Ryan Air - Pestle Analysis

1 Ryan Air Introduction Ryan Air is an Irish based airline greatly characterized by great expansions in the recent past. In 2006, for instance, the airline earned a 39 percentage increase in profits. The airline is also widely considered to be a low cost airline. In addition, the airline's policy to award 25 percent of the seats for free has led to its massive market recognition. In addition, the deregulation efforts that were awarded to the aviation industry have also enhanced the success of the low cost model. This paper seeks to critically evaluate the key factors that affect Ryan Air and how the airline can use these elements to gain and maintain competitive advantage over the existing competitors. In addition, the aspect as to whether the elements in question have negatively affected the airline’s ability to make strategic decisions will be critically evaluated.

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2 The evaluation on Ryan Air will be based on various results derived from analytical tools, for instance Pestle, SWOT analysis, the five Porter’s forces, and the other strategic options that have been undertaken by Ryan Air over the years seeking to acquire greater and better market share.

Pestle Analysis Political When considering the pestle results, Ryan Air has a lot of ground that can foster even advanced growth in the foreseeable future. Since the European Union is expanding, the political nature of Ireland is deemed to upgrade (Leach 2009). This is the host country where the Ryan Air is located.

Economic The company will grow due to the presence of a favorable business environment that will foster growth. In addition, the European union has also inculcated the abolishment of duty free sales among the new policies meant to improve the growth of the local companies. Severe security measures and regulations restricting various illegalities are also in place.

Social In the airline industry, it is essential that the political nature of the country be positioned in such a way that security is of the essence (Creaton 2004). Security measures also enhance a good environment for those travelling, thus attracting most travelers. This will also enhance Ryan Air acquire a competitive advantage over other airlines, for instance those located in war torn areas or nations. The invention of the new climate charge will also help Ryan Air acquire competitive advantage.

Environmental

3 The fact that Ryan Air has aircrafts with low levels of noise will facilitate ease with which the airline adheres to regulations that are in place to oversee noise pollution. In addition, Ryan Air has in place aircrafts that release greenhouse carbon emissions. This will ensure that low levels of emissions are produced, hence the airline will not contravene the already set regulations.

Technological On the technological aspect, Ryan Air has also done a lot of improvement. According to Ryanair.com (2006), the technological improvement has harnessed increased sales through the internet, and has also been able to increase the rate of gambling. The website that is hosted by Ryan air has also facilitated massive marketing via both the site and the television (Ryanair.com 2006). This form of publicity has also greatly harnessed the airline’s ability to lure and retain more clients.

Legal The fact that the airline has been able to subdue the number of litigations through emphasis of compliance to the required forms of regulation has also boosted the airline’s public image. Illegalities are prone to happen in airports. However, the imposed policy to tighten security measures by emphasizing on vigilance has facilitated the company’s success. With the increase in the prices of fuel around the world, it was inevitable for the airline industry to negate imposition of the increased cost to the end consumer through increased cost. However, as a policy, the airline maintained the low costs that have been the key stronghold of the airline’s success amid stiff competitors (Hill & Jones 2010). In the European economy, fast vehicles and the speedy electronic trains are in place. This kind of competition has greatly encroached into Ryan’s air target market as the trains are quite affordable. However, the change in the travelling

4 lifestyle where a majority of the those travelling seek to advance their class has given Ryan Air an upper hand. There is also an increase in the number of people travelling for business in Europe, hence the aviation industry has generally expanded (Bamber et al. 2009).

The Porter’s Five Forces Model According to Porter’s five forces model, in every industry, there are five forces that should be critically evaluated for an organization to be aware of the current industry position.

The same applies to Ryan Air, hence a critical evaluation should be done based on the Porter’s five forces model.

Threats of new entrants The Porter’s model begins with evaluating the threat that would emanate from a new entrant in the industry. It is apparent that in the airline industry, it requires patience before a new entrant can capture a wide share of the market (Kahawatte 2010). The threat is, therefore, of a new entrant that would affect Ryan Air is minimal.

Buyers bargaining power The other factor under consideration is the bargaining power of the buyer. The buyer in this case has a low bargaining power since the airline industry, the seller, will mostly set the price which will not be open to negotiations. In addition, the Ryan Air will also not have much to say with regard to price as the market forces of demand and supply will regulate the pricing. This will in turn imply that Ryan Air is better placed as it is widely recognized with market friendly pricing antics.

Threats of substitutes The other factor considered under the five Porter’s forces is the threat that emanates from substitute products. In the airline industry, the substitute products are the other forms of transport

5 and communication. These will include the mediums such as motor vehicles and trains. In Europe, the threat from the substitute commodities for Ryan Air will be considered to be at minimum.

