ContentsPage
Executive Summary
Introduction
CORPORATELEVEL STRATEGY
Corporate Strategy
Ryanair’s Organisational Structure and GrowthDirection
Financials
BUSINESSLEVEL STRATEGY
Internal AnalysisusingPorter’sValue Chain
External Analysis usingPorter’s5Forces
CSR / SustainabilityStrategy
EVALUATION
Evaluationof StrategywithSWOTanalysis
Conclusion
References
Appendices
Executive Summary
Introduction
Thisreportwill examine the strategyof airline operatorRyanair. Ryanairare a low cost Irish airline
dealingwith over1600 shorthaul flightstomore than 180 destinationsspanning30 countries across
Europe. (Mintel,2014) To ensure thisprocessrunssmoothlylike inanyorganisation,itisvital a
business strategyisinplace.Strategyishardto define asitisviewedthroughdifferentperspectives,
Porter(1996) feelsthatstrategyisputtinga planinplace to gaina sustainable competitive
advantage overcompetitors,howeverbelievesthereisafine line betweenstrategyandoperational
excellence.
JohnsonandScholes(2008) state that Strategyis the directionandscope of an organisationover the
longtermin whichachievesadvantage forthe organisationthroughitsconfigurationof resources
withinachallengingenvironmentwhich meetthe needsof andto fulfil stakeholderexpectation.
It becomesclearthatthere isno single definitionof strategythatiscorrectas theoriststendtohave
differentperspectives,thisisknownasstrategyformation.
Thisreportwill analyse andexaminethe corporate andbusinessstrategyof Ryanairby analysingthe
waystheyhave made theirstrategyso effective, beforefocussingonInternal andExternal Analysis
and the company’sCSRsustainabilitystrategy.The reportwill thenevaluate the strategybefore
concludingthe report.
Corporate Strategy
1.1 Corporate Strategy
Corporate strategyis
“The overall scope anddirectionof acorporationandthe wayinwhichits variousbusiness
operationsworktogethertoachieve particulargoals”.(Businessdictionary.com)
Good strategiesare generallysimple,thisenablesthe companiestogenerate aparticularfocusand
not try to be all thingsto all people orasPorter 1996 states “stuck in the middle”.
The lowcost airline strategywasfirstinitiatedbySouthwestAirlines,thiscompanyofferedshort
haul flightsforcheapwithonlyone class.Ryanair’smodel hasevolvedfromthatbutismore catered
price crunchingand beingefficient.One of the waysRyanairkeeps costslow isjustcharging
customersforthe ticket,everythingelse isextra,whetheritisa case,foodor drinkor a boarding
pass.This enablespeopletravellinglighttotravel cheaperandthe plane tocarry lessweight
optimisingfuel consumption.(Mintel,2014).
Goals
Ryanair’sgoalscan give usan indicationof the company’slongtermvision,howeverdespite the fact
these goalswill heavilyinfluence the overallstrategyitisimportanttonote that these are separate
entities.(Rumelt,1980)
Ryanairaimsto cementitspositionasmarketleaderthroughitscheappricingstrategy.Through
doingthistheyaimto increase growthandmarketshare by enteringnew countriesandaddingmore
routesto existingcountries(Ryanair,2014).Ryanair’sstrategyisto be cheaperandmore efficient
than anyotherairline operatorbyofferingthis,theyofferapointof differentiationtoitsnearest
competitorseffectivelygivingthe organisationcompetitive advantage.Thisisreflectedthroughthe
wayRyanair act in businessasthe companyaimstoofferthe cheapestandmostefficientformof
travel.
‘Asour businessmatures,andourgrowthratesslow somewhat,we are committedtoimprovingour
customerexperience inadditiontoprovidingourguestswiththe lowestfares,the moston-time
flights,the fewestlostbags,andthe fewestcancellations.’Ryanair,2014).
1.2. – Ryanair’sOrganisational Structure andGrowthDirection
The Ryanair organisational structure istraditional comprisingof a teamof functional directorswho
reportdirectlytothe CEO. The boardcomprisesof one executive(MichaelO‘Leary) andnine none
executives.ThisisintegratedwithRyanairholdings,enablingthe boardtomake changesthroughout
the organisation.(Ryanair,2015)
Ryanairruns operationsinthe UKand across Europe,as a resultof thisthe companyundertakesa
formof growth,thisisdone by settingupnew activities(internal growth)butcanalso be
undertakenbybuyinganotherfirm(acquisition),thisisknownasdiversification. (De Wit&Meyer
2012).
