Environmental Analysis Of Ryanair

Environmental Analysis Of RyanairIn spite of lots of contr everyplacesies, in august 2006 Air Transport World Magazine announced that Ryanair was the intimately profitable air duct in the world on the basis of its operational and net profit margins (case study). The purpose of this report is to undertake an environmental digest of European airline business indus search with implications to Rynair. On the bases of environmental summary Ryanairs supremacy and its sustainability in European budget airline manufacture is critic every last(predicate)y assessed.An environmental digest is undertaken on the European airline industry with implication to Ryanair employ tools such as PESTEL summary, Porter five forces, jam analysis and st positiongical root word analysis.Pestel analysis is wholeness of the important tools to analyse environmental factors influencing establishments strategy. PESTEL stands for political, economic, social, technology, environmental and legal. It is important for organisation to analyse how these factors atomic number 18 changing and how they ar presumable to change in the future (Johnson et. al, 2009). PESTEL analysis is apply to analysis macro-environment in which Ryanair operates and to separate key-drivers of change.Government policies contri stille influence to a large persist in on airline industry. After the terrorist attract in 2001 UK authorities compel serve security measures at all airports. As a matter of this Ryanair suffered a loss of 1.9 million Euros on reduced bookings. Airport and treatment charges was increased by 21% in 2006, which could put to a greater extent mechanical press on budget airline like Ryanair. In 2005 EU regulations came into effect, which squeeze the airline to refund f bes to passengers in case of delays, cancellations or denied boarding.Economic climate plays a vital role in influencing airline industry. During time of break population refer to reduce their expenses which co uld reflect on number of people give-up the ghostling in a flight, they may use any early(a) alternative transport.The main(prenominal)(prenominal) economic factors that concerns airline industry is increase in fuel price, which forced some of the airlines to include fuel surcharges into airf bes. Ryanair guaranteed its customers that it testament not add fuel surcharges into their tickets. Current fluctuation in exchange rate is an other(a) issue in airline industry. The fuel price was ever quoted in US dollars therefore there is incessantly a lay on the line in converting, as Ryanair deals with Euros. Ryanair had not hedged early, so it was paying $70 per barrel of oil up to October 2009 while other airlines were paying $50 to $60 per barrel of oil.SocialSocial factors include social brio style, demographic, perceptions which could withal influence airline industry. It is expected that by 2012 there leave behind be more old people in European countries this will be the key to all airlines to come up with something special for them. Ryanair supercharged up to 18 for using wheelchair and check in baggage and advert standards rebuked the airline for misleading advertisement complaint, all these could create a negatively charged impact on customers.TechnologicalWith crudefound technological improvement fast(a) has became a new experience for passengers. New flights, online boarding, in flight pastime system are some of the technological advancement in airline industry. In 2001 Ryanair launched its website which facilitates car hotel rentals, rail services and travel insurance, all at low prices. The airline website was largest travel website in Europe and fifth nigh recognised brand on Google, swirling huge potential in E-commerce and advertising revenues. Ryanair brought new Boeing 737-800 aircraft which is more environmentally-friendly, reducing fuel consumption by 2%.EnvironmentalThe airline industry is been accuse by mingled social grou ps for emissions of carbon. Aviation represents 2.6% of carbon emissions in the EU, Oxford university study predicted that carbon from breeze would accelerate. in that respectfore airline industry was asked to play environmental taxes which could put more twinge on all airlines. Ryanair protested against this taxation arguing aviation contributes still littler proportion of carbon emissions.LegalRyanair filed two cases against UK government wiz for claim to compensate the carrier for lost flights and bookings other was for increase in insurance tolls for all commercial airlines. The carrier was sued by Swedens top minister and a former foreign minister for placing their photos in one of friendships advertising campaign without acquiring their permission.Porters cardinal ForcesThe five forces model was introduced by Porter, which helps to identify the sources of competition in an industry or sector. Although initially used with business in mind, it is of value to most org anisations (Johnson and Scholes, 2002). Porters five forces model is used to analyse the level of competition existing in airline industry. warring RivalryThe low-cost airline market is very emulous compared to other markets. The concept of low cost can be easily copied by rivals, which leads to noble competition in the industry. Two major low-cost airlines (EasyJet and Ryanair) establish always avoided direct competition by serving different routes. in that respect is uplifted level of competition for Ryanair and other established airlines in getting landing permissions and expiry slots.Bargaining Power of CustomersCustomers who prefer low-cost airline are often price sensitive and tend to switch over to another airline. Now old age all airlines are online which has made customers comparatively easier and cheaper for them to more to another airline. Moreover they try to maintain some furcate of loyalty towards the airline in which they frequently fly.Bargaining Power of Su ppliersThe major cost for all airline industry is fuel prices, which is constantly increasing. on that point is no alternative to aviation fuel therefore oil companies has high bargaining power. Boeing supplies plans to Ryanair, if they dumbfound to switch to another supplier it will cost them high since they have to retrain its pilots. Bigger airports like Heathrow has a high bargaining power than smaller airports, thus it will be tall(prenominal) for Ryanair to operate from these airports.Threat of New EntrantsThe low-cost model can be easily adopted by others and can enter into the market. There are in any case some barriers for the new entrants like requires huge capital investment, availability of slots and price war existing in routes where other low-cost airlines operates. The new entrants have to get prior authorisations which are not easily these days and necessitate to setup strong base in order to weather in the competition.SubstitutesNot all people prefer to trave l by flights. Especially during time of recession most people avoid flights and travel by other cheap alternatives like travel by ocean or by trains or by ferries or by cars. There are some people who may be aerophobia (Fear of flying), these people try to avoid flying and choose other