Ryanair Case Study, Business Strategy

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LEEDS METROPOLITAN UNIVERSITY
FACULTY OF BUSINESS & LAW

Business Strategy

Questions
Section 1
To what extent has Ryanair’s strategic growth been internally or externally driven?

Section 2
Referring to the Ryanair case, critically discuss the extent to which low cost competitive strategies are sustainable.

SWOT Analysis:

Firm’s strategy should take external opportunities and threats and internal strengths and weaknesses into account. This is done by SWOT Analysis. The SWOT-Analysis is an effective way of identifying internal strengths and weaknesses of any organization and of examining opportunities and threats of the external environment. The analysis’ objective is to take advantage of the opportunities the environment offers, and to avoid or minimize environmental threats.

1. What are the organization’s strengths?
2. What advantages does the organization have compared to others? 3. Which procedures are better examined by the organization (compared toothers)? 4. What do other people perceive as the organization’s strengths? 5. What are the organization’s weaknesses?

6. What can be improved within the organization?
7. Which activities are carried out in a poor quality/way? 8. Which mistakes can be avoided in the future?
9. What are external opportunities?
10. What are opportunities that can be useful for future organizational development? 11. What are current market trends and how may these develop into opportunities? 12. What are external threats?

13. What obstacles are faced by the organization?
14. Are changing technologies threatening the organization’s position? 15. Are there any bad debt or cash flow problems?
16. What is the development of the organization’s competitors?

Ryanair is operating in the low cost airline segment of the market. Its main focus is given on pursuing the low cost strategy, which supports its mission ‘to make flying possible for everyone’. The company demonstrated its superior performance. One of the main factors that helped to achieve the excellent profitability is the air transport industry deregulation.

While concentrating on providing the lowest fares to its customers the company considers other important issues such as safety and extended customer service as well.

“Ryanair is focusing on lowest costs it is able to offer low fare tickets but also puts effort into increasing service”.

Strengths

The low cost strategy is an obvious strength of Ryanair. The company is able to successfully apply this strategy in recognition of simple company logistics, effective use of airtime and also in appreciation to its UK home market, which provides a strong base due to its high traffic. In addition, the focus on secondary airports allows minimizing landing and ground handling fees. The fact that the company does not take this strategy for granted and is seriously committed to it implicates even more positive factors. As the main focus is given on the secondary airports Ryanair does not come into direct competition with EasyJet/GO. It also benefits from the ‘first mover advantage’15 since it was the first low budget airline on the European market. This enables the airline to develop a powerful brand while stimulating demand with low prices. With its low cost approach Ryanair has proven to be an excellent niche strategy. “It was playing its cards right”

Strong revenue growth

Ryanair has been reporting strong revenue growth. The company reported huge increase in revenues during the fiscal year ended March 2007, an increase of 32.2% over 2006. The increase was primarily attributable to an increase in passenger volumes. The company's strong consistent revenue growth provides its operations with financial stability and the ability to fund expansion strategies.

Weaknesses

• The company is small in size compared to its competitors. Many of its competitors, such as Air France, Lufthansa and British Airways are...
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