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Innovation in Organizations: Ryan Air

Executive Summary

The study has shown that innovation is a strong business weapon that can give an organization a competitive edge over others. By adopting certain characteristics that encourage innovation, an organization puts itself in a position to compete favorably and even stay afloat during economic hardships. The characteristics mentioned by Trott (1998) include the company’s disposition towards growth, the culture of the organization, being linked to other organizations, constant investment in technology, readiness to risk, readiness to take advantage of new inventions in of technology, closely knitted departments, availability of space for creativity, a good strategy towards innovation and availability of different skills within the organization. A good organization that portrays these characteristics stands a high chance of growth as evidenced by Ryan air. This organization joined the airline industry amid economic hardships and worked into becoming one of the strongest airline companies in Europe. This is evidenced by its increase in the number of passengers from a mere 5000 in 1986 to 30,946,000 in 2006.

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Introduction

Nowadays, many business stakeholders are becoming very keen not to miss the evening news on BBC. Of great interest is the news of the economic downturn that is causing ripples all over the world. They are very concerned about the companies that are being forced to close their doors as their economic muscles continue to grow weaker and weaker. Not only the business stakeholders are concerned about the issue, but several other people all over the world are also very concerned about it too. This is because every citizen in every country is affected by the waves of this economic seismic tremor. Millions have lost their jobs, millions of others are resting on a brink of collapse and billions are going without food as food prices skyrocket beyond their limit. This marks the environment of the present economic state. Most organizations are experiencing hard times calling for appropriate measures that will help them keep afloat amid this storm. The greatest question to ask is, “what is the most appropriate move that a company can take to succeed?” the answer is innovation. What the companies need is an innovation that will help them stand out and above their competitors. This essay will therefore highlight how Ryan Air has been able to come up with creative innovations, execute them, and therefore benefited from them. Furthermore, the essay will also propose innovations to help the company continue performing after attaining the plateau phase of its reign of superiority.

History of Ryan Air

In July 1985, Gatwick Airport received a new airline plane courtesy of Ryan Air. This was the first flight by this airline. Ryan air was started in 1985 by the Ryan family with a simple organization consisting of 25 staff members. With a share capital of as little as one pound, Ryan air embarked on a journey that would lead them into a great name in the airline industry. Their first flight was from Waterford a town in the Southeast of Ireland to Gatwick, London. With their 15-seater Bandeirante model of aircraft, Ryan Air continued to have daily flights on the same root. Ryan air experienced a steady growth since then until the year 2000 when they completely embraced technology in their day-to-day operations. This led to a great leap in the customer base. In 1999, the customer base accounted for 5,358,000 passengers a number that leaped to 30,946,000 in the year 2006 (Ryanair.com). This was a great improvement owing to the fact that many airlines were closing doors at this moment due to the economic crisis.

By the year 2007, Ryan air remained Europe’s most favorite low-cost airline. It boasted of more than 830 routes in more than 26 countries in Europe. In addition, it accounted for more than 67 million passengers with 31 bases in Europe. Currently, Ryan air has on its name 181 new Boeing 737-800NG aircraft with staff that comprises 6000 people of 26 different nationalities (ryan.com 2008).

Ryan Air’s Strategy

The greatest competitive strategy majored on by Ryan air was the provision of low-cost airline fares in the whole of Europe (ryanair.com 2008). Apart from providing affordable fares, Ryan air embraced technology by starting to sell tickets directly to their customers online. These were the two major strategies that Ryan air has used for a long time making it the leading airline industry with the lowest fares in Europe. This was made possible through their innovative approaches which allowed them to lower their expenses and subsequently their fare costs.

Despite its great success, Ryan air is not bound to experience a smooth road to the end. Several challenges are bound to act as obstacles en route to their destiny. One of the greatest challenges is the entry into the market by many low-cost airlines (Lowcostairlineseeurope.org, 2008). These are a direct competition because the strongest selling point of Ryan air was their low fares as compared to the whole of Europe. Among the entrants are Easyjet, Air Scotland, Air Finland, etc. This will call for a lot of brainstorming in order to come up with new strategies and innovations that will help them continue standing out above all the other new entrants.

In addition to this, the economic crisis is still biting hard and it will still be considered one of the greatest threats in the future. This still calls for more and more innovations and strategies. Much has to be done to put into consideration the weight of the economy that is also impacting on their clients and on them through fuel prices. In the same line of fuel prices, the international tension between the West and Iran in terms of its nuclear project might impact negatively the availability of this precious commodity that is vital in the industry Velu, 2008).