alternative. rig out AnalysisSWOT analysis summarises the key issues from the business environment and the strategical capability of an organisation that are most likely to impact on strategy development. It aims at identifying the extent to which the current strengths and weakness are relevant in traffic with threats in the environment (Johnson and Scholes, 2002). It is very useful tool in environmental analysis, which helps to find out strengths, weakness and opportunities threats of Ryanair. Strengths and weakness are concerned in detail to analyse current position of the company, complete SWOT analysis can be found in Appendix 3.StrengthsRyanairs CEO Michael OLeary is one of the main strength t o the airline as he often comes up with new ideas and was credited with single-handedly transforming European air transport. Ryanair always operates from small airports thus reducing their costs on airport charges and gaining suitable departure SLOTS. In 2000, Ryanair launched its website www.Ryanair.com, which facilitated car and hotel rentals, rail services and travel insurance and all at low prices (Box and Byus, 2007). The airline uses Boeing 737-800 which is more environmental friendly and also reduces fuel consumption by 2%.WeaknessRyanair is always criticised for charging for wheelchair and check in luggage which could leaves a negative image on the customers. The staffs and crew members are not well trained therefore not customer friendly. Ryanair always avoided bigger airports and concentred on small regional airports, which could be a drawback for the company for future expansion. Other important concern for Ryanair is its relationship with authorities, the airline often i nvolved in some kind of crash with them.Strategic congregation AnalysisStrategic groups are organisations within an industry with similar strategic characteristics, following similar strategies or competing on similar bases. There are umteen different characteristics that distinguish between strategic groups but these are classified into two major categories scope of organisations activities and resource commitment (Johnson et. al., 2008). The main competitors to Ryanair are EasyJet and Aer Lingus. Strategic group analysis (Appendix 5) is used to understand the competition, strategic opportunities and mobility barriers of Ryanair in low cost airline industry.Strategic Groups in affordable industryIn Europe there are three main airlines providing low-cost flights to destinations namely Ryanair, EasyJet, Aer Lingus. Ryanair is dominant low-cost producer and has a utter(a) cash of more than 1.8bn Euros. EasyJets majority of passengers are UK based, but becoming pan-European player. Aer Lingus is another low-cost airline operating from Dublin serving more than 70 destinations across Europe and US. Figure 1 in appendix 5 shows the positioning of these airlines on bases of passengers capacity and their market share in industry. Ryanair and EasyJet have 56% of market share in low-cost industry.Strategic length in IndustryStrategic group maps help us to identify the most attractive strategic spaces within an industry. A strategic group map is only the first stage of the analysis strategic spaces need to be tested carefully (Johnson et. al., 2008). In low-cost airline industry, for showcase the airlines can serve long tie routes which could help them in expansion. They can also consider moving into other low-cost segments like trains and stretch its passengers new attractive products and services (figure 2 in appendix 5).Mobility Barriers travel across the map to gain agonistical advantage is costless but it often involves difficult decisions and rare resources . Mobility barriers are the obstacles to lastment from one strategic group to another (Johnson et. al., 2008). Similarly in the low-cost airline industry (figure 3 in appendix 5) it will be difficult for airlines to move to another strategic group. The lack of experience in long haul routes, increasing fuel prices, high competition from big airlines like British airways and other regional airlines are some of the barriers which could put more pressure on airlines to move to another strategic group.RYANAIRS SUCCESSWhen Ryanair was started in 1990, everyone where dying(p) to see its performance in an industry where there was a monopoly created by giants like British Airways and Lufthansa. In response to this, the airline became one of the roaring low-cost airlines operating from 127 destinations around the world (Case study). There have been many ups and downs for Ryanair since its launch but it continues to be successful in its operation.The success of an airline depends on how an d what it offers to its customers. In case on Ryanair, it always tried to offer its passengers low-cost airfares at all times. The airline often comes up with new ideas which make them to reduce its airfares. These new ideas differentiate it from other traditional airlines. wiz of the main differentiate is its website, the companys site is largest travel website which was recording 50000 bookings per week (Box and Byus, 2007).The website also provides additional facilities to its customers like car, hotel rental, rail services and travel insurance, all at low prices. The airline offers customers online check-in which enables them to save its costs on picture tickets and other additional costs. The use of internet also makes it easy and quicker for customers to check-in.LIMITATIONS OF MODELS USEDPESTEL AnalysisThe environment is constantly changing therefore PESTEL analysis should be done on regular basis and information demand to be accurate (Campbell et. al, 2002).PESTEL analysi s is very expensive in foothold of cost and timeThe effectiveness of this model depends on the level of prodigy made on future. No one can predict the future.The urge of changes makes it difficult for managers to anticipate developments that may affect the organisation in future.Porters Five ForcesPorters five force model assumes that all companies try to achieve belligerent advantage over others in the industryThis model assumes that goal of competitive advantage is to dominate suppliers and buyers (Campbell et. al, 2002).Internal environment is not taken into nameIt is difficult to use this model in complex industries with multiple interrelations.SWOT AnalysisIt is not critically analysedThe data used in the analysis may be based on assumptions.Lacks detailed structure.It usage seldom amounts to much more than a poorly structured, very general disputation of factors regarded by the proposing individual as important components of the organisations strategic situation (David, 1997). cling to ChainThe concept of value chain disaggregates a company into legal action or the discrete functions or processes that represent the elemental building blocks of competitive advantage (Porter, 1998).There is risk of losing control of proprietary knowledge, skills, capability, or competency as these are disseminated to supply chain members (Morden, 2007).It can be apply only to manufacturing companies not to service industries.Strategic Group Analysis ambitious to group companies based on their strategy.Strategic groups are relatively unstable.