Research Topics: Ryanair Pestel

European low cost airlines

Recently, low cost airlines have become increasingly high profile. The value for money offered is capturing the public’s attention as European flights become more affordable and businesses of all sizes have begun to take advantage of the potential savings. European low cost airlines have learnt much from `no frills’ air travel in the US. Southwest Airlines has, in fact, unashamedly been used as a blueprint in the European Market. Later, higher yielding business was taken from the traditional airlines and competitor reactions became more aggressive. This does not appear to have either discouraged Southwest’s expansion or deterred other low-cost airlines entering the market. But how can low-cost airlines offer such low prices? The use of forecasting tools can assist airlines to predict likely load factors the percentage of seats occupied well in advance of flight dates. Armed with this knowledge airlines can benefit from selling this excess capacity at a low price, as long as the associated variable costs are covered. Ryanair has benefited over recent years from having bought aircraft when the prevailing market rate was low. This is reflected in their current profits. Bulk orders of new aircraft will also undoubtedly benefit buyers through reduced prices. However, there could well be a negative impact upon the profit and loss account as older, written-down fleets are replaced or enlarged.     The majority of cost centres now serve both brands to some extent. In the management accounts these are apportioned between brands using a variety of methodologies, depending on the cost driver of each department, be it sectors, passengers or flying hours, for example. Only three departments are wholly classified as buzz’s. Referred to internally as the “buzzgang” these cost centres consist of revenue management, marketing communications and sales and distribution. As seats are sold directly to customers, buzz’s sales team is far smaller than a traditional airline of similar size. The low-cost airlines are not competing against each other directly. Very few routes are served directly by more than one brand, and with Eastern Europe being within the reach of Boeing 737s there are still many other destinations to target before head-to-head competition becomes more evident. Size means yet further economies of scale and all-important brand awareness throughout Europe. Clearly this means that competition is rife, with low cost airlines striving to differentiate themselves from the opposition. Inevitably some form of shake up in the market will occur, but we could see more low-cost carriers entering the market; with hubs appearing across Europe, before this happens.         The response of traditional airlines cannot be underestimated. Established major airlines have huge scale economies and other advantages such as alliances, travel agency incentive schemes and frequent flyer loyalty schemes. Lufthansa is competing aggressively with buzz on German routes using marginal capacity to offer low prices. We could see problems if they use anti-competitive behaviour and increase capacity at low prices to maintain their market share. With a traditional cost base this yield dilution would be likely to cause losses. In an attempt to overcome this we are working with creditcard issuers and overseas banks to educate potential customers and convince them of the security of this method of payment. Systems now exist that allow the cost of purchases to be added to telephone bills, which could help overcome the concern over the circulation of credit-card numbers. Ensuring that departure and arrival times are suitable for businesses has been difficult because slots at many airports are scarce. Given that several of buzz’s routes are primarily focused on the business traveller, this can have a huge impact on the success of a route. The large increase in air travel has had a favorable impact on both the car rental companies and hotel chains, although earnings for the latter have been adversely affected by a tremendous expansion of facilities.       One problem the travel industry must face is the spread of frequent flyer programs and their car rental and hotel counterparts. The market is cluttered, and the programs are increasingly difficult to manage and confusing to consumers. They are now being re-evaluated by the industry, and some airlines are retrenching. Another problem is the growth of travel agent consortiums, which have become a powerful force in the market. Airlines must learn how to work with them, and the consortiums must try harder to understand the needs of travel suppliers. Foreign governments and travel companies abroad should take a close look at what has been accomplished here during the past years. There is a huge market ready to be tapped if the travel industry starts thinking in global terms. That is the challenge facing the industry today. Service quality and productivity in regional airlines were investigated to determine how these airlines compete in today’s market. The results show that regional airlines suffer from severe problems but air transportation is still expected to be the dominant form of intercity transportation. Passengers were inconsistent in rating regional airlines’ service quality but all gave a high score to the quality attributes offered by new aircraft. The results suggest that service quality image can be improved by communicating quality attributes to passengers.       From an operational standpoint, productivity measures that were considered to be more useful for this study are seat miles generated per engine hour, seat miles produced per pound of fuel used during a fourteen-hour day (the industry average utilization rate), and total daily engine hours flown per aircraft, a measure of aircraft utilization. In addition, typical costs per seat mile data provided by aircraft manufacturers will be utilized as indicators of aircraft productivity. One strategy that regional airline management can employ to overcome this perception is to educate existing and potential passengers of the enhanced safety features of the new aircraft. Such an educational effort may be accomplished through direct advertising programs, sales calls with travel agents, and in-flight announcements and literature. However, increased expenditures for advertising programs featuring the new aircraft as a key selling point must be undertaken with caution since only 30 percent of the respondents recalled any marketing promotion which mentioned the introduction of new aircraft, despite extensive media publicity and advertising efforts by both carriers.           Furthermore, low cost airlines can improve their service quality image by communicating these attributes to passengers through a variety of means. A bright future awaits those carriers that recognize that providing excellent service quality can be done efficiently. As regional airlines continue to upgrade their fleets (including jets), it is clear that regional airlines will play an increasingly important role in Europe’s transportation system. In recent years, there have been a number of changes in global airlines industry which have had profound effects on the development of this very volatile sector of the economy in most countries of the world (Pustay 1992). The essence of the marketing concept incorporates three basic elements of customer-orientation, integrated marketing efforts and the resultant company profitability and customer satisfaction. In this process, continuous relationship between airlines and their customers has become the watchword and airline industry standard (Kaynak 1987). For instance, global marketing can work best for a service industry like airlines whose products and services have universal appeals (Agnew 1986). Internationally-oriented airlines would have a greater chance of securing consumer acceptance by developing and introducing products/services which are used and demanded on a universal scale and their products/service will have “universal selling appeals” (Pustay 1992, Kasper 1988, Tretheway 1990).       Airline industry is very much influenced by changes taking place in its varied environment. The development of the consumer-oriented marketing concept by airlines industry has been a response to changed environmental conditions from a sellers’ market to one of a buyers’ market (Folkes, Koletsky, and Graham 1987, Nelms 1991, Reamy 1989). Whether a marketing orientation is needed or not for organizational prosperity and well being will depend fundamentally on the prevailing relationship between the airline and its macro environment. On the impact of environmental changes on airlines industry, Elliot (1990, p. 28) examined Australian airlines industry. Traditionally, Australian domestic airlines operated within a strictly controlled legislative framework where The Two Airlines Agreement enabled two airlines to share the major inter-state and intra-state routes. The two airlines, namely, Ansett and the government-owned Australian Airlines, dominated the domestic market but competed with each other in international markets. Despite their domestic cooperation, they engaged in competition in international markets with each other. Fearing the consequences of price warfare, they competed with each other through product and service differentiation and through vertical integration as seen as attempting to treat the environment as if it was placid clustered and the dominant approach in such a market environment is one of market segmentation (Toh and Hu 1990).       Thus, customer satisfaction is very important in the repeat purchases. In terms of developing strategic marketing plans, airline executives should place more importance to those attributes which are deemed most important by passengers. In the development of new services and utilization of newer type of aircraft, consumer driven type of input should be utilized. In particular, most salient attributes used by airlines’ passengers need to be delineated. Airports around the world are becoming more aware of the importance of designing infrastructure and services to meet the requirements of their airline customers. Different airline market segments are considered and the passenger characteristics in terms of airport requirements identified. Possible future innovations are then discussed, including enhanced business and personal services and differentiation of the airport product by type of airline and passenger such as low-cost, high-value, transfers and surface mode integration. A successful airport must keep and attract air services. Different types of airline operation are identified along with target groups for airline marketing. The economic impact of air services provides a strong motivation for development of new routes. A marketing strategy is developed including SWOT analysis, market research and how to create an airport presentation to a potential airline customer. One of the most crucial decisions an airline must make is the composition of its fleet. To obtain the optimal fleet over a given time period requires an understanding of the demand for air travel, costs, revenues and market share.   