Strategic analysis of Ryanair

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1 Mergers and acquisitions Many businesses have the intention of growing more than their current size but often times they dont know what direction to take to grow as they desire. In order to gain market share and to
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increase bottom line results like revenue and profitability companies like Ryanair may seek to pursue either of a merger or an acquisition strategy. Mergers take place when two different companies come together to become a single unit (Caroline, 2007). In this type of situation both parties may choose to adopt a new name and they may combine their names so as to retain a measure of their previous identify. The merger could be between a big firm and a small firm or it may be between two small firms or it may be between two big firms. Often times the sizes of two companies coming together may be different. Difference in size may also be as a result of revenue capacity of each party. One party may have more access to revenue, facilities, technology and experienced personnel. In either case, mergers often require the management of both parties to consider their cultural differences, differences in asset base and differences in number of employees. These differences often constitute lots of barriers to the successful implementation of the goals and objectives of the merger and it is highly important to carry out a comprehensive analysis of the project before embarking on it. Acquisition on the other hand often takes place when a bigger firm seeking to gain more market share decides to acquire a smaller firm. For example Ryanair acquired Buzz airline and retained just 10 out of its 24 routes, and only 170 out of its 670 staffs. The two firms were operate based on an agreement in the MOU (Memorandum of Understanding). Acquisition is a very risky process because of the implication the success or failure of the process often has on the image of the bigger company (Stuart, 2007). Acquisition often begins with an assessment of the potential target of acquisition. Analysis could involve carrying out a financial analysis of the potential target to ascertain the position of the company and the impact the relationship will have on the long term survival of the new venture. Some of the risks involved in this process are the potential for the merger and acquisition to fail. For example Ryanair thought that they would make profit from their
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acquisition of Buzz at the end of 2004. Mergers and acquisition are not always successful. On many occasions it may result into workers retrenchment because the new management cannot accommodate the large number of employees in the target organization. This was the situation with Buzz, when Ryanair did not accept all of their staffs. Mergers and acquisitions are also capable of increasing the customer base of the newly formed company. The customers of the first company ultimately become the customers of the second company. This was exactly what happened with Ryanairs acquisition of Buzz when they doubled Buzzs customer base from 2 million to 4 million. So in effect there is a combination of customer strength which results into larger customer base for the new relationship. Mergers and acquisitions often increase the technological strength of an organization. The technological strength of the first company is always at the disposal of the other. So in a way the two companies are combining their competences for better performances. Mergers and acquisitions are often cost intensive and time consuming. It consumes a lot of management efforts. Meetings and deliberations and series of evaluations are carried out before making decisions on the right kind of company to merge with or to acquire. 2. Strategic alliance Many strategic management authors and writers have identified strategic alliance as one of the means of achieving competitive advantage in an industry (Pearson and Robinson, 2005). Alliance on its own stands for the coming together of two or three individuals of entities. The same definition can be applied to business by viewing strategic alliance as the business relationship that exists between two or more organizations for the purpose of advancing the interests of all parties involved. A strategic alliance is a voluntary formal agreement between two or more parties to pool resources to achieve a common set of objectives that meet critical needs
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while remaining independent entities. This suggests that the identity of either of the parties remains unchanged, but in a bid to take advantage of the strengths of all parties involved to achieve a particular objective, many or more companies are getting involved in strategic alliances. One of the key reasons for entering into strategic alliance is to reduce operational costs through economies of scale. Economies of scale occurs when an organization or many organizations reduce costs to large volume purchases or through large volume investment. Strategic alliance between two or more parties contributes to increase in market share as well as a larger customer base. Strategic alliance allows both parties involved to have access to either partys technology. Technology contributes greatly to a firms ability to attain competitive advantage, and consequently when two or more firms decide to come together, the technological competence of all parties involved are combined to achieve the stated goals and objectives. Strategic alliance also grants access to the knowledge capital of all participating companies. This can greatly contribute to the process of knowledge sharing and knowledge transfer which ultimately influences research and development. Strategic alliances can also enable participating companies to break the competitive strength of a leading competitor. By combining the market prowess of all participating companies, it becomes easier to increase product quality, reduce cycle time and to offer more differentiated product and services to clients which can ultimately attract more customers in the market. There are many types of alliances; cooperatives, joint ventures, equity investments, licensing, subcontracting (outsourcing), franchising, distribution relationships, research and development consortiums, industrial standards groups, action sets, innovation networks, clusters, letters of intent, memorandums of understanding, partnership frameworks, etc.. For Ryannair the type of alliance to be employed depends on the nature of the needs of both parties involved as well as the goals and objectives of all participating companies
