MD-4018Strategic Management

Course: MSc Business Management

Name of student: NIKHIL MAHAJAN

(G-20468408)

Name of Tutor: Owen Leeds

Date: 05 / 08/ 10

Business strategies or strategic management in Business is an important aspect and it cannot be

left out as it is submitted with various arguments in lieu of its relevancy and success (Franklin,

2001). Looking back, existence of strategies in business came when the existed policies of

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business and planning were rechristened by Hofer and Schendel (1977), as they proposed the

strategic concepts, the fundaments of alimentation and specialized strategies of the business.

Different authors waged there research in this new field after adapting these paradigmatic

shifts, (Hoskisson et al 1999) cited in Nag, et al 2007 found that Business strategies laid stress

on the environment and on the resources which are there inside and internally in their

company, in order to have enough participation in altering field of business but it was classified

by the Mintzberg that there are different thoughts of school which are categorized in to 10

different categories, out of 10, every school of thought describes the sequence of strategies

from different paradigmatic view, all of that having a particular motif. Comparatively,

importance of business strategies gained concentration and exploration with its tremendous

attributes and various approaches, and was suitably described by Barney 1995, as an emerging

strategy directed for attaining competitive advantage. By taking an account of a firm core

competencies and positioning strategic management is understood, when all are directed for

acquiring competitive advantage in the areas of the competition.

This essay aims for examining how actions and operations of Ryanair, a private company of

airlines corroborates the strategic models of question by talking a look into their core

competency and positioning, taking a reference to the adherent of the both the models.

Michael E Porter in an interview with Harvard disclosed that in profitability chart 2009 airline

industry was at the lower side although they have massive investors in the field, therefore in

order to withstand the dynamics of the business, they have to need a proper understanding

and practice of the strategy in the operations of the airline industry. As competition is

increasing in airlines industry, comparatively it is becoming difficult for the Airline operators in

the ragging battle of competition and ranging to distinguish them from others. Porter (1996)

identifies straddling as a fake rampant type in the industry; therefore by keeping its surviving

position, straddling can easily match the benefits of the new position. For beating this

happening, he observed that a firm had to execute activities not only like an activity but it has

to be done differently than its rivals do, therefore his view demanded that for understanding

the strategy the key is positioning. The 3 different types of positioning are Variety based

positioning, Needs based positioning and Access based positioning. He describes that in a

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Variety based positioning, particular product or service is as a choice to offer for customers, by

doing so company can specialize on delivery of that particular product or service by classifying

the set of actions. In Need based he identifies, focus on customers plays an important role, in

which segment of customers are targeted with their different needs and to fulfill their needs,

the activities of the company is tailored. Third and in last Access based positioning, he explains

that it is a function which is geographically aimed to reach customers in the easy and best way.

According to other adherents and porter that positioning is a sculpturing a niche in a business

sector with a view of “outside-in” (Mintzberg et al, 1988). Implementation of their perspective

means that business should be driven according to the market and oriented externally,

therefore insisting that a major role is played by business environment in the success of the

particular business, as it is contented with the argument that from the external environment

the identification of the opportunities for the company, ideal position for harnessing and to

avoid potential threats is revealed (Johnson 2005). In further identification porter explained

that analyzing the external environment as a mean of positioning, is a key for generating

superior strategy and maintaining competitive advantage. A model is devised for analyzing by

Porter which is known as Porters Five Forces Model. This model consists of five different

factors, which measures rivalry in the business within the competitors of the industry, the

power used by buyer or by the supplier for bargaining and a substitute product threat or of the

services and the threats by the new entrance of different businesses or firms in the market. In

Airline industry, with the recent retrospect of his model, that his forces are intense and all the

five forces comes into with the fierce battle (Porter, 2008). Therefore, it is important to position

itself properly in the industry and to the point and always seeking for generating a strategy that

should win over customers, likely as it will satisfy their needs more efficiently and in better and

different way other than their rivalries or competitors. A stronger market position can be

gained in the industry, by doing so and with consistency they provide benchmark by invariably

adjusting their strategies according with the changes in the environment (Johnson 2005) which

will gain them a competitive advantage.

