Analysis of Ryanairs StrategyWord格式.docx

Analysis of Ryanairs StrategyWord格式.docx

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Contents

1.Introduction…………………………………………………………3

1.1.Industrybackground………………………………………………………….……3

1.2.Ryanairoverview………………………………………………………………..….3

1.3.Researchquestions……………………………………………………………......3

2.StrategicPositionAnalysis…………………………………………4

2.1.Environmentanalysis……………………………………………………………….4

2.1.1.Macro-environmentanalysis………………………………………………...4

2.1.2.Industryanalysis……………………………………………………………..7

2.2.Ryanair’sstrategiccapability………………………………………………………9

2.2.1.Resourcesaudit………………………………………………………………9

2.2.2.SWOTanalysis………………………………………………………………11

3.StrategicOptionsAnalysis………………………………………..13

3.1.Businesslevelstrategy……………………………………………………………13

3.1.1.Costreductionstrategy…………………………………………………….14

3.1.2.Ancillaryservicestrategy…………………………………………………..15

3.2.Corporatelevelstrategy……………………………………………………….17

3.2.1.Strategicdevelopmentdirections……………..………………………….17

3.2.2.Portfolioanalysis………………………………...………………………….20

3.3.Strategyevaluation……………………………………………………………….21

3.3.1.Evaluationofoperationalstrategy…………………...…………………....22

3.3.2.Evaluationofdevelopmentdirectionstrategy………...………………….23

4.Conclusion……………………………………………………….…24

5.Reference………………………………………………………..…25

1.Introduction

1.1.Industrybackground

LowfareairlinefirstlyemergedintheUSwithPacificSouthwestAirlines,pioneeringtheconceptin1949.[1]In1991,Ryanairre-establishedtheairlineasthefirstEuropeancompanyfollowingthelowfarestrategyimplementedbySouthwestAirlines.Nowadaysthegrowthoflowfareairline（LFA）iscurrentlyfocusedontheEuropeanmarket,whereLFAsstoodfor19.5%in2007ofthetotalairtransportsupplyaccordingtoseats.[2]AccordingtotheEuropeanLowFaresAirlineAssociation（ELFAA）’sexpectation,thetotalshareoflowfarestrafficinEuropeisexpectedtoreachover40%by2010.[3]RyanairandEasyJetarethelargestrivalsinEuropeanLFAsstandingfor28.67%and22.1%passengernumbersrespectively.[4]

1.2.Ryanairoverview

Ryanair,thefirstlowfareairlinecompanyinEurope,hasbeentheWorld’sfavoriteairline.ItwastillMarch,2010thatRyanairofficiallyannounces247Boeing737-800aircraftsoperatinginitsfleetandabout6000employees.[5]Ryanairturnstobeprogressivelyfamousforitsextremelylowpriceticketsandhighlyrapidgrowth.Commentslike‘themostprofitableaviationcompanyintheworld’fromEconomicsand‘oneofthemostpopularairlinestocks’fromWallStreetJournal,havedemonstrateditselfagreatmodelasalowfareairlineorganizationsofar.

1.3.Researchquestions

ThisessayreviewsthesituationofEuropeanlowfareindustryandRyanair’sdevelopmentintherecentyears,aimingtostudyontwocentreareas:

analyzingthestrategicpositionofRyanairbetween2006andtoday;

andonthebasisofthisanalysis,describingandevaluatingthestrategiesRyanairusedduringthattimeperiod.

2.Strategicpositionanalysis

2.1.Environmentanalysis

Whenanalyzingthestrategicenvironmentofacorporation,abusinessenvironmentscanningisalwaysnecessarygivenitsvitaladvantages（Thomas,2007）.Generallyanenvironmentalanalysishelpsorganizationpositionitselfproperly（Palmer,2008）.Inthispart,differentanalysistools,suchasPESTELanalysis,Porter’sFiveForcesanalysiswillbeusedindifferentbusinessenvironmentlevelsrespectively.

2.1.1.Macro-environmentanalysis

Particularly,themacro-environmentisthetop-ratedlevelgivenitsvastimpactandinfluenceonacompany.Inordertoachieveacomprehensivelearningandawarenessoftheenvironment,wideconsiderationiscrucial.Thus,PESTELframeworkwhichwidelyincorporatespolitical,economic,social,technological,environmentalandlegalaspectsisrecommendedforabusinessenvironmentanalysis（McGahan,2000）.

2.1.1.1.Politicalandlegal

Deregulationandliberalization

ThemostinfluentialpoliticaldecisiontoEuropeanLFAindustrywasthederegulationoftheEuropeanflightmarketin1997.Beforethat,themarketofflightwaslargelycontrolledbythegovernmentsofEuropeancountriesthroughwhichtosecuretheirrespectivenationalcarriersmarketshare.Theliberalizationandrelativelyfreecompetitionsforcedthecarrierstoexamineandre-establishtheiroperationandencouragednewrivals’entry.Meanwhile,airlinefromotherregionsintheworldcomesinEUmarketbecauseoftheliberalization.

