SWOT analysis of Ryan Air and subsequent decisions to make business essay

SWOT analysis of Ryan Air and subsequent decisions to make business essay Business changes its style, shape and presentation. New technology, new methods, new strategy has made the difference. The entire way of business has change today. Now organizations can take decisions before they get entered into new market, they can be aware from the obvious dangers. Strategic management is very good subject to study in modern days business prospect. Through the assignment a lots of strategic matters came into knowledge, which was unknown before. Thanks to the institute and my lecturer to work with such an interesting subject. Introduction SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.( Understanding Change, by Jane Edmonds, page no 22) The radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization. A number of checklists have been developed as ways of cataloguing the vast number of possible issues that might affect an industry. A PEST analysis is one of them that are merely a framework that categorizes environmental influences as political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTEL analysis, but these themes can easily be subsumed in the others. The analysis examines the impact of each of these factors and their interplay with each other on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans. (Industrial Marketing, by Krishna K. Havaldar, page no 45) (Havaldar, 2008, p45) http://www.welove2ski.com/images/news/ryanair_plane.jpg (Ryan Air logo, figure no-1) Primary collected datas of Ryan Air Ryan Air is an Irish airline with headquarter in Dublin and its biggest operational base at London Stansted Airport. It is Europes largest low cost carrier and one of the worlds largest and most successful airlines in terms of profits, number of flights and number of passengers flown. Today the carrier is the first airline in Europe per passengers traffic 66 million boasts more then 950 routes in 26 countries, 36 bases and it is recognised as one of the most punctual airline in Europe. (Strength: Growing number of passengers for Rayan Airways) http://www.ryanair.com/en/news/Ryan-s-july-traffic-grows-19-percent SWOT analysis of Ryan Air Strengths: Strong pan European brand (36 bases), Biggest and most profitable LCC Europe and Focused aggressive and innovative management system. Secondary and regional airports allow cost reduction and fast turnaround. Strong balance sheet and cash generation allow facing eventual problems, increase capability to attract finance, enhance capability to take risk and face new challenges and competitive price on aircrafts parches. Reduce barriers to its entry in new market, while contributing to increase barriers to new entrants. High seat occupancy rate and lowest seat mile in short haul flights. Uniform and modern fleet shaves on maintenance; training costs which is enhance safety and fuel efficiency. High rate on punctuality and low baggage lose rate give reliability to the organization. High rate of aircraft utilization allow the revenue to increase. Point to point flight as apposed to hub and spoke allows service cost reduction. Low labour non union cost, low cost due to flat and simple form of the organization. And major earning from innovative ancillary service. Weakness is seen as the organizations internal factor. Because organizations dont want to let the competitor know about their business weakness. The weakness of Ryan airs are bellow. Weakness: Exposed to regulation on airport deals and passengers compensation , the distance between secondary airports to the main location. Lacking of appropriate frequency in certain routes and brand is strictly linked to a low cost model and maintain the position could be challenging. Too much exposed to outsourcing. Market extremely sensitive to price elasticity, prone to bad press I that its top management is perceives as arrogant and provocative. Poor customer service is one of the big weaknesses of Ryan air. And high seat available could be a problem for when they flying to less popular destinations. Limited slots in main airport could be a big problem in the future. Constant innovation requirements to sustain the business model and low empathy for employees and high turnaround could increase the CO2 emission. Opportunity: European market still offers considerable for developing the business model, under way industry consolation offers opportunities for new routes and airport deals. EU enlargement allows expending in new markets; demand based on price should remain high independently of economic cycle. Bad condition of Italian air industry gives an opportunity for consolidation in Italian market. Threats: New entrants on the market and increased competition in the near future, some flag carriers have tried to reposition as low cost carriers. Some other tradition carriers have reduced fares which could undermine the market share. A serious accident could endanger trust on low cost industry. High speed trains and land transport, environmental taxes could be big threats for Ryan air. PESTEL analysis of Ryan Air PESTEL is the acronym for political, environmental, social, technological, legal and environmental, and all this tools devoted to carry out analysis considering the external influences to an organizations activity is of fundamental to properly develop a reliable strategy. Political: The political aspect of the tool considers the possible political influence on the strategy pursued by the organization. For Ryan air this aspect has represented a considerable advantage, in that the European Union is a completely stable political region and EU integration has allowed the carrier to expand its activity and route. Economical: The ageing population factor is likely to impact the travel industry in the next decade and to cause a shift in land transport, easier to access, to use and allowing movements from and to central city areas. Young generations like this carriers airline and because of its cheap ticket price it is become economically stronger. Social: Another uncanny social trend is represented by the tendency to the cocoon effect every time a terrorism act is carried out people follow events like these, prefer to avoid travelling then stay home. On the other hand it is very likely that the young generation are much more likely to use carriers fro their travel and are the more enjoying the benefits of a common European area where they can move from a capital to another in an average one hour to forty five minutes at very low price. Technological: As for the technological aspect the video conferencing system could deter business people to travel in many circumstances, but not leisure travellers. It must be said that technology been crucial for Ryan airs success and it is likely to be important in the future. Internet in particular has allowed the organization to avoid lots of cost. Environmental: The aircrafts new generation engine in terms of less emission and less fuel consumption will allow the organization to move on through its cost reduction strategy. Legal: The legal aspect has had and could still have negative effect on the carriers activity, the emission constrains set by European commission its actively on implementing and monitoring antitrust law and policies and the EU legislation on working time regulation and union recognition sooner or later will affects Ryan airs policies and this could seriously threaten its revenue result. http://solvay.ulb.ac.be/cours/alle/BuspPresRyanair04.pdf Porters Diamond and national advantage Increasingly, corporate strategies have to be seen in a global context. Even if an organization does not plan to import or to export directly, management has to look at an international business environment, in which actions of competitors, buyers, sellers, new entrants of providers of substitutes may influence the domestic market. Information technology is reinforcing this trend. (Advanced in statistics, comminatory and related area, by Chandra Gulati, Yan-Xia and Jonh Rayen, page no 53) Michael Porter introduced a model that allows analyzing why some nations are more competitive than others are, and why some industries within nations are more competitive than others are, in his book The Competitive Advantage of Nations. This model of determining factors of national advantage has become known as Porters Diamond. It suggests that the national home base of an organization plays an important role in shaping the extent to which it is likely to achieve advantage on a global scale. This home base provides basic factors, which support or hinder organizations from building advantages in global competition. Porter distinguishes four determinants and they are conditions Demand condition. (Michael Porters diamond model, figure no-3) Factor Conditions The situation in a country regarding production factors, like skilled labour, infrastructure, etc., which are relevant for competition in particular industries. These factors can be grouped into human resources like qualification level cost of labour, commitment etc, material resources or natural resources, vegetation, space acknowledge resources, capital resources, and infrastructure. They also include factors like quality of research on universities, deregulation of labour markets, or liquidity of national stock markets. These national factors often provide initial advantages, which are subsequently built upon. Each country has its own particular setoff factor conditions; hence, in each country will develop those industries for which the particular set of factor conditions is optimal. This explains the existence of so-called low-cost-countries (low costs of labour), agricultural countries large countries with fertile soil, or the start-up culture in the United States well developed venture capital market. Porter points out that these factors are not necessarily nature-made or inherited. They may develop and change. Political initiatives, technological progress or socio-cultural changes, for instance, may shape national factor conditions. A good example is the discussion on the ethics of genetic engineering and cloning that will influence knowledge capital in this field in North America and Europe. Home Demand Conditions Describes the state of home demand for products and services produced in country. Home demand conditions influence the shaping of particular factor conditions. They have impact on the pace and direction of innovation and product development. According to Porter, home demand is determined by three major characteristics: their mixture (the mix of customers needs and wants), their scope and growth rate, and the mechanisms that transmit domestic preferences to foreign markets. Porter states that a country can achieve national advantages in an industry or market segment, if home demand provides clearer and earlier signals of demand trends to domestic suppliers than to foreign competitors. Normally, home markets have a much higher influence on an organizations ability to recognize customers needs than foreign markets do. Related and Supporting Industries: The existence or non-existence of internationally competitive supplying industries and supporting industries. One internationally successful industry may lead to advantages in other related or supporting industries. Competitive supplying industries will reinforce innovation and internationalization in industries at later stages in the value system. Besides suppliers, related industries are of importance. These are industries that can use and coordinate particular activities in the value chain together, or that are concerned with complementary products like hardware and software. A typical example is the shoe and leather industry in Italy. Italy is not only successful with shoes and leather, but with related products and services such as leather working machinery, design, etc. Firm Strategy, Structure, and Rivalry: The conditions in a country that determine how companies are established, are organized and are managed, and that determine the characteristics of domestic competition here, cultural aspects play an important