other publicly available secondary data sources.

Introduction

Ryanair is an Irish airline started its operation in 1985 competing in European budgeted airline industry in the recent years. Ryanair is one of the most profitable and key players in the European budgeted airline market. (Refer Appendix 1)

Low cost business model was intruded by the US biased southwest in early 1070s. In 1992 Ryanair was the first to introduce low-cost business model in European market. Easyjet is the main low-cost business model competitor for Ryanair in European market,

The reduction of the cost is the center point for low-cost business model. Some of the innovative choice made by Ryanair to maintain low-cost, no-frills service are eliminating traditional in-flight catering and by that reducing labour-related cost, use of on-line booking system, connecting point to point network using secondary airport, comfortable but not spacious seats by that increasing seating capacity, use of similar fleets.

This report carries out detail study of Ryanait by analyzing Ryanair’s current strategy and the management of the strategy. It recognizes how the business functions and operations are affecting the customer and leadership with their overall strategy.

Critical success factor of Ryanair

Currently Ryanair is facing lot if problems especially in cost strategy but it overcome from these problems by adding new strategies and grow up in market place. It uses different strategies to have Ryanair alive and to competitive with competitors. It gets a positive competitive advantage from competitors. Ryanair become the first largest low cost airline industry in Europe.

Recently Ryanair is awarded for punctuality. It keep up times when flies through countries. Ryanair adopt new strategies to grow in market place and use tactics to keep low cost for flying and remain to get profits. Ryan air’s goal is to meet the need of travelling places in low cost. Critical success factor are low cost, customer satisfaction with pricing, reliable and comfort service for customers.

Ryanair’s main critical success factor is to provide low cost. For that it eliminates in flight services. Seats adjustment and drinks but for their target market they prefer on time facilities, frequent departure and seat reservation.

Low cost carrier business model

The Low cost airline concept first was used in America by Pacific Southwest Airline in 1949. Southwest is now grown to become one of the largest profitable airlines in the United States. European history low cost airline model started in late 1990″s. Low cost airline business model could be defined by the following three key elements. (Refer Appendix 2)

Simple product: No in-flight catering and catering on request with extra payment. Plane with beiger capacity with narrow seat. Only single class without any seat allocation.

Positioning: Price-conscious business passengers. High frequency point-to-point traffic using secondary airport. Aggressive marketing and competition with all transport carriers (Refer Assignment 1 appendix 6, p.25 and Appendix 10, p. 29)

Low operating cost: Uniform fleet low maintenance cost, reduced crews training cost, low airport fees. Low wages, high usage of recourses and productivity, simple boarding process reduces ground waiting, high percentage of internet advance reservation, reduced clearing time and no hub service.

Ryanair’s current strategy

Ryanair is an Irish airline competing in the low cost European airline industry. They are the most profitable and key players in the market. Ryanair’s main objective to establish leading low-fare schedule passenger airline in the European market through continued improvements and expanded efficient low cost service.

Low fare:

Ryanair’s low price policy increases price-conscious leisure and business travelers otherwise they would have used other mode of transport such as train, couch and cars. Ryanair sell one way air ticket for the schedule service by eliminating minimum stay requirement.

Customer satisfaction:

Ryanair achieved grater customer satisfaction by reduced cancellation and few lost baggage compare to other airlines. Achieve better punctuality by using less congested secondary airport.

Regular point-to-point flights on short-haul routs:

Ryanair provides regular point-to-point flights on short-haul routes around major populated centers by connecting secondary airport. This benefited higher rate of on time departure and faster turn around tine. Point-to-point non stop flying benefited Ryanair by way of cost of providing service for connecting passengers, baggage transfer and cost associated with transit passenger.