Porter also realized that positioning has its drawbacks also or we can say it has its darker side

also. He observed these changes which are radical in the competitive positioning and practices

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which are operational could sabotage the structure of industry or it will put immense pressure

to get major market share. One typical example is the establishment of British Airways, no frills

carrier in a bid which comes as a response to pressure in the airline industry to get major

market share (BBC News). The opinion of the Porter was that motion dynamics set by strategies

should be avoided as it would make industry structure weaken in long term when action

generated are aimed to improve competitive advantage. Widening it as it may be, the Porter’s

five forces came under attack when Brandenburger and Nalebuff, (1996) noted that a sixth

force needed to be added to the framework. Complementor force was omitted by Porter as

they noticed it as a key player. Due to existence of the fact of complementary products or

services, this resulted in sixth force. A situation where your customer values your product more

if they have the other firm’s product, rather than having your product alone; like in the

complementary relationship between television producers and cable television companies

(Barney and Hesterly, 2006).

Evaluation of competitive advantage in general from the viewpoint of positioning, one or two

aspects of competitive advantage was argued by Porter that can be possessed by organization

which can be noted as cost or differentiation. Any organizational success would largely rely on

the cost and differentiation of strategic focus on relative product or services. In addition Porter

proposed cost leadership, differentiation and strategy focus is the 3 generic strategies,

exclusively influenced by cost or differentiation as a competitive advantage choice.

Comparatively he argued that organization must concentrate on any 1 of the three strategies,

so that they should not fall in a trap of a rat race. Staking of strategies which involves both cost

and differentiation, he observed that competitive advantage will be relegated and an overall

business performance will be constrained. It’s a matter of choice (strategies) argued by

Markides (2004) in today’s ever changing business, a situation where putting of the choices

altogether for creating a requisite fit between the strategy needed by environment and needed

by company. He stresses on the need for holistic, big picture approach of organizational

tailoring the activities for meeting the strategic demands and for gaining competitive advantage

by understanding that positioning or core competence as a key to successful management of

business strategy.

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After looking on positioning, the other side of the coin, the core competence, there are authors

who argued the best way and to achieve a successful business strategy, core competence is

needed. As its focus is on making strategies those are based on an internal strengths instead on

the external strengths of the organization. As per Prahalad and Hamel (1990) core competence

is the roots for the core competence. These competence led perspective, differs from the

position approach because it views the organization from an “inside-out” basis. It starts by

assessing the competences an organization wants to build before considering the market

opportunities that they are best suited for (Leavy, 2003). Two central ideas are observed by

him, which were related to the perspectives of core competence, first is itself the concept of

core competence as many strategies uses to imply strength. Second one is an assumption of

relation between the core competence, core product and the end product, as per his notice it

extends the perspectives of competition to three levels. Let it as to be but it is argued by

Prahalad and Hamel, for organization competence should be strategic, it must possess the rare

and unique capabilities, difficult to imitate and not in short turn but in a long run they should be

valuable for the customers. As per the observations, it is a unique quality with which the

product or services of organization is identified, and if it is identified as core competence in the

midst then there rivals, it will serve as a yardstick which will attain them competitive advantage.

By saying this Leavy (2003) noticed a central idea which is related to core competence

perspective which is not imaginative as it will signify arguably about the organizations strength

and core competence which is aimed for attaining competitive advantage amongst competitors.

From a resource based view Barney saw core competence as resources of firms which are

crucial for sustaining the competitive advantage. He emphasize that a firm’s resources includes

all its assets, capabilities, organizational processes, information, knowledge, that are owned

and controlled by the firm, that enable it to formulate and pursue effective strategies. He also

noted that the proper bonding of both the tangible and intangible resources renews and shapes

them, to work equitably to achieve competitive advantage. These resources was categorized by

Mintzberg (1998) as physical capital resources which included location based on geography and

physical technology; In human capital resources experience training and cohesion is included

and in organizational capital resources it includes formal and informal systems. However the

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resource based views importance is on the basis of the assumption that this will enable the

organizational resources t believe and implement strategies which will amend its proficiency

and effectiveness and by doing that it will doubtlessly exploit these resources to respond to the

opportunities in the external environment and will attain competitive advantage. It was

observed by Barney (1991) that to provide sustainable competitive advantage by a resource, it

should posses 4 attributes; an ability to be viable in its ability to exploit opportunities and

neutralize threats in the environment, a rare capability amongst competitors, difficult to

replicate and strong enough to withstand substitutes. With the growth in research and

development, however it will be right to observe that to attain competitive advantage

organization should not rely on its real resources such as physical capital resources because

they are most susceptible to change, wear and tear, and easily copied or retroflexed. Likewise,

several other authors and critics of core competence have noticed that it lapses in exploiting

the current market position in the external environment while depending on an inside out

perspective Mintzberg (cited in Leavy, 2003). Comparatively to change and diversify, core

competence is also have been labeled as a barrier. Once an organization develops a set of

competence observed by Christensen (1997), it is not hard for an organization to deviate from it

or to opt for new one to learn.

