Managing Corporate Reputation - Ryanair - Case Study Example

Managing Corporate Reputation Table of contents Introduction.………………………………………...………………………………………... 3 Analysis……………………………………….….………….……………………………… 3 The Challenges.....……………………………………………………………………………. 5 Proposals……………………………………………………………...…………………….... 7 Conclusions and recommendations.………………………………………………………….. 8 References………………………………………………………………………………… 10 Introduction Recently, consideration of how reputation reflects on a company, stakeholders, and the employees has increased. It determines the success of the company largely (Doorley & Garcia, 2015). Most of the concern lies in the relationship between the corporate reputation and the responsibility of each company. The practice of each company paints a picture to the public about its operations. This creates an opinion in the minds of the consumers, which is termed as a reputation of the company. It is in the best interests of companies to have a good reputation, as it will attract more customers to them (Davies, 2003). An excellent reputation allows the consumers to market the company on their behalf. In the end, a company will increase their profit margins by reducing the need to promote their products in comparison to competing companies. Corporate reputation is paying attention to as a concept, its measurement and implications for organizations, according to Kaul and Desai (2014) causing numerous definitions stated by researchers (Helm, Liehr-Gobbers & Storck, 2011). Martin, Burke and Cooper (2012) defined corporate reputation based on stakeholders’ perception, an overall combined perception of multiple stakeholders and compared amongst competitors.  The following report will analyse the reputational challenges of Ryanair, an Irish low-cost airline company and its issues. It will reflect positive and negative impacts of corporate reputation and different strategic and organizational perspectives. Analysis Being the Europe’s only ultra-low-cost carrier, as stated on the official website (Welcome to Ryanair, n.d.), the company provides its customers with the lowest fares available in the aviation industry. The strategy was aimed at attracting more customers, which would translate to increased revenue margins. Accessible to the masses, it has opened Europe for tourism in the way that had never been done before. Led by CEO, Michael O’Leary, the company operates more than 1600 flights, which connect to over 189 destinations, in over 30 countries around the world, every day. Despite the increase in revenues, which were estimated to be 5,036 million Euros in 2014 (Annual report, 2014), the company had a number of reputations challenges in the recent years that resulted in different claims and fines due to the poor quality service given to passengers. However, the report highlights a 3% growth in traffic, opening of eight new bases and introduction of 121 new routes. The company employed more than four hundred people, which raised the number of employees to 9,501 people. In addition, the company increased the wages of the employees after negotiating a 5-year payment plan. The plan included all pilots and cabin crewmembers based on all their 12 pilot bases. However, according to Independent articles (Wright, 2013), the company is also appearing to be exploiting its staff members to achieve increased profit margins. The report (Annual report, 2014) further states that Ryanair successfully improved its customer service by launching a new website and allocating seats to the passengers. Such actions are the result of poor customer care, which is evidenced in the Telegraph article report (Smith, 2013). Despite the priority of low price of the admission, there were problems at Ryanair in treating customers. The staff members were unpleasant, hostile, rude and aggressive towards the customers. As stated in the Independent article (Mulligan, 2014), the company is the second largest company in Ireland with its stock market at eleven and a half billion Euros. The article showed that the soaring shares had added one billion Euros to Ryanair’s market capitalization. The CEO’s stake in the airline also increased in value to €423 million. Different issues connected with the economic factors and difficulties Ryanair faced in the previous years, lead to the challenges in the reputation it was facing. According to Martin, Burke and Cooper (2012), it is the role of the CEO to determine the reputation of the organization, despite the economic crisis that has the capability of harming the company. In addition, violations of consumer rights, shareholder expectations and rights of employees are considered to be majorly the fault of the CEO. Within Ryanair, the role of the CEO was described as inappropriate for years, which forced the company to issue a profit warning that sent shares plummeting down by 13% (Faull, 2014). The company did not stop in becoming the leading contender in the market. However, that was until the competitors began to make inroads into the market niche that Ryanair was lost due to the bad management. The company was once dominant in the market, but poor management caused it to be overtaken by its competitors. The Challenge It is not surprising that a 100% of the CEOs report was on their frequent thinking about the company’s reputation (Hiles, 2011). While they are taking the role of guarding the reputation, not all of them were of the opinion that a good reputation should be gained by means of good actions. To some, the treatment of stakeholders and customers did not determine the company’s reputation. Instead, some consider that inappropriate behavior will add more news about the company and will bring more profit. To some extent, the CEO of Ryanair was building a reputation for the company with an eccentric and peculiar leadership style. His manner of leadership is what was visible to the rest of the world. Despite