The fleet planning process is built up using a PESTE analysis, basic assumptions laid down and critical variables identified. Data requirements and market research needs are identified. A Quality of Service Index for different aircraft types is discussed along with methods for estimating yields and traffic. International airline alliances enable airlines to dramatically extend their market coverage. The components of an alliance are examined including frequent flier programs (FFPs), airport facilities, code-sharing, schedule co-ordination and revenue/profit sharing with anti-trust immunity. The criteria that go into choosing a good partner are identified and the benefits of alliances to airlines and passengers and discussed. In a deregulated market-place, airlines and airports need to continually evaluate their competitive position and assess rival developments and strategies. Over the last five years there has been a surge in new entrant airlines starting services within Europe in the UK market. Criteria for successful new entry are then considered. It is demonstrated how low-cost airlines can stimulate demand, take advantage of under-utilized secondary airports and innovative methods of distribution to offer lower fares that benefit both the business and leisure traveler.         Business passengers are normally the most lucrative for airlines and a relatively small number of people can generate a large volume of business travel. They therefore merit special attention in terms of airline marketing and market research. Segmentation of the business market is demonstrated by issues such as length of haul, frequency of travel and attitude to a particular airline. Travel ‘mindsets’ are defined and research into passenger attitudes developed. The relative importance of different product features is quantified with particular regard to the value of customer service. Examples are given of the perception of different airlines in the UK market. New aircraft cost vast sums of money to develop and long lead times for production necessitate accurate forecasting of the demand for air travel and how this can best be served. Market research is an essential input in the process as the existing geographical distribution of demand will be modified by future growth rates and airport capacity constraints. For the world’s major airlines a key competitive advantage lies in the strength of their route network. In order to plan the network most effectively, market research provides a vital input. A wide variety of other information sources are also used including origin/destination demand, ticket coupon data, schedules and costs to evaluate changes in the destinations served, frequency and schedule. Competition is shown to be between itineraries, not individual flights. Network complexity grows very rapidly when flights serve hubs at both ends of a route.   A major challenge arises for an airline in entering a market segment for the first time. British Midland has developed from its roots as a domestic and charter airline into European scheduled services over the last 15 years and in 2001 plans to enter the long-haul scheduled market on the North Atlantic. The rationale leading to this decision is explained including consideration of the regulatory issues which are currently preventing services from Heathrow and the need to build a strong alliance partnership to provide marketing support in the US and globally. British Midland’s branding and positioning in the market place will be discussed. Hundreds of flights by subsidized airlines in Europe are endangering the global climate and the ozone layer. The European boom in “low-cost” airlines, fuelled by tax incentives, is increasing the level of toxic gases in the atmosphere and displacing less polluting and more efficient means of transportation for shorter distances, like trains. In business, Ryan Air got the low-cost religion in 1991 and started aggressively hitting the newly liberalizing European market soon after Stelios popularized the no-frills concept to the masses. Unlike easy Jet, however, Ryan Air refused to take on popular routes at congested and expensive airports, sticking to a strict diet of cheaper regional flights to keep its prices the lowest in Europe.       EASYJET and Ryanair pioneered low-cost airline travel in Europe but they are now up against plenty of local converts to the craze for cheap seats, particularly in Germany. Charter airlines in Germany are making moves into the budget sector to offset weakness in their core business. Last year, five charter companies set up low-cost operations including TUI (whose budget arm is Hapag-Lloyd Express) and Air Berlin (which runs the no-frills City Shuttle). Easy jet filled a lower proportion of its seats last month. The growing empty places reflected in part the 44% growth in the airline’s capacity year-on-year. But more capacity is on the way: the Luton-based airline recently ordered 120 aircraft from Airbus. The population of the European Union (EU) is 378m, significantly larger than the US’s 285m. Southwest, the US no-frills success story which pioneered peanuts instead of in-flight meals, says it might take 10 more years to cover the US fully – that comes on top of 30 years of double digit growth. Given the huge potential market, it could be another 50 years before the European low- cost sector reaches saturation point, experts predict. Southern Europe is also underexploited by low-cost carriers, according to Chris Avery, aviation analyst at JP Morgan. Low-fare carriers started life taking northern nationals to the south for short breaks in the sun. But Ryanair has disclosed that 45% of its traffic on its routes between the UK and Italy originates in Italy – much more of a two-way flow. Easy jet’s new Paris routes already have 30% French originating traffic.     This study suggests that low cost airlines need to focus on those core competencies that allow them to design the operation of their networks of air services from a value-based perspective. Airlines clearly need to be customer-focused. However, further liberalization and overcapacity in some markets, coupled with the impact of low-cost carriers and the commoditization of air travel, will lead to a long-term decline in yields (Doganis 2001). Perhaps airlines should outsource as many non-core functions as possible. This may mean abandoning peripheral services such as catering or ground handling services. Should they not want to do this, they may be required to perform these activities as external specialist companies defined to be independent profit centers. In any case, it is not clear that the traditional paradigm of the self-sufficient airline, which provides all of its ancillary support services in-house, can survive. The new European low-cost airlines are quite different. Even if they are keen to keep their customers happy, they give far more weight to cost-cutting. It is certainly the right strategy on a continent that offers efficient, relatively low-cost, surface transportation systems. In Europe the market differentiation tends to be far clearer. If during the crisis quite a number of business travelers have flown on the low-cost airlines–especially easy Jet–the vast majority of the European low-cost customers are new air travelers–people who in the past had not considered flying because of the high costs.     European low-cost airlines take pride in not passing oil price increases on to their passengers contrary to the legacy carriers. However, they omit to mention that they simply cannot do so without losing their customers. In the same vein, if Ryanair, is constantly struggling against what it calls the “bureaucratic” attitude of the European Commission in Brussels, it is because it knows that each cost increase due to new regulations will translate into the loss of thousands of its customers. However successful the low-cost carriers may be in convincing Brussels to let them operate in a totally deregulated environment, they have no way to influence oil prices. If, as a growing number of experts think, oil prices are going to increase because the world supply is close to its historical maximum, it may be the end of the story for many–if not all–low-cost operators. Every company needs to co-operate with rivals at some point during its business lifetime. Increased levels of local and international competition, coupled with smarter and more discerning customers, require more sophisticated and efficient ways of doing business. In addition, many regulated or protected industries have restrictions on cross-border activities or mergers.           Formulating effective strategies for achieving business goals has been, still is, and will continue to be one of the most important concerns of business leaders. In this context, perhaps no other organizational practice has captured more of the attention of academics and practitioners in recent times than offshore outsourcing. As more and more companies transfer their functions beyond the confines of national boundaries, new insights are needed to deal with the associated complexities. Offshore outsourcing refers to the practice of migrating routine business processes to overseas locations with the aim of achieving lower costs while maintaining quality. Competitive advantage derived from cost leadership results “when the company sets out to be the low-cost producer in the industry” (Porter 1985, p. 12). Even if a company manages to be the lowest-cost producer, some other company may dethrone it by pursuing low-cost strategy on a more aggressive scale. This has been the phenomenon in most industries and is not new. To regain lost cost leadership, the company would have to search for a new vendor that could provide at an even lower price than can the nearest competitor’s provider. The search for low-cost providers becomes a continuous process. The low-cost position that companies achieve through off sourcing enables them to serve target customers more effectively by providing lower costs of products and/or services, and by extending newer, differentiated products and services.     Thus, off sourcing development activities to outside providers may allow companies to bring products to market or enter a new geographical area much faster than it could while maintaining in house activities as the primary activity of marketing and sales can be disaggregated into activities such as marketing management, advertising, sales force promotion, sales force operations, technical literature and promotion (Porter 1985: 46). Similarly, outbound logistics may be segregated into information systems, order processing, fleet maintenance and delivery. Marketing is as old as business, but the discipline of marketing only emerged in the last century. Today, marketing differs less than the perspectives academics take on it. It is also context dependent: the product, be it goods, services or service, may have only a small impact on the fundamental logic of marketing. Choice and complexity are influencing practice, as is the pressure for accountability, and pressures for cash flow are also changing the way we understand marketing. This article seeks to draw out the fundamental logic of marketing and separate it from contextual and relativist perceptions. “Marketing management seeks to determine the settings of the company’s marketing decision variables that will maximize the company’s objectives in the light of the expected behavior of non-controllable demand variables” (Kotler, 1972 p. 42). The low cost airlines must have the advantage over the premium airlines because they will never get their costs to a point where they can make a profit at low fares in bigger markets. Credit:ivythesis.typepad.com

