Ryanair Case Study

Strategic Management Report

General Introduction

Airline industry is usually assumed to have expensive services. Ryanair, with its cost-leadership
strategy, has been very popular among the consumers. However, in pursuing this low-cost
business model, it has received several complaints regarding the quality and poor standards of
customer service. Thus, analyzing the strategic environment of the industry, the company came
up with the introduction of a new strategic plan under ‘Always Getting Better’ idea. This is
strategic report has been prepared to analyze the growth and success of the company to establish
a future from the perspective of various strategical tools like generic strategies of Porter,
strategic clock, five forces theory of competitive rivalry, cultural web, as well as SWOT matrix
for the firm.

Analysis

GENERIC STRATEGIES

Michael Porter gave three generic strategies which are discussed in the context of given case
study as under. These strategies were Cost leadership, Differentiation, and Focus. These
strategies are used to determine the competitive advantage of a company and how it pursues it in
its chosen domain of the market.

Cost Leadership
Campbell (2002) assets that the aim of this strategy is to operate functions, activities, and
operations of a firm on low costs so that the company can gain advantage over other rivals. This
allows a company to offer affordable and cheap services and deals on its products to penetrate in
the market or gain a huge chunk of customers to increase its market share. Ryanair had been
utilizing the same principle to accomplish this purpose and achieve the best operating margin
among rivals in the market. All its operational elements are designed in a way that helps it in
reducing cost and improving the productivity and efficiency. This also allows the company to
offer low prices to its customers that boosts the demand of its services in the market and
customers who have not flown before or have had no travel experience by air now fly using its
services to go on holidays or accomplish their other air travel needs.

It exploits one way pricing methodology in its operation to decrease the minimum stay needs and
enables the company to be the market leader in whole Europe in comparison to other players in
the market. it offers a great advantage to the travelers as well who only want to get from one
point to another.

Differentiation

O`Higgins accentuates that the company has been quite successful in distinguishing itself by
offering distinguished services from the rivals. It offers more punctual services and has a very
less cancellation rate. In addition to this, it has very low number of injuries and there are no
plane crashes in comparison to other competitive services. Moreover, it avoids huge landing as
well as gate charges add it flies from major airports to secondary airports. This also makes it
possible for the firm to avoid the congestion at the primary airport. This improves and enhances
the benchmark of arrivals, departure or take offs with punctuality and insurers increased
turnaround time for the planes too.

Also, it has been able to maintain its lower costs for consumers by maintaining lower cost
operations in comparison to other players in the market like that of Easy Jet and Aer Lingus.
Thus, Ryanair is a Differentiated airline service.

Focus
To attract their customers and become a popular airline among European citizens, Ryanair focus
on low cost to get people from point to point. Therefore, one of the focuses is to make customers
select pure low budget airline over its competitors. According to O`Higgins, the company has
been able to maintain high quality catering service with extremely low charges touch customers
who want to reach secondary airports. In this way, it is very useful for them to focus on the
business clients most of the times and prioritize them as well as the people are traveling for
holidays and need more comfort over A to B transportation services.

According to O`Higgins, to reduce unnecessary waste of cost Ryanair buys only Boing 737- 800
and all the aircraft fleets that is 11 to 17 years old. This focuses on less training and availability
of trained staff on board.

BOWMAN` STRATEGIC CLOCK

Intense competition in air travel industry requires effective and efficient strategies to gain
sustainable competitive advantage as well as remain profitable in the market. Ryanair`s strategy
is positioned in different options under this model. Johnson (2011) asserts that this is strategic
tool is used to analyze the position of a firm with respect to what rivals in the industry offer. The
firm has been positioning in different categories under this model as indicated in figure 2. But all
of them can be placed between options 1 and 5 (figure 2).
Low price and low added value

According to O`Higgins, the firm has witnessed several dramatic changes over the time of last 10
years and has been flabbergasted its rivals. Its main strategy of low cost and low price has
ensured it's profitability and growth overtime. The main market segmentation focus of the firm is
on economic class travelers as well as price conscious customers with air travel needs.

Low price and risk of price

This is one of the main focuses of Ryanair and its could be counted as heart of the business.

Hybrid

Hybrid is about investment in more low-priced goods, Ryanair uses hybrid strategy in purchasing
aircraft fleets which reduced the cost of new fleets.