all this, it still had a strong reputation. The company was perceived by people to be bad, and this further led to the fall in profits and decline in passenger and revenue growth (Janson, 2014). One of the biggest issues of the company is tough criticism from shareholders about Ryanairs inappropriate management culture and poor service provided to the customers. Focusing on the obsessive cost cutting strategy has damaged its reputation, becoming one of the hundred brand companies in the UK with poor customer relations. One of the Forbes articles (Maynard, 2012) stated that Ryanair’s CEO was not only mistreating customers, but called them “stupid” for breaking the corporate rules of the company. That kind of attitude towards customers did not make a good businessperson from O’Leary, at least in the customer-centric business. He did not adhere to simple rules where every customer value and good service is the responsibility of everyone. Another considerable challenge for the company was its controversial advertising campaign, which became a serious issue for the company. According to The Daily Mail, the controversial advertising had damaged the company, but also helped it to expand its recognition (Margath, 2014). For example, Ryanair had a campaign, it had advertised in Belgium 2001, which featured the famous Belgian statue with an announcement about the low fares coming to Belgium. Instead of achieving popularity, Ryanair was sued. The court coverage gave popularity to the company despite the public apology from the company. While the company has given jobs to more than 9,000 people, the demand for trade unions continues to rise. However, Ryanair struggles to avoid recognizing them. At the same time, the independent organization that represents the majority of pilots who work for the company, challenges the management of the Irish company to constructive dialogue with the pilots. They are demanding improvement of their working conditions. So far, the company did not comment on the action and it seems as if it is not trying its best to resolve such issues within the shortest time possible (Ryanair pilots seek improved employment conditions, 2013). While the company did not have a good attitude toward its customers and employees, it had created a bad corporate reputation. However, as Diermeier (2011) states, a strong reputation is critical to the company’s ability to build a good strategy to move forward. For this reason, the company should use business models involving trust to develop unique customers’ experiences and solutions. Shifts in expectations about the corporate conduct should be done focusing on the latest trends among the customers. Another positive impact on the reputation of the company constitutes the media coverage, which makes it virtually impossible for companies to hide and make the business more transparent. Proposals Reputation-related risks are big challenges for the modern company, and it can threaten its existence (Scifo, 2015). For this reason, companies are improvising new strategies that will help them improve relations between the company and stakeholders in the market. Dabadie (2014) proposes that companies should check their perspectives and have an empowered reputation leader. In addition, they should drive outcome that matters and can be measured. They also cease from chasing the numbers and instead take care of the missing points. After November 2013, Ryanair implemented the first improvement plan by hiring the first chief marketing officer Kenny Jacobs, who was taken on board to bring new ideas and replace Michael O’Leary with his inappropriate sayings about customers. In order to change the way the company treated its clients, the new chief had implemented the “Always Getting Better” program in order to change the customers’ perceptions about the previous management system in the company (Faull, 2014). According to the news, the company was striving to cut out its bad experiences, thereby changing the brand perception of the new direction. The company has reduced baggage fees and allowed two free carry-on bags. The company further introduced the option for customers to reserve their seats before boarding the flight. Another innovation of the company was concerned is website operation, which in the previous times was not comfortable for those using the airlines. Thus, the application was launched with the ability to book boarding passes using the internet-enabled mobile phones. This increase the number of customers who booked using the mobile devices (Topham, 2015). Its real time price comparison on the website will allow the customers to be aware of the fees at specific times, book flights and cancel them with ease. Business reporter (2014) stated that the company increased the number of passengers following its transformation into the carrier services. These new changes include the new website, greater baggage allowance, ability to rest during the quiet flights between 9pm and 8am, reduced penalties, and more legroom. Conclusions and Recommendations Chibuike Iwo-Egwuonwu (2011) states that corporate reputation positively influences the business’ performance and can bring wealth to both the business owner and stakeholders. As an intangible asset, it is the main driver for the sustainable competitive business, and it results in a corporate advantage. Reputation is also influenced by operational and communication activities. For this reason, the components should be essential to the company’s strategy of building a corporate reputation. In the modern age of technology, effective communication with the customers is vital. Ryanair can improve its communication with the customers by reaching out immediately to dissatisfied customers, and their negative comments should be resolved in a friendly manner. Another way to build a good reputation using online opportunities is to use the reach of digital