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Before the introduction of low-cost, low-frill airlines, traditional European air transport companies had conquered the airline industry. However, in 1985 Ryanair, a low-cost carrier made its appearance. Ryanair shook things up with its innovative strategy by introducing a low-cost product without many comforts and services compare to traditional companies did.
Ryanair's leadership strategy
Ryanair follows the cost leadership strategy as its aim is to become one of the lowest cost carrier in Europe and gain a large market share. (www.garsonline.de) Company offers lower fares than its rivals by reducing costs, providing its products in a standard way and as a result achieves a great number of sales. The key factor that makes Ryanair stand out against competitive traditional airlines is its low prices accompanied by minimum services. To achieve this, Ryanair is cutting back on services, operations and overheads, while remaining profitable by making profits through in-flight sales and selling services through its website. (www.amacsolutions.com) The following strategic decisions contribute to the achievement of Ryanair's competitive advantage:
Use of underutilized airports. Their low cost airport base does not encumber tickets price.
Provision of short-haul journeys. Thus, shorter turnaround times and more flights per plane.
Higher aircraft seat capacity, no seat allocation and no business class service.
No sweets, drinks, food and newspapers free of charge.
Ticket sales through company's website or telephone reservation. No coordination with travel agents.
No fuel charge on tickets price.
Generation of revenues through restaurants and shops into the airport. (Barrett, 2004)
Through the aforementioned steps, sales get increased while costs reduced. By this way, Ryanair makes air travel affordable to everyone and maintain advantage over her competitors.
Elasticity of demand
Ryanair achieved great success by offering very low prices and satisfying services to the air travelers. Firm gained a great market share by selling affordable ticket fares for everyone. The fact that only one parameter has changed, the lower prices, shows that travelers are highly price-sensitive and the demand for air traveling is elastic. This is obvious, from the fact that Ryanair in 1986 was licensed to operate the route Dublin- London. In 1987 traveler numbers were 92% greater compare to last one and in 1990 there were 4,5 million passengers on the particular route. This shows a massive travelers exodus from full-service carriers to low-cost one. (Barrett 2004)
Experience Curve effect
Ryanair's profitability is mainly attributed to an Experience Curve effect taking place. As Ryanair operates decades now, has gained a remarkable experience on providing air tickets, improving personnel shortcuts, running services smoothly, and decreasing procurement costs. As a result, average costs are falling down with accumulated production experience. Company achieved a remarkable increase on its sales year by year, in tandem with a decrease on its average costs. Employees and company worked more efficiently achieving an increase in productivity and a decrease on inputs and an increase on outputs made unit costs go down. Apparently, Ryanair's provision of low price tickets accompanied by satisfying services led to increased market share and improvement of its profits. (Kotler and Keller, 2006)
Ryanair's efficiency, effectiveness and adaptiveness
Throughout the years, Ryanair has gained enviable profits and a great number of loyal customers by being efficient, effective and adaptive. Ryanair, instead of increasing its ticket fares like many rivals did, decided to low its prices as much possible so as to make them affordable to everyone by cutting down costs e.g. using secondary airports instead of expensive hubs or take advantage of its short-haul flights and achieve optimal use of its aircrafts by providing a greater number of flights a day. Furthermore, Ryanair was the first airline company which created a website, through which customers could have the ability to book and receive their tickets. Also, it introduced a check-in service via its web page to diminish wait time at the airport. Lastly, company's profitability shows the effectiveness of its strategy to provide the cheapest air travels, with keeping provision of services and operational costs to minimum while earning money. (www.ryanair.com)
In an economic recession period, like the one we are going through, problems like limited incomes, unemployment and constraint credit markets lead to dissatisfied people, reluctant to spend on leisure. Consecutively, total European demand on air travelling will decrease, as worldwide economic crisis spreads coupled with stricter EU rules, and Ryanair's objectives will be affected. A significant drop in demand will appositively affect Ryanair's aims to boost passengers' volumes and conquer new airports. Furthermore, inflation in fuel costs and changes in fuel availability, may negatively affect its profitability. Jet fuel costs may increase dramatically due to inadequate supply and market speculations and lead to an uncontrolled situation. As a consequence, company's expenses will increase and unless Ryanair find a way to minimize its operating profits, there will be significant losses on its profits. Moreover, terrorist attacks or threats to Ryanair's areas of interest could lead to passengers' unwillingness to travel which will bring significant cancellations of flights and limited bookings which in turn will affect its profitability. Another threat to Ryanair's business would be the outburst of viruses or any other airborne disease in Europe. If this incident come to public, potential travelers will get scared and threaten by getting affected and will take a second thought of their booking. Also, National or European authorities may propose cancelations of travels. Lastly, atmospheric disturbances like volcanic ash emissions accompanied by the closing down of airports by authorities as a concern for travelers safety, will impact Ryanair's financial state by flight cancellations. (www.ryanair.com)
Conditions in the broader market for air travel and company's growth
Ryanair to sustain its growth tries to be flexible with any new conditions in the broader market for air travel e.g. in June 2009 the UK Government announced a 10 pounds APD tourist tax. The company estimated a 40% decrease in capacity with the new tax policy and decided in July 2009 to reduce its London-based aircraft (from 24 to 40) and decrease by 30% its weekly flights. Furthermore, Ryanair reduced its flights from and to Ireland due to falling tourism demand. Also, as competitive airlines going bankrupt due to economic downturn, Ryanair took the chance to replenish their routes and gain their market share. Moreover, in other cases where competitive airlines reduced their presence in particular airport destinations, Ryanair opened 254 new routes like Morocco, Belgium etc. (www.ryanair.com)
