Operations Management - Ryanair and British Airways - Case Study Example

Operations Management Table of Contents Table of Contents 2 Introduction 4 Role of Operations management 4 Importance of Operational Management 6 Value Chain Analysis 8 Ryanair 8 Inbound logistics 8 Operations 9 Outbound Logistics 9 Service 9 Supporting services 10 British Airways 10 Inbound logistics 10 Operations 10 Outbound logistics 10 Post-sale services 11 Support activities 11 Comparison of Operations Management Strategies of Ryanair and British Airways 11 Dependability 14 Speed 15 Quality 16 Cost 16 Conclusion 17 Reference list 17 Introduction For the organisation to operate in the long run, a stream of resources and capital is essential. Strategy is the plan to allocate these resources and funds in a structured manner for the effective flow of the business operations and attain the organisational goal. The strategies help in identifying the competitive positioning of a company and its place in the market which enables them to plan for their future by achieving the position they desire. The report focuses on operations strategy that reflects the needs and requirements of the business market. It further discusses how strategies influence the company’s operations management performance from the design, planning, control and improvement perspectives. The study would reflect the major differences in the strategic operations management functions of Ryanair and British Airways. It would further differentiate the competitive objectives of the two companies which would influence their decision making of operations and product characteristics. Role of Operations management It is the arena of management which initiates in forecasting, structuring, planning, controlling and maintaining the production procedures and business process reengineering in the field of production of goods and services. The operations management takes care of the organisational operations. It assures the use of adequate resources for production and maintains the demand of customers. The role of operations is to maintain the production process that is, the process of conversion of the inputs which are the raw material, energy and labour into the outputs in the form of products or services (Slack, Chambers and Johnston, 2004). The primary role of operations management is to ascertain the production process by converting the inputs of production into the desired outputs. There are strategic role of operations management as well. The word strategic determines its importance in terms of planning of the action or process. Therefore, the strategic role of the operations management is to structure and execute the business processes to achieve the organisational mission and vision. Hence, the role of the operations manager is to frame proper strategies to target business needs to help the operations department to allocate its resources for the production process and estimate the quantity resources needed and method to be applied to meet the operational goal of a company (Schermerhorn, 2011). The Transformation Process The operations process in a business organization is to produce products or services by transforming the inputs into the outputs. These production processes follow the method of ‘input-transformation-output process. There are two types of production inputs in operation process which are the transformed resources and the transforming resources (Bensoussan and Fleisher, 2008). The transformed resources are the inputs that are processed, redesigned and changed into the desired outputs. Transformed resources are as follows: Raw Materials which are converted either physically through the manufacturing process or transported to different locations; ownership transformation which is also known as retailing and warehousing where the material is stored (Slack, 2015). Information is another form of transformed input resource which can be altered; it can have possession transformation through market research, can be stored in the form of documents and books in libraries as well as can be transported through telecommunication (Chase, 2012). The last form of resource is the customers. Customers can be made aware through touch points which results in customer loyalty, experience and satisfaction. The transforming resources in the operations management process are the resources that initiate the transformation process. These resources include the facilities which constitutes of equipments, factory, office building and the technology processes as well as staffs who are the manpower involved in the operation process. The features of staff and facilities differ on the basis of the operation process. As to a factory operation requires machinery and technical skills, whereas, an accountant must possess educational qualifications and analytical skills. The same way the facility requirements also differ with the nature of the work or processes. There are ambiguities in production of goods and delivery of services as the degree of contact with the customers in terms of services are high and therefore, they tend to judge a service every time it is facilitated. The uniformity of inputs is less in terms of services as there are no fixed inputs for a service function. The measurement of productivity in case of services is judged by the level of customer satisfaction and experience which leads to customer loyalty. Therefore, it is very difficult for a service organization to judge the customer needs as it varies company to company as well as customer to customer. Quality assurance is difficult for