Ryanairs Strategic Management Practices

Ryanairs strategical Management PracticesIntroductionThe aim of this assignment is to explore Ryanairs strategic caution practices through the guess of meaning competencies stimulateed by Prahalad and Hamel (1990). Ryanair operates in the broken monetary honour immune carriers (LCC) industry and experienced success since the launch of its trading operations. Ryanairs successful strategic management position is reflected in the optimisation of its internal processes offering hold dear to guests whilst eliminating waste. By ontogeny a set of snapper competencies, Ryanair has been sufficient to develop a strong commercialise position while transporting millions of clients every year.The stolon part of the move provides a brief overview of the participation and the industry in which it operates. This branch outlines the key competing forces and suggests for the bon tons cost leaders sexual climax towards its dodging. The second branch outlines the core competence theory developed by Prahalad and Hamel (1990). This parting soon summarises the theory and its assumptions. The third section discusses the application of the strategic theory to Ryanair. This section argues that Ryanairs core competencies fright not only the efficient utilisation of its substantial resources (e.g. aircraft, contract on destinations with airports), only if in like manner intangible resources (e.g. market sh atomic number 18, reputation, customer loyalty).Brief overview of RyanairRyanair gained its reputation as a moo cost carrier (LCC) throughout atomic number 63 by following the SouthWest commerce assume (strategic guardianship, 2006) (see Appendix 1 for a comparison amongst the two stumpers). This model included the delivery of a no- frill aid whilst offering a point-to-point service and short haul routes to secondary and regional airports. By competing on cost, Ryanair was able to offer cheap tatters to a range of atomic number 63an destinations w ith the expiration of changing how customers perceived their traveling experience. Ryanair was able to offer competitive prices by reducing operational cost through the utilisation of its aircrafts. In particular, by avoiding a hub-and-spoke service, creating short haul journeys, scrapping the traditional system of ticket harvest-homeion and seat reservation and in-flight meals, the social club was able to increase the cast of journeys whilst reducing be. Moreover, the use of secondary and regional airports offer less use costs, fewer terminal delays, and greater airport access. gibe to Datamonitor (2010) as of June, 2009, the society offers over 1,200 scheduled short-haul flights per daytime serving 145 locations throughout europium and Morocco, with an operating fleet of 196 aircrafts. The company operates through approximately 845 routes (p.6). The scale of the companys operations indicates its positive reception by consumers sampleing to constrain travelling costs whilst change magnitude the frequency of trips to European destinations.Current campaigns in the petty(a) approach Carrier (LCC) Market3.1 A dissimilar approach to airplane loony toonsMalighetti, et al (2010) argue that the growth behind the LCC market is underpinned by the consumers increasing interest in using airplanes not as a voluptuary mode of transportation but as an opportunity for travelling to virginborn destinations at a minimum cost. agree to Huttinger (2006) many countries perceived the airlines as a state institution and their reason for existence as a fulfilment of public postulate (p.229). The like idea is besides evince by Pitt and Brown (2001) who argue that the development of a differentiated system allowed the LCC loadeds to create a bracing niche. Dobruszkes (2009) argues that enterprises towards deregulating the industry by the EU allowed airline libertines to introduce changes in their way of operation. Lack of regulation meant fewer rest rictions as to how the airlines needed to design and perform their operations (e.g. ticketing system, destinations, etc) (Dobruszkes, 2009) fit to strategical style (2007a, 2007b, 2007c) the emerging opportunities developing from deregulation were followed by the SouthWest business model in the USA. This model was not only copied but withal extended by companies like Ryanair and Easy outflow in Europe (Barrett, 2004). As body-build 1 illustrates, a steady increase in the number of passengers carried between LCC firms fecal matter be noted. For example, whereas Virgin Atlantic achieved 28.9% growth, in contrast, Ryanair achieved 171.9% for the number of passengers carried. The difference in slew is evidence of the consumers growth and changing travel needs.Figure 1 Scheduled passengers carried, 2002-0620022003200420052006% changemmmmm2002-06easyJet11.420.324.329.633.7+195.6Ryanair14.921.326.633.740.5+171.8Flybe2.63.25.5+111.5bmibaby0.72.83.33.64.1+583.3Monarchnana22.63.2naVirg in Atlantic3.83.84.34.54.9+28.9BMI7.59.410.510.510.5+40BA (est)403836.135.735.6-11 man-made lake Company data/CAA UK airline statistics/MintelA key trend in the LCC market has not only been the consumers attention on cost but as well as opportunity for travelling to new destinations within Europe (Malighetti, et. al. 2010). As Pitfield (2008) argues, following the recent economic credit crunch the new business model favoured the LCC. Cost became a differentiating factor in the way consumers made their purchasing choices on travel (Pitfield, 2008). Moreover, from Figure 2 it sewer be noted that the competition between the LCC mud fierce. Ryanair and Easy Jet