RYANAIR CASE STUDY ANALYSIS

1. Strategy of Ryanair Overview of the Company Ryanair started in year 1985 with only 57 staff members and with one 15 seater turboprop plane from the south of east of Ireland to LondonGatwick which carried 5 passen!ers on one route "#arrison$ % %&' In 198($ inspired from the story of )a*id and Goliath the company !o after the bi! !uys for a slice of the action and end up smashin! the +er Lin!us or ,ritish +irways hi!h fare cartel on the )ublin-London route' -he staff increased from mere 57 to 1% staff members and the plane carried for about 8%$ passen!ers on two routes' In 1989$ the company employed .5 staff and their a*era!e ma/imum passen!ers increased to ( $ ' In 199 -1991$ the company has 7 $ passen!ers' #owe*er$ despite of the increase of passen!ers$ the company is not so !ood in mana!in! cost that the company has lose its money' + new mana!ement team is brou!ht in to sort it out and re-launch as a 0low fares or no frills1 airline$ closely modellin! the 2outhwest +irlines model in the 3'2' +nd in 1994$ Ryanair bou!ht its first ,oein! 7.7 aircraft which carried o*er 1'5 million passen!ers' In 1995$ Ryanair is the bi!!est passen!er carrier on )ublin-London route$ the lar!est Irish airline on e*ery route bein! operate and carried %'%5 million passen!ers in the year "#arrison$ % %&' In 1997$ the 53 air transport dere!ulation allowed the airline for the first time to open up new routes to 6ontinental 5urope with o*er . million passen!ers on 18 routes carried' Ryanair launched ser*ices to 2tockholm$ 7slo$ 8aris and ,russels and took time out to float Ryanair plc on )ublin and 9+2)+: 2tock e/chan!es' -he company was awarded as +irline of the ;ear in 1999 by the Irish +ir -ransport 3sers 6ommittee' In % $ they announced the launch of 1 new 5uropean routes for the summer % after much deliberation and watchin! others burnin! money' -he company has also <ump onto the internet with the launch of their new online bookin! site and in <ust . months the site is takin! o*er

5 $ bookin!s a week' ,y % 1 there are more than 15 employees workin! for Ryanair and more than 1 million passen!ers are carried to 5( cities in 1. 5uropean countries' -he company has opened =rankfurt-#ahn in % % as their second continental 5uropean base and announce a lon! term partnership with ,oein! which will see the company ac>uirin! up to 15 new ,oein! 7.7-8 series aircraft o*er an ei!ht year period from % %-% 1 ' -he bookin! in their web accounts ha*e increased to 94? which has probably has somethin! to do with openin! another %( routes' In year % .$ the company is characterised by rapid e/pansion and the start the year by announcin! that the company has ordered an additional 1 new ,oein! 7.7-8 series aircraft to facilitate the rapid 5uropean !rowth plans (,in!!eli and 8ompeo$ % %&' -hey ac>uired ,uss from @L A in +pril and re-launched 1. buss routes in Aay' In =ebruary they opened their first base in Italy at Ailan-,er!amo and launched their 2tockholm 2ka*sta base in 2weden with si/ new 5uropean routes' In all ( new routes are added throu!hout % . to brin! the company a total of 1%7 routes' ,y % 4$ the company is named as the most popular airline on the web by Goo!le and they launched their 1 th and 11th bases in Rome 6iampino and ,arcelona Girona and continue to add more routes to their already e/tensi*e network' -he company has also passed out ,ritish +irways to become the 3@Bs fa*ourite airline in 3nited @in!dom and throu!hout 5urope ",in!!eli and 8ompeo$ % %& . Critical Success Factors +lthou!h the company had encountered different problems$ specifically in line with its cost structures$ the company had been able to sur*i*e and !row in the marketplace' Ryanair implement different marketin! strate!y to make the company sur*i*e in the competition and to be able to !ain competiti*e position in the airline market' It is said that the company was re!arded recently as the most punctual airline between )ublin and London' +nd because of the strate!y of the industry$ Ryanair is now reco!nised as the second lar!est airline in 3nited @in!dom and 5uropeBs lar!est low-fares airline ha*in! a network of o*er 57 routes in 11 countries and ser*ed by a fleet of .1 ,oein! 7.7-% and -8 aircraft with o*er 1$4 staffs and personnel' In order to position itself in the marketplace the company continuously concentrates on dri*in! own its costs to offer the lowest fares

