Case Study And Analysis Of Ryanair Management Essay
This case study and analysis is to identify the current strategy of Ryan Air using various models and strategies to develop a better future for Ryan Air. As this report addresses different aspects of Ryan Air with the help of Porter’s 3 Generic Strategies and the justifications using the value chain model has helped in the analysis of the real focus of RyanAir. This report also addresses the various control systems with the implementation of the strategy for Ryan Air together with the leadership styles of Michael O’Leary. As he plays a big role in the company in cost management and many other strategies of running a low budget airline.
The Strategy implementation has been carried out using the Mckinsey’s 7 S model. This has helped identify the various aspects of improvement for Ryan Air. As Ryan Air is the first budget airliner, it has been able to become the largest carrier in the UK. To address the short comings and the strategy defects, the following report addresses various models to analyse and implement a strategy to enhance the airline since its cost management systems remain of top notch.
Through this report the identification of the strategy and a new implementation of it may enhance through the 7’S model has been able to address all aspects. This report contains vital information of Ryan Air’s position and its strategies and recommendations to ensure the company is performing at high levels in all sectors.
2.0 Porter’s Generic Strategy of Ryan Air
Ryan Air is a low budget airline. Its main focus is more or less cost reduction. Its strategy remains the world’s low budget airline. Therefore we are able to make and analysis of Ryan Air using the Porter’s Generic Strategies to analyze the current position of Ryan Air. Through analysis we are able to outline the three generic strategies such as,
Cost Leadership strategy is based upon a business organizing and managing its value-adding activities so as to be the lowest cost producer of a product within and industry (Campbell, 2002)
The strategy here is based on the goal of the airline. A low budget airline that is value adding and competes against its competitors with the lowest costs. Ryan Air has been able to become a popular airline among European citizens and have attracted many European business travelers who only require getting from point A to point B.
With the recent recession and various other factors of customers searching for cheaper option which provided quality service, Ryan Air have been able to create a demand for its tickets. At first they were an ordinary airline with normal service of high quality which also suggested that they are a high priced airline. Therefore the company was forced to go in to cost reduction mode due to the external forces of recession.
Therefore along with the expansion to Europe the air line was faced in hardships of surviving as a high costs airline. Therefore the company was forced to become a more effective cost leader in its sector. Through this they are able to become the best low fares airline in the European sector.
Differentiation has many advantages for the firm which makes use of the strategy. Some problematic areas include the difficulty on part of the firm to estimate if the extra costs entailed in differentiation can actually be recovered from the customer through premium pricing. Moreover, successful differentiation strategy of a firm may attract competitors to enter the company’s market segment and copy the differentiated product. (Lynch, 2003).
As RyanAir faced various hardships in the past receiving losses of up to IR£20 Million, the fight to survive along with Michael O’Leary decided to change company strategy that was based on the model developed by American Southwest Airlines.
Ryan air’s generic strategy remained unclear, alas they remained somewhere between a focuser and a cost leader. But their previous strategies were heavier on the focuser aspect of the porter’s generic forces. When their competitors were blooming they were on the verge of changing their strategy to becoming a low budget airline. Therefore differentiation together with cost leadership was made a combination in being popular among the segment for a unique service provider in the airline industry.
As it competitors like EasyJet were using primary airports which charges a higher rates, Ryan Air was able to use Secondary airports being available to most destinations suggesting it was the most pure low cost airline.
As Aer Lingus and Lufthansa remained as competitors they have focused on differentiation over low cost. They are focusing on both differentiation and low cost. Therefore Ryan Air is able to maintain its lower costs focusing mainly on low costs.
As Ryan Air remain cost leader Aer Lingus and EasyJet focused mostly on differentiation. Therefore these airlines on this aspect were differentiated where as Ryan Air focused entirely on a pure low cost airline.
Porter initially presented focus as one of the three generic strategies, but later identified focus as a moderator of the two strategies. Companies employ this strategy by focusing on the areas in a market where there is the least amount of competition (Pearson, 1999).
The focus of Ryan air is to attract customers to low cost airlines getting from point to point. Therefore its focuses are to accommodate passengers and customers to select a purely low budget airline over its competitors as mentioned above. Therefore the case also represents that Ryan Air has no frills and suggests extremely low cost with high quality service catering to customers who need to get to cities with secondary airports. This helps them focus on business clients over the holiday customers who demand comfort over A to B transportation. Therefore through these strategies Ryan Air is able to use the purely low cost strategy to gain sales of air tickets that were often demanded by businessmen.
