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Ryanair case study analysis

The report is mainly a case study analysis based on Eleanor O'Higgins' review of Ryanair
conducted in 2007. However, other secondary research has been analysed and used to support
the arguments put forward in this document.
Purpose of this case study is to conduct a strategic analysis of environment and the industry as
well as the company. Firstly I conducted a critical evaluation in-order to figure out the critical
issues of the five restructurings of Ryanair. Next I have conducted an environmental scan to
analyse the external and internal environment of the organization. Then I took my attention to
carry-out a SWOT analysis in-order to identify the strengths, weaknesses, opportunities and
threats of the firm that would shape the competitive advantage of Ryanair.
In sorder to justify my argument I will be using strategic management models and theories such
as, PESTEL analysis,Poters 5 forces model,Market segmentation analysis,Strategic grouping model,
Value chain analysis etc.. After concluding the analysis I will deliver my recommendation for
Ryanair.

Overview of the Company


Ryanair started in year 1985 with only 57 staff members and with one 15
seater turboprop plane from the south of east of Ireland to London-Gatwick which carried 5000
passengers on one route. In 1986, inspired from the story of the company go after the big guys for
a slice of the action and end up smashing theor British Airways high fare cartel on the DublinLondon route. The staff increased from mere 57 to 120 staff members and the plane carried for
about 82,000 passengers on two routes. In 1989, the company employed 350 staff and their
average maximum passengers increased to 600,000. In 1990-1991, the company has 700,000
passengers.
However, despite of the increase of passengers, the company is not so good in managing cost that
the company has lose its money. A new management team is brought in to sort it out and relaunch as a "low fares or no frills" airline, closely modelling the Southwest Airlines model in the
U.S. And in 1994, Ryanair bought its first Boeing 737 aircraft which carried over 1.5 million
passengers. In 1995, Ryanair is the biggest passenger carrier on Dublin-London route, the largest
Irish airline on every route being operate and carried 2.25 million passengers in the year.
In 1997, the EU air transport deregulation allowed the airline for the first time to open up new
routes to Continental Europe with over 3 million passengers on 18 routes carried. Ryanair
launched services to Stockholm, Oslo, Paris and Brussels and took time out to float Ryanair plc on
Dublin and NASDAQ Stock exchanges. The company was awarded as Airline of the Year in 1999 by
the Irish Air Transport Users Committee.
In 2000, they announced the launch of 10 new European routes for the summer 2000 after much
deliberation and watching others burning money. The company has also jump onto the internet
with the launch of their new online booking site and in just 3 months the site is taking over 50,000
bookings a week. By 2001 there are more than 1500 employees working for Ryanair and more
than 10 million passengers are carried to 56 cities in 13 European countries. The company has

opened Frankfurt-Hahn in 2002 as their second continental European base and announce a long
term partnership with Boeing which will see the company acquiring up to 150 new Boeing 737-800
series aircraft over an eight year period from 2002-2010.
The booking in their web accounts have increased to 94% which has probably has something to do
with opening another 26 routes. In year 2003, the company is characterised by rapid expansion
and the start the year by announcing that the company has ordered an additional 100 new Boeing
737-800 series aircraft to facilitate the rapid European growth plans. They acquired Buss from KL
M in April and re-launched 13 buss routes in May. In February they opened their first base in Italy
at Milan-Bergamo and launched their Stockholm base in Sweden with six new European routes. In
all 60 new routes are added throughout 2003 to bring the company a total of 127 routes. By 2004,
the company is named as the most popular airline on the web by Google and they launched their
10thand 11thbases in Rome Ciampino and Barcelona Girona and continue to add more routes
to their already extensive network. The company has also passed out British Airways to become
the UK's favourite airline in United Kingdom and throughout Europe.

Critical Issues
Although the company had encountered different problems, specifically in
line with its cost structures, the company had been able to survive and grow in the marketplace.
Ryanair implement different marketing strategy to make the company survive in the competition
and to be able to gain competitive position in the airline market. It is said that the company was
regarded recently as the most punctual airline between Dublin and London. And because of the
strategy of the industry, Ryanair is now recognised as the second largest airline in United Kingdom
and Europe's largest low-fares airline having a network of over 57 routes in 11 countries and
served by a fleet of 31 Boeing 737-200 and -800 aircraft with over 1,400 staffs and personnel.
In order to position itself in the marketplace the company continuously concentrates on driving
own its costs to offer the lowest fares possible and remain profitable. In addition, Ryanair offer
minimum standards of service and very low prices for point-to-point, short haul flights. The goal
of Ryanair is to meet the needs oftravellingat the lowest price. The Critical Success Factors
(CSFs) are as follows in airline industry: the strategic focus of having the lowest prices, being
reliable within the marketplace, comfort and service and frequency.
It is noted that low-cost companies concentrate on this first critical success factor by trying to offer
the lowest prices. Although Ryanair has eliminated extras such as in-flight meals, advanced seat
assignment, free drinks and other services, it still prioritises features which remain important to its
target market. Such features include frequent departures, advance reservations, baggage handling
and consistent on-time services.(Ryanair vision,mission,goals and objects has been elborated in
Appendix 01

External Environmental Analysis


By using a PESTEL Analysis we scan the macro environmental factors that would influence the
performance of an organization. It is often used to generate market ideas and product ideas.