role. Indifferent nations, factors like management structures, working morale, or interactions between companies are shaped differently. This will provide advantages and disadvantages for particular industries. Typical corporate objectives in relation to patterns of commitment among workforce are of special importance. They are heavily influenced by structures of ownership and control. Family-business based industries theatre dominated by owner-managers will behave differently than publicly quoted companies. Porter argues that domestic rivalry and the search for competitive advantage within agnation can help provide organizations with bases for achieving such advantage on a more global scale. Porters Diamond has been used in various ways. O rganizations may use the model to identify the extent to which they can build on home based advantages to create competitive advantage in relation to others on a global front. On national level, governments can (and should) consider the policies that they should follow to establish national advantages, which enable industries in their country to develop a strong competitive position globally. According to Porter, governments can foster such advantages by ensuring high expectations of product performance, safety or environmental standards, or encouraging vertical co-operation between suppliers and buyers on a domestic. (Government globalization and international business, by John H. Dunning, page no 31) Purpose and attributes of SWOT Once Strengths, Weaknesses, Opportunities and Threats are listed, now the decision makers must go through the attributes in the listed categories. In each of the categories a more thorough analysis of each attribute listed must take place. The most important outcome from a SWOT Analysis is to determine if a goal or objective can be achieved. If it cant, it might want to repeat the process including new strengths and opportunities, digging deeper into analysis process. However, if looking at the SWOT Analysis, the decision makers feel that the goal or objective can be achieved, they can start by using the analysis to create a strategy to achieve the goal. One of the ways to get the most out of SWOT Analysis is to ask basic questions using SWOT. For instance, look at the strengths and figure out how organizations can maximize every steps of strength to achieve the goal. Continue on with external opportunities, figure out the best ways to take advantage of each opportunity and reduce the threats that can cause failure for the organization when trying to achieve organizational goal. (Dynamic SWOT analysis, by T. Richard Dealtry, page no 17) Environmental Change and the impact on the strategic dynamics The business environment of the firm consists of all the external influences that affect its decisions and performance. Given the vast number and range of external influences, how can managers hope to monitor, environmental conditions. The starting point is some kind of system or framework for organizing information. For example, environmental influences can be classified by source into political, economic, social, and technological factors PEST analysis or by proximity the micro-environment or task environment can be distinguished from the wider influences that form the macro-environment. Though systematic, continuous scanning of the whole range of external influences might seem desirable, such extensive environmental analysis is unlikely to be cost effective and creates information overload. (System Analysis and design level three, by D. Barnaed, page no 131) The prerequisite for effective environmental analysis is to distinguish the vital from the merely important. For the firm to make profit it must create value for customers. Hence, it must understand its customers. Second, in creating value, the firm acquires goods and services from suppliers. Hence, it must understand its suppliers and how to form business relationships with them. Third, the ability to generate profitability from value-creating activity depends on the intensity of competition among firms that vie for the same value-creating opportunities. Hence, the firm must understand competition. Thus, the core of the firms business environment is formed by its relationships with three sets of players: customers, suppliers, and competitors. This is its industry environment. This is not to say that macro-level factors such as general economic trends, changes in demographic structure, or social and political trends are unimportant to strategy analysis. These factors may be critical determinants of the threats and Opportunities Company will face in the future. (Understanding Organizational context, by Claire Capon, page no 15) Conclusion In different situation in business organizations need to take difficult decisions very prompt. But before taking the decision they need to confirm that they are taking the right decision in the right time, in right manner. It is important because the effect is diverted into the whole organization. Thats why they try to make the right decision through the help of various analyses. References Barnard. D (2008), System Analysis and design level three, 1st edn, Pearson publications ltd, Forest drive, Pinelands, Cape Town, South Africa. C. Claire (2004), Understanding Organizational Context inside and outside of the organizations, Ashford colour press ltd, Gosport, 90 Tottenham Court road, London, UK. D. Richard T (2002), Dynamic SWOT analysis, 2nd edn, DSA publications ltd, 43 Hunstanton avenue, Harbome, Birmingham, B17 8SX, United Kingdom. D. John (2004), Governments, globalization and international business, 2nd edn, Oxford University press, New York, United states of America. E. Jane (2005), Understanding Change, 4th edn, IMA publishing ltd, 200 Wheeler road, Burlington, Miami, USA. H. Krishna K (2008), Industrial Marketing, 8th edn, Tata McGraw-Hill publication ltd, 7 West patel nagar, New Delhi, India. R. John, G. Chandra and L.Yan (2006), Advances in statistics, combinatory and related area, 1st edn, Mainland printing press, 5Toh tuck link, Singapore.