Pestel Analysis Example Essay Example
Pestel Analysis Example Essay Example

Pestel Analysis Example Essay Example

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  • Pages: 3 (799 words)
  • Published: December 16, 2017
  • Type: Analysis
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PESTEL Analysis In this part all factors, which influence the company as a whole but are out of their direct control including wider social, political and economic factors shall be explained. The analysis of those factors of the macro-environment is therefore often known as PESTEL analysis. 3 PESTEL is an acronym for the six key strategic areas of change: Political, Economic, Social, Technological, Ecological and Legal and a technique for understanding the various external influences on a business4.Each single area has the potential to fundamentally change the competitive environment your company operates in. Due to the fact that the airline industry is very much influenced by changes taking place in the environment and has undergone rapid and dramatic changes during the last decades, this analysis is especially important for Ryanair. 5 A detailed matrix of all single


points of the areas of change – Political, Economic, Social, Technological, Ecological and Legal – can be found in the appendix.

Furthermore the PESTL Analysis is made within the important points of the airline industry.Ryanair targets in the first instance, as the largest and most successful of Europe’s low fare airlines, leisure travellers and the visiting friends and relatives segment of the market. Describing itself as “lowest cost scheduled airline” means basing the airline’s financial strategy on the average number of seats sold per flight in place of on the revenue made per sold seat. As a result every environmental issue, which either affects basic costs of flights or affects the likeability of customer to book a flight is important for Ryanair.

6The past decades have brought many events, which affected flight security in the eyes of th

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customer. 11th of Septembers and “Sars” have shown that global dangers heavily affect the air-travel. As an European airline and following an effective promotional strategy Ryanair sales increased irrespective of this danger. However the unstable political global situation is a major factor of insecurity in the airline business.

Ryanair, still being a main carrier between UK and Ireland and heavily using London Stansted is particularly affected by the fact that more terror attacks are predicted for Great Britain. “Sars” or “Bird Flu” have shown that an epidemic can have a heavy influence on the airline business. The World Health Organisation (WHO) has already forecast a global epidemic within the next years. This will certainly have a larger influence on Ryanair’s business, relying as it does on a high number of sold seats among leisure travellers than do traditional airlines whose clients merely fly for business reasons and which are operating in terms of yield management. 8 Low price, value for money and efficiency are core values for Ryanair.Those core values should not change regardless of environmental turbulences.

This means that cost reduction and other profit sources than travel fares are important factors in Ryanair’s strategy since they cannot compensate its expenditure by increasing travel fares. For the low cost strategy prices of taxes, fuel, and governmental regulations are especially important. The airline deregulation not only helped Ryanair but also increased competition under different airlines and air traffic. 9 The result of this is increased regulations by the EU government in terms of safety and environmental rules.

This again raises operating costs within the EU. When Ryanair wants to maintain its low fares it has either the

possibility to cut costs elsewhere in order to compensate increasing costs for safety and environmental taxes or it has to finance those costs by growing ancillary services revenue. Efficiency and low prices are due not the least to the company’s lower labour expenses. The Ryanair Company controls these costs through a performance related pay structure. This special system is of course also dependant on EU social/employment legislation, which is always subject to change.A main problem is the uncertainty of the oil price, which is again tied to political developments.

Since the political situation in most major oil producing countries will stay unstable for the foreseeable future, the oil prize will remain a main problem for airlines. The fuel cost difficulty is exacerbated by unpredictable currency exchange rate fluctuations because aircraft fuel prices are denominated in US dollar. Nonetheless the weak dollar has compared to sterling a positive impact for Ryanair. Finally Ryanair as a major European airline has to consider the travel regulations within the European Union.The falling obstacles of travel and trade have certainly had an influence on inter-European travel rates. Flying has become much easier, faster and convenient.

This can be seen as an advantage for Ryanair operating in mainland Europe. The recent and potential continuing expansion of the European Union eastwards will therefore offer a growing market in terms of passenger volumes, destinations, and suppliers, particularly as the new markets become more fully integrated, including membership of the Euro zone.

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