Business strategy can be an essential element of a firm's business design and is a essential player in aiding the firm drive itself to accomplish its mission. By using a clear business strategy a firm can derive its position in the permanent and generate a competitive advantage searching for itself. In this essay we explore the business enterprise model of Ryanair and examine their strategy. Ryanair can be an Irish low priced airline headquartered in Dublin founded in 1985. It works 181 aircrafts over 729 routes across European countries and North Africa from 31 bases. Ryanair has seen large success in the recent years because of its low-cost business model and is among the most world's major airline in terms of international traveler volumes. Taking Porter's general business strategies under consideration, Ryanair performs a cost-leadership technique to drive itself into attaining its mission to be the leading Western low-cost carrier (LCC). Throughout this essay the business enterprise strategy of Ryanair will be analysed and the sustainability of the model examined.
Ryanair's aim is 'to solidly create itself as Europe's leading low-fares slated traveler airline through continued improvements and broadened offerings of its low-fares service' (Ryanair). Considering their objectives and mission, Ryanair's decision on their cost-leadership strategy was based on a few main factors which can be reviewed below.
A major impact was the deregulation of the airline industry in 1978 which removed authorities intervention within the European continent. Beneath the new guidelines, routes and fare decisions were created by individual airlines which supposed that they could compete on other factors besides food, cabin crew and frequency. As a result of deregulation, a huge number of new airline start-ups surfaced within the European union and competition among airlines increased dramatically resulting in downward price pressures. Ryanair was established to consider full advantage of these market conditions. By offering low prices, Ryanair came into an enormous and virtually endless market.
Having seen the major success of the low cost carrier Southwest in the United States, Ryanair made a decision to follow in their footsteps by establishing a LCC for the Western continent that targeted fare mindful leisure travellers and regular low cost business travellers. By doing this Ryanair became the first low-fare airline in Europe. However, they required the Southwest model further by offering no beverages and snacks whatsoever and abolishing the frequent flyer program which Southwest up even today offers its customers (Boesch 2007).
The evaluation of Porters five pushes influenced Ryanair's selection of a cost-leadership strategy, as the risk presented by new entrants and the threat of substitutes could hinder their success. The threat of new entrants is high within the aviation industry which recommended that low fares would help drive away any more competition. The risk of substitutes to Ryanair had to also be carefully evaluated. Their major market, Europe, acquired the availability of broadband trains and car holidays. For Ryanair to be successful, prices needed to be low to catch the attention of the general public, and avoid strong competition from substitutes like Eurostar.
As Europe's largest low fare airline, Ryanair's competitive benefit remains in their ability to keep as cost leaders; providing the least expensive fares to its customers. This dictates that the company must minimise its own costs to ensure that they are in a position to offer customers the service at a price below their direct opponents. This leads us to consider some key useful strategies which directly help Ryanair towards their ultimate goal 'to be Europe's leading low fares airline' (Ryanair).
The marketing strategy could very well be the most clear and significant efficient strategy of Ryanair. Low fares are designed to stimulate demand, appealing to fare-conscious travellers, those and also require used alternative forms of travelling or even those and also require not travelled in any way. Penetration pricing as it is called helps gain market talk about and simply, more customers equals more revenue (Wheelen & Craving for food 2006). Tickets are almost only sold on their website 'www. ryanair. com' which very importantly keeps sales costs to the very least since very few phone operators are employed and computers have the ability to cheaply deal with all functions of sales. With ever increasing ease of access of the internet internationally anybody with internet access can buy flight tickets from Ryanair, so syndication practically manages itself through this medium. Ryan Air relies on low cost special offers and recently has concentrated on the 'One million seats at one pound' which is usually promoted through their web page, countrywide press and bulletin planks. It is the simplicity of this promotion which helps maintain costs low since expensive advertising businesses can be completely prevented and advertising can be handled in house.
Ryanair's businesses strateg1y determines the way the airline will deploy its resources and the procedures it'll operate by. To help keep costs low they operate a 'no frills' service onboard aircraft. This implies the fare only includes the airfare. There are however a number of other procedures directly related to a no frills service. These include ticketless boarding, unallocated seats, one school of travel, charges for check-in baggage, no refund policy, basic seats (to increase aircraft capacity) and charging for any additional service. All this significantly reduces costs to Ryanair. The Achilles heel of Ryanair is their increased aircraft utilisation through super quick turnaround times. Essentially this means the aircraft spends hardly any time on the floor, they achieve this through their real human resource procedures and by having none or very little cargo in the baggage hold to increase loading and unloading of the aircraft.
