Competitive strategy at Ryanair
By Nigel Evans and David Campbell
This paper is based on the case study by Nigel Evans and David Campbell which analyses the early stages of development of Ryanair to its current market position, which is the most profitable low cost airline in the market. The case study focuses on the negative perception of the airline in relation to service quality.
Ryanair Holdings (Ryanair) is a low fare passenger airline, which serves short haul point to point routes between Ireland, the UK and Continental Europe (Datamonitor 2008, p.5) First established in 1985, it began operating on 23 May 1986. In 1990/91 a new management team under the leadership of Michael O’Leary aimed to make Ryanair profitable. O’Leary and team reinvented Ryanair by basing it on the Southwest Airline Model, which was the first leading low cost carrier in the world.
Ryanair has maintained its competitive advantage over its competitors, by offering a highly differentiated product, which is a continuous lower fare. Therefore Ryanair has achieved a sustainable competitive advantage.
A SWOT analysis of Ryanair (Datamonitor 2008, p.16) lists employee relations as a weakness. This indicates that weak employee relations may be linked to the poor customer service. Ryanair may improve their customer service whilst still remaining competitive by:
•Designing a better service system which can keep costs low but deliver service •Offer employees career development plans, which may contribute to employee morale •Better training frontline employees to maximize their operational efficiency, in order to best handle service failure situations •Monitoring what the target market needs, wants and values rather than making the assumption that offering the lowest fare is the only incentive •Not taking advantage of the price sensitive consumer and instead embrace them (Gursoy et al 2005, p.65)
1.0 Introduction 4
2.0 Company profile6
3.0 New management and Southwest Airline model7
3.1 Continual growth and gaining market share9
4.0 Differences between Southwest & Ryanair11
5.0 Customer service concerns13
5.1 Competitive advantage13
Ryanair was first established in 1985. It began a daily flight with a 15 seater turbo prop aircraft which flew from Waterford Airport in Southeast Ireland to London Gatwick Airport. Ryanair started operation on 23 May 1986. They had 57 employees and their flight carried just over 5000 passengers on this route in just a year. The company was known for its’ commitment to low fare air travel and making air travel affordable for people in Ireland and the UK. The report will discuss and analyse the issues that were in the case study. Their main issues were the customer complaints and service. We will then have a discussion of how Southwest Airlines and Ryanair differ in terms of employees.
Firstly, an overview of the company provides current information about Ryanair. Secondly, the current market position of Ryanair is related to the new management of the early 90’s and the ability to follow the low-cost model of Southwest airlines. As a result profits were made by controlling costs which enabled Ryanair to keep their core competency, and that is offering the lowest air fare. Thirdly, the paper refers to the case study to illustrate the contradiction of Ryanair. The contradiction refers to Ryanair being one of the least liked airlines in terms of customer perception despite being one of the most profitable. This part refers to the success of the airline due to its sustainable competitive advantage and how it is able to benefit from an economic downturn.
Lastly the paper relates the airlines poor customer service to its weak...