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Aside from the challenges, the company still remains one of the greatest service providers in the airline industry. This is attributed to their allegiance to quality. The principal aim of Ryan air was to get “its customers safely from A to B, on time and at the lowest price.” (Velu 2008). They showed their unfaltering commitment to quality when they were voted by the association of European Airlines (AEA) as the company with the least number of cancellations, best in terms of punctuality and also the company with the least number of lost luggage (Hill, 2009).

Factors Facilitating Innovation

One question that might be asked is what makes an organization develop more innovations than another? In simple terms, what are the characteristics that promote innovation in a given organization? A company that answers these questions is more placed at an advantage compared to one that does not put these characteristics into consideration. In his study, Trott (1998) outlined ten characteristics of an organization that can facilitate its innovative string. Among them was the company’s orientation towards growth. Companies that are created with their principal aim being long-term growth always give a more innovation-friendly atmosphere.

This is one quality that can be identified in Ryan air. From its inception into the market, the main aim was to be the best company in the provision of services and with lowest fares in the whole of Europe. This was the main strategy and which they intended to live by. Up to this moment, Ryan air is still flying high as a provider of low-cost flights in Europe (Ryan air.com).

The second issue identified by Trott (1998) as important in cultivating an innovative atmosphere is the company’s culture and heritage. An appropriate atmosphere of heritage and culture makes the deferent departments identify the trait that has always existed in the company, therefore, developing a cooperative atmosphere between them. Ryan air has had its aircraft model as Boeings which were purchased directly from Boeing. This move has led to a culture and heritage of experience towards the handling of the Boeings. According to Velu (2008), this becomes very important in terms of the maintenance of its human and physical resources. In addition, it offers insight into the available resources and thus a high likelihood of innovation.

Another important characteristic of an innovative-oriented organization is the availability of a vigilant workforce and an unbroken link with the external environment. With this, Trott implies that a company can only excel in its innovative prowess if it has a connection with what is going on in the external environment in terms of new inventions and also the changes in the market demand. This can be achieved through extensive reading of the available literature and also an intensive market research. These characteristics were highly exhibited in Ryan air’s qualities. It was through a thorough market analysis that Ryan air discovered that most airline companies were offering high fares courtesy of their high expenditures in terms of onboard services. They then knew that there was a way through which they could come up with low-cost airline services. To achieve this, they did away with the luxury services offered onboard, chose to use small airports that had less congestion, and eventually took to a single class airplane. With the advent of the Web, Ryan air took it as an opportunity and started the first-ever low-cost online booking that was to be ticketless. All these contributed positively by increasing their efficiency. They did most of their work without too many formalities that could be presented through ticket checking, arrangement of passengers in their respective classes, and easy and faster turnaround due to the less congestion offered by the smaller airports (ryanair.com, 2008).

Trott identifies commitment to technology, research and development as another characteristic that encourages innovation in a company. He purports that the maintenance of a technological investment that is constant can work positively in the encouragement of innovation. This, according to him sends a message to the employees that encourages innovation. Ryan air can boast of a constant investment in the latest models of Boeing aircraft (ryanair.com 2008). This has been the trend from the word go. They have maintained the same type and constantly improved on it every time Boeing improved on its models. This gives the employees an opportunity to come up with new ways of improving their services because they understand the in and out of their plan models. This mostly applies to the engineering department.

Acceptance of risks is another characteristic of organizations that encourage innovation. Trott identifies a risk not as a gamble but a well-calculated move whose success can be of great value to the organization. A good example of this move by Ryan air was its decision to enter the airline industry market when other giants were falling out. Furthermore, they came in with a totally new idea of doing away with all luxuries offered onboard and even decided that all services offered on board were to be bought. This was a calculated risk whose success contributed to an increase in revenue through the sales of food and drinks and also reduced formalities that increased its efficiency. In addition, their choice of secondary airports drew criticism from competitors who thought that Ryan air could not manage with such strategies (Thompson & Frank, 2005) 2004)

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Ryan air made great use of innovations in the outside world to improve their service production. This is what Trott (1998) calls receptivity. Organizations that are keen on the inventions in the outside technological world and make use of it are more prone to innovation as compared to those that live on their own without making use of technological inventions. With the advent of the Web, Ryan air saw an opportunity through selling their tickets online and thus avoiding the middle man (ryanair.com, 2008). This helped them improve on their efficiency and increase their revenue. This also increased the number of passengers as they found it easier to apply online.

The cooperation between different functional departments within the organization is vital in the encouraging innovation (Trott 2004). This is because one department cannot play the role of the other. They therefore must cooperate so as to acquire desirable results. At Ryan air, there is evidence of cooperation through the success that they experience in all of their strategies. Research and development department must have come up with the market needs and also the new technologies before allowing the other departments to work on them until the new products eventually reached the customers. Without this, some of the innovations like the abolishment of free drinks and entertainment onboard could not have been implemented because of the risk involved.

