Case study analysis:
Ryanair – the low fares airline: wither now?
The purpose of this paper is to use analysis of the airline industry and of Ryanair to highlight the firms’ successes thus far. It also considers the sustainability of the current strategy by viewing the future of the firm and its competitors. Using Porter’s five forces, the VRIO framework and the SWOT analysis it gains intimate information on the factors impacting the firm and industry. Its success is primarily down to its low cost operations. Price is the distinguishing element in this industry. Ryanair has a great market influence, pricing out new entrants. The ability to use its resources and capabilities to create competitive advantages has helped fulfil its strategies. Strategies like the use of secondary airports, increasing ancillary services, fast turnaround times and free publicity have insured success. Hence the firm has been efficient in reaching their aims of keeping ticket prices low, keeping on time and increasing efficiency through technological resources. However, some negative factors could impact Ryanair in the future. Ancillary services which constitute a large proportion of operating profit are at risk of reaching their full capacity. Other environmental factors like higher taxes and oil prices, as well as long term effects of their sometimes bad reputation, could affect long run sustainability. Additionally, in the future there could be a mismatch between the level of industry growth and the rate the firm’s fleet is expanding. As a result this essay derives some remedies, such as moving to different airports, expanding destinations, reducing the fleet size and decreasing turnaround times.
This essay aims to discover how effective Ryanair’s strategy has been, and what have been their competitive advantages. Firstly, this paper analyses the industry strategy using the Porter’s five forces framework. Then, it scrutinises the firm’s strategy using the SWOT analysis and VRIO framework. Following this, it investigates the company’s competitive advantages. Finally, a long term view of the sustainability of its strategies will be analysed. Ryanair was founded in 1985 as a network airline. Following an EU deregulation of competition barriers in 1992 (Kawagoe, 2008), under the influence of CEO Michael O’Leary it restructured and adopted the model of the US carrier South-western Airlines. It became the first European airline to implement such a flexible and low cost pricing strategy. Thanks to this cost leadership strategy, Ryanair has been able to outperform competitors, become the European market leader and manage to remain profitable even during global economic downturns.
The drivers of such successful operations are the competitive advantages which distinguish Ryanair from its competitors. As mentioned, the firm has a low-cost ethos which itself commands high operational and cost efficiency. Crucially, no other European airlines are able to achieve similar performances. Furthermore, the firm benefits from other competitive advantages, for instance, being the industry driver and holding a solid brand image. Through analysis of firm and industry, we noticed some threats to the sustainability of their successful operations. Resultantly this essay asserts some remedies to insure they sustain and develop competitive advantages.
Having introduced the firm, it is now appropriate to describe the airline industry, the industrial sector in which it operates. By implementing Porter’s five forces, it is possible to investigate its main characteristics. With regard to the degree of rivalry among competitors, it must be said that deregulating laws have led to an increase in competition. Specifically, international hubs such as London, Milan and Madrid have become airports where numerous low cost airlines concentrate their operations. Furthermore, such...