Market segment:

Early entrance in France, Italy, Scandinavian low cost airline market creates more profit brand recognition in the Europe budgeted airline industry. The success of the company is being able to attract more passengers at the both ends of their routes. This creates a name for Ryanair stating that Europe first number one no frills airline. Ryanair identify it maket growth through ansoff matrix (Refer Appendix 10)

Competitive advantage:

The main competitors for Ryanair in the low cost market are carriers including easyJet, FlyBe and ThomsonFly. All they try to attract potential customers by lowering the ticket price. In early stage favorable relationship with airport operators helped Ryanair’s aggressive pricing until EU commission ruling in 2004 (Refer. Assignment 1, Appendix 11, and page number 30). Dispute with EU commission gives free publicity across the Europe continent. (Refer Appendix 7)

Business functioning:

Internal resources of the business and its functioning are extremely important for the business to prosper. Ryanair’s important function and how this will affect business decision explained in SWOT analysis

(Refer Appendix 15, Assignment 1- Appendix 9.p 28)

Employees and Technical operations.

Human resources are one of the most important functions in an organization. Ryanair keep their staff more happy and motivated. This they do by introducing incentive scheme for all operational employees and share option scheme which allow employees to participate for the success of overall company.

Customer relation.

Ryanair continues to offer no frills low fare service to keep the ticket rate at minimum level. Also Ryanair uses regional airports instead of national airport in order to keep the ticket price at lowest level and helped them for their punctuality due to less congested in the airport. Customers are looking for cheapest way of travelling; hence any bad publicity does not affect sales figures.

Profitability.

Ryanair have consistently year by year increased its profitability with customer satisfaction by keeping low cost ticket pricing and comfort service to the customers. Ryanair announced profitability despite bad year for airline industry such as gulf war and an outbreak of SARS. (Refer Appendix 6) financial statement published in Ryanair’s annual report and also profit in euro for the period 2005 – 2008 and projection for 2009, passenger numbers and average fare for 2007

Less operating costs: Ryanair’s operating cost is the lowest compare to other European airlines. It control major schedule airline operating cost such as aircraft equipment cost, personal productivity cost, customer service cost and airport handling and access cost

Aircraft equipment cost

Ryanair’s aircraft acquisition strategy is to purchase single type aircraft. In 1998 Ryanair has taken a decision to purchase Boeing’s latest generation aircraft Boeing 737-800 replacing Boeing 737-200A and starts to use from 2005 onwards. Purchase of aircraft from single manufacture benefited Ryanair’s barraging power for the new aircraft and cost advantages from personal training, maintenance and purchase and storage of spare parts. Also it has greater flexibility in terms of scheduling crews and equipment.

Personal productivity

Ryanair control their labor cost by continuously increasing its productivity with highly competitive work force. Ryanair pay productive-based incentives for employees including flight attendants for in-flight product sales and payments based on number of sectors and ours flown by pilots and cabin crews with limit of industry standard of maximum number of hours. Ryanair average salary per employee is high compare to its competitor easyjet, Lufthansa, British airways, Lberia and Acer Lingus.

Customer service cost

Ryanair has entered into competitive log term third party agreement for certain airport passenger, aircraft handling and ticketing and other services. Approximately 96% of the ticket sales through Ryanair’s website and telephone and by this eliminating travel agent commission cost.

Airport access charges

Ryanair’s constantly high volume of passenger traffic many of the airports benefit them to favorable contracts with those airport for access their facilities.

Booking Advantage on internet

The Ryanair’s internet booking system Skylight reservation system allows internet users to access Ryanair host reservation system to make a reservation and to pay the confirmed reservation in real time. The company advertises heavily about reservation system though newspaper, radio and television As a result 94% of the reservation comes through the company’s reservation system.

Safety and quality maintenance

Ryanair’s management fully committed for the safety and quality maintenance to the aircrafts. The company operates latest Boeing 737-800 with additional safety features inbuilt in it. Also the company committed to hire and training pilots, cabin crews and maintenance staffs in accordance with highest European airline industry standards.

In past 24 years Ryanair’s operating history, it does not had any major incident injuring pilots or cabin crews or passengers. Although Ryanair aggressively practice low cost model, it gives high importance for the aircraft safety, maintenance, training and quality assurance.

Increasing operating results through ancillary services

Ryanair provides various ancillary passenger services connected to its main air passenger service such as in-flight sale of food, beverage and merchandise and also it provides through telephone reservation officers and Ryanair’s internet system accommodation service, travel insurance and car rentals.

