For the final task of this unit, I will be critically appraising the advantages and disadvantages of the growth and influence of a MNC (multi-national company) of my choice. With this, I will be examining the strategic reasons for expansion whilst examining the impact it would have/has on a developing host country in terms of factors such as consumer’s choice, employment rates, individuals/citizens, other businesses (competition), etc.
Finally, I will also be assessing the impact it has on developed host countries and the impact it would have on their governments. The business I have decided to choose is Ryan Air because as I have been working on it throughout this unit, I believe I will find it easier to relate certain to topics and theories to it. Strategic Reasons why RyanAir Expanded For the first part of this task, I will be giving strategic reasons why RyanAir decided to expand internationally.
First and foremost, most basic reason why RyanAir must have wanted to expand internationally is because that is the concept of what flight services are, going from one country to another consistently and safely and as this is RyanAir’s service there was basically no other choice but to expand. However. Below are some other basic strategic reasons as to why they may have decided to expand. Geographic Diversion (RyanAir) Geographic diversion is a situation where businesses purposefully aim to spread their risks by moving into overseas markers and could very well have been a factor in RyanAir’s decision to act as a international company.
Geographic decisions is used in particular cases where a business has saturated their home market – just like RyanAir seem have done with the UK – and so therefore use large markets overseas in which they would be able to build a competitive market. So for example, if RyanAir’s sales and number of passengers started to fall in the UK, the success being enjoyed in other countries would banish the risk being held to RyanAir as a company. Pursing a Global Logic (RyanAir)
The second strategic reason why RyanAir may have decided to expand is to pursue a global logic – this meaning to identify a condition in the market that requires a company to adopt a global strategy. This means that because of the nature of the market, that expanding is the only sensible thing to do and that definitely applies to RyanAir because air flights are a global service and so by expanding across Europe RyanAir were able to spread their costs over millions of more customers.
The Temptations of Overseas Markets (RyanAir) Despite the UK having quite a large and very well structured market, the temptations of larger markets such as Germany and Russia may have been what tempted RyanAir to expand across European waters and even though these countries may not be as economically advanced as the UK nor is the average wage as high, RyanAir’s low fares are likely to stop this being a problem. To increase Profits (RyanAir)
Moving abroad to make best use of existing resources is probably one of the best decisions a business today can make because for example, a company that spends a great deal of money on research and development will find that they can actually spread the cost over a much larger output by selling in a wider market which would eventually lead to higher profits which is one of the main aims of any business and most definitely appeals to RyanAir.
Advantages of Becoming a MNC There are many advantages to come from being a one-country business into a multi-nation corporation, for this part of the task I will now be explaining in great detail some of the advantages that benefited or that will benefit RyanAir in the future from becoming an MNC. Below is a table of some = of the advantages that come from being an MNC related to RyanAir. – By becoming an MNC, RyanAir have given themselves the opportunity to benefit from them the growing world market for goods and services.
This is part of the process of globalisation which is the rapid growth of similar goods & services produced and distributed by MNE’s on a world scale and despite RyanAir only being a European company, their flights and air service still has a big part to play and this and so the company would definitely benefit. – Another benefit that would come from being an MNC to RyanAir is that they are giving themselves a higher chance of the basic risks and uncertainties of the free trade cycle that they face from within their own economy.
This is because the more they spread their influence of other nations through their service just like they have done on the UK, they are then able to spread their risks along the way. – One of the biggest benefits is that operating abroad provides RyanAir with the perfect opportunity to respond to the increased foreign competition that is continuously rising and protect their own European market share.
When other foreign multi-national companies (airlines) begin to compete in a particular MNE market that RyanAir is involved in, this gives them the incentive to expand into new markets. – Being an MNC also allows RyanAir to overcome tariff walls from within the United Kingdom. – Of course, being an MNC gives RyanAir a wider range of customers to target and choose from as they give nearly everyone around Europe the options of using their service as opposed to just restricting themselves to the UK which gives them a higher chance of obtaining a larger customer base year after year.
Above are just some of the advantages and benefits that RyanAir would have been able to enjoy from operating as a multi-national co-operation that would have given the company itself a greater chance of success and more international recognition. How RyanAir becoming an MNC affects less developed/developing Countries I will now be discussing how RyanAir becoming a multi-national company would affect less developed countries or developing countries in which they operate and what impact it would create on them.
Because RyanAir only operate in Europe, it would be very difficult to say how they affect less developed countries (3rd world countries) because near to none of these exist in Europe however I can say what impact they would have on developing countries (2nd world countries) because many of these exist in Eastern Europe, countries such as Bosnia, Serbia, Poland, Belarus, Ukraine, Romania, Russia, etc and RyanAir operate in all of them. The elements in which I will be discussing how RyanAir affect these nations will be broken down into factors such as customer choice, employment, competition and the environment.
Consumer Choice/Individuals No matter the state of the economy or government, having a wide choice available is always a benefit to the citizens of that nation, but possible particularly more so for people in developing countries than in higher developed countries. Nearly all of Western Europe is filled more economically developed countries such as Spain, Portugal, England, France, etc. however having a wider choice available (in this case of flights) would definitely be more valuable to those living in Eastern Europe and I will now explain why.