services as the inputs are variable and the delivery and consumption takes place at the same time whereas, in case of product, the delivery and consumption takes place at separate time frame. Importance of Operational Management The operations management is important in any business organization as it is the primary function which controls the operations process of a firm. As in the case of finance and marketing functions, operations management is also a defined function of an organization with clear set of responsibilities, process strategies and framework. Operation management helps in reducing cost of production and enhancing share holder’s value. It helps the organization to achieve the market leader position by minimizing resource cost and maximizing output. It leads to product and service management from generation of idea to manufacturing of the product. Operations management leads to total quality management which is essential for an organization to achieve customer preference and need. Further, organizations can resort to total quality management, reengineering, benchmarking and outsourcing to achieve the objectives of operations management. Managing the outbound process is also a part of the operational management as management control and coordination also constitute to a larger picture to attain company’s goal in an effective manner. Management control includes product assessment, product allocation, advertising and promotion, sales and service and product improvement. Further, facilities management and inventory management is also an integral part of operations management. Background of Ryanair and British Airways Ryanair is a low-cost airline and has an Irish history. It was established by the Ryan family in the year 1985 flying once a day commuting flyers between Waterford in Ireland to Gatwick airport in London (Ryanair, 2015). It expanded in 1997 due to the European deregulation of the airlines industry. Ryanair is considered to be the largest low cost airline company, globally and in the European airline industry (Ryanair, 2015). British Airways also known as BA is an airline carrier in the United Kingdom and is considered as the largest airline on the basis of its carrier size, destination coverage and international flights. It is the second-largest airlines in Britain in terms of the passengers carried (British Airways, 2015). It is an UK government established airlines initiated in the year 1972 to manage two nationalized airline companies, the British European Airways and the British Overseas Airways Corporation as well as two regional airline companies, the Cambrian Airways and Northeast Airlines which were all later merged in the year 1974 to form the British Airways. Value Chain Analysis The value chain analysis is the study of the different operational processes involved in an organisation to secure its competitive position in the market. To gain a competitive advantage, the firm can resort to cost leadership and product differentiation (Bensoussan and Fleisher, 2008). Ryanair Ryanair has followed the cost leadership strategy to gain a competitive position and sustain in the market. The value chain analysis would highlight the operation process which enables the company to achieve cost leadership in the airlines industry (Ryanair, 2015). Inbound logistics Ryanair sources its transforming resources from suppliers at a lower cost than that usually charged in the airline industry. For example, the company operates its flights, its landing and departure from airports outside the cities which reduces its operational cost as compared to the other airlines landing in major cities. This enables Ryanair to charge its customers a lower price for travel as the expenses incurred is much less due to low charges on landing and ground services in smaller airports outside the cities. The company has also managed to have a good relationship with the airplane manufactures Boeing and the fuel company Jet fuel, so that they receive service and deliveries on time leading to effective operation processes (Stevenson, 2011). Operations Ryanair has adopted various operation strategies for its effective business operations like the automation of the ticketing service which reduced the hiring of staff resulting in reduced operational expense. The automation service enabled customers to directly book tickets and check in. The company does not provide entertainment and meal in the travel duration thereby decreasing the additional expense and attaining cost leadership (Hill and Hill, 2012). Outbound Logistics Other airline companies appoint agents and online services for selling off their tickets to their potential customers which is not followed by Ryanair. It does not depend on agents or online website for selling their tickets instead, it resorts to direct marketing strategies, selling through their own websites, hence, decreasing the operating cost as there is no commission paid to the agents. It also follows the short turnaround times (TAT) strategy where the plans are initiated to be on air the maximum time which leads to low landing and ground service cost (Grundy and Moxon, 2013). Service Ryanair maximises its operation by ensuring its planes are landing and departing on time by following the TAT strategy as well as it does not offer food in the plan which leads to lower travel cost for its customers. Therefore, firstly the customers do not have to wait before boarding due to its on-time strategies and also have to pay low rates for their travel compared to other airlines (Hill and Hill, 2012). Supporting services Ryanair