Noticeably it is difficult for all the organizations to suggest a change if market indices because

the amount of money already spent on building the existing the core competence and

moreover this amount of money needed to engulf for the emergent strategy. Constantly this

will serve constraints in exploration of new opportunities which are laid by the changing

external environment. Result of this backdrop, it is observed by the Markides (2004) that for

forever none of the strategies are unique and it is a subject to change with passage of time and

situation. He noticed to achieve success in business; some flexibility should be there, because of

the strategic change of direction of the business condition and to attain or to accomplish a

continuous competitive advantage, the internal content of organization must change according

the needs.

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It is obvious from forgoing that after examining the both strategic approaches, they have their

merits as well as demerits for the understanding of the business strategy which is aimed for

attaining competitive advantage. Likewise, every social phenomenon both the sides of good

and bad, however what is good for the situation and may not be for the other, therefore none

of the strategies can be called universal which should be applied throughout in any situation.

Moreover to properly identify it is necessary for organization to adopt best applicable practice,

as both strategies aim for attaining competitive advantage. As it is suggested by Leavy (2003)

for organizations to analyze equally from the perspective of both the approaches, differences

should be understood properly and should be able to turn them to the viable composition. With

further description he added that by doing so, two sets of contrasting perspectives can be

generated, hence having a broader lay out of options which will be put together for an action,

as it will provide better result than using alone one perspective. Therefore it is essential in a bid

to assess the cogency and practicality of these arguments looking at the both approaches, is to

look at an organizational practices. To accomplish that business and operations of Ryanair will

be examined.

A background look into the organization detailed that Ryanair is an Irish-based airline, set up in

1985 by the Ryan family with only staff of 25 and a share capital of only £1 (ryanair.com). It

started its operations during a time when competition was only between Aer Lingus and British

Airways on the Dublin to London route with the aim of becoming a force in the airline business.

It started its operations on similar grounds and approaches with its existing competitors

operating full service flights. It was business as usual, with little or no effective strategy, Ryanair

was notably running at a loss until 1991 when Michael O’Leary was appointed CEO of the

company, tasked with a responsibility to transform Ryanair into a profitable airline (rynair.com).

It was from then that Ryanair became a force to reckon with as they engaged in a massive no-

frills airline operations, because the business management led by Michael O’Leary responded to

the opportunity posited by deregulating the airline industry, which allowed European airlines to

operate routes between other EU states. He utilized the positioning approach, looking from the

outside-in perspective to generate proper strategies, replicating the successful low cost, no-

frills business model of Southwest Airlines (Leavy, 2003). O’Leary achieved this through a

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proper integration of Porter’s (1996) three distinct sources of positioning, by variety-based

positioning; he implemented a model which saw Ryanair operate a consistent 25 minutes

turnaround for its aircrafts to keep costs at a minimum and serving of the meals are avoided

during the trips in order to save cost. More so, the usage of a single model aircraft, which

encouraged no-frills travel, with an absence of business class seats, encouraged the variety-

based positioning. Another future was its replication of Southwest Airlines use of secondary

airports, which offered low landing rates even though they were neglected because of their

location, these Barrett, (2004) noted, has furthermore boosted Ryanair’s successes.

Comparatively, using secondary airports will have less congestion, which will ensure the less

turnaround time and landing time. Looking from an angle of need based positioning; those

customers are targeted by Ryanair which needed fast trip to and fro for their business location,

people loving to travel and customers which are price sensitive. To attain that they declined the

use of airport facilities such as air bridges, business lounges and hired less check in desks per

passenger (Barrett, 2004). Ryanair avoided sale of tickets through travel agents but they

provided it through internet online booking and travel ticket printing. Finally, they access based

positioning view in the light of their taking advantage of the airline deregulation policy made by

EU and strategically locating in Europe where the numerical strength of travelling passengers

are relatively high. Usage of secondary airports by O’Leary ensured a broader and faster service

which is also a lieu of access based positioning view.

