Case Study of European Budget Airlines

carapace Study of European Budget AirlinesRyanair is one of the leading flight path companies of Europe. This flight path fellowship is known for its low-down exist and last quality service. It operates more than 1,400 flights per day from 44 bases and 1100+ low f be routes across 27 countries, connecting 160 destinations (Ryanair-a, n.d.). This publisher endeavours to analyse Ryanair, with special emphasis on situation analysis, purpose devising, supplying and dominationling process, leadership and organisational structure. This paper will conclude with some plausible recommendations on future growth and progress.Situational AnalysisSWOT is a very helpful management tool for analysing the situation of a company. Ryanair was schematic in 1985, and despite its before longcomings it established a strong position in the market.StrengthsRyanair has mounted a strong brand name in airline industry as a low cost service provider.Ryanair has been in the airline company since the last 25 years and has gained sufficient experience in it.Ryanair has developed its internet facilities and has made it an definitive selling point. This helps the company to eliminate the costs of agents.Ryanairs fleet admits aircrafts with high sitting capacity and low maintenance cost.Ryanairs run performance is of high standard with punctual fleet timing.WeaknessTo save cost, Ryanair charges its passengers for services like refreshments, wheelchair etc. It creates very impression among passengers about the company.It is not a preferred airline with the high curriculum passengers.OpportunitiesThe European Union market is expanding with time and most of the passengers prefer low f ar for their air travel.Regions like North America and Asia have greater arena for low cost provider like Ryanair.ThreatsThe existing airline companies are following strategies that lower the cost and hence competition within the industry is increase with time.The oil market is a major supplier t o airline business. In recent years, price of oil has increased significantly.The customers are becoming very price and service sensitive.Porters 5 ForcesThe bargaining power of suppliers is very high as the number of aircraft manufacturer and oil suppliers are very less in the market. access codeability of proper airports is also very chief(prenominal) for this industry. However, airports bargaining power is quite low as they depend on aircraft companies. The bargaining power of customers is very high as they have many airline service providers to choose from. The barrier entry of airline industry is quite high as it requires heavy investments and adept expertise. Airline is the fastest mode of transportation for overseas and long distance travel. No former(a) substitute can match the service of airline industry. contender among existing rival is the most import factor in this industry. The rivals are competing with each other for increasing their market share. In European Un ion, Lufthansa, Ryanair, Easy greenness etc are leading airline companies.3. Decision Making3.1. Decision Making Process in RyanairRyanair provides low cost and high quality airline services to its customers. It places customer satisfaction above all other priorities. The termination make process is primarily centred on concerns regarding ways to provide higher customer services. scoot planning, airline fare, fleet scheduling etc are some of the chief grammatical constructions of Ryanairs effective decision making process.3.2. Decision Making ApproachDecision making advent can be defined as strategical approached of an organisation. Ryanairs management team aims to follow rational decision making approach. The rational decision making approach is an ongoing and dynamic process. This approach helps to identify the underlying problems and to find relevant solutions (Kroon, 1995 p.187). For example, in 2004, when the company was passing through a financial crisis, rational deci sion making approach not only helped it to overcome it but also paved the path of growth.3.3. Types of Problems and Decisions Making In RyanairIn 2004, Ryanair was one of the worst performers in FTSE Eurotop 300 index. During that period, competition in airline industry was very high in the European nations as many new companies entered the market. Despite the stiff competition, the company enjoyed a healthy growth rate till 2003. But the managements inability to understand and rectify the inherent weakness of its decision making process scrawny its growth.3.4. Decision-Making Conditions in RyanairWhile framing the strategic move for any decision making process Ryanairs first priority will be to analyse the elements of immaterial competition. The European airline industry is crowded with many leading companies like Lufthansa, Virgin, Aer Lingus, and British Airway etc. Consumers needs are also very primal for Ryanairs decision-making. Prior to 2003, the companys concern for custo mer service was very low, except the low fare advantages.3.5. Decision-Making StylesThe decision making style of Ryanairs management team seems to be bear on by unlike factors. However, the decision making methods are quite flexible. After analysing its rapid growth during 2002-2003, it can be claimed that it focuses on short term clinical rather than long term goals. Creativity is another major feature of its decision making style.3.6. Decision- Making Biases and ErrorsRyanairs temporary fall during 2004 brought into fore many drawbacks of its decision making process. Robbins has identified some unexplained prejudices and errors of decision making like biases relating to overconfidence, anchoring, confirmation, availability, escalation of commitment etc (Robbins, 2009, p.126). Ryanairs decision was touch on by two major biases i.e. anchoring biases and status quo biasness. Its decision making was based on the past success that failed to take in to account unfavourable macro-econ omic conditions resulting from 9/11 attack on WTC.4. preparedness4.1Vision and representation StatementVision and mission statements help an organisation to prepare a roadmap for its operational activities. Ryanairs official website does not have the vision and mission