Introduction

Ryan Air is one of the biggest budget airlines in the world. it employs over 5000 employees
and is based in Dublin, Ireland. They specialise in offering low fares to a number of
destinations around Europe. They have one of the highest frequencies of flights between
Ireland, UK and Europe. They have been a success mainly due to their no-Frills policy and
their ability to grow has been phenomenal. RyanAir has been successful in attracting a large
number of customers to their service. This assignment takes a look at the factors responsible
for the success of the organization.

Swot Analysis

Strengths
Ryanair has the most recognized brand name in the budget airline industry. Strength is that they
were the first to be in the market and got the best slots at the regional airports at cheap rates. Most
of their bookings are done directly through their own website which saves them money. Ryanair
manages to sell a high number of seats on each flight. Their flights are mostly punctual and they
don’t have to deal with problems such as flight cancellations or lost baggage issues. It is also well
known for having a very modern fleet of Boeing aircraft which are also very fuel efficient.

Weaknesses

Rynair has gotten a lot of bad press due to their policies. They faced a lot of negative press when
they announced that they were going to charge passengers for using the toilet during flights. They
have been criticised for using regional airports for their operations. Furthermore a lot of the
regional airports are further away from some places. It is difficult for customers to travel that
distance and potential customers get turned off. Ryanair has been criticised for not giving its
employee’s people skills. There have been a lot of complaints about rude employees who have
not been helpful.
Opportunities

The recession has the opportunity to help Ryanair as they can attract corporate customers which
they have not targeted before. They can target those companies who want to cut on costs while
sending its employees on short haul business trips. RyanAir has the financial capability to gain
market share as they can invest more in their marketing programs to gain new customers. There
are a number of countries who are poised to enter the European Union in the near future. If they
play their cards right they can gain the rights to travel to the new destinations being opened up.

Threats

Ryanair is totally dependent on the low fare system for their survival. The recession has affected
consumer travel plans. They also face threats from Easyjet as they both have the same model and
can cause a price war. The Regional airports are also a threat as they can renegotiate the terms of
their charges as a number of airlines are operating from their bases. The changing oil prices are
also a threat as they have no control over how the rates are like in the market. Higher fuel prices
mean higher fares.
PESTEL analysis

Political

Security threats have forced the government to implement stricter security policies. The costs of
these policies have been passed on to the consumer. Ryanair has faced a lot of problems from the
trade union who wants favourable terms for its employees and if the airline does not comply they
can always walk out. They also have to contend with European Governments who support their
national airlines which gives them an unfair advantage over Ryanair. The European Union has set
a timetable for its expansion which ensures that new countries will be part of the regional
economy and will automatically open them up for new routes.

Economic

Ryanair can target business travellers as a new market and create a new revenue stream as some
want to save money by adopting cheaper means of flying. There is the threat of substitutes as
people can choose to travel by other means of transport .there is also a chance that taxes and
interest rates will go up for the airline and they will have to pay more. A threat is the oil prices
can increase and this can affect fuel prices. Rynair has to prepare for this by making arrangement
to buy oil at pre arranged prices so that they can be in the safe zone.

Social
People have started spending more money on travel and holidays abroad. Despite terror threats
people still spent money on going out for short holidays. Ryanair helps them do that at a cheaper
rate due to its low prices. The recession has put a curb on people travelling for holidays. Even if
the prices are low the fact is that it also costs money to stay in a hotel and pay for other expenses.
The good advantage is that due to the large number of baby boomers within the region Ryanair is
able to capitalise on the fact that they can get enough travellers who want to travel.
 Technological

Technology has made changes in the world. Technological advances have made it such that
people do not even have to travel out of the city for meetings. Video conferencing solutions have
changed things in such a manner that it is more feasible for them to stay comfortably within their
offices and conduct meetings. This does not bode well for RyanAir as it can look into the
possibility of tapping into that market segment. If this is the way things they can lose an untapped
stream of revenue. Technology is good in a positive way as well as it can help them refine their
reservation system. People can use it to print out their boarding passes before they board their
flights. A good long term investment in a proper enterprise resource management system will
also benefit them as they can find out their flaws and make everything work well. The internet
provides them with opportunities to come up with better offers for its customers if their
customers try to beat that rate.

Environmental

The environmental factors are different for the airline industry. Since Ryanair is an airline it is a
major contributor to noise pollution, polluting the environment with its carbon emissions and
other waste generated from it. They have their responsibility of paying to offset their carbon
emissions and have to put measures in place to make sure that their level of pollution is as low as
possible.