European low cost airlines

Recently, low cost airlines have become increasingly high profile. The value for money offered is capturing the public’s attention as ...

The Economics of International Airlines

The integral importance of this research study was that, it has given the airline industry a detailed and clear emphasis of the underlying information relating to the crucial part of certain useful marketing strategies of low cost airlines in Europe and its impact to loyal customers worldwide through the use of a survey that will serve as a research tool in getting and collating relevant data and information needed in realizing the study in determining consumer preferences between local and foreign goods. The dissertation has covered how marketing strategies of the airlines drive business sales and profits in lieu to Porter’s generic strategies of marketing business in the EU society along with competition on the other side of the scenario and has conducted a valid study on the value and significance of low cost airlines in Europe that has directed to the strategies in building up a solid marketing status to meet the needs and demands of its customers and travelers integrated globally that kept a sound research process in terms of supporting evidence basis of the whole study.    Moreover, the research had presented that low cost airline industry in the European setting presents a marketing strategy that shows the concern of the European customers on cost effective services. The preference to low cost airlines in Europe appears to create a trend in the airline industry in the said region leaning towards lesser airfares and considerably budgeted terms of service provision. The airline industry has constantly been vulnerable to transformations around it and the previous years have thrashed a lot of impediments in its course. Survey questionnaires are provided that has completed using the Likert scale having five response scales wherein the chosen respondents were given such response choices. The results have been tabulated in every question in the survey. (Saunders, Lewis and Thornhill. 2001) The study required an organized data gathering in order to pinpoint the research philosophies and theories that will be included in the research, the methodology of the research and the instruments of data interpretation. The descriptive research method uses observation and surveys. In this method, it is possible that the study would be inexpensive and time-efficient. Thus, this study will use the descriptive approach. Descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. RECOMMENDATIONS The recommendations for the low cost airlines in Europe such as Ryanair and Easy jet is that these airlines need to strengthen whatever opportunities there is in the airline industry through engaging into a more established process of their marketing strategies. The low cost airlines should have a detailed plan for their strategic moves in the market and be able to provide good customer services to the customers like by having discounted flights and value promotion to keep the competitive advantage at a stable mode within its competitors and will need to focus more on the core competencies that allow those low cost airlines to practically and wisely design suitable airline operations within the bracket of their marketing network services in a market standard-based perspective. These airlines should amicably need to be goal oriented and must not stop to rejuvenate and change their marketing plan strategies from time to time in order to re-invent the performance process upon the upgrading of rules and regulations of these airlines as mandated by the state and should adhere to further liberalization in the market along with the impact of low-cost airlines and the commoditization of air travel that can lead to a long-term decline in sales and profits taken (Doganis 2001). It is then recommended that low cost airlines should outsource as many non-core functions as possible that may abandon peripheral services such as catering or ground handling services and can be required to perform such activities as external specialist companies defined to be independent profit centers. Europe’s low cost airlines are to overcome the lack of product differentiation and increase it that will have the ability to revive revenue generation as the low cost fares got the industry in better function as these airlines in Europe have proven a better segment of the market that grew up to forty percent from twenty in the future as there is no mistaking that low cost airlines are not only here to stay, they are here to take over as the biggest low cost markets in Europe in significance to the internal and external drivers for their marketing strategies resulting into a reliable operation management processes and useful operational models that will reassess the appropriate nature of customer service within the area of market cost savings that includes meals, drinks and others to passengers as part of their fare, as low-cost airlines have realized better marketing measures for growth and maintenance by not placing their seats through global reservation systems but by providing better services to customers and boost management relationship within the process of gaining and re-gaining profits and sales that are of high value to the country’s airline industry that can possibly create woes in the process as it is a crucial factor that strategies works best in its market sanctions.   The appropriate way of giving out recommendation for these low cost airlines in Europe can be best explain in understanding the research objectives such as the following: Low cost airlines need to segment customers using value-based and needs-based approaches. These airlines must be proactive in pursuing initiatives that respond to the needs of their customers and also provide a high rate of return. Low cost airlines need to pursue an organizational design that imbues employees with a service mentality and provides them with a clear understanding of their role and a complete view of the customer and by allowing value-based segmentation of the low cost airlines in Europe to understand the profitability of each customer. This allows for the identification of high-valued customers to be retained and lower-valued customers who might be migrated upward to higher-value segments, airlines might want to characterize customers along the two dimensions of monetary value and travel frequency. CONCLUSION In conclusion therefore, low cost airline industry is very much influenced by changes taking place in its varied environment. The development of the consumer-oriented marketing concept by airlines industry has been a response to changed environmental conditions from a sellers’ market to one of a buyers’ market as marketing orientation is needed for success that will depend on the prevailing relationship between these low cost airlines and its macro environment. (Elliot, 1990 p. 28) Furthermore, European low cost airlines are finding they can increase capacity by forging partnerships with other carriers that have a stronghold in the global market for the industry as there was a pricing reality that must he adhered to when considering lower-deck capacity on passenger flights versus capacity on freighters. Thus, customer satisfaction is very important in the repeat purchases. In terms of developing strategic marketing plans, airline executives should place more importance to those attributes which are deemed most important by passengers. In the development of new services and utilization of newer type of aircraft, consumer driven type of input should be utilized. In particular, most salient attributes used by airlines’ passengers need to be delineated. These low-cost airlines are gearing up to launch another humiliating attack on the business models employed by their larger other airlines and better get used in the process because the only profits being made in the airline industry in Europe are coming from these low cost airlines. Credit:ivythesis.typepad.com

The Economics of International Airlines

The integral importance of this research study was that, it has given the airline industry a detailed and clear emphasis of the underlyin...

