Ryanair group

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Marketing Strategy Prof. Dr. Joachim Büschken

European Airline Industry: Ryanair in 2003


Group 5: Desoutter, Adrien Hamburger, Sebastian Koths, Gerhard Patzki, Kirsten Strobl, Julia Santiago, Maria Cristina

The following paper presents an analysis of the sustainable competitive advantage of Ryanair and the question why other airlines are not able to imitate Ryanair’ssuccess easily. Therefore, the text is separated into five parts. First of all Ryanair’s business model is revealed by analyzing its capabilities and core competences before the second part will shed light on Ryanair’s financial statement. Subsequently, this business model is compared to those of other low-cost carriers and the gaps to those of the flag carriers are highlighted. Finalizing the caseanalysis, possible opportunities and threats Ryanair might face within the future are presented. In order to get a better understanding of the different business models of Ryanair, its competing low cost carriers (LCC) and the traditional flag carriers, this text points out its differences by two main dimensions: the regional area each airline is operating in and the customer segments it is targetingon. Ryanair’s strategic intent is to maintain its leadership position in the low-cost airline sector. To keep this position in the highly competitive market, the interaction of Ryanair’s capabilities and resources, which lead to their core competences, can be seen as the leading edge of their strategic development. Ryanair applies a unique cost reduction strategy; whereby cost control is seen asthe total priority. By cutting different operating costs (personal, maintenance and ground services), minimize turnaround time and maximize aircraft utilization, Ryanair is able to offer the lowest rates. Through all their operations, Ryanair tries to make use of simple processes. Staffing, transport without commodity as well as easy internet booking are just some examples of keeping the processesas simple and cost efficient as possible. Moreover, Ryanair benefits from its high brand awareness which can be seen as a result of their first-mover advantage as well as their promise to grant the “lowest price in the market”. Ryanair concentrates on a clear offer. Thus, it focuses on a small geographic coverage for a particular segment on the market. Regarding its basic resources like thehomogenous aircraft fleet, its main bases (physical resources), different shareholders (financial resources), employees (human resources) and their knowledge and skills (intellectual capital), Ryanair is quite similar to its low-cost competitors. But due to its specific capabilities and core competencies Ryanair has been able to maintain its competitive advantage over the last decade. Ryanairexemplifies most of the characteristics of a low-cost strategy concentrating on a particular market segment rather than the overall market. Thereby, Ryanair focuses exactly on its tree core competences. In order to keep the costs down, the airline maintains a no frills strategy whereby all frills are removed from the service in order to generate a cost advantage. Ryanair is even one step ahead and chargesfor any additional service onboard. According to Ryanair’s profit and loss statement of 2002 these ancillary revenues account for around 12% of the total operating revenues. Furthermore, Ryanair has a special route policy strategy. Therefore, routes are basically set up to secondary cities which are usually not served by incumbent airlines. Therefore, slots are easier to get, less expensive androute charges can be avoided by their point-to-point service on short-haul routes to less significant and restricted airports. Furthermore, Ryanair only operates on profitable routes and planes do not serve as feeders of complex hub&spoke systems as flag carriers do. Last but not least 1

Ryanair has a very efficient low cost strategy. Ryanair benefits from its economies of scale for all...