Business environment analysis: Ryanair

In this report we will carry out both an Industrial and an Environmental analysis of Rainy with the help of a number of academic analysis lolls and frameworks which will help us to examine both the Micro and the Macro environment in which the organization operates. Micro-Environment Firstly we will examine the Micro-Environment in which Rainy operates and the numerous factors which affect it through the use of a SOOT analysis.

If we look at the work of Hit, Black and Porter (2009) we can see that they set out a SOOT analysis as: “A SOOT analysis approach to integrate the separate analyses requires managers to consider their firm’s strengths (S), weakness (W), along with opportunities (O) and treat’s (T) for Its continued operation. SOOT analysis Is a basic framework for integrating the result of analyses that gulled the formulation of an appropriate strategy. ” (Hit, Black and Porter, 2009, p. 49) We can see from the above quote that a SOOT analysis of an organization essentially involves the organization identifying what its main strengths and weaknesses are as well as what opportunities it may be able to exploit and what treat’s it must protect itself from. After the gathering of all this information, the SOOT framework can then be used as a guidance tool for the organization in its strategic planning. We will now set out a SOOT analysis for Rainy as follows: Strengths:

Strong Brand Name Rainy has been able to build a strong brand name and has firmly established Itself as ‘Rupee’s leading low-fare airline’. The great emphasis which the company places on the ‘low-cost’ element of services has been hugely popular with customers and if we look at the Annual report for the fiscal year 2013 we can that the company’s passenger traffic for the year grew steadily by 5% to 79. Million passengers, an extremely high proportion of market share. High Ancillary Revenues Ancillary Revenue in the case of an airline is all the revenue which is earned through means other than direct air fares.

Rainy has been very successful at developing a high level of ancillary revenue through a creative range of different products and services such as priority boarding, In flight scratch cards, text message reminder alerts and baggage check In. Again from the annual fiscal report year ending 2013 we can see that the company able to grow ancillary revenues by an Impressive 20% to в?1,064 million. Government and European legislation There are many new laws and legislations being introduced in Ireland and the E which have had a serious impact upon Ryan’s ability to maintain its competitive advantage I. Its low cost such as the introduction of a в?10. 00 travel tax on all flights by the government and European legislation requiring Rainy to reimburse customers affected by cancellation or delays for costs such as food and lodging Opportunities: Failing Airlines Rainy has been very effective at ceasing upon and exploiting the failings of its many competitors. While the global economic downturn in 2008 resulted in many airlines going bankrupt and ceasing operations Rainy has been able to continuously grow its profits every year.

If we look at the accounting figures for 2013 it shows that refits have risen by 13% to over в?million. This has been down to Ryan’s ability to reduce its unit cost through the opening of new bases and routes to many countries affected by the downturn. The have offered Rainy favorable rates in the hope off generating more traffic to their airports, which in turn allows Rainy to spread its costs over a larger area and thus reduce unit cost. Again if we look at the annual financial report for 2013 we can see Rainy open 7 new bases and 217 new routes for the year ending 2013.

Acquiring new Fleet Again Rainy has been very effective in exploiting the reduced demand for aircraft uh to many failing airlines as a result of the economic downturn. Rainy has been able to acquire many new aircrafts to meet its needs not only now but in the future at very favorable prices. In the year ending 2013 they were able to put a deal in place with airplane manufacturers Boeing to provided them with 175 new planes growing their overall fleet to 410 aircrafts which will result in growing their traffic by 39% to million people by 2019.

Threats Fuel Hedging One of the main threats facing Rainy is the unstable nature of the global oil markets. Rainy like many other airlines engages in a practice called ‘Hedging when it comes to purchasing its fuel. This involves buying large quantities of fuel at a agreed price over a set period of time e. G. One year. Rainy has already hedged 90% of it oil for the fiscal year 2014 at $98 per barrel which is set to see its overall fuel costs rises by over в?200 million.