Research Paper on Impact of Effective Corporate Governance Systems

Every business is subject to factors that affect its function as a whole.  These factors are the ones attributed for the success or even the failure of a business (Oliver, 1997).  In the light of this, there are certain ways or techniques that can be considered in order to emerge and continue to be competitive within the global market place. The effective implementation of strategic management strategies is among these. On this case, the first low-cost, no-frills European airline – the independent Irish airline Ryanair* is taken into scrutiny particularly on its strategic management and implementations.              SWOT ANALYSIS Strengths             Ryanair has been known as Europe’s first low-cost, no-frills airline brand (Doganis 2001). This fact alone credits is the company’s strongest selling point. Ryanair started in year 1985 with only 57 staff members and with one 15-seater turboprop plane from the south of east of Ireland to London-Gatwick which carried 5000 passengers on one route (Harrison 2002). In 1986, inspired from the story of David and Goliath the company go after the big guys for a slice of the action and end up smashing the Aer Lingus or British Airways high fare cartel on the Dublin-London route. From therein, Ryanair’s lower fares offering increased their market share rapidly resulting to the establishment of low-cost subsidiaries of established airline companies such as British Airlines and KLM (Doganis 2001).             The ‘low-cost, no-frills’ strategy resulted to a rapid increase of customers and expansion of their operations, wherein the staff increased from mere 57 to 3, 400 staff members and almost 35 million passengers. In terms of operations, the EU air transport deregulation allowed the airline for the first time to open up new routes to Continental Europe with over 3 million passengers on 18 routes carried in 1997. Ryanair also launched services to Stockholm, Oslo, Paris and Brussels and took time out to float Ryanair Holdings plc on Dublin and NASDAQ Stock exchanges. The company was awarded as Airline of the Year in 1999 by the Irish Air Transport Users Committee. In 2001, while almost all traditional airline companies suffered from losses and stiff competition, Ryanair, being a low-cost airline became more than merely profitable by recording 26 percent in operating margins – results that the former only dreams about (Binggeli and Pompeo 2002). In June of the following year, Ryanair made a market capitalization amounting to 4.9 billion euro (.82 billion), breaking the records of 45 percent more than the mighty British Airways that has 20 times larger in terms of revenue. Ryanair possesses the sophisticated and able technology that can cater to the fast changing global marketing management trends. It has core competence in its use of information technology that can support its management and marketing operations. Thus, adding to its innovations in service providing among the wide range of clientele. Its IT supports competent procurement of services (e.g. bookings and ticketing) in e-marketing or online aspect. After establishing its website in January 2000, it became one of the busiest sites in the country with 14 million impressions a month. The booking in their web accounts have increased to 94% which has probably has something to do with opening another 26 routes. In year 2003, the company is characterized by rapid expansion and the start the year by announcing that the company has ordered an additional 100 new Boeing 737-800 series aircraft to facilitate the rapid European growth plans (Binggeli and Pompeo 2002). The company is named as the most popular airline on the web in 2004 by Google. The company has also passed out British Airways to become the UK’s favorite airline in United Kingdom and throughout Europe (Binggeli and Pompeo 2002). In sum, Ryanair’s strengths rest on the company’s commitment to low fares, deep-seated management, and willingness to address managerial challenges and marketing trends (e.g. competition, expansion, and IT solutions). Weaknesses             Despite of the increase of passengers, the company is not so good in managing cost that the company has lose its money. At the moment, there have been urgent and deliberate mechanisms that were implemented to address such weakness. Such cost reduction strategy relies on five main aspects like fleet commonality, contracting out services, airport charges and route policies, managed staff costs and productivity and managed marketing costs. Ryanair, in spite of its strategies has other problems that serve as weaknesses too.  One of the problems is in terms of handling customers or target market. Reports say that Ryanair accumulates ‘hidden’ taxes and other fees, restricted customer services, and deceiving advertisements. In addition, another problem is assuring quality service. According to the result of poll conducted by BBC involving air travelers in 2003, 56 percent of respondents claimed that the airline caused them ‘the biggest headaches’ in terms of services and customers. Also, Ireland’s Commission for Aviation Regulation recorded a total of 60 percent of all complaints accumulated by the commission (M&C 2007). There has been significant number of bad publicity for the company, thus, creating a negative impression to the airline brand. The company is faced with different unsolved issues because of lack of strategic decision making in several areas of human resources particularly in relation to trade union policies (Harper 2006).                Opportunities             With the management system of the company and the strengths that it has, Ryanair has bigger opportunities to still dominate and catch up with the competition in the European airline industry in terms of providing more quality service standard and at the same time preserving it low-cost no-frills strategy to its clients or even have an opportunity to be the number one airline company in the whole region after its eventual application of its proposed plans in the future. Another opportunity that can be attached to the company is it would gain more customers if they would be able to determine the latest trends in airline management and marketing to meet the demands of their target market. The continuous initiatives of the company in diversification of its revenue resources also open new opportunities to make the business become stronger to outgrow all its rival companies. Such opportunities will include e-business development by strategic alliances as well as suppliers, leveraging the company’s investment in the World Class Customer Satisfaction Systems, and other business opportunities in both non-core and core areas. Threats             Operating in the most competitive marketplace especially European airline industry, Ryanair is faced with the inevitable threat of stiff competition. For a company to succeed in global competition there is a continuous plan to develop new products with higher quality than its competitors. Kay (1993) analyzes that new product and new business development must be highly effective and efficient, however that alone will not ensure its competitiveness. The expansion of its operations to other areas means adjusting to the trade policies and political problems of the locality. The dynamic needs and demands of customers served to be a challenge to the management. Furthermore, consumer behavior and satisfaction with regards to the product/service procurement is also a risk. If the company will continue to be a vertically integrated corporation, the company may fail in terms of management ability. The division of the company may tend to have internal complexity. Additionally, fast paced technological advancement may be a threat to Ryanair as a whole.  In terms of the competitors, the company should be able to provide unique and more technologically advanced services to be able to survive in the competition in the world airline industry. OPTIONS FOR FUTURE DEVELOPMENT Ø      Generic Strategy Aside from it cost-reduction strategy, Ryanair has also been able to use Porter’s generic strategies to position itself in the marketplace. Accordingly, a company positions itself by leveraging its strengths. Today, more and more people and organization are striving to be recognized in the business arena.  With this objective, these organizations had been able to competently and effectively adapt to the situation in the market place by using generic strategies that enhanced their competitiveness. There are five different generic strategies that a business can choose.  These include cost leadership, differentiation, focused cost leadership and integrated cost leadership/differentiation. Each generic strategy helps the company to establish and exploit a competitive advantage within a particular competitive scope (Hitt, Ireland and Hoskisson 2003). By applying these strengths, three generic strategies are resulted: cost leadership, differentiation and focus (Johnson and Scholes 1997). The strategies used by the company include cost leadership, differentiation strategy and focused differentiation. 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 an industry (Campbell 2002). Cost advantage may achieve in terms of how product or services is designed or in terms of its quality. Differentiation strategy is based upon persuading customers that a product is superior to that offered by competitors (Campbell 2002). The value added by the uniqueness of the product or services may allow the company to charge a premium price for it. However, the danger associated with differentiation may include imitation by competitors and changes in customer tastes. Focus-differentiation strategy is aimed at a segment of the market fro a product rather than at the whole market or many markets (Campbell 2002). The successful way using focus strategy is to tailor a broad of product or service development strengths to a relatively narrow market segment that they know very well. The risk may include imitation and changes in the target segments. In the case of Ryanair, these three generic strategies had been utilized. First, the company offers the lowest cost of fare than its competitors in the airline. On the other hand, Ryanair has also become a focuser because it concentrated on a narrow customer segment which include Irish and UK business people or travelers who could not afro to fly major airlines. The main goal of the company is to provide a no-frills service with low fares designed to stimulate demand. At the time, it did not aim to offer the lowest fare on the market.  