The aims and nature of ryanair

The aims of this report are to analyse and explain the nature of Ryanair business organisation, identify the contribution of functional areas to the operation of Ryanair organisation and to demonstrate an understanding of core concepts in functional areas. The objective of this report is to show understanding in organisation’s key areas such as: organisational type, financial information, marketing management, quality and supply chain.

The “Ryanair Holdings” second-largest airline in Europe in terms of passenger numbers came to the business world in July 1985 with flights on a 15-seater Bandeirante aircraft. It was operating daily from Ireland to London Gatwick airport. Quantity of passengers was approximately 5,000 thousands. In 2009 quantity of passenger’s increased by 66,503,999 million. Ryanair’s fleet rose to 232 Boeing 737-800. During 1985-2009 Ryanair has opened bases in the centre and north side of Europe. Low cost airline profits rose 200% to over 318 million euro while many of Ryanair’s competitors announce losses and even more go bankrupt (Ryanair 2009). Ryanair’s future activities will be considered in below presented articles.

2.0. Findings

Figure 1. Ryanair Holdings Logo (Ryanair 2010)

2.1. Organisational Structure

Bonderman and O’Leary (1996) established a new company “Ryanair Holdings”, they have bought the control of Ryanair Company just for £5 million cash, an airline they had valued at approximately £57 million. From that moment Michael O’Leary is “Ryanair Holdings” legal entity (Creaton 2007:117).

2.1.1. Sector in which Ryanair Trade

According to Palmer et al., Ryanair operates in private-sector, because the aim of private-sector organisations is to earn profits for the owners of the organisation. As O’Leary is entity of Ryanair, he:

“…always acting in the interests of the company because he is a shareholder” (Siobhan Creaton 2007:278).

Moreover, O’Leary said that he will earn as much profit as he cans (Siobhan Creaton 2007:277). In addition, private-sector is able to monitor the results of its marketing activity, as the benefits are usually internal to the organisation (Palmer and Hartley 2006:230). Ryanair publish their annual report which will be used in this report as an example of sources of finance (Ryanair Holdings 2010).

Private sector is subdivided into four types, but Ryanair refers to two of them: Private Limited Company (LTD) and Public Limited Company. LTD permits some defence to the shareholders – they take a risk to invest money for business. Thus, shareholders can use Ryanair’s annual report (Ryanair Holding 2010) which includes detailed financial information (Boddy 2002:488). PLC must have a minimum share capital of £50,000 and must have at least two directors. As to Ryanair, O’Leary and Bonderman have bought control over Ryanair Limited for £5 million (Palmer et al. 2006:220). Consequently, Ryanair Holdings PLC (Ryanair Holdings) is the holding company for Ryanair Limited (Ryanair).

2.1.2. Structural Style

Ryanair’s structural style is divisional, where administrators create divisions and make them responsible for all the functions to deliver their facilities to the consumers (Boddy 2002:245). Ryanair Company has geographic divisions, to the location of customers. For example, Ryanair has a group of people who works in Baltic countries, such as Latvia and Lithuania and there are managers, who are responsible for staff, customer needs, and manager use autonomy to meet local needs (Boddy 2002:246).

2.2. Ryanair’s Source of Finance

Ryanair’s company is financed by internal sources – sources of finance that come from the business’ activities – retained profit. For example, if the Ryanair business had a successful trading year, the organisation can use got profit for future activities. Of course, Ryanair can use profit only after paying all its costs (Manak 2009:184-185). The advantage is that source is very useful for long term business, because they can use it sources for future business activities. For example, Ryanair’s attendants sell a variety of products such as MP3 players, digital cameras, perfumes and so on. All the extras revenues are up to 15% of all revenues. Ryanair Company is trying to earn revenue on everything on the board except seats (Kotler et al. 2009:577).

Furthermore, Ryanair is run by equity finance. That means that organisation or a person providing money, does not receive interest and there is no guaranty that it will be repaid. If organisation had a success in borrowing money there will be an increase in share value or in dividends. Besides, after borrowing success, shares could be sold to some on else. (Smith 2007:291). There are different types of shares: ordinary shares and preference shares. Ryanair’s organisation has ordinary shares. Shareholders receive ownership of a small part of a business and they carry complete voting rights. The number of ordinary shares that Ryanair has is 1,476.4 (in Ms) (Ryanair Holdings 2010:138). Correspondingly, company’s earnings per ordinary shares are 20.68 (euro cent). However, if organisation will have unsuccessfulness, shareholders will be last people who will receive proceeds and may be receive nothing at all. (Smith 2007:292).