As per cost leadership Ryan air has focused in to becoming the lowest cost airline catering to many customers who seem to easily select Ryan Air over other airlines that provided a higher quality and quantitative service for a premium price. Therefore the focus of this airline such as Ryan Air was to focus less on differentiation and maintain focus on low cost airlines.
Through these aspects by using the porter’s generic forces, Ryan Air remains as purely a low cost airline that focuses less on being unique against its competitors lacking differentiation. Their strategies are entirely based on being the Cost Leader in its segment.
3.0 Value Chain Analysis
“By identifying the key resources and capabilities which are unique to the business and which are valuable and hard to imitate will determine the sustainable competitive advantage.” (Hubbard, 2008, p23).
Through the help of the value chain analysis the company could be able to identify how RyanAir could build up its capabilities to compete against other similar budget airlines. This illustration does show how the organization could add value to their services. It will also help understand the strengths and weaknesses.
In the above diagram the value chain analysed through the study of Ryan Air has been able to outline the important areas in Porter Value Chain Analysis. Throughout this analysis it is clear that the infrastructure made for Ryan Air has been quite competitive and have worked to their advantage.
When analysing the Inbound Logistics which provides quality training with the help of low cost suppliers and airport agreements have helped through Building a low cost training facilitation of crew and pilots together with internet sales and ticketing which has made things much efficient and effective. The Boeing discounts received on procurement of new airplanes have enabled them to create a qualitative inbound logistics at Ryan Air.
Operations at Ryan air on the other hand have remained focused on low cost, which suggests a no frills airline that caters to customers of the European sector. A limited crew in lower cost on HRM and technical development that helps access to information much easier that help alliances in working together to be more efficient. These have attracted low costs that attract more customers in to choosing Ryan Air.
The outbound Logistics remain as Management control which consists of an integrated system that is outsourced to a company that would help handle outbound logistics. This helps in the efficiency of the airline. Quick turnaround and Reliable service both helps Ryan Air to enhance their efficiencies in their value systems to maintain outbound logistics at a efficient pace.
Marketing and sales have been conducted in house with existing employees of Ryan Air and have been handles internally. Low technical Marketing and internet sales have required a minimum number of staff which helped in cutting down on costs to remain truly a low cost airliner. Therefore Low cost promotions to attract customers, together with free publicity have helped create awareness among the public to enhance sales. Controversial comparisons to its competitors making Ryan air the selected airline among many businessmen. Internet Sales have boosted the speed of acquiring customers and efficiency and saving of time in obtaining the maximum number of passengers in each flight. Yield management has helped enhance the Marketing and Sales to make sure performance is at its peak where the sales are constant and consistent. Influencing consumers to select Ryan Air has enabled Yield Management to be successful in Ryan Air’s Marketing and sales division.
Under the service aspect of Ryan Air performance contracts of employees have ensured that all perform at high levels and high productivity. This suggests that making maximum use of limited resources and a basic low cost would enhance the service through performance contracts. These aspects on the service sector of Ryan Air have made it able to reach high targets being a low cost airliner. They have been able to acquire many sales and is on the verge of being the best budget airliner in the European sector.
Therefore through this analysis it has been identified that a successful budget airliner and remains a truly low cost airline.
4.0 Michael O’Leary’s Leadership
Ryan Air’s leadership strategies are based on Michael O’Leary’s ways of managing the business. As CEO of the company he is very outspoken and is ready accept any challenge he faces. The success of Ryan Air is not possible without a strong commitment by one of executives of the company. Therefore Michael O’Leary was the one to stand up and begin to run this company to retrieve it back to a path of success.
Mr O’Leary was the saviour of Ryan Air transforming it to a profitable airline in Europe. His leadership styles were the main backing to help all sectors work together in to achieving this target. With its low cost strategy and to be the world’s best airline, his leadership style represents a quite task oriented leadership style. This style often was based on position and authority and seniority.
His plans on acquiring Aer Lingus are still on the verge where he would not give up in acquiring it. Therefore this illustrates that his leadership style exhibits a focused and determined leadership style.
He is not afraid to take on his staff if they stand in the way of cost reduction. This also suggested that his team that worked under him had to load baggage and was abusive and abrupt with the staff. This also illustrates aggressive growth and an aggressive stance. He is now a marketing genius being voted the European Businessmen of the year.