subcontracts its supporting services to other companies for baggage handling and aircraft services to reduce cost and time of operations. This enables Ryanair provides its customers high quality service at a low cost travel. Therefore, the value chain justifies that Ryanair earns greater profit and revenue and charges less from its customers giving them the required service to enhance customer satisfaction which attracts more customers leading to market growth (Stevenson, 2011). British Airways Inbound logistics The British Airways maintains good relationship with its suppliers, offers proper control of stock and professional training to its staff which is certified by the UK City and Guilds (British Airways, 2015). Operations The company provides greater security of luggage; instant online check-in services, enables customers to book tickets through third party booking like agents and online travel websites (Wu and Lee, 2014). Outbound logistics British Airways operate from the airports of major cities around the world ensuring greater coverage and availability which enhances customer satisfaction. It also ensures best customer service which helps them to gain competitive edge in the airline market.  Marketing and sales To gain a greater sustainability in the airline market, British Airways not only provide excellent customer service but also takes care of maximizing stakeholder’s value. The company also invests a lot of amount on the implementation of marketing and sales strategies. Post-sale services British Airways controls the post sales service through loyalty programs, membership cards as well as enable regular communication with its customers through various channels ensuring higher customer experience leading to loyal customer base. Support activities British Airways ensures higher customer experience by providing meals and entertainments during travel. It has installed LCD television for better customer satisfaction. BA ensures larger employee job satisfaction and enhancement of their efficiency through training programs. Comparison of Operations Management Strategies of Ryanair and British Airways In the competitive market of the airlines industry, it is very tough for the airlines company to survive without a well structured operational strategy. Ryanair follows the strategy to operate as a low cost airline providing the cheapest cost for travel which results in achieving higher revenue and increases profit growth. On the other hand, British airways follows its operational strategies in providing the best service to its customers and providing an upgraded experience in every flight (British Airways, 2015). It aimed at improving the operational efficiency. In order to achieve successful operational management, the companies should target to reduce production cost, initiate in enhancing customer experience and satisfaction through quality service thereby increasing revenue. The companies can resort to well structured operational strategies and planning an effective operational capacity by allocating resources to achieve company vision which can further result in decreasing capital investment on product and services but maintaining high quality (Handfield and Bozarth, 2012). Trade-Offs Ryanair British Airways Product features Single class of seat (Yes or no?) Yes No Seating (High or low seat density? Seat pre-allocation possible? Yes Yes Load factors (High or low occupancy?) High High Catering (No, little or always?) No Yes Network (Point to point or hub and spoke?) No Yes Frequency of flights (High or low?) High Low In-flight entertainment (Yes or none?) No Yes E-ticketing (Essential or not necessary?) No Yes Frequent flyer schemes (Yes or none?) No Yes Operational features Single aircraft type in fleet (Does the company operate with either large and small aircrafts or only one type?) Small Large Airport choice (Main or secondary?) Secondary Main Aircraft utilisation (Does the aircraft spend much time on ground or is it highly utilised?) Highly Utilized Low Utilization Fast turn around (Yes or no?) Yes No Flight distance operated (Long and short hauls or only short?) Short Long and Short Cargo (Do they carry cargo besides passengers?) No Yes The parameters to judge the performance of the operation strategy objectives are as follows: Dependability To secure its position in the competitive market, British Airways has ensured to enhance its dependability by using information technology in various sectors of its operations. It uses IT in all aspects of its processes starting from its company’s website to its procurement processes for fuel as well as use of high end entertainment gadgets in flight to employing promotional strategies through mobile technologies. This would give a competitive edge to the company securing its position in the global market. The Operation Management team of BA aspires to deliver a strong, protected as well as dependable technological operation at a considerably fair price (Cook, Behringer and Benger, 2012). Ryanair dependability strategy deals with on-time flight scheduling and security of luggage. Though it has assigned third party companies for aircraft and luggage management services, it ensures that the customer security is the primary objective of the company and customer should achieve the best experience on travel (Cook, Behringer and Benger, 2012). Flexibility To gain a competitive edge, British Airways has initiated 24/7 call centres to handle customer enquiry, supplier feedback and communication. It also promotes grievance handling and complaint management throughout the day to