Differentiation
Ryanair make their customers to pay for the services like food, drinks and usage of toilets on the
aircraft, also they give the opportunity to select the seats for a really low price of 5 euros which
make them different to the other airlines.

Focused differentiation

According to O’Higgins, Ryanair used this strategy for the particular segment, where the main
focus of the firm is on its regular customers who do not have to take any baggage with
themselves and use only sets instead of higher prices and customers with higher standard needs

PORTER`S FIVE FORCES

The idea of the rivalry implies that challenges and opportunities in the industry should be of
identical level. Michael Porter (1980) framed a model which helps to identify the different forces
that influence the industry. This model is known as Five Forces.

Competitive Rivalry

Ryanair has its rival from other airlines such as Easy Jet, Lufthansa, British Airways. The
competition is so high on flight market, and it makes the companies to keep their prices more
closely the same in order to strive in the market. According to O`Higgins most of the cost
advantages that Ryanair has already could be easily copied by the other companies and it would
make the pressure on prices, profitability and margins of the company. Therefore, the company
has been able to make several agreements so that it does not have to compete head-to-head with
its Easy Jet which is assumed to be the largest competitor of the company.

Bargaining Power of Suppliers

According to O`Higgins, Ryanair has Boeing. Other than this, it has airport authorities to
carryforward strategies smoothly as its management plans. The company is heavily relied on the
prices of fuels add any changes in the oil prices directly impact its costs. But due to several
number of suppliers available, it does not have a significant impact on its expenses pertaining to
the fuel. Thus, its suppliers do not have much potential of bargaining.

Bargaining Power of Buyer

The buyers have an impact on the prices that been fixed by Ryanair. It is very east to change the
airline and it is not associated with high expenses. It does not have monopolistic advantage. It is
operating in perfect competition market from others.

Barriers to Entry

The company does not have much impact from the new entrants in the industry as it is very
challenging for a new company to be and survive in this industry. It is because of various barriers
to entry. one of them is flight authorization. Others include difficulties to gain accessibility to
different distribution channels, additional space required at the airports to accommodate new
entrants, and a huge investment and capital requirement to be in the market and carry out
marketing activities and find the required competent human capital.

Threat of Substitutes

The company has several substitutes. These include sea transport, railway travel services,
coaching transportation, rental companies, by road travels and so on. However, the major
substitute is train service that is occasionally addressed by the firm in a proactive way. It does so
by creating a comparison of price between the firm services with that of train services on its
official website as well as on other advertising sources that it uses. So, a customer with need to
travel will be more willing to choose Ryanair in comparison to the railway services.

STRATEGIC GROUP MAPPING

On the above presentation it shown that Ryanair is the most radical low-cost airline, its different
with more closet competitors on the graph because it’s used secondary airports to lower its cost
base whereas other don’t. Air Lingus is getting close to the low-cost model on its short haul
flights. Virgin Express is based on the middle of the graph as it still offering seat allocation.
Lufthansa, Air France and British Airways adds more comfort and has high standards.

CULTURAL WEB
Johnson (1992) shares that This tool is used to help understand various factors that have an
influence on the organization.

Stories –Low cost culture within Ryanair.

Symbols – The slogan of low fares and thrive as cost leader in industry.

Power Structure – Michael O`Leary is the boss and there is no doubt about in the organization

Control system – All the control derives from Michael O’Leary

Organizational structures – Employees are empowered to reduce the cost.

Control – The head of the organization, Michael O`Leary performs all the control functions.

Rituals and Routines – Lesser time consumption and thus time saving.

The paradigm – Self-sustaining and self-enforcing culture along with low-cost strategy.

SWOT ANALYSIS

According to Rose (2017) SWOT analysis is study undertaken by an organization to identify its
internal strengths and weaknesses, as well as its external opportunities and threats.

Ryanair Strengths

 It has lowest cost per passenger in entire Europe. It has lowest unit cost as it main
advantage against its rivals.
 Fastest turn overtime
 Lower handling and checking in costs at airports
 Productive and flexible workforce
 High seat density
 Newest airplanes ensure lower maintenance cost and increase efficiency of fuel.
 Excellent financial performance
 Ancillary revenues
 Focus of management
Ryanair Weaknesses

 Takeoffs and departures are at very inconvenient time and thus it has low frequency.
 sensitivity in EU as EU targets the company with several verbal attacks and signs it out
for harsh treatment regarding selectivity.
 It is perceived as obsessed with bottom line at any cost
 Customer service policies are also perceived as bad ones
 Earnings are seasonal and thus, profits are heavily relied on summer season.

