Samsung Ansoff Matrix and Generic Strategies free essay sample

Over the past few years the company has shown tremendous ontogeny. Indeed it is Europes largest low cost carrier and fastest growing airlines. Currently it’s operating more than 1,500 flights every day from over 50 bases and around 1400 low fare routes across 28 countries which connect 165 destinations. Now I am going to discuss Ryan air’s (RA) current strategic position by analysing its macro (external)and micro (internal) environment. Macro Environment Macro environment consist of those major external and uncontrollable factors that influence an organizations decision making, and affect its performance and strategies. Now, i am going to analyse company’s position by using PESTLE and porter’s 5 Forces. Pestle Analysis: This is mainly used to analyse the wider macro environment in which the business operates. The organisation normally have no control over PESTLE factors and at best should try to accommodate and device strategies around these factors or issues. Political factors: The political environment in EU has been stable, enabling Ryan air to expand its routes and activities successfully. We will write a custom essay sample on Samsung Ansoff Matrix and Generic Strategies or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The increase in Air Passenger Duty in UK in 2009, 2010 and 2012 (? 11, 12, 13 ) and the EU Airport Charges applicable from March 2011 have affected the operating costs of Ryan air consequently. The repeated European government owned Air Traffic Control strikes have also caused a huge loss for airline industry as these strikes forced RA to cancel huge number of flights. Ryanair also had to pay compensation to passengers based on EU 261 reforms. Economic factors The interest rates in England is 0. 5% which has a positive affect and will encourage RA to borrow money on low interest rates to expand their business activities. (buying air crafts etc. ) The high unemployment rate in EU and UK has resulted in less people travelling even by low-fare airiness. This has a negative impact on RA as the ratio of domestic flights in Uk has been decreased due to less disposable income. The economic instability in Greece, France, Hungary and Italy has resulted in low demand for air travelling, thats why many airlines are cutting their routes including RA. The social environment It can be explained by different demographic trends. Majority of the people living in UK and EU countries are individualistic and they prefer to travel during their vacations. A substantial increase in leisure travelling, student migration programs within the EU nations has resulted in an increased demand for low-fare airlines especially Ryan air. The free trade concept specially in European union, has made possible for Rain Air to earn some revenue from the business community. Technological factor Internet is the most powerful tool available to travel marketers. RA and its competitors have their internet-based reservation system which helps to increase the number of passengers. RA uses the modern aircrafts with new generation engines, which result in less emissions and less fuel consumption; and allows the company to move on through its cost reduction strategy. Ryanair has introduced online check-in and self services in airports for the passengers which has received a mixed response from the passengers especially people travelling with families. Legal factors The emission constraint set by the European commission and its activeness of monitoring antitrust law and policies, sooner or later will affect the RA strategies; as EU legislation on working time regulation and union recognition, could seriously threaten RA policies and revenues. Due to BAA airport monopoly, Uk Court of Appeal asked BAA to sell Stansted and Glasgow airport (October 2010) to increase competition; which has helped RA in increasing their market share by increasing the traffic at those airports which had declined due to BAAs high cost and mismanagement. Environmental Factors As for the environmental aspect, Ryan air is currently the industry leader in terms of environmental efficiency. As per requirement of Environmental Protection Laws Ryan air operates a single-aircraft-type fleet of Boeing 737-800 â€Å"next generation† with an average age of only 3. 4 years which are aimed at minimizing drag, thereby reducing the rate of fuel burnt and noise levels. The unit emission per passenger has also reduced due to the inherent capacity increase in the Boeing 737-800 aircraft. The new cap-and-trade scheme of EU for CO2 emission control can effect RA cost management based on the allowances to be needed in 2012. Now we are going to analyse industrial environment of RA using porter’s five forces. Porter’s 5 Forces The 5 forces are the environmental forces that impact on the companies ability to compete in the given market. The purpose of 5 forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is. Threat of new entrants: The threat of new entrants is low. The short haul market is highly competitive as it needs high capital investment, special licenses and flight authorisation. Then