Ryanair’s corporate strategy

The Ryanair’s corporate strategy (Appendix 3) has been defined much advance and its main objective developed before it commence. Emerge of Ryanair’s corporate strategy is the final objective is developed during the course its life. Ryanair’s business visor, mission, main objective please. (Refer Assignment 1, Appendix 1 and p. 16-17)

Ryanair’s business strategy

Ryanair’s business strategy is to offer very competitive affordable fare for the airline users to reach their destination in the European market.

Ryanair’s long term marketing plane and its position:

Ryanair’s long term marketing plans please refer Appendix 2 and its position please refer (Assignment 1 and p. 8 & Appendix 6.p 25)

Porter’s competitive strategy model for low cost carrier

Porter’s (1980) competitive strategy model (Appendix 5) describes that there are three types of strategies are used by business for their long term survival. They are cost leadership, differentiation strategy, and market share and market segmentation strategy. These strategies are measured along with business strategic scope and strategic strength.

Stuck in the middle

OVERROLL LOW COST LEADERSHIP

FOCUSSED DIFFERENTIATION

COST FOCUS

BROAD DIFFERENTIATION

Differentiation

Narrow

Market

Cost

Low cost

Broad

Ryanair’s business strategic scope

Ryanair’s business strategic scope is to become number one low cost airline in the European market for cost conscious business and leisure travelers.

Ryanair’s business strategic scope

Ryanair’s business strategic scope is to become number one low cost airline in the European market for cost conscious business and leisure travelers.

Ryanair’s business strategic strength.

Ryanair was first Europe discount airline capitalized by the EU decision to deregulate the airline industry stating that any European airline can operate anywhere in the Europe Its aggressive pricing and grater customer satisfaction for the punctuality, reduced cancellation and few lost baggage compare to other airline. In 2005 it became market leader in the low cost airline market.

Cost leadership

Use of secondary airport: Ryanair did not fly to the major hub airport bur instead it uses secondary airport some distance away from the main airport for low airport access charges.

Rapid turnaround: Ryanair maximize use of aircraft by turning around the aircraft within 25 minutes

Point-to-point routing: Ryanair fly point-to-point and it avoid cost connected with passenger and baggage transfer

Boeing aircraft: Single aircraft family the being 737. It palace big being aircraft order just after September 11 2001 benefiting purchases price advantage.

Aviation fuel: Major portion of fuel porches hedged hence increase in fuel price not affected to the company.

In-flight service: No free in-flight service such as free drink or snacks. No refund for no-shows.

Staffs and overhead: Ryanair staffs are non-union and pilots and cabin crews get low salary but compensated with other benefits.

Differentiation strategy:

Ryanair’s operation provided several positive features for the passengers towards its punctuality, reduced cancellation, few lost baggage compare with other carriers. Passengers always were assured to reach their designation on time with their baggage. Many other revenue generating service such as travel insurance, car hire, couch and train ticket.

Market share and market segmentation strategy:

Ryanair has taken grater market share in the low cost airline business in the European continent and it became market leader in that sector. (Ryanair’s route map in Europe Refer appendix 8)

Organizational Structure

DIRECTOR

Paolo Pietrogrnde

CHAIRMAN OF THE BOARD David Bonder man

DIRECTOR

James Osborne

DIRECTOR

Klaus Kirchberger

DIRECTOR

Michael Horgan

DIRECTOR

Emmanuel Faber

DIRECTOR

Kyran McLaughlin

FLIGHT OPERATIONS

David O Brien

COMMERCIAL REVENUE

HUMAN RESOURCE

PILOT

ENGINEERING

Michael Hickey

CUSTOMER SERVICE

Caroline Green

LEGAL &SECURITY

COO

Michael Cawley

CFO

Howard Millar

CEO

(Source – www.ryanair.com, last update February 14th 2010)

This diagram shows the organizational structure for Ryanair. The airline is operated with the name of Ryanair Ltd. Subsidiary for this Darley Investment Ltd. In this organization all international dealing are done by Ryanair.com. Nature of this business is aircraft trading. These boards of directors are responsible for the strategic view and functions which are in Ryanair Ltd. Chairman is Michael O’Leary and other directors responsible other activities such as audit, executive, remuneration, nomination and the air safety committee.