Logistics strategy deals with the movement of products into and out of Ryanair. Again there is certainly heavy emphasis on cost saving and reducing measures. Ryanair take a flight to secondary airports which are possibly much further from the City centre but accessible enough by other types of ground travel. At these airports Ryanair have the ability to discuss extremely aggressively and demand the lowest getting and handling fees. Additionally Ryanair is usually able to gain financial assistance with marketing and promotional campaigns at these international airports.
As cost innovator Ryanair strives to undercut all its competitors but this means very low income per fare and requires maximum utilisation of its resources. Luckily their financial insurance plan ensures they could still make money handsomely from very cheap fares. The aim is to breakeven on fares but to make their gains out of ancillary charges and commissions of their associates. Ryanair has a number of affiliates such as Hertz car local rental, Acumus insurance and reservation. com most of whom are publicized conveniently on the Ryanair website. Since the website has high web site traffic its partners have the ability to get in touch with Ryanair's huge client base and are ready to pay good commissions to the company because of this privilege (IdeaWorks). Ryanair also generate profits from advertising up to speed the aircraft. Ancillary earnings is made from many of the services that traditional airlines wouldn't charge for, such as large baggage into the cargo carry, allocated seating, snack foods and beverages.
Ryanair's strategy when purchasing airplane is to buy new, standard aircraft. This is beneficial for a number of reasons which straight help cost keeping measures. Firstly, by being in a position to order same airplane in bulk they could negotiate a better price per aircraft. Secondly, uniform aircraft imply that there are potential personal savings in staff training; air stewards being more acquainted with all airplane and maintenance will be simpler. Finally by purchasing new, the business has safer, more fuel efficient planes with lower maintenance costs. Safer plane also means better consumer self-confidence, equating to more fare sales.
Furthermore Ryanair aggressively hedge and fix as many of the costs as possible, such as oil and aircraft prices so they aren't at the mercy of future price fluctuations that could adversely affect success (Stone 2008).
The human resource plan is again immediately related to minimizing costs. Employees are anticipated to cover their own uniform and equipment. Training given is the mandatory minimum and staff utilisation is probably the highest in the airline industry. Many staff are employed on performance deals and those who do not meet their anticipations are readily changed. Staff are also expected to take on a number of tasks, cabin staff will also clean the aircraft prior to the next service, check in staff assist in boarding the aircraft etc.
Ryanair has efficiently experienced years of progress both in the number of its aircrafts and passengers since its kick off. However, with the global economic climate recently enduring its greatest crisis in more than 70 years, existing business models of many aviation firms are approaching under great pressure. As this financial downturn bankrupts LCCs like XL and Zoom with more expected to follow, the question is whether Ryanair's cost-leadership strategy is ecological or much less it continues to offer lower fares when confronted with high costs. Although Ryanair has put up losses and also other aviation companies for the latest one fourth, it is expected to emerge out of this downturn with fewer competitors because its 1. 8 billon balance sheet is one of the best in the industry. On top of that, as the market meltdown took its toll, traditional airlines aren't able to slice fares and the threat of new LCCs is practically eliminated because of the lack of funding. Although Ryanair encounters competition from substitutes like Eurostar, it is at an edge because of Eurostar's limited spots.
Ryanair is sticking to its mantra, when the heading gets troublesome, sell more seats for almost nothing at all (Symonds 2008). By offering low fares, Ryanair expects passengers to operate down to the reduced cost airlines rather than stop flying completely. This craze appears accurate so far predicated on passenger amounts as recession causes an incredible number of passengers to concentrate on price (Waterman 2009). On top of that, the latest information from The Western Low Fares Airline Connection participants show a 15. 7% year-on-year expansion in the number of passengers for 2008, indicating that the LCC model is robust, even in times of crisis (Latest 2009). As a result, there is absolutely no uncertainty that Ryanair appears poised for considerable profits and passenger progress in the returning years. However, to be able to compete with other LCCs and maintain its continued market share expansion in the foreseeable future, Ryanair needs to improve its poor customer relationships.