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in the alliance. Alliances cannot be not be successfully achieved without the critical evaluation of the participating firms strategy, business model, present level of capabilities, vision, mission and objectives. A though evaluation of these issues is important to the success of any form of alliance initiative. The scope of the alliance as well as the selection of the target firms is also highly crucial to the success of the program. Strategic alliance is not always successful. Sometimes poor communication, incompatible culture, inability to share risks, incompatible objectives, lack of trust and conflicts could contribute to the failure of strategic alliance. Ryanair has not been engaged in any form of alliance based on the information in the cases. 3. The growth share matrix: Ansoff (1987) matrix represents the four possible product portfolio of a business. Product portfolio is a term used in business and management to describe the total number of business an organization is engaged in. Typically all products have a lifecycle which is broken into the introduction stage, the growth stage, the maturity stage and the decline stage (Kotler and Armstrong, 2006). Not all products in a firms portfolio are in the same stage of the product lifecycle. There are some products that are currently generating revenue for the company while some others are still trying to penetrate the market. Some other categories of products have penetrated the market but because of many other competitors in the market, sales and revenue are not at their best. The BCG matrix was designed by the Boston Consulting Group (BCG) in the USA to identify four types of products in a firms portfolio in terms of market growth and market share. The basic assumption of the BCG matrix is that an increase in market share would result to an increase in cash for a business. This is so since market share is a representation of the number of customers purchasing a product. As more customers purchase the products and services, so do revenues increase, and when revenue increase, cash obviously increase. The
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second assumption is that a growing market requires investment in assets in order to expand capacity. For example a Hotel which has 20 rooms in a particular suburb suddenly begins a massive advertising campaign and as a result, more clients begin to visit the hotel more than the number of available rooms. In order to accommodate the growth in demand the hotel must of a necessity build more rooms or expand its existing facility. There are four types of products on the matrix. The cash cow represents products that generate relatively stable level of cash. They are often characterised by high market share in a low growth market. Cash cows enable the organization to develop other businesses with a steady flow of cash from another product source. For example Ryanairs cash cow is its no-frill flight. Over two-thirds of the company revenue comes from this. The dogs typically have a low market share and a low growth rate.Ryanair has no product in the class of dogs. They dont generate or produce a large amount of cash. Money is often tied up to products that are dogs. Question marks are still growing and are capable of consuming large amount of cash. The question mark has the potential to gain market share and become a star. The stars generate a lot of cash which is similar to a cash cow but they also consume a lot of cash. If a star maintains its existing market share, with time it will become a cash cow. At Ryanair, the ancillary services which are the sales of travel insurance, car rentals and hotel bookings represent the stars. The BCG matrix is a good model to assess all the products in a firms portfolio and to examine their contribution to the business in terms of market growth rate and market share. 4. Strategy development Strategy development emanates from the process of assessing the internal and external situation of a firm. The internal situation is usually assessed through the use of the SWOT analysis. The strengths and the weaknesses focus on the real internal capabilities and drawbacks of the
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company while the opportunities and threats are outward focused. The value chain analysis developed by Porter (1985) is another tool for evaluating a firms internal capability. Porter divided this analysis into two by focusing on the primary activities of a firm and its support activities. The external analysis is also usually called a macro-environmental analysis and it is normally carried out by applying a PESTLE and five forces analysis to an industry where a firm operates (Ginter and Duncan, 1990). The true position of the firm would then emerge and by identifying the vision statements, mission statements, and the stakeholders objectives of the firms, a set of strategic options will begin to emerge relative to the preliminary analysis carried out. Strategy development process is often divided into four stages: generation of options, strategy evaluation, strategy implementation and strategy control. The generated options are evaluated through many financial methods like the benefit cost ration, return on investment, return on equity etc. Pearson and Robinson (2005) identified the SFA (suitability, feasibility and acceptability) frameworks as another option to evaluate the appropriateness of an option. Once the option is evaluated and it has been successfully approved by the executive management of the company, then the implementation process begins, and the last stage of the process is to set control measures in order to measure the degree to which the strategy implementation process meets with target. Often times targets are set, and at the end of the process target results are measured with actual results, in order to identify gaps and problems in the implementation process. But many authors and writers have identified several strategy development frameworks. These writers say that a firm may either approach strategy development from an emergent point of view. Here no formal planning takes place. An example given in the case was the adoption of the Southwest airlines operating strategy by Ryanair. Although the case did not discuss the details of the entire process, it was clear that a fresh management team came was set up for the process.
