Paulius BagdanskasU1271535Travel and Tourism management
University of HuddersfieldModule: BHH 4002 Strategic Management for the Hospitality, Travel and Tourism IndustriesModule leader: Dr Derek CameronDue date of work: 17/01/16Word count: 2500
Ryanair industry analysis – A case study report
Executive summary
This report looked into Ryanair’s industry, its position in the competitive industry. Ryanair’s
further development and improvement towards customers, SWOT and PESTEL analysis of
Ryanair, placing Ryanair in Porter’s generic strategies, use Porter’s five forces to identify
profitability in the industry and applying Christensen’s disruptive innovation model to Ryanair.
Table of Contents
1.0 Introduction……………………………………………………..1
2.0 Strategic Analysis……………………………………………….2
2.1 Ryanair’s Strategy……………………………………………...22.2 “Always getting better” programme……………………….......32.3 Ryanair’s PESTEL analysis…………………………………...42.4 Porter’s five forces analysis…………………………………...5 2.4.1 Porter’s five forces model……………………………......5
3.0 Strategic Choice………………………………………………...8
3.1 Ryanair’s SWOT analysis……………………………….........8 3.2 Porter’s generic strategies………………………………….....9 3.2.1 Porter’s generic strategies table……………………….....9
4.0 Strategic Implementation……....................................................11
4.1 Christensen disruptive innovation…………………………….11 4.1.1 Christensen’s disruptive innovation model………………11
5.0 Conclusion……………………………………………………..12
6.0 Recommendations……………………………………………...12
7.0 References………………………………………………….......13
8.0 Appendices…………………………………………………......14 A: Ryanair’s PESTEL analysis……………………………………15B: Ryanair’s SWOT analysis……………………………………...16C: Ryanair’s “always getting better” programme …….…………..17D: Ryanair’s 30 years overview…………………………………...18
1.0 Introduction
Ryanair - first Europe’s low cost budget airline that took over low-cost airline industry and
changed drastically since 1985, see Appendix D for Ryanair’s 30 years overview. Due to
copying the Southwest Airlines low fares model and strong leadership of Chief Executive
Michael O’Leary Ryanair is known for its strong cost leadership in the industry. As well,
Ryanair is known well for its bad reputation of poor customer service, working conditions
(Ryanair, 2015). However, in the recent years Ryanair is improving its image and making a lot of
new changes which helps to attract more travellers and to listen to the customers after many
years of poor reviews. Using PESTEL and SWOT analysis, Porter’s five forces and generic
strategies together with Christensen’s disruptive innovation Ryanair industry is going to be
broadly analysed by these indicators.
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2.0 Strategic Analysis
2.1 Ryanair’s strategyRyanair’s goal is mainly to become Europe’s greatest scheduled passenger airline by using more
offerings and improvement at low-fares. Ryanair aims to offer low-fares which would develop
more passengers’ numbers and at the same time concentrate on the quality and cost of the
operation in the challenging environment (Ryanair, 2015). Ryanair’s sustained strategy involves
few main key factors which are customer service and low fares. Ryanair’s strategy is to provide
finest customer performance within Ryanair’s competitor group. According to Association of
European Airlines and Ryanair’s announced statistics Ryanair has succeeded in less flight
cancellations, better on time punctuality, less lost bags compared to the other competitor airlines.
To make sure that small issues within airline, such as, loss of baggage and flight delay are
repaired fast and that staff is ready for this Ryanair keeps track of logs and everyday airline
organises conferences via calls with the staff at each of the Ryanair’s airport base (Ryanair,
2015). Ground operations staff are responsible for inspection of short flights and delays.
Passenger expectations fulfilment is achieved by different types of surveys, mystery-passenger
visit check and through online website.
Ryanair’s low prices on tickets are used to attract more demand especially from people who have
low budget and tend to use everything that is cheap and want to save money. Ryanair mainly
sells tickets for passengers’ for one way travel who are not planning to return to the original
destination and buy the ticket together (Ryanair, 2014). Ryanair determines the fare price
according to demand of the certain flight and by day count left till the departure day, for
example, the less days left till the departure the higher price will be. When the demand of the
flight is high Ryanair increases the price of the fare to be profitable. As well, Ryanair from time
to time introduces promotional fare campaigns which attract more people (Ryanair, 2015).
Main competitors of Ryanair are Lufthansa, British Airways, Alitalia, EasyJet and Air France.
Fare competition amongst airlines appears within increased capacity, price discounting, ticket
sale promotions and price matching. Little variations in passenger flows and pricing may have a
negative impact on airlines finances and operations. Consequently, big competition between
airlines could influence airline potential to expand route map, open new bases, and help to
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increase passengers’ demand which could be unfavourable to airline market share
(RyanairHoldingsPlc, 2015).
