Strategic Service Vision of Ryanair

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  • Topic: Low-cost carrier, Service system, Southwest Airlines
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Operations Management – JS MT Assignment

Title: For a firm of your choosing (but not one of the firms studied in class, describe all of the elements of the strategic Service Vision (SSV) and assess the degree of ‘fit’ between the SSV and the firm’s Strategy/Environment. What would you change in the operations strategy or service system to increase the potential profitability and/or value to the customer?

Company (Service Provider) Chosen: Ryanair
Word Count: 3327 Words (not including Cover Page and Bibliography)

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Ryanair is an Irish low fares airline (or LCC – Low Cost Carrier) that was founded by Dr. Tony Ryan in 1985 to compete in the Ireland/U.K. travel market. The firm has gone from strength to strength, particularly under the leadership of C.E.O Michael O’Leary (since 1994) and is now the second largest airline in Europe in terms of passenger numbers. The airline’s business model is based on the model of Southwest Airlines in the United States, which Michael O’Leary was sent to America to study after Tony Ryan hired him in 1987. Ryanair operates a low fares service from several bases around Europe and from its humble beginnings - carrying 5,000 passengers in 1985 - it expects to carry 73.5 million passengers in 2011. Ryanair has been at the forefront of the evolution of the airline industry in Europe over the past two decades. Over the past 20 years, “the industry has evolved from a system of long established state-owned carriers operating in a regulated market to a dynamic, free-market industry” (Tinbergen Institute Discussion Paper, 2004). Many other airlines in Europe have now copied aspects of the low-cost model that Ryanair operates and in the East, AirAsia has copied the Ryanair model almost completely for its’ operation. The Strategic Service Vision:

“The need of most service organizations to plan as well as direct marketing and operations as one function has led to the formation in leading companies of what I call a strategic service vision. Its elements consist of identification of a target market segment, development of a service concept to address targeted customers' needs, codification of an operating strategy to support the service concept, and design of a service delivery system to support the operating strategy” (Heskett; March 1, 1987). At its simplest level, Ryanair’s primary market is ‘people who are looking for the cheapest possible flight to a particular destination’. These people are concerned about the price of the flight and thus are more often than not, tourists of some kind. Compared with leisure travellers, business travellers are usually less concerned about the cost of the flight and more concerned about the comfort and quality of the service. For this reason Ryanair carries far more leisure travellers than business travellers, however, with the global financial crisis causing a decline in demand for business class services, this attitude is beginning to change. The lack of interest from business travellers in Ryanair in the past is evident from the airline’s attempt to start a business class service and a frequent flyer club in 1988 – neither of which were successful. (Ryanair.com)

As Ryanair operates across Europe and Morocco, the vast majority of its’ customers will be European. It should also be noted that 99% of Ryanair’s customers originate from Web bookings rather than from telephone bookings or airport ticket desk sales because the only way to get cheap fares from Ryanair is to book your flight online. Ryanair’s customers are also concerned about the quality of the service in terms of dependability, safety and choice of routes and Ryanair has managed to develop its’ service to the stage where it satisfies these particular criteria better than any other European airline.

“The Operations Strategy in terms of value creation is, simply put, ‘the basic choice between standardisation and customisation, and the role of employees...
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