Example research essay topic: Strategic Management Of Ryan Air - 2,225 words

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Strategic Management of Ryan Air Strategic management is the art, science, and craft of formulating, implementing, and evaluating cross-functional decisions that an organization makes to achieve long-term objectives. Herb Kelleher, former lawyer, proved the viability of low cost flights in 1973 when he formed Southwest Airlines, which began the budget flight industry in Dallas, Texas. Southwest is the largest airline in the United States and the second largest in the world, with no intention of expanding into international flights. Ryanair's Michael Leary and Easyjet's Stelios acknowledge Southwest airlines as inspirational. Pacific Southwest Airlines and Southwest Airlines are pioneers of low cost carriers (LCC) in the United States. The idea was to offer flights much lower than those of competing airlines.

Low prices were offered in 1950 by Pacific Southwest and from 1967 onwards by Southwest Airlines. The Aircraft Deregulation Act from 1978 liberated the market for flight routes and flight prices between states in the US. Similarly, low cost carriers began in the European Union. In the 1970 s strategic management dealt with size, growth, and portfolio, the growth and portfolio theory. General Electric and Harvard through the Strategic Planning Institute studied the relationship between profitability and strategy. Their initial conclusion was directly the greater the market share, the greater the profit.

The high market share provides volume and economies of scale, which provides experience and learning through tacit knowledge. They thought they knew which business strategies work and do not work with PIMS providing compelling evidence. London's Heathrow airport in the United Kingdoms capital, a busy airport and important travel hub, maintained a monopoly and charged extravagant prices. Freddie Laker challenged the monopoly with budget Skytrain flights to the United States in the seventies. The 1990 s saw budget airlines, Easyjet and Ryanair, open in London's less used Stansted airport. They now offer cheap flights to many destinations across Europe.

Easy Jet and Ryan Airs strategy was to offer cheaper flights to make travel possible for Ettore Thermes, an Italian financier, who commutes every week between his home in Rome and his office in London and says I use the plane like a bus. Or Suzy Romer, a Scottish student visiting her boyfriend in Bilbao, who noted these airlines let you live in two countries at once. Then, a group of middle-aged men and women schedule weekends away in Europe. None paid more than $ 95 for their flight.

In Brussels, monuments to the builders of Europe in the Schuman district, the Monnet circle, the Spinelli building and now, there should be a Stelios Square or a Boulevard O'Leary. In recent years, Stelios Haji-Ioannou and Michael O'Leary, the two pioneers of Europe's low-cost airlines, have done more to integrate Europe than diplomats and ministers. They helped to create a new generation for whom travelling to another European country is no longer exotic or expensive, but utterly commonplace. The United States low cost carrier Skybus, modelled on the United Kingdoms Ryanair, began offering low cost flights to Europe in 2007. Virgin Atlantic, bridges the gap between short and long 3 + hour flights. Virgin America offers low prices with better customer service and first class options, pay per view movies, music, and fresh food that can be ordered through the seat screen as well as power for laptops in every seat.

Easyjet and Ryanair did not compete with each other or with existing flight routes. By using the less traveled Stansted airport, Ryanair avoided competition with the larger existing airlines and did not compete with Easyjet. The strategy of the low cost carriers was to reduce airport and personnel costs to a minimum. Ryanair's tertiary airports charge low clearance fees for starting, landing, and parking airplanes. Check-in and baggage processing are reduced using Internet booking. Less personnel are needed for the LCC short flights.

There is not an absolute difference between low cost carriers (LCC) and traditional full cost carriers (FCC). Low cost carriers operate on short distances within region without additional services. The concept of low cost carriers is successful for two reasons. They created a demand in air traffic not seen before and save costs wherever possible to offer transport for very low rates because it is cheaper to land at the less used airport.

