StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Operational Strategies and Objectives of Ryanair and British Airways - Case Study Example

Cite this document
Summary
food and beverages) for the majority of its short-haul flights into a variety of European locations. Ryanair competes primarily on pricing as compared to competition, accomplished through significant…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.2% of users find it useful
Operational Strategies and Objectives of Ryanair and British Airways
Read Text Preview

Extract of sample "Operational Strategies and Objectives of Ryanair and British Airways"

Critical analysis of the operational strategies and objectives of Ryanair and British Airways BY YOU YOUR SCHOOL INFO HERE HERE Critical analysis of the operational strategies and objectives of Ryanair and British Airways Introduction Ryanair is a low-cost, no-frills airline company offering few amenities (e.g. food and beverages) for the majority of its short-haul flights into a variety of European locations. Ryanair competes primarily on pricing as compared to competition, accomplished through significant cost reductions along the entire value network, especially in areas of procurement and outsourcing. In opposite accord, British Airways is a full service airline model able to provide higher cost ticketing to consumers due to the strength of its brand under a premiumisation model in marketing. British Airways is able to maintain its competitive edge through operational structuring with emphasis on technology support, dependability, and high quality especially as it pertains to employee engagement with revenue-building consumers. Both airlines have significantly different operational strategies, giving each a unique competitive advantage stemming from operational strategy development and implementation. This report illustrates the unique strategic operational return on investments for both companies that continue to sustain these airline models. The operational strategies of Ryanair and BA For companies that maintain a broad and diverse supply chain network in order to provide products and services, such as British Airways, holding costs for warehousing and inventory management are significant. These costs include space, labour support, utilities, and even taxation (Heizer and Render 2004). For diverse procurement models, these costs are unavoidable as facility management requires expenditures for support labour and technology support on receivables and deliverables (Heizer and Render 2004). British Airways, in order to provide diversity of product and services under its full-service model, spends on average £4 billion annually on procurement, dispersed between 14,000 different domestic and international suppliers (Anderson and Day 2009). British Airways, in its 2010 annual report, highlights the risks associated with significantly-fluctuating consumer demand in this industry that affect strategic planning and operational procurement (British Airways 2010; Anderson and Day 2009). Coupled with vendor-supplied materials needed to carry out its full-service model, it was no longer efficient for British Airways to maintain decentralised procurement strategies with products deliverable from over 80 different countries. The costs of procurement and warehousing were adding unavoidable, variable costs into the business model that continued to seize competitive cost advantages from British Airways. Low-cost, no-frills carriers were emerging in multiple consumer sectors that were able to negate high inventory holding costs and distribution costs associated with a diverse supply chain network. As it pertains to the costs of procurement, British Airways faced a trade-off situation: Continue to absorb costs by operating under a decentralised supply chain strategy to sustain or allocate capital resources to centralise supply chain strategies and eliminate redundancies. There were multitudes of opportunity costs associated with the existing supply network, therefore the business determined that implementation of appropriate procurement planning software (in this case SAP) were necessary to radically alter the supply network. The business changed its procurement strategy to include development of more strategic alliances with vendors, including involving suppliers during the early stages of product and service development, taking advantage of supplier expertise to assist in creating a mutually-rewarding procurement network. These are significantly important operational strategies for cost controls in supply chain strategies (Copacino 1996; Ragatz 1997). British Airways began to benchmark practices associated with lean procurement modelling, which focuses on eliminating waste and the costs associated with excess inventories (Shah and Ward, 2003; Cua, McKone and Schroeder 2001; Sanchez and Perez 2001). As previously identified, Ryanair did not maintain these fixed and variable cost burdens associated with a geographically-dispersed supply network due to its commitment to providing per-ticket value to consumers by avoiding introduction of comparable amenities, necessary