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a.

Identified Issues
Ryanair is the leading low-cost airline in Europe that has won numerous awards since its
inception in 1985. The airline has been rapidly increasing its fleet of Boeing 737 aircrafts, as
it continues to add new bases and routes. Ryanair adopts a low cost concept, emphasising on
keeping costs low with hassle free, no-frills offerings to ensure high efficiency in every part
of its business. Nonetheless, with the emergence of several new low-fares airlines as well as
stiff competition poses by the conventional national carriers, the companys current business
model and its implementation may not be robust enough to face the turbulent, fast-changing,
uncertain business environments and increasing levels of competition.
b. Current Strategies (if any)
Ryanair employs the cost leadership strategy to target a broad customer segment that is
highly price sensitive. It concentrates in lowering its costs by constantly finding ways to
rethink their primary and secondary activities to reduce cost. The airline has done well in 3
main areas to achieve cost leadership.
First, Ryanair follows a very deliberate strategy which is only configured with a single
passenger class, serving no meals and assigning no seats, as it offers a simple and low fare
structure. In this sense, it manages to attract strong growth in passenger number and high
passenger load, hence leading to profitability.
Second, the airline insists on a single aircraft type i.e. Boeing 737 and it has helped it to
better negotiate a low leasing and maintenance rates for its aircrafts. Moreover, Ryanair
constantly purchases new and more fuel efficient and environmentally friendly aircrafts. This
is in part to keep its fleet of aircraft young and at the same time, reduces the fleets overall
fuel consumption. In the end, it translates to more costs saving for the company.
Aside from the above, Ryanair also attempts to keep cost controlled through hedging fuel
prices, and in doing so also helps the airline to achieve lower fuel costs. As a result, the
carrier is able to attain higher saving and this leads to passing its savings to passengers in the
form of lower airfare price.
c. Results of Internal Analysis (systematically compiled)
The internal analysis of a firm examines its portfolio of resources, bundle of heterogeneous resources and capabilities managers have created.
Fundamentally, it serves to identify Ryanairs strategic capabilities, and evaluate them through a test for four criteria of sustainable advantages to
determine the companys competitive consequence. From the analysis carried out, the success of Ryanair will be gauged based on its core
competencies and strengths.
Strategic Capabilities
Resources Tangible Intangible Remarks
Provides ancillary
services

Include in-flight sale of food and beverages, merchandise, as well as other services such as
car rental, accommodation services, travel insurance, credit cards, and airport transfer.
Utilises information
technology system

Enables web-based check-in and seats reservation.
Possesses strong
company financial
performance and healthy
cash flows

Ryanairs healthy accumulation of profits throughout the years has seen remarkable growth
and success. This substantial growth will serve as one of Ryanairs competitive advantage to
gain confidence and trust of their customers.
Operates extensive
flight network and
operations

Ryanair operates more than 1,500 flights per day with more than 50 bases, flying 1,500
routes across 28 European countries, connect more than 160 destinations
Possesses recognised
brand name

Pioneered the low-cost airline business concept in Europe and has established its reputation
as one of the largest budget airline.
Threshold Capabilities
The above strategic capabilities are derived from Ryanairs threshold capabilities. Indeed, to
remain economically viable, the company needs to retain certain threshold capabilities in this
highly competitive industry. Below are the required attributes that Ryanair maintains to
remain competitive.
Low airfare to continuously attract customers
Minimum incidence of airplane downtime and malfunction
Minimum baggage delay
Statutory compliance and conformity of relating authority