Another characteristic that encourages innovation is the availability of space that could allow for creativity. In this one, Ryan air also gives evidence of its availability through the diverse one innovation after another. Starting with low fairs, abolishment of free drinks and entertainment, booking online, using secondary airports, sticking to one model of the plane, using a same class system onboard, ticketless traveling, etc (ryanair.com, 2008). All these are innovations that seem to be originating from different departments. Without a free space, all these could not have come to pass.

Every organization must have a long-term strategy towards innovation. Trott (1998). Apart from the entry strategy, the organization must have a well-laid plan that allows for further innovations to sustain it. Ryan air had its core mission as provision of cheap and efficient transportation of their clients from one place to the other. This has not changed. They are still among the cheapest airline company with the greatest efficiency. This has been complemented by other innovations like ticket-less travel and online bookings that allow the clients to experience comfort and efficiency.

Finally, Trott (1998) identifies organizations with diverse abilities as best for innovations. According to him, an organization should have managers, engineers, advertisers, PR specialists. All these would lead to great innovation within the organization. Ryan air portrays all these through their innovations that entail different knowledge. For example, sticking to the same model of aircraft called for the knowledge of an engineer, booking and advertising online called for a good advertiser and knowledge in IT, choice of secondary airports called for good managers, abolishment of foods and drinks on board would therefore call for exemplary online services that would replace these absences.

From the points mentioned above by Trott, several aspects in a company can make it favorable to innovation. Company recourses, both human and physical, are essential in the creation of an atmosphere conducive to innovation. This is to say, physical resources like assets and money will be managed by qualified and creative people, who form the human resource, which can lead to an innovative organization.

In each point above, the effort and performance of Ryan Air can be identified. In fact they score highly in research and development including being very vigilant and receptive. They also have employees with a lot of abilities that is necessary for innovation. From, my own analysis, it is only in two points that Ryan air scores low. This includes long-term strategy and their orientation towards growth. According to Trott (1998), these are also essential characteristics of an innovative organization. He identifies that an organization’s orientation for growth is mostly based on its formation. Most family-owned businesses do fail in this area. This applies to Ryan air which is a family business. From their business activities, one can realize that Ryan fails to offer a long-term insight into their business. Their innovation and strategies are based on the current economic crunch. They used this strategy in their market entry and penetration but have not changed it. To the present, they still offer low-cost luxury free air travel.

With the end to this crisis, Ryan air stands a chance of failing to attract clients. Currently, most people are trying to save as much as they can so as to ensure that they don’t end up cash strapped. This leads to their choice of low costs in all their undertakings. In the event of an economic recovery, the saving characteristics of people will be brought to an end. Then, they will go for quality thus making Ryan lose market. Therefore, Ryan has not exhibited a long-term perspective in their strategies.

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Ryan’s Most Innovative Product

Ryan air’s most innovative product was the low-cost non-luxurious flights. At Ryan air, their main reason was to ensure that they got their clients from one point to the other at the lowest possible cost and with the least inconvenience (Ryan air.com, 2008).

Doblin identifies three main types of innovation. The first one is product innovation. This includes both innovation in terms of products and service. Product innovation can be defined as giving birth to a new idea that will contribute to the solving of a consumer problem and at the same time benefit the company that has sponsored the idea through the development of a new product (Kotelnikov, 2009). Although it is commonly believed that it entails a genius to develop a product, the truth is that this is a team affair that entails the participation of all the departments. The departments play different roles to ensure that the product succeeds. These include engineers, marketers, finance, lawyers, etc. The second type of innovation is process innovation. This can be defined as the aspect of implementing a nouvelle or greatly improved method of production or delivery. In terms of production, it means an innovation that entails a new machine or computer software that will improve the production of goods or services offered. In terms of delivery, it entails the bringing to life a product that will improve the physical movement of the product from the factory to the end-user (QuickMba, 2009). And thirdly, he identifies organizational and marketing innovation. This is the process of implementing a new method of marketing which involves changing the design of the product or its packaging, product placement, its promotion and its pricing. The main aim of this type of innovation is the addressing of the customers’ needs and demands, new market opening for the ultimate aim of maximizing sales. This third innovation falls under what is termed as non technical innovations.