The low cost airlines usually pay about half the costs of the full cost carriers with no costs for baggage administration and direction to connecting flights. Traditional airlines hub and spoke concept facilities cost much more. Local government might support the LCC because they benefit airport services and bring job opportunities for the inhabitants. In 1997 the Irish airline Ryanair began offering connections from Dublin to London for low fares. LCC fly point-to-point flights connecting flights.

They fly the same short routes many times per day, and do not have to train staff for other routes. The routine time between landing and the next flight time is minimized. The Lcc's fly only one type of the newest generation aircraft with higher fuel efficiency and lower repair costs. Maintenance is less costly with only one type of aircraft to repair and it is easier to maintain an inventory of parts.

In addition to reduced services of the low cost carriers, the employees are not organized in labor parties (labor unions). Strategic management is the highest level managerial activity. Planned, crafted or guided by the Chief Executive Officer, approved or authorized by the Board of directors, management plans are implemented under the supervision of the organization's senior executives. Strategic management provides overall direction to the enterprise and interface between the organization and its environment.

Ryanair's mission may have been to make air travel possible for the majority, but the vision, objectives, and developing policies and plans to achieve the objectives were to maximize cost reduction meeting changing circumstances, new technology, new competitors, and a new economic environment with enthusiasm. Rapid growth of South East Asia budget airline since 2000 resulted in aggressive competition. Malaysia's Air Asia expanded rapidly into a major carrier in the same region, making it possible for more Asians to fly at reduced cost. Singapore's Tiger Airways and Australias Qantas owned Jetstar, competing aggressively with each other on Asia to Australia routes as well as within Australia.

Australia is dominated by the low cost Virgin Blue. Air Asia plans a budget carrier to Europe. RyanAir is a successful company that grew through competent management, planning, implementation, and ability to adapt to changing circumstances, technology, new competitors and a new global economic environment, which Ryanair greeted with enthusiasm. In 2001, Ryanair and Easyjet established connections between two airports other than their home country and installed their aircraft on key airports in third countries, due to a political decision to allow airlines to turn from governmentally controlled transport providers to private companies in a free market.

Easyjet's annual fuel bill rose 22 % from 2003 to 2004 accounting for 14 % of its spending, and Easyjet experienced stiff competition, but shares in the airline jumped immediately after Icelandair bought a 10 % stake in Easyjet. Strategic management process evaluates and controls the business and industries of the company, assesses competitors, and sets goals and strategies to meet all existing and potential competitors. Easyjet tried to make use of more fuel-efficient Airbus A 319 s withdrawn from poorly performing markets or airports charging high landing fees. The airlines thanked the "resilience" of their business model for a 21 % rise in annual profits, despite the pressure of high oil prices and tough competition. The two big aircraft companies Boeing and Airbus estimate that air traffic will continue to grow with a rate of about 5 % per year.

This means within 20 years the number of passengers and the amount of freight will triple. Low cost airlines contribute in this development significantly to the growth in passenger transport. Kerosene costs are 30 % of Ryanair's total operation costs, compared to 10 % for Lufthansa. Easyjet added nine new no-frills routes to its European Network. Easyjet carried 25 % more passengers in November 2004 than in November 2003, a record 2. 1 million passengers, even though the number of seats filled on flights (the load factor) was down slightly from the previous year (81. 2 % from 81. 5 %). Luton-based Easyjet flew more than 150 routes, competing with 42 low-cost rivals in the European market in 2004.

Low-cost airlines carried 80 m passengers in Europe in 2004, up from 47 m in 2003. They have over 20 % of the European market today and may reach 40 % by 2010. Ryanair alone was flying to some 70 different destinations. The inspiration for the low-cost revolution came from America, and the British and Irish were the first to pick up on the trend, in the early 1990 s.

