INTRODUCTION: A DEFINITION OF STRATEGY Strategy is the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholder expectations. (Johnson & Scholes, 2001)
1. Identify Ryanair’s strategic position? (Bowman’s strategy clock; strategic group mapping) 2. How do the key external drivers of change affect Ryanair? (PEST(EL); Five forces Framework) 3. How does Ryanair add value to its strategic position? (Resource audit; Value chain) 4. Identify and evaluate strategic options for the company (this is the conclusion of the analysis)
Focused 5 differentiation
PERCEIVED ADDED VALUE
Low 2 Price
Strategies destined for ultimate failure
Exhibit 6.4a The strategy clock: Bowman’s competitive strategy options
Example Mapping for Supermarket sector
Tesco; Carrefour; Spar; Walmart
LIDL; Aldi Minor International Brands Multinational Brands
Geographical coverage (% of European Community)
Regional Brands MiniMarts
Morrison; Sainsbury’s; Waitrose
Store size (sliding scale)
Strategic Group Mapping
Strategic Group Mapping: some possible characteristics of Organisational Difference for the airline industry
? ? ? ?
Extent of geographical coverage Number of market segments served Product or service quality R&D capability (extent of innovation in product or process) ? Cost position (e.g. extent of investment in cost reduction) ? Pricing policy ? Size of organisation
Strategic Group Mapping
Quality of service
PEST for Airline Industry
taxes and policy ?Expanding of countries into the European Union ?Concern over incentives in regional areas
in some areas/Growth in
others ?Increasing energy costs – oil prices ?Disposable income may drop as prices increase
mobility of population ?Improved fuel economy of aircraft ?Expansion of second homes in ?Increasing use of IT for business Europe communication ?Increasing size of population - obesity ?Mobile communications utilised on flights. ?Perceived risks of terror attacks
Which are the long-term drivers of change?
Are there high barriers to entry (e.g. capital; branding?
Rivalry: Are there high barriers to entry? Powerful suppliers ? Powerful buyers/? Threat of substitution? Is there growth in the market?
Suppliers: Are suppliers powerful (e.g. are inputs rare;?; are airlines dependent upon a small number of?)
Buyers: Are buyers powerful (e.g. are there numerous individual customers;?; are air fares a high cost item?)
Are there a number of ‘equally balanced ‘airlines in competition with each
Are there a range of products which meet the same customers needs?
New Entrants: High barriers to entry in terms of: ?Capital outlay ?Economies of scale ?Established brands ?Expected retaliation Rivals: ?High barriers to entry ?Many suppliers lack power ?Recession may reduce global demand for air travel ?Market differentiation e.g. ‘no fills’ BUT: ?Buyers are powerful ?Needs/products can be easily substituted ?Recession may encourage passengers to seek low fares ?Numerous airlines Substitutes: ?Different forms of transport ?Different types of airline ?Different low cost airlines
Suppliers: ?Reliant upon fuel companies ?As large purchasers of aircraft and air routes, manufacturers and airports can be squeezed
Power of individual domestic & business passengers increased by: ?High cost encourages buyers to seek best deals ?Low switching costs
Which are the key forces?
Resources, competences and competitive advantage
SAME AS COMPETITORS/ EASY TO IMITATE Necessary resources e.g. Computers & booking system Cash/Debtors/ creditors Pilots, Cabin crew & admin. staff Passengers (leisure & business travellers) BETTER THAN COMPETITORS Unique resources e.g. Aircraft (designed for cost efficiency) High level of capital reserves Experience & entrepreneurship of SMT Loyal customers/ reputation for low fares Aggressive ‘cost cutting’ culture e.g. wellpriced contracts for air routes Threshold competences e.g. Core competences e.g.
Customer service systems
Pre-printed boarding passes
Fast turnaround of aircraft Free publicity & sales bonus systems
Value chain: Ryanair
Firm infrastructure e.g. planning; finance HRM e.g. training; employee reward schemes (sales bonuses etc.)
Technology development e.g. aircraft design Procurement e.g. aggressive negotiation of air routes; purchasing aircraft & goods for resale Inbound logistics e.g. Flight scheduling; warehousing of aircraft; stock control of goods for resale Operations e.g. Baggage drop/ handling; aircraft cleaning & refuelling etc.; passenger boarding Outbound logistics e.g. Flying the plane; safety demo; sale of food, drink & ‘duty free’ items Marketing and sales e.g. Website & online promotions; free publicity Service e.g. (basic) complaint handling; Car rental
Which linkages add value?
Supplier value chains
Distribution value chains
Customer value chains
Supplier of aircraft
Suppliers of goods for resale
The value system: Ryanair
Points to remember
? 3000 words (+/- 10%). ? Word-processed & proof-read ? Submitted via Turnitin by 11:59pm on June 10th 2013. ? Report format, appropriately referenced in Harvard style ? The report must not only describe but the models used but interpret them as well ? Use examples but not too many
Assignment Brief: Example report structure
– This section will NOT contribute to the word count
? LIST OF CONTENTS ? 1.0 INTRODUCTION
– What will the report cover? – Definition of business strategy
Example report format
2.0 Ryanair’s strategic position 2.1 Bowman’s strategy clock 2.1 Strategic group map
3.0 Key external drivers of change 3.1 PEST(EL 3.2 5 forces
Example report format
4.0 How Ryanair adds value 4.1 Resources Audit 4.2 Value Chain
5.0 Ryanair’s strategic options (conclusion) References (Harvard style) Appendices (if applicable)