2.2.1. Profit or Loss?

Being based on Ryanair’s Income statement for year 2010 company got the profit of €341million before tax and €305.3 million after tax (RH 2010:135). Thanks to lower oil prices, company’s traffic increased to 14% of customers. Ryanair’s non-ticket revenues rose to €661 million or 11% in 2009 but now (2010) account is 22%. Besides, Ryanair opened 280 new routes in 2009, with destinations such as Spain and Portugal for summer travellers, making higher summer rates. Besides, shareholders will receive special dividends up to 550 million euros. Congruently, Ryanair’s chief executive O’Leary will receive 20 million euros, who owns just 4$of the company’s shares. (Guardian 2010)

2.3. Marketing strategy and Target Market

Marketing strategy:

“…involves the activities of selecting and describing one or more target markets…” (Lamb et al. 2008:43).

To identify target market, an organisation should identify which of the segmentation is distinct and actionable. Ryanair’s target is market segmentation activity. Segmenting market relies on detecting the variables that differentiate customers with need (Boddy 2002:215). Ryanair organisation refers to demographic segmentation – social class. It can be used characterised function standards such as education, profession and property worth (Kotler 2009:16). Company select only one target segment to focus on, consequently, organisation use concentrated targeting strategy. The advantage is that business may concentrate on resources and can better meet the needs of defined segment (Lamb et al. 2008:247).

2.3.1. Marketing Mix

When target market is identified organisation can evaluate marketing mix. McCartney’s four marketing mix tools were expanded to 7Ps by Boden, which had a more services focus and included process, physical evidence and people. 7Ps is a necessary mix that company should track to maximise marketplace results (Kotler et al. 2009:17).Ryanair is using “7P Formula” for its brand image, which consists of:

2.4. Quality Strategy

According to David Garvin (1981) there are 8 dimensions of quality that can serve as a quality framework. For Ryanair’s Company quality strategy identification we will use only 4 the most obvious dimensions:

Performance – characteristics of a service (Garvin 1987:50). For example, Ryanair’s service speed, flight booking is depended on your own, because Ryanair is offering only self-service. Another example is absence of waiting, unfortunately, Ryanair not the best in this service, because flights are usually delayed.

Perceived quality -it is about client’s previous experience, what he thinks about that company (image, reputation) (Garvin 1987:59-60). Focussing on core brand value (providing cheap tickets to approximately 49 million passengers who desire low cost to high service) is a key of Ryanair’s success. (Kotler et al. 2009:443).

Aesthetics – it is about personal judgment of individual (Garvin 1987:59). For example, passenger is ordering some food that looks and tastes not as good as at picture was. In addition, sight or vision of service. For example, Air France – KLM have an impression of luxury thanks to leather seats, while Ryanair – has plastic seats with blue and yellow as the dominant colours of no – frill focus company (Kotler et al. 2009:681).

Serviceability – how fast client will be served (Garvin 1987:57). For example, passenger is ordering some meal and he gives denomination but not a coins, it will take an eternity to receive back your change. So Ryanair has very poor serviceability.

Relying on above mentioned facts it is possible to tell that Ryanair has not got any strategic quality at all. Ryanair’s chief executive is obsessed with providing a functioning airline and cared little about pleasing its passengers, passenger’s number growth and company’s profit (Creaton 2007:271).

2.4.1. 3 Key Areas of Quality

Quality

Service

People

Marketing

High

(Service satisfies customer’s needs)

–

–

Sales promotion

Low

(customers are dissatisfied)

Food for extra pay;

Uncomfortable seats;

Checked luggage;

Bus transportation into town.

Employees must pay for own security checks

Staff must pay for own uniforms and parking

Staff must supply own tea and water

Advertising

Service is an indicator of poor quality, because while you are flying at Ryanair aircraft you will not receive any food for free. For example, the hot dog for 4 euros (Kotler et al. 2009:577). Moreover, it is well known fact, that Ryanair’s seats are uncomfortable, seats do not recline and seat-back pockets have been removed (Kotler et al. 2009:577). Comparing British Airways (BA) with Ryanair, BA has first business and economy classes seats, while Ryanair has only Economy class seats (British Airways 2011). Furthermore, client should spent extra money for bus or train transportation into town from distant airports that Ryanair uses (Kotler et al. 2009:577).