the restriction or lack of slot availability makes it even more difficult for new entrants, to assess many airports. Any new entrant should have a differentiation strategy to enter and stay competitive in the market. The low threat of new entrants has provided RA an opportunity to grow and focus on the existing customers. Ryan Air has consolidated its position in the market with a brand differentiation as low-cost airline. The power of buyers: At present, the bargaining power of buyer for RA is medium/high due to the alternative options available and switching to another airline is relatively simple and doesnt imply further cost. Internet has made it easier for the customers to have an access to the latest low fare offers, provided by different airlines and do the comparison among their prices and services as well. Though Ryan Air has 7% growth in volume of passenger in third quarter of 2011 but they are not getting good customer service feedback and customers are not loyal to RA. So, RA should consider its other extra-cost factors like customer service, punctuality etc. to attract the new and retain its existing customers. The power of suppliers: The bargaining power of supplier is high. The suppliers for Ryan Air include aircraft suppliers, airports, fuel suppliers, catering etc. Boeing and Airbus are the only two aircraft suppliers. Ryan Air uses only single type of aircraft Boeing 737-800 and so faces high switching cost related to maintainability. Ryan Air uses regional airports which have low bargaining power as they are heavily dependant on one airline. Bigger airports where RAs competitors operate, have greater bargaining power. RAs policy is to avoid these airports. Price of aviation fuel is directly related to the cost of oil; RA controls this successfully through hedging. So rising fuel prices could not be a threat to RA in future. Threat of Substitutes: Threat of substitutes is very high as there are number of substitutes available to the customers. Induction of high speed trains and cars with low fuel consumption are the biggest competitors of Ryan air; as they have attracted the young generation in EU nations towards land transport which is easier to access and use. In Ryan Air’s case: Depending upon the price/performance ratio, passengers of airline can easily opt for the land travel substitutes like trains, cars or ferries. For e. g. the high speed trains in UK like Euro star are the main competitors as these trains give almost same services in similar budget as that of RA Moreover the stations are nearer the city centre than the regional airports (RA). Hence, there is no brand loyalty for RA. Competitive Rivalry: The low cost airline industry in UK is highly competitive and most of the advantages can be copied easily. There is no much differentiation on services among LCC; thus the main differentiating factor for RA is price. One of the main competitors of RA is Easyjet which like RA offers no-frills, short haul travel in low cost. So far, the direct competition has been avoided by mainly operating from/to different destinations; the moment the competition should become direct, there will be heavy pressure on prices, revenues and profitability consequently. Other competitors are Aer Lingus, Analysis of the internal environment An analysis on Ryan air internal environment needs to be done to assess the extent to which companys strategies are suitable to what is happening in its task environment. Micro environment This environment influences the organization directly. Firm has full control over these factors. For the analysing the micro environment of the RA, I will use SW analysis. SWOT This is an overall evaluation of the companies strength, weaknesses, opportunities and threats. Strengths and weaknesses are internal and can be controlled by the organisation while opportunities and threats are external. The objective of SWOT is to identify and convert the threats into opportunities and weaknesses into strengths. Strengths: Ryan air provides no-frills, point-to-point services on short haul routes which allow offering its low fares by cutting down the unnecessary frills like meals, video etc. The source-to-destination service cuts down extra service charges on connecting passengers and baggage transfer resulting in reduction of baggage losses. RA has earned a good repute due to its punctuality and in 2010 the rate of on-time departure was 88%. RAs aircraft maintenance cost is controlled by using single type of aircraft Boeing737-800 with average age of 3. 4 years. However its 374. 