Using Porter’s (1980) derivatives of generic strategy of cost leadership, to be a prices leader is

the strategy of Ryanair which eventually allowed Ryanair to have a strong market share and

provide a strong competition in the market to its competitors. Advertising was refused by

O’Leary to cut cost, instead it used controversial adverts fashioned inside the company which

he referred a free publicity. In order to attain competitive advantage in its competitors, Ryanair

thus offered lowest fare for basic no frills and point to point airlines travel as it invented in right

way of mixing of all the aspects of positioning. Ryanair operation provided full acceptance to

Porter’s (2008) belief that impact of all five forces on airline industry is almost acute or vivid.

Operations of Ryanair showed that they are constantly are in a battle of cost cutting among

their rivalries like Easy jet and British airways, O’Leary jollifies that Ryanair is a remark and he

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observed that to new entrants there are huge barriers and no new airline will find a price below

the offering of Ryanair. After looking at the bargaining power of suppliers Ryanair utilized to use

only one type of air line type that is Boeing (737-800) aircraft, which placed a strong barrier in

the bargaining power of its supplier (Ryanair.com). With bargaining power of buyers, Ryanair

variety based positioning provided its customers few choices to bargain like no choices of seats

or of meals. Observed by Lawton (1999) that non participation of Ryanair in alliances for

keeping and handling costs and at a minimum turnout time, restricted the buyers or

stakeholders bargaining power. Ryanair prepared a customized car hire services for picking

customers from secondary airports in order to discourage any resentment that secondary

airports are miles away from the actual locations and also not to overemphasize the part played

by the substitute products or services, therefore its continuation of cost cutting services to

attain competitive advantage can also seen in deterring substitute products and services.

Ryanair successes with the leadership of O’Leary, establishes acceptance of proper realization

of business strategy through positioning, seeing from a perspective of outside-in. It was

notably, a swift response to an opportunity posed by the external environment that led to the

success of Ryanair, and the use of Porter’s generic strategy of cost leadership, aided the

actualization of the strategic position of the organization. Still utilization of outside in

perspective can be seen in by Ryanair, but lately growth and call by other authors (Leavy, 2003)

for firms to incorporate both the approaches in order to attain better competitive advantage,

might have led to be adopted by Ryanair some kind of inside-out approach, using their low

price rates as a benchmark. Lawton (1999) observed that as argued by senior management of

Ryanair, that cost cutting is more likely a tradition within the organization and thus searching

everyday how to cut down the cost. Filtration of whole organization on cost cutting focus and

tradition formed the standards of Ryanair organizational culture. He further noticed that

decisions are made by staff at all the levels and they are engaged in practices which are

directed in Ryanair’s culture of cost cutting. Observation made by Mintzberg (1998) that

strategy shaping process is affected by culture and organizational strategic durability. Lawton

argues (1999) that cost cutting may be emergent strategy of Ryanair but it is risky in long term

as a small amount of changed in external environment can pose serious effects to their

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operations, especially in the industry like Airline. Maintenance and cleanliness of Ryanair are

neglected and eluded in the investigative documentary in order to meet the requirement of

their 25 minutes time of turnaround. Moreover boarding staff hurries the checking of the

passport details in order to meet the schedule of aircraft. Comparatively, there will be more

working hours for the staff, guiding to the footage demonstrating the sleeping crew members,

which is a safety threat to the passengers. Although the external environment is consisted of

dynamics of changing and perceived by unease of Ryanair critics but still their strategies is rock

solid against and in all the odds.

Conclusion:

As this aims to evaluate the approaches of core competence and views of positioning for

generating competitive advantage and looking at each: strength and limitation or merits and

demerits which is identified by critics or disciples. Ryanair is used as a yardstick to incorporate

the need of strategies of the leadership, to the employees as it is detected in order to attain

competitive advantage. Flexibility touch, opportunity harnessing and proper realization and the

consolidation of the strategies, however will encourage and quickly achieve competitive

advantage. Therefore for maintaining a competitive advantage, firms should understand that

there is no best perspective or approach for theorizing the competitive advantage, but it

depends a lot on the right execution of practices and of proper business strategic management.

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