There are twotypesof diversificationmoves;horizontal andvertical. Verticaldiversificationiswhen
a firmentersotherbusinessesupstreamordownstreamwithinitsownindustry. AccordingtoPorter
(1987), enteringintoanotherbusinessshouldonlybe done if the propositionisattractive,financially
beneficial andthe companywill be betteroff inthe longterm.
Ryanairdemonstrated thisbyacquiringAerLingus,anIrishairline towhichtheyown30% inan
attemptto getintothe mainairports. Thiswasalsothe case when the companydecidedtobuyBuzz
as it enabledthemtooperate more planes,effectivelyincreasingoperationsfromStanstedairport.
(Daily Mail ,2003)
Ryanairannually move vertically byenteringnew countrieswiththe producttheyhave.Firmscan
alsoenterhorizontallyforinstance,Virginpossessmanydifferentoperationsthroughthe same
company.(Gyms,trainsplanesetc.) Thisisknownashorizontal diversificationastheyare entering
businesses outsidetheirindustry.
Ryanairtendto use internal growth,astheirstrategyiseasilyadaptable toothercountries,thisis
highlightedthroughthe newcountriesthe companynow flytosuchas Russia.
“Ryanairhas announcedplanstobeginregularflightsfromDublintoMoscow andSt. Petersburg.
Expertsbelieve thatthe newroutescouldincrease trafficbetweenthe citiesby35-40 percentand
revive competitioninthe market.”(RBTH,2013)
We can see thatRyanair have attemptedtoexpandbydifferentmeansinthe airline market.Thisis
done annuallybyofferingtheirlowcostproductindifferentmarkets.Now Ryanairtendstokeepto
thistype of growth howeverhave alsotriedtogrow throughthe assistance of othercompaniessuch
as AerLingusand Buzz to increase theiroperationsandmarketshare.
Financials
Ryanair’snearestcompetitorisEasyJet,appendixbshowsa graphof profitaftertax for the two
companies.AsEasyJetprofitscontinuedtoincrease (EasyJet,2015),Ryanairsprofitsincreaseduntil
2014 whentheydecreased,thisindicatedthat thisindicatesthatthe strategyinplace neededtobe
tweakedtopreventdeclining profits.
BCG Matrix
Market Growth-
Ryanairin termsof the BCG matrix is evolvinginto a“cash cow,thisisbecause ithas a highmarket
share and withdevelopmentintonewcountriesannuallythere isplentyof potentialtocontinue
achievingmarketgrowth., howeverwithlesscountriestomove intothe growthmayslow down
hence the decisiontoimprove customerservice toincrease customerretention.
BusinessStrategy
Internal Analysis
Accordingto Porter(1985) the conceptof value creationliesat the heartof competitive advantage
? Ryanair
Market
Share 
“Dividingthe organisationupintoseparate value addingactivitiesbymeansof the value chaintool
allowsthe analysttoidentifywhatthe companydoesmore cheaply orbetterthanitscompetitors
(Porter,1985).
Essentially, bybreakingupall the operationsthatgoonwithin an organisationsuchas Ryanair
enablesthe companytobreakdowntheirservicesandlookatwhere theycanimprove inaccordance
withtheirbusinessstructure.Thisisalsoknownasoperational excellence asitisanalysinga
businessineverydetail.
Managers adoptinganinside outperspective believethatstrategiesshouldnotbe builtaround
external activities,insteadtheyshouldbe builtaroundacompany’s strength;itisarguedthat a
build-upof strongresourcescandeterminethe successfulnessof acompany.(De Witand Meyer
2012)
PrimaryActivities
Inboundlogistics
Inboundlogisticsare placedfirstonthe value chainasit isthe firstopportunityfora businessto
create value.Ryanair’sinboundlogisticsare measuresputinplace tomake sure the companydrives
downcost.
FirstlyRyanairchargesitsstaff for initial training(Dispatches),thisnotonlykeepsthe costlow for
the companybut alsoensurescommitmentfromthe staff,as it iscomingout theirownpocket,soif
someone wastodrop outit isat nodirectcost to the company.