However, the company expanded to continental Europe and had to focus on critical success factors to survive. Nowadays, it can be said that Ryanair has shifted generic strategies to become more of a cost-leader not only in terms of passenger volumes but being the lowest cost operator in the airline industry. Ryanair has restyled itself and shifted from a full service conventional airline to the first European low-fares, no-frills carrier. In 1985, it provided scheduled passenger airline services between Ireland and the UK. By the end of 1990 and despite a growth in passenger volume, the company had experienced some trouble and had to dispose of five chief executives, recording losses of IR£20 million. Ryanair had to fight to survive and the new management team, headed by Michael O’Leary, decides to restyle the company on the model of successful American Southwest Airlines. Indeed, when one considers Porter’s original framework, Ryanair’s generic strategy used to be unclear as it situated itself somewhere between a cost leader and a focuser, although we can consider it was closer to a focuser. The problem with such niche strategies is that they involve a number of risks, the most obvious being that the niche can get saturated and competitors invade the segment. As long as Ryanair was the only European no-frills airline, it did not have to distinctly define its strategic position. It used to try and mix focus and cost leadership and was muzzy about which one it wanted. But as soon as competitors started blooming, it had to decide which strategy it would stick to. This was the very strategy of Michael O’Leary as he decided to ruthlessly pursue cost leadership. This strategy was a success and by 1997, Ryanair was floated on the Dublin Stock Exchange and on NASDAQ. Expansion strategy is another factor that enables Ryanair to position itself in the marketplace. The company has been known to be an airline which launches new routes since its operation begins. In addition, under the expansion strategy, company acquires Buzz in February 26, 2003. Such acquisition enables Ryanair to gain immediate access to11 new French regional airports and makes the company the largest airline operating at London Stansted Airport. It also continues to expand by opening two new Continental European bases with low-fare flights from Milan, Bergamo and Stockholm. Ryanair launched 73 new routes and carry over 2 million passengers in one month (July) of 2003. In addition, the company website has been able to make the company position itself in the global market. Ø      Ansoff’s product-market matrix The major service offered by Ryanair is low-cost, no-frills air travel services. This service of Ryanair has been recognized because of its strategic market penetration which includes branding and the use focus differentiation and diversification. With this, the company has been able to have a new market segment from different customer segments. In order Ryanair to enter in this marketing arena, the company used the concentric diversification. Concentric diversification is the expansion of a certain industry through diversification into a related industry (Hunger and Wheelen 1996). The market segmentation of the company includes those clients form residential, commercial, and industrial and other potential customers. The summary of the analysis of Ryanair using Ansoff’s Matrix can be seen in the Appendix section. EVALUATION The industrial competitions in airline industry worldwide are at brisk, making companies in this field across the globe search for extensive strategic management procedures that would keep them in on the business world. The tasks of crafting, implementing, and executing company strategies are the heart and soul of managing business enterprise. A company’s strategy serves as the game plan management and is use to stake out a market position, conduct its operations, attract and please customers, compete successfully, and achieve organizational objectives. In terms of suitability, the opportunities of Ryanair are definitely directed to growth. This is based on the company’s on-going strategic planning and management efforts. Further, by exhausting the company’s research and development (R&D) efforts, the potential future strategies are feasible. By looking on the financial framework of Ryanair, it could be deemed that the company is able to carry out such strategies, while maximizing returns, enhancing profitability and minimizing risks. Lastly, the acceptability of such strategies meets the expectations of the stakeholders as proven by the deliberate support coming from all areas of the management. The belligerence of corporate efforts towards development indicates a high level of acceptability in all areas concerned. RECOMMENDATION The Critical Success Factors (CSFs) of Ryanair relies on the strategic focus of having the lowest prices, reliability, comfort and service, and frequency. It is recommended that the company must be able to use or impose a strategic management system that will help them enhance their operations. Also, Ryanair must not only focus on its strengths but must try to also pay attention on weaknesses and find solution to solve issues and maintain a competitive business operation and performances. The Impact of Effective Corporate Governance Systems and Processes on Company Conduct and Performance             The conditions of the global marketplace as well as economy require organizations to evaluate all aspects of their operations. More often than not, the ability of a business to stay long in the industry where it belongs is the measurement of its success. This is synonymous to survival as a necessity and ability to compete using appropriate marketing and management strategies so as to overcome business challenges. This idea continues to direct the activities of business into the 21st century (Paley 1999). The trust, honesty, responsibility, integrity and accountability between transacting business firms and organizations are values which serve as the key foundation of gaining credibility and good position in the international arena. Hence, standardization of the code of ethics in the corporate world was realized and enacted through the legalization and enforcement of laws and policies that will protect the interests of business establishments. Such legal move resulted to the proper attitude and behavior among business organizations with business transactions thereby decreasing the number of business-related cases filed. Meanwhile, significant changes in the perception, management, and impacts of corporate governance on businesses have been developed in the earlier years. The term corporate governance was coined in the 1980’s (Kay and Silberston 1995). At present, a significant body of literature provided by business authors and policy-makers recognize corporate governance and its impacts on businesses in a purposeful standpoint which requires suitable interventions in designing of alternative organizational coping measures. Corporate governance has become one of the main components in the operations of organizations. With the proliferation of worldwide companies on the notion of effective corporate governance, it is then important to illuminate on the impacts of effective corporate governance systems and processes on company conduct and performance. Basic definitions             According to Stapledon (1996) and Cadbury (1992), corporate governance is briefly defined as a system that is used to direct and control companies. It is a set of established policies that directs the ways in which an organization or company is managed, governed or operated. This reinforces the claims made in the introduction of this paper regarding corporate governance as a main component in the operations in a corporation. Looking at the definition of Stapledon and Cadbury, it appears that the commission of corporate governance is given to the top level management employees of an organization. Similarly, Zingales (1998) made the definition of the term even broader by stating that corporate governance pertains to anything that has affects the previous post bargaining power over the generated value for the firm. By providing this definition Zingales recognized that conflicts between the large shareholder, small shareholder and management can arise brought about by unforeseen factors before the creation of the contract. As such, corporate governance constitutes the rights entitled to certain parties for the resolution of the disputes. Shleifer and Vishny (1997) considered corporate governance as an institutional arrangement. In addition, it is being assumed that that corporation’s suppliers of finance guarantee themselves that proper return of investments are viable. For Shleifer and Vishny, they view corporate management as a means of protecting the interests of a company’s shareholders. Given the directing and controlling attributes of governance, it is basically given to the directors and executives of the firm. Aside from the effectual execution of the organizational processes that are necessary in satisfying customers, employees, and management itself, corporate governance is centered on the careful administration of the processes involved particularly on the relationships among all the stakeholders (Bhattacharya 2000). Normally, the structure is composed of a board of directors, which is similarly made up of executives and non-executive members of the firm (Detomasi 2002). Role of executive and non-executive directors             The executives of the firm include those who are involved in the daily operations of the organization. However, there is still a question why such activities have to exist in an organization. Detomasi (2002) noted that the function of the board of directors in corporate governance is to fundamentally examine the strategy of the company in general. This could be carried out through probing for weak points in the organizational functions and operations and by retrospectively studying the previous decisions made by the company. In so doing, corporate governance ensures that the company still possesses their competitive position in their respective industry (Detomasi 2002). Meanwhile, the role of non-executive directors is inherent to the specific functions of identified areas of the organization. They provide continuous feedback in relation to company performance.  