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Posted: March 5th, 2024
This study has prepared to fulfil the requirements of Project Operation in the business environment module of OTHM professional higher diploma. This study has concentrated on Ryanair, which is providing airlines services around the Europe. On that study internal and external business environment of Ryanair has discussed by utilising well known business models like PESTLE. I have discussed how macro environment of the industry has been shaping that business gradually. In light of that discussion strategies are recommended to gain more market share by exploiting their strengths and minimising weakness and threats. Also this study has diagnosis their service current systems and recommendations have proposed to improved business quality. Secondary data has utilised to prepare that report. Various sources like online, articles, books and our lecture handout used to finalise that report. This report is reflection of my learning from early mentioned module.
Tourism and hospitality industry is one of the largest and fastest growing industries, which is constantly expanding by managing various unfavourable conditions. Tourism industry has been contributing to grow various countries economy. The more the industry is growing, the more employment opportunity is creating. In 2009, that single industry was expected to be generated by 9.4% of world GDP and 8.2% of total employment. Despite of 4.38% decline of industry and 12% lower investment in that industry contributions remain very high to global economy [i] . However the industry is strongly bound back by 6.6% growth in 2010 and 5% growth by first quarter in 2011 (UNWTO, 2011).
I can classify entire industry into two different divisions-inbound (countries attracted by largest number of tourists), outbound (countries from where largest number of tourists travel). The following two bar graphs have shown the inbound & outbound countries growth of travel, tourism & hospitality:
Ryanair has been contributing travel & tourism industry since commencement of their operations. Unique business model (no frills) makes their position at top and thrived better than any other airlines during post terrorism attack in the United States of America and recession period observed during 2009. That was one of the key reasons of choosing Ryanair for this study. Once I have opportunity to choose any company of travel & tourism industry, I picked the Ryanair.
Ryanair had been in the news when it decided to abolish airport check-in desks in an attempt to save the airline approximately £46m and the fact that it had ordered 300 new aircraft carry 100 million passengers by 2012. Such news items caught my attention and I decided to analyze their business and marketing strategies.
Europe the largest low fare airline company
Serving 26 different countries through 31 bases and 825 low fare routes
Carried more than 67 million people in 2009 to more than 150 different destinations.
More than 99% passengers booked their ticket over online and do online check in system.
Travel & tourism is one of the largest and fastest growing industry which has been continuously growing since 1965. There are five important sectors at the travel & tourism industry as follows:
Hospitality sector
Attractions and events sector
Transport sector
Travel organizers and intermediaries
Destination organization sector
Hospitality sector is made by guest house, hotel motels, holiday cottage, conference centre etc. It is basically ensures accommodations for guests.
Theme parks, historical places, heritage sites, safari park etc belong to attraction and event sector.
Transport sector which is consist of Airlines, bus/coaches, train services. Transport sector provides transportation services for individual, business persons or all tourist which is crucial and part & parcel for travel & tourism industry.
Retail travel agent, booking agencies, tour operators etc are playing the roles of travel organizers and intermediaries.
There are few other offices such as national or local tourist office, tourist association act like destination organization sector.
Ryanair is one of the largest and cheapest airlines company in Europe. It is a very well known airlines company which has been serving millions of tourists to travel one city to another city of Europe. It becomes one of top choice for tourists to travel Europe due to very low fare.
Ryanair basically fits in the travel sector of travel & tourism industry as an airlines operator.
Any group or individual who can affect or be affected by the achievement of an organisation’s objectives known as stakeholders implied by Freeman (1985). There are two types of stakeholders named as internal and external. Management, employees are example of internal stakeholder. Customers, suppliers, bank, government etc are example of external stakeholders.
An organisation might have unidentified number of stakeholders due to high expansions of business activities. Not all stakeholders are equally important for business entity. It could turn to massive loss due to mishandling of one key stakeholder. Therefore, identifying key stakeholders become important for business entity.
Mendelow framework is good techniques to priorities key stakeholders based on stakeholders power and interest of an organisation.
Power
Low
High
Interest
Low High
Keep informed
Keep satisfied
Key players
Ryan’s family: The company was established by Ryan and Micheal O’Leary, head of management team and having share interest has great influences in decisson making process.