Ryanair provides one of the most successful marketing mix. Its low cost strategy is valuable, effective and industry changing. It succeeds in taking into consideration all aspects of it markets and operations and satisfies customer expectations in an unforgettable way. (http://marketingteacher.com)
Ryanair offers low cost travels without frills. There are no sweets, drinks, food and newspapers free of charge. In addition, there are cash inflows from car rentals, hotel bookings, phone cards and bus tickets or even by the restaurants and shops surrounding the airport. By this way, the company makes 16% profit and can keep its costs down. Furthermore, there is better punctuality, low rate of losing bags and no overbooking. (http://marketingteacher.com)
Price is the element which makes Ryanair stand out against its competitors. Company's philosophy is that customers firstly take a look at the price and then at the product itself. So, its long-term strategy focuses on the low price of its tickets. Occasionally, company uses various pricing tricks in favor of its customers like, lower prices on seasons with low demand, when booking in advance and when buying via its web page. It always assures that offers 20% lower fares than its rivals and be one step ahead of them. 70% of company's seats are sold at the lowest fares and 30% at higher. (Mayer, 2007)
Ryanair sales its tickets through its web site or by telephone reservation and it does not use travel agents, saving 15% on fees. (Barrett, 2004) By online ticket sale, the customer books his flight and gets a confirmation code, which he has to print and bring it to the airport and use this as a ticket. By this way, Ryanair minimizes ticket printing costs. Furthermore, it uses underutilized airports which are smaller than the ones traditional airline services use. Costs are lower and turnarounds faster. (http://marketingteacher.com)
Ryanair's communication mix is around the product's price because it believes that people have to be aware of its low cost service in order to prefer it among competitors. It uses advertising space on newspapers or organizes press conferences. Firm also informs past customers via e-mail about special offers. (www.ryanair.com)
Because Ryanair understands that its personnel service skills are significant for the company's effective service, follows a continuing professional development program where its staff get trained and educated, unfortunately invested by themselves plus they pay for their uniforms' cleaning. Also, pilots get hired in a young age as pilot cadets. Even more, few employees are over 35 years old and each employee has promotion opportunities. As a whole, crew main duty is to keep travelers safe and be responsible for in-flight revenues. (Barrett, 2004)
Ryanair invests little for its aircrafts. It began its operations using second hand planes but due to constant maintenance and its high costs changed its mind and started purchasing new ones. Company buys planes with big discounts when others do not want them e.g. after 11th September. Specifically, Ryanair bought a Boeing 737s with 50% discount. (Mayer, 2007)
In Ryanair's airport, passengers do not check in. They just show their passport and their printed confirmation code. That makes the process quicker. Furthermore, there is a first-come, first-served service where travelers cannot select their preferred seat. Air bridges do not exist and passengers walk to the aircraft or use the buss. Finally, baggages are deposited directly on the terminal. (Barrett, 2004), (Mayer, 2007)
Ryanair's new promotion campaign
Collect passenger's impressions about their experience traveling with Ryanair.
Gather all the appropriate information about Ryanair travelers' needs.
Ryanair's management team take all the information gathered and turn them into tomorrow marketing opportunities.
Our target market is leisure and business customers, both sexes and over the age of eighteen, who have travelled with Ryanair.
We collect primary data because we need to know about customers experience so far and their future expectations from Ryanair. By this way, we will collect fresh data which will help understanding passenger needs nowadays.
Collection of primary data through survey.
Primary's data instrument will be the questionnaire.
As a contact method will be used questionnaires via e-mail, sent to past Ryanair's customers. Their web address will be taken from Ryanair's database. Also, self-administered questionnaires where travelers can complete by themselves while experiencing their journey. Questionnaires will be delivered to each traveler on every route, for one week.
We will use conclusive research which is designed to facilitate the decision maker in defining, evaluating and choosing the best course of action to take in a given situation
How would you rate the Ryanair's services?
Not Good Excellent
In-flight services 1 2 3 4 5
Ground services 1 2 3 4 5
Staff attitude 1 2 3 4 5
Booking service 1 2 3 4 5
Please distribute 100 points between the following factors according to their importance.
Low ticket price……………………………………………………….
Fast boarding system………………………………………………….
Free in-flight services (food, drinks, magazines etc.)………………….
Strict time schedule…………………………………………………..
Low accident rate…………………………………………………….
The price of Ryanair air tickets is high considering their provided services.
Strongly Disagree Strongly Agree
1 2 3 4 5 6 7
Which of the following in-flight services would you like to experience will traveling with Ryanair?
1) Wi-Fi internet access
2) iPod on a seat back display
3) Mirrors on the backs of seats
4) Special in-flight treatment for babies
Rational of the proposed methodology:
As Ryanair wants to collect data about its customer needs, demands and their proposals in order to organize an effective new campaign, has to gather opinions from its recent and past customers. As long as we need fresh information we will collect primary data through the use of questionnaires. Data instruments will be delivered to passengers during the flight in every route for one week and via e-mail to old travelers. Concerning the questions asked we used different types of questions, like constant sum, multi-chotomous and lickert type. Furthermore, we used self-administered questionnaires because they can be administered in large numbers all at one place and time, provide anonymity and privacy which encourages more candid and honest responses and there is less pressure on respondents. Last but not least, findings will be valid because, all passengers who will answer the questionnaire are included to the target group, the use of questionnaires onboard will give high response and completion rate and passengers will fulfill them without bias and confounding.
Passengers accepted the tradeoff between low prices and loss of in-flight services provided. The company's steady growth, in a time when rival firms go bankrupt or reduce their routes, shows the effectiveness of its strategic decisions. Ryanair's product, productivity and cost reducing technique appear to have a great impact on its performance and sales. However, the airline industry faces many challenges nowadays and unless Ryanair continues to be innovative and expand its destinations, its future will be open in doubt.