Leadership.

Ryanair fight for its survival in early 1990’s. In 1992 Ryanair introduced low cost no frills business model in Europe market under the leadership of Mr. Michael O’ Leary. Despite huge success Mr. Michael O’ Leary has come under both praise and criticism about his leadership and management style. Financial Times Magazine Mr. Tim Jeans argue that Mr. Michael O’ Leary genius in his ability motivate people with single-handedly transforming European air transport. Mr. O’ Leary leader ship style doses not fit rigidly into one style. His characteristic highly task oriented controlling cost, aircraft acquisition, and rout development. Also at the same time he is highly people oriented both with customers and people. His outspokenness has made him to expose into public-eye. EU commissioner for Belgium describes him in the Financial Times as ‘irritating’ and ‘arrogant’ Creaton (2004). But former and present staffs prized his leadership style in an interview with Financial Times Magazine. (Refer Appendix 4)

There are three main characteristic of leaders in an organization Finley (2000). They are

Leader should have strong held vision

Mr. Michael O’ Leary took the leadership of Ryanair with very clear vision to the model the carrier on Southwest Airline and to create low fare no frills carrier in Europe.

Leader should be able to communicate the vision

External communication concern Ryanair was well recognizing one of the first budgeted airline in Europe. Internal communication concern he motivated and created incredible energy among the people to achieve the desired objective.

Leader should be able to convert the vision into reality.

Certainly the vision has turned into reality Ryanair grown and created a record profit low cost no frills airline in the European market.

Culture

The culture web describes the paradigm of an organization and physical manifestations of an organizational culture. (Johnson and schools, exploring corporate strategy, p.230) culture basically explained the organizational behaviors. Culture will include stories, symbols, system, structure, routines and rituals.

(Refer appendix 11)

Ryanair’s pricing strategy

Ryanair’s cost leadership is the backbone for its lower piecing strategy. Ryanair is the lowest cost in Europe and its 40% low compare to closet competitor in Europe. (Refer Appendix 6)

Implementation of gap

Strategic implementation is complex and time consuming but success of an organization lies on this stage. However good the business or corporate strategy is, it is off little value unless implemented (Hubbard R.C, 2008, pg 349). Therefore, during this phase, strategy makers should consider the question of who implements that strategy, what must be done and how the strategy is implemented (Fletcher, 2001, p.2). Hence, 7’S framework has been applied to Ryanair to identify gaps & the issues that should be addressed during implementation phase

(Refer appendix diagram 9)

Recommendation

Ryanair continues to attract customers with heavy advertisement stating that they are not going to charge furl surcharge with the aim to keep the fare low. Davey (2006) states that the figures release by the Ryanair shows that its low cost formula is continue to work.

Ryanair in order to increase the business travelers who needs punctuality, the carrier reduce the turnaround time from 30 minutes to 25 minutes by dropping there cargo service even they new that they are going to lose â‚¬ 500,000 per year However budgeted airlines continues to enjoy its boom with low cost and opening new routes in the European market.

If there is drop in demand Ryanair would certainly suffer and they might have to change their strategy by offering drink vouchers and making alliances with hotel groups in order to offer complete package and attract more people to its carrier. Also Ryanair should pay attention technology changes happening such as on line check in and would able them to cut their cost.

Ryanair’s innovating action creates future sustainability. In future if they found new routes reach places quick it will bring more tradition of getting more passengers for Ryanair. Ryanair for low cost uses secondary airport it will cause inconvenient for some customers to reach their place so they have to consider this point to get a solution for customers to reach their place easier.

Conclusion

Overall RYANAIR is in good position when compared to other players. The strategies implemented seem to be more effective since they have helped to match RYANAIR with its external environment. The adoptability & flexibility of RYANAIR to the environmental changes have contributed to the success of RYANAIR.

