Case Study on Ryanair Airlines

Case Study on
Ryanair Airlines
Strategic Management in a Global
Context
0 | P a g e

Contents
1. Porter’s five forces framework...........................................................................................2
2. Value Chain Analysis.........................................................................................................4
3. Cultural Web.......................................................................................................................7
4. Implementation and Recommendation...............................................................................8
5. Conclusion........................................................................................................................10
1 | P a g e

Ryanair: the low fares airline – ‘always getting better’
In Europe, Ryanair is the biggest low-cost carrier airline company. It is the largest
airline as measured by international passengers carried in the world with more than 34 routes
and adding new routes to expand network. The company provides baggage assistance, flights,
travel insurance, hotel accommodation, and other services related to traveling mainly to the
customers of Europe. It provides low fares at all routes and no frills policy benefits of air
traveling with the growth of 25% every year. The case study given is to analyse the internal
and external forces to enable the examining overall attractiveness in the airline industry
operations of Ryanair and its capabilities with core competencies conducting value chain
analysis. It shows the focus on the company’s culture to identify it for the successful
implementation of strategy with the achievement of competitive advantage and growth of
business in future.
1. Porter’s five forces framework
In 1979, Porter’s five forces were established by Michael E Porter analysing the
company’s competitive position structured to evaluate and assess the strength. It helps in
examining the competitive attractiveness and intensity of a market identifying the power in
the situation of business. This framework provides the understanding of company’s strength
and its current competitive position to move forward. It makes the company to know its
weaknesses for improvement and avoiding mistakes understanding the potential profitability
of new products or services. The bargaining power of buyers and suppliers, threats of
substitute product or services, and new entrants consisted competition between the existing
rivals.
1.1 Low threat of Entry
Ryanair is provided by the benefits in economies of scale at large while reduction in
average costs generated in long-run. The deals were made over flight paths and air-time by
various other local airports with Ryanair. Further, Ryanair made deals related to costs
reduction and also restricted the available air traffic slot as suitable of limited routes to the
airport. The easy increase of entry barriers and outperforming competitors with the
company’s operation in more than 29 countries at 180 airports flying 1,611 routes more than
1,500 normal departures. In the airline industry, Ryanair profits with lowest fares are not
affected by the increase in fuel costs at global space. This is the reason company can charge
2 | P a g e

average lowest fare connecting in the UK with any airline low carrier. The new companies
are not setting the same prices as per the increase in entry barriers and Ryanair capital return
recorded 18% of profits. In the profitable industry of airline, the company’s over time in
long-run with the exploitation of economies of scale, there is a low threat of entry.
1.2 Low threat of substitute products or services
Ryanair considers substitutes like Eurostar ferries, trains and buses ranges of tickets
from around 50 to 180 euros of an individual ticket costing expensive and it takes longer-time
as well. Ryanair rates are much cheaper than Eurolines companies but the company do not
provide less time consumption and comfort for reaching at the destination. The flights prices
of Ferries and Ryanair are similar but Ferries are time consuming and not strong as a
substitute. The reason is not affecting the company instead of bringing changes in the future
with increase of global environmental awareness leading few passengers on planes traveling.
Another alternative can be leading customer dissatisfaction but the company’s ability of costs
reduction, and taskforce efficiently with new maintenance of low substitute products.
1.3 Bargaining power of customers (buyers)
Ryanair provides low customer satisfaction where the chance of losing its brand
loyalty is high in future. It shows that the given substitutes to flying and alternative of low-
cost airlines with high bargaining power of customers. The switching preferences of
customers forces buyers to down prices of the company looking at the opportunity of taking
advantage with cash flows growth experience and after recession time of operating profits.
The execution of policies such as friendlier websites and less overweight baggage fines was
started. Ryanair tried to win over the passengers with this plan changing its business model of
obsessive cost cutting from other costlier airlines. Ryanair thought of winning customers by
advertising increment over brand loyalty with the need of targeting social media either the
tendency of company’s customers leave due to change in high probability or prices over fares
because of bad customer service.
1.4 Bargaining power of suppliers
Market for production of planes is in hand of two producers, Boeing and Airbus
showing duopoly hence the high bargaining power of suppliers. Hence, the high prices
charged by these companies for planes in all airline companies with bargaining power
increment of Boeing helping Ryanair selling 737 models. So, this avoided paying the
3 | P a g e