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Strategies are developed in response to the needs and issues at hand. Another framework for strategy development is to go through rigorous planning and evaluation as stated above. This process is often time consuming but it eliminates the risks and uncertainties involved in the development of strategies. Many writers have argued in favour of adopting a planned strategy development approach because according to them, planning in any managerial activity cannot be ignored. But other researchers feel that planning strategies slows down the process of implementation as many people would be involved in making decisions and conducting evaluations. The September 11, 2001 crisis in the US forces Ryanair to adopt an emergent strategy by renegotiating its contract with Boeing. Another school of thought has agreed to have a combination of both approaches where some degree of planning are introduced to emergent strategy so that the whole process benefits from the values in an emergent approach, and it also benefits from the values of planning. In both situation strategy development is not an easy process. It is time and resource consuming. 5. The balanced score card This model was developed by Kaplan and Norton, two Harvard University Professors. This tool is generally for evaluating the internal position of an organization. According to the authors, a balanced scorecard enables a firm to identify its current level of performance and the performance indices for such performance relative to its internal processes, financial perspective, customer perspective, and innovation and learning perspective. In general the balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The balanced scorecard has evolved from its
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early use as a simple performance measurement framework to a full strategic planning and management system. The new balanced scorecard transforms an organizations strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis (Taylor and Every, 2000). It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies. The learning and growth perspective focuses on employee training and development programs in the organization as a means of creating an environment of learning where knowledge will be shared and all cadres of employees will work at the required level of skill and expertise to meet the companys goals and objectives. Learning and growth is very crucial to an organizations survival. Many organization development authors have related learning and development with competitive advantage. According to them, organizations which are constantly offering their staffs well tailored training programs aimed at improving their knowledge of work processes, are definitely going to be more competitive on the long run than many others who dont t do that. Financial perspective focuses on measuring the performance of an organization with key financial ratios. A firms current position is often tied to its profitability, revenue stream, operational expenses, return on equity and investments, liquidity and other financial measures of performance. The management of Ryanair has used the financial measures to assess the performance of the business since it started. Yearly profit and loss statements are released, and senior management use this to determine courses of actions. Often times management focuses on these measures more than other more objective measures that reveal the true position of things in the organization. The customer perspective focuses on the customer service orientation of a firm as measured by the number of customer complaints, after sales support service, volumes of customers, and types of products and services offered to the
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customers. Customers perception about a firm is an indicator of the current overall business performance of the firm. The internal business process perspective focuses on the core measures of business performance in an organization which are market share, sales figure, delivery efficiency, product quality, pricing systems etc. These measures are determined by the management of the firm in response to the key success factors of the business. The balanced score card approach has been used by many organizations for many years and it is still relevant for many business applications and performance evaluations.