Furthermore, Ryanair has poor quality in HRM. Staff could no longer enjoy their tea or coffee for free, staff must to bring own drinks and snacks to work. Cabin crew were banned to use ovens on board, because there will be no additional cleaning costs. Pilots were told that they can use only one ream of paper a day (for reports). They also have to do bi-annual medical examinations, in their own time, and what is the worst they have to pay for their own for it. Additionally, reduction concerns to uniforms, company will deduct monthly sum from staff pay to cover their uniforms. Besides, there is a problem of absenteeism in Ryanair’s company (have lost over 10,000 days) (Creaton 2007:239).

Ryanair is famous with rude and scandalous posters. One of the examples is poster which offended BA’s company (Creaton 2007:239). Comparing Ryanair’s posters with BA’s we can say that BA’s advertising is more enjoyable, because there are no slogans that are concerned with price reduction (see Appendix 1 and 2). The only thing that has a high quality is sales promotion; because a quarter of seats are free, passengers pay only taxes and fees of approximately 7 – 16 euros (Kotler et al. 2009:577). In addition, buying a ticket passenger can return their 10 pounds, receiving a coupon (after completing online booking Ryanair offer to complete form).

2.5. Sequence of Supply Chain Activities

Ryanair Company provides transaction by airplane services. The table below shows the sequence of supply chain activities.

At First, passengers decide to use Ryanair’s airline then they have to complete the online form at Ryanair.com, then passengers will receive digital receipt at their e-mails. The following stage is online check-in, which you must to complete from 15 days up to 4 hours prior to passenger’s scheduled flight departure. Moreover, client must to print check – in ticket. (САМ ДОЛÐ-ЕН РАСПЕÐАТАТЬ) At day of flight traveller arrives to the airport and registers their luggage and then goes transportation. When passenger arrives in the airport he should undergo the same procedure as well as before flying (registration, получение luggage).

The disadvantage of Ryanair’s Supply Chain service output is “waiting time”. It is the time that customer has to wait before flight. The lower the waiting time, the higher the level of service (Bowersox et al. 2010:51). For example, Ryanair’s flights are often delayed and sometime even cancelled. Consequently, Ryanair’s level of service is poor.

2.5.1. Value -Added Services

Ryanair’s internet booking is the value-added service in Supply Chain process. According to Bowersox (2010) et al. value-added services refer to unique activities that firms can develop to increase their productivity. For example, internet booking is unique activity, and passengers, buying tickets, online can save they time. In addition, online check-in is value added service, because if passenger does not have luggage (more than 15 Kg) he can go straight to the gate. Online check-in helps to save passenger’s time (do not wasting time staying in the registration queue) and company’s time and money (staff working hours).

The company is in great demand at consumers despite that consumers are performing self-service, of course except transaction by airplane. People are ready to for this kind of services, because they prefer low cost rather than high quality or supply chain services. Ryanair is offering close distance only that is why consumers prefer low cost ticket, 2 or 4 hours may not cost a high quality.

3.0. Conclusion

The main conclusion that can be drawn therefore is that:

1. Ryanair organisation is trading in the public sector that gives an advantage for its owners, because private sector help’s to earn money for them. Also, Ryanair adopted divisional structure, because airline has it offices almost in all over Europe.

2. Ryanair is run by retained profit and equity finance. Furthermore, company is making profit of €341m before tax.

3. Ryanair’s target market is demographic segmentation if speak in detail Ryanair company is considering social class for characterising function standards such as education, profession and property worth. Ryanair is using “Seven P Formula” as a marketing mix for its brand image.

4. Quality dimensions speak about that Ryanair business organisation has got a poor quality. 3 key elements: people, service and marketing -are not high quality. The only thing that is high quality is Ryanair’s sales promotion.

5. Almost all the Ryanair’s services are self-services, except transaction by airplane. Correspondingly, Ryanair’s supply chain has disadvantage such as service waiting time and supply chain’s poor quality.

Ryanair’s trading in the last 5 years are talking that organisation had pick moments and also had some falls. Generally, company had shown excellent performance in low-cost strategy, increasing it passenger number from 34.8 million (2005) to 66.5 million (2009), while many of Ryanair’s competitors announce losses and even more go bankrupt. During 5 years Ryanair has opened bases several new bases such as Bournemouth, Birmingham and Belfast.

