Macro Environment Influences Of The Airline Industry Tourism Essay

large Environment Influences Of The Airline Industry Tourism EssayIn foothold of the case, it suggests that the environment of respiratory tract companies is non very stable, especi aloney the increasing toll of fuel which is the key driver of change. From Ryanair profit statement (Exhibit 1a) it shows the fuel and oil color terms has increased by 200 million from 2005 to 2006. The increase in fuel apostrophize is 74 part. The cushion to the air passage businesss companies is intelligible and the cypher air lanes may face the trouble more(prenominal) than so than normal air lanes. Moreover, air manner companies besides have to concentrate on nigh different issues. For example, check to the case, they ar facing the risks from terrorist attacks which be difficult to predict.It is not difficult to find the changeability, even so it is complex to the skyway environment. more or less factors, such(prenominal) as legal execute and customer demand, to a fault h ave influence on them. Some of these such as the price of fuel and oil can be predicted, duration almost of them cannot.Stage 2 Audit environmental influencesThe Pestel Analysis is assiduous to identify macro-environment influences of the airline effort.Political governance wants to strengthen the frugality and, consequently, leave behind support local airlines by qualifyting rules, such as discriminative rights. Every politics however, pull up s larns probably do so. on that pointfore theres no obvious advantage between competitions. The political issues have a replete(p) range of effect, so they ar not the key points that budget airlines are facing.Economic This is identified as the most essential factor to airline companies, especially to budget airlines. The influences refer to the macro-economic factors such as the national increase rates and the exchange rates. As budget airlines, they provide have more attention to the operation costs such as fuel cost. It became a massive issue for budget airlines beca utilize of the increasing cost of fuel. That may pare the advantages and the companies pass on be less competitory than before. On the other hand, the deferral will lead more people to choose budget airlines. neighborly With the development of Asian countries in particular China, there are more and more people deciding to study or expedition in atomic number 63. In recent years, the lifestyle of local people has also changed. They course to travel abroad to enjoy their lives. Most of these people are not wealthy such as student. The budget airlines therefore, will be their beat option to reduce the travel costs.Technological The innovation of engine room functions the airline companies reduce costs and carry out tasks more effectively. The parvenu face of aircraft can help to reduce the burning of fuel and new technology can also reach the security check more effectual and accurate.Environmental European countries pay m ore attention on environmental issues, especially greenhouse gases from carbon emissions. Moreover in terms of the case, airline companies have to pay the environmental taxes for the contri aloneions they make to global warming. In particular, it is pitiful news for budget airlines. Costs will increase and the companies want to fight good brand image in the consumers perception. furthermore, noise pollution and muscle consumption cannot be ignored under such conditions.Legal Some legal actions such as preferential airport rights are direct a relieve oneselfst the specific airlines. As budget airlines, which have higher competitive spring, they should pay more attention to the legal forces to prevent loss. On the contrary, they can also pretend the initiative over illegal aid to rivals.Stage 3 Determine persistence specific factors (this show will be analysed in Question 2)Stage 4 disclose competitive position (this stage will be analysed in Question 3)Stage 5 Identify ke y opportunities and threatsThere are many a(prenominal) potential opportunities for the airline companies. For instance, the recession may lead to more people choosing the budget airline or else than the expensive ones new technology which helps to reduce the usage of fuel government set the tax at a trim down percentage.On the other hand, the increasing cost of fuel may be the most portentous issue most budget airlines face. Whats more, the compensation to passengers, terrorism and security, and customers satisfactions will all have potential negative impacts on the airline. In order to deliver the goods lower costs, budget airlines will have to reduce costs from many departments and operations. Thats why lots of customers are not satisfied with the budget airlines leave off for the price.Question 2Prepare a Porter Five Forces depth psychology of the budget airline constancy. Express Ryanairs perspective of these forces.The threat of entryThere are high barriers to enter the budget airline industry. i) High investiture requirements. Economies of scale are important in the airline industry. It is difficult for new entrants to match others existing competitors. In addition to this, the operational experiences cannot be acquired in such short space of time. ii) Expected retaliation. Retaliation will take place when new entrants appear for budget airlines, it will probably be in the form of a price war collectible to costs of entry creation very high for them. iii) Legislation or political relation action. Government wont let new entrants enter the market if the industry is saturated.With regards to Ryanair in the budget airline industry, there will not be large impacts to existing budget airlines if new entrants appeared. Budget airlines always centering on the costs and price, so does Ryanair. According to the case, Ryanair was the scratch budget airline in Europe and now its ticket prices are much lower than the other rivals. Therefore it will be impossible for new entrants to set a low price to win the market.The threat of substitutesBefore discussing the threats, somewhat comparative data is showed below.Round Trip by Ryanair Flightcapital of the United Kingdom Stansted MilanGoing OutRegular FareAdult8.99 GBPTue, 2 declivity 08Flight FR 4184815 Depart1115 ArriveComing BackRegular FareAdult12.99 GBPSun, 8 Dec 08Flight FR 4185645 Depart750 Arrive(Source Ryanair.com)One way by Rail EuropeLondon (ST Pancras) MilanStandard ClassAdult227 GBPTue, 2 Dec 08840 Depart2120 Arrive(Source Raileurope.co.uk)Most of the travellers will prefer the short journey, in addition to the cheaper way to travel. From