possible and remain profitable' In addition$ Ryanair offer minimum standards of ser*ice and *ery low prices for point-to-point$ short haul fli!hts' -he !oal of Ryanair is to meet the needs of tra*ellin! at the lowest price' -he 6ritical 2uccess =actors "62=s& are as follows in airline industryC the strate!ic focus of ha*in! the lowest prices$ bein! reliable within the marketplace$ comfort and ser*ice and fre>uency' It is noted that low-cost companies concentrate on this first critical success factor by tryin! to offer the lowest prices' +lthou!h Ryanair has eliminated e/tras such as in-fli!ht meals$ ad*anced seat assi!nment$ free drinks and other ser*ices$ it still prioritises features which remain important to its tar!et market' 2uch features include fre>uent departures$ ad*ance reser*ations$ ba!!a!e handlin! and consistent on-time ser*ices' Cost Reduction Strategy -o achie*e its !oal of ha*in! a competiti*e position in the airline market$ Ryanair uses a cost reduction strate!y' 2uch cost reduction strate!y relies on fi*e main aspects like fleet commonality$ contractin! out ser*ices$ airport char!es and route policies$ mana!ed staff costs and producti*ity and mana!ed marketin! costs' In terms of fleet commonality$ the company used only one kind of plane which limits the cost for staff trainin!$ maintenance ser*ices and facility of obtainin! spares$ facility in schedulin! aircraft and crew assi!nment' Dith their purchase of aircraft ,oein! 7.7$ Ryanair has been able to !ain capacity and reduces the a*era!e a!e of fleet which means sa*in!s on maintenance costs and a*oidin! the fit of 5uropean 3nion-conform e>uipment on old feet' -he ne/t factor under the cost reduction strate!y of Ryanair is contractin! out ser*ices' In this manner$ aircraft handlin!$ ticketin!$ handlin! and other functions are contracted out by Ryanair to third parties' In addition$ in order to limit their e/penses en!ine and hea*y maintenance are also contracted out whereas the staff of Ryanair carries out routine maintenance' +nother factor for the cost reduction strate!y of the company is in terms of airport char!es and route policies' #erein$ Ryanair has made <udicious choice of dealin! with secondary and re!ional airports$ where the traffic is not <ammed and fees incomparably lower' 2ince Ryanair$ is a true windfall for such airports$ the airline company has a bar!ainin! power which enables it !ettin! fa*ourableaccess fees' In addition$ Ryanair

pro*ides only a point-to-point ser*ice$ thus$ it has no cost concernin! connectin! passen!ers' Aoreo*er$ the company pays special focus to ontime departures because it means ma/imisin! aircraft utilisation' Aana!in! staff costs and producti*ity is another factor used for reducin! the cost for Ryanair' In this manner$ the company pays its staff on modest salary but has set up a performance related pay structure which ur!es employees to ma/imise the number of sectors flown daily' -his way$ Ryanair both controls producti*ity and keeps staff costs down' Lastly$ mana!in! marketin! costs is another factor that makes the company reduces it costs' Ryanair ad*ertises mainly on it website with its lo!o 0Ryanair'com$ the Low-=are +irline1' In addition$ it is also ad*ertised in national and re!ional Irish and 3@ newspaper$ on radio and on tele*ision' Porters Generic Strategy +side from it cost-reduction strate!y$ Ryan has also been able to use 8orterBs !eneric strate!ies to position itself in the marketplace' +ccordin!ly$ a company positions itself by le*era!in! its stren!ths' -oday$ more and more people and or!aniEation are stri*in! to be reco!niEed in the business arena' Dith this ob<ecti*e$ these or!aniEations had been able to competently and effecti*ely adapt to the situation in the market place by usin! !eneric strate!ies that enhanced their competiti*eness' -here are fi*e different !eneric strate!ies that a business can choose' -hese include cost leadership$ differentiation$ focused cost leadership and inte!rated cost leadershipFdifferentiation' 5ach !eneric strate!y helps the company to establish and e/ploit a competiti*e ad*anta!e within a particular competiti*e scope "#itt$ Ireland G #oskisson % .&' ,y applyin! these stren!ths$ three !eneric strate!ies are resultedC cost leadership$ differentiation and focus "Hohnson G 2choles 1997&' -he strate!ies used by the company include cost leadership$ differentiation strate!y and focused differentiation' 6ost leadership strate!y is based upon a business or!anisin! and mana!in! its *alue-addin! acti*ities so as to be the lowest cost producer of a product within an industry "6ampbell$ % %&' 6ost ad*anta!e may achie*e in terms of how product or ser*ices is desi!ned or in terms of its >uality' )ifferentiation strate!y is based upon persuadin! customers that a