Rivalry from competitors Finally, the aspect under consideration is the rivalry that emanates from the other competitors. In the airline industry in Europe, the level of prevailing competition is high, thus Ryan Air should strategize on how it will retain the market share it has already acquired (Mennen 2010).

The SWOT Analysis Strengths The SWOT analysis considers Ryan’s ability to offer point to point flights as the major strong point. The other strong aspect is the fact that the European Union has expanded, and the expansion is gradually forging forward. The European Union has also spearheaded deregulation efforts in the aviation industry. This will also be a positive for Ryan Air. Weaknesses The weakness that underpins Ryan Air’s capability to harness competitive advantage is the increase of traffic charges. This is due to the fact the corporation was widely accepted in the market given the aspect of pocket friendly ticket charges. According to Smith (2009), the environmental charges that are imposed on the aviation industry also have a detrimental effect to the profit capability of the organization.

Opportunities On the other hand, there is the lucrative opportunity for Ryan Air to increase in the level of internet sales (Osborne 2009). This will address the issue of marketing, which will in turn

6 increase the level of revenue collected by the airline. In the end, it will help Ryan Air maintain a competitive edge. The company also offers cheaper landing fees, hence this is another opportunity that can foster the company’s growth.

Threats The threat that currently encumbers Ryan Air is bad publicity. The issue of bad press relations would be detrimental to any organization (BBC News 2004). In addition, there is a poor state of reserves and Ryan Air has also suffered bad leadership in the past.

The Strategic Options The possible strategic options open to Ryan Air include buying out Aer Lingus. This move will foster the ambitions of the company to go international and attain globalization status.

The company also has the option to develop a business class that will facilitate more advanced sales for the company. The policy that has already been inculcated in the Ryan’s Air business operations is the urge to be a low cost carrier (Hoffmann 2007). Ryan Air has added value as a low cost carrier. This is due to the fact that it has massive competitive implications which will attain above average results. In addition, the fact that the low cost carrier policy is inculcated in the operations of Ryan Air will enhance the company to remain as a cost leader among other players in the market.

7 Reference List Bamber, G, Gittell, J, Kochan, T & von Nordenflytch, A 2009, Up in the air: How airlines can improve performance by engaging their employees, Cornell University Press, Ithaca, NY BBC News, 2004, ‘Ryanair advert dubbed 'offensive’, BBC News [online] Available at: http://news.bbc.co.uk/2/hi/business/3456423.stm [Accessed November 28, 2012] Creaton, S 2004, ‘Ryanair warns of 'bloodbath' in the airline industry’, The Irish Times, [online] Available at: http://www.irishtimes.com/newspaper/finance/2004/0602/1084325421698.html [Accessed November 28, 2012] Creaton, S 2004, Ryanair: How a small Irish airline conquered Europe, Aurum, London.

Hill, C & Jones, G 2010, Strategic management theory: An integrated approach, Houghton Mifflin Boston, MA. Hoffmann, S 2007, The low-cost airline Ryanair A critical evaluation of the Ryanair phenomenon and its future prospects with taking the European airline industry into consideration, GRIN Verlag, München.

Kahawatte, U 2010, Ryanair's strategy from a perspective of core competencies, Grin Verlag, GmbH München.

Leach, B 2009, ‘Ryanair to make passengers stand’, Independent.ie, [online] Available at: http://www.independent.ie/travel/travel-news/ryanair-to-make-passengers-stand-1808116.html [Accessed November 28, 2012] Mennen, M 2010, An Analysis of Ryanair's Corporate Strategy, Grin Verlag GmbH, München.

Osborne, A, 2009, ‘Ryanair's 'lose loos' strategy typifies its win, win focus on low fares’, The Daily Telegraph, [online] Available at:

8 http://www.telegraph.co.uk/finance/comment/5431689/Ryanairs-lose-loos-strategy-typifies-itswin-win-focus-on-low-fares.html [Accessed November 28, 2012] Ryanair.com 2006, News: Ryanair moves to web check-in only, [online] Available at: http://www.ryanair.com/en/news/ryanair-moves-to-web-check-in-only [Accessed November 28, 2012] Smith, O 2009, ‘Ryanair to improve clarity over 'hidden charges’, The Daily Telegraph, [online] Available at: http://www.telegraph.co.uk/travel/travelnews/5757047/Ryanair-to-improve-clarityover-hidden-charges.html [Accessed November 28, 2012]