are the largest competitors in Europe sharing the greatest volume of passengers travelling. According to Gillen and Lall (2004) such growth is attributed to a) the number of destinations already served by the airliners, b) the reputation on cost and c) the development of a outline that allows them to lend oneself resources wh ilst minimising waste. Efficiency remains a key attribute to the development of competitive advantage in this market. This is because excessive costs contribute to the firms cost structure. This means that for a LCC firm to remain competitive such company needs to sustain its levels of ability whilst improving the value chain with which the service is delivered.Figure 2 Passengers carried in 2006Source Mintel/Company data (2007)3.2 Ryanairs cost leadership systemAccording to Porter (1980, 1985) there are three types of strategies companies apprise adopt in an industry. These are a) cost leadership, b) differentiation strategy, and c) focus strategy. A cost leadership remains effective depending on the volume of customers served. Such strategy focuses on achieving economies of scale by maximising its profit margins through the maximized over volume of sales. In contrast, a differentiation strategy is based on the specific attributes of a service and/or harvest-festival that com petitors are not able to offer (Porter, 1987). The distinctive features that are unique to such service/product differentiate the companys competitive power (Porter, 1996). A focus strategy concerns a firms concentration on a particular segment in the market (e.g. consumers, product, health-related products) with the result of creating new barriers of entry for other competitors to enter (Porter, 1987). Such barriers are created because of the tacit intimacy (e.g. methods of production) that is needed in order to develop the product and/or service.Ryanair is adopting a cost leadership approach to strategy. As Figure 4 shows, when comparing the companys prices against competitors and for the same destinations the cost difference remains considerable. Mintel (2007) notes that the company aims to turn flights around within 25 minutes and routes are systematically the shortest of all the Low Cost Carriers (LCCs).Wood (2004) and Boru (2006) argue that even though this cost leadership strategy has proven effective, withal, it has been difficult for Ryanair to maintain it without influencing the prime(a) of service offered to customers. In particular, Boru (2006) argues that Ryanairs hard approach on cost has resulted in a hostile behaviour towards customers. Ryanairs couldnt-care-less approach to customer care also applies to refunds and baggage. Not only are refunds never paid out, even if a passengers travel plans are disrupted by the death of a grandparent, but the bereaved customer is told to for having the temerity to ask (Boru, 2006, p.50). Datamonitor also reports various lawsuits, claims, and levelheaded proceedings, arising in the ordinary course of its business. Some of these legal proceedings and claims judge damages, fines, or penalties in substantial amounts or remediation of environmental pollution (p.7). The discount of this argument is that even though consumers continue to fly with Ryanair, they nevertheless remain weary of its behaviour t o their changing travelling needs.Figure 4 Comparative fare levels (same booking date and approximate departure multiplicationSource OHiggins in Johnson G, Scholes, K, Whittington, R. (2008, p.839)Mintel (2007) argues that in order for Ryanair to increase its revenues, it tends to engage in making incremental increases on costs that remain hidden to consumers. For example, consumers are being charged to pay for advance boarding to seat reservations, sports equipment to s sessty baggage and others. OHiggins (2008) mentions for example that a disabled man won a landmark case against Ryanair after it charged him 18 for a wheelchair he needed at Stansted Airport to get from the check-in desk to the aircraft. The passenger was awarded 1,336 in compensation from Ryanair, as the UK based Disability Commission said it may launch a class action against the airline on behalf of 35 other passengers (p.834).Such hidden costs generated a negative soma for the companys low cost reputation. Don ne (2004) and Groom (2004) argue that customers dislike extra charges and seek to withdraw their loyalty for carriers that are not committed to their quality of service on the flat coats of reducing costs.Figure 5 Customer complaintsSource in Johnson G, Scholes, K, Whittington, R. (2008, p.842)The implication of this argument is that Ryanairs successful strategy remains dependant on(p) to the changing trends in the environment. As Figure 3 illustrates, the process of strategy formulation and evolution goes through a cycle where application needs to conform to the changing conditions of the environment. This means that Ryanair needs to develop a different approach to its cost leadership strategy by introducing modifications to its model. This can be done by placing greater importance on the customers perceptions of satisfaction or else than just promoting the selling of low cost tickets.Figure 3 Aspects of dodging formulation and evolutionSource Chaharbaghi and Willis (19981022)C ore Competencies TheoryAccording to Johnson et al (2008) Chaharbaghi and Willis (1998) the study of strategic management is concerned with take ining how an organisation can realise its merged goals through the manipulation of its tangible and intangible resources. According to Ansof (1984) strategic management can be