Ryanair is one of the famous and most cost effective airlines in the Europe. The company has adopted the business model of Southwest airline of USA. The key objective of the business model is to gain cost leadership in the operating market. So, Ryanair has adopted the business strategy of cost leadership to gain competitive advantage among the customers. According to the needs and requirements of the customers, the company has adopted various strategies to fulfill the requirements of the low cost of the services. For this manner, company has slogan i.e. you get what you pay for. The slogan of the company shows that company is so much focused for the strategic considerations and provides the services at very low fair. Along with this, if any customer wants some additional leverage or benefit then he or she needs to pay for that specific good or service. So it is very effective strategy adopted by the Ryanair and by this strategy, the company is able to give the strong competition to other airlines in the operating market (Sabrautzki, 2010).
Based on the PETEL analysis of Ryanair, it is observed that the political factors affect the business of the company as there are various political conditions in the various countries. The political system of the country and the relationship with other countries has the big impact on the airline industry. Ryanair is the low cost airline and has limited number of destinations. The airline is abided by the political policies of the country. There is the liberalization in the airline industry due to European Union and by this; airline will make effective pricing policy and product differentiation.
Further, in the economical factor, the economic conditions have big impact on the airline industry. It has direct relationship with the trade cycle and the Ryanair is less affected with this factor as compared to other airlines. If the business activities of the airline are reduced due to economic instability then the numbers of passengers are reduced. So, it can be the cause of business loss for the airline. Economic crisis can be the reason of downfall of the passengers and reduce in the revenue. The economic recession has impact on the individual and families (Palepu et al, 2007).
In the next social factor, passengers always seek for the security in the airline and if they feel safe, they prefer to travel with the airline. In case of any fear of terrorist attack, passengers will not travel and the revenue of the will be affected. Ryanair is the Irish airline and the staff of airline is hospitable and polite. The airline always provides excellent quality air services to the customers. So passengers will definitely prefer the airline due to its good and low cost services (Azar & Brock, 2010).
In the technological factors, the Ryanair airline provides various innovative facilities to the customers i.e. facilities of audio songs and movie during the travel. The airline provides the facility on the LCD screens in the flights so; it can become great chance for the customers to enjoy with the latest technology. By the internet services, passengers can get complete information about the airline in terms of time and fair of the flights for a particular flight. Along with this, the airline has introduced latest and new software to provide the services and information. Having advanced technology, the business is expanding quickly and it is able to provide more effective services to the passengers (Morley & Parker, 2010).
Next factor is the ecological factor and due to increased awareness of environment, the passengers are more concerned about the services which they are getting from the airline. Environment issues are the main focus of for the global airline. Demand of the airline has been increased to reduce then negative impact of carbon footprint. There are large numbers of airlines and they fly in the various destinations. With the increased awareness of the environmental factors, there is the need to minimize the impact of carbon gases by the Ryanair airline.
Last but not the least factor is legal factor. IATA is the international air traffic agency and there are some rules made by this agency for the airlines. The airline has to follow these regulations for the benefits of the passengers. The airline has to face issues in terms of airport ownership as some are government owned and some are fully privatized. It can be the competitive advantage but the privatized airports have to face high operative costs. So, EU has provided the legislations for the rights of the passengers.
In case of bargaining power of suppliers, Boeing is the main supplier of the Ryanair. It is observed that the bargaining power of suppliers for Ryanair is increasing continuously. The switching cost of suppliers Ryanair is very high due to the expenses involved with the pilot retraining needs. Along with this, airline pilots have strong bargaining power in the industry due to the abundant supply of qualified and experienced pilots (Milmo, 2011).
From the appendix, it is observed that there is high bargaining power among the customers of Ryanair due to the availability of many other low cost airlines. The bargaining power of the buyers is increasing because most of the airlines companies are forced to cut the cost sue to strong competition in the market. Increased level of the prices are the another factor which affect the bargaining power.
In case of threats of substitutes, the substitutes of airline like Ryanair are railway networks, coach transport, sea transports and car rental firms. But the fairs of all these transports are costly then the tickets of Ryanair. Because of the selected approach of Ryanair, it is realized that low costs of flights are the main cause of competitive advantage. So, the threat of substitute is low for the Ryanair in the marketplace (Szymanski, 2011).
Next factor is threats of new entrants. The threats of new entrants for the Ryanair is relatively low because of the entry barriers for the entering airlines such as capital requirements, economies of scale, access to distribution channel etc.
The factor is competitive rivalry which is estimated to be low for the Ryanair in the marketplace. The reason is that there are enormous economies of scale which reduce the entry of new airlines. Ryanair is already largest and newest airline so; it is having competitive advantage with its marketing plans.
Based on the information in appendix, the internal analysis of the Ryanair can be done by the SWOT analysis. The factors in the SWOT are as follows:
In case of strengths of Ryanair, the airline has low cost as compared to any other European airline in the world. The production of capacity and traffic costs of Ryanair is less than other competitors. Further, the airline has low fares which are good on a profitable basis. The average fares of the Ryanair are lower than its competitors in the country Europe. Along with this, Ryanair has done many changes in its business including low cost revolution. Ryanair also opened up for unknown regions of Europe to air travel with its network (Muller, 2011).
