Ryanair Marketing Strategy | An Analysis
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Ryanair operates around 610 routes to European countries, has 24 European bases and employs a team of 5000 people, comprising over 25 different nationalities. It has been characterised by rapid expansion and has evolved into one of the world's most profitable airlines. It is the third largest airline in Europe in terms of passenger numbers. The company has the world's youngest fleet of Boeing 737-800s, with an average age of around 4 years (as of December 2008); Ryanair plans to double its fleet to 262.
This report is prepared to cover the strategic marketing planning process, the marketing audit, strategic development as well as the application of the marketing mix for Ryanair.
2.0 Strategic Marketing Planning Process and Ryanair
Strategic marketing planning is a management process leading to a marketing plan (Malcolm, 2008). Marketing strategy can be defined as a process by which any organization aligns itself with the market it has decided to operate (Fifield, 2007). A strategic plan is a plan which covers a period beyond the next fiscal year. Usually this is for between three and five years (McDonald, 1999).
Marketing planning is very important for any company as it works as -
A road map for achieving its objectives
A framework for monitor and control
Clarifies roles and functions and assigns responsibilities and deadlines
Assist efficiency and effectiveness
The marketing planning process involves some steps which are generally called SOSTAC Model, which is used to implement and monitor plan's progress.
S stands for Situation Analysis
Situation analysis answers where the business is right now. It involves conducting a marketing audit which is a comprehensive and periodic examination of Ryanair's marketing activities so as to identify problem areas and then propose solution for overcoming problems. The situation analysis can be done using SWOT, Porter's five forces and PESTLE analysis.
O stands for Objective Setting
Objectives are what the company wants to achieve through its activities. To set objective for Ryanair, SMART criteria can be used. Objective can be corporate, business and marketing. Corporate objective for Ryanair includes increase their profitability, marketing objective includes increase their market share through their extensive marketing campaign.
S stands for Strategy Development
Strategies are the means to achieve Ryanair's objectives. Strategy can be developed through various techniques such as- the ANSOFF's matrix, Boston Consulting Group (BCG) matrix. These strategies are used to fulfil Ryanair's objective to expand and grow its profitability in the market
T stands for Tactical Development
Tactics are the techniques to achieve the objective of Ryanair through the chosen strategy. Tactics development includes the use and manipulation of 7P's- Product, Price, Place, Promotion, People, Process and Physical evidence.
A stands for Action
Actions are required to take when strategy and tactic has been set for Ryanair. Action plan for Ryanair includes three activity- Allocating tasks and responsibilities, Scheduling of marketing activities and Setting the marketing budget.
C stands for Control
When the chosen strategy with the correct tactics has been implemented for Ryanair control is required which means taking corrective measures if things are going according to plan. Control includes benchmarking and balanced scorecard method.
3.0 Marketing Audit Using SWOT, Porter's 5 Forces, PESTLE Analysis for Ryanair
Marketing audit might be defined as a comprehensive, systematic, independent and periodic examination of a company's environment, objectives, strategies and activities to determine problem areas and opportunities, and to recommend a plan of action to improve the company's marketing performance (Kotler et al., 2005).
3.1 SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis evaluate the company's internal strengths and weaknesses on which it has control over, it also evaluate company's external opportunities and threats on which the company might not have control over. The main objective of SWOT analysis is to convert threats into opportunities and weaknesses into strengths.
Strength is internal issue for an organization. It is the aspects of the organization in which they are better than other competitor's. For Ryanair, strengths are-
Ryanair is Europe's largest low-cost carrier which is a greater advantage for them as they can attract more customers who wants to travel to different places without expending too much money.
Ryanair's turnover and pre-tax profit increased than previous year which is an advantage as with the increased profit they can use them to increase their routes and number of fleets.
Ryanair has the world's youngest fleet of Boeing 737-800s which means that they will be able to use them for longer time than their competitor
Weakness is also an internal issue which refers to aspects in which any organization lacks compared to its competitor. For Ryanair, greatest weakness is as they are low-cost carrier, they tend to cut down some facilities for their passenger which other company's might take advantage to compete with Ryanair.
Opportunities are external issue on which the company can take advantage of. For Ryanair, the opportunities includes-
Approved open sky pact which will enable Ryanair to fly over anywhere from EU to USA. It means that they will be able to launch new routes from EU to major US cities in more competitive fare.
Forecast of growth in the number of passengers carried by UK based airlines. As Ryanair planning to increase their fleet by 2012, it will be perfect timing for them because they will be able to carry more passengers with the increased number of fleet.