the tables it is obvious that winning a plane from Ryanair is much cheaper than taking the train in a similar location. Although some airlines may be expensive, budget airlines such as Ryanair will usually be the best choice. The impact of substitutes, therefore, has less impact on the budget airlines.The power of buyersBuyers of airlines tickets can sometimes be the travel agency.In other cases, Ryanair caters to ultimate consumers. Majority of the buyers are not strong buyers and they come from all over the countries. Individuals can select the budget airlines according to their preference, because the switching costs are low and the differentiation of such supporter is weak. It is extremely expensive for people to own an aircraft. When there is a choice of budget airlines to use, with low prices. So there is a low buyer competition threat. Like Ryanair, with less concentrated buyers and buyers competition threat, the power of buyers is low.The power of suppliersThe high power of suppliers may be one of the most of import threats among the budget airline industry. The increasing price of fuel, which leads to a high cost for airlines, is a basic issue they are facing. As we know, fuel industry is now concentrated in the hands of few producers. Therefore, in this situation it is difficult to cut the pric e for this essential material. In addition to this, it is deceitful to change fuel suppliers when the global price is developing. Moreover there are no practical substitutes. Ryanair is facing this problem with other budget airlines.Furthermore Ryanair sells all the ticket directly through the website. Thus there is no intermediary.Competitive rivalryRivalry is influenced by these four competitive forces and to each one of them may have different levels of impact on the competitive rivalry.In this market, every airline provides the uniform services which are poorly differentiated. deplorable differentiation and switching costs in this industry, therefore, cause the price competition. Ryanair, which has the dry land-class mover advantages, still holds the dominant position. Although many of the competitors were losing money or even have been taken over, Ryanair remains steady in incremental growth.For industry growth rate, this industry is in the maturity situation of life cyc le, which kernel the growth is low. Price war is therefore playing a crucial role throughout the competition.Question 3Evaluate Ryanairs particular strengths and weaknesses and explain, with reasons, what Ryanair moldiness do to retain a sustainable competitive advantage.As the first-mover of budget airline industry, Ryanair still holds the dominant lowest-cost position. This is also the one of the strengths it has. Whats more, Ryanair was announced being the most profitable airline in the world according to the case. The revenue is still increasing, despite the price of fuel did not stop growing in recent years. The brand image of Ryanair is also one of its strengths. Customers are attracted by the lower price. Its traffic is the highest among the competitors (see Exhibit 2) and it is still increasing due to the enlargement of the company.On the other hand, there are still some weaknesses of this budget airline leader. In terms of the case, Ryanair win the market for the most pa rt depends on the costs. However, the costs of its major raw materials are increasing chop-chop these years. This will be a serious issue. Further, minimize costs largely will cause the lack of service and training quality and so on. The Skytrax star rating (See Exhibit 2) indicates Ryanair is below the average level. Besides, competitors contri thoe big influence to Ryanair. For example, Easyjet which is a young upstart of the European budget airline industry grows quickly with a large number of market shares.It is obvious Ryanair makes success base on its price advantage, and how to sustain this advantage break very crucial issue in recent situation.Keep first mover advantages. Long history with experiences, well-known brand image and economy of scale, these are the unique resources of first mover advantages. It is difficult for competitors to get these resources at a similar level. Therefore, in order to prevent the competitors from copying the same strategy as cost reduction, Ryanair must make good use of these unique resources and try to dominate the market.Technology. Purchase and introduce the latest technological support. Although the fixed costs will be high, they can help the airline carry out tasks more efficiently and effectively such a new security check machine. Moreover it can also help to reduce the variable costs. For example, according to the case, new type aircraft produced 50 percent less emissions, 45 percent less fuel burn and 45 percent lower noise emissions per seat. They help Ryanair reduce the fuel cost with a lower pollution to environment.Unique cost structure. A cost structure which aims to minimize the costs must be set up. In particular to fuel cost, the fluctuations are subject to unpredictable and volatile world events according to the case. It is important for Ryanair hedge the risks before the price goes up suddenly. On the other hand, choosing the secondary and regional airport destinations is a good way of the structure . Moreover, the internet is used to reduce distribution costs.Service quality / Customers satisfaction. Customers will normally associate low price with low service benefits. Ryanair was voted the worlds least favourite airline due to its bad service such as unfriendly staff and poor legroom. However it still won a great number of customer base on the price. Thus if some competitors cut down the ticket price to a low level, Ryanair will get into a big trouble due to the similar prices but lower service quality. Therefore it must not only concentre on the price but also the service. In order to gain competitive power, for example, brand loyalty can be one of the aspects.Government / legal actions. Ryanair should take care of the government and legal actions and moreover, can take the initiative over illegal aid to rivals. These may prevent the supererogatory loss.In summary, Ryanair, as the cost leader in budget airline industry should not only focus on the costs but also lots of o ther issues. Although it is developing rapidly and successfully, the future is unknown. The chatoyant environment is changing all the time, thus Ryanair should always follow it and make the long-term plans in order to retain a sustainable competitive advantage. Grasp the opportunities, and it will has a bright future.Word2123