Ryanair seems to be using their strategy sensibly which work for them. They aware the environment and understand the importance of monitoring and they are the first to come into low-cost market in Europe.

However they constantly monitor the environment and any change they should be ready to change their strategy.

The flexibility & adoptability to environmental changes was possible especially because of the value adding factors RYANAIR has focused. The value chain of RYANAIR has been designed to deliver the low cost concept by emphasizing only in value adding activities and by eliminating non value adding activities such as eliminating catering.

In my point of view I believe RYANAIR was successful in managing the strategic management process by matching itself to its external environment. However, it does not have a major market share as the leader though it has beaten the market leader in many areas. Therefore, I suggest following recommendations for RYANAIR to achieve its potential & improve its market share.

References

Cavendish, Camilla, ‘A policy that pretends we can all fly on the cheap is a policy that won’t fly’, The Times, 5 January 2006

Doganis, R., 2001, The Airlines Business in the Twenty-first Century, Routledge, London

Fletcher J (2003) .Strategic management Study guide and plan Edith Cowan University Perth Australia

Hubbard, G. Rice, J. & Beamish, P. [2008] Strategic management Thinking analysis action 3rd edition Pearson education Australia

Lynch, Richard (2000), Corporate Strategy 2nd Ed. Pearson Education Ltd, ISBN 0-

273-64303-7

Miller A, (1998), Strategic Management, McGraw Hill, 3rd Edition. New York. Study Guide: Strategic Management

Ryanair industry details retrieved on the 21st may 2010 from

www.ryanair.com

Viljoen, J. & Dann, S. 4th edition (2003). Strategic Management, French’s Forest, New South Wales: Pearson Education Pty Ltd.

Appendix

Appendix 1 Ryanair’s Introduction

Ryanair started its operation in 1985. In the first year more than 5,000 passengers traveled between South Eastern Ireland and London. The company expanded continuously and 600, 000 passengers traveled per year in 14 aircrafts by 1989.Past four years the cost increased substantially and ends up with loss of £20 million.

In 1990 the current CEO Mr. Michael O’Leary took over the management and conducted major changes in the company. Ryanair followed the low cost-low frills concept and reduces the routes from 19 to 5 by 1991. The company increased the fleet to 21 over the next 6 years and remarkable increase in passenger traveled in Ryanair due to its low pricing policy. European regulation restricted Ryanair to take advantage to implement low pricing policy.

Ryanair took full advantage in 1997 open new routes in Continental Europe due to deregulation of European Union air transportation regulation. Ryanair established 160 routes by 2001 and hubs established around the continent in London, Glasgow, Brussels, Frankfort, Milan, Now Ryanair is the most profitable and key players in the European budget airline market.

Appendix 2

Low cost carrier business model (Source MERCER management consulting 2002)

Appendix 3

COPORATE STRETEGY.

Corporate Parenting

Parenting strategy

Portfolio Analysis

BCG Matrix

Directional Strategy

Growth

Stability

Retrenchment

Corporate strategy basically explains about the direction of the firm. It go through in three ways. They are as follows:

Directional strategy

This strategy includes three points which are growth, stability and retrenchment. Growth explains expansion and growth of the company. Here we are going to look at the growth perspective of Ryanair. Stability explains ryanair’s did not change its current activities. Retrenchment explains strategies reduce the company’s level of activities.

Portfolio I’ll explain about the BCG Matrix. BCG Matrix is a best analysis part to analyzing and managing the performance of a business unit within the organization. It developed to identify the growth rate of an industry by classifying its business unit. This BCG matrix relies on lifecycle and experience curve

Relative market Share

Low

High

DOGS

CASH COWS

PROBLEM CHILDREN

STARS

Industry Growth Rate%

High

Low

This BCG Matrix growth strategy explains the growth of the company. If we looked at this case study Ryanair is in stars position that means high industry growth rate and having high relative market share.