for British Airways, allowing Ryanair to allocate expenditures to more critical dimensions necessary for revenue production including service transformations. British Airways also maintained difficulty in establishing standardisation in the business model, defined as “producing the maximum variety of products and/or services using a minimum of materials, systems and tools” (Kumar and Suresh 2009, p.183). British Airways, maintaining a full-service model, catered to multiple market demographics and lifestyle characteristics which required diversification of procurement (e.g. in foods variety) to satisfy cultural preferences with a host of diverse international markets. Ryanair, on the other hand, achieved ease with standardisation by setting a singular product model enforceable throughout the business model with no deviation, which was achievable by focusing less on cross-cultural procurement to satisfy diverse consumers and remaining properly positioned (through marketing prowess) on price advantages and price value to consumers. British Airways was able to overcome these inefficiencies in procurement by aligning operations with strategic management accounting that began to examine cost structures in operations to develop a more holistic and homogenised product and service strategy. This strategy gave the business much more cost advantages as it relates to procurement and supply strategy and finding balance between operational cost drivers and their relative importance to revenue drivers (Wu 2007). Again, this is an industry in which operational planning is quite difficult due to fluctuating consumer demand and fluctuating pricing structures associated with vital commodities such as fuel and oil. In the airline industry, the main strategic goal is to maximise sales revenues per flight in an industry where most short-term costs are fixed (Malighetti, Paleari and Redondi 2009). British Airways utilises a price discrimination strategy for this pursuit, basing this on customer loyalty, different fare class options, and even overbooking strategies (Malighetti et al. 2009). Ryanair, in opposite accord, uses dynamic pricing to gain market attention from price-sensitive consumers in multiple demographic segments. It is, however, the methodology of operations that determines whether dynamic pricing or price discrimination strategies can be aligned with more effective and streamlined operations. As an example, British Airways must understand the tangible, statistical productivity in its many operating markets domestic and international, utilising the formula of output divided by the volume of resources consumed (Jain and Daga 2009). Following its lean, benchmarked strategy, gaining competitive advantages in productivity involved restructuring operations pertaining to labour contribution to achieve reliability, speed, and high quality services that are absolutely vital to revenue maximisation. Most of these changes are incremental in the business model, such as providing pilots with iPads to improve facilitation of communication between support service personnel and various ground crews (British Airways 2012). Output increases through efficient communications systems whilst also maintaining a lean system of operations that require sustainable resources. Ryanair, in opposite accord, improves productivity by aligning operations with a human resources, organisational culture development strategy utilising motivational remuneration packages and development of a cohesive culture (Ryanair 2011). Efficiency in resource utilisation at Ryanair can be witnessed in terms of more effective customer service methodologies (Ryanair 2011). Ryanair realised that its most critical resource to achieve competitive advantage was improving labour relationships and developing a knowledge management system. Interaction with others holding tacit knowledge, rather than isolated business segment expertise, was necessary in an open culture strategy (Stover 2004). Products and services, in this industry, can be easily replicated by emerging competition and even existing competition, such as British Airways with its low-frills subsidiary operating to gain price-sensitive market attention. For Ryanair, maintaining a powerful brand image is the only real asset that cannot be imitated by competition (Nandan 2005; Bennett and Rundle-Thiele 2004). Ryanair needed to align its operational strategies with knowledge management systems as part of organisational culture development, thus improving interactivity with various experts in multiple business divisions. The outputs associated with this strategy included better consumer brand loyalty, as new operational strategies improved service development, quality, speed, and dependability created by knowledge management practices. British Airways, unable to align operations with these communities of practice, have been forced, instead, to focus on statistical productivity measurements that often fluctuate with changing staff motivations and deviating customer demand in domestic and international markets. British Airways, however, has managed to reduce costs associated