Factor

Factor
Ways which factor might affect RyanAir
Political/ Legal
Change of government/policy
Ryanair have been involved in various legal disputes with governments both in this country and
the EU regarding their business deals with airports and airline regulatory bodies
Political changes in countries where they have routes to (could also be affected by above point)
Governments in countries they fly to may support their own flagship carrier
Local councils objecting to noise and new runways being built as in past
Governments looking to increase tourism might welcome Ryanair and therefore act in their favour.
Economic
Potential economic recession, Ireland's economy has already been stated as growing however this
may suddenly change.
Because of above main customers wouldn't fly for business as would be cost cutting
Energy and fuel costs are cause of uncertainty
Economic change within countries they fly to or would hope to open new routes to, for example
war with Iraq has shut off any hope of tourism there for the foreseeable future and other factors
such as SARS (O'Higgins, 2004) and more recently, Bird Flu.
Social
Because of economic growth at the moment it has become normal to fly away for holidays
therefore market has expanded and new opportunities for tourism have opened in previously
unconsidered countries.
Business trips, although Ryanair do not offer luxury they are possibly more attractive because less
cost to a company means they can travel more frequently.
Lower costs means attract a wider demographic of consumer
Technological
Main threat to business market is video conferencing
To a lesser extent VOIP
Online check-in, self service check in at airport
O'Higgins, (2004) discusses that Ryanair currently have a fleet of mainly Boeng 737s which are one
of the best known and used commercial aircraft. 'Thus, the company is able to obtain spares and
maintenance services on favorable terms thanks to economies of scale, limit costs of staff training
and offer flexibility in scheduling aircraft and crew assignments'
Environment
Using more environmentally- friendly aircraft.

Aviation represents 2.6 per cent of carbon emission in the EU and airline industry should pay
environmental taxes for the contribution they make to global warming.
Deploying more efficient aircraft that use less fuel and produce less pollution.

.
Industry Analysis
Industry can effects profitability and the competitive positions of members. To identify it we can
use,

Market Segmentation
Ryanair lay claim to their market segment by stating they were 'Europe's first no frills airline',
www.ryanair.com. Ryanair have made strategic decisions based on increasing their competitive
edge, the main one becoming involved in attracting customers at both ends of their routes.
Haberberg and Rieple , support this by showing that Ryanair's key source of revenue from as far
back as a decade ago has been in enticing passengers from France, Italy and Scandinavia. This has
had the advantage of increasing their market share as well as the added bonus of creating a well
recognised brand name across Europe.

Competitive Advantages
Their main competitors are carriers including easyJet, BMI baby, FlyBe and ThomsonFly all of who
try to attract potential customers by emphasizing their low cost tickets. This makes the
competition in this market segment fierce as in order to offer the lowest fares, costs must also be
kept to a minimum. The well discussed fact that Ryanair possesses a more than favourable
relationship with airport operators has benefited the carrier in a time of industry growth and
aggressive pricing. The carrier continues to pay little or no costs despite being the focus of the EU
Commission in February 2004, 'which ruled that Ryanair had been receiving illegal state subsidies
for its base airport at publicly-owned Charleroi Airport', O'Higgins (2004).
Ryanair and the airport in question defended themselves by declaring they paid a fee for every
customer and therefore complied with the EU state aid rules. O'Higgins (2004) claims that Michael
O'Leary's main argument was that the 'state aid rules allow the Wallonian government to stimulate
traffic at an unused airport facility in exactly the same way that every private airport reduces its
charges it if wishes to grow its business'. However, although these decisions by the EU
Commission went against Ryanair, it also made them even more of a household name across the
EU. The free publicity was an added bonus, as well as the position Ryanair took, of being almost a
savior of the lesser known airports, bringing them trade and tourism and then being persecuted
for it.

