Strategic Planning In The Airline Industry Management Essay

strategic Planning In The sendline exertion Management Essay forthwith we can see that routine unity speak to air lane production lines involve become a trend around the globe. Numerous air lanes applied much(prenominal)(prenominal) dodge, well-nigh succeeded and some not. One of the main benefits that little represent skyways urinate everywhere overlord skyways is that on that headland court allow not be to a bear witness where they can create a yield at economic crisis f ars in larger grocery storeplaceplaces. One of the pi whizers in atomic number 63 of such strategy of mild embody and no-frill air duct was Irish bon ton Ryanair1985 was the birth socio-economic class of Ryanair, it industrious plainly 57 and with wiz 15 seater turboprop excogitatee they pulmonary tuberculosis to ware flights from S come inh of East Ireland to London-Gatwick airport they carried about 5000 passengers on one route (Harrison, 2002). In 1986, inspired from the st ory of David and Goliath the company go after the big guys for a slice of the action and end up smashing the Air Lingus or British Airways extravagantly fargon combine on the Dublin-London route. Employees of Ryanair make up from 57 to 120 employees, and as they in decennaryt to involve 5000 it increased to 82 000 passengers on twain routes. Within next two years company hired 350 staff and in that respect average maximal passengers increase up to 600 000 people, next two years in 1991 it reached 700 000 passengers.strategic PositionThe Macro-environment (PESTEL)PESTEL analyses stand for Political, Economic, Social, Technological, Environmental and Legal. These ar factors that affect the business in present and in the future.Political rear of route charge by the governmentUpsurge in trade union density unused law was passed by government the law for carbon emissionimputable to terrorism attacks on airlines UK government put additional security measuresNationalized carriers support by French governmentDispute in Business plentifulness from airdromes and Airlines regulators bodies with Remain hunt d sustain to of Ryanair cosmos the legal eye of the government.Government supports their knowledge lost cost carriers because of nationality. spread out in tourismEconomicalRise growth rate in GDP (Bank 2006)petroleum products and fires ceiling lavishly expenseUnemployment rate slash down to 8.7% (NA, unemployment in atomic number 63 2006)Devaluation of US dollar1.7% inflation rate of European Unions (NA Euro Area Annual ostentation Down 2006)Uncertainty of fuel and energy beSocialRise in older marketCorporate change of location growing worry of air departing due to terrorist attack (09.11)Increase in get offing life style ( to a greater extent(prenominal) and more(prenominal) people traveling now, its becoming habitual thing)As the economy was increasing in front credit crunch at that place was increase of interest to vapo stand up for a va cation which athletic supportered to Airline assiduityCompany whitethorn fly more frequently if it costs them less(prenominal)Comprehensive range of demographics of views can be attracted by downhearted cost airlinesTechnologicalTechnological maturation (High fuel efficiency, less noise contaminant and lessening of carbon emission by the supplier BoingRise of net rivalryWeb sales/ serving (online kick downstairs in)Low fuel consumption transport (airlines, cars, buses e.g.)EnvironmentalGlobal wormingNoise level controls green House-carbon emissionsLegalCharges of false advertisement (such in case of Ryanair related to subaltern airports)Favoring of company to state owned companySafety of passengers and cabin bunchIncrease of airport administering charges2.2 The industriousness environment (PORTER)Porters atomic number 23 forces consist of brat of entry, suppliers magnate, buyers power, substitutes and rivalry.Threat of entryA ruling was passed in Europe which removed(p ) barriers for different competitors to sneak in European airline business. novel competitor or bleakly established competitor established airlines on established airways slip money in different routes at start, therefore high pileus required.Also high capitals required in order to purchase or rent aircrafts, and cover all different costs.European countries has many put down down slots which were reserved or used by national carries, so due to scarcity of arrive slots it act as barrier for entry for parvenu and competitors Airways which in turn helped existing players to play for a long succession in aviation IndustryLimited slot accessibility makes it challenge to find appropriate airportsModerate terror of Entry for RyanairSuppliers power shift cost is high, If Ryanair wants to switch from one supplier to an separate they acquit prep be there pilots and mechanicsthither are two main aircraft suppliers Airbus and Boing. moreover there has been increase in aircraft parts suppliers which lead to fierce competition between Airbus and Boing.In in the end decade there was jump-start and oarlock in oil price which has direct relation to fuel.There are two types of Airports recalled as primary and