2.2 “Always getting better” programmeRyanair in 2013 introduced customer experience programme called “Always getting better”
AGB, see Appendix C. This Ryanair’s strategy applied to management team, 9,500 aviation staff
and entire Ryanair’s board to listen to the customers wishes in order to fix Ryanair’s bad
reputation over the years along with, better flight experience, various problems which passengers
do not like, deliver new online booking platform and deliver new services by keeping what is the
best for the Ryanair on time flights and low fares (Ryanair, 2015).
Especially, Ryanair improved customer reputation regarding answering and listening to
feedbacks that customers give to Ryanair through “customer suggestions” website and the most
important factor is that everything is answered by chief executive Michael O’Leary (Ryanair,
2015). As well, Ryanair policies changed which were the same for over twenty years. Customers
desired second carry-on luggage and assigned seats and Ryanair implemented it. More
importantly, Ryanair renewed “Family extra” and “Business Plus” services, introduced up to date
mobile app for people to make it easier to buy tickets, re-designed Ryanair’s website which was
very poor and had many difficulties, developed “quiet flights”, reduced luggage and airport fees
and brought back relationship with global distribution system which is connected to corporate
travel agents (Ryanair, 2015).
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2.3 Ryanair’s PESTEL analysisPESTEL analysis for Ryanair assists with producing opportunities or seeing what threats disturb
Ryanair’s operations in the external environment and what is the situation of the company
(Yuksel, 2012). PESTEL consists of political, economic, social, technological, environmental
and legal factors, see Appendix A for Ryanair’s PESTEL analysis.
Political factors of Ryanair are: regional government’s regulation on national employment
contracts with Britain and France and taxes, European Union’s regulations and restrictions on
staff welfare and emission fee interrupts Ryanair’s strategy (Ryanair, 2015). For Ryanair all
regulations from EU have to be reviewed for Ryanair’s strategy in order to evade from negative
effects on the airline.
Economic factors follow use of secondary airports to escape from extra costs and charges in the
primary airports. If exchange rate and fuel price rises then Ryanair’s operation costs go up. Since
2015 Ryanair’s growth rate last time was affected enormously in 2008 by economic downturn.
Primary Ryanair’s social factors are good relationship with staff, “always getting better
programme” created in 2013, public image history of providing bad customer service, new IT
hub and Ryanair labs for improving the image or the airline (Ryanair, 2015).
Main technological factors are use of internet, online check-in saves time for customers, new
improved website without no more of unfair advertisement and new aircraft model contributes to
cut emission and cost charges.
Most important environmental and legal factors consist of harsh CO2 management, lower
emissions and noise due to new aircraft model, bad working conditions and violation of media
have implications on law. Also, acquisition of Aer Lingus was rejected more than three times by
UKOFT and EC (Ryanair, 2015).
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2.4 Porter’s five forces analysisMichael Porter in his first chapter of 1980 competitive strategy book identified that five forces
establish the structure of the competition demonstrating the reason of lucrativeness in the
industry (Porter, 2008). According to Porter (1980, p.3) identifying all five forces together the
potential of profit in the industry can be established. If the five forces are extremely intense and
especially in industries, such as, hotels and airlines then for a firm to achieve positive returns on
investment is really hard. Porter’s five forces consist of threats which are caused by power of
suppliers, power of buyers, the intensity of rivalry between competitors, substitute products and
possible new entrants, and for Ryanair it is shown in Figure 1. In this situation for Ryanair it
shows if it is worth entering budget airline industry (Dobbs, 2014).
2.4.1 Porter’s five forces model
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The Threat of New Entrants
To enter low fares industry when there is a strong cost leader Ryanair is very difficult. In order
for new entrants to compete in the strong European market high entry barriers are necessary,
such as, capital requirements, price and access to distribution channels to establish high
economies of scale (Ryanair, 2015). To conclude, the treat of new entrants for Ryanair is low.
The Bargaining Power of Buyers
There is high bargaining power of buyers because switching to different airline is easy and there
is no need of extra expenses (Ryanair, 2015). Those budget airline examples are, such as, Virgin
Express, EasyJet and Aer Lingus. Particularly in the cost leadership strategy each buyer takes up
significant position. The main trouble is that at the same time rise in competitor numbers
participating in offering cheap prices is involved.
The Threat of Substitutes
Substitutes, such as, sea transport, railroad networks, busses and rent-a-car companies are the
services that generate relative value for customers same as airline industry. Train services are the
most notable in terms of threat for the airlines because other alternatives are too costly (Ryanair,
2015). Europe is known for well-established railroad network, especially “EuRail” which
connects west, central and southern part of Europe and the main barrier between airlines is the
travel time. To travel to a destination with a plane takes less time than with a train and this factor
for trains brings higher transaction and opportunity costs. To summarise, the threat of substitutes
for Ryanair is low.
