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Competitive positioning of Ryanair:

Executive summary:
Somebody has said that good thing in life comes in small packages. Ryanair did not think

of charging high prices but made it as low as possible which brought him a tremendous

profit. To accomplish competitive positioning and sustain the advantage over it, the firm’s

resources and capabilities are deployed excessively. Ryanair objective been so far is to

establish itself as a lowest fair scheduled passenger airline. So they focused on the

operating cost efficiencies which led them “the way”. Despite the adverse economic,

political and legal circumstances like rise in fuel prices, E.U. regulations to restrict pilots

flying hours, Levied arrear charges of the public airport Charleroi, greenhouse emission

etc. they continued on their promises and kept their positioning strong and less affected.

And that is where their capability reflected “hard to imitate” resources which was

possessed by them.

Residing on the customers services requires a great deal of customer relationship

management skills, so these are capabilities and resources which complemented firm with

its right strategy. Now certain environment, socio- cultural and technological favored

them as well. Like for example increasing passengers due to changing in life style, less

competition (because no one wanted to take risk of no-frills low cost services) fueled

their success. Not much differentiation between services, Price is the main differentiating

factor. Their frequent point-to-point flights, choice of the different Routes, low-fares

which was consistence, low operating cost(airplane maintenance Cost, staff expenses,

customers servicing cost, airport excess fees, maximizing the use of internet) and with the

help of auxiliary revenue they positioned themselves as the pure low cost airlines. But the

main cause of demise of a firm is not that comes from outside i.e. threats but the
weakness is always there main cause for failure. The carelessness of a firm could also

come under weakness where the firms always look at the positive effect of the action and

simply ignores the negative part of it. The strategy of generating auxiliary revenue was

executed wrongly, where without thinking from the passenger’s point of view they took

on and on. That was the loop hole being left by them. But then to pay extra attention on

these internal weaknesses, can be easily overcome, and this is where internal analysis

plays a dominant role. Talking about the threats and other external forces in the industry,

where all the firms get affected, do not bring the much difference. First know the

positives and negatives of the firm and then position it to compete against the

competitors.

Introduction:
Now, Ryan air is competing in the fairly recent development of the European budget

airline industry. They are one of the key players within the market and perhaps the most

profitable. It is currently serving to 26 European Countries with 148 destinations. It

operates on 794 different routes daily serving by more than 1050 flights in a day. It has

totally 169 aircrafts running for different routes with 5986 number of employees working

in it(). It is planning to invest some €17bn to replace its all old aircrafts with the new

Boeing 737 – 800 to run the flights environment friendly. Moreover it has reduced the

fuel burn and CO2 emissions per passenger kilometre by 45%. ()

Ryanair the low fare airlines set up in 1985 with just a share capital of $1 and staff of 25

starts off their first flight from Ireland to London. And then in 1986 they sought out the

permission from the regulatory authority to compete against British airways and air

lingus and started off the lowest fare war. So the concentrate is after deciding over the
corporate strategy i.e. the attractiveness of the industry to go in, the next option to go

further is to think of a business strategy where a decision has to made on the selection of

target market taking into consideration the firms internal scarce resources and

capabilities, the competitive advantage.

To accomplish competitive positioning and sustain the advantage over it, the firm’s

resources and capabilities are deployed excessively. Target competitive position has to be

intended for the exclusive combination of price, speed, services, innovation,

customization and responsiveness etc, which will justify firms appeal to its target market.

Like for example low cost control has to blessed with low cost control strategy, or

residing on the customers services requires a great deal of customer relationship

management skills, so these are capabilities and resources which provides firm with its

right strategy. Anyways “the firm may look akin but in different species” this is what the

competitive positioning is.

External analysis:

Layers of business environment:

External factors shaping the competitive positioning of Ryanair:


There are not one but many factors which determine the strength of competition, the level

of profitability and thus adumbrate the industry’s attractiveness. New entrants bring

competition to the industry, and risk for the fall of market share and profitability, so they

are to be speculated sincerely. Does the barrier is high or the entrants could face high

retaliation from the existing competitors.

Entry barrier:
As there was the requirement for huge capital investment and then the disbursement of

the capital investment and the profit leveraged on it was very slow and steady. Then

coming to the restricted slots being given to the airlines was much difficult to actually

find suitable airports and required a lot of initial knowledge and survey. As there was a

need for the low cost base which was pretty tough to actually realize and found out the

ways to get these bases which would be low cost, there was also high risk indulged with

the flights as it was a pure services driven sector then the risk like for example the no

inventoried factor or fluctuations in demand and supply was much o be thought at before

going for the investment in this sector. But in case of Ryanair the flight authorizations

and also because of the pioneer in this low cost segment favored it a lot.