COPORATE LEVEL

Low

High

Cost reduce

Need for local responsiveness

High

Low

Global strategy

Export strategy

Multi domestic strategy

Transactional strategy

Ryanair is moving from export strategy to transactional strategy. Export strategy which explains products are standard but can varied, market is usually main market, operation &location done in home market, and strategy control is done by home. Here coordination level and local responsiveness is low.

Transactional strategy explains the product are same as export strategy, market means all markets, operation & location done in two way organizational structure, strategy control varies with a product are within global framework and coordination level as well as local responsive level is high.

Ryanair moves from export strategy to transactional strategy to adopt more strategies to survive in the world. Ryanair evaluate on “No Frills” segment, low fare cost leadership, ancillary revenue into focus differentiation and adopting transactional strategy and no fares relationship.

Appendix 4 Leadership vs. Management

Leadership and management are two terms used to define a group behavior in a professional setting. Leadership and management are inter-connected and inter-dependent concepts.

Leadership

Management

Setting up new goals, vision or planning

a new strategy

Contorting the organizing to achieve

realistic goals and objectives

Managing the group properly

Help the leaders to achieve the goals

on collective vision of the group

Seeks effectiveness – do the right thing

Seeks efficiency – do things right

Provides direction to the group

Enforces control

Thrives on opportunity

Lives for the job well done

Make people go down in history as great

men to inspire generations.

Only behavioral aspects that alter

with environment and requirements

Leaders are made, not born

According to Great Man theory, Leaders are born and not made. In my point of view leader are made and some or all of the following helps them to become a great leader, their background, education, knowledge and experience, and their career path. If we further explain leadership as anyone in a position whose success requires the support of others can play the role of a leader. Leaders have ability to discuss, communicate, influence, and control others to do things is absolutely indispensable to everything you achieve in life.

Of course, everyone you meet has different values, opinions, attitudes, beliefs, cultural values, work habits, goals, ambitions, and dreams. Successful leader should have leadership traits. When you become capable in your job or skill, then you become skillful at understanding the motivations and behaviors of other people.

Michael O’Leary deeply believes leaders are made not born. Mr. Herb Kelleher is the one born with leadership quality the founder of original budgeted airline, Southwest Airline in the United States… Mr. Michael O’Leary is made leader who flowed budgeted Southwest Airline model in the European market

Leadership Skills

Getting and giving information

Getting and giving information is probably number one competency required from leaders. Leaders should be communicating effectively and must be able to exchange information effectively and accurately.

In Ryanair Michael O’Leary is the leader who gives decision to others to do. He has the charismatic power to control all its staff and work under him.

Understanding the needs and characteristics of the Group

As the group plans and carries out activities, Michael O’Leary learns more about the individual’s needs and characteristics.

Knowing and understanding the resources of the Group

Knowing group people’s skills, attitudes, backgrounds and experience and to use an effective technique for bring a group together and creating commitment to common goals.

Controlling the Group

A group exists for a purpose. As a leader exerts control, he needs to balances to get the job done and keeping the team together.

Setting the example

As a leader, he should competent enough and set an example to the group. If the leader doesn’t match it with his behavior, he will not get respect and find increasingly difficult to get the group to work with you.

Planning

The leader should be able to plan it and solve the problem to take the group forward. Michael O’Leary will easily solve problem. Because he will plan all the things correctly if one thing goes wrong he knows where and he will correct it,

Evaluating

Michael O’Leary should evaluated the process either formal or informal of judging the situation against a standard

Sharing the Leadership

Depending on the job and the group, certain ways for the leader to work with the group will be more appropriate than others. He will take the decision and share with other directors and so on. Then he will implement it to Ryanair.

Leadership style

Leadership style is basically based on personality, background, believes, values and its leadership position.

Appendix 5

Appendix 6 Financial Information

Total revenue up by 33%

Fuel cost rose by 108 % meaning total cost up 8%

Net profit up by 18%

29% increase in the seat capacity

Tangible asset 2,117,760 (â‚¬000)

Profit after tax increased by 20% – Storing growth in passenger volume and continued tight cost control excluding fuel.

