This case study deals with analysis of information system implications in an organisation whether it enables the organization as a technology or acting as a strategic weapon. The organisation selected for the study is Ryanair which is a well functioning company in the field of low cost airline industry in European region. Through this analysis we intend to identify the information system adopted by the organisation and its strategic importance in attaining competitive position in the industry. The research topic is whether the information system of Ryanair enables technology or strategic weapon?
The operational and strategic value of information system
Information system plays an important role in the success of any organisation. In the information age, the organisational success is greatly related to the effective utilisation of information systems. The value of information system in any organisation is perceived differently by different organisations. Cost savings is the main benefit attributed to information system. It would provide significant strategic value to the organisation involving quality, time and risks criteria. It helps to improve the performance of the organisation through bench marking, reengineering etc. Outsourcing opportunities can be identified in time and this provides greater benefits to the organisation.
Concept of value and competitive advantage: Competitive advantage is the position of sustaining profitability more than the average of the industry rivals. All of the business strategies are focused on attaining competitive advantage. In the concept of Michael Porter there are two types of advantages; they are cost advantage and differentiation advantage. Cost advantage is attained through reduced operating cost than the rival firms. It helps to create superior value for the customers. It describes the position of the firm in the industry. (Strategic Management: Competitive Advantage. 2007).
Value of information system in organisation
Organisational information system influences the planning of an organisation. It has great influence on the economic factors of the organisation by shortening the length between the current stage of business and the target business. Adoption of various technologies information system contributes a lot to the organisation. It works as the vital factor for the achievement of management aims and objectives. The feasibility of the desired Information system must be ensured before the acceptance of the desired IS. Information system has to be implemented well to succeed in the field of business. (Information Systems in Business Information systems in Business)
Information system facilitates greater organisational control through availability of information for all departments. It enables them to perform efficiently and effectively. The goals and objectives of the organisation can be properly undertaken with the accurate projections of information system. It should help to improve the operational performance with increased turnover and greater profitability. (Olugbode, Richards and Biss 2006, p.641-648).
Information sharing, communication and understanding are the core competency in organisation which is greatly facilitated through effective information system. In the field of knowledge acquisition, information distribution, and information interpretation which are the basic factors of organisational learning, information system has great role. Greater disemination of information to the entire organisation creates more informed, flexible and organic environment in the organisation. It will motivate the performance of individual which provides competitive advantages to the organisation in the industry. (Balasubramanian). Organisational learning is a vital factor which helps organisation to get competitive positioning in the industry through improving the innovativeness and effectiveness. Learning enables the organisation to effectual and rapid responses towards the changes in the complex and dynamic business situations. Information system has significant role in the organisational learning process. Information system reduces the cost requirements for processing and transferring of data. It helps the organisation to take effective managerial decisions.
Strategic value is the performance based concept of value. The increase in the strategic value is based on the up-to-date information acquired by the organisation. Getting the right information about the changing market places would add strategic value to the organisation. Using alternative information resources would be a better factor for the improvement of the strategic values of information system of an organisation. (Conrad 1995).
The competitive forces that affect Ryanair’s environment
In the European low cost airline industry, there is a large number of competitors and Ryanair is the most successful low cost airlines in the low fair airline industry. The airline industry is highly influenced by changes in the external environment. The environment is undergoing rapid and dramatic changes constantly. In this changing business environment, information system has vital role in the profitable performance of Ryanair. While fixing the flight fare the average number of seats sold per flight is undertaken as an alternative of revenue made per sold seat. Thus it is essential for Ryanair to identify every environmental issue that affects basic costs of flights or the likeability of customers to book a flight. Flight security is a crucial customer attractive factor that determines the profitability of business in the industry. Global economic and environmental changes and threats affect the air travel business. Due to the effective promotional strategy, Ryanair attained continuous growth in its business operations. (Five Forces Model on Ryanair. 2009).
In the low cost airline industry, the rate of airline closures and consolidation across Europe continues to speed up due to the unbearable operating costs. Mergers and acquisitions are continuously carried out in the industry in order to avoid the increased operating loss. As a result of these consolidations four large European airlines have emerged in the industry, and Ryanair is prominent among them. Through accurate business strategies, Ryanair attained success in its business with larger customer base. Airport cost is a competitive factor in the airline industry. Due to the increased operating loss in the industry companies followed the policy of reducing flights and flight capacity. This resulted in traffic collapses in the larger airports. This creates plenty of opportunity for Ryanair. (News Release: Ryanair News: Ryanair Beats Recession as Traffic Grows 13%. 2009).
Fuel cost as well as operating cost is an aggressive factor in the airline business. In order to sustain the competitive position, Ryanair wants to keep the operating cost at minimum level. Due to the adverse economic conditions in the environment resulted from recession positively influenced the low cost airline of Ryanair. More and more passengers are switching over to Ryanair’s low cost airlines. It helps Ryanair to sustain its business growth in the industry.
Organizational information system in Ryanair
Information system plays an important role in the performance and business growth of Ryanair. It adopted expansion of information system to all of the operational areas for attaining cost effectiveness and operational performance improvement. On board mobile telephony service is arranged by Ryanair in the airlines to facilitate in-flight communication. It is with the intention to motivate the ancillary sales growth. A noticeable change that they have recently brought is the planning to use software for the payroll as well as other HR services. The treaty is to cover around 2,500 employees of Ryanair mainly in Ireland and UK. Ryanair has adopted a resource link system, which is capable for Human resource management, mainly health and safety of the employees, recruitment and training sessions, and payroll system of the company. (Ryanair to Use Northgate HR Software in ₤ 240,000 Deal).
The main purpose of the application of the Resource link software system is for the renewal of the payroll and HR system using more advanced techniques of training and recruitment programmes. Previously, it relied on complex spreadsheets. But after the adoption it has made a lot of changes in the information system development of the organisation. (Berry 2006).
The value that information technology has added to Ryanair
Ryanair, a low-fare passenger airline service, operates from 12 European countries. They are equipped with a large fleet of aircrafts. The passenger figure in a year is about 34 million. With the increase in the passenger figure it has brought an internet booking facility and reservation method. Major parts of its sales are being done through the internet. Due to the improved unit cost performance on its staff cost Ryanair attained 3% reduction in its operating cost than the previous year. Airport handling cost, and depreciation cost are also reduced. Information system expansion is the major contributor of reduction in operating costs of Ryanair. The online booking facility is greatly utilised by the passengers and it counts more than 90% of the total passengers. It improves the operational efficiency of the company with lesser time and labour cost requirements for the transactions. To manage the website with up-to-date information, Ryanair arranged advanced infrastructure facilities in the organisation. In the year 2002, Ryanair expanded its operational area through starting new offices in several European cities. Ryanair’s IT team were capable of managing problems remotely. Critical situations that could affect the schedules or aircraft safety can be transferred speedily among the organisation through integrated information system resources. (The Information Age Interview. 2006).
A well developed argument on Ryanair whether their information system just helped them to perform efficiently in their market place or provide them with real strategic advantage:
From the discussion about the information system in Ryanair it is derived that in order to reduce the operating cost with improved operational performance, information system in the organisation has a great role. In the airline industry increased operating cost is a major constraint that affects the profitable working of airliners and most of them are forced to close their business due to lack of surviving ability. Through the consolidation of IT resources in the operational areas of the organisation efficiently and effectively, Ryanair sustained its position of second largest budget airline, even in the time of economic recession. Thus it can be concluded that information system in Ryanair is not a mere operational performance improvement strategy but a real strategic advantage to compete with other firms in the industry and sustain its market position and profitability.
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