The main objective of the Ryanair is to remain in Europe and to become a leading low fare airline by using regional and secondary airport with a point-to-point service. It is popularly known as the largest low-cost airline which can also be specified as no add-ons or a discount carrier.
O'Leary developed a strategy which was heavily influenced by Southwest Airlines in the US, the world's first low-cost carrier, and not only stemmed Ryanair losses, but turned it into a huge success. Ryanair is distinguished from competitors like British airways and Irish airlines and Virgin airlines because of their low cost strategy.
Ryanair followed a strategy which was similarly followed by Southwest they also carry out direct point-to-point service. Ryanair flights have proven to carry out the shortest journeys out of all low cost carrier firms, helping the company to achieve the high level of success.
2. Pestle Analysis:
In analyzing the macro-environment, it is important to discover the factors that might affect a number of vital variables that are likely to influence the organization's supply and demand levels and its costs (Kotter and Schlesinger, 1991). According to Johnson "PESTEL (PEST or PESTLE) framework can be used to identify how future trends on the following environments might impose on organizations". (Gerry, J and Kevan, S. 2002)
2.1 Political Issue
Airline industry will be influenced by political factors and policies in many ways, they can create advantages and opportunities for organizations and on the other hand they can place requirements and duties on organizations.
Ryanair operates mainly on Europe so European politics play a major role. There have been many changes in the security concerns of airline industry since the terrorist attack on 9/11.The Government has imposed lot more instruction so that the airline industries have become lot more restrictive and cautious. For example the security measures and the scare of airplanes being blown up in the UK on august 10th 2006 has fixed the level of baggage passengers can carry with them and ban of liquids, and the essential of carrying items in a clear bag. Immediately after the announcement of new rules there has been a huge loss for airline industry and particularly for Ryanair it has canceled 279 flights and refunded â‚¬2.7m to its passengers and it estimated to suffer a loss of â‚¬1.9m in reduced bookings. There was change in the restrictions in a short time by increasing the number of quick check-ins and full body scanners.
2.2 Economical Factors:
The economical factors within the airline industry involve areas concerning the local, national and world economy and the impact on market. It is a euro based business, so Ryanair will be affected by the changes within the currency. For example if the euro is stronger than the pound the company is likely to come across more customers travelling from Europe to the UK and vice versa.
One more major concern with the airline industry affecting their economic market can be outlined through the rise of oil prices which will damage the profits of the airline industry. Although there is hike in oil prices still companies like Ryanair are still managing to get higher profit by their strategies like, approving a price for oil in well in advance of requiring it , but this involves a cost. However, it has depended on cash reserves to deal with unrestricted oil price rises, affecting profits. For example British Airways used to add extra charge to tickets where as Ryanair policy relies on periods of unrestricted price rises being short.
The socio-cultural factors include demographics, disposable income, changes in buying pattern (Pearce and Robinson, 2005).
2.4 Technological Factors:
Technology must be considered as a prime factor in the analysis because it is a part of the organization as it is used for the creation of competitive advantage within the industry. (Capron and Glazer, 1987).
The technology plays a major role in the airline industry because there will be improving constantly to provide better and safe services for the customers; and thereby reducing the rate of emission of carbon dioxide, decrease of water vapor levels and also reduce noise traffic and congestion within airports. If the technology in the use of aircrafts is improved it automatically increase our opportunities, Ryanair is currently using different types of Boeing aircrafts like 737-800 and 737-900 (www.boeing.com) as the pilots are type-rated to fly the variants. If the 737 goes out of production then Ryanair will be facing a lot of issues because 757 or 767, requires additional training to know about type rating, with expensive flight simulator and line checks. As of now there is no risk for Ryanair because planes are manufactured for several decades before being discontinued.
Legislation is certainly the basis for privacy protection; however Social norms, business practices, and technical means can also contribute to this goal (Camponovo & Cerutti, 2004)
Legal issues are more complicated for Ryanair because they are employing staff across Europe. Ryanair has several Belgian staff working for them and they were laid off after a year-long train period which was accepted according Irish law. A court ruled stating that they belongs to Belgian law even though they are hired in Ireland and according to Belgian law maximum trail period is 6 months (Rochet 2005) and therefore its unfair to remove them.