The substitute:
As the customers were not brand loyal and also there was no switching cost for the

customers if in case they are moving to the other airline, these factors made the industry

much riskier for the existing players and also much attractive for the new entrants. Other

modes of transports like Eurostar, Ferries, Cars, TGV etc were there which were not very

much relevant to say were the close substitute to the low cost airline primarily because

the people want to travel by the low cost airline would be saving time and also being

benefitted in a lot more way which was not possible to get through other means of

transports. Also the relationship management with customers was also very lenient

leveraging on the higher substitutable corner of the product.

Buyers bargaining power:


Customers were not concentrated and thus had no control on the price of the airlines, but

then as the customers are price sensitive they had a huge inclination towards the low cost

airline, but again some factors like less loyalty and very minor switching cost made the
customers more powerful in certain respects, as per the case they welcomed this “NO

FRILLS LOW COST” airline which shows that still there was no monopoly and certain

control was there with the customers as well.

Supplier’s power:
The supplier’s power was high since there were only 2 imperative suppliers of planes,

Boeing and Airbus, which led to high context of supplier and were playing dominant role

in the industry. Also switching cost from one supplier to other was high which led to

retrained mechanics and pilots for the usage of other supplier’s product. Boeing is

Ryanair main supplier. Also price of the fuel used in aviation industry is directly

proportionate to the cost of the oil, so the cost of production was varying vastly due to

fluctuations in the oil cost. The main air port charges were also very high because even

they were the dominant players in the supply chain, but the nearby air ports had have the

comparatively lesser bargaining power where the Ryanair chose to operate rather than

going for the main airports.

Competition:
For the low cost airline like Ryanair the competition was low but in the overall airlines

sector the competition was intense. Market was emerging and also gap existed in the

supply and demand line. However if some other company would had decided to compete

on the same basis as Ryanair did then there would have been a heavy pressure on prices

margins and hence on profitability. There was not much difference in the services they

were providing hence the only competition was on the price differentiation also there is

high exit barrier in the aircraft industry since high cost of capital and after losing on the

competitive battle no one can abnegate. That was the risk involved in the industry to inter

in.
Political & Legal

• In the different countries the government may support their own flagship carriers and
demoralizing other countries carriers.
• All the local councils which were much concerned about the noise and new runways
which was being built in the past was a great check to the airlines industry.
• The concerns and the efforts being put by the government to look after the tourism
industry might also trigger the industry. ()
• The abolishment of the free duty on sale by the EU. (Liberalization).
• Accusation of Misleading Advertising.
• Establishment “Climate Protection Charge”. ()
• The internet which was caused to face legal charges was simply the misuse of the
facilities.
• Pilots and cabin crew across Europe.
• IATA intrusion in Slot instruction for carriers and routes.

Economical

• The fuel price fluctuations were the most key factor for ELFA industry.
• The EU integrations had widened the opportunities for LFAs.
• Plummet in GDP and surge in the unemployment rate in January 2008 as compare to
January 2007.
• The airline industry is in the growth rate of the life cycle.
• To maintain the common interest rate throughout the EU, the interest and inflation rate
plunged and is low.

Socio-cultural

• European countries have lower population growth rate.


• Wider demographic of consumers were got attracted by the lower cost strategy.
• Lots of population shift was happening in Europe at that time which fuels in demand.
• Huge change in lifestyle caused increase in frequent travelling.
• Education and literacy rate increased due to population shift towards urban areas.
• Operations increased in grey market.
• €12,000 per person is the on an average purchasing power in Europe.
(Purchasing Power of Europe, 2006).

Technological

• Wireless technology expended in a myriad way.


• Online reservation through internet facility provided customers with more comfort and
ease.
• Substitution of all the Boeing 737 – 200 by 737 – 800.
• New aircraft costs lesser and Carbon emission also decreased.

Environmental

• Strict check on Green House Gas and Global Warming issues.


• The increase number in direct flight and also reduce number in the indirect flights to
reduce the pollution was also executed.
• The ELFAs do not provide any Food or Beverage inside the flight to reduce the leftovers.
• ELFAs keep more seats available as compare to other traditional airlines. That means
even if the capacity is low then also ELFAs keep booking for more than that number.

Key Drivers of Change:

Terrorist attack has the huge impact on the aviation and hotel industry.The 9/11 and 26/11 attacks
in US and Mumbai had effected the industry to its root level hence this is the one of the key
drivers for these industry.
Other Key Drivers of Change,

• Oil and fuel pricing fluctuations are the cost driven factors for Ryanair.
• Eco friendly organization leads to the trade of carbon emission.
• Transformation in technology through the help of internet world increased demand for
Ryanair since the bookings and cheek-ins were made easy.
• The policies of the Government regarding taxation and environmental charges caused
Ryanair to protest since that had a effect on its cost structure.
• On the name of social responsibility there was the intervention from the European
Commission.
• Shift in population and increase in literacy rate showed the upward trend in the bookings
and top line.