Ryanairs distinctive capabilities (core competency)
Amid the business uncertainties and unpredictable environmental concerns, Ryanair
continues to enjoy steady growth. This is because the airline adopts numerous cost cutting
strategies which are unique to its competitors.
Marketing strategy Ryanair promotes its website heavily through the traditional
media as it seeks to divert customers to its own website and online booking system.
Consequently, it has resulted in 99% of all reservations being done online. Moreover,
it minimises its marketing and advertising costs, through free publicity in the form of
controversial and topical advertising, press conferences and publicity stunts. In
doing so, it has greatly reduced cost of advertising for the company.
Outsourcing of services Aside from cutting down on advertising expenditure, the
company has also contracted out numerous non-core services such as aircraft handling,
ticketing, and baggage handling to third parties providers. Ultimately, this has helped
in shortening its operation processes to achieve cost reduction, as well as allows it to
channel its resources to its core competences to further enhance its capabilities.
Single passenger class operation - Ryanair only operate a single class service
(economy class) and this has allowed them to target the majority of customers from
price-sensitive business travellers to those on student budgets. In the end, the
company is able to keep costs down as it eliminates the need for higher standards.
Further, Ryanair insists on procuring only a single type of aircraft: Boeing 737, to
keep staff training and aircraft maintenance costs as low as possible as well as
periodically renewing its fleet to the more fuel efficient new aircrafts while disposing
of its older and less efficient planes.
Taking advantage of the internet As mentioned above, Ryanair exploits the full
potential of the internet to achieve cost reduction. Essentially, it eliminates the need
for check in attendants as much as possible, as internet users are able to access to the
airlines host reservation system to purchase the flight tickets in real time. Through
this process, it greatly contains the cost of staffing as no longer customers are required
to go through a real person to transact as he is able to perform various procedures via
Ryanairs self-directed website.


The VRIO framework
Capabilities Valuable? Rare? Inimitable? Supported by the
organisation?
Competitive implications
Strong Financial Resources Yes No Yes Yes Temporary competitive advantage
Providing Ancillary Services Yes No No Yes Temporary competitive advantage
Strong Brand Name Yes Yes Yes Yes Sustained competitive advantage
Innovative Technology Yes No Yes No Temporary competitive advantage
Extensive flight network and operations Yes No Yes Yes Temporary competitive advantage


d. Results of External Analysis (systematically compiled)
External analysis entails the examination of the challenging and complex external
environment in which firms operate. It is crucial to determine how these factors are changing
now and for the future, so as to draw out implications for the organisation. In this respect,
PESTEL analysis will be employed to study the general environment, followed by Porters
Five Forces that will examine the Ryanairs industry environment.

PESTEL analysis of Ryanair
PESTEL Analysis
Positive
(Opportunities)
Neutral
Negative
(Threats)
POLITICAL factors:
Government support for
national carriers

ECONOMIC factors:
Fuel prices
National growth rates
SOCIOCULTURAL
factors:
New demography of
travellers

TECHNOLOGICAL
factors:
Fuel efficient engines
100% Web-based
check-in policy

ENVIRONMENTAL
factors:
Noise pollution controls
Energy consumption
controls

LEGAL factors:
Restrictions on
merger/acquisition

Preferential airport
rights for some carriers

GLOBAL factors:
Natural disaster,
terrorism and war

Secondary airports

Ryanair operates in an environment which is highly influenced by government intervention,
technological advances, population demographics as well as global factors. Indeed, the
biggest force that weighs heavily in the industry is the volatility of fuel price and government
regulation. These factors can influence and change the entire industry within short period of
time and at the same time, impact heavily on the airlines bottom line. Nonetheless, with the
adaptation of its fleet commonality policy of the more environmentally-friendly Boeing 737,
Ryanair is able to keep staff training and aircraft maintenance at low costs. Moreover,
through only using secondary airports, the airline is able to further reduce airport charges
which also help to maintain the companys profitability.

Porters Five Forces Framework

Porters Five Forces Threat of New Entrants

Threat of New Entrants is MEDIUM
HIGH when:
High Low Explanations
Economies of scale are:

Huge capital investments to
acquire fleet
Product differentiation is:


Cost leadership
Capital requirements are:

High capital outlay
Switching costs are:


No switching costs for
customers
Ease of Access to distribution channels is:

Online, travel agents, etc.
Cost disadvantages are:

New entrants not able to reap
economies of scale as market
is dominated by existing big
players

While the initial capital outlay serves as an effective barrier to entry, the overall threat of new
entrant is actually high as new entrant, particularly those of national carriers which have the
financial capacity to enter into this industry can have significant impact on Ryanair even
though the number is small. In addition, regional governments may encourage the
development of budget airlines to stimulate tourism and investment.