A factor keyto Ryanair’scostdrivingstrategyisthe sourcingof planes.Asthere are onlytwomajor
airline manufacturers,adeal withRyanairismajorlybeneficialtoeitherairline manufacturer,this
givesRyanairandChief Michael O’Learythe bargainingpowertonegotiate adeal bestsuitedto
Ryanair.Alsoitenablesextraseatingdue tothe planesbeinglargerandmore efficientonfuel fitting
inwithRyanair’sstrategy. InSeptember2014, Ryanairnegotiatedadeal withBoeingworthnearly
£14 billion,thiswill
“Offermore seats,18pc fuel savingsandallow the low costairline toalmostdouble insizeoverthe
nextdecade,”(Telegraph,2014).
Anotherfactorfor drivingdowncostsisthe use of secondaryairports,thisisbecause itischeaperto
pay groundrentthenthe main airports.
“The low-costmodel motivatesairlinestonegotiatecontractsthatsignificantlyreduce aeronautical
revenues,leavingairportstocompensate byseekingcommercial revenuesfromthe increase in
passengers”(Francis,2003)
OperationsManagement
At the centre of Ryanair’soperationsisthe tagline “low costnofrills” ,everytaskundertakenis
cateredtowardsdrivingdowncostinan attemptto make the ticketprice as cheap as possible for
the customer.
Thisapproach had been effectiveasitenabledRyanairtoestablishitself asa marketleader
(Appendix A).Thisalsoenabledthe companytogrow instature and increase theirprofitsyearon
year.In 2013, Ryanair’sprofitdropped(seeappendixB) thisindicatesthatthe strategyinplace
neededtobe tweakedtopreventdeclining profits.Thisadaptationmayhave beendowntobad
reputationdue tonegative pressandsocial media,becauseof badcustomerservice andpoor
customerretention.
OutboundLogistics
Ryanairdidholdthe biggestshare of the low costairline market,theirclosestrival isEasy
Jet.(appendixa) EasyJetseemto offerbettercustomercare butRyanairdifferentiatebybeing more
efficient(Mintel,2014),one of the waysRyanairachieve thisisthroughthe quickturnaroundof
planes(Panorama).ThisenablesRyanairtochartermore flightsthenitsnearestcompetitors.With
the introductionof improvedcustomerservice andmore efficientplanes,indicatesthatRyanairwill
be perceivedtobe strongcompetitorsinthe nextfew years.Thissectionof the value chainis
importantfromRyanairas it helpsachieve whathasbeenpromisedtothe consumer.If outbound
logisticsissuccessful thenRyanairare able tocontinue offeringhighlevelsof efficiencyand
maximise theirprofitsenablingthemtocontinue theircompetitive rivalry.
Marketingand Sales
FiguresfromOAG(AppendixA) showthatRyanairownsthe biggestmarketshare forlow cost
airlines.Ryanairhave shownincreasingnetprofitfrom2009- 2012, howeverin2012 netprofit
droppedslightly(Fame) (Appendix b).Thismayhave been because of negative mediafrom
newspapersandprogrammessuchasPanoramaand Dispatches. Ryanairoperate online meaning
that no moneyisspentonpremisesenablingthe companytodrive downcost.Throughtheirwebsite
theyare able toofferlowcost promotions,althoughthisisseenbymanyascontroversial asextra
chargesmisleadsthe customerandoftenleadsthe consumerintopayingmore thanexpected.(BBC
News,2010).
However,due toa mixture of mediapressure anddropinnetincome,Chief executiveMichael
O’Learyhas enforcedsome changestomake iteasierforcustomerswhenbookingonlineand
decreasingchargesforforgettingonline boardingpasses.Thishasinturnledto an increase insales
inthe lastquarterof 2014.
“If I hadknownthat beingnicertoour customerswasgoingto resultinhigherloadfactors[a
measure of howfull itsaircraftare],I wouldhave beenniceryearsago,”Mr O’Learysaid.“Noone is
goingto be nicerto our customersnowthan me.” (Financial times,2014).
