AIRLINE INDUSTRY

External Environmental Analysis of Airline Industry

External Environmental Analysis of Airline Industry

Abstract

The objective of my report is to analyze the external environment in “Ryanair-'Southwest” of European airlines” case, which is very important factor for the firm's formulated effective strategy. The external environment consists of a wide array of economic and socio-political factors. It is the specific market arenas that the organization has chosen in its strategy; it provides the business opportunities to the firm and it's also a source of threats or forces that may impede the successful implementation of a strategy.

Introduction

Ryanair was founded in 1985 as a small Irish-based competitor to Aer Lingus, the Irish national airline. In the beginning Ryanair took on the same business models as that of their competitors but that particular strategy took Ryanair absolutely nowhere. Then in 1990s, under the watchful eye of Michael O'Leary, Ryanair transformed its prospects after it decided to recreate itself by imitating the Southwest Airlines (SWA) model in the British Isles, and then later extending it to Europe.

Competitive advantage based on a privileged market position usually tends to be in the favour of the first-mover by giving advantages in market-specific investments, skills and infrastructure aircraft, location-routes, landing rights, etc. in the case of the airlines, which follower companies will find more expensive to replicate. For example, as other airlines now rush to follow Ryanair into the same competitive space within the European airline industry, the CEO of Ryanair gives them little hope for success. As Michael O'Leary sees it, there are huge barriers to entry now, and none of these new airlines is going to find a price point below Ryanair.

External environmental Analysis (PEST factors affecting Ryanair Airlines)

Ryanair is seen as the biggest and most prosperous of Europe's low budget fare airlines targets in the first instance leisure travellers and the visiting friends and relatives segment of the market. Claiming itself as "lowest cost scheduled airline" means basing the airline's financial strategy on the average number of seats sold per flight, instead of on the revenue made per sold seat. Therefore every environmental issue which either affects basic costs of flights or affects the likeability of customers to book a flight is important for Ryanair.

In the recent year there have been many events which affected the flaws in flight security in the customer's eyes. Especially 11th of September and "Sars" have shown that global dangers heavily affect global air-travel. As an airline based in Europe and adapting an effective promotional strategy Ryanair sales grew irrespective of this danger showing a profit from 4 percent to 28 percent surpassing the 20 percent target margin.

Low price, value for money and efficiency are core values of Ryanair. These core values should not change no matter what the environmental turbulences are present. This means that cost reduction and other profit sources other than travel fares are important for Ryanair since it is a part of their strategy and thus they cannot accommodate it's expenditure by increasing the travel ...