Porters Five Forces Model


Porter's five forces analysis is a framework for the industry analysis and business strategy
development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts
developed in Industrial Organization (IO) economics to derive five forces which determine the
competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers
to the overall industry profitability. Porters five forces model has been fully elaborated more on
Appendix 02

Threat of substitutes is medium for Ryanair and is basically in the

Threat of substitutes is medium for Ryanair and is basically in the


form of land,travel. Barganing power of buyer is high as low budget
air travel is almost a commodity today and carriers are many. Buyer
are well informed at prices and deals via internet and other mediums.
Barganing power of the suppliers as Ryanair with its large scale holds
the power to switch suppliers and demand better terms, especially to
cut cost.Threat of new entrants is medium- as entrance to tarvel
industry needs special licenses etc as well as high capital
investments.Existing Rivalry is high with Ryanair competing against
national carriers as well as low budget carriers for their share of
market. Overall the industry witch Ryanair in is of medium
attractiveness.
Strategic Group Analysis
The value of strategic group analysis as a tool for understanding industry dynamics and structure.
Studing strategic groups, but that the analysis can help a firm in effort to understand the industry
in which it competes and to identify its most relevant competitors.

Internal Environmental Analysis


Resources
There are two kind of resources, tangible and intangible again movin further it can be categarise
as financial, human, physical resources.
Physical Resiurces and Human Resources has been fully elaborated more on Apendix 03

Financial Resources
In the low cost structured airline industry Ryanair was the highest profit making airline.(ratioes has
been fully elaborated on Appendix 04)

Value Chain Analysis


An analysis of an organisation's resources can include its financial, physical, human, intellectual
and reputational resources. In the deployment of these resources, it is also important to
understand the competences and core competences of an organization. Porter's (1985) value
chain concept is an important part of this process.
Ryanair strongly manages and forms relationships with various suppliers e.g. Boeing and
food/beverages etc, to ensure goods are received of requirement standards and on time in-order
to add value throughout its value chain In addition to this by forming strong relationships with
Boeing, they are able to obtain spares and maintenance on favorable terms reducing costs, thus
offering lower prices to passengers and safer flights (adding value). In-order to add substantial
value for its service by providing low-fares, they closely monitors relationships with airports
around Europe, so they provide subsidies to the airliner in order for them to provide low-fares and
seen as adding greater value for customers. Furthermore they have agreed with these airports to
provide storage hubs as to when a plane enters these sites it's automatically refueled and
beverage/duty free products are reloaded at negotiable prices reducing costs and quicker

turnaround timing is achieved, thus seen as adding value. For the airliner to provide low-fares to
consumers it contracts staff for aircraft handling, ticketing and baggage handling to third parties at
competitive rates as well as engine repairs and heavy maintenances of its aircrafts. Thus reduces
direct exposure to employee relationships and disputes reducing costs all through value chain.
Additionally, to add greater value for customer, the aircraft staff e.g. pilot, cabin-crew, they holds
close relationships, giving the right training making them competent enough to feel confident to
answer on flight questions. The airliner has a commission placed for its aircraft crew linked with
the sales of duty-paid goods (rewarding mechanisms).Thus close management with aircraft crew
ensures good labors turnover reducing the threat of staff being absent for flights, thus seen as
adding value for customers.(more on Appendix 05)

SWOT Analysis
Factor
Ways which factor applies to Ryanair
Strengths
Marketing - strong branding and reputation, aggressive price strategy.
Low costing due to airport operator deals.
Reputation as biggest budget airline.
Lots of publicity due to O'Leary and controversial issues.
Air Transport World magazine announced that Ryanair was the most profitable air line in the
world.
2006 Annual Report, Ryanair desinged itself as the 'World's Favourite Airline'.
Weaknesses
Cash tied up in purchase of new planes.
Entire company based on European low cost airline market.
Shock profit warnings may have used cash reserves and weakened fiscal structure
Refusal to back down over issues such as EU Commission
Poor employee relations
Total dependance on the CEO Michel O 'Leary
Opportunities
Possible new routes,
New planes = larger capacity.
Advertising space on website and planes, more revenue
International Airline colloborated
EU expansion
Threats

Competitors - BMI baby, Easyjet, ThomsonFly.


Economic recession would mean less disposable income.
EU Commission could put restrictions on company if do not adhere to state aid rules
Subsitute transpotation like car and high speed trains.
Fluctuatioans in fuel prices

Conclusion
On the whole Ryanair seem to be following a strategy which works for them. They are obviously
aware of their business environment and understand the importance of monitoring it as they took
advantage of the opening in the market when they restyled themselves over a decade ago.
However they need to be aware that this environment is constantly shifting and evolving and
therefore maintaining a close eye on it and being ready to adapt to any changes should be a
fundamental part of their strategy.

