Académique Documents
Professionnel Documents
Culture Documents
airlines
Case Study
By
Sid Hegde
Ryanair – the low-fares airline
Table of Contents
2/20
Ryanair – the low-fares airline
3/20
Ryanair – the low-fares airline
Low Price
Ryanair’s strategy is based upon this core competency. Strategies based upon core
competencies are usually successful as articulated by Prahalad and Hamel in their article on
core competencies [4].
Size
Ryanair’s market dominance gives it advantages of size that will help it sustain it’s low cost
operations as it can use it’s size to dictate terms with it’s supplier
Leadership
Even excluding Michael O’Leary, Ryanair’s management from senior management down to
front line managers is wed to the lost cost culture and they are geared towards maintaining
and sustaining the low cost culture
Experience Curve
Ryanair has built up a huge low cost operations experience curve which will help it sustain
going forwards
Analyzing these core competencies via the VRIO framework (A10) proves that the core
competencies give Ryanair Sustained Competitive Advantage.
Using Rumelt’s [1] techniques (A11) to evaluate the Ryanair’s key business strategy of Low Price
shows that this strategy does not have any critical flaw.
4/20
Ryanair – the low-fares airline
The international oil and currency market is a very volatile market and there could be huge
spikes in oil prices in the event of a terrorist attack (or threat), political struggles in the oil
producing countries etc. Improving it’s hedging practices could cushion Ryanair against
unforeseen increases in oil prices.
As oil is traded in US dollars in the international market and Ryanair’s income is solely in
Euros, Ryanair has a substantial exposure to the vagaries of the currency market. Ryanair
needs to improve it’s policy of buying US dollars to pay for aviation fuel.
It would be beneficial for Ryanair to hire a specialist company that specializes in the future’s
markets to help it improve it’s hedging practices.
One of Ryanair’s key edicts is that as long as it has low prices customers will fly with them.
This was a reasonable approach when Ryanair was the first mover. But as the competition
has increased customers could switch to another carrier which might be slightly more
expensive than Ryanair because of Ryanair’s perceived poor customer service policies.
Even a marginal improvement in Ryanair’s image could help it future proof against potential
competitors.
Ryanair’s approach of hard selling of ancillary products during flights seems to have had quite
a push back from frequent fliers. Ryanair is probably better off trying to soft sell ancillary
products during flights.
Ryanair should leverage it’s website to better sell ancillary products as well as looking into the
possibility of gaining advertising revenue through it’s website.
A Ryanair credit card could be a good addition to it’s portfolio of ancillary products.
Succession planning
The case study does not offer any insight into Ryanair’s succession planning after Michael
O’Leary leaves the company.
A leader who is not as polarizing and rebellious as Michael O’Leary could be a good
replacement as Ryanair further expands. A softer image projected by a new leader could help
Ryanair mend it’s relationship with Irish and EU officials.
5/20
Ryanair – the low-fares airline
There is also considerable opposition from the Irish government as well as the EU as it might
reduce competition.
But, it is recommended that Ryanair hold on to it’s current shares in Aer Lingus as it would be a
good buffer against a possible take over of Aer Lingus by one of it’s rivals like Easy Jet.
If the financial struggles at Aer Lingus continues and it keeps loosing money then Ryanair can
look into the possibility of making a bid for just the international operations of Aer Lingus. This
would give it an opportunity to expand internationally and also give access to gates and landing
slots at major airports.
6/20
Ryanair – the low-fares airline
Other
Mastery of details
O’Leary appears to have a mastery of all the details of Ryanair’s business. This helps
him to better lead Ryanair as it expands throughout Europe.
Attitude
His brazen attitude has probably hurt Ryanair’s image in the political and legal circles in
Europe. This could be the weakest link in O’Leary’s strategic leadership. He is the face of
Ryanair and his attitude and actions tend to convey a confrontist image for Ryanair. This
probably was suitable in the earlier days, but it’s probably time for him to tone down his
approach.
Bottom line
The success of Michael O’Leary’s strategic leadership can be summed by looking at Ryanair’s
bottom line. They are the leading carrier in Europe with ever increasing profits.
7/20
Ryanair – the low-fares airline
Conclusion
Ryanair has built a low cost culture and it’s entire organization has bought into this philosophy.
The leadership at Ryanair practices what it preaches and it helps further reinforce the low cost
message throughout the organization.
But Ryanair needs to pay close attention to the risks highlighted in the Risk dashboard (A14) as it
continues to grow. Ryanair need to start planning for life after Michael O’Leary.
A low price strategy is a sustainable strategy as we can see from other and similar organizations
like Ikea, Southwest, Aldi etc. Ryanair’s low price strategy is a perfect fit for them and the future
looks very rosy for Ryanair.
