Internal analysis of Ryanair Essay

1. Internal audit of tangible, financial and intangible resources material Resources1. Human Resources* Ryanair currently employs 2000 people (2003) from 25 nations.* The pay is performance cogitate and among the highest in the airline industry (Annual Report 2004, p. 5). Travel concessions and participation in the share option program is granted to all employees. In 2003 all over 30% (639 in total) of employees similarlyk part in the stock option program the aver jump on pay per employee was around 53.000 (Annual Report 2004, p. 21).* chief exe reduceive officer Michael OLeary has importantly shaped Ryanair.2. Physical resources* Ryanair operates 72 aircrafts (Annual Report 2004, p. 3). All aircrafts are of a single type. Ryanair has ordered 225 brand new Boeing 737-800 aircrafts. The norm aircraft age was about 10 years vs. easy Jets was 5.1 years (2003). until now with the deliver of the new aircrafts, Ryanairs figure will enhance. The average age of the flutter is impor tant, as maintenance be depends on this.* Facilities Dublin aerodrome facilities, but no study other ones.Financial Resources* Ryanair will lie approximatelyly unhedged in 2005 (Annual Report 2004, p. 12).* With a quick ratio of 2.7 Ryanair has sufficiency cash even if all liabilitieshave to be paid at once (Brealey et al., 2001). Ryanair has also shown skilful profit mogul.* Ryanair is listed on a stock exchange, obtaining bully in form of equity capital. In total, Ryanair has 1.5 billion in shareowner funds (Annual Report 2004, p. 12). The stock was very attractive to investors, outperforming its benchmark index. nonphysical Resources* Ryanair has access to medium sized airports which provide cheap slot licences. The average airport charge applied to Ryanair was less than 7 .* Ryanair has an option to arouse 200 additional brand new Boeing 737-800 from Boeing.* cyberspace as major distribution platform with very huge attractionRyanairs most important assets are aircrafts and access to secondary airports. But this alone doesnt make this airline achievementful the real assets are the employees and particularly the chief executive officer Michael OLeary. Ryanair has a solid financial account and a good profit track which is currently negatively influenced by the ongoing set war.2 Threshold and union competences and resources1) Threshold Resources* Avail skill of aircrafts and access to ( imprint cost) airports* Internet as sales and marketing guile2) Threshold Competences* If a emergent oil price shock occurs or the exchange rate develops reproving this may have negative effects on net income. The ability to hedge exchange rate risks and oil prices is thitherfore a core threshold competence.* Customers expect to get cheap just the book prices, punctuality and highest resort standards from Ryanair. Ryanair must(prenominal) therefore be able to provide customers with lower fares than their competitors.* The ability to generate income from anc illary serve (in order to subsidise the lowest slate prices).Threshold capabilities of Ryanair are the ability to keep flying from A to B on a low cost tush and sustaining rivalrous ticket prices.Core capabilities/competencesEfficient low cost baseRyanair always searches for possibilities to cut costs. Low operating costs within the complete value chain, subcontracting and political economy of scale (performance related pay, efficient aircrafts, use of secondary airports, internet as marketing and sales device) make it workable to provide the cheapest ticket prices available.Sound financial statementVery sound financial statement (e.g. liquidity ratio, shareholder funds).Leadership style of Michel OLearyCEO Michael OLeary (Effective, charismatic leadership) and Ryanairs direction. The management of Ryanair received several awards and Michael OLeary was named one of 25 European business starts by the Financial clock. spunky market powerRyanair has a high market share, and the chess opening to act as a price leader (sound financial figures devising it possible to initiate and sustain a price war)Employment constitutionEffective employment handling Every 7th employee (191 in total) was promoted internally (Annual Report 2004, p. 5), keeping people who already know the participation which in turn reduces costs (introduction) and enhances motivation. Employees have also the interest to bring the company forward because over 30% already are shareholders.Sustainable competitive benefit according to Lynch (2003) of Ryanair is the low cost basis (key success factor), offering of the cheapest ticket prices (in order to target price sensitive customers) and the abilities of the management and the CEO (leadership) of Ryanair. In addition to that first mover envision (experience from competing against BA and Aer Lingus at the beginning) may also have benefited the company.3 Ryanairs combat-ready capabilitiesDynamic capabilities provide a constant flow of oppo rtunities (Lynch, 2003), from which Ryanair could take advantage in order to sustain the competitive advantage* Ryanair immediately responds to opportunities and threats in order to cut costs and sustain the low cost basis (e.g. abandonment of ice cubes) or to increase profits (e.g. ancillary services)* Constantly shaping the internet as the main communication device to its customer (marketing and sales, booking).* Ryanair wants to provide the lowest fares. Therefore the company must bevery flexible and always at least answer (or outperform) competitors in terms of the price.* Ryanairs aim is to enlarge. This means to add unendingly more routes and boost of frequencies on rotes with high demand.As it can be seen, Ryanairs dynamic capabilities are flexibility and the ability of rapid word meaning to changing conditions. Hence the competitive advantage is not static (e.g. low cost basis). This is what Brown and Eisenhardt (1998) define as continual revolution (Lynch, 2003 p. 130).4 Strength and weaknesses of RyanairBy referring to the above said, its possible to identify the sideline strength and weaknesses.Strength/Weakness* Efficient and low operating costs (e.g. airport charges, same type of aircraft, economics of scales, cost cutting where possible)* Immediate reaction of the management to use opportunities (e.g. when ice cube werent fee of charge anymore, Ryanair stopped ordering them)* Excellent career opportunities and efficacious employment handling (e.g. no union exists so far, good consolidation of employees in the company via the stock options program)* Because of their obtained size they have to some drop dead pricing power* The financial statement is sound (e.g. for sustaining the price war)* High load factor (about 85%, which is one of the best in the industry)* salutary performing CEO and management (e.g. several awards)* First mover experience (Ryanair and its management shaped the whole European airline industry)* Good arctic record* He dging policy (Ryanair remains unhedged although PESTEL analysis concluded an instable environment)* Ryanair added too much capacity in a short time cast (overcapacity may lead to deteriorating load factor and danger of high situated costs)* Ryanair doesnt consider people without internet (more passenger may be attracted if Ryanair wouldnt merely use the internet)* The behaviour of the CEO towards government officialsAs it can be seen, Ryanair fulfils all key success factors. The cost leadership approach is certainly Ryanairs major strength and provides competitive advantage. yet there were some weaknesses identified for now, the company should at least rethink its hedging policy.The classification of factors into strength and weaknesses can be misleading. For example, the enlargement of the fleet can lead to economics of scope. But at the same time, there is the risk of creating overcapacity (and thereby deteriorating performance indicators, e.g. load factor). Hence some issues m ay be both, a possible strength and weakness. The same is true for opportunities and threats. This is a limitation of the SWOT analyses.