Recommendation
Ryanair's aim to keep fares low, mainly by not introducing fuel surcharges. Actions like this, which
were of course highly publicised, ensure Ryanair is constantly attracting customers.
Part of Ryanair's success is made possible by the fact they are such a lean company, both in the
way they operate and the services they offer. O'Higgins (2004) claims that when the carrier
dropped their cargo services, although they were going to be losing 500,000 of revenue a year,
they decreased the turnaround time of their aircraft from 30 minutes to 25 minutes to attract
more business travellers who required the punctuality.
Innovativeness like this has ensured Ryanair's sustainability and will carry them forward into the
future. To recommend any major changes would be to predict how the airline industry will change
which ultimately cannot be foreseen. However it has been concluded that the budget airline will
continue enjoying its boom, with many passengers now enjoying the short breaks away at a low
price. Also the advent of new routes will bring more custom, from both departure points. If there
was to be a drop in demand Ryanair would certainly suffer and subtle shifts in their strategy could
be appropriate. For example offering drinks vouchers onboard for the customer's next Ryanair
flight might entice more people back, or making alliances with hotel groups in order to offer a
complete package, rather than just selling advertising space on their website.

Reference
Finlay, Paul (2000), Strategic Management. An Introduction to Business and Corporate Strategy.
Pearson Education. ISBN 0 201 39827 3
Haberberg, Adrian & Rieple, Alison (2001), The Strategic Management of Organisations. Pearson
Education Ltd, ISBN 0 130 21971 1
Lynch, Richard (2000), Corporate Strategy 2nd Ed. Pearson Education Ltd, ISBN 0- 273-64303-7
McManus, John, 'Maybe it's time for Ryanair to jettison O'Leary', Irish Times, 11 August 2003
O'Higgins, Eleanor, (2004), Ryanair
O'Higgins, Eleanor, (2007), Ryanair - the low - fares airline

www.ryanair.com
www.grin.com

Appendix 01
Company Vision
Ryanair's CEO, Michael O'Leary, has a vision of a world where the fare could drop to nothing as
local communities would subsidize the airline to bring a steady traffic of business people and
tourists to their region.
Main Aim
To firmly establish itself as low fares,scheduled passenger airline through continued
improvements and expanded offerings
Rayanair's Main Objective
Ryanair will become Europes most profitable lowest cost airline by rolling out the proven `lowfare-no-frills service in all markets in which we operate, to the benefit of our passengers,
people, and shareholders (Ryanair Report, 1997).
Ryanair's other Objectives
GOALS AND OBJECTIVES FOR 6 YEARS TILL 2012.
To raise the market share within the low cost sector up to 40%.
Fleet of 200 airplanes in 2012,
To double the annual passenger transportation to 80 million by2012.
To eliminate the rest of our costly call centers
To base the distribution only on online booking.
To quadruple its annual profit up to 1,230 billion in 2012.
(www.grin.com/ebook/---ryanair.)

Appendix 02
Suppliersbarganing power

low
Competitor Rivalry

High
Threat of new entrants

Medium
Threat of Subsitutes

Medium

Buyers' barganing power

low
How poters 5 force analysis effect Ryanair;

Appendix 03
Rhysical Resources
The physical resources which Ryanair possess is the 196 Boeing aircrafts. The huge amount of
money being spent by them on their physical resources for the maintainance. They need to keep
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.

Human Resources
Human resources can be considered one of the most important functions of a business. The vast
majority of organisations all employ staff and Ryanair is no exception especially due to their size.
When the carrier was established over twenty years ago they only had fifty one members of staff
on their payroll. (www.ryanair.com.) With this amount of staff they have to ensure that, in order to
have operations like call centres and cabin crews running smoothly, they keep their staff happy
and motivated. They do this by offering incentives and a share option scheme which
allows employees to participate in the success of the company overall.
Ryanair's technical operations should mainly revolve around their aircraft as this is the core of
their business. In February of last year they announced an order placed with Boeng for 70 firm
aircraft as well as 70 options, www.ryanair.com. This means that between now and 2012 Ryanair
will have 225 firm aircraft and options for another 220, allowing them to grow to over 70 million
passengers per year. Due to this excellent deal negotiated by the carrier their growing amount of
aircraft will not add huge amounts to depreciation costs as they will be depreciated over 23 years.
Technical operations have to run smoothly for obvious reasons, if a plane scheduled to make a
flight for technical problems, for example, then this will impact on all of Ryanair's operations and
functions and also cause disharmony amongst their
passengers, possibly costing them future ticket sales

Appendix04
Financial Ratios

Net Profit Margin


Net Profit Margin (NPM) tells us how much profit a company makes for every $1 it generates in
revenue. Net profit margin indicates, when compared with GPM, how well a firm is managing its
indirect costs in addition to cost of goods sold.

Return On Assets

Return on Assets (ROA) provides a view of how efficient management is at using its assets to
generate earnings. ROA for all three primary competitors is virtually the same. Therefore, we can
say that all three companies are generating similar revenue per dollar of assets.

Current Ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to
pay its debts over the next 12 months

Inventory turnover
Inventory turnover ratio shows how many times a company's inventory is sold and replaced over a
period. This should be compared against industry averages. A low turnover implies poor sales and,
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therefore, excess inventory. A high ratio implies either strong sales or ineffective
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