Strategic Management

Ryanair – The Low Fares Airline

Team members:
Ivan Martinov
Sabbir S. M.
Agenda

1 Company Overview

2 Strategic Analysis

3 Strategy Formulation

4 Organizing for Strategy

5 Conclusion

11.10.2011 Strategic Management 2

Company Overview

» 1985, first route with daily flights on a 15-seater Bandeirante aircraft,

» In 1986 launch fare of £99 return, less than half the price of the BA/Aer Lingus
lowest return fare of £209. First European fare war

» In 1990, losses of £20m. Adopt Southwest Airlines low fares model.

» In 1997, Ryanair launches its first four European routes

» By 2009, traffic grew to 14% compare to 2008, resulting 66.5m passengers in

response of reduced of just €35.

» Covering 44 bases, 27 countries, 160 airports with 254 Boeing 737-800’s

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Agenda

1 Company Overview

2 Strategic Analysis

3 Strategy Formulation

4 Organizing for Stratgy

5 Conclusion

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 Porter’s Five Forces - Supplier

 Boeing is main suppliers

 Only 2 possible suppliers
Threat of
of planes – Boeing and Entry
Airbus
 High switching cost

 Price of aviation directly

related to the price of oil

Suppliers Buyers
Regional Airports
depends on one airline
Bigger airports have

competitors of Ryan Air Rivalry

Substitutes
 Porter’s Five Forces – Threat of entry

 High capital investment

Restricted slot availability
Threat of
makes it more difficult to Entry
find suitable airports
Immediate price war if

encroaching on existing
LCC route
Need for low cost base Suppliers Buyers
Flight Authorization

Rivalry
Substitutes
 Porter’s Five Forces - Buyers

Customers are price

sensitive Threat of
High Switching tendency Entry
Customers know about

the cost of supplying the

service
No loyalty
Suppliers Buyers

Rivalry
Substitutes
 Porter’s Five Forces - Substitutes

 No brand loyalty of
customers Threat of
 No ‘close customer Entry
relationship’
 No switching costs for

the customer
 Other modes of

transport: Eurolines, Suppliers Buyers

ferries etc.

Rivalry
Substitutes
 Porter’s Five Forces - Rivalry

 The LCC market is highly

competitive Threat of
 Most cost advantages Entry
can be copied immediately
the two major low-cost

airlines have avoided

direct head to head
competition by choosing Suppliers Buyers
different
Followingroutes to serve
Ryanair
strategy will create
heavy pressure on
prices, margins, Rivalry
 Price is the main
Substitutes
differentiating factor
SWOT Matrix

Strengths Weaknesses
- Brand name - Prone to bad press
- Low airport charge - Niche market: restricted expansion possibility
- First mover advantage on regional airports - Distance from some regional airports make
- E-ticketing (94% on booking) reduce operating cost inconvenience to the traveler
- High seat density - Poor service
- All Boeing aircraft make it low maintenance cost - Extremly sensitive in changing fare
- Fuel and other risk hedging
- High service performance: punctual, low baggage
loss

Opportunities
- European Union expansion
- Scope of potential market to capture
- Benefits from less exposure geographical risk
- Economic slowdown helps Ryanair to promote
their strategy of low fare
Threat
- Oil market fluctuation
- Increase of low fare competition
- Limited growth in Southern Europe
- Customers are price sensitive
- Increase in air traffic charge

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 PESTLE Analysis
Political Social Legal

» Changes in demographics and

» Strong Political Environment » Emission constraints
consumer preferences

» EU Expansion » Frequent short-term trips » Corporate Lawsuits

» Threat of terrorist attacks

» Trade Union Pressure

» Increased environmental awareness

» Global Carbon Tax

Economic Technological Environmental

» New aircrafts; with much more

» Rising fuel prices » Global warming and CO2 emissions
efficient engines → reduced CO2
emissions and fuel consumption
» Weak US dollar » Noise pollution
» Internet
» Global crisis
» High speed trains
» High rates of unemployment

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Conclusion of PESTLE Analysis

Conclusion:
» Positive sociodemographic factors
supported by strong technological
innovations
» Bad legal and environmental aspects
» Mixed political and economic
environment