Industry life cycle:

As the low cost European


airlines did well in the European market, it showed the rapid growth in the recent period of time.
Even in the economic downturn it showed a rapid growth. There are total of 50 players existing
in the whole market out of which 15% are LFAs.() In fact there are more hidden participants also
of which these LFAs were not aware of. There was very minor difference in their cost structure
and services between each of them. Ryanair was leading the industry with the market share of
27.85% which was then followed by easy jet with 22.98%. Hence seeing the above trend and
points we can state that the low cost airlines in the European market are in growth phase of the
life cycle.
()

Strategic Drift
The gap between the external environment trend line and the progress of the organization is
known as strategic drift. The lack of the organization to cope with the external environmental
change and get fit itself in it creates strategic drift. So to get the gap bridged the organization
adopts different strategies in the flux phase. Similarly Ryan Air also applied different strategies
like; in 1990s they were giving all the facilities in low fare charges as compared to other
competitors to recover their loss. They started giving online booking facilities, Online Check – in
facilities, entertainment packages in Flight and in 2006 Ryan Air came up with different
packages like; Hotel Booking, Car Rental, Sight Seen, etc... This is how it bridged the gap and
continues with Transformable change.

Reason for ultimate Demise of Ryan air


The whole industry goes towards the fall just with the change in a single key factor. Like for
example if the government charges the high taxes in the airline industry and is persistence to it
than this can cause a war fair in between the existing players of that industry and can drive out
the plenty of those players out of the industry. In a similar way a rise in fuel price can also cause
a similar price war and thus bringing head to head competition. All the reasons could cause
demise for the whole industry. But as Ryanair has straddled itself into the other services also like
for example car rental and hotel bookings etc which can help it to sustain in the market. The one
reason which could lead to the ultimate demise for Ryanair would be the services provided by it.
If Ryanair fails to provide better services which it is providing now and also stop taking
concerns of the passengers then it would be just over performed and would be thrown out by the
other competitors. The maneuvers of Airline business is service. If it is not there nobody likes to
travel in your Airline.

Internal analysis:

Resources

There are two kinds of resources, tangible and intangible again moving further it can be
categories as financial resources, human resources, physical resources, intellectual capitol.

Physical Resources

The physical resource which Ryanair possess is the 196 Boeing aircrafts. The huge amount of
money was being spent by them on their physical resources for the maintenance. They need to
keep the resources proper and running to make sure that these will not harm their low cost
structure. They also have the youngest fleet in whole Europe with a highly fuel efficient
capacity. ()

Financial Resources

In the low cost structured airline Ryanair was the highest profit making airline.. It was working
with the 18% net margin which was around 300% more than any other airlines operating in the
same industry (). Its EPS was increased by 20% to €31.81 with increase in bottom line by 22%
to €480.9 in 2008 as compared to 2007. The cash balance of Ryan air at the end of the year
2008 was €2169.9mn. ()

Human resources

Initially the number of employees in Ryanair was 25 only. But gradually the Ryanair started
growing and became the market leader in the low cost airline industry of Europe which had 6000
thousand employees working in it and all of them are entrenched with cost cutting concept. ().
The employees were very much passionate about the works they do and also wanted help
Ryanair to retain at the no.1 position. Apart from this the top level management is working with
Ryanair for minimum 10 years. Hence they know the strategically right things to do because of
the knowledge gained in the company, also know about the internal and external strength of the
company. So this is the very unique and valuable resource of Ryanair.
Intellectual capital
The highest % of a pie of ELFA is still being shared by the Ryanair airline and its all because of
the senior management team of the company who has enormous experience in the same industry.
Mr. Michael O'Leary Joined Ryanair as a director in November 1988 and was appointed Chief
Executive Officer on January 1, 1994. Captain Ray Conway was appointed as Chief Pilot in June
2002, having joined Ryanair in 1987. He worked in Irish Air Corps for 14 years taking care
Training and Transport Squadron. ()

Diagnosing Strategic Capabilities:


Value chain

The start of the value chain is with the inbound logistics as a low cost fuel supply and low cost
aircraft supply also embraces the airport authority contracts. The relationship with the suppliers
was very warm and friendly and was also doing outsourcing for its check in work through the
websites for its passengers. The landing and take-off schedule were very much punctual and was
being operated in a very fine ways.The cargo services being provided by them were also too
good. The extra services and the entertainment facilities inside the aircraft were also attached and
that was the point of difference attracting passengers. The free publicity and the low cost
promotion was able to create a unique image in the mind of the consumers and also handled in a
cheaper way which led the company being firm at its position.