Legal
Deregulation in the airline industry changed the way airlines operate within the European union.
Legal problems are faced by all airlines and Ryanair is no exception. They have been accused of
getting illegal subsidies from local airports for the service they give them. There have been a lot
of outcries over the way they do their business and how they have used false advThe legal factors
show that Ryan air has had to face many challenges such as their trouble with the advertisement
regulators which proved that Ryan Air had violated law through misleading advertisements to
promote their services. They have also been accused by the European Union of ignoring anti-
competition laws and creating problems in the marketplace.
Porters Five Forces

Bargaining Power of Suppliers

Regional airports are slowly getting bargaining power as a number of budget airlines use their
bases for operations. They can increase the rates due to the high level of competition. Oil
companies also wield power over airlines such as RyanAir by increasing their rates. Since all
companies have the same rates they have no choice but to buy oil from them.

Bargaining Power of Customers

Budget airlines do not have any loyal customers as the rates are very competitive. There is a lot
of choice within the market as customers can find a cheap price anyone on websites such as
cheaptickets, Expedia,etc. It is easy to buy a ticket with a few clicks of a button. Customers will
travel any airline just to get a cheap ticket so that means no brand loyalty.

New Entrants

New airlines will not find it easy to make an impact within the industry. It requires a lot of
investment in human and cash resources. It also requires a lot of leg work to get the necessary
permits to set up a new airline. The competition is too high and it is difficult to get the necessary
landing and takeoff slots at airports.

Threat of Substitutes

There are other ways of travelling and that means that RyanAir customers have better choices
instead of relying on it. They can choose to go by Bus, Train or Ferry to the destination of their
choice even if there is a higher charge involved.
Competitive Rivalry

Competing airlines will do anything to get market share by resorting to a price war. The budget
airline industry has a lot of competition and this has resorted in airlines reporting lesser revenues
due to all the heavy competition. Ryanair set up the first successful European Budget model and
has had more airlines follow similar suit.

Strategic Comparison with Easy Jet

Ryan air has one of the best known brand names in Europe. One of its biggest competitors is
Easy Jet who has been following the same budget model. There is a lot of competition between
the two though they have not crossed into each other’s territory as yet. Ryan Air had the first
mover advantage as it was the first budget airline to be established in 1985. EasyJet was set up in
1995 and has grown as a result of acquisitions. Ryan Air is the biggest airline in the region as it
carried 70 million while Easy Jet is the second largest carrier with around 40+ million passengers
last year.

Ryan Air and EasyJet both follow a cost cutting strategy which was borrowed from Southwest
airlines. They both don’t provide snacks on board nor do they provide any connecting flights.
They both have a fleet of modern planes so that they spend less on costs. However Easyjet flies
only to bigger airports while Ryan Air only flies to smaller airports. Ryan Air does not cater to
business customers specifically but then Easyjet provides them with benefits such as transferring
to early flights without imposing any costs.
Q2.

Ryan Air has successfully followed the Southwest Model of cost cutting within the organization
so at they can save on costs. The key is to come up with cutting costs in a sophisticated manner
which would ensure that the quality of the services is not compromised. Ryan Air has been able
to offer the lowest price and has been able to make profits during most of its financial years
except for the last quarter due to the recession. Their operation costs are lower than their rivals.
They also utilise the strategy of using as little as possible. They pay their employees as little as
possible and outsource the rest of it to other companies. They have achieved a high turnover
mainly due to the fact that their flights are always to near full capacity. Ryan Air also gets a good
price through its supply chain by buying in quantity.

Ryan Air also follows a differentiation policy which means that they can offer a better package to
their customers at a good price. Their low prices are the reason why they get a lot of customers.
The focus differentiation policy proves that they only base all their targeting on a particular
segment of the market. Ryan Air focuses on customers who are looking for budget travel.
Ansoff Matrix

Market Penetration

Ryan Air can come up with up with better ways to make an impact in the current market. This
strategy will involve them working on a minimalist strategy to try and steal customers from their
competitors by offering more services and better costs. Ryan Air can use the traditional methods
of gaining market share by introducing more promotions or offering package deals. They will
have to spend the least amount of money in that and it’s the least risky as they do not have to
make any changes in their strategy.

Product Development

Ryan Air can create new products by targeting new customers. They can cater to the tourism
industry by letting them charter their jets in the lines of Thomson Airways. Tour Operators can
book flights in advance and in this way Ryan Air will be able to make the maximum revenues out
of it as they can charge more for the service. They will be able to get a new source of revenue by
cashing in on this opportunity.

