Analysis of the external environment of "Ryanair –"Southwest" of European airlines" case

Topics: Airline, Low-cost carrier, European Union Pages: 6 (1713 words) Published: May 31, 2009
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 sociopolitical 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.

Macro-environmental Analysis (PEST factors affecting Ryanair Airlines)To analyze the macro environment, I will use the PEST analysis, which refers to political, economic, social and technical factors that confront Ryanair airlines. This analysis provides a no exhaustive list of potential influences of the environment on the organization. Each of the forces is categorized by a particular macro-level external influence, which directly impacts strategic direction at Ryanair.

The political environment can have a significant influence on businesses as well as affect consumer confidence and business spending. The political environment is one of major advantages to Raynair, as the majority of its operations are contained within Europe. This region maintains political stability, thus Ryanair does not experience issues with governmental instability in Europe as a concern regarding passenger volumes or flight destinations. Political factors in our case are:-Irish government policy from September, 1989. This policy were known as "two airline policy" valid for three years and was directed at benefiting both Irish carriers Aer Lingus and Ryanair. The new policy ruled that the two major Irish airlines will not compete on any international route and they both had to have separate routes-European Union deregulation of the airline businesses from 1997; set up a number of low-cost airlines offering no-frills services. This deregulation enabled Ryanair to open new routes to continental Europe.

-European Union expansion enabled the company to expand its business to new countries in Europe.

Other very important factors that have near- and long-term effects on the success of company's strategy are the economic forces. They include inflation rates, tariffs, the growth of the local and foreign national economies, exchange rates, as well as unemployment rates. Economic factors include:-Economically- stable European Union market provided Ryanair with significant value in the form of higher volumes of consumers.

-Increasing oil prices inflated the costs of fuel and impacted profit margins-At the same time people in Europe are willing to travel more for lower price and this was option for low-budget airlines like Ryanair.

-European Union deleted duty-free on intra- European Union countries, and this new taxation policy affected Ryanair in loss of revenue, increased landing charges and increased the number of flight attendants.

The social and cultural influences of business vary from country to country. Social cultural factors in Ryanair case include:-Increasing of the people's mobility in Europe, where good transportation is essential for every European citizen and it was a great opportunity for Ryanair to expand its business.

-Personal disposable income of people in Europe was rising which increased travelling lifestyles and business travelling.

-People in Europe travel for leisure, business, and searching for new jobs, as well as the number of senior citizens who were enjoy travelling.

-Travelling low cost has become a norm on European market.

Technology is vital for competitive advantage and is a major driver of globalization. Technological factors have a major effect on the threats and opportunities firms encounter and in Ryanair case they are:-A new trend in European airline industry which was website establishment. Airlines set up websites through which they sell tickets and other ancillary products...
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