Total revenue per passenger up by 3%

Operating profit increased by 20%

Total cash increased by â‚¬200.6 m to â‚¬1,806.3 m

Total operating cost increased by 40% to â‚¬664 m due to the increased level of activity, and the increased costs, primarily fuel, aircraft rentals, rout changes, airport and handling cost associated with growth of the airline.

(www.ryanair.com)

Appendix 7

(Source – www.ryanair.com)

Appendix 8 Ryanair routes map 2007

Appendix 9 The McKinsey 7s Framework

7s McKinsey is a value based management. It describes how the company organise it activities effectively and historically. The 7s are as follows: structure, strategy, system, staff, style, shared value and skill. (Rasiel & Friga, 2001)

Structure

A Matrix structure was introduced to the organization headed by a hierarchy people in different functional areas.

Ryanair has a different organizational structure compared with other competitor such as easy jet. In Ryanair, top management takes decision.

Procurement was taken under the charge of the chairman portfolio

CEO and other Directors will directly take over the responsibility of the quality issues, marketing and customer satisfaction issues.

Strategies

Strategy of continuous value creation was introduced

Creating value for customers through marketing and new product development

Creating value for company through cost reduction

Marketing strategy was changed from niche marketing strategy.

Ryanair was awarded as low cost airline.

Introduce regular point-to-point flights on short-haul routes

Adaptation of a new business strategies and models to increase cross functional activities in the areas of production, marketing and procurement.

Increase market share and divide market into segmentation.

Styles

Charismatic leadership style.

Autocratic leader

Systems

Implementation of the technology system

Product quality functional department was established in 2003 to focus on product quality and customer co ordination

Cross functional teams were formed consisting of two employees from accounting department one from production and one from technology

New communication style such as documents, news letters, booklets and evaluation methods were used to motivate employees towards value creation.

Automation department was disbanded in 2003, and its work was shifted to IT and equipment department

Campaigns such as ‘Golden Ideas’ and ‘productivity contest among three shifts’ were introduced to motivate employees

Performance appraisal and incentive schemes were launched in 2003

Salary of top and middle managers was linked to the financial performance on a monthly basis

Special incentive schemes for front line employees were launched ( salary systems more performance based)

ERP system was developed on the areas of sales, material and production.

Skills

All the employees at Ryanair hold at least one engineering degree and special MBA qualification.

High field experience (e.g.: Michael O’Leary’s working experience as an executive officer for 16 years work in airline industry).

All employees were capable of managing all type of people with their issues.

Shared Values

Creating value for company as low cost airline.

Creating value for customer through new market development and Customer satisfaction

Employee involvement in performance.

Staff

Innovation discussion meetings to improve employee creative ability

Innovation Reward schemes were introduced to encourage staffs.

Staff Training program provided for Ryanair’s staff.

Appendix 10 Ansoff Matrix

High

Penetration

Product Development

Market

Diversification

Market Development

Low

Product

High

Low

This diagram shows growth strategy developed by Ansoff. If we looked at this case Ryanair is moving into growth and expansion. In this case it shows Ryanair gets 12% of increased in net profit and ancillary revenue grown up to 36%. It generates 7.70% per passenger with very high margin. To cope up with competitive environment Ryanair is moving towards marketing development. It concentrates on getting additional routes at low price, increased the services in normal routes, and introduced new domestic routes within EU.

There secondary service is not in high rate so they concentrate on product development also by adopting new attractive customer satisfaction services to reach growth.

Ryanair is planning to produce in-flight service and non flight service. In-flight service is like internet facilities. And non flight is like customer satisfaction about their transport service and customer care service

Appendix 11 Cultural Web

Routines refer how organizational behave internally and externally and people behave in an organization. Here Ryanair scheduled for routine maintenance, repairs and checking aircraft with its own engineers routinely. This factor will provide of saving money.

Rituals are referring to special events which help to carry out the activities successfully in an organization. In 2001 Ryanair pilots and Ryanair flight employees receives munificent 5 year pay. This is one of the special event occur in Ryanair.

