The air travel sector has been struggling for decades, with numerous high-profile merges indicating the market’s shifts caused primarily by rising fuel prices and several recessions. Despite the bankruptcies and failures of full-service carriers (FSCs), low-cost carriers (LCCs) slowly continue to become more dominant in various regions, namely Europe. As of 2014, the profits of Ryanair and EasyJet, two of the most prominent LCCs in Europe, were €523 million and €474 million accordingly. Apart from such massive profits, the rate of growth these enterprises have managed to achieve is truly remarkable. Ryanair is the pioneer of a successful low-cost airline model and now has a 30 percent market share. While the company certainly enjoys great profitability and a dominant market position, it faces the risk of caving in because of EasyJet, which now has a market share of 20 percent. EasyJet is a smaller LCC, which is less profitable, yet more attractive to shareholders. Data demonstrates €10,000 invested in EasyJet in 2000 now amounts to €62,510, which is a far larger figure than €33,742 in the case of Ryanair. Thus, it is apparent EasyJet generates more value for the shareholders.
In regards to the carriers’ strategies, they are rather similar as they both utilize the low-cost model. Ryanair and EasyJet target the same customer segment with relatively high price sensitivity and no regard for additional comfort during flights. Both carriers offer frequent flights with no layovers, flying passengers point to point, which saves a lot on transferring baggage. The strategies of both airlines are to cut costs as much as possible by reducing staffing needs and excluding food or beverage options during flights. Not offering food during a 3-hour flight seems reasonable to passengers, yet saves the carriers much money since they do not have to spend on the food itself as well as cleaning afterward. In addition, both EasyJet and Ryanair fly only one or two types of planes. For Ryanair, the aircraft of choice is Boeing 737, whereas, for EasyJet, Airbus 320 and Airbus 319 are the top choices. Having all the planes be the same ensures that the carriers cut costs on maintenance and staff training. Furthermore, both airlines are notorious for cost reductions in terms of inflight merchandise, referrals, insurance, and baggage.
Despite all the aforementioned similarities, the strategies of Ryanair and EasyJet have differences as well. Firstly, EasyJet aims to cater to other customer segments as well, individuals with lower price sensitivity and a higher need for comfort. In order to target them, the carrier offers the features Ryanair seems to be neglectful of, including assigned seating, additional legroom, and in-advance seat bookings. Secondly, EasyJet chooses to and from primary airports, whereas Ryanair sticks to secondary airports. While this way Ryanair cuts costs, EasyJet provides passengers with an opportunity for flights to and from well-connected airports with a great infrastructure that are usually situated not far from major cities. Thirdly, EasyJet adopts a differentiation strategy by focusing on the quality of its customer service. In contrast to Ryanair, EasyJet invests financial resources in training its staff to be as friendly and helpful as possible. Such a strategy seems to be extremely effective as EasyJet now flies out more than 65.3 million passengers. All in all, it is evident that EasyJet attempts to move a bit closer to the FSC model while still offering the passengers the benefits of the low-cost one.
The goal of this paper is to provide a pest analysis of the contribution of technological factors toward the success of Ryan air. This analysis presents various external factors likely to hinder this airline company from normal operations. Expansion in technological factors has led into the adoption of online booking services in Ryan air.
Expansion of technology is performed with regard to the Porter’s five forces of competition because of the increased competition in the airline industry. To attain a competitive advantage, Ryan air operates a low cost approach. To attain the implicated competitive advantage and at the same time maintain low costs of operations, aircrafts in this company and designed and build by Boeing.
Technological factors
Technology refers to the process implicated in changing the inputs of a company into outputs:
Technological factors for this company revolve around the fleet.
Ryan air’s fleet comprises of a collection of 735 aircrafts (Sheth 590).
These aircrafts are owned by the company contrary to other airlines that prefer to lease aircrafts.
Owning aircrafts as opposed to leasing ensures the capitalization of maintenance costs on the company’s balance sheet.
The company sources spare parts and various maintenance services with regard to economies of scale.
The importance of technological factors in enhancing the operations of Ryan air
Expanding technology enables this company to attain new markets through the use of online booking.
These factors enable the company to earn a competitive advantage.
Identify mechanisms of reducing costs.
Aircraft maintenance services
To enhance its commitment toward safety:
The company uses very qualified aircraft maintenance personnel.
Provides adequate training to aircraft maintenance personnel.
Adheres to European Union Industry standards.
Despite that the company wishes to enhance a cost-effective approach in the maintenance of its fleet, the top management of this company does not explore the low cost strategy with regard to aircraft maintenance.
The company acknowledges the use of very qualified personnel and a very effective quality assurance team for the supervision of aircraft maintenance services.
The company strictly adheres to the regulations of the European standards of aircraft maintenance alongside standards formulated in the European Aviation Safety Agency (Data monitor 1-3).
Besides forming part of the EASA with regard to 145/JAR, this airline is an approved contractor of aircraft maintenance services.
