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Ryanair is the largest airline in Europe in terms of passenger numbers and the world's largest in terms of international passenger numbers. It is a major airline which was founded is 1985 by Christy Ryan, Liam Lonergan and Tony Ryan.Ryanair is the World's favourite airline with 37 bases and over 950 low fare routes across 26 countries, connecting 150 destinations. Ryanair currently employs a team of more than 7,000 people and expects to carry approximately 67 million passengers in2009. The company never state a mission statement when promoting their airline but they do state that they will have the cheapest airline through the most profitable routes. Implementing this vision is a function of many individual tactics, including an absolute dedication to low cost performance in every element of the value chain, quick gate turnarounds, nonunion operations, performance-based incentive compensation plans, standardization on one type of aircraft, and flying (in most cases) to secondary airports, which provides significant savings for Ryanair.
In January 2000, Ryanair introduced Europe's largest travel website, www.ryanair.com. Within three months, the site was recording 50,000 bookings per week. The website also facilitated car and hotel rentals, rail services and travel insurance, all at low prices. To accomplish competitive positioning and sustain the advantage over it, the firm's resources and capabilities are deployed excessively. Target competitive position has to be intended for the exclusive combination of price, speed, services, innovation, customization and responsiveness, which will justify firms appeal to its aimed target market.
Ryanair was taken over by Michael O'Leary and was made Deputy Chief Executive of Ryanair between 1991 and 1994. In January 1994 he was promoted to chief executive of Ryanair. Under O'Leary's management, Ryanair further developed the low-cost model. European consumers would attribute the birth of ancillary revenue and penny tickets to Europe's largest low fare airline. O'Leary described the induction of the ancillary revenue movement in 2001.
The corporate social responsibility for each company is different based on the services that the company offers to their consumers. "A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment", over the years Ryanair have accomplished the most environmentally friendly and sustainable way by investing in the latest aircraft and engine technologies which help to reduce fuel burn and CO2 emissions by 45%. They are currently the industries leader in terms of environmental efficiency and it is constantly working towards further improving its performance.
(http://www.mallenbaker.php) REFER TO APPENDIX
Ryanair do not have a vision or mission statement for their airline, but the do like to remain in the eyes of their customers and give a vision to stay the lowest and cheapest airline offering cheap flights around Europe.
There objective has always been to establish itself as Europe's leading low-fares scheduled passenger airline through continued improvements and expanding offerings of its low-fares service. They aim to offer low fares that generate increased passenger traffic. A continuous focus on cost-containment and operating efficiencies is a vital part of the Ryanair way of succeeding.
Eric Reidenback and Donald Robin established a moral pyramid to show the range of corporate attitudes; companies can use this theoretical model as a basis for dealing with ethical issues. It is important to note that a multi-divisional organisation may occupy several stages at the same time, and companies may also regress from higher to lower levels. The model has a two dimensional form that has5developmental stages that a company may grow through tempered against a concern for profits and ethical standards. These stages are Amoral, Legalistic, Responsive, Emerging Ethical and Ethical Companies. Ryanair fits in to all these categories and aim to stay at the top end of the pyramid at Ethical Companies to remain successful. Although the concept of social responsibility may change from time to time, the pyramid model gives a framework of understanding the evolving nature of the firm's economic, legal, ethical and performance. (http://www.oldredlion.htm) REFER TO APPENDIX
FINANCIAL ANALYSIS ----COMPARE EASYJET
Ryanair is extremely competitive in the flight industry, as it is known to be Europe's largest low fare airline. There sales and financial strengths have been shown through vertical and horizontal ratios.
The sales growth in 2005-2006 was 29.2% but slightly declined in 2006-2007 to 28.9% then increased in 2007-2008 to 41.8%.
The companies Pre-tax Profit Margin (return on sales) have decreased over the years. In 2005 the return on sales was 22.14% then dropped down to 20.02% in 2006 but increased slightly in 2007 to 20.16% but then immensely decreased down to 16.17% in 2008.
The return on capital employed for Ryanair in 2005 was 9.39% then decreased in 2006 to 8.95% increased in 2007 to 9.86% then decreased again in 2008 to 9.20%. Capital employed is also defined as shareholders funds. It's the value of the assets that contribute to a company's ability to generate revenues.
Ryanair's liquidity ratio in 2005 was at 2.52 then it decreased to 2.42 in 2006 then decreased even further to 2.1 in 2007 and then to 1.53 in 2008.
The gearing ratio for Ryanair in 2005 was 89.96 then in 2006 increased to 97.88. In 2007 it increased again to 87.12 and in 2008 it increased again to 105.31
SWOT Analysis: Strength:
The airline offers a low cost leadership
Pioneer in the low cost airlines, known as European's largest budget airline
Advantage in the gain of market share.