Stories are like history or activities told by employees to new recruit people and other. The first Ryanair success is based on growth. People believe they can travel from Ireland to UK at low cost. It reaches the Europe with success factor. In 1997 Ryanair become the first low cost airline in Europe. And 2000 Ryanair won the prestigious Best Managed Airline Award organized by US Aviation week & Space Technology Magazines.

Symbols are like logos, pictures, terminology and a type of language used. In Ryanair “No frills” airline is clear picture to identify Ryanair. Uniforms for staffs, fling a bid logo to identify Ryanair. Terminology is like in-flight service, bagging, ticketing and no Frills services.

Power is considers as assumptions. Michael O’Leary has a significant power to control and give assumptions to directors, operational level staffs and his employees. Control system refers as measurement and reward system. Ryanair uses performance based pay structure to reward his staffs.

Organizational structure is referring as it creates a good relationship with members. Ryanair uses hierarchical structure to control the organization here top management will take decision and implemented to middle level and operational level staffs. Ryanair designed as “No Frills” airlines with low cost to travel between Europe. And it advantage is on time performance, less time for baggage handling and quick turnaround time.

Appendix 12

Appendix 13 Resource based View.

A firm includes a bundle of productive resource and capabilities.

Resources- In resources we includes tangible and intangible assets which a firm uses to implementing the strategies. Tangible assets include financial, physical, technological and organizational. Intangible assets includes human, innovative and Reputational.

Resources

Ryanair Resources.

Physical Resources.

Aircraft – 103

Destinations – 127

Countries – 27

Financial Resources

Total asset is 4,634.2 million

Total debt 1,787.0 million

Total equity 1,992.0 million

Intellectual Resources

35 million customers

Award – World’s most profitable airline by the air transport world magazines (2006)

Low cost player

Human Resources

Total employees is 35000

Michael O’Leary is the CEO of Ryanair

Source – www.Ryanir.com,Annual Report

Terms

Ryanair

Threshold Resources

Flight

Head Quarter

Office Equipment

Employees

Finance Resources

Threshold Competences

Online Booking

Point to point Routing

Operation of on- time delivery

Core Resource

Management Team

Core Competences

No Frills strategy

Low Cost

Route Policy Strategy

Source – www.Ryanair.com

Appendix 14 Value Chain Analysis

INFRA STRU

SERVICE

MKTING

OPERATIONN

INBOUND

TECH

PROCUM

HRM

Minimum Corporation HQ

Low cost limited Crew Management In – House Performance

Training Control Contracts

Internet Internet Integrated Low tech marketing N/A

Information System internet sales

Boeing Alliance Outsourced private Low cost

Discount

Quality No Frills Quick Low cost limited Resources

Training Low Cost Turn around Promotions Basic Low Cost

Low cost Reliable Free Publicity High

Suppliers Service Controversial Productivity

Airport Internet sales

Agreements Yield mgmt

OUTBOUND

Here in value chain analysis includes primary activities and supporting activities. Primary activities refer as: inbound logistics, operations, outbound logistics, marketing sales and service.

Inbound logistics are input activities which are necessary for developing the organization. In this case Ryanair gives excellence training, favorable airport agreement and low cost suppliers, Ryanair having all Boeing aircraft, hence it has grater bargaining power from the supplier and it place most of the orders when the aircraft price was low in order to preceding in the market. Operation means activities accepted during the process. Ryanair’s main operation is to have low cost& it is popular as no frills budgeted airline. Outbound logistics are carried out after the production. In this case Ryanair carried out quick turnaround and reliable service. Marketing and sales rely on reaching customers. Ryanair uses low cost promotion, free publicity, controversial & internet sales to attract and also quick reach by the customers. Service is basically adding value towards customer. Ryanair says with restricted resource and low cost get high productivity.

Supporting activities are: firm infrastructure, HRM, technology development and procurement. Firm infrastructure refers as activities and functions which are linked with decision making.

Minimum Corporation is relying on Ryanair’s decision making.HRM says quality HR for the company can make difference in the market. Ryanair differ with low cost training, limited crew, management control, in-house and performance contracts. Procurement is a systematic process and it builds a long term relationship with suppliers’ Ryanair also private low cost company has good relationship with suppliers.

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