Most of the routine aircraft maintenance services are performed by the company itself.
In addition, the company conducts constant checks on its fleet.
The checks are performed before take-off and during transit at some of its major bases.
Most of the repair and aircraft maintenance services required when its aircrafts are within any of airports served by the company are offered with regard to the provisions of the Part 145/JAR 145.
These provisions cater for aircraft maintenance provision contracts.
Most of the company’s fleet return to its bases every evening for examination by qualified engineers.
In 2002 the company indicated plans to expand its aircraft in-house maintenance potential by developing two-bay hangar services in one of its bases in Glasgow (Davey 1-2). This facility was meant to enhance light C checks on its fleet. In 2003, the facility launched its operations. At the moment, this facility has been developed further to cater for A checks on the company’s 737-800 aircraft.
In addition, the facility can perform two light C-checks in a week (Alle and Schmitz 145). This enables the company to enhance in-house flight checks. However, the company does not have the full potential to conduct most of the heavy maintenance checks. This explains why it is considering the possibility of engaging service providers from Poland, Venezuela, and Turkey.
Current service providers on aircraft maintenance services contracted by Ryan Air
To enhance the provision of adequate aircraft engine maintenance, Ryan air entered into a 10-year engine maintenance agreement with General Electric (GE).
The agreement was an inclusive aircraft maintenance contract involving engine overhaul and repair.
This contract was to cover repair and maintenance of CFM56-7 engines used in most of its Boeing aircrafts, especially the 737-800 fleets.
This agreement was geared at enhancing partnership between GE and Ryan air for the purpose of promoting a wide access to quality aircraft engine maintenance at relatively reduced costs.
Aircraft maintenance services in Venezuela
The aviation industry in Venezuela has undergone rapid expansion with numerous aircraft maintenance providers. Among the major service providers are Elite Air Services. This company offers;
Cargo and commercial passenger aircraft maintenance services.
Other services offered by this service provider include
Provision of Marshall Procedures.
Corrective procedures for maintaining aircraft parts.
Aircraft quality assurance inspection
Routine servicing of aircraft
Trains and offers skilled personnel to help the flight crew.
Additional services include
Inspecting fuel appliances.
Fuelling and defueling of planes.
Aircraft manual revisions.
Aircraft maintenance services in Turkey
There are two major aircraft maintenance facilities at Ankara Guvercinlik airport.
The first hangar facility is located between Sefakoy and Yesilkoy (Jiang 431).
Unlike, Poland, and Venezuela, Turkey has a long history of aircraft maintenance.
The maintenance services offered in Turkey are diversified and can accommodate different types of aircrafts.
The maintenance services in Turkey have been approved by the Joint Aviation Association.
This association established the compliance of the aircraft maintenance services in Turkey to stipulated regulations.
The Turkish airline received a certificate of compliance to the Joint aviation regulations in 1996 and is authorized to provide international aircraft maintenance services.
Aircraft Maintenance Services in Poland
Most of the airline maintenance services in Poland are provided by both state and private service providers.
Among major service providers are ARP, a state owned corporation that has acquired most shares in nearly all aircraft maintenance service companies.
Aircraft maintenance service provision in this region is not very developed and offers limited international services.
Conclusion
Aircraft maintenance is an essential determinant of flight safety, which adds on to determine the competitive advantage of an airline company. This possibly explains why Ryan air is willing to invest heavily in aircraft maintenance despite operating a low cost approach in its major service provision. The choice of this company to invest in Boeing aircrafts is an added advantage with regard to enhancing the competitive advantage.
To foster the safety of passengers and the durability of its aircrafts, the company uses its highly qualified aircraft maintenance personnel to perform in-house checks. In addition, the company has also outsourced services of other companies, such as GE to perform major engine checks.
The choice of an appropriate service provider will enhance safety and quality service provision. Considering, Venezuela, Poland, and Turkey, the later has a better range of aircraft maintenance services to offer.
Works Cited
Alle, Michael, and William Schmitz. “Ryanair plc.” Séminaire d’elaboration d’un Business Plan 2004: 1-45. Print.
Data Monitor. Ryan air holdings plc. Data Monitor Europe: London, 2008. Print.
Davey, Jenny. “Ryanair has earned its wings – investors should set autopilot.” The Times, 6 January 2006:1. Print.
Jiang, Hudson. “Competitive strategy for low-cost airlines.” Asia Pacific Management Conference 13.1 (2007): 431-436. Print.
Sheth, John. “The future of relationship marketing.” Journal of Services Marketing 16.7 (2002): 590-592. Print.
Companies conduct market research with an aim of improving on their competitiveness. This is essential for continued growth of such companies. In this regard, they analyse various aspects of service delivery and customer satisfaction as well as competitors. In so doing, they fast track their ability to perform effectively and efficiently in the market.
Airline industry is both competitive and challenging. The cost of fuel is ever rising. In addition, technological advances and innovation is constantly proving to be expensive to airline companies. This has put increased pressure on companies to perform. Moreover, customers are usually unpredictable even though they need quality services.