Entire regional economies felt the impact. The city of Carcassonne in south-west France reckons that the 235, 000 passengers who arrive every year on low-cost airlines have created over 270 m ($ 360 m) of extra economic activity. Table 1. A Comparison of Ryanair and Easyjet 2003 to 2004 Ryan Air Easy Jet 12 month passenger totals to December 2004 26, 582, 833 25, 716, 329 Increase in Passengers since December 2003 29 % 28 % Load Factor in December 2004 Percentage bums on seats 83 % 81 % Rolling 12 month passenger totals to January 2005 26, 918, 454 26, 116, 482 Percent increase in passengers since January 2004 20 % 22. 8 % Load Factor in January 2005 Percentage bums on seats 74 % 84. 4 % Passengers transported per airline employee 2004 - 2005 10, 000 6, 200 Airport costs for 2004 147 million EUR 18 % of cost 448 million EUR 36. 6 % Rate of revenue passenger kilometers to seat kilometers 80. 9 % 84. 5 % Lufthansa and British Airways revenue rate 73 % In Kuala, Lumpur, low-cost carriers will soar to higher earnings in the year ahead, as customers migrate from full-service airlines with steep revenue declines and forced mergers.

Full-service carriers will try to compete, but the Lcc's have the upper hand. The aviation industry is expected to lose $ 2. 5 billion from the United States and $ 3. 7 billion in 2009 due to the economic crisis after loss of $ 5. 0 billion from the United States in 2008. The full service airlines cut back growth plans and axed loss-producing routes to weather spiraling fuel prices which sent at least 27 carriers out of business last year. In the global downturn, low-cost carriers will outpace traditional airlines in terms of traffic growth and earnings in 2009. Stormy economic conditions in 2008 already helped the low-cost segment gain a larger slice of global aviation.

Tougher economic conditions and lower fuel prices will give the sector a major advantage in 2009. Mr Tony Fernandes, chief executive of Air Asia, predicts that passengers will not cancel trips but will hunt for the cheapest tickets. Mr Fernandes said that the fortunes of British low-cost airline EasyJet and Ryanair, Europe's biggest budget airline, will soar as the downturn depresses European economies. Airbus chief, Thomas Enders warned of a 'very challenging year for the aeronautics industry', saying he expected a sharp drop-off in orders for Airbus.

Frost and Sullivan also said that Asian budget carriers were in a good position and that most of the damage to the aviation industry would occur in the United States. Asia-Pacific is predicted to see passenger traffic increase 5 - 7 per cent this year. The European region, which accounts for nearly 41 per cent of international traffic, grew by 5. 2 per cent in 2008, mainly due to the performance of its fast-growing LCC segment. Falling demand for premium aviation services together with pressure on revenues will drive merger and acquisition activity further among traditional airlines in the year ahead. The low-cost sector focuses on organic growth via fleet and network expansion. The result: a shift in the balance of world aviation.

New-generation long-haul Lcc's, such as Air Asia X and Jetstar, will be bolstered by the current lower fuel prices. Entering 2009, the world's leading Lcc's, Ryanair, easyJet, Viewing, Sky Europe, Air Asia, Virgin Blue, Jetstar and Tiger Airways are growing their capacity at double-digit rates. Mr Fernandes said that Air Asia's fuel costs had fallen from 40 per cent of total operation costs to just 20 per cent. We are now in a strong position to offer more low-cost tickets and new routes. For 2009, we are optimistic that we can achieve our best-ever profits. Business (2004).

Ryanair and EasyJet, the world's fastest growing airlines? ? web Economist (2005). How cheap air flights are bringing Europeans together was retrieved from web on April 23, 2009. Newport (2009). Budget airlines to soar retrieved on April 23, 2009 from web Thompson, Strickland, & Gamble (2008). "Ryanair: European Pioneer of Budget Airline Travel" in Crafting and Executing Strategy 16 th ed.

McGraw Hill-Irwin Uherek, E. (2006). Low-cost airlines history: How it all got started based on a study on low cost carriers in Europe carried out by Bernd Hahn and published in: Wuppertal Papers, No. 159 - July 2006 retrieved on April 23, 2009 from web development 61 i. html

Research essay sample on Strategic Management Of Ryan Air