Internal management: Pilot trade association, cabin crew associations act for the best interest of each group.
Irish Air: one of the key lender has great interest and influences on Ryan air.
Government bodies: Make sure no compliance is breached
Regulators: European airlines association ensures no unethical practices
Environmental group: Protest against any hazardous activities of Ryananir
Airport authority: Having high power but not much concern unless breach any contract.
Tourist/passenger: Ryanair passengers are price sensitive. Therefore always keep on touch to inform any changes.
Travel agent: Having a high interest but not that much power to decision making process of Ryan air.
Local people: local community does not have interest or any power to change Ryanair decision.
PEST analysis is another subjective analysis done by the researchers to evaluate business situation. PEST stands for Political, Economic, Social and Technological respectively; although, few researchers love to adjoin one more element to PEST namely Legal environment. However, as the PEST analysis is a part of microenvironment analysis process so obviously it consists of ‘larger societal forces that affect the microenvironment’ (Kotler & Armstrong, 2008). These large societal forces are not remaining constant all the time, it changes time-to-time. So, it won’t be possible always by employing PEST analysis to analyse those large societal forces properly with ensuring higher accuracy to predict the future. That is the main limitations we can consider in PEST analysis.
Ryanair has been operating business in Europe where political stability is very high.
Government in UK and Ireland has increased the airport charges at the two largest bases which are Stansted and Dublin which will increase tourist travel costs.
Tourist may disappoint price hike due to introducing fuel tax or emission levy at the European level but from environmental point of view it has good impacts.
Europe has a stable economy despite of facing big credit crunch which has shrunk overall economy of Europe. Grace, one of the tourist attractive places is now facing economical crisis which makes their political unstable. Apart from that UK tourist market has negative growth at that time.
On the other hand, fuel price is increasing every day. Higher fuel price encourages higher fares.
Unemployment’s rate was almost 9% on 2008 still job market is not stable. Consumers do not have enough money to manage a travel package.
There has been increase in grey market which is encouraged by growth in unauthorised distribution channels.
As the economy is rising it is highly likely that more people will be interested to fly for vacation which will help Ryanair to boost its revenue.
Mode of travelling has changed last few years because of terrorism attack
Business travelling has been increased over the years.
In Europe besides air people could travel by cars and high speed trains.
Consumer choices fluctuates over the period
Internet competition has been rising in the recent and probably in the near future.
There has been demand for web sales and services by the customers.
Boeing has been effective on supplying high fuel efficient and less carbon emission aircraft.
Online check-in, self service checks at airport for the passengers of Ryanair might be quite complicated.
People are getting concerned about Global Warming. Consumers awareness is rising regarding environment issue.
In Europe Airline industry is responsible for 2.6% of Carbon emissions
In contemporary business world all big organisations are utilising social media as an advertising instruments. Unfortunately, presence of Ryanair in social media is almost absence.
It is a new era of digital consumer society. Even though Ryanair sells their seats on internet but their marketing on online does not exist that much.
Currently Ryanair marketing strategy is not mass enough to cover big community. Their current advertisement is very limited to limited spaces
It is a marketing strategy, which divides entire market into small group of consumers who have similar demand from product or services. In other way we can define market segmentation as division of market in to different group of consumers with similar needs.
Geographic segmentation: Company divides their entire market based on geographic location and design marketing strategies to attract more customers.
Demographic segmentation: It is based on demographic factors like age, gender, education level, ethnicity etc. For example garments manufacturers- adult male, female cloths, children cloths etc.
Psychographic segmentation: Based on customers need, wants, personality, attitude, price sensitivity etc. entire market divides into different group
Behavioral segmentation: Consumers are classified into different groups according to their knowledge, attitude, use or response to the product. For example, purpose of travel – e.g. business or leisure
It is important to identify target customer group to design strategies in such way as if can attract target group. Based on identified target group a company can form their strategies like design product or services, pricing etc.
This is the way to create an impressions among target customer group. Manufacturers or service providers always try to build up an image through product or service design, pricing among their targeted market, which is known as market positioning.
Ryanair’s targeted passengers are mostly based on Europe. Ryanair passengers prefer to travel one city to another city of Europe at cheaper rate. Their cost leadership strategies make them one of the leading airlines company in Europe.
