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Ryanair is an Irish low-cost airline -the largest in Europe- which founded in 1985. Its head office is based at Dublin Airport. Ryanair operates 1400 flights per day with 254 Boeing 737-800 aircraft (the airline has a rapidly expand and by 2012 will operate a fleet of 292 aircraft) and on over 1,100 routes across Europe and Morocco from over 43 bases and connecting 160 destinations. In terms of passenger numbers is the 2nd-largest airline in Europe and in terms of international passenger numbers the largest in the world. Ryanair has more than 1700 employees and in 2011 is expected to carry 73,5 million passengers approximately. Furthermore, the fact that in the middle of recession Ryanair's profits increased by 204%, indicates how profitable is. (http://www.ryanair.com; Slack, et.al. 2004)
STRATEGY AND COMPETITIVE ADVANTAGE
Ryanair follows a cost leadership strategy, which means that the company attempts to reduce its cost structure in order to have cheaper prices than its competitors and thereby a competitive advantage and above-average profitability. The major aim is a decrease of the operating costs thus pursuing a lower position at the experience curve. Ryanair proclaims a policy of providing just the necessary service needed. Hence the selling of tickets is managed directly with the customer through the internet. There are no free meals, blankets and pillows on board. Furthermore, Ryanair uses just one airplane model (Boeing 737) to reduce maintenance costs. Thus by reducing costs, Ryanair has been able to sell an average ticket for $48, whereas British Airways demands $330 and consequently to become the European cost leader.
Ryanair, also follows the focused cost leadership strategy that enables the company to compete solely in one or few market segments. Thereby the company concentrates on segments where it can exploit cost advantages and compete against the cost leader. Companies with that initial position have expansion opportunities. Ryanair in her first steps focused only on flights between Dublin and London. Due to the lack of any European cost leader at that time, Ryanair was capable to expand to its current stance as European cost leader, compared to British airways that follows a differentiation strategy, by producing goods and services that are considered, by their customers, as unique and therefore to raise the cost of the ticket.
Ryanair manage to succeed in what other airlines like British Air did not and this gives to Ryanair its competitive advantage: the low-budget which passes its costs to its customers direct in order to maximize the profit. The factors which help Ryanair to be a cheap-flight airline are the variety of routes and destinations, the rapid amount of flight and the sufficient capacity. Ryanair in comparison to BA does not have long delays in checks (Hill and Jones, 2009)
ELASTICITY OF DEMAND FOR THE AIR-TRANSPORT SERVICES
The Elasticity of demand (ED) shows how sensitive the quantity of a good or service is in changes in its price/income, in other words the ED measures the way in which the quantitative demand reacts when the price of the product or service increases or decreases. (Jones, 2004; Campbell, et.al. 2002; Siegel, et. al. 1997)
Ryanair's elasticity of demand for the air-transport services is elastic. Ryanair succeeded to offer services in low cost [for example: tickets booking through internet, the use of secondary airports landing (less taxation), the cost of selling its services is reduced, no meals etc.] and these low prices help Ryanair to increase the market share in comparison to other established and well known companies, like British Airways. Consequently, Ryanair with the change of one variable (price) has succeeded to increase in the number of passengers.
EXPERIENCE (LEARNING) CURVE
According to the learning curve effect the more time a task is needed to be performed the more efficient is it, because less time is required for each subsequent repetition. The experience curve effect is broader than the learning curve effect and does not include the labor time only, but according to it, the more often a task (good or service) is executed the lower will be the cost of doing it. Every time that the volume doubles, value added costs fall by continuous and expected percentage. (Ryanair´s costs have declined at about 20% when the production is doubled).