Threats are another external factor on which the company has no control over. Threats are issues that create challenge to any organization to achieve their goals. For Ryanair, threats are-
Government legislation of doubled air passenger duty. This is direct threat to Ryanair as it will affect the fare policy of Ryanair. Either they will have to increase their fare or absorb the additional cost
Campaign of various environmental groups. These groups are blaming airline industry for greenhouse effect which might force government to make legislation to make carbon offsetting 1 mandatory resulting pressure to use larger and fuel-efficient aircraft not to mention the fare
3.2 Porter's 5 Forces
Porter's five forces are used to analyse and better understand the industry in which Ryanair operates. These five forces can affect all the company in the industry. Ability to earn higher profit depends on the strength of these forces. According to Porter's framework a strong competitive force can be regarded as a threat while weak competitive force may be regarded as opportunities. It may be possible for a company to alter the strength of one or more of the five forces to its advantages through it strategy (Hill and Jones, 2008). These five forces are-
Bargaining power of buyers
Bargaining power of suppliers
Availability of substitutes
Threats of new entrants
3.2.1 Bargaining power of buyers
Buyers are the consumer of the company who use the services or products. It refers to choices of buyers have regarding the product they buy from company. As in the case of Ryanair, bargaining power of buyer will be higher if they want to operate in Bangladesh as there are many airlines operating from Bangladesh namely Bangladesh Biman, United Airlines, GMG Airlines, Qatar airways etc. So the buyer has the availability of choice from various airlines.
3.2.2 Bargaining power of supplier
Suppliers provide the necessary impacts needed by Ryanair to provide its services. If there are fewer suppliers for a particular site, then Ryanair has more bargaining power as in the case of aircraft. There are only two aircraft manufacturing company in the world- Boeing and Airbus. Ryanair uses Boeing, so the bargaining power is higher for the airlines manufacturing company as Ryanair has to depend on Boeing for its activity. Bargaining power of supplier is higher for fuel supplying as only Bangladesh Petroleum Corporation has the authority to supply fuel.
3.2.3 Availability of substitute
Substitutes are alternative products that can satisfy the same consumer needs. Substitute could be either direct or indirect. In the case of Ryanair, the direct substitute is Biman Bangladesh, United Airways, GMG Airlines whereas indirect substitute is high speed rail service, Bus services.
3.2.4 Threat of new entrants
This refers to how easy or difficult it is for new competitors to enter the firm's industry. Entry of new competitors depends on various factors such as-
Cost of capital or investment needed
Level of expertise required
Demand and profit level
Ryanair operates in airline industry which is very expensive and requires much higher capital and investment than many other industries. So the threats of new entrants is lower for Ryanair In the airline industry people required to work should be highly skilled and highly expert. So for a new competitor to come in the airline industry is very difficult.
3.2.5 Competitive rivalry
Competitive rivalry refers to the level of the intensity of competition in the firm's industry. There are generally two types of competition- friendly competition and hostile competition. In the airlines industry the competition is very fierce. Every company tries to take advantage of other companies fault. In Bangladesh rivalry is friendly rather than cut throat.
3.3 PESTLE Analysis
PESTLE analysis helps to analyse and better understand the company's external or macro environment. The company has no control over these factors and should therefore change and adopt changes to these factors. This analysis seeks to predict the extent to which change is likely to occur and its possible consequences for the organization. PESTLE stands for-
3.3.1 Political factor
There are various political factors that impact the company decision to run its business. If Ryanair tries to expand its route to Bangladesh then they will have to consider that Bangladesh doesn't have as much political stability as India has. Incidence of strike fairly common but the situation has improved over last few years as there was no such incident
Threat of terrorism is a hot issue in the current context. Bangladesh might be the right choice if Ryanair chooses to operate, as the country does not have any record of having such incident.
3.3.2 Economic factor
Ryanair must concentrate on various economic factors if they want to expand its route into another country. Main concerns in economic factors are- Recession, Demand, Interest rate, Inflation, Exchange rate, Employment level, Disposable income.
If Ryanair decides to include Bangladesh in their route then they need to consider the demand and disposable income level as they will impact the most for the profitability of the company. Demand for airlines is high especially from European countries as lots of Bangladeshi people live here. There are well over 150,000 Bangladeshi people living in London and the south east of England (BBC, 2010) alone and many of them travel frequently to their home country. So the demand of airlines is high for Bangladesh. Another factor might need to be consider is the exchange rate of local currency. In 2009 exchange rate of Bangladeshi taka (BDT) to per US dollar was 69.047tk (CIA, 2010). So, this factor is also positive for Ryanair.
3.3.3 Socio-cultural factor
Before considering expanding the business, Ryanair needs to consider various socio-cultural factors which includes-Education level, Population demography, Religion, Beliefs and values, Aesthetic, Ethics.
Education factor would be the biggest factor for Ryanair if they choose to operate in Bangladesh. Literacy rate is 47.9% (CIA, 2010) in Bangladesh and this will impact the company's business as they mainly operate online. As few people are educated enough, Ryanair need to find alternative ways to operate their business in Bangladesh.
3.3.4 Technological factor
As Ryanair sells their ticket online only, technological factor are the biggest issue in the country they are operating such as- Communication structure, transport facilities, technological skills.
Communication structure such as- availability of broadband, radio, TV etc. are getting better in Bangladesh. Government has taken initiative to widen the broadband service to whole country, new license has been given to operate 3G, Wi-Fi service in the country. In 2008 total number of broadband user was 556,000 (CIA, 2010).