Gain the faith of public towards its low fare airline
Ryanair has developed a very well recognised brand name over the years
Benefits from low airport charges: These aid the low cost base Ryanair benefits from.
Has first mover advantage on regional airports (e.g. Charleroi): Acts as a barrier to entry
Internet site (94% bookings) www.ryanair.com: Lowers the cost of distribution as over the phone bookings are more costly. Eliminates the need of travel agents
High Service performance: Punctual, high rate of flight completion, low baggage loss, these give a good image of the company's reliability.
Employees relationship is very poor with customers
Tied up cash with the purchase of new aircraft
Poor employee relations
Prone to bad press: Ryanair is perceived as arrogant and the slightest incident gets a lot of press coverage.
Niche market: Restricted expansion possibility
Distance of some regional airports from advertised destination: Over time customers may find this a big inconvenience.
New and more possible routes for travelling from nearer destinations
Work in partnership with other international airlines
Economic slowdown actually helps Ryanair-changes in corporate culture, 'steals' customers from traditional carriers as they seek lower fares.
EU enlargement: There will be a lot of new destinations opened up for Ryanair to travel to.
Economic crunch affect sales
Entry of new players in the industry, too much competition
Mergers and acquisitions happening at a faster rate.
Substitute transportation like car and high speed train.
European court decision: This may make expansion more difficult and costs rise in the future
Porter's Five Forces: Analysis of the Low - Cost Airline Industry
Dependence on oil markets: Fuel costs depend on the oil market.
Increase of low fare competition
Competitive strategy- Porters Generic Strategy
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. Low cost airlines which utilize the cost leadership strategy to create a competitive position, as well as strengthening its core competitors and to increase performance it's helped Ryanair to achieve its significant achievement therefore Ryanair remains in its competitive position in the cheap flight industry.
Ryanair falls in to two categories- Cost Leadership and Focused Low Cost. The firm has lower costs but is trying to broaden their targets. Cost is an advantage as it's varied and depends on structure of industry and can also fall in to Low Cost Focus as it has narrow targets as it is cost advantage in its target segments. Ryanair has competitive advantage over its rivals as it utilises special offers and promotions in order to promote its success.
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If Ryanair can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
Management believes that Ryanair's operating costs are among the lowest of any European scheduled passenger airline. There are four main expenses which Ryanair is able to control and/or reduce and therefore works hard to do so: (i) aircraft equipment costs; (ii) personnel expenses; (iii) customer service costs; and (iv) airport access and handling costs:
Competitive position in the industry environment- Ansoff Matrix
Ryanair falls in to the aggressive/competitive strategy as they have a very strong competitive position in the airline sector. It is aimed at a wide range of target market as their prices are low and affordable.
Ansoff's product/market growth matrix suggests that a business' attempts to grow depend on whether it markets new or existing products in new or existing markets. It shows the growth strategy of the business and how well it's doing.
Ryanair falls in to two categories- Market Penetration and Product Development. Market Penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. It offers online sales and bookings, increase penetration, flight offers, flight sales etc. A Market Penetration marketing strategy is usually about "business as usual". The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.
Product Development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. Product development offers care hire, travel, Insurance, company credit card, gift vouchers, hostels etc. Ryanair have not tried to develop in to Product Development if they did this would help increase sales further. They rather increase on services that they already offer and help expand on them to ensure that they meet their customer satisfaction of having low cost airlines and still make a profitable profit. EXPLAIN
Due to the current recession which has affected businesses, Ryanair claim that the recession would enhance its competitive position as it raised its guidance for the full year from breakeven to at least £45m net profits- despite soaring third-quarter losses. The recession forces it to drop prices further therefore they plan to use lower fuel and other costs to pass on the price cuts to customers and win business from rivals. Michael O'Leary claims that "We are the perfect airline for the recession. You don't want to waste any money at the moment on overpriced flights." (http://business.timesonline.co.uk) Ryanair offer cheap flights starting from as little as 1p to there customers, but can add a large amount of tax which can help make up the cost of the actual travel cost. They also offer cheap car hire, hotels, hostels, B&B's, travel insurance and airport transfer. Usually customers that are booking flights through Ryanair website will go ahead and book their hotel etc as well through them as they are amazed at the cheap flight prices and believe they will get another cheap bargain.
METHODS OF GROWTH - It was good that you attempted this section (as most other groups omitted it!) but you applied it only to the services and deals that Ryanair offer to penetrate the market. You could also describe internal growth such as organic and any alliances they may have with other companies - or mergers or acquisitions, or international growth?
CONCLUSION - The SPACE matrix was used to summarise findings and an appropriate stance was identified. However I think the environment is slightly more unstable than you identified. Try to use the aggressive stance identified to make recommendations for future strategies. Refer to the SPACE matrix in the textbook p400 for some examples
Ryanair will offer the same service while increasing flight frequency and choice of routes to different destinations.