Ryan air’s innovation falls under the third category which is organizational and marketing innovation. In this type of innovation, one is supposed to identify and provide value to his consumers not just around the product but even beyond. Ryan air identified that although the main need of their customers was to travel from one point to another, one thing would act as an added value. This was their need to save due to the economic hardship. To capitalize on this, they invented a low-cost non-luxurious flight that would meet the need of their customers.

A Product Life Cycle

Quickmba.com defines a product life cycle as the sequence of stages through which a product develops over some time. Subsequently, it identifies four stages in the process of a life cycle of a product. These four stages are determined by the changes in the market and therefore call for changes in marketing strategy. The stages include introduction, growth, maturity and decline. In the stage of introduction, the main aim of the organization is the establishment of awareness and market development. The second stage of growth entails the effort to establish brand preference and ensure market share increases. In the maturity stage, there is a decrease in sales with an increase in competition from other companies offering the same product. Eventually, the product enters the decline stage which calls for other strategies (Quickmba.com, 2009).

Ryanair’s product is currently at the maturity stage. This is characterized by decline in sales due to entry of competition. Many low-cost airline services offer exactly similar products as Ryanair. The steepest competition is from Easyjet. The product life cycle is as long as the economic crunch lives. It will be interrupted only when the international economy begins to get to its feet. This will mark its decline and will call for a new strategy.

By starting low-cost airline services, their main aim was market penetration. Ryan air wanted to enter into a market that was already full of many other service providers. Their strategy was therefore market entry. Also, by starting a low-cost airline service, Ryan air managed to compete and beat established airline companies like British Air, Air Berlin, Air Scotland and many other European airlines that had established their customer bases. It also helped them stay afloat when some of their counterparts were closing doors e.g. Air Sabena, Swissair, Canada 3000 (McDonald, 2008). This was a result of affordability and efficiency of the service offered.

In addition, by starting to apply their innovative product, they increased their customer base from 5,358,000 in 1999 to 30,946,000 in the year 2006 (Ryanair.com 2009). Furthermore, Ryan air remains the most popular low-cost airline in the whole of Europe and features among the FT500 list as number 361. This was a great improvement because their arc rivals Easyjet are yet to be listed. This product also improved on their revenue as the increase in the number of passengers reflects the increase in revenue.

The Future of The Company

Trott (1998) outlines the long innovation plan as one of the most important characteristics of a good organization. Currently, the product will remain the same based on the fact that it is still in its maturity stage. This will call for minor amendments to ensure that they protect their current market segment. This will also be encouraged by the persistent effects of the economic crunch.

From the analysis, I believe that only a new strategy will salvage the company from going down after the maturity stage. This is likely to be affected by the state of the world economy. If the economic crunch subsides, they will be forced to deviate from this strategy that was meant for entry into the market and looks for a new form of added value that will keep them afloat.

Conclusion

Innovation is therefore very essential for the growth of any organization. This means that companies should ensure that they provide an ample atmosphere that will encourage innovations. As a result, they will be in a position to walk through competition and also through economic hardships with a raised head and a smile on their face. This is evidenced by Ryan air’s innovation-friendly atmosphere which enabled them to increase their customer base and at the same time offer value to their customers. Therefore, for a company to remain afloat, it will need to ensure that its departments work closely while at the same time the employees are given the freedom to try new moves. In addition, they will be forced to be vigilant and have a focus on long-term growth. Finally, they should ensure that they maintain a certain culture and heritage in which new employees will be inculcated. With the observation of the above mentioned, the organization will experience innovative stunts that will keep them afloat.

References:

  1. Doblin. (2009). “Types of Innovations.”
  2. Hill, Tony. (2009). “Ryan Air, Best for Customer Service.Holiday Extras.com.  Web.
  3. Kotelnikov, Vadim. Product Innovation. 100Ventures.com. Web.
  4. Larry McDonald (2008). Technical Analysis: Which Sectors will lead the Rally? Globe Investor Magazine.
  5. Lowcostairlineseurop.org. (2008) “All Low Cost Airlines in Europe.” Web.
  6. Ryanair.com. (2008). “about us.” Ryan Air.
  7. Thompson, John and Martin, Frank (2005). Strategic management: Awareness and Change. (5th Ed). London : Cengage Learning EMEA Ltd
  8. Trott, P (1998) Innovation Management & New Product Development. Pearson Education, Harlow
  9. Tushman, M.L., Nadler, D. (1986), “Organizing for innovation“, California Management Review, 28 (3):74-92. Tushman, M.L., O’Reilly
  10. Twiss, Brian. (1985). Managing Technological Innovations. 3rd ed. Pitman
  11. Velu, Guillaume. (2008) “Ryan Air Study.” MJN Consultants. Web.
  12. QuickMBA. (2007). “The Product Life Cycle.”

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