3.3.5 Legal factor
Legal factor such as- employment law, health and safety law, investment law are also needed to consider to operate in a certain country. There are about 47 labour-related laws, which regulate wages and employment, trade union and industrial disputes, working environment and labour administration, and related matters (Bangladesh High Commission, 2010). So for Ryanair, it will be easier to operate in Bangladesh as there are specific laws regarding investing of their operation.
3.3.6 Ecological factor
Ecological or environmental factor also plays a very big role in the business. Issues like pollution, recycling, green factor is needed to be considered. In Bangladesh emphasize has been given to minimize pollution and there are recycling center which has been built in the city.
4.0 Range of Strategic options open to Ryanair
Various methods can be used to determine strategy for Ryanair, but mostly used method is ANSOFF's matrix which is also known as Product-Market Extension Grid. This strategy can be shown by the following figure (figure-1):
Existing Products New Products
Figure 1: ANSOFF's Matrix
This strategy includes increase in sell of existing product in the existing market in which the company operates. In case of Ryanair, market penetration involves persuading existing customer to generate more revenue such as discount, family bonus etc.
This strategy includes developing of new product and provides it into existing market. This strategy is recommended when demand of existing product is in decline.
This strategy involves of selling the company's existing product to a new market. For Ryanair, they might go to another country to provide their existing service to the new customer.
Diversification means creating a new product and supplies it into a completely new market. For Ryanair, diversification can include creating a new service such as built a hotel, resort, restaurant etc.
Recommendation for Ryanair:
If Ryanair wants to increase their profit, then market development will be right strategy for them. As discussed earlier, Bangladesh can be future market for Ryanair where people fly to different location including various countries in Europe and Middle East. So they can take their existing service which is flying different location at a cheapest fare and market it in Bangladesh. As discussed earlier there is an opportunity for Ryanair to expand their operations as far as USA under the new open air pact. So it will be a perfect opportunity for Ryanair as there are very few airlines operating from Bangladesh to USA and take advantage of the situation.
Ryanair needs to decide the strategy to compete with other airlines and choose the competitive advantage to use against its rival. Competitive strategy can be expressed as three possible strategies-
Cost leadership strategy is used when the company has a costing advantage over competitors. Differentiation aims to offer products which are unique compare to rival companies. Focus uses cost leadership or differentiation but concentrate on particular segment of a market rather focusing on the entire market.
For Ryanair, cost leadership would be the right strategy as they are already the cheapest airline in Europe and they can use the same strategy to gain access market of Bangladesh.
5.0 Employ Recommended Strategy Using Marketing Mix for Ryanair
The marketing mix is the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product (Kotler et al, 2008). Marketing mix consist of 7 Variables commonly known as 7P's that can be used to achieve Ryanair's marketing goals and objectives. 7P's includes:
Product means the totality of goods and services that the company offers to the target market to satisfy consumer needs. In the case of Ryanair main product is their service to fly people to the desired destination. If the marketing development strategy is chosen then Ryanair don't need to develop a new product rather they can market their existing service. If Ryanair decides to operate in Bangladesh then they can choose to start domestic flight as there are 15 airports available in the country. The most popular destination in Bangladesh include Chittagong, Cox's Bazaar and Sylhet, so Ryanair can operate in Bangladesh internationally and domestically.
Price is the money charged for a product or service. Price plays a very important role in marketing. For Ryanair, they are already the cheapest airlines in Europe. They can continue to do so if they chose to expand their business in Bangladesh as that will attract more customers because the flights that are operated inside the country are not cheap.
Place involves company activities that make the product available to target buyers. For Ryanair, the only place their service can be bought is through internet. But if they want to operate in Bangladesh, the company will need to change their strategy for selling their service through internet to travel agencies as most people don't have the accessibility to use internet.
Promotions are the activities that attract customer to the product or service the company selling. If Ryanair chooses to operate in Bangladesh they can give some promotional offer such as family package which might include discount if three or four people of the same family buy tickets from Ryanair. They can also promote their product through media such as TV, Newspaper. They can also sponsor in various cricket tournament that are held in the country, in this way they can reach to wide range of customer.
People are the employees that work in the company. Ryanair will need to hire motivated people and train them to give the service to the customer to maintain the brand image of Ryanair if they want to extend their service to Bangladesh.
Process mix involves how the activities are done in Ryanair. As Ryanair do not operate through travel agencies, they will need to plan thoroughly to maintain queuing, delivery schedule if they choose to operate in Bangladesh.
Physical evidence mix:
Physical evidence means the aspect of Ryanair that consumer can see and feel which in the process might influence their perceptions of the service provided. Ryanair can print brochure and supply them through their office in Bangladesh. Another example of physical evidence can be introducing special outfit for the staff of Ryanair as the culture of Bangladesh is different from Europe and they need to reflect the culture of their operating country through the outfit. They can also use magazine, in-flight movies, halal foods as the most of the customer are Muslim. They can also improve the seats for their customer.
Thus it can be concluded that Ryanair can choose to operate in Bangladesh to increase their profitability. To do so they will need to implement strategy that has been discussed along with marketing audit using various techniques. To operate in Bangladesh a strategy has been recommended and marketing mix has been applied to explain the strategy.
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