defined as a systematic approach to a major and increasingly important tariff of general management to position and relate the firm to its environment in a way which will assure its continued success and have it secure from surprises. (p. xv) According to Raduan, et al. (2009) strategic management can be seen as a combination of strategy formulation, implementation and evaluation (p.406)According to Mintzberg et al (1998) there are two principle indoctrinates of thought that influenced the discourse on strategic management over time. These are characterised as the a) design school and the b) emergent school. The design school argues for the importance of careful p lanning. Lidtka (2000) for example argues that the orchestration of processes can lead to the achievement over the intended strategic unified outcomes. The emergent school was influenced by the work of Mintzberg (1979, 1983) and argues for the managements inability to manage scruple in the course of realising its corporate goals. Mintzberg (1983) argues that the role of strategic management is to typeset a firms intentions according to the shifting conditions of the environment. Such conditions cannot be known a priori but only realised at the time of their development (Mintzberg, et al (1998). Cunah and Cunah (2006) also support this idea by arguing that firms developed their strategic positions by an emergent process resulting from managers and employees improvisations in response to the realities of the market (p.839).In the discourse between the two schools, Prahalad and Hamel (1990) developed the theory of core competencies. This theory argues for a firms ability to develop specific competencies which are intertwined with the employees tacit familiarity and expertise. Core competencies remain context-specific and are not easily transferable because of the specificity of the employees association and skills that help maintain it.According to Grler (2007) core competencies represent a firms capabilities created by the complex interaction of its resources combined with implicit or explicit cognition about the effective combination of these resources (p.252). According to Prahalad and Hamel (1994) the implication of this argument is that the progressive might of a firm remains closely located in its awareness of the employees skills and their continuing development. Hence, the process of fostering core competencies comprises the development of qualities which concern the advancement of products/services which are intertwined with a set of skills which are people-specific (Hamel, 1996). As Figure 4 illustrates, performance remains an outcome of the int eraction between capabilities and resources. Such a process is participating and not static, which means that the firm is in a continuing process of identifying and streng whenceceing its core competencies over time (Goold, 1996).Figure 4 Relationship between resources, capabilities and performance execution of instrumentCapabilitiesResourcesSource Adapted from Grler (2007, p.253)Having outlined the theory of core competencies the following section will discuss its application on Ryanair.Assessing Ryanairs strategy through its core competencies5.1 Waste minimisation and modifyment makingAccording to Lawton (1999) and Done (2004) Ryanairs core competencies are identified in its ability to discover and remove operations that do not add value to customers. Prices can be decreased when un needful processes are eradicated and/or improved. Pietfeld (2008) argues how the increase in efficiency is an natural action that needs to move beyond the process of careful planning. Gillen and La ll (2004) argue that Ryanair has instilled an improvement-making strategy that resides in its corporate culture. This means, that employees can take real-time initiatives which are then evaluated and implemented by the management on the organisation as a whole (Leavy, 2003).Lawton (1999) argues that the management of the organisation remains unable to detect deficiencies as employees are the ones who have immediate contact with customers. Hence, the process of introducing quality improvements requires the necessary organisational structure to allow initiative-taking by employees whilst these are also supported by the management layer.According to OSullivan and Gunningle (2009) the literature on initiative-taking by employees remains put down to criticism. This is because employees can indicate neighborhoods of improvement but such suggestions may not be readily applicable. However, a core competency developed by Ryanair is the development of an organisational structure where the c orporate culture allows them to take initiatives which are then institutionalised. The management is responsible for the development of the necessary regulations, policies and procedures that can accommodate initiatives (Barrett, 2004). The implication of this activity is that the firm is able to swiftly respond to the customers changing needs with little delay. This core competency remains difficult to copy by competitors because it resides within their existing work ethic and cultural values of employees that has mature over time.A criticism that is expressed against Ryanair, and in contrast to its effort to increase levels of efficiency, concerns the absence of unions that may exercise resistance to the managements growing demands. By increasing the array of responsibilities, employees are required to achieve performance targets, OSullivan and Gunningale (2009) argue that Ryanair has created excessive demands on employees that are not accounted