Ryanair will continue to lower its fares. The Company will continue to increase the number of seats it sells for free. This has been the strategy for generating growth up to now and has proved very successful. This is what Ryanair is famously known for and this is the reason they attract a large number of customers.
Ryanair bookings are generally done online but some can be done over the phone. In order to discourage the remaining few passengers from booking via the call centres Ryanair
Will place an extra charge on call-centre bookings and will introduce reductions for online reservations
There is a perception that because Ryanair is a low-cost service, it is also a low quality service. To correct this awareness they will launch an exceptionally intense marketing campaign (radio, newspapers and television.
Ryanair will use the introduction of a new fleet of Boeing 737-800's "next generation" aircraft as an opportunity to rejuvenate the image of the airline. There is a perception that because Ryanair is a low-cost service, it is also a low quality service. To correct this perception we will launch an exceptionally intense marketing campaign (radio, newspapers and television (this is a one off)).
Ryanair's internet site has been really effective since 2000. The internet booking growth took 70% in that year, which had a significant impact on the distribution costs. The distribution costs decreased every year as an explanation for the reduction of the overall 'marketing and distribution cost's. However, a basic level of marketing is needed as to maintain the level of passengers constant while an incremental amount of marketing is needed in order to increase the number of passengers, especially when new routes are being opened.
The increase of marketing costs in the first years can be also seen due to the fact that we expect the airports such as Charleroi in Belgium will not subsidize Ryanair.
For the low cost airline like Ryanair the competition was low but in the overall airlines sector the competition was intense. Market was emerging and also gap existed in the supply and demand line. However if some other company would had decided to compete on the same basis as Ryanair did then there would have been a heavy pressure on prices margins and hence on profitability. There was not much difference in the services they were providing hence the only competition was on the price differentiation also there is high exit barrier in the aircraft industry since high cost of capital and after losing on the competitive battle no one can abnegate. That was the risk involved in the industry to inter in.
Stage 1 Amoral
At the base of the pyramid is Amoral or ethically challenged companies, who are likely just starting off. They are around strictly for a short term, and aim to hit high very quickly. At the heart of this organisation is the theoretical conviction that business is not subject to the same rules as individuals and that there is no set of values other than greed.
Stage 2 Legalistic
Legalistic firms obey the law, though ethical concerns. A legalistic company's code of ethics - if it exists - would be dominated by harming the organisation statements. Some legalistic companies have no ethics code, and do not accept the necessity.
Stage 3 Responsive
Management test and learn from more responsive actions. A responsive company's ethics code would reflect a concern for other stakeholders, but additional ethics support vehicles, such as hotlines, are less likely to be found.
Most stage two companies would leave ethical concerns aside until they become a problem only then would they consider an alternative action.
Stage 4 Emerging Ethical
Managers want to do the right thing. Values are shared across the organisation. Ethical perception focus but may still lack organisation and long term planning. Organisations accept that their code of ethics is a starting point.
Â Stage 5 Ethical Companies
This stage represents what the researchers call the ethics organisation. Here there is a total ethical profile, with carefully selected core values of the organisation.
Although the concept of social responsibility may change from time to time, the pyramid model gives us a framework for understanding the evolving nature of the firm's economic, legal, ethical and philanthropic performance.
Corporate Social Responsibility
Ryanair has minimised and continues to reduce fuel burn and CO2 emissions per passenger kilometre. This has been achieved through the combination of: numerous fuel saving measures and commercial measures aimed at maximising passenger numbers per flight in order to spread the fuel use and CO2 emissions over the greatest number of passengers.
Ryanair have made environmental reductions to help protect the environment. They have done this through:
Noise: Ryanair is also the European leader in minimising the number of people affected by noise nuisance and lowering the volume of this nuisance. This has been achieved through: the application of modern technology, this will reduce the noise affected area at airports by 6.5%. Ryanair operates from; the absence of night operations; and compliance with all local noise restrictions.
Waste: Ryanair's low-fare low-cost business model does not include "free" meals, drinks or newspapers to passengers, therefore there is a reduction in the amount of waste generated by Ryanair flights, compared to traditional airlines that produce large amounts of waste from food, packaging and newspapers distributed "for free" to all their high-fare passengers.
Air transport accounts for less than 2% of EU CO2 emissions and delivers huge economic benefits, whereas road transport is responsible for roughly 20% of emissions and provides a fraction of the economic benefits.
The table shows the net benefits of selected sectors in the UK:
If the European Union continues its drive towards extending the scope of the EU Emissions Trading Scheme to include aviation (instead of, for example, targeting the environmental inefficiency of air traffic control services, which would immediately reduce aviation emissions by 12%), it should ensure that the scheme addresses the real problem areas and rewards airlines that are maximising their environmental efficiency through investment in the latest technology and through operational efficiency. Any such scheme should therefore be based on the following principles espoused by the European Low Fares Airline Association (ELFAA):
Uniform application to all flights to and from any EU airport.