6. Organization structure In historical times during the era of Max Weber, F.W Taylor and Henry Fayol factory workers were treated as machines. There was no focus on relationship of training of employees to increase their productivity. The arrangement of the organization focused on long and hierarchical level of decision making. There was a boss-subordinate level of relationship and there was a high level of bureaucracy. Modern day organizations have however changed their perspectives because of the prevailing volatile and dynamic business environment which requires faster response times, and more flexibility in new product development. Organization structure has therefore focused on the arrangement of working relationships in organizations, the lines of authority, and the overall decision making process of the organization (Daft, 2007). Many organization management writers like Richard Daft, Laurie Mullins, Chander etc have identified some common organization structure models which fit into many organizations. There is the simple and functional type of organization structure, there is the product based, division based, horizontal based, network based, virtual based, and multi-divisional structural model of organizations. Each of these types of structures represents different level of management
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interests and they offer different level of benefits to the users (Patricia and Cornelia, 1997). For example a simple and functional structure is often found in very small scale organizations which are often entrepreneurial based. Ryanairs structure was simple and functional when it started. The Ryan family headed the company. At this point in time, Michel O Leary has been the CEO, and there are other unit managers under him. Ryanair air is still functional in its organization structure. There is a very high level of centralisation of authority and the bureaucratic structure of this type of organization is also very strong. The advantage of this type of structure is that it is much easier to make decisions since only one or very few individuals are involved in the decision making process. The disadvantage is that it lacks flexibility and innovation and workers under this type of structure would not be able to express themselves. A product based structure arranges departments and functions around different products in the organization. This creates a strong sense of specialization in the firm because workers are focused on a particular line of product for a long time. The other types of structure are found in many other organizations and they also have different expressions at different situation. Some of the more recent organization structure types are the virtual, network and horizontal organization types which are found in many IT based firms. Organization structure has a strong influence on the ability of a firm to remain innovative. Innovation is built on a high level of flexibility in a firm. The more flexible decision making process is the greater the chances of developing new products and services through collaborative contributions from staffs and management (Mullins, 2007). An environment of low creativity and low level of innovation due to high rigid structures and bureaucracies is highly detrimental to the sustainability of an organization. Since it is certain that the current level of competition will not reduce, it is also right to say that those firms with very high level of flexibility will be the ones to survive on a longer time than the rigid ones.
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7. Leadership Many management writers have argued that there are striking differences between leadership and management (Mullins, 2007). The Ryan family provided leadership responsibilities over the affairs of the company from inception. Management had been defined by its five primary functions which are: planning, organizing, directing, commanding and controlling. But these functions are not completely favourably disposed to modern organizations. Many firms engage in intensive employee training programs on leadership just to equip staffs and most especially the senior management with leadership skills. Leadership inspires, motivates and influences followers to achieve a task they were not willing or motivated to achieve initially. Many organization management authors have identified several styles of leadership. There are the participative, inspirational, autocratic, authoritarian, transformational, situational and

transactional styles. The list is longer than this but this has been chosen to reflect some of the examples of leadership and their role in enabling both management and workers to achieve goals and objectives. A participative leadership style is described as the cooperative style where the leader involves followers in the decision making process, and engages them in several deliberations before decisions are made. This style is strongly encouraging to followers and it can improve their level of productivity since they are assured of the fact that their opinion is important to the wellbeing of the organization. But a major drawback here is that it slows down the process of decision making and consumes a lot of management time. The autocratic leadership style works well in a bureaucratic set up where there are hierarchies and several lines of authority. It does not support innovation and creativity and the leader uses command and control as the major traits. The authoritarian approach is a bit similar to the autocratic in that it
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does not encourage creativity and innovation since the leader uses more of personal authority in making followers to respond to instructions aimed at executing work activities.. The transformational approach is concerned with inspiring followers. Michael Leary, the Ryanairs CEO fits the role of a transformational leader because of its inspiring influence on the staffs in the company. It is one of the most discussed approach because of the significant contribution is makes in the execution of goals and objectives. Employees are more motivated and inspired under a transformational leader, and the result is increased productivity. The situational leadership approach focuses on gauging the readiness of followers by a leader before engaging them in the performance of work activities. This type of approach is not flexible because it suggests that if followers are not mentally or physically ready to undertake a task, the leader cannot initiate a move to undertake that task. The transactional leadership approach focuses on an exchange relationship between a leader and the followers. The leader tries to establish a transaction between followers in a give and take relationship before work activities can be initiated. This approach is quite common but it is not the best source of providing inspiration to followers and it is not applicable in all situations. The inspirational leadership approach is very similar to the transformational approach because its main objective is to inspire employees or followers to achieve corporate goals and objectives as designed by the management of an organization.

