EXTERNAL ENV

8/7/2019 EXTERNAL ENV

http://slidepdf.com/reader/full/external-env 1/4

External Environment Analysis

Ryanair is an Irish airline competing in the fairly recent development of the European

budget airline industry. They are one of the key players within the market, and perhaps

the most profitable.

To evaluate any organizations External Environment analysis certain factors have to be

assessed. These include those below and also the environmental analysis, competition,

government regulations and external forces.

Political

Political and legal factors encompass actions by local and national administration and

political parties, and by international bodies such as the European Commission, the UN

and the World Trade Organisation. Most of Ryanair’s routes are in Europe where the

political environment is quite stable. Ryanair’s only concern could be the local

governments support for there own national carriers.

Some noticeable political factors are

• Political changes in countries where they have routes to Governments in countries

they fly to may support their own flagship carrier

• Local councils objecting to noise and new runways being built as in past

•Governments looking to increase tourism might welcome

• Ryanair and therefore act in their favour.

Economic

Consumer spending power is a major factor in the prosperity of any industry. In most

developed and a number of developing countries, personal disposable income has been

steadily increasing for the past three decades. Ryanair has been cautious in it’s outlook

for 2007. Few things that could hurt Ryanair (along with the entire Airline industry)

would be a downturn in the European economic, Fuel prices going up, Terrorist attacks

etc.



Social

Consumer tastes ultimately determine where demand is directed. Sometimes these tastes

are manifested in what consumers themselves actually buy. In other cases they are

expressed through voting, lobbying and other political processes, which influence the

decisions of politicians and civil servants. Even though Ryanair is perceived to provide

poor customer service, the cheap fares still make it attractive for the budget conscious

customer. Because of economic growth at the moment it has become normal to fly away

for holidays therefore market has expanded and new opportunities for tourism have

opened in previously unconsidered countries. Business trips, although Ryanair do not

offer luxury they are possibly more attractive because less cost to a company means they

can travel more frequently.

Technological

Many major transformations in the ways firms compete can be traced to technological

change. Sometimes these changes span the boundaries of many industries and trigger

changes in society itself. Ryanair has made use of the internet technology to provide

online booking and checking making their website one of the most heavily used websites.

There is a potential for Ryanair to leverage their website traffic to sell/promote ancillary

products.

Environment

As Ryanair’s fleet is one of the youngest it’s producing less emissions and more

environmentally friendly than other carriers, especially the legacy carriers. This could be

one of the USP’s for Ryanair in the future.

Legal

Ryanair is currently involved in quite a few legal battles with cases filed against it and

cases filed by it. Regardless of whether Ryanair wins or losses the court battles it will still

incur a lot of legal expenses and managements attention could get diverted from running

the business to fighting in courts.



Looking at the PEST analysis, the Key drivers of change for Ryanair are the Economic

and the Legal factors.

Government Regulation

The airline industry in Europe has always been fraught with regulation from both

domestic Governments and the European Union. More recently the E.U. is trying to forge

a bilateral agreement with the US to replace the individual agreements tat have been

already made between some individual states and the US. Also, an area that has received

much publicity lately is the Subject of State Aid. The E.U. has the power to control any

aid given to a business if it encourages discrimination or is contrary to competition unless

the aid has been sanctioned by the E.U. Competition and Antitrust Law also plays a

significant role in determining the boundaries of the industry.

Competition

Liberalization measures and competition policies, competition in the airline industry

exploded, especially in the last ten years. Also, with more of these measures on the

horizon it is likely that competition will continue to grow as new entrants seek to take

advantage. However, even though there have been an abundance of new entrants many

have not lasted. This is mainly due to the reactions of the existing players who ousted

many of them with sustained price competition and other such measures. Also the slot

system in operation in many major airports meant that new players couldn’t get a strong

foothold from the beginning.

External Forces

• SARS

• Gulf War II

• Oil Prices

• Economic Downturns

The airline industry has always been susceptible to changes around it and the last few

years have thrown many obstacles in its path. From the outbreak of Foot and Mouth in



the UK to the SARS epidemic in Asia, from the terrorist attacks of 9/11 to the War in

Iraq, all of which caused a global economic downturn, the industry has had a torrid few

years and most of the major airlines have been running at a loss. Income elasticity of

demand for air transport is high meaning a small decrease in GDP will cause a

disproportionately larger decline in flying. Also with stricter ruling on state aid the major

airlines have well and truly suffered leaving huge gaps of opportunity for the smaller

low-cost airlines.

Innovativeness like this has ensured Ryanair’s sustainability and will carry them forward

into the future. To recommend any major changes would be to predict how the airline

industry will change which ultimately cannot be foreseen. However it has been concluded

that the budget airline will continue enjoying its boom, with many passengers now

enjoying the short breaks away at a low price. Also the advent of new routes will bring

more custom, from both departure points.

EXTERNAL ENV

Documents

Transcript of EXTERNAL ENV