As their targeted passengers are based on mostly Europe, It could be argued that Ryanair is following geographic segmentation strategies. However, the success behind of Ryanair is Michael O’Leary low pricing strategy. That mean’s Ryanair passengers are very much price conscious. Therefore, currently Ryanair follows ppsychographic segmentation strategy.
The following map has been used to identify current market position of Ryanair:
High Quality Service
Expensive Cheap
Low quality services
Core products or services which core benefit of buying that product or services having once consumers buy that product or services. That mean’s core benefits or services consumers expected from that product or services. For example, buying a tourist package consumers expect to having opportunity to travel various places is the core expectation.
Facilitating product or services makes customers to consumers the core product. The way product or services present to final consumers. For example, reception services of any office are an example of facilitating product or services.
Additional product or services offered with core product is known as facilitating product or services. Customer services is the best example of supporting product. If consumers have any queries or complaints can contact with service provider any time over phone.
Augmented product is the combination of core and other peripheral products or services offered together. A holiday package is combination of visiting certain places, transport facility, accommodation and other services even though core product is visit opportunity to specific places.
Ryanair has been following No Frills strategy to become a market leader. No frills strategy suggests to remove all unnecessary services and offer only core product.
Ryanair core services is to allowing passengers to travel. It has reduced other facilities such as food facility, entertainments facility, no extra language unless pay extra money. Not doing these kind of normal facilities, Ryanair control costs and reduce travel cost for passengers.
It attract mostly price sensitive customers to use their cheap services. But passengers need to pay if any extra services required during travel time like drink, using toilet faculty etc. It is also a good strategy during economic recession time. But it always create a cheap impression to all level of consumers. Therefore, if company try to change pricing policy by offering extra services, it will not be accepted by consumers. Increase of price may cause losing of higher number of passengers.
Pricing strategy is crucial decision due to retain and attract customers in any industry. Charging higher prices could result losing existing clients and charging lower will end up making losses. There are various pricing strategy followed by companies. Few pricing strategies mentioned below:
Cost-plus pricing: It is one of the simplest and widely used by pricing strategy. First, firm finds out total production costs and add profit margin with cost to determine selling price. It does not focus about competitors pricing strategy. Therefore, it is not a competitive advantage for any company following cost plus pricing.
Price Skimming: At beginning firm charge very high price in returns of premium quality product. The product or service quality is very premium and certain extent it is best quality product and services. I Phone is one of the best example where at beginning manufacturer charges very high price due to unique quality product and services and gradually price is reduced. It is a suitable if firm follows niche marketing strategy. Unless firm provide premium quality services or product never can justify such a high price.
At initial firm charge very low price to make a diffusion and gradually price increases. But quality of product or services is not so high. It is easy way to gain high amount of market share by charging lower. Turnover is really high but profit margin is very low.
It is not like normal pricing strategy. The price is predetermined from competitor’s price. First finds out how much other competitor is charging and targeted to sale same price of competitors. Therefore start working backward to know whether firm can offer on that price or not. If it is higher than offered price than firm decide to drop that product.
Ryanair is low cost airline company. Since its inception it is offering lower price compared to other airlines. Over the last decade it has grown rapidly due to following low cost pricing strategy.
It is beyond doubt that Ryanair has adopted market penetration pricing strategy. It is offering not only low price also the cheapest airlines in the Europe. Ryanair offers fare as low as one penny (excluding travel taxes).
Ryanair is not providing any supporting services like carrying big language, customer entertainment or refreshment facility. If any passenger wants to use augmented services need to pay for extra services. Passengers also require to pay for toilet facility. Therefore in that way Ryanair is justifying their lower prices.
Over the last decade Ryanair was able to create a strong market and within very short period of time gained a big market share.
Due to become a cost leader, it is holding their market shares steadily and existing competitors are still struggling to beat Ryanair.
This low price marketing strategy discourages new entrants to penetrate in this sector. It will be really difficult for others to offer such low price and get in this sector.
It is really difficult to create substitute. Price sensitive customers are very conscious about cost. Therefore, they do prefer to switch to other suppliers unless cheaper than Ryanair.
It has created strong brand-Ryanair, the cheapest airlines in the industry.