Ryan Air, which is one of the most successful flight companies in the world, has had to work towards offering cheap quality flights to achieve customer satisfaction. It has employed several pricing techniques in order to satisfy the need of various groups of customers. This has enabled it to achieve high market penetration as well as perform fairly in a market that is highly competitive (Cadwalladr, 2012, p. 1).
Ryanair
Ryanair is a multinational airline company that was founded in 1985. Over the years, it has strengthened its presence all over the world with a mission of providing quality service in order to contribute to society. Having begun with just 25 employees, the company has sprung up and now boasts of 8500 employees. The company is in Ireland with its headquarters in Dublin.
Ryan family founded the airline, which has since emerged as a world market leader. Ryan airline is considered the largest in the category of low cost airline throughout Europe. It runs nearly 1500 flights daily from around 51 bases. Its first cabin crew was only 5 ft. 2ins. This happened because of the small aircraft they begun with in 1985. In 2011, it was estimated that Ryanair carried about 75 million passengers.
It has routes in 28 countries with a connection of more than 168 destinations. Despite its low cost measures, the company is considered the most profitable in the world. This shows how consumers love to spend less for quality services. Moreover, the company’s economic policy has enabled it to achieve these impressive results despite news of heavy losses made by most airline industries in the world.
This has made them the leaders in airline industry (Bachelor, 2012, p. 1). Currently, they have opportunities in emerging markets such as Asia, South and Central America as well as Europe for cheap flights that are efficient and save on the cost of transport. The company boasts of about 300 aircrafts (Boeing 737-800). These are the newest aircrafts in Europe and most probably the world with just 2 years as their average age.
In essence, opportunities are solid as they seek to venture into more regions as well as improve on the quality of service they provide. According to news polls, most customers across Europe and in other parts of the world are hoping that Ryanair would reach their destinations. This shows how the company has managed to be successful in planning and strategising for better results.
The company has seen growth from a meagre 25 employees to thousands of them. This great achievement occurs in a market that struggles to sustain itself. Most companies are barely managing to pay their expenditure. Ryanair’s business model is highly successful. It should be followed by other airline industries that are struggling to sustain their employees.
For instance, 2011 sent shockwaves across the world with rampant strikes by airline employees for better pay as well as massive cutbacks to help sustain the industry. Ryanair’s model is thus important in achieving sustainable airline activities (Edreams International Network, 2013, p. 1).
Analysis of the business’s environment
Market analysis aims at studying the dynamics and attractiveness of a given business environment within an identified industry. It primarily takes two separate forms. In the first form, investors use market analysis to oversee and analyse its growth curve in order to come up with investment decisions. In the second form, market analysis is a field of study employed by marketers to examine the market in target.
Regional and urban economics is the field of studying real estate market analysis in regional and urban setup level. The following segment will look into the business environment of Ryanair (Casselman, 2011, p. 1). Ryanair has utilised its low cost model to achieve significant growth over the years. However, it has faced a number of problems in this regard.
For instance, the media has accused it of charging extra charges on passengers due to on board charges. However, the company assured customers that they aim to encourage customer that do not carry luggage and do not need other services to pay the least possible amount. Moreover, charges that are alleged are optional since one can choose not to carry a language. Its low cost model has also brought renewed criticism on payment methods, which is alleged to place extra charges on customers (Tutor2u, 2012, p. 1).
In addition, their employees have also faced a number of issues since their pay is less than that of other airline employees. This has brought controversy because they are also alleged to have convinced their employees not to join workers union. This is because employees are also allowed to buy shares in the company and thus give them an opportunity to contribute to the running of affairs at the company.
The company’s bargaining power has helped it spur growth as they trample their competitors in both cost and quality of services offered. Porter’s analysis gives a positive outlook on their ability to offer competitive advantage. This is attributed to their resource base, price service, and appeal to customers with the latest jets.
A discussion of the company’s resources
Ryanair has a customer base of about 75 million people. This is huge considering that it is a low cost airline. The low cost business model has enables it to move forward at a rapid rate. This is also attributed to Europe’s deregulation policy on aviation industry. The airline boasts of more than 300 aircrafts with connection to about 170 destinations. It had revenue of 4.325 billion euros in 2012 with an operating income of 683.2 million euros.
Moreover, it had a net income of 374.6 million euros. Moreover, its assets were estimated at slightly more than 9 billion euros with equity of 3.308 billion euros. In addition, the company boasted of about 8400 employees in 2012. This shows a massive growth since its expansion in 1997 (Edreams International Network, 2013, p. 1).
Threats that face Ryanair include upcoming competitors as well as increasing cost of flight operation. These include fuel costs, which are driving the cost of transport. Moreover, some customers feel that their relatively cheap prices would be related to quality, a notion that is false but can as well work against them.
In this regard, they need to perform thorough tests of products before launching them to avoid such misgivings as those witnessed in the sticking accelerators. Moreover, they should pursue technology in order to appeal to more customers through efficiency, reliability, and cost effectiveness.