Porters Five Forces Power of Buyers
Power of Buyers is LOW when: High Low Explanations
Concentration of buyers relative to suppliers is:


Many buyers
Switching costs are:


No switching costs for
customers
Product differentiation of suppliers is:


Similar products/services
Threat of backward integration by buyers is:
Impossible due to high
capital outlay
Extent of buyers profits is:
Great savings

The bargaining power of buyers is relatively low as there are many customers who are unable
to integrate backwards and have little bargaining power even for bulk buying.

Porters Five Forces Power of Suppliers
Power of Suppliers is MEDIUM
when:
High Low
Explanations
Concentration of suppliers relative to
buyer industry is:

Only Boeing and Airbus
Availability of substitute products is:
No other products can replace
aircraft
Importance of customer to the
suppliers is:

Suppliers can exert considerable
pressure on buyers via increasing
prices or lowering product or
service quality
Differentiation of the suppliers
products and services is:

Aircrafts can be differentiated in
terms of technology, size, design,
features, etc.
Switching costs of the buyer are:
Maintenance, inventory, training
Threat of forward integration by the
supplier is:

Suppliers unlikely to offer flight
service on top of aircraft building

The bargaining power of suppliers appears to be medium. The suppliers of aircrafts are
mainly by Boeing and Airbus which sell globally and head to head competition. In this sense,
it greatly undermines the ability of airlines to exercise control over suppliers and earn higher
profits. Nonetheless, Ryanair may sign long-term lease and maintenance agreement with the
suppliers to lock in price and reduce their power.
Porters Five Forces Intensity of Rivalry
Intensity of Competitive Rivalry is MEDIUM
when:
High Low
Explanations
Number of competitors is:

EasyJet, Aer Lingus
Industry growth rate is:

High population
Fixed costs are:

Cost of aircraft,
maintenance cost,
insurance, etc.
Storage costs are:
Parking of fleets
Product differentiation is:


Cost leadership
Switching costs are:


No switching to
consumers

The success of Ryanair and deregulation of the airline industry has invited many players,
some of which originating from established full-service carriers. Further, products offered in
the low-cost airline industry are similar and cannot be differentiated widely, thus resulting in
high rivalry.

Porters Five Forces Threat of Substitute Products
Threat of Substitute Products is
High Low Explanations
LOW when:
The differentiation of the substitute


Cars, buses, trains, sea routes,
etc.
product is:
Rate of improvement in price-performance


Low cost airlines willing to
lower price to match price of
substitute product
relationship of substitute product is:


The threat of substitutes at the industry level is low. The substitutes such as long haul air
travel, rail, ferry and coach are not close substitutes which lose out in terms of destinations
covered and times.
Ryanair operates in an unattractive and competitive industry. While competitive threats from
product substitutes are low, it has medium high threat of new entrants, suppliers and buyers
with strong bargaining positions, and strong and intense rivalry among competitions.
e. A matrix showing Strengths, Weaknesses, Opportunities, and Threats.
The definition of success for a firm is dependent on its objective and looking at Ryanair, its
definition of success will be measured by its ability to keep cost low and to maintain
profitability.
Based on internal and external analysis conducted on the airline, it shows that it is able to
sustain its success. With the help of SWOT analysis, the companys strengths and core
competencies will lead to the capitalising of its opportunities and subsequently allowing it to
sustain its success.
I have presented my findings from both internal and external analysis in the following table.
SWOT Analysis
Strengths Weakness
Strong financial resources
Providing ancillary services
Strong brand name
Innovative technology
Extensive flight network and operations


High cost

Opportunities Threats
Secondary airports
Rapid technological growth
Economic downturns
Government support
Changing preference of consumers
Increased Competition
Government support
Rapid technological growth
Secondary airports