Formative Assignment - Dec 2011
Ryanair was founded in 1985 with only two aircrafts and a single Dublin-London route . By 2010 Ryanair had transformed itself into Europe's leading low cost airlines with 232 aircrafts flying to 153 destination. Ryan Air's strategic objective has been to offer the lowest possible air fare to its passengers and strive towards becoming europe No.1 Low Cost airlines. In this paper we will explore and analyze Ryanair's competitive position, strategic capabilities and sustainability of its strategies.
COMPETETIVE POSITIONPORTER'S FIVE FORCES FRAMEWORK;
Threat of New Entrants: LOW
High entry barrier due to large capital requirement, longer procurement and marketing period. Restricted airport slots availability.
Threat of Substitutes: MEDIUM
Threat of alternative mode of transportation like high-speed train and ferries within Europe. Customers can easily switch to driving.
Buyer's Bargaining Power: MEDIUM
Customers are price sensitive.
No customer loyalty as customers can easily switch to another airline offering lower price
Supplier's Bargaining Power : HIGH
Entire fleet is made up of Boeing aircrafts.
Fuel prices are fluctuating.
Regional Airports can increase the fees.
Internal Rivalry : HIGH
Highly competitive Low Cost market with Easyjet, Aer Lingus,etc. Easy to imitate the Low Cost model by a Full Service airline.
Political stability within europe but risk of tighter regulations. Airport Security restriction and enhanced passenger screening measures. Risk of labour law changes.
Airport subsidies dependent on regional/local government.
Eurozone financial crisis, economic downturn.
Rising and uncertainty in fuel cost.
Falling US Dollar.
Social Cultural: LOW
Change in consumer travel lifestyle and demographics.
Customer environmental awareness.
Increase in discretionary income, making air travel popular. Business travelers forced to fly in Low-cost airlines due to slowdown.
Increase in aircraft R&D resulting in newer fuel efficient and quieter aircrafts. Internet technology helps to lower operational costs and create new business oppurtunities within the airline industry . Technological growth in the cheaper high-speed trains, ferries services.
Laws to curb Carbon footprint and global warming concerns. Airport curfew regulations for controlling noise pollution.
Potential lawsuits against the legality of subsidies received from regional airport governments. Allegation on misleading advertisements.
Potential lawsuits on passenger discriminations (fat tax, wheelchair fees).
Strong Brand Recognition as a low cost leader.
Cost conscious corporate culture with innovative cost reductions. Flight punctuality due to operational efficiency.
First mover advantage and high experience curve.
Modern and uniform fleet of aircraft.
Poor customer service, so customers are coming to Ryanair only for the value for money. Does not fly to major airports.
Regional airports limits passenger market.
Full Service airline can easily start a low cost spin-off. Substitute mode of transportation like Cars, Trains & Ferries. Pressure to unionize.
Fuel Price fluctuations.
Expanding tourism industry.
Eastern european expansion.
Gain further market share by introducing medium haul destinations in eastern europe.
From the PESTEL and Porter's Five Forces analysis, it is evident that Ryan Air is operating in a highly competitive and unfavorable business environment. The biggest macro environment threat facing Ryanair is the political...