The SWOT analysis of Ryanair shows that a lot has been done to assure customers of their reliability due to series of success witnessed. In addition, the company has been instrumental in evaluating its performance. Risk assessment techniques such as SWOT analysis show strength in economic policy, which has energised them to their current levels. This helps to improve a company’s competitiveness.
Segmentation within the sector
Airline sector has segmentations that have enables smooth conducting of activities. For instance, there are two major segmentations namely, are the low cost airline and the high cost airline. This ensures that airline choose to align with one of the industry’s segmentation to pursue their goals. For instance, there are passengers who would not want to spend on extra services provided onboard.
These group of passenger can pay very low amounts to travel to their destinations without incurring extra charges that are compulsory in high cost airlines. Moreover, they have the option of buying whatever they want as opposed to the other segment in which a standard fee is charged (Greenslade, 2013, p. 1).
Segments targeted by Ryanair
Airline industry deals with transport of people as well as goods. This is essential in effective safe transport of goods and services. Ryan air targets low cost passenger transport as part of its business model. It offers cheap services as compared to its counterparts such as EssyJets. Moreover, it uses the latest technology of jets in Boeing to spur its growth. However, it is important to note that challenges it faces in this line.
Ryanair offers on board services at a cost. This is aimed at making these services optional for passengers to have lower costs of travel. In addition, the airline aims to provide customers with informational required expedition of its services (Edreams International Network, 2013, p. 1).
A discussion of how (or whether) these three elements are related to the business’s performance
Market analysis helps in evaluating the market clients and ascertains the most viable courses of action necessary to enhance profitability and sales. Investors generally analyse numerical data, existing market patterns, and probable future patterns of a specific data in carrying out market analysis. They carefully analyse the price movement within a specific sector, events that may affect their commodities and the entire market trend.
They may also investigate events like emerging technological discoveries, announced mergers, and profit predictions. The three elements stated above are crucial to the survival of any business model. For instance, airlines that offer low cost services must have enough resources to target numerous customers. This enables them to achieve their goals of high profits through the man customers.
In essence, low cost model depend on numbers. In this regard, the relationship between these elements is clear in that a firm that chooses to go for low cost segment must have enough capital bases (resources) to get the numbers required for profitability. Moreover, business environment must also be conducive for such services to take place in a successful manner.
Ryanair therefore prides itself in finding the unique model based on its resources and segment chosen. However, it is important to note that this has not gone easily as the company faces numerous customer relation issues pegged on their low costs.
For instance, some quarters have accused them of paying employees meagre wages while others have accused them of evading tax. Overall, it is necessary to note that these elements are related and have to work together for a company to thrive in airline services as well as in most business sectors (Skyscanner, 2013, p. 1).
Conclusion
Ryanair has the largest base of customers in low cost airline industry throughout the globe. This is attributed to the economic policy they adopted which has attracted more customers as well as retained their profitability levels. However, this has not come easy. The company has passed through periods of difficulties when accused of evading tax and charging extraneous services on ticketing, among others.
Despite this, they have continued to expand. Currently they have over 300 fleets of aircrafts connecting more than 168 destinations. This is massive for a firm that started with barely 25 employees. Moreover, the challenging market rocked with ever-increasing cost of operation has done little to stop its success.
Issues related to their employees have also rocked the news with workers union accusing them of exploitation of workers for higher profits. However, they have reiterated that their focus is to ensure employees own part of the company. Ryanair is a success story that relates the three elements of marketing namely business environment, segment, and resources.
These elements are essential in marketing and must work together for success. However, they still face other challenges. These include addressing of employee issues as well as the need to venture in emerging markets and consolidate their position in areas of establishment (Ryanair, 2013, p. 1)
Describe the key events and issues apparent at the first reading of the case study.
Michael O’Leary, the CEO of Ryanair, aimed at the cost-leadership strategy while focusing on the reduction of expenses in all spheres (Macneil, 2007). Meanwhile, the overall inexpensive traveling welfares were beneficial for the low-budget customers, who did not want to pay any additional extras for the airfare (Macneil, 2007).
Despite the initial positive intentions, O’Leary decided to minimize the comfort of the working conditions to support the cost reduction strategy while not providing extras during the probability period and making the payment for the training a requirement (Macneil, 2007).
These events were the primary causes for the rise of aggression among workers and establishment of the union, which would focus on the protection of their rights (Macneil, 2007). Based on the factors provided above, it could be said that the primary issue is the underestimation of the importance of workers while not focusing on their rights due to the presence of the cost-reduction strategy as a key emphasis.
Systematically define the problem. Check for additional data, if available (via websites) etc.
As it was mentioned earlier, the problem is related to the inability to depict that the workers are the key assets of the company to reach success. For instance, the management of Ryanair considered that the prohibition of charging phones at work to reduce the costs for electricity (Clark 2005). Furthermore, a potential future member of Ryanair team has to pay Ryanair’s preparation courses to be qualified pilots and air attendance staff (Doward, 2013). It could be said that a combination of these factors underlines the existence of the described problems and underlines that actions have to be taken to resolve it.