with technology by 30 percent and has improved quality of service by 50 percent since implementing a well-developed self-service website (SCC 2012). British Airways, prior to development of this self-service philosophy, required substantial labour to support interactive ticketing and booking processes. This gave British Airways a more effective statistical model by which to measure total productivity by considering the administration of customer ordering as order line inputs, new customer engagements, and express ordering. Thus, the business shifted to activity-based costing processes, rather than product costing methodologies that gave the business a much clearer picture of what was actually driving operational efficiencies and redundancies. Value chain management under activity costing can now introduce time to ensure speed, quality and dependability (Kaplan and Anderson 2007). Conclusion Both Ryanair and British Airways, as identified by the research findings, operate differently and maintain competitive advantages by having unique operational strategies and evaluation tools to measure how to achieve the most effective and profitable competitive advantages. Procurement strategies, technology utilisation, equational modelling for statistical controls in operations, standardisation and the linkage between labour and productivity mark the disparate strategies that allow both companies to achieve sustainable profitability. In an industry where predicting demand grows ever-more difficult, both companies are well positioned for achieving long-term operational gains. References Anderson, J. and Day, M. (2009). British Airways: A journey in procurement transformation, European School of Management and Technology. [online] Available at: http://www.esmt.org/fm/479/ESMT-606-0062-1M.pdf Bennett, R. and Rundle-Thiele, S. (2004). Customer satisfaction should not be the only goal, Journal of Service Marketing, 18(7), pp.514-523. British Airways. (2012). British Airways’ Pilots Switch to iPads. [online] Available at: http://press.ba.com/?p=2540 (accessed 3 February 2013). Copacino, W.C. (1996). Seven supply chain principles, TraBc Management, 35(1), p.60. Cua, K.O., McKone, K.E. and Schroeder, R.G. (2001). Relationships between implementation of TQM, JIT and TPM and manufacturing performance, Journal of Operations Management, 19(2), pp.675-694. Heizer, J. and Render, B. (2004). Operations Management Flexible Version Package, 7th ed. Prentice-Hall. Jain, A. and Daga, T. (2009). Productivity Measurement, Praxis Business School. [online] Available at: http://www.scribd.com/doc/21057558/Productivity-Measurement (accessed 4 February 2013). Kaplan, R.S. and Anderson, S.R. (2007). Time-Driven Activity-Based Costing: A simpler and more powerful path to higher profits. Harvard Business School Press. Kumar, S.A. and Suresh, N. (2009). Operations Management. New Age International Publishers. Malighetti, P., Paleari, S. and Redondi, R. (2009). Pricing strategies of low-cost airlines: The Ryanair case study, Journal of Air Transport Management, 15(1), pp.195-203. Nandan, S. (2005). An exploration of the brand identity-brand image linkage: a communications perspective, Brand Management, 12(4), pp.264-278. Ragatz, G. (1997). Success factors for integrating suppliers into new product development, Journal of Production Innovation Management, 14(2), pp.190-201. Ryanair. (2011). The World’s Favourite Airline, Annual Report and Financial Statements 2011. [online] Available at: http://www.ryanair.com/doc/investor/2011/Annual_Report_2011_Final.pdf (accessed 5 February 2013). Sanchez, A.M. and Perez, M.P. (2001). Lean indicators and manufacturing strategies, International Journal of Operations & Production Management, 21(2), pp.1433-1451. SCC. (2012). Supply chain / virtualisation / managed services / service desk, SCC Service Solutions. [online] Available at: http://www.scc.com/pub/en/files/British%20Airways%20Customer%20Reference%20v2.pdf (accessed 4 February 2013). Shah, R. and Ward, P. (2003). Lean manufacturing: context, practice bundles, and performance, Journal of Operations Management, 21(2), pp.129-149. Stover, M. (2004). Making tacit knowledge explicit, Reference Services Review, 32(2), pp.164-173. Wu, G.H. (2007). The cost drivers, revenue drivers, and value chain analysis in strategic management accounting, International Journal of Knowledge, Culture and Change Management, 9(2), pp.69-78. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Operations Management Essay Example | Topics and Well Written Essays - 1500 words - 11, n.d.)
Operations Management Essay Example | Topics and Well Written Essays - 1500 words - 11. https://studentshare.org/management/1793640-operations-management
(Operations Management Essay Example | Topics and Well Written Essays - 1500 Words - 11)
Operations Management Essay Example | Topics and Well Written Essays - 1500 Words - 11. https://studentshare.org/management/1793640-operations-management.
“Operations Management Essay Example | Topics and Well Written Essays - 1500 Words - 11”. https://studentshare.org/management/1793640-operations-management.
  • Cited: 0 times