If the price of oil were to fall considerably due to unforeseen circumstance Rainy could be in big trouble. Climatic Factors Climatic factors have had a serious impact upon the operations of many European airlines such as Rainy in recent years. The volcanic ash cloud incidents in 2011 presence of legislation resulted in Rainy having to reimburse many of these customers for expenses such as food and lodges having a serious impact upon its profitability.

Now that we have examined the micro environment of Rainy through the SOOT analysis, we will know use the PEST framework to examine the macro environment in which the company operates. To understand what the PEST framework is we will now look at the work of Tirana and Morley (2001): “An organization should thoroughly analyses both its macro and task environment, focusing on the relative importance of ACH of the components for the organization and the extent to which they are changing.

This process is sometimes referred to as the PEST analysis. PEST is an acronym for political-legal, economic, socio-cultural and technological analysis of environmental influences. In this sense it corresponds to an analysis of the primary features of the macro environment. ” (Morley and Tirana, 2001, p. 128) We can see from this description that the PEST framework is essentially a theoretical tool used to examine the macro environment of organization through the examination of what it perceives to the four most key areas.

Political- Legal There are many Political and legal factors which affect or have the potential to greatly affect the operations of Rainy. The one Political and legal factor which provides the greatest opportunity to Rainy is the implementation of the Open Skies agreement in 2008 between the EX. and the United States of America. This essentially allows any European airline to open a route or bases to or in any US city. Rainy has looked into the possibility of starting operations but has not yet acted upon this potential opportunity for market growth.

While this may have the potential for a positive impact upon Ryan’s operations it is important to note that there are political and legal factors which have had a negative impact upon Ryan’s business operation such as Else’s emissions trading scheme which resulted in Rainy having to put a levy on all flights to cover the cost of this new tax scheme or the implementation of a travel tax by the Irish government resulting in a tax of up to в?10 Euro on some flights reducing Ryan’s ability further to maintain its competitive advantage and provide the cheapest flights in the market place.

We have already seen from the SOOT analysis that Rainy has been very successful n exploiting the economic environment it has faced over the past few years, further growing its profits by 13% in 2013 to в?million. It has done this at time when many of its European rivals have faced bankruptcy or ceased trading altogether.

This has been partly down to it being able to acquiring new routes and bases at favorable rates due to many European airports suffering from reduced passenger traffic as well as the fall in demand for aircraft resulting in Rainy being able to meet its present and future aircraft needs at very favorable prices. Socio-cultural Rainy has been very reactive to its customers’ needs in that it has realized in the harsh economic climate since 2008 customers have little expenditure for luxuries and simply want the cheapest prices possible.

Rainy has made this possible through the removing of all luxuries from the base air fare price and implemented a charge for them such as biscuits, soft drink or even extra baggage. This has been a every successful strategy for Rainy as they have been able to keep its prices as low as possible while increasing traffic by 5% in 2013 to 79. 3 million passenger, it has also hon. a growth in its ancillary revenues by 20 % to в?1064 million. Technological Rainy has been able to use advances in technology to its advantage in recent years.

Through the acquiring of new fleets of aircraft it has been able to maximize its fuel efficiency and pass these saving on to its customers. It has also been able to reduce cost through its implementation of online check in and self-service kiosk in airports helping to reduce the cost of labor and again pass these saving on to their customers Findings and recommendations: We can see from this report that Rainy has successfully dealt with both the external and internal factors affecting it business operations in recent years.

My main recommendations to the organization would be to continue to embrace its strategy of increasing ancillary revenues as it provides a strong back up stream of revenue to Just relying on it air fares alone for income. I would also recommend that Rainy continues its strategy of expanding its operation by looking beyond the European market and tries to take full advantage of the political and legal factor such as the Open Skies agreement 2008, which allows any European airline to operate a route from any European city to any US city.

If Rainy were to successfully many to offer low fare Trans-Atlantic before any of its rivals could, I feel they would only further increase their competitive advantage over their rivals of having the lowest fares on the market by being able to further reduce their unit costs. I would also strongly recommend that Rainy guard itself from any future unforeseen cancel over 9400 flights over an 18 day period by the possibility of introducing a small levy on all flights to cover any monies which may have to be paid out in expenses to customers as result of future cancellations or delays.

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