Ryanair's Performance Objectives
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Ryanair's five performance objectives to maintain or ultimately increase Ryanair's competitiveness, it is useful to analyse its operations with the help of five performance objectives:
Quality: In the long run, even the most competitive price structure will not attract customers if the quality of the service offered is below a certain standard. This includes maintenance, efficient booking and luggage handling, reliability, punctuality, and interaction with Ryanair staff.
Speed: The areas where speed matters most for Ryanair are turnaround time of aircrafts, reservations, luggage handling, and aircraft maintenance, all of which have a direct impact on costs. Although Ryanair has implemented many steps to increase speed, it also depends on service providers that are not directly under its control.
Dependability: This compares very favourably with competitors, where punctuality is similar, but the missed bag/passenger ratio is orders of magnitude higher. This excellent record has to do with the fact that Ryanair offers only point-to-point flights, thereby eliminating the risk of luggage mismanagement during connecting flights.
Flexibility: Customers have a high degree of flexibility in choosing the level of service, since only the basic airfare is charged and any additional services must be paid for. Increasing flexibility for the customer would mean offering additional options. From Ryanair's perspective, flexibility comes with diversification of supplementary services on the one hand, and, with increasing market strength, the ability to negotiate alternatives for various service sectors, such as maintenance agreements, outsourced functions, etc.
Cost: The fuel price is one of the direct costs for any airline operations. There are enormous fluctuations, and, unlike its competitors, Ryanair has committed to a policy of not imposing fuel surcharges. Therefore, the fuel price become fluctuations and Ryanair takes consider of that action. As a result, Ryanair reported its first annual loss in 2009 when oil prices were at a record high. (BBC Online News, 21 June 2009)
7.1 International Competition:
Ryanair is one of the most successful low cost carriers in Europe. The phenomenon strategy for long-term sustainable which Ryanair has developed from Southwest airlines is cut-cost to gain in high profitable in market share. According to Gillen and Lall (2004) stated that Ryanair has taken step further of Southwest operational, therefore, Ryanair has strongly and clearly position regarding to the airline does not offer any frills such as, no providing service, no ticket, no connection, no travel agents, no frequent flyer programme as well as food and beverages are sell on board. However, Ryanair can keep the cost low and gain more profit by setting the cheaper fares to customer regarding to increase the cash flow. In addition, according to the economic crisis and the fuel price has been increased, it effected to all airlines industry. However, it seems not really effected to Ryanair. Based on that, in 2009, Ryanair has aggressively discounted fares to increase the pressure on its competitors and increase the cash flow. (Euromonitor International 2010) Nevertheless, Ryanair has been very tactical and acted very quickly to get advantage out of the competitors. Moreover, the competitors of Ryanair, for example, in Western Europe are mostly the schedule airlines such as, Lufthansa, Air France-KLM Group, British Airways, and Easyjet. Therefore, Easyjet is the direct competitor of Ryanair. Furthermore, the competitors in Eastern Europe are mainly budget airlines such as, Wizz Air (Hungarian airlines) as well as the schedule airlines Aeroflot (Russian airlines), LOT (Polish airlines) and, CSA (Czech airlines). In this case, Ryanair claim to increase the traffic to compete with cometitors by operate more routes. However, the competitive advantage of Ryanair that helped Ryanair to maximine growth which require the location advantage by using the secondary airports that located not far away from the city. For example, Gillen and Lall (2004) stated that at Hahn airport near Frankfurt, the number of passengers increased from 450,000 in 2001 to 1.5 million in 2002, due to Ryanair serving that airport. Easyjet tend to have the same direction, however, Ryanair negotiation with secondary airports, often located in economically depressed areas, Ryanair bargained hard for low fees compare to EasyJet. On the other hand, Gillen and Lall (2004) stated that EasyJet is not entirely secondary airport based and so it does seek to attract some business customers. Based on that, Easyjet has more cost regarding to the airport fees. In addition, one of the advantages of Ryanair is rapid turnaround time than other airlines. According to (Barret 2004) stated that the shorter turnaround times permit more journeys per plane which, coupled with the higher seat density of Ryanair planes, generate lower seat mile costs. Based on that, Ryanair planes are mostly flying and it savings more cost of the airport fees in term of the landing charge. According to Ryanair report (2010), Ryanair received award of being punctual and less in baggage lost Based on the short-haul point to point routing, hence, (Barret 2004) stated that the punctuality performance of Ryanair is high, therefore, the simple point to point is not delayed the passenger and check-in is quicker because is less complex than an interline one. According to table 1, staff of Ryanair's were non union, (Vlaar et al. 2005) stated that the consequence is flexible workforces enable low-cost airlines to fly and support each aircraft with only eighty workers, compared to the employees that required by traditional network carrier. For instant, Ryanair focus on the tight cost control measures. Pilots and cabin crew received lower salaries than other industries, however, the employees received significant variable compensation such as, the commissions on on-board sales. (ibid)
Table 1. Some distinctive features of Ryanair's business model
Secondary airports ƒ Low airport fees
Lowest ticket price ƒ Large volume
Low commissions to travel agents ƒ Low cost
Standardized fleet of 737s ƒ Bargaining power with suppliers
Single-class ƒ Economies of scale
High-powered incentives ƒ Attract combative team
No meal ƒ Faster turnaround
Nothing free ƒ Additional revenue
Spartan headquatres ƒ Low fixed cost
No unions ƒ Flexibility in rostering staff
Source: Casadesus-Masanell R, and Ricart J E, 2010 cited from Strategy to Business Models to Tactics
As a result, (Vlaar et al. 2005) concluded that Ryanair's business model is a simple product, low operating cost, and differential positioning which they focused on leisure, VFS (visiting friends and relative). Based on that, the value proposition is good fit with these customer segments. More importantly, (Casadesus-Masanell and Ricart 2010) concluded that Ryanair plan of action create a unique and valuable position by engaging in a new set of activities. Based on that, Ryanair found the way to operate the company more efficiency amongst the competitors by create the value for their stakeholders.
7.2 International emerging markets
The Ansoff product-market expansion grid is useful for Ryanair to visualise and identify market opportunities. Therefore, Ryanair establishing a partnership with Wizz Air, it helps company penetrate non-EU markets, synergies can benefit in both party. Regarding to, the market development Ryanair striving to target in business travellers by offering them more benefits such as refundable tickets in terms of more flexible. Moreover, Ryanair consider of the product development by plan to open the new route to US for long-haul, with flight tickets starting at EUR10 according to the Open Skies Agreement between the EU and the US. Based on that, Ryanair could attract more young generation travellers who has low income but would love to experience in Hollywood place.
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