product is superior to that offered by competitors "6ampbell$ % %&' -he *alue added by the uni>ueness of the product or ser*ices may allow the company to char!e a premium price for it' #owe*er$ the dan!er associated with differentiation may include imitation by competitors and chan!es in customer tastes' =ocus-differentiation strate!y is aimed at a se!ment of the market fro a product rather than at the whole market or many markets "6ampbell$ % %&' -he successful way usin! focus strate!y is to tailor a broad of product or ser*ice de*elopment stren!ths to a relati*ely narrow market se!ment that they know *ery well' -he risk may include imitation and chan!es in the tar!et se!ments' In the case of Ryanair$ these three !eneric strate!ies had been utilised' =irst$ the company offers the lowest cost of fare than its competitors in the airline' 7n the other hand$ Ryanair has also become a focuser because it concentrated on a narrow customer se!ment which include Irish and 3@ business people or tra*ellers who could not afro to fly ma<or airlines' -he main !oal of the company is to pro*ide a no frills ser*ice with low fares desi!ned to stimulate demand' +t the time$ it did not aim to offer the lowest fare on the market' #owe*er$ the company e/panded to continental 5urope and had to focus on critical success factors to sur*i*e' 9owadays$ it can be said that Ryanair has shifted !eneric strate!ies to become more of a cost-leader not only in terms of passen!er *olumes but bein! the lowest cost operator in the airline industry' Ryanair has restyled itself and shifted from a full ser*ice con*entional airline to the first 5uropean low fares$ no frills carrier' In 1985$ it pro*ided scheduled passen!er airline ser*ices between Ireland and the 3@' ,y the end of 199 and despite a !rowth in passen!er *olume$ the company had e/perienced some trouble and had to dispose of fi*e chief e/ecuti*es$ recordin! losses of IRI% million' Ryanair had to fi!ht to sur*i*e and the new mana!ement team$ headed by Aichael 7BLeary$ decides to restyle the company on the model of successful +merican 2outhwest +irlines' Indeed$ when one considers 8orterJs ori!inal framework$ RyanairJs !eneric strate!y used to be unclearC it situated itself somewhere between a cost leader and a focuser$ althou!h we can consider it was closer to a focuser' -he problem with such niche strate!ies is that they in*ol*e a number of risks$ the most ob*ious bein! that the niche can !et saturated

and competitors in*ade the se!ment' +s lon! as Ryanair was the only 5uropean no frills airline$ it did not ha*e to distinctly define its strate!ic position' It used to try and mi/ focus and cost leadership and was muEEy about which one it wanted' ,ut as soon as competitors started bloomin!$ it had to decide which strate!y it would stick to' -his was the *ery strate!y of Aichael 7JLearyC he decided to ruthlessly pursue cost leadership' -his strate!y was a success and by 1997$ Ryanair was floated on the )ublin 2tock 5/chan!e and on 9+2)+:' 5/pansion strate!y is another factor that enables Ryanair to position itself in the marketplace' -he company has been known to be an airline which launches new routes since its operation be!ins' In addition$ under the e/pansion strate!y$ company ac>uires ,uEE in =ebruary %($ % .' 2uch ac>uisition enables Ryanair to !ain immediate access to11 new =rench re!ional airports and makes the company the lar!est airline operatin! at London 2tansted +irport' In addition$ the company continues to e/pand by openin! two new 6ontinental 5uropean bases with low-fare fli!hts from Ailan ,er!amo and 2tockholm' In the year$ % .$ the company has been able to launch 7. new routes and carry o*er % million passen!ers in one month "Huly&' In addition$ the company website has been able to make the company position itself in the !lobal market' 2. Strategic Options

-he case study has pro*ided the problems and issues encountered by the Ryanair$ in spite of its strate!ies' 7ne of the problems is in terms of handlin! customers or tar!et market' In addition$ another problem is assurin! >uality ser*ice' In this manner$ the strate!ic option that can be used by the company for satisfyin! both internal and e/ternal customers and marketin! en*ironment is the use of total >uality mana!ement' -he industrial competitions in airline industry worldwide are at brisk$ makin! companies in this field across the !lobe search for e/tensi*e strate!ic mana!ement procedures that would keep them in on the business world' -he tasks of craftin!$ implementin!$ and e/ecutin! company strate!ies are the heart and soul of mana!in! business enterprise' + companyBs strate!y ser*es as the !ame plan mana!ement and is use to stake out a market position$ conduct its operations$ attract and please customers$ compete successfully$ and achie*e or!aniEational ob<ecti*es' -hus$ -:A as a strate!y is certainly appropriate for such situation'