4.1 Michael O’Leary’s Leadership levels
In order to analyse Michael O’Leary we could use the Level Five Leadership prepared by Jim Collins. According to Jim Collins “Only 11 companies in history have successfully made the transition to greatness.” What they seem to have in common is that all leaders had all five levels of leadership.
Through the following individual levels of leadership we are able to assess the quality of leadership Mr. Michael O’Leary possesses.
Level One: A capable individual who makes productive contributions through talent, knowledge, skills and good work habits.
According to the relevant information on the case and the understandings of the leadership aspects of Michael O’Leary it is understood that he does posses productive contributions through talent that has definitely helped Ryan Air in reaching its targets of becoming the Largest Carrier in UK. Also becoming the first budget Airliner in the UK has made them establish themselves as truly a cost leader. These aspects of Ryan Air have only been able to be reached due to its well talented Leader, Mr O’Leary. His productivity among anything he does and also his skills of handling a financial plan and handling the overall financial aspects of a company, he has truly mastered and redesigned the art of cost cutting. Therefore his skills and knowledge have helped him develop good work habits to ensure every aspect of Ryan Air is done efficiently.
Level Two: A Team member, he contributes his individual capabilities to the achievement of the group objectives and works effectively with others in group settings.
When addressing level two according to Jim Collins, Michael O’Leary exhibits a moderate level of the ability to work with teams. He is able to direct and ensure that his subordinates are achieving their targets. This illustrates that his individual capabilities have been passed down individually ensuring that all targets are met.
Level Three: A Competent Manager. He knows how to organize people and resources towards the effective and efficient pursuit of predetermined objectives.
As a competent Manager Michael O’Leary’s art of executing tasks were of top notch. Reviving Ryan Air in becoming the best Carrier in the United Kingdom has ensured his effectiveness and Efficiency to be in par with the companies’ objectives of becoming truly a low cost budget airline with no frills at all.
Level four: Goes one step further and become an effective leader, his catalyses to and a vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.
As for Mr. O’Leary being an effective leader is of no doubt. Along with that he is efficient in it as well due to the fact that low budget financing and strategically implementation of controlling a large entity like an airline industry with minimal cost is of a state of the art financial plan for Ryan Air. And that suggest that the strategies Mr. O’Leary has implemented has truly brightened his leadership capabilities. By creating a strategy to achieve a clear compelling vision such as being the lowest cost airliner or cost leader, O’Leary has developed a sophisticated financial plan and cost management system for a yet simple vision with optimum performance and standards.
Level Five: The person who knows how to build enduring greatness through paradoxical blend of humility and professional will.
Mr O’Leary in his leadership has been able to undergo several steep steps in to making Ryan Air the No.1 Airliner in UK. His driving forces often were much stronger than his restraining forces. Building greatness in anything he does was based on his personality together with his ability. His vision of not stepping down from the agreement of Aer Lingus joining hands with Ryan Air has been due to the fact that his professional will and his blend of humility has worked to his advantage.
Through these aspects we are able to understand that Mr. Michael O’Leary is not a level 5 leader due to his limitations of working together as a team. But he is quite close to becoming a true and effective leader of a level 5 leader. Therefore his improvements of being able to work as a team would advance him from being a level 4 leader, advancing to a level 5 leader.
5.0 Organizational Structure and Systems of Ryan Air
The organizational structure of Ryan Air according to the details of the case remains to be tall. Therefore Ryan Air structure has been illustrated in appendix 1 to indicate the functional structure of the organization.
This functional strucuture represents a traditional functional structure with functional heads reporting directly to the CEO, Michael O’Leary. The Chief financial Officer and the Chief Operating Officer reports directly to the CEO together with the the HR manager, Legal Scretary and ground operations officer. This illustrates an ideal short heirachy as the company is able to communicate within its segments to ensure consistency is permenant.
Since Michael O’Leary is the mastermind behind cost management he has been able to work clsoesly with the financial heads of the company Howard Millar as illustrated in the appendix. This also shows the various methods of communication that Michael O’Leary used to direct and supervise his direction as a leader. Therefore all sectors report directly to the CEO, Michael O’Leary.
Through the functional structure of Ryan Air it has been identified of the Advantages and Disadvantages of a functional structure to suit Ryan Air’s needs.