The direction and control of the company is specified by the distribution of responsibilities as well as rights among the parties involved (OECD 1999), which includes managers, board members and other stakeholders. The focus on the narrow application of corporate governance on the structure and functions of the board as well as the prerogatives and rights of the shareholders in participating in the decision making process was proposed by Blair (1995). However, in order for this to be effective, several elements should be present in a setting of the company. Detomasi (2002) indicated that a strong public policy regarding governance should be established in a specific setting. This means that laws and legislations with respect to reporting, auditing and other financial activities should be specified in the legal system. Another element identified is the existence of a sturdy and well-built regime for practicing internal governance among the companies themselves. This means that in order for corporate governance be effective, the top level management personnel should be knowledgeable and well-trained in such a way that their actions are still in the bounds of the established legislation of the land. Lastly, Detomasi (2002) indicated the need of a network of independent auditors that would serve as the needed link and check of corporate governance in general. This means that an independent body is required in order to monitor whether the actions of the top level management of companies do complement what the legislators have created, particularly the regime governing corporate governance as a whole.    Relation of Corporate Governance to Corporate Purpose and Business Ethics             Corporate governance best explain and provide understanding of the relevance of maintaining good business relationship especially among global corporations where cultural orientation and political standpoint provide distinctions among participating bodies. The concept of corporate governance enhances the confidence of foreign investors, thus promoting competitive market play and improving economic conditions. It primarily deals with the roles and responsibilities shouldered by board members and directors in efficient and effective business management and accountability. The challenges that corporate governance presents deal with sustaining balanced relationship between transacting businesses, maintaining stability upon legislative and regulatory reforms while accounting its impact on the international business relationships in order to enhance business activity and competitiveness as well as stimulate investment flows. According to Oman and Blume (2005), a country’s system of corporate governance comprises the formal and informal rules, accepted practices and enforcement mechanisms, public and private, which together govern the relationships between people who effectively control corporations on one hand, and all other who may invest resources in companies located in the country, on the other. Well-governed companies with actively traded shares should be able to raise funds from non-controlling investors at significantly lower cost than poorly governed companies because of the greater risk premium such potential investors can be expected to demand for investing – if they accept to invest at all – in less governed companies. Much of the recent emphasis on corporate governance has arisen from high-profile corporate scandals, globalization and increased investor activism. Recent new legislative and self-regulatory corporate governance requirements have helped to instill global market confidence. The Institute of Chartered Accountants in England and Wales (2005) includes improved integrity and oversight of management, scrutiny over board composition and independence, effective use of internal and external audit functions, higher levels of disclosure and transparency and greater engagement with investors. Corporate governance looks at the institutional and policy framework for corporations – from their very beginnings, in entrepreneurship, through their governance structures, company law, privatization, to market exit and insolvency. The integrity of corporations, financial institutions and markets is particularly central to the health of the economies and their stability (Oman and Blume 2005). Corporate governance must be seen in the context of product competition, market factors and macroeconomic policies. As such, corporate governance is also dependent upon institutional, legal and regulatory environments (Roe 2000). This being the case, factors such as the ethics, societal and environmental awareness can affect the long-term success of a company (Chen and Cheng 2007). The concept of corporate governance summarizes the need to maintain good business operations while considering the significance of improving the relations between companies and shareholders, establishing long-term business transactions in ensuring that the interests of all stakeholders are protected. Reasons for the growth of interest in the subject             The need to have a solid management body armed with the most effective governing skills that adopts in the emerging business trend is one of the most compelling reasons in which corporate governance is widely accepted. With the goring importance of honest and ethical corporate structure, more and more business are attracted to the idea of systematic and humanistic system of administration. Since corporate governance covers the issues of interest especially the resolution of conflicting ones, corporate governance it related to the over-all performance of a company. With the resolution or impediment of internal conflicts, smoother decision-making and decision implementation can be secure. This means that interests of the stakeholders are the same, they will be able to work as one body in order to achieve their objectives and thus uphold their respective interests within the organization. How Governance operates in an organization             Provided that corporate governance protects the injection of self-interest among stakeholders, governance operates within an organization by serving as among the main mechanisms in directing and controlling processes. It is seen on the definitions provided in the previous discussions. Through corporate governance, the set of organizational objectives is pursued and sustained, thus resulting to increased productivity and performance. Why it is of interest to diverse stakeholder groups The need to provide sufficient knowledge on the search and experimentation of the most effective strategies to be implemented within an organization requires diverse stakeholder groups to pay particular attention on the idea of corporate governance. Aside from the fair and ethical protection of individual rights, it reflects on the maximum application of valuable corporate resources. Jobber (1998) reports that corporate governance systems are being implemented within diverse stakeholder groups for the purposes of determining the most valuable ways to manage essential business resources through the utilization of methodical methods as result of empirical studied taken among various fields of application. Examples of good practice Good corporate governance can be observed when the proper incentives are provided to the Board and the management in order to ensure the pursuant of the organizations’ objectives and upholding the interest of the company and its shareholders. In addition, good corporate governance also sees to the efficient use of resources. These criteria of good corporate governance entail the prevention of damage to the interest of the parties involved. Logically, corporate governance is associated with the performance of the organization. Even though, the definitions and criteria presented above are concerned with businesses. It is evident that the most of the definition and conditions of corporate governance is applicable to other forms of organizations. This is the case since the organizational structure used in most of the definitions is nonspecific in a sense. The presence of the Board and other stakeholders can also be observed in other organizations such as educational institutions, for example. The premise of governance is based on the manner of operation, may it be an organization or society. From the Latin root of the word governance itself, which is steering, it can be stipulated that governance is generic regardless of the nature of the organization since the main objective of governance is to serve as a guide. All organizations, profit or non-profit, need guidance in order to achieve their objectives. However, variations may be seen depending on the set objectives that need to be attained. Differences in the kind of governance being implemented can vary based on what the organizations holds as its top priority (IFC and OECD 2005). Stapledon (1996) also indicated in his work that there are several corporate sectors that provide a generalization of specific types of corporate governance feasible. The corporate sectors of the U.K. and U.S. as well as Germany and Japan as among the countries that share notable features which is similarly comparable to other countries. This means that their considerations will also vary and thus the variations on the kinds of governance implemented. Nevertheless, the aim  of governance, which is to lessen the cost of conflict between stakeholders holds true for any type of organization since all organizations are composed of stakeholders. Examples of bad practice             The absence of good corporate governance can lead to the worsening of conflicting interests. Each of the stakeholders has the tendency of agreeing with decisions they think will be beneficial to them, even though, it does not equivalent to the welfare of other stakeholders. This means that various corporate players can assert their own views and perspectives. As such, the organization will no longer function as one instead selfishly directed.             The stench of distrust and irresponsibility reeks from companies with poor corporate governance. These characteristics lead to companies paying a higher price than they expected. One of the business organizations that were unfortunate to experience this scenario is ENRON, U.S.’s largest bankruptcy and stock collapse (Fox 2003). The collapse of ENRON was being attributed to poor corporate governance. This is the case since the fall of ENRON was due to illegal practices such as inside trading. When the story of ENRON’s illegal activities were made public, investors became wary and as such, the inflow of capital stopped.             It is due to corporate scandals like that of ENRON that shareholder activism increased (Ariff 2005). They were demanding for changes in management as well as aggressive enforcement of laws and regulations. These moves by shareholders were supported by national governments by introducing more strict laws and regulation that calls for better corporate governance such as Thailand SET Guidelines 2001, Singapore Rules 1998, Japan Code 1998, Indonesia Code 1999, Malaysia Code 1999, Korea SE Act and Commercial Code 2000, and Hong Kong Code 1993 (Ariff 2005).             All in all, corporate governance mainly works on the most effectual control and management of organizational operations. Aside from protecting stakeholders’ rights, it also focuses on the guaranteed achievement of organizational objectives leading to outstanding corporate performance and profitability. Thus, the emerging culture of effective corporate governance among modern companies is directed to a competitive company conduct and performance. Credit:ivythesis.typepad.com