The Bargaining Power of Suppliers
There is high bargaining power of suppliers in the industry and there are mainly two major
aircraft producers in Europe which are Boeing and Airbus. The bargaining power of suppliers is
high because switching costs are high and meaning that high capital investments together with
training pilots from the beginning are necessary (Ryanair, 2015). Ryanair’s primary supplier is
Boeing, though Ryanair any time can modify their suppliers because of positive cash flow, for
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example, Ryanair tried to purchase Airbus aircrafts but later they cancelled their plans and
ordered 200 new Boeing aircrafts in 2014 (O’Hora, 2014).
The intensity of Rivalry between competitors
The intensity of rivalry between competitors is medium though the threat of entry is high
because numbers have risen in competitors trying to copy Ryanair’s cost leadership. Ryanair
command as a leaders of budget airline industry (Ryanair, 2015). The development of airline
industry is feasible because barely 30% of budget airline’s market share takes part in the entire
airline industry. There is a little chance of possible difficulty for Ryanair trying to broaden its
strategy.
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3.0 Strategic Choice
3.1 Ryanair’s SWOT analysisSWOT analysis occupies significant part in company’s strategic business planning and it is very
important to summarise SWOT for companies at least once a year in order for firms to stay
strong (Simoneaux & Stroud, 2011). See Appendix B for Ryanair’s SWOT analysis.
Ryanair’s main strengths are robust brand name of low-fare airline, broad Ryanair network, high
operating margins, economies of scale for being the greatest low price airline in Europe, best
current low cost strategy provides bigger profit, and new aircraft model allows to save costs on
fuel and maintenance (Ryanair, 2015). Also, Ryanair’s single type fleet helps to maintain lower
maintenance and training costs and one of the most fundamental factors of Ryanair’s strength is
being the first created budget airline in Europe (RyanairHoldingsplc, 2015).
Primary Ryanair’s weaknesses follow use of secondary airports which for customers’ point of
view is too far from city centre, reputation from media and news about providing bad service,
large level of innovation is needed. Moreover, Ryanair’s profit is based mainly on seasonality
and working conditions for employees are not perfect which makes them less loyal to the airline
(CAPA, 2014).
Ryanair’s main opportunities are social media expansion, use of ancillary product, technology
advance for new aircraft models and internet, improved customer service in 2013. Also, “always
getting better” programme success and popularity of Ryanair’s website brings advertising
promotion and revenue (Ryanair, 2015).
The most significant threats for Ryanair are the risk of security due to terrorism, regulations from
local and EU government, legal issues with European Commission and Irish government.
(Ryanair, 2015). As well, risk of forecasted economic downturn, threat of euro exchange rate
against US dollar, rising fuel price and competition in low-cost budget industry.
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3.2 Porter’s generic strategiesMany academics around the world to date follow Michael Porter who wrote a book about
competitive strategy which is used widely in the strategic management (Miller and Friesen,
1986). Porter (1980) stated that competitive strategy is the tool for allocating suitable
competitive position in the industry which by the companies may be upgraded or destroyed
subject to businesses alternative of the strategy. Michael Porter obtained a conceptual model of
the three generic strategies which are differentiation and focus strategies and cost leadership
strategy (Eldring, 2009). Michael Porter’s main aim in competitive strategy is to categorise and
identify unsuccessful and successful firms and place them either in differentiation and focus or
cost leadership (Porter, 1980, p.40). If the company is not going to be allocated in one of those
strategies then company automatically will operate poorly and will be recognised by phrase
“stuck in the middle” (Eldring, 2009). Ryanair’s position in Porter’s generic strategies is shown
in Figure 2.
3.2.1 Porter’s generic strategies table
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Ryanair belongs to Cost Leadership strategy and is a leader of low-cost fares in the Europe.
Companies which use cost leadership strategy set goal to become low-cost manufacturer in the
industry. Framework of the companies’ structure in the industry is important because sources of
cost advantage differ all the time. Low cost companies attempt to make full use of and derive
benefit from sources of cost advantages when companies sell standardised product within wide
rage (Porter, 1980). Generally, cost leadership strategy is set to be more appropriate for big
companies which have more power and strength over operating expense costs and resources
(Salavou, 2015). When Ryanair became cost leader in its industry then the company took over
the control of being dominant with the prices and performance. Firms who are cost leaders
benefit from rivals which have prices lower or at the same level because they get extra profit for
that and it opens the way for the barriers to enter the market (Miller and Friesen, 1983). In fact,
Cost leadership companies cannot avoid the competition coming from companies with
differentiation strategy because if the product which is to be sold is not suitable by consumers,
cost leadership firms sell products cutting them which however repeals the cost advantage (Akan
et al, 2006). According to Porter (1980) the only way how cost leadership functions is by letting
only one company take over the industry by developing into cost leader in the whole industry.