8. Change management Change has been described as the only permanent thing in life. The same opinion is relevant in businesses and operations in organizations, especially when the owners of these businesses have a desire to grow and become successful. Change is about moving from a level of performance to
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a desired level of performance, and it can be expressed in any form depending on the initiative of the change initiators (Matthew, 2008). Ryanair has been involved in several change projects according to the case. The acquisition of Buzz was a change process, and the change in the management team was another change program. Organizations decide to introduce change in response to the highly dynamic global business environment which requires that businesses create the necessary flexibility to accommodate customers` changing demands (Malcolm, 2008). Since the forces of demands and supply keep changing then it is highly important for an organization seeking to become sustainable to embrace change. Certain factors make the introduction of change to be very difficult. These are often called the barriers to change or why people resist change. People often resist change in organizations out of fear. They are not sure if their present positions will be retained or if their wages will be reduced as a result of a new technology or a new human resource director. So out of fear they begin to work in opposite directions to the objectives of the change. People also resist change out of ignorance. When workers are not well informed about the benefits of a change program they tend to be repulsive towards the change agents and this has the potential to result in failure of the change program. To ensure that a change program is successful a change management team is always set up to work through the process of change and to carry out a comprehensive analysis of the entire program. Organizations dont embark on change just anyhow. Change is executed from two dimensions of the extent of change and the nature of the change. Under the extent of change there are the realignment and transformation choices for organizations to make, and under the nature of change there are the incremental and big bang choices for the organization to make. If the organization is contemplating a big bang approach to change where they want to create or introduce something new but time is really a big constraint, then they have to decide if they want
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the extent of change to be a realignment of a transformation, and if the company wishes to embark on an incremental change program where they want to conduct a comprehensive analysis of the firm`s current situation, then they will have to choose between a reconstruction approach or a revolution approach, This framework has been designed to assist organizations in being effectively guided through their process of change in a systematic manner that will utilize their resources as efficiently as possible and at the same time the goals and objectives of the change program will be achieved. Change management is an ongoing program that many organizations permanently engage in and it is the link between their current position and a future position. Change can be an increase in market share, it can be an expansion of existing structure or the recruitment of more staffs.

9. Stages of entrepreneurial growth Entrepreneurship focuses on the establishment of a new product or service through a novel idea. It is different from existing product or service lines that are modified by an intending individual or a corporate organization. There are generally four stages of entrepreneurial growth as

described by Johnson and Scholes (2008). The first stage is the start up or the introduction phase. The Ryan family began the Ryanair business as an entrepreneurial project, and all the phases described here resemble some of the challenges and issues Ryanair faced.At this phase the goal is to penetrate the market with a particular product or service offering that has been developed through the NPD (new product development) process. Typical issues here are the determination of the exact target market to which product and service offerings will be focused. It is also important to determine the quality standards and performance of products and services from the perspective of the customer and to identify all key resources for the launching of the new
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products. Typical challenges in this stage are finances and infrastructure. Finance issues appear in the form of capital requirements to execute all aspects of the new product and service. Most entrepreneur resort to borrowing money from banks and financial institutions in order overcome this problem, and often times this process becomes so difficult to facilitate. Growth is the next stage in the process. Here the assumption is that the entrepreneur has successfully secured capital and other crucial resources for the successful launching of the product and the product has been targeted to a particular market and sales are already coming in. At this level the main goal would be to increase product and service market share which in turn will be reflected in increased revenue and profitability for the business. Effective management of this process is the main source of concern at this stage, and it may be possible for the entrepreneur to consider the option of employing more people relative to the size and income of the company. Management issues here can be in the form of financial management, HR management, and marketing management. The next stage is then the maturity of the products and services in the market place. Maturity occurs when the product has reached the largest share of the market and sales have remained the same for a relatively long period of time. At this stage the owners of the business would be concerned with the introduction of new products and service either by introducing an entirely new brand of products or by innovating on the existing brand. Sometimes the option may be to seek for market development with the same line of product and services. If the entrepreneur does not introduce a new product after the maturity stage is reached then the next stage is an exit out of the market. Exit occurs when the business begins to make losses and the only option is to pull out of the business, but most entrepreneurs dont wait until things degenerate to that level before introducing new brands of products and services.