Promotion is a kind of communication to increase customer awareness about product or services. Without a effective promotion mix, it s really difficult to reach to final consumers. It would not be easy to attract new customers unless firm cannot reach to final consumer and tell about product and services. It is a wrong perception that promotion mix is about advertising. There are five important components in promotion mix which mentioned below:
Advertising – Informing customer about product/services through print media like newspaper, magazine, or electronic media such as television, radio, webpages could be defined as advertising.
Personal selling – The best example of personal selling are sales presentation, sales agent, cold calling etc. These are really useful to reach customers directly.
Sales promotion – To attract more customers various types discount such as buy one get one free, half price, coupons, trade show arranged by firm. It is widely used by manufacturing companies. It is mostly observed during the festival times such as Christmas. It really assist to boost certain period turnover of business..
Public relations – Arranging public relation activities and passing about firm activities is an example of public relation. For example, Barclays premier league- Barclays is sponsoring to arrange this tournament.
Direct Marketing- It allows service providers to directly contact with customers. For example In United Kingdom, people receive very frequently text message regarding PPI claim back. The intermediaries who are working to recover money continuously sending text message to receive their services.
Ryanair has been utilising several media to do promotion such as advertising, sales promotion or direct marketing. Few of them has mentioned in this study.
It is one of the most effective media format used by Ryanair. In a research reveals that that kind of advertising pass specific message among all passengers of Ryanair because 2 hour long advertisement on board is eye catching and attract customers easily. This overhead advertising is not only visible also vibrant between tourist and passengers. This kind of advertising is used by few key world brands like Vodafone, Sony etc.
There are two key reasons of using on board advertising.
It is directly communicating with Ryanair passengers and possibility of ignore this kind of advertising is not possible at all.
It is cost efficient because Ryanair is using their own resources to do advertising. Therefore, cost of external advertising is now a day is very high. But Ryanair does not need to pay any media cost to do on board advertising.
The Ryanair does a monthly magazine, which covers various issues like travel guide, itiniery ideas health and beauty tips and few other updated information.
This magazine is not for selling purpose. It is distributed among all passengers. Therefore effectiveness of this magazine is higher than normal leaflet distributions.
Customers of Ryanair always utilised company website to buy tickets. Therefore, Ryanair do sales promotion throughout the year on their website. For example travel cost is low as 99p. Despite of receiving criticizes from critics it has proved very effective marketing strategy. Again it is very cost effective and cover most number of customers.
Ryanair customers are able register them self as member of RyanAir’s through their web page and their subscriber list. Registered members are regularly receives emails and updated information from Ryanair.
It is a cost effective approach. But customers may not paid special attention when they receive continuous emails and may mark as spam. The success rate of this kind promotion is not even 1%. But it is a fruitful technique to keep your client up to dated.
Ryanair uses few promotional event as medium of reaching to potential customers.
http://static.guim.co.uk/sys-images/Media/Pix/pictures/2011/12/13/1323796753970/Ryanair-ad-007.jpg
http://www.brandchannel.com/images/home/home_img1_ryanair.gif
http://www.utalkmarketing.com/UTMImages/Old/633203519674910000.jpg3.5 Product distribution channel
It is one of the 4p’s (marketing mix) known as place. The way manufacturers or service providers serve their customers. It is important and firm needs to design carefully. If the distribution channel is long and inconvenient for users then, customers may not be happy to use that channel. It is basically depends on nature or product and services. To buy a bottle of coke, none of us would be happy to travel around 1 miles. But, to buy a new motorcar, buyer would not be mind to travel more than 1 mile. That’s why depending on nature of nature of products or services, firm always design their distribution channel.
Ryanair’s distribution channel is very simple. They are not using any middlemen or agents to sell their seats. Potential customers of Ryanair can buy ticket from http://www.ryanair.com/en.
There is option to choose destination of flights date & time. Passengers can modify their chooses from that website and book a ticket by online.
It is easy and cost saving approach of Ryanair. As there is no intermediary between Ryanair and their passengers, overall service costs is lower.
The major reason of choosing online ticket option is to control overhead expenses. There is no middlemen fees or other office costs like other airlines companies. As Ryanair does not have any local office therefore overhead costs are save greatly.
It is an competitive advantage for Ryanair saving their operating costs and offering passengers the cheapest price which assist them to gain high market shares.