It seemsRyanairhave alsosteppeduptheirattemptstochange people’snegative perceptionof the
companythroughmarketing.Inearly2014, Ryanairbroughtout theirfirstadvertfor25 years
highlightingthe recentchangesmade towebsite,baggage allowance andintroductionof allocated
seating.(Smith,2014)
Service
As Ryanairoperate online,the costof offeringthisserviceisverylow,thisisanessential partof the
Ryanairbusinessplanasitfurtherincreasesoperatingthe companiesoperatingcosts.
SupportActivities
Ryanairoperate througha traditional boardmade upof a chief executive and nine none executives.(
Ryanair,2014) These figureheadsformthe basisof how the companyisran. Through keeping the
strategysimple andcheap,the companycan maximise itsprofitseasily,thisishighlightedthrough
the online systemprovidedofferingcompetitive advantageoverthe firmswithshopsnationwide.
Ryanairalsoemploytheirstaff onperformance contractswithflightattendantsoncommissionfor
sellingproductsonflights,thisenablesstaff toworktowardstargetschemeseffectivelyincreasing
companyprofits.(Panorama,2009)
External Analysis
Porters5 forces
Porter’s5 forcesframeworkshowsthingsfromadifferentperspective.Itallowsacompanyto be
viewfroman external perspective.The outside inperspective believesfirmsshouldnotbe self-
centredandtake intoaccountthe environmentwhencreatingtheirstrategy,itisarguedbysome
that successful companiesare externallyorientatedandmarketdriven(Day,1994).
Competitive Rivalry
The industryas a whole offersbroadcompetitionwithlotsof companiesofferingdifferent
parameterssuchas price,comfort and efficiency.(Appendix c)
Threat of newentrants
WithRyanair’spricingstrategytwinnedwiththe cheapdealsalreadybeingnegotiatedwithairports
and manufacturers,makesathreatof a new entrantseemunlikely,astheyare not likelytobe able
to compete onprice.
“The number ofpeople flying with the Irish carrier climbed 20 per cent on the same period in 2013 to 6.02 million.
Seat occupancy rose 7 per cent to 88 per cent and in the year to December itcarried 86.4million passengers.”
The onlythreat would be onquality;however, more people are willingtosacrifice thiscommodity
for cheaperflights.(See appendix c)
Competitive Rivalry
High
Threat of New
Entrants
Low
Suppliers
Bargaining
Power
Medium
Buyers
Bargaining
Power
High
Threat of
Substitution
Low
Newentrantswouldhave todifferentiate onstrategyandhave massive financial powertoindent
themselvesonthe market. Newentrantsmayneedtooffersomethingunique andhave lotsof
equitytocompete inthe market.
Threat of substitution
Threat of substitutionislowasalternativemethodsof transportare generallylessreliable,
expensive andmore time consuming.Airlines,especiallylow costcarriers offerthe cheapestand
mostefficienttravel aswellasone of the quickest.Alternativetransportwouldbe more thanlikely
indirectandmore costly,as well asmore likelytoencounterdelays.
Buyersbargainingpower
As there are so manyairlinesinthe sector,buyerscanchoose the bestparametersof whichtofly
e.g.luxury,time of flight,cost,bestcustomerservice etc.(appendix c) Thissignifiesthatbuyers
bargainingpowerishighdue tothe highlevel of competitionbetweenfirminthe sector.
Suppliersbargainingpower
Airline operatorsare reliantonfuel,if fuel pricesfluctuatethiscanhave a detrimental effectonthe
operator.
“Fuel priceshave a profoundeffectonthe airline industry.Muchof an airlinescoststructure is
basedon fuel beingavailableata certainprice”. ( EHow,2014)
Anotherfactoroperatorshave to consideriswhere tosource theirplanes.There are currentlytwo
majorplane manufacturers,BoeingandAirbus.The biggerthe operatorthe more theyare
able to negotiate withthe operatordue tofearof loss.Operatorsalsohave toconsiderthe
competitionandthe offersonpurchases,thiscouldcause anoperatorto examine their
strategy.