Stateaid

EUhaslaiddownstrictcontrolonstateaidtodiscouragegovernmentsfromsupportingnationalflagcarrierswithstatesubsidies,alsocomparedtolegislationinothercountriesingeneral.[6]Evenafter911,EUstillinsistednottosubsidizeanyairlineapartfromallowingcompensationforlostrevenuesdirectlycausedbytheterroristattachandasaresulttheBelgiumnationalflagcarrierSabenawentbankruptinNovember2001astheailingairline.Additionally,governmentsupportsuchasinvestmentinterminalsespeciallysecondterminalscanencouragelowfareairlinecompaniestosetmorefutureairlineplans（Johnson,2002）.

Traveltax

GovernmenttaxesontravelcoulddamageLFAs’developmentandcouldhaveamaterialadverseimpactonLFAs’operations.Somecountriesincreasedthetaxesontravelintheresentyears,whichhaveanegativeinfluenceonpassengervolumeandotherfinancialindex.Forinstance,theU.K.governmentleviesanAirPassengerDuty（APD）of£

11perpassenger.Thetaxwaspreviouslysetat£

5perpassenger,butitwasincreasedto£

10perpassengerin2007and£

11in2009.[9]

2.1.1.2.Economic

Globalrecession

Astheglobalrecessionhasstillbeenongoing,ageneraldownturntrendneedstobebearinmind.Thisdownturnsituationislikeadouble-bladeswordtoLFAs;

ononehand,obviouslyeconomicrecessionbroughtgeneralshocktoairlineindustrythroughfinancialmarket;

ontheotherhand,itmadecustomers’purchasepowerweaker,andmorecustomerswouldliketotakelowfareairlineconsideringthemuchcheaperticketprice,safetyandswiftnessratherthanfullserviceandluxuryenvironment.

Fuelprice

Themostimportantcosttolowfareairlinecompaniesisdefinitelyidentifiedasfuelcostasthefuelcostsconstitute10-14%ofanairline’soperatingcosts.[2]Fuelpricehasalmostboostedsharplyinrecentyearsandithasalreadyforcedsomecompaniestoquitthecompetitionfrommarket（Johnson,2002）.Traditionallyairlinecompanieswouldchoosetooff-setthecostsofrisingfuelpricesontothecustomers,eitherthroughincreasinggeneralfaresortoadda“fuelsurcharge”intotheticketpricesasmostfullserviceairlines.HowevermostLFAsrefrainsfromusingthisstrategy,insteadthattheyaretryingtoincreasemarketshareoff-setthehigherfuelpricesbyservingmorepassengersandincreasingtheloadfactor.

Laborcosts

Laborcostisanothermaincontributortoairlinecompanies’operationalcosts.Insuchadownturnsituation,reducingthelaborcoststhroughloweringwagesorworkforceisreasonabletoairlinecompanies.However,incountrieswithinflexiblelabormarketsandstronglaborunions,itisdifficulttoreducethewages;

thereforemanycompanieswentbankruptduringtherecessionbecauseofunaffordablehighwages.ManyLFAssuchasRyanairfiercelyopposeunionsandtheiremployeesarenotunionizedandtheflexiblelaborrulesthathasattractedsomanyinternationalbusinessestoIrelandhasalsohelpedRyanairinreducingitslaborcosts.[2]

2.1.1.3.Social

Affordableflighttravel

Asthedevelopmentoftheairlineserviceandtheincreaseofthepeople’spurchasepower,flighttravelismoreandmoreaffordablebymiddle-classpeopleandstudents.Andthemediumandshortrouteflightshaveattractedanincreasingnumberofpassengersoftrainandshiptravel.

Demandformobilityandtime

People’sincreasingdemandformobilitybecomesanotherfactorpromotingtherapidgrowthoftheairlineindustryingeneral.Moreandmorepassengersnowtravelfrequentlyviaairplaneratherthantrainorshiptoholidaydestinationsorweekendtripsforsavingtime.Forthemajorityoftheseprivatetravelers,priceistheprimarydecisionfactor;

commitmentofthemisalsobasedoncheaperprice.

2.1.1.4.Technological

Onlinesalestechnology

Althoughtravelagentscanincreaseflightticketsaleshugely,thecommissionfeesforagentservicedoleaveairlinecompaniesbigpotentialprofitspacetoexplore.Thus,newsaletechnologybasedoninformationtechnologywhichcansimultaneouslysavethecostofcommissionandincreasesaleswillbewarmlywelcomedbylowfareairlinecompanies.Currently,mostlowfareairlinecompanieshaveadoptedonlinebookingsystemtofacilitateitssaleandcustomerservice.

Fuel-savingtechnology

Apartfromonlinesalestechnology,introducingnewfuel-savingsolutionstoreplaceout-of-dateequipmentshouldbethemostcriticalaspectaccompaniedwithlow-costmarketingstrategy.Therealsoweremanytechnologicaldevelopmentsinthepastfewyearsfacilitatinglowfareairtransportation.Forinstance,“turn-aroundtime”,thetimerequiredforanaircraftfromarrivaltonextdepartureatanairportwasdecreasedfromaboutonehourtolessthanhalfanhour,whichismadepossiblethroughadvancedmethodsofaircraftfuelingsimultaneouslywithpassengersboarding.Sincelowerturn-aroundtimesareessentialforhighermargins,thisisanimportantfactorforLFAs’capabilitytoofferlowerprices.

2.1.1.5.Environmental

Manyconcernsintermsofenvironmentcanbeapparentlyfoundnowadays.Oneofthemostserverconcernsmaybereferredtoaviationemissionwhichalwayscauseshotdebateonglobalwarm