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Analysis Ryanair's external Marketing environment and strategy

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Introduction

Analysis Ryanair's external Marketing environment and strategy 1 INTRODUTION The aim of this report is to carry out a investigation of Ryanair's external environment and a strategic analysis of Ryanair, to identify opportunities and threats it might face, and its strategic capability, to isolate key strengths and any weaknesses that need dealing with. Finally, a SWOT analysis will be carried out to assess the extent to which Ryanair's strategies are suitable to what is happening in its task environment. Ryanair is Europe's largest low-fares, no-frills short-haul carrier. The organisation was founded in 1985 as a conventional airline but re-launched itself in 1990/1991 as a low-cost carrier, replicating American Southwest Airlines' business model. Since then Ryanair has grown substantially and successfully. The company currently has 146 routes to 84 destinations in 16 countries, and carries more than 15 million customers annually. Ryanair aims to be Europe's largest airline in 8 years (www.ryanair.com). 2 ANALYSIS OF THE EXTERNAL ENVIRONMENT This is a crucial part of a strategic analysis because organisations do not exist in a vacuum, they are part of a complex world and many factors can influence operations, beneficially and unfavourably. However, these can be difficult to comprehend due to their complexity, diversity and fast changing nature. Necessarily a number of techniques have been developed to facilitate the process and to '...contribute to answering the key managerial question...'of what '...opportunities and threats might arise in the future' (Johnson & Scholes 2002). 2.1 PESTEL analysis This identifies the main micro-environmental influences by classifying them into six groups: Political, Economical, Socio-cultural, Technological, Environmental and Legal. ...read more.

Middle

Bargaining power of suppliers = The price of fuel is directly related to the cost of oil which is determined by Opec and out of control of the industry (www.opec.org). = Budget airlines have work-hard cultures to keep costs down (Gilbert et.el 2001) meaning a scarce number of multi-skilled employees which '...can bargain away a significant fraction of potential profits...' (Porter 1980). = However, carriers tend to experience economies of scale which gives purchasing power. Consequently, airlines are able to negotiate favourable deals with most of their suppliers (Johnson & Scholes 2002). Rivalry among existing firms = Already very competitive industry. = Numerous new entrants intensify competition, although several newcomers have struggled to establish themselves and failed, Debonair and AB Airlines for example. = The over-crowded market, and commodity nature of the product, means that airlines are battling to fill planes. Aggressive pricing, efficient distribution and innovative communication mixes are frequent competitive measures. = However, carriers vary somewhat in segmentation by targeting different markets (narrow versus wide customer base) and offering divergent routes (regional towns versus main cities) which reduces rivalry somewhat (Gilbert et.al 2001). = Nevertheless, competition is intensified as conventional carriers adopts '...many strategies of the no-frills carriers and continues to cut costs' (Done 29/01/04). With low fares but a higher level of service (more frills and main airport servicing) they are a big threat. = Mergers, acquisitions and alliances are increasingly used for consolidation and competition. EasyJet bought Go, bmibaby partnered with Germanwings (Economist 01/03/03 & Hotten 13/03/04). Ryanair acquired Buzz but paid too much and was forced to close it to boost its productivity. ...read more.

Conclusion

Although growth is slowed down new planes has been ordered aiming to double the fleet by 2009. = Buys mostly during recession when prices are down = Good buyer-supplier relationships ensure reliability and low-cost procurement of services (many functions are contracted out). Safety is guaranteed as contracted work is supervised and planned by Ryanair staff (Johnson & Scholes 2002). Technology development = Ryanair uses its website to monitor bookings to see how full planes are minute by minute. If numbers fall prices can be slashed immediately to attract buyers thus increasing the load factor. However, '...they don't hesitate to raise prices if demand is buoyant' (Bowley 21/07/03) which leads to effective yield management. 3.2 Key Strengths and Weaknesses Strengths Weaknesses Cost-consciousness at every level Isolation of airports Ability to drive down costs Poor judgement in route selection and acquisition Fast turnaround times Targets very narrow market Cross-utilisation of employees Poor brand image Website Negotiation skills Ability to achieve growth Use of secondary airports 5 CONCLUSION The aim of this report was to carry out a strategy analysis of Ryanair, Europe's largest low-cost no-frills airline. From this it became evident that the organisation operates in a complex environment with fast changing influences that affect its business both beneficially and unfavourably. It also enabled identification of some of the sources of Ryanair's competitive advantage: core competencies, unique resources, key linkages and the superior cost performance compared to its closest competitor. However, it also became clear that the organisation still has a lot to learn from best practice. In general Ryanair's strategies match its task environment although it fails to address certain crucial issues. If these are not dealt with they could lead to future problems and reductions in profits. ...read more.

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