Efficient use of resources, economies of scale
Poor Communication across functional departments
In depth skill specialization and development
Slow response to external change and lagging innovation
Career progress within functional departments
Decisions concentrated at the top of the hierarchy, creating delay
Top manager direction and control
Responsibility for problems difficulty to pin point
Excellent coordination within functions
Limited general management training for employees
High Quality technical problem solving
These pros and cons have helped Ryan Air identify its organizational structure to determine if it were healthy to the operations of Ryan Air. Since the organizational structure is the way activities are arranged, structure does not directly affect performance of the company. RyanAir is able to make adjustments to its structure based on new strategies and maintain a pure structure. A formal Structure is much suitable for Ryan Air but along with Michael O’Leary a good structure should be helpful in assisting the organization if it was a formal or informal structure. Since O’Leary was indeed approachable the structure of the organization remains short and is more effective in getting the task done.
6.0 Recommendations and Strategy Implementation using Mckinsey’s 7’s model
The strategy implantation for a better future for Ryan Air recommends various aspects that need to be enhanced in order maintain stability and improve efficiency. According to the 7’S model developed by Mckinsey this study is able make the recommendation on how to overcome the current situation and the art of improving the strategy of Ryan Air under the commandment of Mr. O’Leary. Therefore the 7 S model has been able to develop a through recommendation all round to improve efficiency and effectiveness the company.
The following criterion addresses each aspect of the company on how to improve its performance. (Refer Appendix 2 for diagram)
Strategy: Concentrating on becoming a truly low cost airline suggesting that Ryan Air is truly a low budget airline would maintain competitive advantage over the other airliners.
Structure: The structure at Ryan Air is such that all head of sectors report directly to the CEO of the company, Michael O’Leary. Therefore Ryan Air consists of a short organizational structure. Maintaining this structure would ensure transparency is secured together with efficient tasks.
Systems: Better frontline employees to maximize the operational efficiency in order to handle any situation. By not taking advantage of the price sensitive consumer and instead, embracing them would help Ryan Air reach its goals in sales.
Shared Values: The core Values of the company would be followed according to the culture of the organization. Since the organization is a low budget service provider, catering and adhering to basic needs should be the main focus and should be seen as a value of the company.
Style: The style of leadership used by Michael O’Leary is quite close to becoming a level 5 leader, but needs to be improved in being more team oriented. The style of leadership adopted at Ryan Air has so far been successful reviving them as the largest carrier in the United Kingdom.
Staff: Better training and career development plans would help contribute to employee morale and motivation. More training programmes would enhance their efficiencies in maximizing operational efficiency in order to provide the best service possible even in failure situations.
Skills: The skills and Competencies seem to derive from Mr. O’Leary himself. Strong financial plans have ensured again that Ryan Air is indeed the cost leader who focuses much less on differentiation. By not taking advantage of price sensitive consumers and instead embracing they would help Ryan Air reach its goals as the No.1 Budget Carrier in Europe.
The expansion of routes available
Offer more Premium services
Increase sales of air tickets
Turn Focus to leisure and private travel market
These recommendations consist of business expansion which would require capital investment. Therefore they remain as additional recommendations that would enhance Ryan Air as the lowest cost budget airliner the world.
In conclusion the analysis of Ryan Air is to assess its viability and ability to overcome obstacles and restraining forces to become the largest carrier in the United Kingdom. Analysis of Ryan Air was conducted with the Value Chain and Porters Generic 5 Forces. These helped in the understanding of the focus in Ryan Air as a Cost Leader and their cost methods that have complimented their business with a demand for their service. As cost leader over differentiation is their major concern, Ryan Air is able to become a true budget airline that offers basic service and high quality and quick flights with no delays and fuel surcharges. Quick turnarounds and efficient flights ensure Ryan Air to be the selected airline in UK among businessman. Expanding the horizons to catering to leisure sectors also may be of value to Ryan Air if expansion is conducted.
Therefore this report consists of vital information that relates to Ryan Air’s existing strategy and the strategy that needs to be implemented as stated in the recommendation section along with Mckinsey’s 7 S model. Further all developments of this study have been conducted with the best knowledge of understanding through the internal analysis and strategical understanding of the company.
Ryan Air is on the verge of succession if their strategies are in par with their goals and objectives. Therefore what is important is that Ryan Air remains as the cost leader in its segment to thrive in the UK market of Airlines.
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