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Case study: Ryanair- The low-fares airlines Name Instructor Class 23 March 2011 Table of contents 1. Introduction 3 2. Evaluation of Ryanair’s strategy compared to competitors 4 2.1 Stakeholder approach 4 2.2 Low-cost business model 5 2.3 Key internal issues 6 2.4 Key external issues 9 3…
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Download file to see previous pages On the one hand, in August 2006, an Air Transport World magazine reported that Ryanair was the most profitable airline in the world, based on its operation and net profit margins, and on a per-airplane and per-passenger basis (Higgins 2007: 2). In November 2006, the company announced new record half-year bottom line of €329 million for the first half of fiscal 2007 (Higgins 2007: 2). Furthermore, traffic increased by 23 per cent to 22.1 million passengers, while yield jumped by 9 per cent as total revenues increased by 33 per cent to €1.256 billion (Higgins 2007: 2). In addition, even as fuel costs increased by 42 per cent to €337 million, Ryanair’s after-tax margin increased by 1 point to 26 per cent (Higgins 2007: 2). Ryanair expects high demand in the future, so it plans to expand routes and its fleet. On the other hand, Ryanair faces legal battles and acquisition challenges for its Irish rival, Aer Lingus (Higgins 2007: 1). Ryanair also faces stiff opposition for its union-busting policies and long working hours and low salary, although it claims the opposite (Higgins 2007: 6). There are, additionally, environmental challenges that threaten to impinge on Ryanair’s low-cost, no-frills business model. These environmental threats can increase operational costs. This paper analyses the case of Ryanair. It evaluates Ryanair’s strategy compared to competitors, by analysing its low-cost business model through the stakeholder approach analysis. It also determines the key internal and external issues of Ryanair. Furthermore, it evaluates O’Leary’s leadership using the transformational leadership framework. Finally, it examines the sustainability of Ryanair’s future strategies. 2. Evaluation of Ryanair’s strategy compared to competitors Ryanair’s business strategy compared to competitors will be analysed using the stakeholder approach. 2.1 Stakeholder approach The society, in general, is becoming more concerned of the role that business plays in managing stakeholder relations and responding to the environment. Many customers also prefer to deal with companies that actively reduce their ecological footprints (Rueda-Manzanares, Aragon-Correa, and Sharma 2008: 188). Similarly, shareholders, as well as financial and insurance companies, seek to lessen liabilities associated with environmental risks that come from corporate operations, such as pollution and harmful human health effects. The European Union has, in response, as well as the United Kingdom (UK) passed environmental regulations, sanctions, fines, penalties and legal costs for companies that are not operating in an environmentally responsible manner (Henriques and Sadorsky 1996 cited in Rueda-Manzanares et al. 2008: 188). These political institutions recognise that stakeholders clearly know their rights and responsibilities and are willing to generate partnerships and networks that can result to win-win situations. Companies that neglect crucial stakeholder relationships, however, may compromise competitiveness in the long-run, particularly now in a globalised world, where stakeholder interests matter (Rueda-Manzanares et al. 2008: 188). Stakeholder theory has rise amidst the public clamour for corporate governance and business ethics (Elms et al. 2010: 405). The theory can be rooted from the integration of business strategy and ethics and gained greater attention from management scholars for the past fifteen years (Damall, Henriques, and Sadorsky 2009 cited in ...Download file to see next pagesRead More
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