ensure greater customer and supplier satisfaction. The company ensures proper update to the customer in terms of flight delay through applications updated with all information. These strategies ensures flexible support to both customer and supplier end. Ryanair offers flexibility to customers by charging only for the flying tickets and additional charges for availing other services. This enable customers to opt for services they are willing to pay as all flyers are not willing to spend extra amount for food and entertainment hence leading to customised service (Evans, Stonehouse and Campbell, 2012). Speed British Airways ensures its passengers to fly on time and land on time. This helps the company to gain customer faith on them. It has launched high speed aircrafts with hybrid technology to save time while flying. The company has also come up with technological advancement and know-me programs through which the staff can track customers with emergency and tight schedules and are offered personalized services to reduce their time of waiting in the airport or boarding pass or luggage claim. Ryanair on the other hand ensures turnaround time of aircraft, on time reservations, total customer support and luggage handling services but it needs to improve more as it has subcontracted the service operations to other company hence, it has less span of control over it (Cook, Behringer and Benger, 2012). Quality The British airways maintain its quality of service by regular training of staff to ensure high quality customer experience. It has developed IT graduate apprentice programs where fresh graduates are appointed as interns. This is a program of 2 years where the employee is given integrated technical training which ensures delivery of quality service to the passengers. It also guarantees best customer experience in their aircrafts as these vehicles are technologically upgraded and efficient as it promises to deliver the best in the market. The company takes care to maintain the best aircraft design, ambience, safety and security service or staff service (Mendibil, et.al., 2013). . Ryanair takes care of the quality aspects but as compared to the high cost airlines, the quality of service is poorer as they are more concerned with the low cost flying experience rather than the quality. Ryanair tries to maintain a standard as compared to the low cost airlines by providing all the facilities from customer service to luggage handling, safety and security as well as on time departure and arrival. Cost British Airways faces competition in comparison to cost; as it is a high cost airline and customers pay a higher amount to fly as compared to Ryanair. Therefore it loses customer base who wants to travel at a lower cost. On the other has fluctuation of fuel prices has resulted in increase of operational cost leading to high selling price of tickets. Ryanair on the other hand eliminates all additional cost of aircraft and luggage handling by subcontracting them as well as maintaining turnaround time of aircrafts to reduce operational cost and provide low cost flying to its passengers. The company also absorbs fuel fluctuation prices and does not allow it to reflect on its ticket cost (Mendibil, et.al., 2013). Conclusion The report projected the role and importance of Operation management in a business organization. The study has also focused on the strategies implemented by British Airways and Ryanair to gain a competitive advantage in the airline market. It further analyzed both the company’s operations management through Value chain analysis. It discusses the role of operations strategies in the business organizations and how the performance objectives of the companies are evaluated based on certain parameters like flexibility, dependability, quality, cost and speed. Reference list Bensoussan, E. B. and Fleisher, S. C., 2008. Analysis without paralysis: 10 tools to make better Strategic decisions. USA: Pearson Education Ltd. British Airways., 2015. About British Airways. [online] Available at: [Accessed 22 June 2015]. Chase, J., 2012. Operations management. New Delhi: Tata McGraw-Hill. Cook, T., Behringer, E. C. and Benger, J., 2012. Airway management outside the operating room: hazardous and incompletely studied. Current Opinion in Anesthesiology, 25(4), pp. 461-469. Evans, N., Stonehouse, G. and Campbell, D., 2012. Strategic management for travel and tourism. UK: Taylor & Francis. Grundy, M. and Moxon, R., 2013. The effectiveness of airline crisis management on brand protection: A case study of British Airways. Journal of Air Transport Management, 28, pp. 55-61. Handfield, R. B. and Bozarth, C. B., 2012. Introduction to Operations and Supply Chain Management. UK: Pearson Higher Ed. Hill, A. and Hill, T., 2012. Operations management. UK: Palgrave Macmillan. Mendibil, K., Rudberg, M., Baines, T. and Errasti, A., 2013. Operations Strategy and Deployment. Global Production Networks: Operations Design and Management, p. 61. Ryanair., 2015. Welcome to Ryanair. [online] Available at: < https://www.ryanair.com/en/about/> [Accessed 22 June 2015]. Schermerhorn, R. J., 2011. Introduction to management. US: John Wiley and Sons. Slack, N., 2015. Operations strategy. US: John Wiley & Sons, Ltd. Slack, N., Chambers, S. and Johnston, R., 2004. Operations Management. Harlow: Pearson Education. Stevenson, W., 2011. Operations management. New York: McGraw-Hill/Irwin. Wu, C. L. and Lee, A., 2014. The impact of airline alliance terminal co-location on airport operations and terminal development. Journal of Air Transport Management, 36, pp. 69-77. Read More