Research Paper on Impact of Effective Corporate Governance Systems

Every business is subject to factors that affect its function as a whole. These factors are the ones attributed for the success or even the...

Sustainable Corporate Strategy: Case study exam – Ryanair

Sustainable Corporate Strategy: The Case of Ryanair   Introduction In competition there is motivation in every company to improve and develop their objectives.  For an enterprise to succeed in global competition there is a continuous plan to develop new products with higher quality than its competitors.  (1993) analyzes that new product and new business development must be highly effective and efficient, however that alone won’t ensure its competitiveness.  It must be supported with a suitable culture throughout the enterprise.  It must have a group of body that supports, encourages, and promote innovation for the company to succeed in the end. Corporate World is very classy and every move they made seems to make an impact on the life of the people. Every aspects of our everyday world have been influenced by modernization, consequences of countless business decisions.  Business activity integrated into our way of life, and culture changes in accordance to the rapid growth of “business culture”.  In other words, people are one of the main reasons why corporations and different business establishments seek to develop different strategies that will make them stand out among their competitors so as to maintain and sustain their existence.  They want to create an impression so that people will patronize their products and eventually lead them to financial success.  This paper discusses and analyzes the sustainable corporate strategies that Ryanair adopted in order to remain competitive and the subsequent benefits it contributed to the growth of the business.    Q.1) Outline contemporary views of the terms “sustainable’ as it apply to large companies. On the basis of what is presented in the case, give your views as to whether Ryanair was a ‘sustainable’ company in early 2004?   Prior to the common use of the term sustainable industries, the terms sustainable economy and sustainable development were common. They coined the most broadly used definition of sustainable development as, development that meets the needs of the present without compromising the ability of future generations to meet their own needs (1996; 1997). Sustainable development demands that the search for ways of living, working and being that allow all people to guide vigorous, satisfying, and economically safe lives without destroying the environment and without endangering the potential interests others (1997). Sustainable development is an economic state where the demands placed upon the environment by people and commerce can be met without reducing the capacity of the environment to provide for future generations; is economic development that has a positive long-term social and/or environmental benefit; and meets the needs of the present without compromising the ability of future generations to meet their own needs (1994). People anxious about sustainable development recommend that meeting the needs of the future depends on how well we balance social, economic, and environmental objectives–or needs–when making decisions today. It requires an understanding that operating has consequences and that we must find inventive ways to change institutional structures and influence individual behavior. Merely it is about taking action, changing policy and practice at all levels, from the individual to the international ( 1997). Ryanair continues to make risks because of increasing and overlapping cost pressures.  However, if it sticks close to its low-fare model as it has been intending to, it may continue its sustainability because true to the Walmart model, the cheapest product always wins.  Eventually being the lowest cost and lowest fair airline will attract several passengers that will compensate for rising fuel costs especially since Ryanair is good at increasing passenger seats and expanding routes.    Q.2) 2002/03 was a difficult year for the world’s airlines, but Ryanair “…was seen to be unique among airlines worldwide…” (p836). Describe the main corporate strategies used by Ryanair to achieve this outcome and why they were so successful when compared with other airlines.               Ryanair is a No-Frills airline meaning to say, it gives customers what they want without the added costs.  By constantly saving money by making premium and attaching amounts on services that are commonly free in airlines, Ryanair is not only able to cut down a significant amount of costs, but it is also able to have increased space in its airline truly resembling a public transport such as a bus or a train on air.  In addition to increasing more seats are its regional destinations and cheaper routes and hubs.  Despite not being placed directly in the main hubs, Ryanair still accomplishes its mission of getting the customers to the intended location with no frills.  It defines Customer Service not through friendly and amiable treatment, but through the delivery of customers from one destination to another in a price that is skinned down to its essentials: punctuality, fewer cancellations, lost bags and complaints   They believe that each plane customer is not really so much concerned of the convenience as they prioritize the cheapest plane more than anything.  By only promising the basics, lessening accountabilities as well as responsibilities and by charging prices for anything beyond this (refreshments, meals, accommodations, wheelchairs etc), the airline is able to achieve this.  Somehow Ryanair is able to take advantage of the depressed airline industry by offering the best deals in a time of financial crises.  Ryanair keeps on finding ways to cut down costs in these crucial years.  For instance, it has introduced its website  in the year 2003 to cut down further on their “Staff costs, agents’ commissions, and computer reservation charges” while increasing growth.   Q.3) The ‘idea’ between Ryanair and Charleroi Airport is set out on p.833 of the case. Discuss this idea from the viewpoint of the “Corporate Governance” of (i) Charleroi Airport and (ii) Ryanair.   Corporate governance can be defined as a system that is used in order to direct and control companies. As a matter of fact, this idea applies to all business sectors all throughout the world such as the banking institutions, financial corporations and other types of businesses such as the retailing industry.  As a term, it has come to imply good, in the non-moral as well as the moral sense. Its non-moral applications include efficient decision making, appropriate resource allocation, strategic planning, and so on. Nonetheless, in its moral sense good corporate governance has come to be seen as promoting an ethical climate that is both morally appropriate in itself, and consequentially appropriate in that ethical behavior in business is reflected in desirable commercial outcomes (2000). Thus, the links here are with due diligence, directors’ duties, and the general tightening of corporate responsibility. In particular, corporate governance refers to the examination of the control of a company as utilized by its directors. In accordance to theory, the directors of public companies are held responsible for their action by their shareholders. On the other hand, the authority of the shareholders to influence the behavior of the company directors is limited in practice and is rarely exercised. This then provides directors of considerable power to take action as they see fit. However, this is not always the case as it appears to be relatively different form that of the government in which the action of the officials is slightly restrained by certain actions of the people it governs.               Ryanair has incidentally been receiving state-aid subsidy from Charleroi Airport.  The Charleroi route was one of the airline’s methods in maintaining lowest fares while at the same time, Charleroi benefits on Ryanair’s exposure to its route.  The EU Commission was appalled at the discounts Charleroi is giving Ryanair thus endangering the fair competition the Commission is upholding.  By removing the Charleroi route, will cancel a significant number of flights and reduce activity.  There are two sides of the argument: Fair Competition versus Charleroi airport’s exposure.  Charleroi has thrived because of Ryanair and it will suffer if Ryanair should pull out. The Corporate Governance responsibility rests on the EU Commissions which must allocate resources and balance decisions that will  benefit both Ryanair and Charleroi.  It will be worse in the long run should Ryanair be given special preference and discount over other airlines despite the fact that it has been aiding Charleroi.  Eventually, Ryanair and Charleroi decided on new fees which will continue operations but not in a manner that will have state-aid subsidies which will go against the rules of Competition laid by the EU Commission.    Q.4) In 2003, Ryanair acquired “BUZZ”, the loss-making budget subsidiary of KLM (p.840). It then reduced BUZZ’s staff from 610 to 170. Discuss what you believe Ryanair’s “Corporate Social Responsibilities” might have been in the circumstances of the case.                         What Ryanair has performed is a form of Mass Layoff as it shed off hundreds of staff.  It is a touchy subject that must be dealt with care.  Employers in their part must not only offer explanations, but they must also express their utmost regret and at the same time, gratitude to the unfortunate worker (2002).  Layoffs should be ended with a sense of respect and justice.  Most often than not, mass layoffs are performed with a lack of consideration in the employees’ part.  This is because a mass layoff may not sound as unfortunate as it seems and employers end up appearing as “executioners”.  In order to save the company, the employees must be sacrificed in its expense.  Employees will tend to feel undervalued and be generally resentful of such a decision (2002).   Employees who have to undergo immediate displacement are most often than not, shocked and greatly dismayed especially if they would have been serving the company for decades.  To cut their employment short is also an interruption to their way of lives and a waste of training and skills.  Most likely than not, the employees will need to be retrained to be adjusted in their next employments after having spent a great deal of time with the company.  They will have to compete along with the new entries in the workforce for jobs.  Some may be lucky, but some will certainly take a long time before they can truly get back on track and adjust to the layoff which is why the company needs total involvement in order to stimulate adjustments.    