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10. Enabling strategic success The success of strategies is at the onus of the management of the organization. Strategy formulation does not translate to successful strategy implementation (Grant, 2006). Many strategic management authors have indicated the need to be wary of the excitement of a well formulated strategy which may be dampened by the failure of the strategy at the implementation process. To avoid this problem many organizations go through a rigorous process of formulating their strategy and they apply the same type of rigour to ensure that it is well implemented. One of the reasons that contribute to the failure of strategies at the implementation phase is the lack of an appropriate organization structure and culture that can guarantee the institutionalisation of the strategy (Ghobadian and O Regan, 2002). Ryanairs adopted the Southwest airline model but the strategy would have failed if the company had not changed its management, and improved on its customer service in all spects. Consequently many strategic management authors have identified structure and culture as two critical elements for enabling strategic success. Four other factors can contribute to the success of a well formulated strategy. The first of them is having the right people around in the organization that will be committed to the cause of the strategy. It is the people that actually work with the strategy and if they show lack of commitment to the successful implementation of the strategy, then it is bound to fail. People are the greatest assets to the success of any given strategy. Information also plays a very vital role in ensuring that strategies become successful. It has been proven many times that information technology is a source of competitive advantage for organizations. Information technology enhances the process of acquiring information and disseminating it. Information technology enables strategies to be implemented successfully by providing timely information to the organization. IT software is also used in implementing strategic options. Finance is another very critical resource that
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enables strategic success. Probably after human resources is the importance of finance. Most strategic options require financial analysis to evaluate their suitability, and even after they have been selected, financial resources are still required to obtain other resources which are required t o execute the goals and objectives of the strategic options. Technology is also very crucial to the success of strategies. It has also been proven that technology is a source of competitive advantage (David, Campbell and Houston, 2002). Strategy cannot be executed without the appropriate technology in place. Technology can even be a process, a computer system, software, telecommunication devices and any other type devices that aid work activities in an organization. Achieving strategic success is crucial to the success of the corporate goals of an organization since corporate goals and objectives are normally aligned to the strategic direction of the firm. Successful strategy formulation does not translate to successful implementation, and it is highly recommended that corporate leaders embrace this idea in creating the right environment to ensure the successful implementation of strategic initiatives through the provision of appropriate resources, personnel, technology, and finance. All of these should be synthesised under the right culture and structure in the organization. With these in place, the risks of strategic failure are very limited.

11. SWOT analysis This is a tool that is normally used to assess the internal performance of an organization. Internal assessment is important when attempting to develop a strategic direction for an organization.
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Internal analysis reveals the weaknesses, strengths in the organization and the opportunities and threats confronting it externally (Pearson and Robinson, 2005). For example Ryanair has been adjudged as one of the most successful short haul airline in Europe. The main strengths of the organization are its ability to offer low fares to customers and to fly as frequently as possible between several European cities. The company`s main strengths also exist in its ability to offer exceptional customer service to customers in the UK and around the European union. The company has also invested a lot of funds in purchasing many planes, so in effect the company has one of the largest numbers of fleets in the low cost carrier industry. The strength of an organization represents its core competences. It represents those areas with the greatest level of achievement which differentiate it from its competitors. The weaknesses of an organization are the areas of relatively poor performance. The company often concentrates its actions on these areas so that with time it can be turned to strength. Ryannair has not been hugely successful with its management team. As far back as 2003 the company had five different CEOs within a short period of time. When the turnover rate (rate at which employees leave an organization) of a company is high, it suggests that either the company is not performing well and it has to consequently lay off its staff on a regular basis, or it suggests that employees are not happy and are looking out to other places for employment. The opportunities of an organization are those areas that have not been explored but with a strong potential for success for the company. Opportunities may exist within a country or without, and the leadership of an organization often develop strategies to take advantage of opportunities and to turn them to strengths. Ryannair opportunities exist all over Europe. The company has bought over a couple of other poorly performing airlines in Belgium and in the UK and this has repositioned the organization as a larger no frills airline within a short period of time. The threats to an organization are external as
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well. They focus on those factors that may influence the ability of the organization of achieving its long term goals and objectives. Ryannair had been affected by the September 11 terrorists attack on the US, and the effect if it was a spill over to the European airline industry with increased focus on security which led to reduced customers` interest as a result of perceived risks in air flight. Other threats to the successful performance of a business are economic and political. Ryannair has also been affected by the recent global credit crunch which hit almost all developed nations in the last 3-5 years. Many competitors like Easy Jet, BMI, and FlyBe has also entered the market making it more difficult for Ryannair to make enough profits.