Try and analyse the issues and problems in the case with relevant theory (ies)/concept(s) covered till date in the course of studying this program. Think carefully about your choices and make sure you are able to justify the chosen model(s)/approach (es).
The primary issues are related to the lack of the competences in HRM and the inability to develop relevant strategies to maintain the motivation of the employees at the sufficient level. In this case, the organizational mission and performance comply neither with best-fit nor best-practice principles of the school of HRM. Best practice implies the focus on the employees as significant contributors to the company’s success while prioritizing the vitality of security and favourable conditions for the workforce’ development (Chopra, 2010).
Meanwhile, best-fit practice suggests emphasizing the essentiality of the similar principles with their basis on the current economic cycle and company’s efficiency in the market (Chopra, 2010). In the context of Ryanair, the company does not comply with none of these concepts, as its growth and development underline the possibility for the advancement of the conditions for the workforce leading to the improvement of the overall service and increase in the revenues.
Based on the above, search for supporting evidence from the case (quantitative and/or qualitative) to support your arguments. Use quotes or quantitative data (if available)
Ryanair utilized the model of Southwest Airlines to promote the low-cost fares in Europe, but Southwest air carrier cares about its employees and provides favourable conditions to maintain their motivation at the sufficient level (“Employees come first” 2007). In this case, the minimization of costs of employees could not be considered as a primary motivation tool and one of the instruments to enhance the company’s condition and development.
In this case, the profitability of the organization can be maximized by paying vehement attention to the motivation of the workforce, as the correlation between the commitments of the employees and organizational performance cannot be underestimated (Dobre, 2013). In this case, the engagement of the employees in the decision-making increases their motivation and rises success rate to 79% (McKinsey&Company, 2010). This finding highlights an advantageous influence of the best practice on the firm’s functioning.
Develop your analysis and complete your allocated case task(s)
It could be said that the outcomes and findings depicted above highlight that the current issue is related to the underestimation of the employees’ contribution to the overall organizational performance. Meanwhile, the studies reveal that the connection tends to exist, and this correlation is one of the key drivers for the company’s success. In this case, the solutions have to be associated with the enhancement of the working conditions in the organizations while changing the overall strategy to the best-fit or best practices of HRM to build trusting relationships with the employees and highlight their paramount vitality in the firm.
List any alternatives in solving the problem / allocated task(s).
Based on the factors and analyses mentioned above, one of the primary solutions is the improvement of the working conditions, as it is one of the instruments to enhance employees’ commitment and desire to continue working for Ryanair. Another alternative is paying vehement attention to the employees’ motivation due to the existence of the interdependence of this factor and the overall organizational performance. Development of the particular skills and competences will have a beneficial influence on the revenue due to the potential increase in the quality of the provided services. Lastly, cultivation of friendly atmosphere could be regarded as another option since it will contribute to the advancement of the functioning of the company while proposing innovative solutions.
Recommend your preferred solution in relation to the case study and/or the allocated case analysis tasks.
Despite a plethora of solutions to optimize company’s efficiency related to the employees’ motivation, Ryanair has to prioritize the improvement of the working conditions due to the absence of the basis to reduce the rising aggression within the firm. In this case, the enhancement of this feature will have a beneficial influence on the company’s success while changing the overall principles of HRM policies. This approach will cultivate trusting relationships with the employees and has a beneficial impact on the company’s overall performance. Other solutions can be considered as subsequent steps for improvement.
(Notes: Please cite references to academic models and any additional data collected for your analysis. Note your analysis and recommendations should logically follow from a short description of “what’s happening” in the case study).
References
Chopra, J. (2010). Human resource management: A contemporary approach. New Delhi, India: DPS Publishing House.
Employees come first at high-flying Southwest airlines: Model contrasts with the Ryanair approach to low-cost aviation. (2007). Human Resource Management International Digest, 15(4), 5-7.
Corporate reputation refers to the values and the association created in the mind of a customer based on organisational communication and other areas of contact between the company and customers. Factors that contribute to corporate reputation include pricing, promotions, leadership, employee attitudes and customer service, among others.
A company with a positive corporate reputation is also characterised by market growth and maintenance of competitive advantage. In addition, such a firm has an excellent brand equity and customer loyalty (Bick 2009).
Although Ryanair operated successfully for a long time with a negative corporate reputation, profit warnings in financial reporting highlighted the need to change the bad image of the company occasioned by poor communication and insulting of stakeholders (BBC News).
The current study focuses on understanding the corporate reputation of Ryanair, identifying contributing factors to negative reputation and proposing measures to improve reputation of the firm.
Background – Ryanair
The airline company is one of the best performing businesses in Europe. In fact, it is characterised by the lowest charges. With regard to the number of passengers on an annual basis, the organisation is the second-best performing airline in Europe (Ryanair 2014). The company, founded in 1985, is named after its founder Christopher Ryan.