8/20
Ryanair – the low-fares airline
References
1. Evaluating Business Strategy, November 28, 1993 – Richard P. Rumelt
2. Strategic Management, 6th Edition – Hitt, Ireland and Hoskisson
3. A Theory of Human Motivation, Psychological Review 1943 – A.H. Maslow
4. The Core Competence of the Corporation, HBR, May–June 1990 – C.K. Prahalad and Gary
Hamel
Bibliography
1. Exploring Corporate Strategy, 8th Edition – Gerry Johnson, Kevan Scholes and Richard
Whittington
2. How Competitive Forces Shape Strategy, HBR, March–April 1979 – Michael E. Porter
3. What is Strategy, HBR, November–December 1996, Michael E. Porter
4. Crafting Strategy, HBR, 2001 – Henry Mintzberg
5. How Successful Leaders Think, HBR, June 2007 – Roger Martin
9/20
Ryanair – the low-fares airline
Appendix
Looking at the PESTEL analysis, the Key drivers of change for Ryanair are the Economic
and the Legal factors.
10/20
Ryanair – the low-fares airline
The overall industry is attractive for existing low price airlines. The low price airlines is about 30%
of the overall airline industry and there is quite a lot of opportunity to grow (at the expense of the
legacy airlines)
11/20
Ryanair – the low-fares airline
Strengths
Brand – Ryanair name has become synonymous with the Low airfares
Size – Ryanair has become the biggest low price airlines in Europe and it’s able to
leverage it’s size to negotiate better agreements from it’s suppliers
Low cost base – Well integrated strategy that takes advantage of it’s low cost operations
offering low fares that’s driving up revenue
New airplanes – leading to less cost in maintenance; fuel efficiency etc.
War chest – Ryanair has a significant amount of cash on it’s books and this can be a
major deterrent for any competition contemplating a price war with Ryanair
Weakness
Perceived to be an airline that does not care for the customer
Perceived to be an airline that is obsessed on the bottom line at any cost
Opportunities
Ryanair has been selling ancillary products during the flight that has high margins. If
properly managed this could be very lucrative
Ryanair’s website is very popular and this opens up new opportunities to leverage the
web traffic into advertising revenue etc.
The website’s popularity could also help Ryanair sell complete tour packages, for
example car rental + flight + hotel. This could make it attractive for consumers as it would
mean a one stop destination for their holidays etc.
Threats
I think the main threat for Ryanair could come from rapid expansion as it might over
stretch management’s capabilities as well as adding a burden on cash flow
The secondary threats (that are common to all airlines) would be a huge increase in fuel
prices
Any new terrorist attacks (or threats) would impact Ryanair (as well as the other low price
airlines) as security would be increased leading to longer turnaround times
12/20
Ryanair – the low-fares airline
Strengths Weakness
- Ryanair can leverage it’s huge - Ryanair can probably overcome it’s
customer base and get better at perceived poor customer service by
selling ancillary products better training and motivating their
- Ryanair credit cards, frequent flyer employees
Opportunities programs, tasteful advertising
through it’s website etc. has huge
potential for additional earnings as
well as increasing it’s customer
base
- Ryanair should use it’s new fleet - Ryanair can better react to fuel
and try to project a ‘Green’ image. prices by hedging for oil prices
This could help Ryanair take a lead - It can also get better at reacting to
Threats currency fluctuations as the oil
over other competitors whenever
stronger emission rules are passed industry primarily deals in US
in the EU Dollars
13/20
Ryanair – the low-fares airline
The stakeholder analysis clearly shows the opposition to Ryanair’s bid for Aer Lingus. The
chances of the key stake-holders changing their mind agreeing to a merger are quite low.
- This should be (and is) one of the - Ryanair’s expansion into Ancillary
Existing key strategic directions for products is a good strategic fit
M Ryanair, that is consolidating
A existing routes and increasing
R market share on existing routes
K
E
T Market Development Diversification
S
- Developing new routes, flying to - Diversification into long haul flights
new destinations can be or flying more than point-to-point
New
profitable strategy for Ryanair flights would be a bad strategic
- Expansion outside of Europe choice for Ryanair
might not be a strategic fit for
Ryanair
14/20
Ryanair – the low-fares airline
15/20
Ryanair – the low-fares airline
16/20
Ryanair – the low-fares airline
Conclusion: The Low price strategy at Ryanair does not have any critical flaws
17/20
Ryanair – the low-fares airline
Stories – Stories are told in the organization about Michael O’Leary’s thriftiness and this helps
promote the low cost culture within the organization
Power Structures – Michael O’Leary is the boss and there is no doubt about it in the
organization
Organizational structures – It’s a top down structure, but employees are encouraged and
empowered to take their own initiatives to reduce cost
The paradigm:
A low cost culture has permeated throughout Ryanair through it’s history and culture and it has
become a self enforcing and self sustaining culture.
18/20
Ryanair – the low-fares airline
19/20
Ryanair – the low-fares airline
Risk Dashboard
20/20