6 millions profit (2011), 8056 staff and a fleet of 275 air crafts displays its spectacular strength. Weaknesses: Ryan air has poor public image and had been involved in different controversies regarding customers dissatisfaction through misleading adverts. In different customer satisfaction surveys, Ryan air has been voted among the bottom players. The reasons for this also include unfriendly staff, uncomfortable seats, hidden costs, insufficient safety measures etc. Recently Ryan air has been accused for charging passengers for boarding pass. It has also been criticized for extra luggage allowance and higher credit card fee per passenger. After analysing its strength and weaknesses we can say that government policies in EU, different EU regulations like compensation for travellers for delay or cancellation of flights, CO2 emission regulations etc. ; recent economic crisis in some EU countries is worth mentioning, all these are a constant threat and can have adverse effects on the operating cost of RA. Else security threats needs to be addressed constantly and demand more and more effective steps to be taken, to maintain Ryan air s passengers volume. Moreover, to compete with substitutes like fast speed cars, ferries, trains and coach services throughout UK and Europe is a big challenge for RA as those services are also easy to access and economical for the customers. Fluctuation in currency rates is another issue which can directly affect the revenue earned by RA as it recorded foreign exchange losses of 1. 0 million in the 2010; due to the strengthening of the U. K. pound sterling and U. S. ollar exchange rates against the Euro. It provides four different growth strategies: Market Penetration, Market Development, Product Development, Diversification. Corporate Level Strategy (Ansoffs Matrix) Existing New Products Products Existing Markets Market Penetration The firms growth with existing products in the current market segment. For e. g sales, promotions, seasonal offers, royalty cards etc. Product Development The firms growth by targeting its existing market segment with new product. For e. g. apple introducing new ipad s. New Markets Market Development The firm targets new market with its existing products. For e. g. Tesco going to USA with the same products to capture that market. Diversification The firms growth into new businesses by developing new products for new markets. For e. g. Virgin introducing low fare flights by the name Virgin Australia. After analysing Ryanairs growth in the industry we suggest that Ryanair should use these two strategies: †¢Product Development †¢Diversification 1- Product Development keeping in mind the technological advancement in the airline industry RA should enhance its product development strategy by introducing Satellite phone in its air crafts. This will help in attracting business travellers; once find it beneficial, they will start travelling frequently by RA. . This satellite phone which also includes video conferencing will help the business community to have a continual communication or remain in contact with their businesses. RA can spread the cost by charging the facility from its customers. Strategic Evaluation and selection Product development Suitability Offering of satellite communication will increase market share and will especially help in attracting more business travellers. Acceptability Risk: medium- it may be expensive because of maintenance expense of satellite communication. Return : medium as it might take some time for business community to chose RA, solely for satellite phone. Reaction : mixed kind of reaction can be predictable. Feasibility Money: They have sufficient financial resources to support their product development. Other wise they can raise funds by issuing shares, as well as low interest rate can also help in raising finance. People time: RA can also outsource their new products saving enough time and minimising their operational costs. 2- Differentiation RA can internationalise by using Diversification strategy. It can be done by introducing long- haul flights into a new market. It means new product targeting new market such as India. Long haul flights that can accommodate travellers easily and are facilitated with all the required immigration facilities. RA has chosen Asian market and especially India because Indian airline is the fastest growing passenger market in major economies up to 18% in 2011. The life style of people in India is changing and buying power of the Indian market is increasing . Indians economy is stable and growing. Else India has got so many attractions for the tourists. While entering India, RA should acquire Air Asia to grow and plan for the long term. RA need to launch aggressive market campaign to reach out to new customers and to grow in the new market. Diversification seems to be the best suitable practise in this environment as airline industry has started to decline. Going to long haul in suitable and aligns with its strategy. RA can use its Boeing 737-800 aircrafts which new generation engines, which result in less emissions and less fuel consumption. Acceptability Risk: High as market (Asian) and product (long haul) ; both are new for RA. But this can be minimised by making an alliance with Air Asia which is experienced and dealing with both. Level of Though uncertainity exists but high risk – high return. Return : high. Adopting the new strategy is always a challenge. But it is expected that RAs diversification strategy will result in increased passengers volume and high profit margins; due to acquisition with AirAsia. Reaction : Positive. Customers are expected to be happy as RA will maintain its low fare strategy. It will create new job opportunities in UK and India.