Allowances to be distributed free of charge on an efficiency benchmarking basis.
Provisions allowing for environmentally sustainable growth.
Scheme to be administered by the European Commission only.
No additional "taxes" on aviation.
http://www.ryanair.com/en/about/ryanair-and-the-environment - GOOD WEBSITE
Political & Legal
â€¢In the different countries the government may support their own flagship carriers and demoralizing other countries carriers.
â€¢All the local councils which were much concerned about the noise and new runways which was being built in the past was a great check to the airlines industry.
â€¢The concerns and the efforts being put by the government to look after the tourism industry might also trigger the industry
â€¢The abolishment of the free duty on sale by the EU. (Liberalization).
â€¢Accusation of Misleading Advertising.
â€¢establishment "Climate Protection Charge".
â€¢The internet which was caused to face legal charges was simply the misuse of the facilities.
â€¢Pilots and cabin crew across Europe.
â€¢IATA intrusion in Slot instruction for carriers and routes.
â€¢The fuel price fluctuations were the most key factor for ELFA industry.
â€¢The EU integrations had widened the opportunities for LFAs.
â€¢Plummet in GDP and surge in the unemployment rate in January 2008 as compare to January 2007.
â€¢The airline industry is in the growth rate of the life cycle.
â€¢To maintain the common interest rate throughout the EU, the interest and inflation rate plunged and is low.
â€¢European countries have lower population growth rate.
â€¢Wider demographic of consumers were got attracted by the lower cost strategy.
â€¢Lots of population shift was happening in Europe at that time which fuels in demand.
â€¢Huge change in lifestyle caused increase in frequent travelling.
Education and literacy rate increased due to population shift towards urban areas.
â€¢Operations increased in grey market.
â€¢â‚¬12,000 per person is the on an average purchasing power in Europe.(Purchasing Power of Europe, 2006).
â€¢Wireless technology expended in a myriad way.
â€¢Online reservation through internet facility provided customers with more comfort and ease.
â€¢Substitution of all the Boeing 737 - 200 by 737 - 800.
â€¢New aircraft costs lesser and Carbon emission also decreased.
â€¢Strict check on Green House Gas and Global Warming issues.
â€¢The increase number in direct flight and also reduce number in the indirect flights to reduce the pollution was also executed.
â€¢The ELFAs do not provide any Food or Beverage inside the flight to reduce the leftovers.
â€¢ELFAs keep more seats available as compare to other traditional airlines. That means even if the capacity is low then also ELFAs keep booking for more than that number
SWOT Analysis: Strength:
â€¢The low cost leadership.
â€¢Consolidated brand image in the low cost airlines.
â€¢Very much aggressive pricing strategy.
â€¢Pioneer in the low cost airlines.
â€¢Advantage in the gain of market share.
â€¢Sought out routes- network.
â€¢36% increase in revenue from ancillary in the year 2006.
â€¢Strong reputation in public.
â€¢Gain the faith of public towards its low fare airline.
â€¢High load capacity aircraft.
â€¢Total dependence on the CEO Michel o' Leary
â€¢Employee relation was very poor.â€¢Customer relationship was volatile.â€¢Competitor's relationship was aggressive.â€¢More roaring flights.â€¢Tied up cash with the purchase of new aircraft.â€¢Poor employee relations.
â€¢New routes were possible to found out.
â€¢EU expansion.â€¢International airlines collaborated.
â€¢Online selling of tickets i.e. Forward integration.â€¢New promotional plans.â€¢Expansion of ELFAA.
â€¢Entry of new players in the industry.
â€¢Fluctuations in fuel prices.
â€¢Mergers and acquisitions happening at a faster rate.
â€¢Evolution of trade union in the industry.
â€¢Substitute transportation like car and high speed train.
Ryanair commits to:
Offer the lowest fares at all time on all routes:
Ryanair will continuously offer the lowest available prices to all our passengers, on all routes on which we operate, regardless of which other airlines compete with us on those routes.
Ryanair's 'Double the Difference' Fare Guarantee ensures that on these rare occasions when a passenger finds a lower air fare on a competitors flight to the same route at the same date/time then that passenger will be repaid double the fare difference between the Ryanair and competitors ticket price as long as they book to travel on Ryanair.
Passengers will always be offered the lowest available fare for their particular journey and itinerary at the time of booking when they book through our website at Ryanair.com.
Ryanair will inform the passenger about the Terms and Conditions which apply to the fare chosen and any applicable taxes, fees and charges.
Where we become aware from time to time of any competitors special offer fare which is lower than Ryanair's, we will immediately lower our fares to ensure that we are lower again.