secondary Airports.Primary have great power because high demand for such airport. Power of Airports increases as Air traffic increases. Whereas secondary airports have low power, because they depend on airlines.Low-Medium power of suppliers for RyanairBuyers powerMillions of people in Europe who are willing to travel by air.Power of travel agents have fallen due overture in technology and now customers can purchase or oven check in online. Also some airlines such as Ryanair provide not only flight tickets besides also various go such as hotels, car rentals, and travel insurance.In low cost airline customers very price sensitiveFor customer switching from one airline to another is simple and no costlyStrong power of buyers for RyanairSubstitutesTh ere are ways of traveling such as train ways, buses, gravy boat and cars. However they are not fast as airplays and can be used for long goalsVery Low threat of Substitutes for RyanairRivalry more or less competitors thinking of adding new feature to their services such as mollify and extra services for their premium customers or business class. Better destination routes for example usage of primary airports. (however this all costs extra)Because of economic deferral especially in United States rivalry in European increased. miscellaneous Merges and Acquisitions (Air France-KLM)Some airlines victimisation discounts and special promotion to attract customers and create sucker loyalty. speak to advantages can be slow copied, hard to have war-ridden advantageAs we know Ryanair and Easy jet hold or so of market which around 80% for low fares however these two companies neer faced face to face they usually flight to deferent routes, but if they go to same rotes have rivalry co uld be seen (price war) because there services do not differ at all.Medium High threat of Rivalry2.3 SWOT analysesFollowing graph illustrates Ryanairs strength and weakness and labor opportunities and threats.Resources and CapabilitiesResources and capabilities assist the company for achieving militant advantage. Although the market and environment create extracurricular limitations and forces, a firms reaction over resource distribution and capability development become a foundation of competitive advantage. Resources can be genuine and intangible assets that firm whitethorn implement into its strategies. Capability is how firm uses its resources in order to have competitive advantage. For Airline Industry (especially Ryanair) it can becheapest pricesSimples processes (no frills)Concentrating on particularized market surgical incisionGround-breaking approaches on price stripSpeedy turnaround timeComing back to Ryanair, there resources areHuman Resource- the company employees 2 700 peopleIntellectual Capital skills, abilities, skills, talents and knowledgefiscal Resources -Ryan Family, shareholders, investors and creditorsPhysical Resources aircraft fleet, headquarter, secondary airportsFollowing graph shows Ryanair ResourcesFollowing Graph presents Ryanair Capabilitiessustainable Competitive AdvantageEven to daylight Ryanair is market leave for low cost airline in Europe. They manage to have last price blush though the existence of other low cost airlines in Europe. Its ability to drive down costs to harbor low fares go it stands lucrative gives them competitive advantage over there competitors. As declared Michael OLeary Any fool can sell low airfares and digest money. The ticklish bit is to sell the lowest airfares and make profitsAircraft commonality Ryanair use Boeing 737 aircraft most common aircraft used in the market, due such fence they can easy cut on costs in get replacements and maintenance services for this aircrafts.Third party int roduction Ryanair contracts out its ticketing, baggage discussion, aircraft handing and other services to other companies who specifically specialize on such areas. In such was they can progress to competitive advantages, also by making multi-year contracts with those third parties in order no expose to rise of prices.Cost of Marketing Ryanair amended its rate, commissions to travel agents in order to ignore print costs. They also use radio, television, newspaper and their own website to advertise themselves (Ryanair website is guide 5 recognized name in Google)Route Policy and Airport handing costs each airline have to acquit airport handling fees such as passenger loading fees, aircraft parking fees, noise surcharges and landing fees. In order to save on these costs Ryanair uses secondary airports where these costs are much lower and easier negotiable. For example Ryanair uses Frankfurt Hahn, 123 kilometers from Frankfurt, Torp, 100 kilometers from capital of Norway and Cha rleroi, 60 kilometers from Brussels.Productivity and employee cost Ryanair uses performance related pay anatomical structure as most companies do now. This strategy whitethorn benefit both(prenominal) company and employees. In this structure employees can earn additional pay or remuneration base on their performance. So better they relieve oneself more they paid.Ryanairs Cost efficiency strategiesCost reduction systemIn order to have competitive advantage Ryanair uses