statement of the company. However, the earth statements of Michael OLeary and other higher executive member of Ryanair indicate that it aims to achieve growth and success by being the utmost cost provider in airline industry (Box and Kent, 2007).4.2. Purposes of PlanningIn general, the purpose of planning is to fiddle effectiveness and efficiency in the operational activities of a business. The implied mission and vision of Ryanairs clearly states its purposes of planning. To buffet the increasing competition, the company has decided to follow low cost strategy. Hence, its planning is designed after taking into consideration this design.4.3 Planning And Performances in RyanairAccording to Riezebos, planning is a very crucial element of operational activity that affects the performance train (Riezebos, 2001, p.12). Planning is one of the major tools of motivating participants to achieve the common organisational goal. collectable to rational decision making approach, the company is able to plan its operational and strategic activities properly. Ryanair is able to achieve its target with the help of an efficient planning process.4.4 Types of Goals in RyanairThe primary goal of Ryanair is to become the lowest cost airline service provider in Europe. The idea of offering low fare proved prospering for the company. However, initially it failed to understand the necessity of good service for customer. Currently, the company is committed to provide lower fare, high quality service and punctual air inventory (Ryanair-b, n.d.).4.5 Types of Plans in RyanairRyanairs decision making process follows rational approach and it also follows rational model for its planning process. Basically, planning can be divided as short term goal and long term goal. The companys management team was concerned only with the short term goal. The company often changes its plan as per the requirements of the market. In 2002, the companys plan was to provide low cost fare and after 2004, its planning process also took note of service quality.4.6 Contingency Factors in PlanningRyanair faces three major contingency factors. Firstly, the organisational level affects the operational planning of middle and low level managers. Secondly, the uncertainty of macro-environmental or other immaterial factors affects the planning process. Therefore, Ryanair aims to develop a flexible planning system. Thirdly, the long and short term objectives of Ryanair affect its planning process. The company always tries to concentrate on its current objective.4.7 ObjectivesThe primary objective of Ryanair is to attain cost leadership in European airline market. However, to achieve this objective, the company needs to conc entrate on other long term goal. These include increasing its operational activities to enter new markets like North America, developing customer centred business model and increasing the use of internet as a major selling point (OCuilleanain et al, 2004).4.8 Management by Objectives (MBO)Management by objective (MBO) approach of management leads to increase in the performance of organisation. MBO is a result-oriented, non-specialized managerial process for the effective utilization of organisational resources by integrating individuals with the organisation and the organisation with the environment (Goyal, 2005, p.304). During 2004, in order to overcome its crisis situation, the company introduced MBO approach to improve its performance.4.9 strategical Management ProcessRyanairs strategic management process is based on its objective of achieving cost leadership in European airline industry. The company has ameliorate its positioning by implementing proper strategic management pro cess. The key elements of its strategic management include low fares, high frequency of point-to-point flight within short routes, proper route choice, reduction in operating cost, increase the internet use for selling, maintenance of safely and high quality service etc (OCuilleanain et al, 2004)5. Organising5.1 Organisation organise and DesignProper organisational structure and design helps to develop efficient management performance. There are four elements of organisation structure and these are departmentalisation, span of take hold, centralisation and formalization. Appendix 1 depicts the organisation structure of Ryanair. Michael OLeary is the CEO of the company and there are seven Directors and a Chairman. For each department like customer services, finance, HR etc, there are individual head management personnel having a team.5.2 Chain of CommandThe Chain of command in Ryanair is based on its organisational structure. The vermiform appendix 1 portrays that the CEO is the c hief person of command of the organisation. However, the decision making process in Ryanair includes all the senior managers of each department. To maintain high level of transparency and to develop two-way communication system in cross functional departments, the range of mountains of command is very essential.5.3 Span of run intoThe span of control in Ryanair is effective and helps to maintain a sound organisational growth. The span of control of the CEO Michael OLeary is the highest and most effective. As per appendix 1, the entire department is required to communicate on the ongoing activities to the CEO. The CEO along with the Directors and Chairman is responsible for making the final decisions of the organisation. However, for better planning and implementation, the employees should be involved in the decision making process.5.4 Centralization and DecentralizationThe decision of centralization or decentralization depends on the nature and expansion of business. Ryanair is a multinational company having different units in European countries and North America. For the airline industry, decentralization is more preferred over centralization. However, Ryanair follows a centralized organisational model. Decentralization of organisation will help it to compete with the major competitors of different markets.5.5 Mechanistic and Organic organizationThe mechanistic organisations are those having a well defined hierarchy. Ryanair has a centralized organisational structure and it is an example of mechanistic organisation. Appendix 2 