Ryanair's profits from learning curve effects respected on costs are in the following areas: the same characteristics of fleets, the staff costs and productivity, the contracting out of services, the marketing costs and the airport and handling charges. (Mayer, 2007) The profit from the experience curve is that Ryanair can save cost through the continual improvements of its processes. (Edith, et. al. 2007)
According to the above it can be assumed that Ryanair's attainment of its profitability objectives should be attributed to an Experience (learning) Curve effect. It can achieve both the experience and learning advantages, (although there are some other factors which affect Ryanair in its low- charge politic, like internet, lack of food and drinks etc.) (http://www.ryanair.com/doc/investor/2010/q4_2010_doc.pdf;HYPERLINK "http://www.google.gr/search?hl=el&biw=1366&bih=653&tbs=bks:1&q=inauthor:"Harold+Kerzner"&sa=X&ei=8T47Ta_gNMmQswaDufDzBg&ved=0CDIQ9Ag"Kerzner, 2009; Baily, et. al., 2005; Monczka et. al. 2009; Kay,1995; Mayer, 2007)
Efficiency - Effectiveness - Adaptiveness
Ryanair, according to its financial performance objectives manages to be effective and efficient. Furthermore, the company's Full Year of 2010Results showed how adaptive Ryanair is in difficult situations such as Ireland's tourism collapse (2009), or in the case of cancellations due to the Icelandic volcanic ash.
Regarding the non-financial performance objectives, Ryanair seems to be also efficient, effective and adaptive considering the fact that is one of the biggest world's airlines, though some people may not find it so attractive due to the fact that its low-cost strategy offers them less facilities. (http://www.ryanair.com/doc/investor/2010/q4_2010_doc.pdf)
CRITICAL FACTORS IN TERMS OF POTENTIAL THREATS
The potential threats to the company's success particularly in an economic recession period such as the one we are going through are:
New entrants: because of the high costs that are needed in order to enter the market, the threat of new entrants is low.
Substitution threat: short distance flights, can be replaced by other means of transport such as train, car, boat and other airlines.
Threat to Ryanair's dominance:if Lufthansa manage to integrate with Austrian Airlines, Brussels Airlines and bmicould assert Ryanair's market share.
Fuel's price threat: nowadays fuel prices are rising increasing the company's expenses, As a consequence there will beeitheran increase in ticketspriceor a decrease in the company's profit (Tiernan ,et. al., 2008)
Terrorism's threat and insecurity: especially after September 11th, owed to the artificial mood of fear and based on wrong information.
Environmental threats: that can't be predicted, but it can cause many problems, such as in the case of the Icelandic volcanic ash which led to closures and cancellations.
EU 261 Legislation's threat: can affect the company's growth, as there is no cap on either the period or quantum that air passengers can claim for. (http://www.ryanair.com/doc/investor/2010/q4_2010_doc.pdf)
Economic climate threat: the uncertain economic situation owed to the global economical crisis. (Tiernan, et.al., 2008)
Epidemic threats: like in 2003 with the SARS epidemic where people were afraid of travelling abroad. (Chau and Kao, 2009)
ADVANTAGES OF NEW CONDITIONS IN THE BROADER MARKET
According to the Full Year's of 2010 Result Statement, Ryanair managed to take the advantage in the case of the falling tourism demand in Ireland, by predicting it. The low-cost strategy of the company combined with its expansion in other countries and the increase of destinations along with the predictions, helped the company to be prepared and effective in order to face difficult situations. Furthermore, the change in existing regulations in the UK helped Ryanair to be relieved from the difficult and disadvantaged situation in which it was involved and forced to pay reimbursement of expenses of disrupted passengers. These changes lead Ryanair to try to achieve a force majeure clause like other competing transport providers such as coaches and ferries, in order to be relieved of the "duty to care" obligations .
Many airlines, because of the economic crisis, try to cut down costs by reducing flights and destinations, giving Ryanair the opportunity to take advantage of this situation by increasing its flights and destinations and be more flexible than others. Additionally, Ryanair can take a risk to buy at low cost airlines which are about to bankrupt and try to take advantage of them leading her to a market leader. (http://www.ryanair.com/en/about)
Marketing mix is the combination of elements which are necessary for the planning of the marketing operation and is known as the 7 P's. Ryanair's marketing mix is the following:
PRODUCT OR SERVICE: Ryanair provides low cost no frills air travel to European destinations without many facilities such as food or drinks in order to be more competitive. Furthermore, tries to increase its profit due to the online cooperation with rental cars companies, hotels, etc.
PRICE: Ryanair has low fares. The majority of the seats are sold at low prices and the price is usually associated with the time booking (the sooner, the cheaper).
PLACE: Ryanair doesn't use travel agencies, but online booking so through this way saves money on agency fees. Also uses secondary airports which have less traffic and they are cheaper.
