Managing Corporate Reputation – the Case of Ryanair

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Table of Contents

Introduction
Background – Ryanair
The current situation
The challenge
Impact of the reputation challenge on Ryanair and stakeholders
A proposal for improving Ryanair’s corporate reputation
Conclusions
References

Introduction

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.

References

BBC News, Ryanair shares plunge after warning over profits. Web.

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, 2014, Cheap Flights | Cheap Flights to Europe | Official Ryanair Site. Web.

Shakespeare, S. 2013, Ryanair charm offensive may heal its brand reputation. YouGov: What the world thinks. Web.

The Economist, 2014, Price or quality-pick one. Web.

Topham, G. 2013, Ryanair’s new touchy-feely O’Leary hits turbulence but sees clearer air ahead. Web.

Vizard, S. 2014, ‘EasyJet narrows gap on Ryanair in passenger battle’, Marketing Week (Online Edition), vol. 2, no. 1, p. 9.

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