Many things can be determined in different countries by the state of their economies and whether they belong to the first, second or third world category – these factors include things such as standard of living and average wage. When there is a wider choice of options available regardless of the field of product or service, more often than not this results in lower pricing because all the businesses try to compete and gain the largest customer base and the largest market share so prices fall considerable in order for this to be achieved.
Along with this, people living in Eastern Europe live in developing countries such as Bosnia and Serbia (2nd world countries) and so the average wage of the population would be considerably lower than that of those living in Eastern Europe and so because of this an increase in customer choice which is what RyanAir would bring in terms of flights would increase the likelihood of prices of flights falling because it is increased competition and so this would be more valuable to those with lower average wages – Eastern Europeans especially with a business like RyanAir who already offer cheap flights naturally.
So to summarise, RyanAir operating in developing countries such as these would definitely be hugely beneficial to the people because not only do they get a wider choice to choose from, but this would also result in lower flights for them which is great all round and could not have been achieved had RyanAir never became an MNC. Employment Employment is another factor that would definitely be affected by RyanAir operating in developing European countries and in a very positive way.
One of the factors that possibly block developing countries from reaching their full potential is unemployment levels. Put very simply, RyanAir operating in countries like these would not only benefit RyanAir but also the countries themselves because with their introduction and existence across parts of the countries, then this opens up a whole new range of jobs which can only be taken by citizens of those countries without harming the position of anyone else’s jobs.
So in conclusion, RyanAir working in developing countries in no doubt benefits them in terms of employment simply because without threatening the jobs of those already working, it opens up positions for those who aren’t which brings down employment levels with that country(s). Other Businesses/Competition In terms of the developing countries as a whole, RyanAir’s operations definitely do much to improve their economy and economies of scales in terms of flights, however their work in these countries would probably bring some worry to the existing airlines in these countries.
A business that operates in a monopoly market has a much greater chance of success because as they are the only business that provides that certain product/service, then they have no risk of losing customers or a change in demand however as competition increases and similar businesses in the same field begin to enter that market, than a business moves further and further away from the monopoly market they crave to be involved in.
For example, Poland is a developing European nation and one of the countries in which RyanAir carries out it’s operations so for a polish airline such as ‘LOT’ which has been one of Poland’s leading airlines for many years, this brings much negative news and disadvantages because now they have the added pressure/threat of holding off Europe’s leading low fare airline to retain their strong customer base.
However, in turn this may cause them to act in a more efficient and productive manner in order to ensure that all customers are tempted to remain with them and if this is the effect that RyanAir will cause on developing countries’ airlines than that it is extremely positive for those countries and their economies however very negative for already existing airlines within that country.
However, in turn I believe that this is more valuable to developing countries as opposed to already developed countries because the sign of a strong economy/country is healthy business competition which would help any country in terms of development so the existence of RyanAir within Eastern European developing nations can definitely help contribute towards this. The Environment As organisations enter other countries they may have a significant effect on the environment. Some multi-nationals have been heavily criticised for the social cost of their activities.
A particular criticism that has come from MNC’s entering is that multi-nationals employ double standards in their activities/operations which is a big concern to RyanAir because it could potentially damage the good image it has build for itself across Europe over the years. A concern is that MNC’s may transfer or pass some of their manufacturing operations to economies that do not have such strict environmental rules and standards and so see it as an opportunity to effectively export pollution (in the case of RyanAir) from richer countries onto poorer countries, e. . – Germany to Macedonia.
This would be an idea used to possibly avoid the complications and protests that would come from polluting richer countries as this is where it would be much more noticed by environmentalists and so if RyanAir were to be caught being involved activities such as these. It would not only completely tarnish their image as a ‘friendly airline’ but it would also completely destroy the trust built up by passengers, especially those in the environments which have been affected. Assessing the Impact on Developed Host Countries (RyanAir)
Just like I did so whilst explaining the impact that RyanAir has on less developed/developing countries, I will now do the same but instead explain the impact it has on already highly developed countries. RyanAir limits it’s operations to all of Europe and because of this they work in many developed countries (1st World countries) mainly coming from Western Europe such as England, Spain, France, Portugal, Germany, Italy and of course their parent country The Republic of Ireland and so I will now discuss how the existence of RyanAir working in these parent countries affects them. Employment
Unemployment is a situation that arises everyone despite and will always exist, in some countries more so than others but nevertheless it will also be a global problem. As I described earlier, the existence of RyanAir in developing countries is probably more important and valuable to them than it is to developed countries in terms of employment because even though RyanAir operating in both creates jobs in both sets of countries, fuller employment in developing countries would contribute to them developing quicker which of course is more of a priority to them then already developed countries.
However, after completing some secondary research I found that most of the higher unemployment levels throughout Europe come from the more developed countries and so in the sense of helping to banish this problem, RyanAir would definitely contribute maybe not much but their need for workers would be high.