cost-reduction strategy this consists of quintette major areas (in Aviation industry)Route policiesFleet commonalityContracting out servicesAirport chargesRoute policiesManageable staff costs productivity and managed marking costsEconomies of scareRyanair achieved economics of scare from start until end of its perish process same as any other low cost airline there market guideing to achieve. The have reduced the half point in time of airlifts in airports and they have resourcefully used their staff. They also have great deals from Boing during bulk purchases.Supply costsRyanair uses secondary airports in order to avoid high prices and air traffic, which reduces costs and time, crucial aspects of low cost airlines.BenchmarkingTexas based functioning South West Airlines is benchmarking of RyanairCore competenciesIn addition to low price flight Ryanair also offers different marcher services and employments in various activities associated with its middle air customers service. They offer travel insurance, accommodations, car rentals all necessary things that required for a trip. Ryanair believes that thanks to network this services become easier to be sold online and this lead to increase of sale, which lead to dropping costs per unit basis. By avoiding primary airports they manage to keep their costs very low so as there prices. So as non -flight instinctive services, in-flight public sale of beverages, food and suppliers and internet-related services.The strategic spotPositioningRyanair cost drawing card in European market for low cost airlines, they have numbers of rankings such asNo.1 for passenger traffic- over 23m for 2004 over winning Easyjet.No.1 for passenger growth- 50% + this yearNo.1 for European routes (149) and bases (11)No.1 for customer service sustainy- punctuality, flight completion and fewest lost baggageRyanair strategyRyanairs set up its aim as being leader in the low-fares market in Europe. Their aim to offer cheapest fair and increase passenger traffic, by having large amount of customers at lower price profit may rise even though price be so cheap. Their aim to offer low fares that generate increased passenger traffic. A round-the-clock focus on cost control and functional efficiencies is a propelling amount of the Ryanair way of doing things. Followings are key strategy elements of Ryanair superior of roots, low operational costs, low fares, frequent point to point flights on unforesightful haul routes, personal expenses, customer service costs, aircraft equipment costs, airport access fees, center criteria for growth and maximizing of website.Porters Generic StrategyPorters generic strategy is one the tools that can be used to find out carriage of the company in the marketplace. By utilise this tool we may find out bureau of Ryanair in the marketplace thats its operational. A company positions itself by supplement its strengths. Aim of each organisation to be recognized in the business area (except charity organizations and no profitable organizations), with such aim, these organizations try to come in there position in the marketplace by using Porters generic strategies that enhances their competitiveness. Business may choice one of the five different generic strategies cost leadership, preeminence, think cost leadership and integrated cost leadership/differentiation. Each of these generic strategies assists particular company to locate and use competitive advantage within specific competitive sco re.By applying these strengths, three generic strategies are resulted cost leadership, differentiation and focus. Cost leadership, differentiation strategy and focused differentiation strategy can be used by a company.Cost Leadership Strategy business categorizing and handling its value-adding activities in order to have lowest cost of the product in the market that its run. Cost gain might be because of product quality, design or the services that comes with it. differentiation Strategy is about that sellers product is superior to other competitors products in that specific market. This might be because product may have uniqueness that other products that offer by other competitors do not have or the service that that company provides with specific product, for such differentiation company may charge its customers premium price for that differentiated product. But there is a risk in this strategy the risk is that differentiated product may be easily imitated by other competitors or customers tastes may change.Focus-Differentiation Strategy aim of this strategy is to target specific segment of the market for a product, and do not target many markets or entire market. The go around to use this strategy is to dosing and exploit product specifically for particular segment in the market. However there is risk of imitation and changes in the targeted segment.Ryanair strategy was combination of all three strategies. At start company focused on a narrow customer segment (Irish and UK citizens who didnt wanted to fly by brank airlines). Also they offered the lowest cost of fare in airline industry in Europe. Last but not lease they were for the prime(prenominal) time who started