CHECK THESE SAMPLES OF Operational Strategies and Objectives of Ryanair and British Airways

Ryanair marketing strategies

This paper seeks to provide a comprehensive analysis of ryanair marketing strategies, an airline company that began operations in 1985 with only a single fifteen-seat plane plying between London Gatwick and Dublin and waterfall in Ireland.... Mission and Strategy The objective of ryanair is to be the largest and leading low-cost airline in Europe through continuous expansions and improvements in its low-cost services.... The principal policy of ryanair is to offer the lowest flight fares available from any carrier (Gugenheimer, 2006:67)....
10 Pages (2500 words) Essay

Operational Strategies of Ryanair and British Airways

Critical analysis of the Operational Strategies and Objectives of Ryanair and British Airways BY YOU YOUR SCHOOL INFO HERE DATE HERE Critical analysis of the Operational Strategies and Objectives of Ryanair and British Airways Introduction Ryanair is a low-cost, no-frills airline company offering few amenities (e.... The operational strategies of ryanair and BA For companies that maintain a broad and diverse supply chain network in order to provide products and services, such as British Airways, holding costs for warehousing and inventory management are significant....
6 Pages (1500 words) Essay

Brief analysis of the global airline industry

The new venture of ryanair and Aer Lingus will need to focus on industry trends and exploit opportunities within the industry as they become available.... It will also examine the strategic resources, capabilities, and scope of the ryanair Holdings with the newly acquired Aer Lingus Group.... ryanair is positioned in the industry to add those routes at low costs that consumers expect.... ryanair could benefit by this type of analysis....
11 Pages (2750 words) Essay

Improving Operations Management at British Airways

The report "Improving Operations Management at british airways" is divided into two parts.... british airways (BA) contains a formalized composition with several predefined policies and measures, and it's because of its magnitude and the global range of its movement.... british airways has its symphony that includes several policies and procedures.... The current economic recession has marked an effect on british airways too....
7 Pages (1750 words) Report

Europe Leading Airline Company Ryanair

Fleet planning, airline fare, fleet scheduling etc are some of the chief aspects of ryanair's effective decision-making process.... This research paper 'Europe Leading Airline Company – ryanair' endeavors to analyze ryanair, with special emphasis on situation analysis, decision making, planning and controlling process, leadership and organizational structure.... In European Union, Lufthansa, ryanair, Easy jet etc are leading airline companies....
12 Pages (3000 words) Essay

Business Strategy and the Economic Environment of Business

According to Miriam (2010) since 1985 it has reined the European skies overcoming competition from big airlines like british airways.... his paper to a huge extent will look into ryanair and how it has evolved and the internal and external factors which have shaped it.... These factors are the ones that individual airlines look into as they are directly linked to customer relations strategies and are also important in gaining competitive advantage....
14 Pages (3500 words) Assignment

The Companys Approaches to Managing Strategic Change

Utilizing a wide variety of strategic initiatives, policies, and procedures, the company is now the largest international low-cost carrier in its category, outperforming even british airways.... The paper 'The Company's Approaches to Managing Strategic Change' presents ryanair maintains a strong long-term which focuses on improving the stability and longevity of the company by creating strategic policies that strengthen the company's balance sheet and total year-by-year profit margin....
12 Pages (3000 words) Term Paper

RyanAir and Its Dominance in the European Low-Cost Airline Market

In the paper 'ryanair and Its Dominance in the European Low-Cost Airline Market' the author reviews discourse on RyanAir strategy and how it has positioned itself within the market.... The author states that with regard to RyanAir's ability to develop and sustain its position as a leader in the European airline industry, the literature demonstrates that a central element of ryanair's success has been its ability to address a gap in consumer demand that wasn't being supplied by pre-existing airlines operating in Europe....
12 Pages (3000 words) Literature review
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us