Forecasting how the Ryanair business may proceed in the current economic climate, I may say that Ryanair will continue to exist in the world market, because its chief executive knows what people want – low cost tickets. Consumer’s interest in traveling will continue to exist even in economic recession time. While consumer’s incomes are falling but supply is increasing, Ryanair’s organisation will continue to offer low – cost seats or even seats for free. I assume that in future Ryanair will expand it destinations to other continents such as South America and Africa, because company has got huge possibilities for that. The only thing to do is to find additional investors and to think over the strategic plan.

4.0. Recommendations

In the light of these conclusions, I would recommend Ryanair organisation to improve organisation’s supply chain. All the Ryanair’s destinations are operating into far-flung airports and passengers are confused about airports. All that it is necessary is change some of the destinations to major cities. Another solution is to write not only the airport’s name and country but write a city’s name as well.

In addition, I would recommend to improve quality strategy a specially one of the quality aspects – people (HRM) as staff may start to strike. Their needs are not considered, company should prove such necessary elements such as uniforms and bi-annual medical examination. Of course, it will cost huge amount of money for the organisation but still staff will be satisfied. As a consequence, staff will work better and Ryanair’s service will be little improved as well.

References

Boddy, D. (2002) Management – An Introduction (2nd Ed.) Harlow: FT Prentice Hall.

Bowersox, J., D., Closs, J., D., and Cooper, B., M. (2010) Supply Chain Logistics Management (3rd Ed.) New York: McGraw-Hill.

British Airways (2011) Travel classes [online] available from <http://www.britishairways.com/travel/classes/public/en_gb?link=main_nav> [5 February 2011].

Garvin, D., A (1987) Managing Quality, New York: The Free Press.

Guardian.co.uk (2010) Ryanair returns to profit [online] available from <http://www.guardian.co.uk/business/2010/jun/01/ryanair-returns-to-profitHYPERLINK “http://www.guardian.co.uk/business/2010/jun/01/ryanair-returns-to-profit> [9”>HYPERLINK “http://www.guardian.co.uk/business/2010/jun/01/ryanair-returns-to-profit> [9” [9 February 2011].

Kotler, P., Keller, K.L., Brady, M., Goodman, M., and Hansen, T. (2009) Marketing Management. Harlow: Pearson Education Limited.

Lamb, W., Hair, F., J., and McDaniel, C. (2008) Marketing (10th Ed.) Mason: Nelson Education, Ltd.

Manak, S. (2009) Introduction to Business Organisation 121BSS, Glasgow: McGraw-Hill.

Palmer, A., and Hartley, B. (2006) The Business Environment (5th Ed.) New York: McGraw-Hill.

Ryanair (2009) About Us [online] available from <http://www.ryanair.com/en/aboutHYPERLINK “http://www.ryanair.com/en/about> [27”>HYPERLINK “http://www.ryanair.com/en/about> [27” [27 January 2011].

Ryanair (2010) Logopedia [online] available from <http://logos.wikia.com/wiki/Ryanair HYPERLINK “http://logos.wikia.com/wiki/Ryanair > [31”>HYPERLINK “http://logos.wikia.com/wiki/Ryanair > [31” [31 January 2011].

Ryanair Holdings (2010) Annual Report & Financial Statements 2010 [online] available from <http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf> [3 February 2011].

Siobhán Creaton (2007) RYANAIR: The Full Story of the Controversial Low-Cost Airline, London: Aurum Press Limited.

Smith, M. (2007) Fundamentals of Management, Glasgow: McGraw-Hill Education.

Bibliography

Beckford, J. (2002) Quality (2nd Ed.) London: Routledge.

Calder, S. (2002) No Frills – The Truth Behind The Low-Cost Revolution In The Skies, London: Virgin Books Ltd.

Harrington. J., H. (1987) Poor – Quality Cost, New York: Mareel Dekker, Inc.

Hoyle, D. (1997) QS – 9000 – Quality Systems Handbook, Newton: Butterworth – Heinemann.

Hutt, M., and Speh, W., Th. (1998) Business Marketing Management – a strategic view of industrial and organizational markets (6th Ed.) Orlando: The Dryden Press.

McDaniel, C., Lamb, W., Ch., and Hair, F., J. (2008) Marketing (10th Ed.) Mason: Nelson Education, Ltd.

Waters, D. (2003) Logistics – An Introduction to Supply Management, New York: PALGRAVE MACMILLAN.

Appendices

Appendix1