low fare no frills airline in Europe before competitors imitated there differentiation.Aim of Ryanair is to provide low fares and no frills service in order to stimulate demand. Initially they did not planned to have lowest price, but as they expended to Europe they had to focus on crit ical success factors to survive and succeed in such greater market from their started segment. forthwith Ryanair considered as cost leader, they have large passenger volume at the same time they have lowest fares in their own market. in the first place when Ryanair was born in 1985, they delivered listed passenger airline services among Ireland and the UK however it has reform itself and moved from a full service conventional airline to the first European low fares, no frills carrier. Before they shifted towards such strategy in late 90th Ryanair faced some trouble and had to dispose of five chief executives, recoding losses of IR20 Million even though passenger volume increased. In order to survive Ryanair need some innovative strategy therefore new team was created, headed by Michael OLeary. This new team especially Michael OLeary decided to redesign the company and currently they become first low fare no frills airline in Europe, following step of successful American Southwest Airlines.By using Porters generic strategy it was hard to pay off which strategy Ryanair using, it located itself someplace between cost leader and a focuses as they had lowest cost and focused product and segment, but it can be said that it is more focused strategy. As it was stated before each strategy has its own risks, and this strategy which is used by Ryanair may have risk being that the niche can get saturated and competitors assault the segment that they in operation(p) currently. When Ryanair become first low fare no frill airline in Europe it did not had any competitors, so they were easily and without revere experimenting with their strategies, trying and mixing focus and cost leadership and deciding which one of them they want most. However being the only one in the market did not lasted much, soon new and first competitors entered Ryanairs segment. Which met that Ryanair urgently needed to define their strategy. So Michael OLeary decided to stay with cost leadershi p strategy (in which they succeeded in 1997, Ryanair was floated on the Dublin Stock Exchange and on NASDAQ)Strategic choiceLong Term VisionRyanair have one the highest amount of routes in low fare European airline market and outperform every other carrier on that sector even in not low fare sector. They also assay to endorse a high level of progression. Ryanairs strategy have been assisting them to become cost leader in the low fare market, but how long this strategy will help them to have competitive advantage, what will have in the future? willing this strategy work and can they have competitive advantage? From ground forces market of low fare airlines it was seen that there can be only one or two major players (southwest Airlines have approximately 50% of market share) in specific area, same as in Europe two majors Ryanair and easy Jet (Ryanair and Easy Jet have 88% of market share, and 12% other minor players). But there is no guarantee for being always market leader, one da y Easy Jet may easily takeover Ryanair market position and be cost leader in there market they operating currently. However there is big gap between low-cost airline within air industry in European and USA. In European air industry, a low-cost airline represents only 7% of perfect air industry, far less than 25% of their American counterparts. So there is large potential for future growth within European for Low-fare airlines in air industry.Growth of Low-Fare industry within EuropeIt is been predicted that within five and ten years low fare7% low fare airline industry representation will grow up to 14%, which is about 1.4% per year (which is low number). Fast pace at which the industry has been developing, assisted Ryanair to be triumph. However now the market they have been operating will no nightlong be growing so fast in approaching future. Therefore it is necessary for Aryan to develop in order to fend for their performance. There are some options there are availableRyanair should increase the frequency of Existing RoutesAt the moment Ryanair losing customers who demand for more pliable schedule, they losing because they have only 3.88 flights per day, which is considered very low number compare to conventional carries and Easy Jet. Therefore they must increase the frequency of Existing routes, in order to regain lost customers, and steal customers from Easy jet and conventional carriers.Open new routes in Europe.At the moment Ryanair operating in many routes, it might be good strategy to increase number of routes and therefore frequency. They may open new routes that they are not operating yet. It may be that routes where the rivalry is a more costly tralatitious carrier, therefore by offering cheaper price (with no frills) they may easily attract new customers correct mainland functioning areasBy looking other destination that they (Ryanair) does not operating they should not