The problem is that if another company aims for the cost leadership then the rivalry between
those two companies gets very intense that the outcome of lucrativeness in the industry is
catastrophic (Porter, 1980) (Eldring, 2009).
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4.0 Strategic Implementation
4.1 Christensen disruptive innovationA disruptive innovation in business is an innovation that establishes value network and new
market and later in time disrupts current value and market network taking over as a market leader
(Christensen, 2015). Ryanair belongs to low end disruptions in the Christensen’s disruptive
innovation mode, which is shown in figure 3. For example, full service airline such as British
Airways are being disrupted by budget airline Ryanair. Another example can be Amazon giant’s
disruption to book retailers and example of Dell disrupting big brands by its low cost.
4.1.1 Christensen’s disruptive innovation model
Figure 3: Christensen’s disruptive innovation model
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5.0 Conclusion
To sum up, in the recent years Ryanair improved in customer service, expanded route map,
updated their website, and finally listened to their customers after years of poor customer
reviews Ryanair’s image is improving. Due to Michael O’Leary’s changed strategy focusing
more on the customers and keeping low fares at the same helped to get away from closest
competitor “EasyJet”. Also, digital innovation, improved boarding flight experience and “always
getting better” programme for Ryanair helped to bring more customers and to prove to people
that Ryanair is changing. Ryanair has a strong secure cost leadership position in the industry and
it is hard to enter the market for new entrants.
6.0 Recommendations
Ryanair management should launch effective programs and initiatives in order to become “greener”
Seek to protect themselves from oil prices Exploit tourism trends Improve in-flight food service More leg room for passengers Reduce costs Continue improving “always getting better” programme Ryanair should look to develop capabilities to move into the long haul sector
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7.0 References
Akan, O., Allen, R. S., Helms, M. M., & Spralls, S. A. (2006). Critical tactics for implementing
porter's generic strategies. Journal of Business Strategy, 27(1), 43-53.
doi:10.1108/02756660610640173
CAPA (2014). Ryanair SWOT: low costs remain the key strength, even as customer service
enhancements take root. Centre for aviation. Retrieved from:
http://centreforaviation.com/analysis/ryanair-swot-low-costs-remain-the-key-strength-even-as-
customer-service-enhancements-take-root-186145
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015).What is disruptive innovation?.
Boston: Harvard Business Review. Retrieved from: https://hbr.org/2015/12/what-is-disruptive-
innovation
Dobbs, M. E. (2014). Guidelines for applying porter's five forces framework: A set of industry
analysis templates. Competitiveness Review, 24(1), 32-45. doi:http://dx.doi.org/10.1108/CR-06-
2013-0059
Eldring, J. (2009). Porter´s (1980) generic strategies, performance and risk. an empirical
investigation with german data (1. Aufl. ed.). DE: Diplomica Verlag GmbH. Retrieved from:
https://library3.hud.ac.uk/
Miller, D., & Friesen, P. H. (1986). Porter's generic strategies and performance: An empirical
examination with American data: Part 1: Testing porter. Organization Studies,7(1), 37-55.
Retrieved from: https://library3.hud.ac.uk/
O’Hora, A. (2014). Ryanair places $22bn order with Boeing, buys up to 200 new aircraft. Irish
Independent. Retrieved from: http://www.independent.ie/business/irish/ryanair-places-22bn-
order-with-boeing-buys-up-to-200-new-aircraft-30564972.html
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors.
New York;London;: The Free Press.
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Porter, M. E. (2008). THE FIVE COMPETITIVE FORCES THAT SHAPE
STRATEGY. Harvard Business Review, 86(1), 78-93. Retrieved from:
https://library3.hud.ac.uk/
Ryanair (2014). Ryanair annual report 2014. Retrieved from: http://investor.ryanair.com/wp-
content/uploads/2015/04/2014-Annual-Reports-Annual-Report.pdf
Ryanair (2015). Ryanair annual report 2015. Retrieved from: http://investor.ryanair.com/wp-
content/uploads/2015/07/Annual-Report-2015.pdf
Ryanair Holdings plc (2015). Ryanair Holdings, PLC SWOT Analysis. Marketline, 1-9.
Retrieved from: https://www.ebscohost.com/academic/business-source-complete
Salavou, H. E. (2015). Competitive strategies and their shift to the future. European Business
Review, 27(1), 80-99. doi:10.1108/EBR-04-2013-0073
Simoneaux, S. L., & Stroud, C. L. (2011). BUSINESS BEST PRACTICES: SWOT analysis:
The annual check-up for a business. Journal of Pension Benefits, 18(3), 75. Retrieved from:
https://library3.hud.ac.uk/
Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), 52.
doi:10.5539/ijbm.v7n24p52
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8.0 Appendices
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Appendix C: Ryanair’s “always getting better” programme
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Appendix D: Ryanair 30 years overview
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