-otal :uality Aana!ement is a philosophy of mana!ement that is dri*en by the constant attainment of customer satisfaction thou!h the continuous impro*ement of all or!aniEational processes "Robbins$ 1998&' It is a mana!ement philosophy that seeks to inte!rate all or!aniEational functions such as marketin!$ finance$ desi!n$ en!ineerin!$ production$ customer ser*ice$ and others to focus on meetin! customer needs and or!aniEational ob<ecti*es "#ashmi$ % &' It is known that e*ery or!aniEationBs primary purpose is to stay in business$ so that it can promote the stability of the community$ !enerate products and ser*ices that are useful to customers$ and pro*ide settin! for the satisfaction and !rowth of or!aniEation members' =rom this perspecti*e$ it can be said that -:A strate!y for achie*in! its normati*e outcomes is rooted in four interlocked assumptionsC >uality$ people$ or!aniEations$ and the role of the senior mana!ement "Da!eman$ 1995&'

-otal :uality Aana!ement is a planned procedure for satisfyin! internal and e/ternal customers and suppliers by inte!ratin! the business en*ironment$ continuous impro*ement$ and come throu!h with ad*ancement$ !rowth$ and safe!uardin! the cycles while chan!in! or!anisational culture' =urthermore$ -:A is an array of mana!ement system throu!hout the or!anisation$ !eared to ensure that the or!anisation to continuously attain or surpass customer re>uirements' -:A places stron! focus on process measurement and controls as means of continuous impro*ement "Ac9amara$ 1999&' Aoreo*er$ -otal :uality Aana!ement is infinitely *ariable and adaptable' +lthou!h ori!inally applied to manufacturin! operations$ and o*er the years only used in that area$ -:A is now bein! reco!nised as a standard mana!ement instrument$ <ust as applicable in ser*ice and public sector or!anisations like the airlines industries "#ashmi$ % 4&' -he -otal :uality Aana!ement "-:A& philosophy of mana!ement is customer-oriented' #ence$ the airline operations must be de*eloped in order to steadily deal with the impro*ement of their operation throu!h the on!oin! participation of all employees in problem sol*in! efforts across functional and hierarchical boundaries' -:A incorporates the concepts of ser*ice >uality$ process mana!ement$ >uality assertion$ and >uality perfection' 6onse>uently$ the airline company must be able to control all

transformation processes with re!ards to their operations and ser*ices to better satisfy customer needs in the most economical way' In order to apply the -:A to Ryanair especially to be used in its airline operations and ser*ices$ the mana!ement of the airline company must be able to accept the whole concept of the impro*ement$ which means that all the people of the airline company must a!ree that there is a need for a total transformation especially for the >uality of operations and ser*ices that the industry will be offered' =urthermore$ the mana!ement should be willin! to participate to all the impro*ement$ *alue each and e*ery ones opinion in order to achie*e total >uality mana!ement and pro*ide a total >uality operations and ser*ices to satisfy their customers' Aana!ers and e/perts disa!ree about how to effecti*ely implement -otal :uality Aana!ement to their or!anisations' 5*entually$ customer satisfaction has always been re!arded as the dri*in! force behind >uality impro*ementK others su!!est >uality mana!ement is achie*ed by internal producti*ity or cost impro*ement pro!rams' In other applications$ -otal :uality Aana!ement is re!arded as a techni>ue to introduce the conte/t of participati*e type of mana!ement "2chlenker$ 1998&' -hus$ the mana!ement should be more strai!htforward to pro*ide the potential role of applyin! the -otal :uality Aana!ement to their operations and ser*ices' In addition$ since -otal >uality mana!ement is based on internal or self-control$ which is embedded in e*ery element of the work system "technolo!y and people&$ the employees or the people behind the operation and ser*ices bein! offered to the passen!ers and customers of the airline must be able to determine the problems beforehand$ to anticipate its occurrences' 8ushin! problem sol*in! and decision-makin! down in the Ryanair especially to their operations and ser*ices may allow people who do the work to both assess and take remedial action in order to deli*er an operation or ser*ice that meets the needs of their customer' In applyin! total >uality mana!ement to airline operations$ they must be able to combine it with the core strate!y of the industriesK this does not mean that such airline companies must ha*e total chan!es' It is important that in application of the -otal :uality Aana!ement to the Ryanair operations and ser*ices they must also consider that an appropriate strate!y should be

used in order to employ a total >uality operations and ser*ices that would satisfy all clients and customers'