Analysis of Ryanair's Competitive Advantages

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A brief about Ryanair's Strategy and competitive advantages.

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Analysis of Ryanair's Competitive Advantages

  1. 1. <ul><li>Ryanair's </li></ul><ul><li>Competitive Advantages </li></ul><ul><li>Last Update:15.Sep.2009 </li></ul>
  2. 2. About Ryanair <ul><li>Founded in 1985: </li></ul><ul><ul><li>2 Aircrafts </li></ul></ul><ul><ul><li>Carried 82,000 Passengers </li></ul></ul><ul><li>1991: Michael O’Leary Appointed </li></ul><ul><li>Transformed to Low Cost Airline </li></ul><ul><li>1997: Floated on Dublin SE and Nasdaq </li></ul><ul><li>Rapid Expansion (2008 Figures) : </li></ul><ul><ul><li>169 Aircrafts </li></ul></ul><ul><ul><li>794 Routes </li></ul></ul><ul><ul><li>148 Destinations, Across 26 European Countries </li></ul></ul><ul><ul><li>58 Million Passenger Annually </li></ul></ul><ul><ul><li>Source: European Low Fares Airline Association,2009 </li></ul></ul>
  3. 3. Key points from the article Ryanair’s Integrated Business Strategy Resource-Based View (Inside out) Marketing View (Outside in) Variety of Destinations &Routes Competitive Advantage Competitive position Low Cost Airline Business Model (Passes the costs directly to Ryanair’s customers)
  4. 4. External Analysis: Porter’s Five Forces Threat of New Entrants HIGH Threat of Substitute Products MEDIUM Buyers’ Bargaining Power LOW Suppliers’ Bargaining Power LOW Industry Competitors Rivalry Among Existing Firms HIGH
  5. 5. External Analysis, PEST Analysis <ul><li>POLITICAL(Low impact) </li></ul><ul><li>Inside Europe </li></ul><ul><li>Political stability </li></ul><ul><li>Outside Europe </li></ul><ul><li>Middle East </li></ul><ul><li>OPEC ,a political force </li></ul><ul><li>ECONOMICAL(Low impact) </li></ul><ul><li>Inside Europe </li></ul><ul><li>Stable economy </li></ul><ul><li>Stable consumers </li></ul><ul><li>Outside Europe (undeveloped market) </li></ul><ul><li>non- stable economy </li></ul><ul><li>non -stable </li></ul>
  6. 6. External Analysis, PEST Analysis(Cont’d) <ul><li>SOCIAL(Highly Impact) </li></ul><ul><li>Changing consumer demographics </li></ul><ul><li>Fluctuating consumer preferences </li></ul><ul><li>Technological(Low impact) </li></ul><ul><li>Aircrafts </li></ul><ul><li>Supply chain software's programs </li></ul>
  7. 7. Ryanair: Value Chain <ul><li>Infrastr. </li></ul><ul><li>HRM </li></ul><ul><li>Tech. Dev. </li></ul><ul><li>Proc. </li></ul>Margin Margin Minimum Corporate HQ Low Cost Training Internet Boeing Discount Quality Training Low Cost Suppliers Airport Agreements No Frills Low Cost* Quick Turnaround Reliable Service Low Cost Promotions Free Publicity Controversial Internet Sales Yield Management Limited Resources Basic/Low Cost High Productivity Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Limited Crew Internet Information Alliances Management Control Integrated Systems Outsourced In-house Low Tech Marketing Internet Sales Private Performance Contracts n/a Low Cost
  8. 8. Business Model <ul><li>Full Service( Traditional) </li></ul><ul><li>Using Hub& Spoke network </li></ul><ul><li>Congestion during peak hours </li></ul><ul><li>Delay of only a few inbound flights Will spill over across large portions of the network </li></ul><ul><li>Low average daily utilization of aircraft, higher costs per seat mile </li></ul><ul><li>Enormous transaction costs </li></ul><ul><li>Complex fare structure </li></ul><ul><li>Low cost(LCC) </li></ul><ul><ul><li>Non-stop point-to-point services </li></ul></ul><ul><ul><li>High seating density and load factors </li></ul></ul><ul><ul><li>Uniform aircraft types (usually the 737-300) </li></ul></ul><ul><ul><li>Direct booking (internet/call centre - no sales commissions) </li></ul></ul><ul><ul><li>No frills such as “free” food/drinks, lounges or ‘air miles’ </li></ul></ul><ul><ul><li>Simple systems of yield management (pricing) </li></ul></ul><ul><ul><li>Use of secondary airports to cut charges and turnaround times </li></ul></ul>
  9. 9. Average cost per seat Mile Low Cost (LCC) vs. Full service (Traditional )