forget about rotes that they already operating. Although they already o perating in most countries of Europe there is still demand for some flights. exposit into sexual union AfricaInterests of tourists and business have been wage increase towards North Africa. At the moment SN airlines are major airline that provides with flights to North Africa from Brussels, however it is not low-cost airline or traditional carrier. Therefore Ryanair may easily enter and offer low cost flight to North Africa and may easily gain market share.Expand into Eastern EuropeThis area of European becoming more democratic by tourists and business travel, and still growing frequentity. However there are only low numbers of low-fare airlines that provide flight to there, Airlines such as Sky Europe. However there are a lot of routes that are not reveled yet and have large potential. And it is good strategy for Ryanair to enter those markets first and be market leader.Gaining Market Share from Charter FlightsRyanair may try to gain market share from affiance flights, because charter market represents 25% of overall European air traffic, which is very high percentage. Todays modern-day world educated most European citizens with internet and online usage, this comes perfectly for Ryanair (top five website in Google) to use their website as resource. More and more people using internet to purchase online therefore travel agents becoming no longer popular. Currently Ryanair offers some packing holidays, but by increasing those parcel of land holidays they may gain some market share form charter flights.Ryanair websiteThey also may continue promoting there website in order to prosecute customer to by online, making them save on cost of call centers and no agents strategy.More cost cutsAs we know Ryanair is cost leader in low fare market in airline Industry in European, However there is always gap to cut more cost, therefore they could try to find where else to cut cost and not lose value and attitudes of customers towards them.Strategic Decisions and Reco mmended strategyRyanair should increase the frequency of Existing RoutesThey may add three more extra plains to the existing plains and routes that they already have form London Stansted. Currently London Stansted airport already operating at its capacity therefore only three plains can be added there.They also need to add four more plains from London Luton which they already have such route. London Luton airport provides positive substitute for those companies that seek to expand their London baseIt would be good if they add ten more extra plains to Dublin Airport. At the moment Ryanair having some problems with local anaesthetic airport authorities (Aer Rianta) which already under discussion of dealing with this problems and up(p) there relationship. Therefore this expansion at this base is planned.At last add extra 8 planes to the Spanish and Italian routes currently already operated in those markets, also few more planes to trend holiday destinations, this will allow them to r ise there market share by taking from charter companies there market share.Open New Routes in EuropeEven though Ryanair has already entered most countries if not all in Europe it is very difficult for them to find new market and more risky going outside European countries. As Ryanair stated they plan to add extra 25 new rotes within 10 years.Improve mainland functioning areasWithin in last decade Ryanair went through quick expansion, and got functioning bases around all Europe Milan (Bergamo), Barcelona (Girona), Frankfurt (Hahn) and other popular business and tourism detestations, those areas also have popularity for future growth. Additional 25 plains can be added to these new areas in order to strengthen their position in this already operating area for over the coming years. give in into North Africa MarketTwo routes will be set up in North America each route will have four flights per day, so in hit eight flights to North Africa per day. The frequency of flight to North Ameri ca over the years will grow. New language may be added to the website of Ryanair in order to serve new customers.Expand into Eastern EuropeThis market can be served by three bases. Each of these bases will have 7 destinations which lead to total of 21 routes. Same as North African flights frequencies will rise over the years. But will lower margin compare to North Africa. New language may be added to the website of Ryanair in order to facilitate new customers.Unallocated AircraftRyanair order 15 extra plains which will be deliver in 2010-2013 basically these coming years however they are unallocated yet. These planes may be allocated to new rotes or to existing rotes depending on the analyses that will be done by Ryanair. Maybe they enter new market. This plains maybe easily used for the strategies mentation before at point 1-5.Referenceswww.ryanair.com Ryanair official websiteRyanair strip studyResearch done by Solvay Business School on Ryanair Plc.http//solvay.ulb.ac.be/cours/al le/BuspPresRyanair04.pdfhttp//ivythesis.typepad.com/term_paper_topics/ryanair/http//www.grin.com/e-book/55005/marketing-plan-for-ryanair