media to its full advantage. In addition, the company should appeal to the numerous sources that would review the service. Here the CEO should be involved in all the aspects of the programs as the example to follow and champion of the company’s process. In an effort to improve company performance, the company should hire the right people to lead its customer-centric strategy. While the company is led by Jacobs’ implications, the customer service strategy is improving every day. Attention to the customers should be of top priority to the company. Letting the customers know that they are heard, and that the services are improved, promotes the good image of the company. In the modern business environment, companies are striving to charge high prices to make high profits. However, there is a healthy sense of understanding that modern customers are not willing to pay for the services or goods, which are expensive, especially if the firm offers no other bonuses or special offers. Besides, with such strong competition, companies should also think about different methods of attracting and retaining customers. For this reason, a reduction in prices can be less useful. However, customer-centric vision and care about clients is in more valuable. This forms a way in which a good reputation can be obtained from the customers. Current CEOs should understand this concept and act on it. Moreover, reputation should be valued as an intangible asset. Hence, it is crucial for businesses to work on improving and sustaining good customer services. List of References 5 of Ryanair’s best customer service improvements, (2014). The Business reporter, [online] Available at: http://business-reporter.co.uk/2014/12/04/5-of-ryanairs-best-customer-service- improvements/ [Accessed on April 26, 2015]. Annual report, (2014). The official report for Ryanair Company, [pdf] Available at: http://corporate.ryanair.com/docs/corp/investor/2014/final_annual_report_2014.pdf [Accessed on April 26, 2015]. Chibuike Iwu-Egwuonwu, R. (2011). Corporate Reputation & Firm Performance: Empirical Literature Evidence, International Journal of Business and Management Vol. 6, No. 4 Davis, G. (2003). Corporate Reputation and Competitiveness, Psychology Press Dabadie, M. (2014). Corporate Reputation & Issues Management Best Practices, Heartandmindstrategies, [pdf] Available at: http://www.heartandmindstrategies.com/sites/default/files/files/Corp%20Rep%20Issues%20Mngmt%20Best%20Practices.pdf [Accessed on April 26, 2015]. Diermeier, D. (2011). The Need For Reputation Management Capabilities, European business review, [online] Available at: http://www.europeanbusinessreview.com/?p=3131 [Accessed on April 26, 2015]. Doorley, J. and Garcia, H. (2015). Reputation Management: The Key to Successful Public Relations and Corporate Communication, Routledge Faull, J. (2014). On a higher plane: How Ryanair refined its tone of voice and improved customer experience, The Drum, [online] Available at: http://www.thedrum.com/news/2014/11/13/higher-plane-how-ryanair-refined-its-tone-voice- and-improved-customer-experience [Accessed on April 26, 2015]. Hiles, A. (2011). Reputation Management: Building and Protecting Your Companys Profile in a Digital World, A&C Black Helm, S., Liehr-Gobbers, K. and Storck, C. (2011). Repuation management, Springer Science & Business Media Janson, J. (2014). The Reputation Playbook: a winning formula to help CEOs protect corporate reputation in the digital economy, Harriman House Limited Kaul, A. and Desai, A. (2014). Corporate Reputation Decoded: Building, Managing and Strategising for Corporate Excellence, SAGE Publications Margath, A. (2014). Ryanair scraps controversial calendar featuring cabin crew wearing bikinis in provocative poses in favour of family-friendly image, The Daily Mail, [online] Available at: http://www.dailymail.co.uk/travel/travel_news/article-2777534/Ryanair-scraps- controversial-calendar-featuring-cabin-crew-wearing-bikinis-provocative-poses-favour- family-friendly-image.html [Accessed on April 26, 2015].Martin, G., Burke, R. and Cooper, C. (2012). Corporate Reputation: Managing Opportunities and Threats, Gower Publishing Ltd. Maynard, M. (2012). Ryanair CEO Calls Customers Stupid: Shame On You, Forbes, [online] Available at: http://www.forbes.com/sites/michelinemaynard/2012/09/07/ryanair- ceo-calling-customers-stupid-makes-this-airline-kids-blood-boil/ [Accessed on April 26, 2015]. Mulligan, J. (2014). Ryanairs market value soars €1bn on profit rise, The Independent, [online] Available at: http://www.independent.ie/business/irish/ryanairs-market-value-soars- 1bn-on-profit-rise-30714654.html [Accessed on April 26, 2015]. Ryanair pilots seek improved employment conditions, (2013). ECA Piloting safety, [online] Available at: https://www.eurocockpit.be/stories/20131104/ryanair-pilots-seek-improved- employment-conditions [Accessed on April 26, 2015]. Scifo, G. (2015). Company reputation now a major strategic business issue, Atelier, [online] Available at: http://www.atelier.net/en/trends/articles/company-reputation-now-major- strategic-business-issue_433058 [Accessed on April 26, 2015]. Smith, O. (2013). Ryanair worst brand for customer service, The Telegraph, [online] Available at: http://www.telegraph.co.uk/travel/travelnews/10319838/Ryanair-worst-brand- for-customer-service.html [Accessed on April 26, 2015]. Topham, G. (2015). Charter flight? Ryanair launches a customer contract, The Guardian, [online] Available at: http://www.theguardian.com/business/2015/mar/03/ryanair-continues- friendly-changes-please-customers[Accessed on April 26, 2015]. Wright, O. (2013). Join Ryanair! See the world! But well only pay you for nine months a year, The Independent, [online] Available at: http://www.independent.co.uk/news/uk/home- news/join-ryanair-see-the-world-but-well-only-pay-you-for-nine-months-a-year- 8619897.html [Accessed on April 26, 2015]. Read More