  10. 10. Breakout :, Cost per seat Mile Gap Low Cost (LCC) vs. Full service (Traditional )
  11. 11. Break Down of Cost Saving Low Cost (LCC) vs. Full service (Traditional )
  12. 12. RYANAIR Competitive Advantages <ul><li>Online Bookings </li></ul><ul><li>One Class Travel </li></ul><ul><li>Ticketless Boarding </li></ul><ul><li>Unallocated Seats </li></ul><ul><li>Flying to Secondary Airports </li></ul><ul><li>Point-to-Point Flying </li></ul><ul><li>In-house Marketing </li></ul><ul><li>No Frills </li></ul><ul><li>Reduced Turnaround Times </li></ul><ul><li>No Refund Policy </li></ul><ul><li>Corporate Partnerships </li></ul><ul><li>No Cargo Service </li></ul><ul><li>Bargaining Power </li></ul><ul><li>New Aircrafts </li></ul><ul><li>Owns Own Fleet </li></ul><ul><li>Operations Denominated in Euro </li></ul><ul><li>Hedge Fuel Risk </li></ul><ul><li>Highly Successful Ancillary Service Offering </li></ul><ul><li>Outsourcing of Services at International Airports </li></ul>
  13. 13. <ul><li>Limited Airport Transportation </li></ul><ul><li>Advertising on Airplanes </li></ul><ul><li>Yield Management </li></ul><ul><li>Uniform Fleet </li></ul><ul><li>High Productivity </li></ul><ul><li>High Service Levels </li></ul><ul><li>General Cost Reductions </li></ul><ul><ul><li>Eliminating seatback pockets </li></ul></ul><ul><ul><li>No blankets or pillows </li></ul></ul><ul><ul><li>Airsickness bags distributed on request </li></ul></ul><ul><ul><li>Charges larger penalties for overweight luggage </li></ul></ul> RYANAIR Competitive Advantages(cont’d.)
  14. 14. Cutting costs:“Race to bottom” Ryanair, the World’s favourite airline, today (9 th  July) launched an online poll to ask if  passengers would ‘stand’ on short flights if it meant they could travel for FREE, or pay 50% less than seated passengers. Ryanair is gauging passenger demand for its ‘vertical seating’ which will allow passengers to travel – for free – in a secure upright position on short flights of approximately one hour. Source: http://www.ryanair.com/site/EN/news.php?yr=09&month=jul&story=gen-en-090709
  15. 15. Europe short haul market(TOP.6) <ul><li>Lufthansea Passengers – 5.53m Market share – 7.8% </li></ul><ul><li>Ryanair Passengers – 5.12m Market share – 7.2% </li></ul><ul><li>Air France Passengers – 4.64m Market share – 6.6% </li></ul><ul><li>easyJet Passengers – 3.53m Market share – 5% </li></ul><ul><li>Iberia Passengers – 3.3m Market share – 4.7% </li></ul><ul><li>SAS Passengers – 3.23m Market share – 4.6% </li></ul>
  16. 16. Ryanair, World’s N0.1 Carrier Ranked By IATA(2008)
  17. 17. Ryanair’s Future Plans <ul><li>Cutting Costs </li></ul><ul><ul><li>No Window Blinds </li></ul></ul><ul><ul><li>No Reclining Seats , Leather Seats </li></ul></ul><ul><ul><li>Velcro Headrests </li></ul></ul><ul><ul><li>Carry-on Luggage </li></ul></ul><ul><li>Revenue Enhancement </li></ul><ul><ul><li>Satellite Television </li></ul></ul><ul><ul><li>Internet On-board </li></ul></ul><ul><ul><li>Rented In-flight entertainment </li></ul></ul>
  18. 18. Ryanair’s Future Plans(cont.) <ul><li>“ Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe. </li></ul><ul><li>The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers </li></ul><ul><li>Pay for access to them, is the internet in the same way that websites earn money for delivering click-through traffic or other sites.” </li></ul><ul><li>Michael O'Leary ,Chief Executive Officer of the Irish airline Ryanair </li></ul><ul><li>  </li></ul>
  19. 19. Conclusion <ul><li>Ryanair rapid growth is due to: </li></ul><ul><li>Low cost Airline Business Model that restructured European Aviation Industry </li></ul><ul><li>Pioneer innovative cost reduction methods </li></ul><ul><li>Creative alternative revenue generation &free flights goal in next phase evolution </li></ul>
  20. 20. Q&A <ul><li>Questions ? </li></ul>
  21. 21. <ul><li>Thank you! </li></ul>
  22. 22. References <ul><li>www.ryanair.com </li></ul><ul><li>Analysis of Ryanair’s competitive advantage ,November ,2008 by Jess Mun </li></ul><ul><li>www.associatedcontent.com/1159874 </li></ul>

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