People mean staff who are working for that firm. People of organisation play a very important role. It gives an impression to outsiders about that organisation. If people are efficient, knowledgeable, experience, it gives a better image to customers. It could cause lots of dissatisfactions if people are not good enough to serve their customers.
Customers has very less contact with Ryanair staff because of having the online ticket purchasing facility. Almost all Ryanair passengers are buying their tickets on online. Therefore, people of Ryanair is not important marketing mix. It is another cost saving approach of Ryanair.
The way a firm serve their customers. It is really important for Ryanair because customers do not bother about business model of Ryanair. As long as they are not having any difficulty to buying ticket from online, customers are happy.
Already mentioned that 99% of Ryanair customers buy their tickets through online. Therefore, Ryanair requires makes sure that website is easy, friendly and secured.
However, Ryanair can conduct a market research on their customers to get more close with customers and know about their complaints.
There is widely used proverb a service cannot be experienced before it is delivered. That means customers do not know what are they buying till they used that product or services. These uncertainties possible to reduce if physical outlook is good and impressive.
Furthermore, as very little customers contact with Ryanair therefore physical evidence is not an important.
Market research is an essential part of any business that wants to offer products or services that are focussed and well targeted. Business decisions that are based on good intelligence and good market research can minimise risk and pay dividends and by making market research part and parcel of the business process and conducting market research throughout the lifecycle of a product or service. The market research plan is consisted with four different stages. The proposed marketing plan for Ryanair has discussed below:
Ryanair is having impressive growth, which may encourage new entrants to penetrate in the market. Currently Ryanair is facing stiff competition from Easy jet, another cheap airlines company. In spite of not providing supporting services, still Ryanair requires to consider their customer carefully. Being a cheapest airlines company and ignoring customers happiness during travel time may cause several problems like switching to Easy jet. Therefore customer’s perception, expectation from Ryanair needs to consider providing better service at the same price.
Importantly price is not the only variable which will create a strong customer base of Ryanair. Price and customer happiness require considering at same time.
The management of Ryanair decided to evaluate customer satisfactions to know more about customers expectation and perception about the company.
To evaluate customer satisfaction level of Ryanair, it is very necessary to be close with customers and hear from customers. Therefore collecting information from customers would be beginning of job. It is crucial how information would be collected.
Ryanair may collect information several way.
Develop a questionnaire and distribute among all passengers
Online survey. As 99% of Ryanair passengers buy their ticket from, possibly, Ryanair may utilise these database. For example may sent an email to all passengers who travelled with Ryanair in past.
Therefore, developing a questionnaire becomes an important. Questionnaire could be mixed of both open ended and close-ended questions.
Success of that analysis highly depends on right questionnaire. On that questionnaire should include those questions, which will give us expected result. Should not include any unnecessary questions, which are not relevant on that research. However, a pilot test is possible to conduct before launch that questionnaire to know whether questions are really related with that research. It is also important who are the targeted customers. In that stage we need to consider also the time will be required to collect data and cost of that study. If it takes more time which will result more cost for company.
Once questionnaire is decided then Ryanair can commence their survey either through online or paper based when passengers travel. It would be wise to use entirely primary data to know about customer’s satisfaction level. There is no restriction to use secondary information for that study. Based on budget for this study, Ryanair needs to decide whether they should go for paper based survey or online survey. Paper based survey will take more time and will enhance overall costs of this research project. On the other hand online-based survey would be faster, accurate and lower than paper based system.
There is no number of that sample size. Different customers will file the more number of questionnaires, the more chance of having accurate information.
Once data collection is completed, it is required to transform these data into meaning information. There is no meaning for data collection unless collected data transform into meaningful information. For an example management wants to need all customers are happy the services are the receiving from Ryanair. Consequently, they have filled up 1000 questionnaire. Collecting these data would be meaningful when they can find the percentage of customers satisfaction towards service quality of Ryanair.
Based on that collected data, Ryanair would be able to find out percentage of satisfied travellers and why rest of them are not satisfied. Ryanair may take corrective actions against to improve their service quality.
Canadian Business for Social Responsibility defines CSR as a company’s commitment to operating in an economically, socially and environmentally sustainab
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