Market Development

Ryan Air can start new flight services to American Destinations. They only fly to European
Destinations for the time being. There are a limited number of airlines which fly to the US and
none of them are budget airlines. People would like to pay a lower charge for flying to the US. It
would help if they started a service which would fly them to the US for a lower charge. It does
not make sense for them to start a low budget airline in the US as there are plenty of them over
there. If they start flying to the US they will be able to tap into the market that is unable to afford
flying to the US at the current rates. This will bring them another source of revenues as the US is
a very lucrative market.

Diversification

Ryan Air can always rebrand itself by creating a new airline which does not follow a budget
model. It would be a good way of reaching out to new customers who do not want to travel by
budget airlines and a good way of gaining a new market. It may be said that this is not exactly a
diversification as this is still the airline business. A new airline would be a good way for them to
tap into the luxury market and to get customers who want services. They already have the
knowledge of running a budget airline and a great relationship with Boeing. They can get a good
deal for aircraft through them.
The Bowman Strategy has a number of options to help find out which strategy is
the most useful of them all. Ryan Air has always targeted passengers who want
to pay the lowest possible fare. It means they utilise the first option of the
Bowman strategy Clock which states that it is the lowest price which adds the
value to everything. Ryan Air implemented a trial and error method to see which
strategy would be the most useful for them. They have been able to use the low
price factor to their advantage as they get plenty of customers. However their
prices are much lower than their customers and yet they manage to make
profits. They are only targeting a particular segment of passengers and are
concentrating all their energy on that. The customers they get are the ones who
are unable to afford to travel on a major airline. The strategy used for this is the
differentiation strategy without a price value as this is where they can offer good
prices without adding any premium price to them.

Q3

Ryan Air has always maintained its position with the help of its low pricing strategy. The cost cutting
low strategy has won it a lot of customers. They need to be careful with the way they play with the
price strategy. The price war which looms in the frontier can never be beneficial for anyone. If Ryan
Air falls for the game it will lose a lot of money as the winners are only the passengers and never the
airline. Easy Jet and other airlines do not have the financial capability to initiate a price war as it will
only create more losses for them. Only those airlines that have deep pockets can absorb a short term
loss in order to make up for future sales. They should not change their price strategy under any
circumstances even if it means losing some share to their competitors.

Ryan Air can lock in some more customers and make them stay with them if they change the quality
of their services. They can be applauded for having punctual flights and the fact that there is a fast
turnaround of service. The most important part is that if the customers are not happy they will not fly
with them at all. This would an erosion of revenues which will not bode well. It is understandable that
Ryan Air wants to cut costs everywhere but it is a bit too much to charge customers for using the
toilet or to ask physically challenged customers to pay for the use of a wheelchair. This is a big
negative point for them in the PR game. The key is to shelve plans to charge passengers for using the
toilet as it is inhumane to charge a person to use the toilet during a flight. This is a very stupid ploy as
this will only discourage people from travelling with them. It is understandable if they want to charge
for other services but it does not bode well with potential customers.

Ryan Air has a number of strengths and competencies. They have one of the highest frequencies
of flights in the region as well as the fact that their flights are always punctual and on time. All
their flights which go from point to point are really good as the customer does not have to be so
frustrated waiting to reach his/her destination. Ryan Air also has a good financial model which
means that they have plenty of financial resources saved. This allows them to use the money for a
rainy day whenever it is required.
Ryan Air has a great management team which has been the reason for its success. They have used
a great model and it will allow them to grow in a big way. Their No Frills strategy is what has
made the most powerful airline but it is also the one which can bring them down.

References

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Edition; McGraw & Hill
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edition; 2008
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6. Ansoff, I., (1957)Strategies for Diversification, Harvard Business Review, Vol. 35 Issue
5,
7. Morden, Tony (1999), An Introduction to Business Strategy 2nd Ed. McGraw-Hill. ISBN
0-07-709451-4
8. Ryan Air faces probes over Misleading Advertisements,
http://news.bbc.co.uk/2/hi/business/7337165.stm (Accessed on the 8th of April 2010)
9. Ryan Air responsible for the safety of Passengers
http://web.archive.org/web/20041224022240/http://www.drcgb.org/newsroom/newsdetail
s.asp?print=true&id=773&section=1 (Accessed on the 10th of April 2010)
10. Ryanair holding plc, (2002)Purpose of Purchase of up to 150 Boeing
"next generation" 737-800aircraft, Notice of extraordinary general
meeting,