The sustainability of Ryanair's cost leadership strategy also relies largely on the price of oil and exactly how effective the firm is in trimming costs in order to keep offering low fares. Based on the firm's latest financial record, 'Ryanair will enjoy significantly lower oil costs because of their recent hedging programme, when the majority of their competitors already are hedged at much higher prices. These lower prices will drive Ryanair's traffic progress, maintain high weight factors and catch market talk about from higher cost fuel surcharging competition' (3rd One fourth Results 2009). In order to spend less, Ryanair projects to close all its airport check-in desks by the end of 2009 and also have passengers check-in online instead. Other cost saving methods not yet carried out include charging customers for using toilets on airplanes (Lalor 2009). These cost chopping ideas are not very popular among consumers and this means that Ryanair needs to improve its already tarnished brand image in the future which it had achieved through negative press reporting and misleading adverts.
The current strategy at Ryanair is likely to work so well that despite the recession Ryanair's CEO has underlined the firm's determination to expansion. The company is likely to expand at 20 percent per annum because of a 180 aircrafts on order from Boeing. These growth plans for the future will require the company to increase its landing slots at airports and recruit more employees. Presently Ryanair has limited usage of landing slots in major airports and the extra airports are long distances from city centres which could make it less attractive in the foreseeable future. However, a impressive cut in plane tickets by other European airline carriers due to recession is creating enormous opportunities for Ryanair, as much major airports contend to reduce charges to be able to entice Ryanair's growth (3rd Quarter Results 2009). Availability of skilled personnel shouldn't be a difficulty for Ryanair credited to recent high unemployment levels. However, Ryanair needs to improve its current low degree of empathy for employees if it's to maintain them in the future.
Even though Ryanair's cost leadership strategy is robust and it looks set to provide them well in the future, there are a few key areas within the business that can be improved to improve the firm's success and brand image.
Ryanair is definitely criticised for most aspects of its poor customer relations. Based on the Economist, Ryanair's "cavalier treatment of passengers" acquired given Ryanair "a deserved reputation for nastiness" and that the airline "has become a byword for appalling customer service. . . and jeering rudeness towards anyone or anything that gets in its way" (Aviation 2007). If Ryanair is to maintain its large customer platform, it requires to ensure that it acknowledges its customers' concerns and keeps a service centered attitude at all costs. Ryanair needs to spend money on servicing customers better by giving a non-premium contact quantity, bettering its non user-friendly website, and simplifying the conditions and conditions of the journey service. Ryanair also needs to create a recurrent flyer program to determine a fixed customer foundation and encourage customer devotion.
Ryanair is notorious because of its high staff turnover which negatively impacts its reputation as an employer. Over usage of employees, poor remuneration package, and minimal training are additional critical what to be considered by Ryanair if it's to retain employees in the future. Ryanair must understand that although it happens to be possible to replace outgoing employees, but as time passes Ryanair's overall image will be tarnished. Resultantly, bringing in new employees could become impossible and this will impede their expansion strategies. Ryanair should incorporate a flexible benefits package solely designed to improve staff morale such as versatile working hours and further holidays. To improve its image amongst employees, training whatsoever employee levels must include contact with similar techniques and methods that help promote the introduction of a uniform company personal information.
Following huge success in European countries, Ryanair should consider introducing low cost transatlantic flights to support its expansion programs and attain a more substantial customer platform. With a higher demand for certain routes like London-New York and room for negotiation in airplane prices and airport slots due mainly to the current financial weather, it is an ideal time to help expand experience the rewards of the price leadership strategy that has served Ryanair so more than the years.
Ryanair's model appears set to survive the current commercial downturn through its lower costs and significant cash amounts. No airline is way better placed in European countries than Ryanair to operate through this downturn. It will therefore continue to grow, by reducing fares, taking market talk about from opponents, and broadening in markets where competition either withdraw capacity or go bust (Monaghan 2008). By firmly taking the recommended advancements into consideration, it appears like Ryanair's cost leadership strategy seems well suited for the near future.
Word Count number: 2, 493
Also We Can Offer!
- Argumentative essay
- Best college essays
- Buy custom essays online
- Buy essay online
- Cheap essay
- Cheap essay writing service
- Cheap writing service
- College essay
- College essay introduction
- College essay writing service
- Compare and contrast essay
- Custom essay
- Custom essay writing service
- Custom essays writing services
- Death penalty essay
- Do my essay
- Essay about love
- Essay about yourself
- Essay help
- Essay writing help
- Essay writing service reviews
- Essays online
- Fast food essay
- George orwell essays
- Human rights essay
- Narrative essay
- Pay to write essay
- Personal essay for college
- Personal narrative essay
- Persuasive writing
- Write my essay
- Write my essay for me cheap
- Writing a scholarship essay