Activity map:

Overall looking at the big organization, every organization use to draw 3 to 4 different activity
maps and then selects one out of that which fetches the high profit margins and also will be
cheap in its structure will be best suitable. But as Ryan Air is operating in a industry where they
have to be the Cost Centric to draw their activity map rather than focusing on Profit
maximization. But even though they are operating on lesser cost they are able to mange to
maximize the revenues through its vast target market.
Benchmarking

If we talk about the Benchmarking method for Ryan Air then we can say that for European Low
Fare Airline Industry in which Ryan Air is performing as a Market Leader, the organization itself
can be set as a Benchmark for it. All the Aircrafts are having high load capacity, operating on
high profit margin, maximum number of employees, low fare charges, carrier (Cargo) services,
online booking & check – in facilities, customer convention packages are different criteria’s of
setting a benchmark and all these are already embed with Ryan Air. So Ryan Air itself is a
Benchmark for the Industry.

SWOT Analysis:

Strength:

• The low cost leadership.


• Consolidated brand image in the low cost airlines.
• Very much aggressive pricing strategy.
• Pioneer in the low cost airlines.
• Advantage in the gain of market share.
• Sought out routes- network.
• 36% increase in revenue from ancillary in the year 2006.
• Strong reputation in public.
• Gain the faith of public towards its low fare airline.
• High load capacity aircraft.

Weakness:
• Total dependence on the CEO Michel o’ Leary.
• Employee relation was very poor.
• Customer relationship was volatile.
• Competitor’s relationship was aggressive.
• More roaring flights.
• Tied up cash with the purchase of new aircraft.
• Poor employee relations.

Opportunity:
• New routes were possible to found out.
• EU expansion.
• International airlines collaborated.
• Online selling of tickets i.e. Forward integration.
• New promotional plans.
• Expansion of ELFAA.

Threats:

• Economic crunch.
• Entry of new players in the industry.
• Fluctuations in fuel prices.
• Mergers and acquisitions happening at a faster rate.
• Evolution of trade union in the industry.
• Substitute transportation like car and high speed train.

Strategic Capabilities & Competitive Advantage

Resource Competen
s ces
Threshold
Capabiliti Threshold Threshold
Resources Competence
es

One model Free publicity


aircraft by EU

Well Low
Experienced Maintenance
Management Cost

Customer High Load


Service Capacity

The best Online Booing


Carrier Facility
Service
Unique Core
Resources Competency

Michael Low Fare


Capabiliti O’Leary Airline with
es for the Best
In flight
Competiti Service in
Customer
European
ve Service
Low Fare
Advantag Frequent Airlines
Flights Industry
e
The best
Carrier
(Cargo)
Service

Organizational Knowledge:

Mr. Michael O’Leary can be known as a Knowledge Guru as far as Ryan Air is concern. He has
so many things in his head which he implies as a CEO and his experience in this Industry is
giving the competitive advantage to Ryan Air over others in this industry. There are other senior
managers and pilots also working in Ryan Air under O’Leary and because of that only Ryan Air
is still Market Leader in the Industry.

Referencing:

About Us (1985). Retrieved 2009 7, June, from www.ryanair.com:


http://www.ryanair.com/site/EN/about.php?page=About
Annual Report. (2008). Retrieved June 8, 2009, from www.ryanair.com:
http://www.ryanair.com/site/about/invest/docs/2008/Annual%20report%202008%20web.pdf
British Broadcasting Corporation. (2007, January 5). Politics (O'Leary interview). Retrieved
June 8, 2009, from news.bbc.co.uk: http://news.bbc.co.uk/2/hi/uk_news/politics/6233019.stm
Denholm, J. (2006). Strategic Analysis & Evaluation of Ryan Air. Retrieved June 7, 2009, from
www.chloebutler.com:
http://www.chloebutler.com/Strategic%20analysis%20and%20evaluation%20of%20Ryanair.pdf
ELFFA. (2009). ELFAA Airline Members Statistics. Retrieved June 6, 2009, from
www.elfaa.com: http://www.elfaa.com/statistics/ryanair.htm
European Low Fair Airlines Association. (2009). Background of ELFAA. Retrieved June 9, 2009,
from www.elfaa.com: http://www.elfaa.com/background.htm
Higgins, E. (2006). Ryanair - The low-fares airline. In G. Johnson, S. Kevan, & W. Richard,
Exploring Corporate Strategy (8th Edition ed.). New Delhi, India: Prentice Hall.
History of RyanAir. (2009). Retrieved June 7, 2009, from www.ryanair.com:
http://www.ryanair.com/site/EN/about.php?page=About&sec=environment
Johnson, G., Scholes, K., & Whittington, R. (2005). Exploring Corporate Strategy. New Delhi:
Prentice Hall.