Further, in case of weakness of Ryanair, although the airline is providing safe air travel at the low fare and high level of punctuality but still the brand of the Ryanair has performed poor in range of survey, polls and awards. Further, the earnings of Ryanair are very seasonal as it is relying on the strong northern hemisphere summer. Due to the business of seasonality, it has made many losses (Walsh, 2011).
In terms of opportunities, Ryanair is improving its quality of the passengers’ interactions with the airline. By the designed website with the attractive look, there is the facility of new mobile app, seating introduction etc. further, there is the opportunity of improving customer services so Ryanair has launched a business traveler product. Along with this, Ryanair has added more airports in the networks to increase frequency of operations.
In case of threats, there is the threat of accident, loss of focus and competitive response. These threats can affect the business of Ryanair in the marketplace. So, it is important for the airline to check the security measures so that it can provide safe travels to the passengers.
Objectives are those the company wants to achieve by the business activities. To aet the objectives for Ryanair, SMART criteria can be used. Objectives for Ryanair will be business, marketing and corporate. The corporate objective includes improving the profitability. Marketing objective includes increasing the market share by the marketing campaigns. For the Ryanair, strategy can be developed by the various techniques i.e. Boston consulting matrix to fulfill the objectives (Roosa, 2010).
Market segmentation can be described as the efficient distribution of the services to the appropriate and right customers in the market. In the competitive industry like airline industry, the company uses the segmentation in order to provide the service effectively to the customers. In case of Ryanair, the company has segmented the customer market based on the psychographic segment in the industry. The company segmented the customers based on two criteria i.e. based on the type of customers and based on customer quality (Witcher & Chau, 2010).
Based on type of customers-
In this criterion, there are three types of customers i.e. business, agents and individual or family. These customers are categorized based on the number of tickets they purchased or their loyalty towards the Ryanair. Business customers are those who buy more tickets more than any other customer and are more loyal towards the company. For instance, a large or small company is booking tickets for its employees. Further, individual or family customers are those who travel less frequently and can switch to other airline if they get cheaper fair. Now, the agents are the booking agents who book the tickets of airline based on the need of their own customers. So, the customers want the cheap flight then they will book the cheapest flight for them.
Based on the customer quality-
There are also three types of customers based on the quality i.e. low value, medium value and high value. Low value customers are those who cost the Ryanair the least but they contribute the lowest towards the profit for the company. Next are medium value customers who contribute towards the costs of the Ryanair as compared to the low value customers. These types of customers bring more profit for the company. Further, High value customers are those who may increase the cost of Ryanair and can bring more and more profit as compare to the rest two types of customers (Hoskisson, Hitt & Ireland, 2008),.
It is advised to the Ryanair that the company should target the business and individual customers. It is well known that Ryanair is the cost leader in the airline industry as the company offers cheapest price to the customers. The individual or family segment is very price sensitive among all the customer segments. Because of the availability of internet, customers are able to compare the price tickets of many airlines. The customers look at the websites of the airlines before booking the tickets for travelling. Further, business segments is suggested to be targeted sue to the current recession and all the companies are seeking to cut their cost. Senior managers of the company are travelling in the economy class and they used to travel in the business class before the recession. Ryanair should not target the agents because they have set commission and this can impact on the profit of Ryanair (Hitt, Ireland & Hoskisson, 2010).
According to the Philip Kotler, there are five value propositions i.e. more from more, more for same, the same for less, less for much less or more for less. The Ryanair is using the proposition ‘less for much less’. In this manner, the company is involved in meeting the requirements of the customers at very low prices. The company has good position in the airline industry. The operating cost of the Ryanair is very low so, the company is able to afford to sell the cheap tickets to the customers. There are many few people who need, want or can afford the best services of the airlines. So, by the cheaper cost, people are able to avail the best airlines services in Ryanair.
References
Azar, O.H & Brock, D.M., (2010), The development of strategy process research and the most influential articles and authors” in Handbook of Research on Strategy Process, F.W
Hitt, M.A, Ireland, D. R., & Hoskisson, R.E., (2010), Strategic Management: Competitiveness & Globalisation, Concepts, Cengage Learning
Hoskisson, R.E., Hitt, M.A. & Ireland, R.D., (2008), Competing for advantage, Cengage Learning
Milmo, D., (2011), Ryanair snubs Boeing by announcing jet design pact with China’s Comac, The Guardian, accessed on 20th July 2017 from https://www.guardian.co.uk/business/2011/jun/20/ryanair-designs-chinese-rival-boeing-737
Morley, D. & Parker, C., (2010), Understanding Computers: Today and Tomorrow, Comprehensive, Cengage Learning
Muller, C., (2011), Ryanair case study and strategic analysis: An analysis on the competitiveness and low-cost strategy of Europe’s leading low-cost carrier Ryanair, GRIN Verlag
Palepu, K.G., Healy, P.M., Geek, E. & Bernard, V.L., (2007), Business Analysis and Valuation: Texts and Cases, Cengage Learning
Roosa, S.A., (2010), Sustainable development handbook, (2nd), The Fairmont Press, Inc
Sabrautzki, S., (2010), Strategies, Mission, Vision, Goals, GRIN Verlag
Szymanski, A., (2011), The Competitive Analysis of Commercial Aircraft Industry, GRIN Verlag
Walsh, C.R., (2011), Airline Industry: Strategies, Operations and Safety, Nova Science Publishers
Witcher, B.J. & Chau, V.S., (2010), Strategic Management: Principles and Practice, Cengage Learning
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