PROMOTION: Ryainair's aim is not to spend much money on advertising. For this reason doesn't cooperate with advertising agencies and makes simple advertisements which just inform the passengers for the low prices.
PEOPLE: Ryanair invest in the training of its employees. The pilots are recruited when they are young and they get early promotion. The cabin crew in responsible for everything and of course for the passengers' safety.
PHISICAL EVIDANCE: Ryanair tries to find opportunities -such as after 9/11 or the invasion in Iraq and Afghanistan- and buy aircrafts cheaper, when other companies do not.
PROCESS: Ryanair doesn't have a long check in. The FIFO method (first come, first served) is used and therefore there is no seat selection. Air bridges aren't available and finally, the baggage is delivered in terminal and there isn't a special treatment in case of an accident such as a bag's damage. (Grönroos, 1997; Nargundkar, 2006; Slack, et.al., 2004)
RESEARCH OBJECTIVES: collect data for a new promotion (advertising) campaign based on customers from all walks of life (including business travelers) desires and needs in order to gather information about travelers behavior (find ways to attract new customers and improve company's services) which could be translated into marketing opportunities.
If the passengers are satisfied with the existing prices
If they consider that the routes are enough.
Which are Ryanair's advantages and disadvantages.
If in order to attract business class passengers should provide superior services and how much should the charges for extra services be.
METHOLOGY'S PROPOSE/ TARGET MARKET: The conclusive descriptive research design will be used, because the research objectives are clear, the research being performed is quantitative and the sample being used is quite big. The conclusive research relies on both primary and secondary data and provides information which is useful for decisions-making or conclusions. The target market will be travelers from all walks of life, all ages and gender: people that interested in price, people that are independent and organize their travel alone, business travelers who are interested in the availability of the destinations, people who travel in Europe.
SAMPLING: The sample of the consumers should be representative and randomly chosen. Travelers have different characteristics, needs and wants, which represent (as accurately as possible) the entire group of travelers. Furthermore they should be randomly chosen, because each traveler of the population has an equal chance of being chosen. The sampling method is probabilistic, because all the travelers have equal chances to be selected.
CONTACT METHOD: The personal interview will be used as contact method, because it can gives a bigger rate of response than the other methods and in our case it will not be too expensive, as the stewardess could share the questionnaires to the travelers during the flight. The online method could also be used, by posting a questionnaire in R yanair's site where customers could fill the questionnaire from their homes.
PERSONAL INTERVIEW vs OTHERS CONTACT METHODS
More personal, inexpensive, fast
Low response rate
Higher response rate
More expensive , no personal observation
High response rate , most personal
(but not in our case)
1) Male Female
How old are you?
60 and more
How often do you travel?
Once a year
Twice a year
Every three months
More than once a week
4) How satisfied are you with the existing prices?
Very Almost Neither Almost Very
Unsatisfied Unsatisfied satisfied nor Satisfied Satisfied
5) Do you think that the existing routes are enough?
Are you satisfied with the online booking?
Not satisfied 1 2 3 4 5 6 7 Satisfied
Should Ryanair provide superior services in order to attract business travelers?
How much should be the advanced services charged?
9) When you are thinking about the reasons which make you to decide between different air companies, what is more important for you? (please rate the following reasons according to their relative importance).
TOTAL : 100 points
10) For which reasons do you prefer to fly with Ryanair?
The proposed methodology is rationale, because it can easily be implied in reality, as the questionnaire can be given from the crew to the travelers of each flight and the questions can give some information for the needs and desires of the travelers. The findings from the research above, could be generalized from the sample to the population as a probabilistic sampling method as the random sample is used. Moreover, the findings can be also valid, as a sufficient sample can be taken all days of the week, for all the flights and destinations. So in this way, we can have valid information about our target market and we can use them in order to succeed our purpose.
Ryanair is a low- cost, no frills airline company, which played a very important role in the revolution of the airline industry and managed to make not only the European but also the worldwide travel, accessible and affordable for people of all economical classes. Furthermore, this new ''player'' forced the established companies to reorganize their operations and its new character (cheap tickets etc) had a great response to the customers and contributed to the big success of the company. Additionally, Ryanair has emerged as the market leader with the highest profits in Europe.