Under the management of Michael O’Leary, the airline adopted and perfected the low-cost model pioneered by Southwest Airlines and most people associate the affordability and ancillary revenue to Ryanair. While other airlines continued to seek ways of increasing ticket prices, Ryanair focused on reduction and making up for the lost revenue through ancillary sources such as shopping on board, hotel booking, car hire and internet gaming.
When providing the low-cost services, Ryanair has no frills, operates from point to point, maximises utilisation of aircrafts, has less delayed flights, charges lowest fares, has standardised fleet, and uses small airports.
In spite of being among the most popular airline firms because of its low-cost model, the company’s corporate reputation has been questioned by many people on the premises of low quality of customer service (Ryanair 2014).
The current situation
The stakeholders’ theory is helpful in understanding the current situation in the airline, as poor reputation impacts on internal, external and connected stakeholders. As discussed in the background, the company faces a problem with its corporate reputation. In fact, customers complain of low-quality services, rudeness and limited attention from staff members; survey ratings put the company at the bottom in terms of customer satisfaction.
Customer complaints, especially in the social media, deal a blow to the Ryanair’s corporate reputation. The situation is made worse when the CEO asserts that the low-quality services are the value of the lowest charges that the firm adopts (Topham 2013).
The huge blow to corporate reputation resulted in the company’s stakeholders asking for a reversal of the situation, which is possible mainly through an effective communication strategy.
The stakeholders theory states that all stakeholders must be considered in the decision-making process of the organisation. This theory focuses on the critical roles that are played by shareholders in order for an organisation to have excellent results (Crowther & Seifi 2011).
In this case, Ryanair’s stakeholders include managers and employees in the internal environment, customers, financiers, distributors, suppliers and retailers as connected stakeholders, and the government, pressure groups, professional bodies, the media, society and local communities being the external stakeholders.
Currently, the company has strengths, including the low-cost model, online presence, efficient fuel consumption, new aircrafts and plans for effective communication and marketing. On the contrary, as the company corporate reputation is poor because of poor customer services, disregard for customer concerns by the CEO, poor booking process, and the use of destination airports.
Because of reputation problems, the company experience declining profits, dissatisfied shareholders, employees and customers, low reputation and popularity of the CEO, falling share price, intense competition in the market, poor communication and service quality (BBC News).
The challenge
As highlighted in the current situation, Ryanair faces a challenge with its corporate reputation, which had implication on the company’s strategic and organisational aspects. A strategic and organisational analysis of corporate the reputation challenge facing Ryanair reveals various positive and negative aspects of the situation.
The company faces corporate reputation challenges as the management often receives complaints from customers and competitors because of misleading advertisements and inappropriate communication in implementing the company’s marketing mix strategies. The company sometimes advices fare prices, which are not consistent with the real prices the company charges passengers.
The company’s publicity is dented by the CEO, who insults the company’s stakeholders in a direct manner (Topham 2013). The company, sometimes, announces measures such as extra charges for using the toilet, overweight passengers and standing, which are never implemented. This is an indication that the company intends to seek attention from customers.
Reputation is also negatively impacted by the company’s low-quality services and bad treatment of customers. The firm fails to provide services that are critical in ensuring relatively higher levels of satisfaction. Social experience is a major problem resulting from negative corporate reputations for the company. People reported of not flying with Ryanair because of negative social influences of others.
Impact of the reputation challenge on Ryanair and stakeholders
Considering the reputation challenge facing Ryanair, the implications for the organisations and its stakeholders are immense. First, in the recent times, the CEO admitted that the company was having reputation challenges, which call for collaboration to change (Topham 2013). This would contribute to maintaining the company’s position as the leader in the low-cost airline market.
Second, empirical research indicates the organisational and stakeholder challenges of having a poor corporate reputation. For instance, the article in The Economist newspaper revealed reports of Ryanair being at the bottom-most of the surveys conducted to determine customer satisfaction, with most customers expressing their frustration in the social media (The Economist 2014).
Furthermore, a comparison between Ryanair and other major low-cost model airlines such as easy Jet revealed better corporate reputation and perception of easy Jet, which impacts negatively on Ryanair’s competitiveness.
Although the low-cost strategy has been the reason for Ryanair’s market leadership and reputation, using the strategy in every aspect of the business, including marketing and communication compromises the quality of service. The low-cost strategy implies cutting cost of every aspect of the airline.
From the information presented, the corporate strategy under the leadership of O’Leary indicates a negative corporate reputation, which results in bad publicity and negative perception of Ryanair (Topham 2013). Furthermore, although the CEO O’Leary’s straightforward nature may be positive for the company it has negative implications as the customers perceive the attitude as that of caring less.
Indeed, O’Leary’s harsh responses to customer dissatisfaction and being straight to the point about returning value for customers’ money worsened the corporate reputation (Topham 2013). The leadership behaviour at the top is often passed down to other employees who in turn express the same behaviour to customers, creating a bad organisational culture and behaviour (Ogbonna & Harris 2000).