CSR /SustainabilityStrategy
Ryanairhave beenat the forefrontof bothmediaandcustomerattentionformanyyears,thisisdue
mostlytothe waythat the companyhave acted intryingto get the mostmoneyoutof their
customersina viewtomaximisingcostsandadheringtotheirstrategy.Thishasbeendone inmany
differentcircumstances,firstlywhenbookingonline Ryanairtendtohide hiddencosts,soalthougha
flightmayappearto be cheap bythe time baggage,creditcard feesandvariousotheroptionsare
added,the figure increasesmuchfurther. ResearchsuggeststhatRyanairislesslikelytobe trusted
by consumers,perhapsbasedonnegativenewscoverageearnedfrombeingprofitcentric.(Mintel,
2014)(Appendix E)
“…is because of Ryanair’spoliciestocharge for..well,justaboutanything.O’Learycharged
customersif theyhadn’tprintedouttheirboardingpassorif theylostitbetweencheck-inand
arrivingat the airport,if theyhad an extrabag, andfor failing tocheckinonline”( Thisis
money.co.uk,2014).
Dispatches (2012) alsoclaimedthatRyanair’schangeroundwastooquickto cleanthe planesanddo
the necessary safetychecks,puttingpublicsafetyatriskhoweverthisclaimwasdismissedbyRyan
air claimingthatthe BBC showwas biasedanduntrue.
“It’ssurprisingthatdispatchesare againinventingfalseandunsubstantiatedclaims”(Kiely,
2013)
ResearchsuggeststhatalthoughRyanairhasdismissedmostclaims,the amountof negative
attentionbroughttothe companybelieve thatCSR wasnot initiallyapolicythattheyfeltwas
beneficial tothe company.Ascompanyfigureshave droppedthishasforcedthe companytorethink
the strategyand tailoritmore towardsthe needof the customer.
Evaluationof Strategy
The strategyput inplace by Ryanairfocussedonlow cost deals andefficiency.The proceduresputin
place such as 30 minute turnaroundsandthe introductionof online checkinsallowedRyanairto
achieve bothbeingthe cheapestin the marketaswell asthe mostefficient. Howeverpunishingthe
customerswithfinesandnotseemingtobe “sociallyresponsible”ledtoa decline inprofitsduring
2013 . Thisway of acting had eventuallycaughtupwithRyanair,thismeantthatRyanairhad to
adapt theirstrategy. Asa resultof this, Ryanairhad to tailorthemselvesmore toretaining the
customerwithbetterservice skills,after puttingthisintopractice in2014 there hasbeena record
highinsales
I will evaluate thisstrategy withaSWOT analysisshowingRyanair’sstrengths,weaknesses,
opportunitiesandthreats.Thiswill be assessedonthe internal andexternal analysisIhave
conducted.
Strengths
 Leading low cost airline
 Good aggressive strategy under
Michael O ‘Leary
 Quick, Efficient Cheap and direct
routes
 Established for over 20 years in the
industry( good foot hold in the market)
 Profits set to increase after increased
customer care
 New aircraft
 Strong financial performance
Weaknesses
 Cash flows could fluctuate by taking on
new routes
 Customer service still needs improving
 Treatment of staff could be investigated.
 Fluctuating cash flows, increases till last
year, this year has shown improvement but
this year’s annualreport yet to come out.
 Flights to secondary airports
Opportunities
 Plan to expand out of Europe, also
increasing flights on routes already
established.
 New fleet of planes will help the
company expand and become more
efficient
 Increase market share as low cost
leader.
 Growing industry
Threats
 Ryanair still have a bad reputation through
customers, media and social media (may
take time to repair).
 In a competitive market, lots of discounts
and competition
 Bad relationship with media may lead to
being exposed for anotherissue
 Britain a recovering economy
 Customer retention, although customer
service has improved its early days in terms
of figures.
Conclusion
In conclusion,myfindingshowthatthe strategyusedbyRyanairhas beenveryeffective.Ryanair
insteadof concentratingonthe customer aimedtogrow theirbusinessfortheirexceptionallycheap
flights.A parametermirroredbythe consumer (see appendix),thisworkedasitenabledthemto
become the leadersof thatsectorwhichhelpedthem innegotiation. O’Learyfeltbyofferingthese
cheapdealsandmakingextramoneyonextracharges and inair saleswouldmake the strategybe a
success.For manyyearsthiswas successful,andalthoughitwasgivingRyanairabad reputation
amongstcustomers,saleswere increasing.Whenthe numbersdroppedin2013, the strategythen
neededadaptingtobe more tailoredtowardsthe customers’needsratherthansolelythe
companies.This approachclearlyworkedasit enabledRyanairtoretaincustomerseffectively
contributingtorecordsalesinDecember2014.