Ryanair Opportunities

 Due to increased popularity of its website, web traffic can generate advertising revenue
for the firm.
 New destinations and countries can further increase its revenue and market share.
 Untapped market share as low-cost air travel transportation providers have not
approached their peak level

Ryanair Threats

 Fluctuations in fuel prices.

 Variations in exchange rate
 Taxes of air travel
 Extreme rivalry among low fare airlines

Recommendations for the Ryanair approach.

1) Succession planning

According to the analysis, Ryanair`s only strategy is only to reduce the cost. Perfect leadership
under Michael O`Leary had led company to success so far but as company is growing, they need
to improve or redesign the strategy. Therefore, Ryanair needs a new succession planner and
leader. Also new leader could help to the company mend the relationship with EU and Irish
officials.

2) Ancillary products
Ryanair needs to enhance the quality of company website to have better sell of ancillary products
as well as looking into the possibility of gaining advertising revenue through website. Therefore,
innovative functions and futures needs to be introduced in Ryanair website, aiming to provide
customers with important information about services in an effective way and increasing the ease
of online transactions. Ryanair could create a special credit card which allows to earn bonuses
for their ancillary products.

3) Improve customer perception

As the Ryanair was the first low-cost airline, most of the people wanted to fly with them. But
competition has increased, customers can choose to fly with the other slightly expensive airline
than Ryanair. It is because the perception off question has been changed regarding the firm and it
is not perceived as a poor customer service brand. This is why it is important that it needs to
improve the brand image so that it can prove itself against potential rivals in the industry.
Moreover, the brand managers of the company need to ensure the image of the brand is
associated with providing value instead of a cheap airline service.

4) Improve fuel hedging and currency trading

The international oil and foreign exchange market is extremely volatile and in the event of
political conflicts in countries that produce oil, oil prices could increase enormously. The income
of Ryanair is in euros but the international trade of fuel in us$ and Ryanair is exposed to the
vagaries of the currency market. The policy of buying us$ in order to pay for the air fuel must be
improved for Ryanair. Additionally, Ryanair need to hire specialists’ companies that specializes
in the futures markets to help it improve its hedging practices.

5) Improve the customer service

By improving the training quality of frontline employees as well as reducing the number of staff
and lead will help it in enhancing his customer service as well as increasing i

Concluding Remarks
On the basis of analysis conducted from various strategic tools, it is concluded that the company
has been able to enjoy its journey of success and managed its success beyond expectations. It has
a low cost culture in the organization and this philosophy has been adopted by whole of
organization. It has established the goals and objectives accordingly and uses aggressive pricing
and expansion strategy in order to accomplish its set goals and objectives. This enables the firm
to be the biggest low cost airline among all the rivals in Europe. This low price strategy has been
the sustainable strategy that provides it the competitive advantage. The airline company was able
to enhance its profitability for a short period of time. And now it has more to lose because of the
observations from competitors as well as shareholders who pay keen attention on how consumers
perceive the brand. Thus, it needs to evaluate as well as make some changes on its strategy due
to shift in market and adaption from the competitors. It is because the core competencies that
Ryanair is exploiting are imitable and sooner or later they are going to be copied by others. And
then, the company will not be able to enjoy its success with this strategy.
References

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https://www.marketingteacher.com/bowmans-strategy-clock/ [Accessed 9 Feb. 2022].

Johnson, Gerry (1992) “Managing Strategic Change – Strategy, Culture and Action”. Long
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Johnson G, Whittington R, Scholes K, Angwin D & Regner P (2017), Exploring Strategy, Ed11,
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Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education,
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PORTER, M. E. (1980). Competitive strategy: techniques for analyzing industries and

competitors. New York, Free Press.

Richard Seel. Organizational Culture: An Introduction, edited by Nasreen Taher, Hyderabad:

ICFAI University Press, 2005, pp 82-92.

Rose, Margaret. "What Is SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats
Analysis).
Appendix