On the positive side, the strategy pursued by the CEO is for the good of the business and its target market segment. Indeed, as the CEO, O’Leary asserted, the strategy suits the target customers who are more interested in the punctuality of flight scheduling, safety and low price because of their budgetary constraints (Topham 2013).
On the contrary, the negative corporate reputation impacted negatively on the company’s competitive advantage. As research findings indicated, Ryanair experienced negative growth while close competitors such as easy Jet experienced gradual, positive growth (Vizard 2014).
Financial and economic reports indicated declining company profits and share price because of customers withdrawing and investors fearing for sustained negative corporate reputation (BBC News 2013). The implications for the organisation and stakeholders highlight the correlation between corporate reputation and organisational growth.
The positive correlation indicates the need for reversing the negative image and embrace good communication, which would improve corporate reputation, customer service and identity. The steps result in positive publicity for the organisation and maintenance of the leadership position in the industry.
A proposal for improving Ryanair’s corporate reputation
Considering Ryanair’s strong reputation as a low-cost carrier, adopting an effective communication strategy could contribute significantly towards improving its perception in the public, which in turn leads to being competitive and increase the rate of growth. Therefore, the proposed measures are geared towards improving the corporate image through effective communication strategies.
The major areas identified included promoting the publicity of the organisation through advertising, social media marketing and positive publicity. Improving publicity is in line with making the consumption experience better through high-quality customer service and ensuring in-flight conflict.
Above all communication will help in creating a positive social influence, which would facilitate the word of mouth advertising (Shakespeare 2013).
Improving publicity is in accordance with the assertion of Crowther and Seifi (2011) who considered it as the best way of product and service promotion through media space, with the low-cost model being a major positive for Ryanair. Appearance in the media informs and reminds people about the company’s existence and the benefits derived from it.
Rather than using negative publicity, the company can replace with positive publicity, mainly through advertising, social marketing and positive publicity from the CEO.
To reverse the negative reputation and regain stakeholders’ confidence, the CEO should publicise an apology for insulting stakeholders, announce plans to transform the corporate reputation, being responsive to customer dissatisfaction and apologising in case of unplanned inconveniences.
With the negative reputation facing the company, improving publicity would catch consumers by surprise, which gains their attention in addition to maintaining awareness (Topham 2013).
Improving the consumption experience through in-flight comfort, service features and quality of services is vital to the communication strategy to be effective (Curry & Gao 2012).
Although in flight, comfort is not a key market proposition for the company, improving customer service on board contributes significantly to a positive reputation. In this regard, positive corporate image is possible with a change in organisational behaviour and culture through positive communication from the management. Good communication with staff is reflected in their communication to customers.
Other service features to improve corporate reputation include transparency in published ticket prices, flexibility in luggage limits, making booking easy, ticket prices, and making the company website more attractive to enhance communication.
Improving social influences in the market is important in ensuring customers affected by negative reputation start using Ryanair services. Employee training is a critical aspect of improving publicity because they are the ones who get in touch with customers first hand (Curry & Gao 2012).
Conclusions
From the analysis of Ryanair’s corporate reputation, various conclusions and recommendations are drawn based on the current situation of the organisation. They are based on internal and external analysis and identification of measures to improve the company’s corporate reputation.
Being a leader in the low-cost airline industry in Europe and the world, the company has experienced profit decline, which, as the CEO admitted, resulted from negative corporate reputation. The reputation resulted mainly from the company’s poor treatment of customers and the CEO insulting stakeholders openly.
Furthermore, the company focused efforts on negative publicity through straightforward communication and failure to respond appropriately to customer dissatisfaction issues. The dissatisfaction resulted in profit decline, which necessitated changes in communication (BBC News).
As the CEO admitted to harmful implications of the bad reputation, the study proposes measures to improve the situation and achieve positive reputation.
The measures proposed include publicity improvement through advertising, social marketing, in-flight comfort, customer service, and improvement of social experience. The improvement measures do not compromise Ryanair’s low-cost strategy because cost differential is the major source of competitive advantage of the airline.
Bick, G. C. 2009, ‘Increasing shareholder value through building Customer and Brand Equity’, Journal Of Marketing Management, vol. 25, no. 1/2, pp. 117-141, Crowther, D, & Seifi, S. 2011, Corporate Governance and International Business. Bookboon, London, United Kingdom.
Curry, N. & Gao, Y. 2012, ‘Low-Cost Airlines—A New Customer Relationship? An Analysis of Service Quality, Service Satisfaction, and Customer Loyalty in a Low- Cost Setting’, Services Marketing Quarterly, vol. 33, no. 2, pp. 104-118.
Ogbonna, E. & Harris, L. 2000, ‘Leadership style, organisational culture and performance: empirical evidence from UK companies’, International Journal Of Human Resource Management, 11, 4, pp. 766-788.
