1. Introduction
Economist’s theory of reputation states that the companies engage in the corporate reputation because the customers will do business with them or the customers will buy the products from them. The customers also prefer the companies with strong reputation because the reputation acts as a guarantee that the company will not engage in an unethical or dishonest behaviour. Another theory on reputation states that the reputation is easy to lose but is very difficult to build up (Barnett & Pollock, 2012). Hence a company which is having a very good reputation in the minds of the customers will try to continue with the image rather than spoiling it for simple reasons.
And the economic theory of cost benefit analysis on reputation states that the cost of building up a corporate image or reputation or a brand is much costlier. However, the benefits derived from this reputation building are going to be more than the cost involved in building the image (Gottschalk, 2011). The benefits comes in the form of people paying a premium for getting the desired services from the service provider and the repeat purchases of the customer as the chances of product or service failure is minimized for the customer. Similarly, the reputation building helps in word of mouth publicity for the firm which is a more powerful medium of prospecting new customers for the company. Corporate reputation has 3 subsets namely the brand reputation, organisation reputation and stakeholder reputation. Brand reputation refers how the consumers see the products. Organisational reputation refers to how the consumers perceive the about the organisation which may include the logo, the ethical behaviour of the organisation etc. The stakeholder reputation refers top how the stakeholders perceive about the organisation. Some of these are intangible like the goodwill of the organisation etc.
2. Analysis
2.1. Reputational Challenges of Ryanair
Ryanair which began as a low cost carrier in 1984 has seen a tremendous growth in the years and had grown to the largest player in Europe. The major reason for the growth can be attributed to the low cost model which it has developed. It has its operations in 28 countries and employs around 3500 employees currently (Ryanair, 2016). The revenues of Ryanair show a continuous increase. The revenue for the financial year 2014 is € 5,037 million which is a 3% rise from 2013’s revenue of € 4,884 million. On the contrary, the profits show a continuous decline of € 523 million in 2014 which is an 8% decline from 2013’s profit of € 569 million. The decline in profit is attributed to the low fares the company is charging. This is evident from the fact that the customers for Ryanair which has increased from 79.3 million passengers in 2013, to 81.7 million passengers in 2014 showing a rise of 3% (Müller, 2011).
Even though everything seems to be fine, the corporate reputation of the firm is continuously on the decline. The customers are highly dissatisfied with the services provided and they have started expressing their discontent. The business class consumers have started complaining about the delays in flights and unprofessional way of handling the customers. Lack of proper communication channels for the consumers about the poor services has damaged the corporate reputation and it has grown to the extent that there is a site developed in the name “Ihateryanair” (Kahawatte, 2010).
2.2. Current Situation
Stakeholders are the persons who have interest in the operation of the firm. They are the persons who influence the decisions of the company and who are also influenced by the decisions of the company (Kimmich et al., 2012). The stakeholder theory states that the company that manages the stakeholders very well has competitive edge over the other companies that doesn’t manage their stakeholders and gives the guidelines to identify the parties that are interested in the running of the firm and how the firm’s decisions need to be planned to provide value to the stakeholders (Phillips, 2011).
The stakeholder’s of Ryanair include the shareholders, customers, the suppliers, employees, government, common public etc. Even though the customer base of Ryanair is steadily increasing, the customers are not satisfied with the services provided by Ryanair. This is quite contradictory. In view of stakeholder’s theory, the low cost model of the firm attracts more customers to the company (Creaton, 2014). However, the communication gap between the management and its major stakeholder like the customers has damaged the reputation. Poor services and not updating with latest technology has been another reason for dissatisfaction of the customers. Decreased profits, in spite of the increasing customer base, have invited the criticism from the stakeholders like the investors and the shareholders. The stakeholders concern is the stunted growth of the Ryanair when compared to the competitors.
3. The challenge
3.1. Detailed analysis of the challenge
The major crux of the entire problem is the negative image that has been developed around Ryanair. The negative image is created among the customers due to the poor services of Ryan air. Ryanair is of the assumption that the reduction in prices means that the customers have to compromise on the quality. However the customers expect the organisation to reengineer the business processes to provide a cost effective solution for travel. This communication gap or the misunderstanding is the reason for the development of the negative image among the customers. This negativity affects the corporate image and the identity of the organisation. (Carreras et al., 2013).
The negative image or the publicity is a root cause which results in series of problems in the organisation. One of the major impacts of negative image is the strained stakeholder relations (Podnar & Balmer, 2013). A critical analysis of the negative reputation reveals that the Ryanair is in a strategically disadvantageous position when compared to its competitors in the low cost category which means that it is not having enough competitive advantage over its competitors. Ryanair may either lose its customers for other low cost airlines which has better reputation for services or to the high service airlines like British Airways. From the organisational perspective, the company may not be able to get the raw materials or suppliers to provide the services to the customers due to its poor reputation. The negative corporate image will affect the motivation and the morale of the employees which will result in the poor performance, absenteeism and increased turnover.
Ryanair had come out with “Always getting Better’ to improve the image among the customers. Ryan air which was fining their customers for making any changes came out with 24 hours grace period to make changes. The program also reduced the number of clicks from 17 to 5 during the booking of flights (The telegraph, 2016). Launch of mobile apps, efforts to brand were some of the other efforts taken to improve the brand image.
3.2. Impact of reputation on organization and stakeholders
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