Every airline has to consider the data protection act where the protection of consumer's personal information is to be confidential. Ryanair recently faces a problem that their ability to meet Disability Discrimination act, they stated in their website that they will offer lower prices for wheel chair users but they had charged â‚¬25 for the use of wheel chair and he filed a case against Ryanair.
2.6 Environmental Factors
The main environmental problem which was faced by Ryanair is Green House effect. It is reducing the fuel burn and Co2 emissions by 45% by using the latest aircraft and engine technologies; and it is working constantly to improve its performance and to decrease pollution. Ryanair old Boeing 737-200 used to make a lot of sound pollution; by using 737-800 even reduced the noise by the aircrafts. According the business model of Ryanair it will not offer any free meals or drinks and this result in further reduction of waste. (www.ryanair.com)
3. Porter's Model
According to Porter (2008), Businesses have to understand the dynamics of its industries and markets in order to compete effectively in the marketplace and is conducted on airline industry.
3.1 Threat of New entrants:
It is not easy for a new airline industry to enter into the airline market. It is very expensive to start because finance places a major role for starting an airline industry however we can start the basic operations initially buy buying a small plane or leasing; like Ryanair it has started with 15-seater plane. The competitors will be very high in the beginning for example Ryanair has British airways and Aer Lingus (www.ryanair.com). Newly set up airlines has to choose new routes which may lead to the loss of money and also we should get permission for landing and takeoff slots. As we are new to the industry to attract customers by offering them tickets for attractive prices which are of fewer cost than the existing airlines.
3.2 Power of suppliers
Switching cost of suppliers is low and it has little risk and more over aero plane materials are supplied by Airbus and Boeing and its having a huge competition among them. There is a high demand for fuel as we can see the fuel price will be always fluctuating as oil is limited. Ryanair maintains better relationship with suppliers so that they can have better deals which other competitors may lack. For achieving the backward integration we can put pressure on competitors by creating our new methods for distributing services to customers and bargaining with consumers.
3.3 Power of Buyers
Switching cost of buyers will be very high because of the high brand names, which can be used by some companies like Ryanair. As the web is well developed and consumers have right to access the data they can check all the options and choose an airline ticket. Consumers mainly purchase their tickets considering price, punctuality rather than features. Customer retention is only possible by means of extraordinary service and a good quality all these features are acquired by Ryanair so still there are more passengers choosing it; and more over it is using small airports with a very less air traffic and minimizing the delays.
3.4 Threat of Substitutes
Technology plays a major role in the coffee market so as to have competitive advantage and is widely recognized by various literatures on strategic management (Capron and Glazer, 1987; Johnson and Scholes, 1993). The main substitutes of airlines which Ryanair need to consider are rail services because they have become much more suitable and easier for travelling and they are also available at low-cost. Some will have passion of driving and will be choosing cars and bikes as their transport. To overcome these threats Ryanair has to compare these transports and advantages of choosing flights.
3.5 Industry Rivalry
Rivalry among the competitors will be very high and it will be having a high risk also so this factor has higher importance. There is a difference between the strategy of Ryanair and competitors they offer at low-cost and also point to point services. The main disadvantage of Ryanair flights is for example Frankfurt flights go to Hahn which takes two hours of road journey to reach Frankfurt so people wish to pay more for direct route. Customers are important, So Ryanair has to adopt location based discounts to attract existing customers and potentially new customers and in that way they can have slight difference with the competitors.
4 Swot Analysis
The first low cost carrier in Europe is Ryanair which helped them to gain a strong market position.
Well established Routes and Networks.
Ryanair used well developed aircrafts and high capacity of seats as well as decreasing the gas emissions.
Customers are well satisfied for the company's value of money.
Strong public image.
Established market share and strong financial expansion.
Staff working in non hygienic conditions.
Customer services are unstable.
Food is not provided in the airlines.
Charging high insurance fee from each person.
Unfriendly relationship with the competitors.
Highly dependent on Michael O Leary.
Looking for a joint venture with Air Lingus which will help Ryanair to expand its flights to global areas.
Decreasing the cost of flight ticket. (http://news.bbc.co.uk/1/hi/business/1638562.stm)
Expansion of Elfaa. (http://news.bbc.co.uk/1/hi/business/4266771.stm)
Because of poor customer service bad publicity was spread on Ryanair.
They are not expanding into Non EU states.