Marketing cesim simulation- Marketing plan

Project description

Describe three ways in which ‘management via accounting’ enables managers to deliver economic, efficient and effective outcomes within a line-and-staff structure. State which one of these is, in your view, the most important, and briefly explain why.

2. Management via accounting at Ryanair:

Founded in 1985, Ryanair has become a leading Eurean low cost airline, or ‘ultra-low cost carrier’ (ULLC). Under its chief executive, Michael O’Leary, Ryanair now flies more than 1,600 routes, with 189 destinations across 29 countries in Eure and North Africa. It uses Boeing 737 aircraft exclusively, and has about 410 aircraft currently. For the year ending 31 March 2013, it reported Total Operating Revenues of € 4,884 million, Total Operating Expenses of € 4,165.8 million, and Profit after Tax of € 569.3 million. The strategic goal for the next five years is to increase market share to 20% of the European air travel market (Ryanair Annual Report 2013).

The company is managed as a single business unit (i.e. as a Unitary-form or U-form enterprise in Chandler’s terms). Ryanair operates its business as ‘a single fleet of aircraft that is deployed through a single route scheduling system’ (Ryanair Annual Report, 2013:185 ). The uniformity of its fleet of aircraft and its standardised procedures for every aspect of the ‘flying experience’, from booking to check-in to travel to journey completion, are designed to enable economic, efficient and effective delivery of low cost flights with on-time arrivals for all passengers on every route. The low cost strategy is based around seeking to ensure every flight is as full as possible, since full flights deliver profits.

Given that fares (even with add-ons) have to be low, a key management focus is on reducing operating costs wherever possible while ensuring safety is not compromised. Examples of this cost-focus include negotiating lowest-cost contracts with airports, and making use of staff time as efficient and effective as possible (e.g. by reducing time required by staff at check-in by incentivising passengers to print out their own boarding cards). Revenues are also boosted by offering fast-track boarding or reserved seats for a small additional charge, and by charging for all luggage that is not carried in the cabin. Incentivising passengers to bring small, low-weight bags is also a way of reducing the overall weight of the plane, thus reducing fuel costs. This is particularly important since fuel costs are one of largest cost components in running an airline. Ryanair’s 2013 Annual Report states that fuel was 45% of total operating costs for the financial year 2013 (page 4, 9, 55, 72).

Ryanair therefore seeks to reduce fuel costs as far as possible on every flight. To ensure this, flight crew must focus on departing on time, to maximise the probability of arriving on time (a key customer satisfaction indicator); on-time departure also allows pilots to reduce flight speed (thereby reducing fuel consumption). Fuel loads are carefully measured before departure, since keeping the fuel load as low as possible also reduces airplane weight and reduces fuel consumption. At the same time, aviation authorities require each aircraft to include a ‘margin of safety’ in its fuel load, in case of unanticipated weather delays or diversion to an alternative airport. A key management focus is on meeting this requirement but not exceeding it.

Here is a case where ‘management by accounting’ can produce significant cost savings on fuel costs. [Ryanair’s own estimate is that they will save / have saved £80m/year on fuel costs (Simon Calder, The Independent 2013).] At the same time, both the company and its flight crews have, as a priority, ensuring safety is not compromised, and in ensuring that this message gets across to the travelling public.

Required:

Describe how ‘management via accounting’ can enable Ryanair operations managers to ensure that the fuel load carried on each flight is as economic, efficient and effective as possible. Consider in your answer how you would manage any flight crew concerns that the ‘margin of safety’ may be too low.
INSTRUCTIONS
The overall word limit for the coursework is 1,500 words (excluding references and appendices). The coursework must be typed with 12pt font size and double spaced.