Ryanair is a low-cost airline that has a unique approach to customer service delivery. Unlike other low-cost airlines, it exploits several avenues of service delivery to minimize operational costs. The company outsourced customer service through service contracting in order to minimize the costs of service delivery.
The company exploits the fact that customers are concerned with company core products, service delivery and the company’s image. In this case, the company associates that customers’ satisfaction is relative to customers’ expectation.
For this reason, value is attached to the time, energy, money and other physical expenditures spent by customers (Bamber, 2009). In addition, the company maximizes on its product delivery service with respect to the level of expectation and satisfaction received by customers.
In most instances, customers are charged higher prices in order to access quality services. This means that extra costs may be attached to extra services provided by the airline.
Service delivery system
Ryanair has used its low cost fares to obtain a competitive advantage in the airline industry. The fares are used to lure customers that results in increased demand since they are provided with high quality services with low fares. This program reduces the levies charged on fares and sometimes offers free seats.
The one-way-pricing policy that is adopted aims at minimizing the stay requirements from travel services. Low operating costs are obtained by purchasing single type aircrafts from single manufactures (Zemke & Woods, 2009).
This reduces the costs required to train the personnel, maintain the aircrafts and purchase spare parts. Third party services are contracted to cater for aircraft handling and ticketing.
On short routes, Ryanair has utilized the point-to-point services. Its flights are made in a manner that discourages customers from booking connective flights since it does not facilitate connection flights.
It aims at minimizing the cost incurred in these flight connections in the form of transit passenger assistance and baggage transfers. The point-to-point measure is also intended to reduce the check-in times and reduce complexity. The airline uses secondary airports to evade congestions and minimize airport charges.
The short-haul flights allow the airline to offer services more frequently while minimizing on frill services (Ryans, 2008). This issue has ensured that passengers are charged for customized services need unlike the general services offered in longer flights.
The airline has resorted to an online reservation system. This means that customers are enabled to book flights on a real-time basis.
A chargeable online check-in process is scheduled for reservations made to reduce the time that is used in the actual check-ins at the airport. However, this initiative does not substitute the security checks and verification of documents before boarding (Gerson, 2008).
Service position
Ryanair’s leadership model has given the company a competitive edge within the industry. It leadership has been viewed to motivate and energize its employees. The management is outspoken and in turn has affected the transformation of its industrial image.
However, the poor company-employee relationship has always been a challenge. The airline is chiefly concerned with the customer satisfaction without much effort to satisfy its employees.
Unlike other airlines, Raynair has adopted the Schein’s functionalist view to create a feasible environment whereby employees learn to develop and adapt to the challenges in the industry.
However, the employer can tap more resources through effective service delivery in its physical setting while employees draw many benefits.
The airline’s service delivery is divergent to the organizational variables such as employee leadership, employee motivation and the supervisory relationships. It expects the employees to deliver as expected notwithstanding the level of motivation foregone.
The company does not recognize employee unions, which are vessels for representing employees’ needs. Most employees are employed on contractual terms via agencies, which in turn pay employee rewards considered low by industry standards (Davidow & Uttal, 2009).
Employees are rarely involved in the company’s decision processes, and thus, affect their performance negatively. The passengers often complain of unfriendly staffs who forego providing them with amenities they paid for due to their dissatisfaction.
This has pulled down the efforts to increase the customer satisfaction. In several views, their staffs do not follow the H.U.R.I.E.R model.
Recommendations
Despite the challenges facing the airline, Ryanair has adequate room to improve its customer service delivery. The focus on customer service delivery should be articulated with the employee development and satisfaction through the creation of sustainable flexible work environments and adequate remuneration.
They must be properly motivated for them to deal with clients in a friendlier manner. With the growing need for air travel, it can expand its routes to ensure that its customers can reach their destinations conveniently (Blanchard & Bowles, 2005).
It should also understand its customers as it rolls out new destination routes to avoid compromising on costs involved in the purchase of new aircrafts and employing new staff. The online service delivery should be complemented by the use of customer care agents.
This will assist in ensuring issues that cannot be completely solved through an online interaction with the system are addressed. For instance, the difficulties encountered by clients with the system are minimized.
References
Bamber, G. (2009). Up in the air: how airlines can improve performance by engaging their employees. Ithaca: ILR Press/Cornell University Press.
Blanchard, K. H., & Bowles, S. M. (2005). Raving fans: a revolutionary approach to customer service. New York: Morrow.
Davidow, W. H., & Uttal, B. (2009). Total customer service: the ultimate weapon. New York: Harper & Row.
Gerson, R. F. (2008). Beyond customer service (Rev. ed.). Los Altos, Calif.: Crisp Publications.
Ryans, A. B. (2008). Beating low cost competition: how premium brands can respond to cut-price rivals. Chichester, England: John Wiley & Sons.
Zemke, R., & Woods, J. A. (2009). Best practices in customer service. Amherst, Mass.: HRD Press ;.