Five Forces Model on Ryanair
Apart from analysing the macro-environment, the micro environmental factors must also be analysed. The Airline is one of the major industries in the world today and is greatly affected by Michael Porter's "Five Forces" model. These are internal factors that have a direct impact on the industry and a business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace. Porter defined the forces which drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business.
Internal Rivalry within the Industry
The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated.
First Mover Advantage
Ryanair were among the first movers because many copycat' airlines have tried to follow suit. There are only two pan-European low cost operators where first mover advantage and scale and cost efficiencies gave the two largest players, Ryanair and Easyjet, a significant advantage. Since deregulation, of the 80 low cost operators that had begun operations, 60 had gone bankrupt.
Large number of competitors
The LCC market is highly competitive. There are more service providers than needed in both local as well as international markets. There are already many new budget airlines with Ryanair and easyJet as the famous ones, but also Virgin Express, Debonair, KLMuk, Go and Air One. However the competitive rivalry between those two groups stays moderate, while it is quite high within each group. However, for Ryanair, low levels of existing rivalry as the two major low-cost airlines have avoided direct head to head competition by choosing different routes to serve. If any company does decide to compete on the same basis as Ryanair there will be heavy pressure on prices, margins, and hence on profitability
Price competition
Internal Rivalry within the Industry
The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated.
First Mover Advantage
Ryanair were among the first movers because many copycat' airlines have tried to follow suit. There are only two pan-European low cost operators where first mover advantage and scale and cost efficiencies gave the two largest players, Ryanair and Easyjet, a significant advantage. Since deregulation, of the 80 low cost operators that had begun operations, 60 had gone bankrupt.
Large number of competitors
The LCC market is highly competitive. There are more service providers than needed in both local as well as international markets. There are already many new budget airlines with Ryanair and easyJet as the famous ones, but also Virgin Express, Debonair, KLMuk, Go and Air One. However the competitive rivalry between those two groups stays moderate, while it is quite high within each group. However, for Ryanair, low levels of existing rivalry as the two major low-cost airlines have avoided direct head to head competition by choosing different routes to serve. If any company does decide to compete on the same basis as Ryanair there will be heavy pressure on prices, margins, and hence on profitability
Price competition