for in their salary.5.2 Utilisatio n of ResourcesA second core competence concerns Ryanairs ability to maximise the volume of customers travelling whilst increasing the number of routes offered. Barrett (2004) argues that the shorter turnaround times permit more journeys per day per plane which, coupled with the higher seat density of Ryanair planes, generate overthrow seat mile costs (p.92). Delays result to high maintenance costs in servicing aircrafts (Barrett, 2004). Such costs, in turn, can result in reducing the number of destinations offered in the first place. Gillen and Lall (2004) argue that a rapid turn improves utilization of all factors of production such as aircraft, gates, ground equipment and labour (p.44). Ryanairs core competency concerns its capacity to maximise the utilisation of its aircrafts whilst also maximising the number of routes offered. However, such utilisation requires the management of the employees contribution for well-educated how resources need to be managed. The exercise of know ledge and training remain task-specific. Employees understand how their contribution, at one segment in the business, can have a wider contribution on the companys performance as a whole. Ryanair demonstrates synergy in managing array of operations that include a) the management of its network routes, b) the punctuality with which aircrafts turnaround, and c) the employees capability to manage an increase in volume of passengers. Such understanding is infix onto the employees. As Prahalad and Hamel (1990) argue, a competency remains difficult to replicate by competitors because it is context-specific, and subject to the tacit knowledge and skills produced in the first place. Ryanairs ability to utilise its resources whilst maintaining a cost leadership strategy results from the combination between the employees knowledge and the utilisation of its resources. Figure 5 illustrates the companys efforts to increase levels of efficiency between 2002 and 2003.A complementary dimension to the utilisation of resources is the creation of new destinations. Datamonitor (2010) argues that in January 2010, the company introduced 25 new routes to/from Alicante, Barcelona Reus, Barcelona Girona, Bratislava, Bristol, Cork, East Midlands, London Stansted, Milan Bergamo, and Pescara. In the following month, the company announced opening three new routes from Edinburgh to Faro, Marrakech, and Paris. It also launched six new routes to the Greek holiday destinations of Kos, Rhodes and Volos (p.6). The creation of new routes is subject to the companys core competencies for sustaining its cost-leadership strategy whilst expanding the destinations offered. This means that by attracting a larger volume of passengers travelling, Ryanair achieves economies of scales that help maximise its profit margins. By achieving a high seat-filling-capacity Ryanair can sustain its hackneyed maintenance costs whilst improving on revenues. Moreover, such strategy can create barriers of entry to com petitors (Dobruszkes, 2009). By gaining entry to the new network routes, other airline companies (e.g. Easy Jet, Air Lingus, etc) have greater difficulty in competing for the same destinations.Figure 5 Ryanair operating statistics between 2002 and 2003Source OHiggins in Johnson, et al. (2008, p.846).ConclusionThe aim of this essay has been to explore Ryannairs strategic management practices. By making use of the theory of core competencies as developed by Prahalad and Hamel (1990) this essay argued for the companys cost-leadership strategy that is sustained through its efforts to minimise waste and improve efficiency. Even though Ryanairs business model has proved successful, at the same time, there is growing criticism regarding the evidence indicating the company undermining the quality of its customer service. Even though consumers continue to use Ryanair for its efficient service and low cost prices the company is struggling to avoid the mounting criticism concerning the access of hidden costs and lack of adequate customer service (Wood, 2004, Boru, 2006). This essay argued that the companys core competencies concentrate on improving levels of efficiency at the operational level. There are two areas in which this occurs. The first is by developing an organisational culture where employees are encouraged to take initiatives in order to reduce operations that do not add value to customers (OHiggins, 2009). The second area concerns Ryanairs ability to maximise the utilisation of resources whilst expanding on the number of destinations offered (Dobruszkes, 2009). According to Prahalad and Hamel (1990) it can be argued that Ryanairs business model remains difficult to copy by competitors because the synergies created are subject to the employees knowledge and experience. Such knowledge remains contextual and task specific.Such core competence is difficult to transfer by scarcely migrating the methods and tools used. However, this essay also argued that percep tions of value need to be reconsidered by Ryanair. This is because value is not only subject to the low cost prices offered but also to the quality of customer service which includes the companys attitude towards responding to complaints and avoiding the misrepresentation of information as well as hidden costs.ReferencesAnsoff, H.I. (1984) Implanting strategical Management. Englewood Cliffs NJ prentice residency.Barrett, D. S. (2004) The sustainability of the Ryanair model, worldwide ledger of Transport Management Vol.2, pp. 89-98Boru, B. 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