» Result of analysis:
The Macroenvironement is
contradictory

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Stakeholder Mapping
High
Keep satisfied Key players

» NGOs » Shareholders and Investors

» Creditors

» Government
Power
Minimal effort Keep informed

» Local communities » Customers

» Employees

» Competitors
Low
Low High
Level of Interest

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Stakeholder Expectations

» EUR 17 billion for fleet replacement

› Higher fuel efficiency
› 45% reduction in CO2 emissions
› Average age of aircraft fleet 2.5 years (average industry 11 years)

» Noise reduction - fulfilled noise requirements, winglets, operational measures

» Waste reduction – no free meals, drinks or newspapers

» Regular financial reports

» CSR Campaigns – Girls of Ryanair Charity Calendar 2011

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Agenda

1 Company Overview

2 Strategic Analysis

3 Strategy Formulation

4 Organizing for Strategy

5 Conclusion

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Vision and Mission

Vision
» Become Europe’s Leading Passenger Carrier

Mission
» No. 1 for offering cheapest air fare
» No. 1 for punctuality
» No. 1 for service commitment

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Ryan Air Passenger Charter

» Offer the lowest fares at all time on all routes

» No fuel surcharge guaranteed
» Honor the agreed fare after payment
» Minimize the numbers of passengers facing delays
» Allow reservation changes
» Respond quickly to passenger complaints and provide prompt refunds
» Take measures to speed up check-in
» Minimize the number of passengers who are involuntarily denied boarding
» Minimize the number of passengers who are involuntarily denied boarding
» Ryanair will provide the following information to passengers at the time of
booking

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 Ansoff Martix
Product Development Diversification

New

Products
Market Penetration Market Development

» Increased number of passengers » Eastern Europe expansion: new EU countries

Existing
» Frequent flights » Turkey?

» Increased number of routes offered » North Africa – Morocco, … ?

Existing New
Markets

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 Boston Consulting Group Matrix
High
Stars Question Marks

» Hot new destinations: » Unknown popularity:

Croatia Morocco

Market
Growth
Cash Cows Poor Dogs
» Small unnecessary
» Popular destinations:
destinations
London, Paris, Milan
Madrid, Rome, Barcelona

Low

High Low
Market Share

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 Global integration/local responsiveness grid
Strong

Global Transnational
Strategy Strategy

Globalization
forces towards
standardization

International Multidomestic
Strategy Strategy

Weak
Weak Strong
Localization forces towards customization

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Agenda

1 Company Overview

2 Strategic Analysis

3 Strategy Formulation

4 Organizing for Strategy

5 Conclusion

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Strategic Goals

» Offering Low Fares

» Frequent point-to-point flights on short-haul routes
» Choice of routes
» Low operating cost:
› Aircraft equipment cost
› Personnel expenses
› Customer service cost
› Airport access fee
» Maximize the use of internet
» Commitement to safety and quality maintainence
» Focused criteria for growth

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Business Level strategy

Overall cost leadership by:

› Low Aircraft maintainence cost
› Lowering Personnel expenses
› Lowering Customer service cost
› loweringAirport access fee

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Positioning

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Balanced Scorecard I
• Increase revenue and • Increase market share and
profitability customer satisfaction
• Reduce costs • Reduce prices

Financial Customer

Internal Learning

• Increase fleet and crew • Employee training

utilization

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 Balanced Scorecard II
Strategy Performance measures Targets Initiatives
• profit margins • 20 % market value increase • Additional routes
• revenue growth per year • More frequent
• cash flow and costs • 20 % seat revenue increase flights
Financial
per year • Further cost
reduction

• market share • > 0.5% missed bags • Customer loyalty

• customer satisfaction • 10% passenger growth per programs
Customer
• on-time arrivals (%) year • Quality
• passengers • < 95% on-time arrivals management
• on-ground time • < 95% on-time departures • Cycle time
Internal
• on-time departure • > 30mins on-ground time optimization program
• number of additional • < 70% of employees take at • Various training
Learning
courses attended least one course per year programs offered

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 Thank you for your attention!
11.10.2011 Strategic Management 27