12. External analysis using PESTLE Ryannair operates in a very unstable business environment. PESTLE is usually applied to the study of the external influences capable of negatively influencing the ability of an organization to achieve its objectives. These influences are generally outside of the control of the organization unlike the strengths and weaknesses. The political climate in which Ryannair operates is so unstable. Many governments in different countries keep changing policies and laws which invariably impact on the ability of the company to operate successfully in these countries. The government regulates the activities of airlines through various legislations and procedures. Ryannair has been taken to court many times and this has cost the company a lot of funds. The economic climate is also changing. The corporation tax being levied against companies in the UK and in other parts of the world is capable of limiting the abilities of these companies to make enough profit as they so wish. Since taxes are paid from the revenue generated. There are social issues affecting an industry as well. Social issues may represent the culture, attitudes and values of customers in different countries. This has a lot of impact on the ability of a company to attract
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the largest portion of the market in terms of its share. Technology is another area where companies make extra effort to be well informed. The airline industry is particularly technology dependent. It is not possible to operate an aircraft with the acquisition of several computerised equipments, software, customer order processing facilities and the rest of them. For example Ryannair as an organization may be influenced by a sudden change in the technological requirement of a particular model of plane. The company may be constrained to buy up this technology and this may at a huge cost to the company. There are also a lot of environmental issue confronting an organization. Many government regulations now make it mandatory for organizations to reduce their carbon dioxide emission to a very minimum level or otherwise risk being fined. The Kyoto protocol in Japan was an accord where many organizations came together to register their support for the massive reduction of their carbon dioxide emissions. The release of these gases comes from a lot of operations which include manufacturing, driving, flying of plane and the generation and distribution of energy through several sources. Ryannair and the other competitors in the industry have a duty to ensure they protect the environment both as a corporate social responsibility duty, and as requirement to conform to government regulations and policies. There are also many legal requirements that confront an organization and in the process of carrying out an external analysis, it is highly important to assess these requirements and to ensure that all key stakeholders in an organization are aware of the requirements and its consequences.

13 Generic strategies of Ryannair Michael Porter developed this framework and the idea for this was that all organizations seeking to become competitive must identify one of three strategies and may decide to follow that
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direction in a generic form for the achievement of their goals and objectives (Porter, 1980 & 1985). According to Porter, a firm may choose from being a cost-leader, to a focus strategy and then to a product differentiation strategy. Each of these approaches is capable of developing advantage for an organization. In the Ryannair industry, the low cost generic approach has been adopted as the generic style to strategy. Low cost generic strategies concentrate the attention of the firm to cost minimization at all levels in the organization. The company will source raw materials from the cheapest suppliers and it will do everything possible to cut costs to the barest minimum. The idea is that when costs are at the least and revenue keeps increasing relative to costs, the company will keep making profit since profit is always the difference between revenue and costs. Another strong feature of the low cost strategy that was adopted by Southwest airlines which Ryannair copied is the complete elimination of frills and other related services onboard. This enabled the company to charge the minimum fare required for them to generate enough operating revenue. And the result was that profit began to grow. Low cost generic strategy may not work well with product differentiation, since it is really difficult to pursue a differentiation strategy without incurring a measure of costs. It is possible to combine a focus strategy with cost leadership as Ryannair has done over the years. The company has focused its business activities on the European customer segment and has combined this with a low cost strategic approach. The result has been favourable for the company over the years. Being a low cost leader does not always mean that production can be achieved with a low cost. For example Ryannair has invested millions of pounds in operational expenses in the company despite its low cost approach to strategy. Being a low cost is a relative state to other competitors, and when it is possible to obtain resources cheaper than competitors, then product and service prices may be used as a strategic weapon to attract customers (Balogun and Hope, 1999). For example Ryannair`s CEO
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is contemplating a further reduction on the price of tickets as a direct implication of the company`s desire to keep reducing costs by all possible means. The idea is that if further cost reductions can be achieved through better resource utilization practices in the company, this may translate to reduction in flight tickets and this may give the company a competitive advantage over the other airlines in the industry. Ryannair has operated this model successfully over the years but it is not certain whether the strategy is sustainable enough for the company or it would attempt to adopt typical traditional airlines strategy in the nearest future. The decision is for the management to examine their short term and long term strategy and to take necessary actions when the situation arises.

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