shows the major difference between the mechanistic and organic organisation. The company has been very strict in maintaining its relationship with the employees. However, such organisational structure of Ryanair creates biases and errors in decision making process.5.6 Contingency FactorsThere are many factors that affect the organisational structure of a company. The industry trend, the growth structure, the social and demographic ch aracteristics of employee customers and vision and mission of the company etc are the major contingency factors that help in designing the organisational structure. The leadership quality of the higher management also affects the organisational structure. The organisational structure of Ryanair is also affected by external competition and its leadership style.5.7 Job Characteristics ModelOne of the primary objectives of Ryanair is to provide high customer services and in this respect the employees are the most important resource. In order to enrich the quality of job, the company motivates its employees to achieve the common organisational goal i.e. growth. The company aim to offer competitive salaries with excellent benefits that are simplistic and easy to understand (Ryanair-c, n.d.).6. LeadershipThe leadership style is an important influencing factor organisational growth and success. The major leadership skills of Ryanairs management focus on the low cost fare for airline. The fleet of Ryanair includes single-class aircraft that increases the seating capacity. However, the leadership skills of Ryanair have led to its success of 2002-2003 and failure of 2004. The leadership in Ryanair strives to focus on position, seniority and authority.Control7.1 Control ProcessThe control process is the key element for Ryanair as it wants to achieve the lowest cost leadership. In order to facilitate effective and efficient control system, employees mustiness be properly organized. Ryanair has developed proper system for regulating the control process by managing its employees.7.2 Types of ControlRyanair strategic moves and policies control various aspect of the organisation. Firstly, cost controlling activity is the major criteria for low cost fare airline and it includes labour cost, marketing cost, airport charges. It also reduces the service cost by controlling many activities. For example, in 2003, it did not offer meals of refreshments to passengers who faced del ays (O Higgins, 2004,).7.3 Managerial Approaches to Implement ControlsRyanairs management team approach for implementation of control, strives to bring down the financial expenses. However, proper organisation culture and operational activities are also very important to improve its service qualities. Fleet control and market control are necessary for achieving the competitive strategy. The market control managerial approach of Ryanair involves the comparison of profit and expenses with that of its competitors.7.4 Management Information SystemFor establishing better management system, Ryanair has brought technological overture in its organisations non-operational activities. For example, it has developed its website for using it as a major selling point. The increasing use of internet has made the managerial activity more efficient. At present, the company is aiming to achieve 100% internet ticket booking.Contingency Factors in ControlLike the decision making process, controlling a ctivity of an organisation is affected by uncertainty of macro-economic factors and the cultural and social characteristics of employees. In the airline industry, the major contingency factor is the competition and conflicts related to organisational objectives. Ryanairs management aims to avoid these contingencies factors related to employees by rewarding them for their efforts.7.6 Corporate GovernanceRyanair is listed on London and Irish Stock Exchanges in Europe. The company is responsible for following proper business ethics and conformity as per the collective governance. The entire management teams including the Directors and CEO are committed to maintain the standard corporate governance. Its business policy clearly defines the role of Directors and other members in meeting its corporate responsibility.Balanced ScorecardBalanced score card is the most popular management tool used by organisations. Ryanairs strategic management system can be explained with balanced score car d. To bring efficiency in its operational activities, Ryanair concentrates of four major areas i.e. finance, customer, business process and knowledge and growth.8.1 BenchmarkingTo achieve the objective of becoming the lowest cost provider in the European airline industry, Ryanair has set its benchmark for cost controlling activities. At present, it is the lowest cost provider in the industry and hence, it has developed its own benchmark. For example, in 2003, the company reduced its cost for wheelchairs services by bringing a third gear party wheelchair suppliers who charged passengers for supplying wheelchairs.8.2 Value ChainThe value chain of the company strives to provide the lowest fare possible. Appendix 4 portrays the value chain which includes other important aspects of the airline industry. To develop a cost effective operational process, the company has combined its balanced score card, benchmarking and value chain.RECOMMENDATIONSTo ensure success, Ryanair must bring some changes in its management and business model. Some of the useful recommendations are given below.It must focus on its services to meet the passengers tokenish expectation.The company should include the employees in the decision making process.As many other rivals are also following low cost strategy, Ryanair can bring certain innovations in its service process.Internal communication should be encouraged for better transparency and motivation.It should develop its public image by increasing corporate social activities.For maintaining low cost fare, it should emphasise on the financial aspects.10. ReferenceBox, T. M. and Kent, B. 2007. Ryanair (2005) Successful Low Cost Leadership. Online. addressable at http//findarticles.com/p/articles/mi_qa5452/is_200705/ai_n21289700/pg_2/. 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