For hundreds of skilled workers to be unemployed for a long time will be a loss and a dent to the economy growth as a whole.    In mass layoffs the workers are in the losing end.  The company must take upon themselves to help these displaced workers in coping with the change of employment especially if the employees served for a long time.  This case only emphasizes how layoffs are tricky situations and would require the extra efforts of the employer to truly attempt to end the lay off in a manner that is with fairness and respect.  They and their families need their own special compensation.   The gradual layoff example presented how employers should ideally confront the situation which is through a comprehensive compensation package and not merely by severance packages and career counseling.  Continuous dialogue in the part of the management themselves is essential in order to appease and support the dismayed employees.          Q.5) In early 2004, Ryanair’s profitability is under threat. If you were designing the first draft of a ‘Balance Scorecard” management reporting system for Ryanair (to help it monitor the implementation of its strategies), what main “perspectives” and “metrics” would you suggest?   In order to maintain competitive edge in a manner that is low-cost, they should keep the following perspectives or metrics in mind:  The maintenance and operation in a manner that is low-cost, effective marketing schemes, development of their brand and the skillful management of their routes.  These metrics are reflective of the major operational decisions which determine how their daily management and performance should be properly decided.  Low cost operations are performed through decisions that have to do with balancing utilities which would be in favor of increasing passenger loads, flight time, and making premium the free services mentioned above.  This is basically where airlines cater to more passengers at a lower rate and is thus also known as Financial Perspective).  Marketing and Brand enhancement is responsible for providing the facelift and attractiveness and promotion of a product which it performs through its shockingly low prices and give Customers the value of their money and encouraging them to be loyal (which would be the Customer and Business Process Perspective).  Route management is the product catered to customers.  This is where the airline finds its audiences and consumers.  This is where they can choose to cater to tourists who travel for pleasure or business.  By managing their Route networks, they may determine which customer segment they should focus and have the most profits possible.  This route network may be enhanced through the increase of new hubs that will have the more customer preference and access.  Customers always look for the cheapest flight available and Ryanair providing this will certainly benefit.  By expanding Routes it is possible for Ryanair to open to new niche where there is no frontal competition.  This can also be the Innovative Perspective approach.           Q.6) What is your assessment of Ryanair’s launch strategy? What is Ryanair’s strategic intent? What factors may have played a part in determining this strategic intent?               Flight fares are always known to be overpriced.  This discourages traveling and usually leads to unnecessary expenses.  The added fees are supposed to make convenient the entire flight experience.  Ryanair intends to rebel against all of the said ‘free’ services.  It believes that every airline goal is to take customer from Point A to Point B with no questions asked.  Thus this is the No Frills Strategy where it cuts down on marketing costs, staff costs, airport charges, contracting out of services and fleet commonality    Ryanair itself is appalled of the high airline fares that has been dominating the Industry and boastfully asserts that traveling does not need to take so much money.  In fact the flight fares Ryanair offers cost as little as cents to none at all (excluding the taxes and other costs).  It truly serves traveling to the masses.  Coupled with its boisterous attitude led by its dynamic and arrogant CEO, , Ryanair does not only seek to reshape the airline industry but spark a campaign and revolution led by the low fare airlines as the best valued airlines while putting down the impractical overpriced airlines (by calling them as idiots among other derogatory callings).  People willingly subscribe to Ryanair’s services which although inconvenient, have been proven irresistible because of the cheap airfare.   Ryanair does not focus quality but it promises to deliver which is the whole point of the transport business.  In this manner Ryanair becomes a frank, straight to the point, and a very practical alternative for airline solutions.  Customers are always looking forward to save money during flights and certainly they would not mind a business bare to its essentials especially if they will save as much as hundreds of Euros.  It is indeed a daring move which is made even more impressive because Ryanair is profitable, until the various external factors of 2004.  In a time of inflation, increasing interest rates among other costs, more and more customers would not mind risking convenience in plane travel at all.  Ryanair is made ideally for such a situation.         Q.7) What are the most significant issues revealed by an assessment of Ryanair’s external environment?               The European Airline Industry is highly competitive and volatile thanks to the European Union Commission’s desire to enhance competition between airlines.  Its ruling against State Aid would be highly disadvantageous to Ryanair and advantageous to more and more airline companies who are also joining the Budget airline trend such as easyJet, Virgin Express, bmlbaby, flybe, MyTravelLite and AerLingus.  These rival carriers will put more fuel to the fare wars.  Ryanair is one airline that makes more enemies than allies because of its aggressive nature, some of which are its own customers.  Ryanair is going to have to adjust to providing the services it has sworn not to provide without an added cost as it is pressured by issues such as the proper treatment of the disabled and the trade prospect of a trade union.     Q.8) How would you assess Ryanair’s resources and capabilities against its competitors? What is Ryanair’s core competence?               In almost anything a consumer does, whether she or he is an institutional buyer, industrial buyer or plain individuals, they will always tend to compare substitutes to find the best deals.  This is especially true in hard times where customers demand for premium service as more passengers seek less expensive travel alternatives. Ryanair has a superb cost management, free seats when the company is feeling generous, no frills in flight, and with its aggressive advertisement campaigns which take on its rivals: the overpriced airlines (when they attempt to impede Ryanair’s route) and airport management or the EU Commission (when they would perform moves that would push Ryanair to charge more). Low-cost airlines rely on a simple business design: one kind of aircraft, one class of passenger, and more seats crammed into the airplane–as well as no airport lounges, no choice of seats, no newspapers, no food, no frequent-flyer programs, no connecting flights, no refunds, and no possibility of rebooking to other airlines. Also, there are no travel agents and expensive computer reservation systems; about 90 percent of Ryanair tickets are booked over the Internet. By keeping the logistics simple, no-frills airlines cut turnaround times on the ground and maximize revenue-generating air time by minimizing landing and ground-handling fees ( 2002). Lower costs and higher seat-load factors permit no-frills carriers to offer fares 50 to 70 percent lower than those of the incumbents. This approach attracts price-sensitive and flexible travelers, even those who don’t find the lack of convenience and flexibility the slightest bit appealing.  Another strength is the CEO’s brash, no compromise attitude that truly drives the company because a low-cost and low-fare airline would really need a leader who will be daring enough to pedal the company towards profitability despite the circumstances.  By his outrageous and oftentimes risky moves, he is able to attract attention and promotion to its favor.  Customers cannot resist Ryanair despite the lack of convenience because the seats are sometimes virtually free (or totally free) with the airline making money of the premium services such as food and drinks aboard.  It gives customers what they want in a fee that will only pay for the travel which is what airlines are supposed to do primarily.  The lowest cost airfare is always sure to win the competition even in the direst, most intense circumstances.    Q.9) What do you think of Ryanair’s strategies? What suggestions would you make to Michael O’Leary to improve Ryanair’s chances of future success?   To repeat: The lowest cost airfare is always sure to win the competition even in the direst, most intense circumstances.  This is a significant strength of Ryanair.  With its impressive cost management and outlook to increase more passenger seats and expand routes, Ryanair may come off just fine after the 2004 crises.  Ryanair knows how to anticipate difficult times due to increasing fuel prices and rivals and set their goal.  Bearing these segments and economics in mind, Ryanair must select routes carefully to generate enough traffic to fill the larger aircraft they use. Profitable markets must also have a large leisure-and private-travel component–the mainstay of the customer base of most low-cost carriers. A majority of these carriers follow the same basic rules, but with some differences in approach. Ryanair, which is as cheap as it gets, operates routes from London Stansted to many secondary airports–for example, to Carcassonne and Biarritz, in southern France, and to Pisa and Verona, in Italy. Low airport fees help keep the carrier’s costs 65 percent below those of a typical scheduled airline. Ryanair can thus offer cheap fares and still make a profit if more than 55 percent of its seats are occupied.  Thus it must proceed its goal in expanding to more little known routes and increasing more passengers in their planes while offering more premium services that the customers will end up purchasing for a more convenient flight.     Credit:ivythesis.typepad.com

Sustainable Corporate Strategy: Case study exam – Ryanair

Sustainable Corporate Strategy: The Case of Ryanair Introduction In competition there is motivation in every company to improve and ...