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Appendix
Appendix A
Appendix B
Appendix c
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015
Graph comparing Easy Jet and Ryanair Profitafter Tax
Ryanair Easy Jet
Appendix D

Global Strategy assignment (1)

  • 1.
    ContentsPage Executive Summary Introduction CORPORATELEVEL STRATEGY CorporateStrategy Ryanair’s Organisational Structure and GrowthDirection Financials BUSINESSLEVEL STRATEGY Internal AnalysisusingPorter’sValue Chain External Analysis usingPorter’s5Forces CSR / SustainabilityStrategy EVALUATION Evaluationof StrategywithSWOTanalysis Conclusion References Appendices
  • 2.
    Executive Summary Introduction Thisreportwill examinethe strategyof airline operatorRyanair. Ryanairare a low cost Irish airline dealingwith over1600 shorthaul flightstomore than 180 destinationsspanning30 countries across Europe. (Mintel,2014) To ensure thisprocessrunssmoothlylike inanyorganisation,itisvital a business strategyisinplace.Strategyishardto define asitisviewedthroughdifferentperspectives, Porter(1996) feelsthatstrategyisputtinga planinplace to gaina sustainable competitive advantage overcompetitors,howeverbelievesthereisafine line betweenstrategyandoperational excellence. JohnsonandScholes(2008) state that Strategyis the directionandscope of an organisationover the longtermin whichachievesadvantage forthe organisationthroughitsconfigurationof resources withinachallengingenvironmentwhich meetthe needsof andto fulfil stakeholderexpectation. It becomesclearthatthere isno single definitionof strategythatiscorrectas theoriststendtohave differentperspectives,thisisknownasstrategyformation. Thisreportwill analyse andexaminethe corporate andbusinessstrategyof Ryanairby analysingthe waystheyhave made theirstrategyso effective, beforefocussingonInternal andExternal Analysis and the company’sCSRsustainabilitystrategy.The reportwill thenevaluate the strategybefore concludingthe report.
  • 3.
    Corporate Strategy 1.1 CorporateStrategy Corporate strategyis “The overall scope anddirectionof acorporationandthe wayinwhichits variousbusiness operationsworktogethertoachieve particulargoals”.(Businessdictionary.com) Good strategiesare generallysimple,thisenablesthe companiestogenerate aparticularfocusand not try to be all thingsto all people orasPorter 1996 states “stuck in the middle”. The lowcost airline strategywasfirstinitiatedbySouthwestAirlines,thiscompanyofferedshort haul flightsforcheapwithonlyone class.Ryanair’smodel hasevolvedfromthatbutismore catered price crunchingand beingefficient.One of the waysRyanairkeeps costslow isjustcharging customersforthe ticket,everythingelse isextra,whetheritisa case,foodor drinkor a boarding pass.This enablespeopletravellinglighttotravel cheaperandthe plane tocarry lessweight optimisingfuel consumption.(Mintel,2014). Goals Ryanair’sgoalscan give usan indicationof the company’slongtermvision,howeverdespite the fact these goalswill heavilyinfluence the overallstrategyitisimportanttonote that these are separate entities.(Rumelt,1980) Ryanairaimsto cementitspositionasmarketleaderthroughitscheappricingstrategy.Through doingthistheyaimto increase growthandmarketshare by enteringnew countriesandaddingmore routesto existingcountries(Ryanair,2014).Ryanair’sstrategyisto be cheaperandmore efficient than anyotherairline operatorbyofferingthis,theyofferapointof differentiationtoitsnearest competitorseffectivelygivingthe organisationcompetitive advantage.Thisisreflectedthroughthe wayRyanair act in businessasthe companyaimstoofferthe cheapestandmostefficientformof travel. ‘Asour businessmatures,andourgrowthratesslow somewhat,we are committedtoimprovingour customerexperience inadditiontoprovidingourguestswiththe lowestfares,the moston-time flights,the fewestlostbags,andthe fewestcancellations.’Ryanair,2014). 1.2. – Ryanair’sOrganisational Structure andGrowthDirection
  • 4.
    The Ryanair organisationalstructure istraditional comprisingof a teamof functional directorswho reportdirectlytothe CEO. The boardcomprisesof one executive(MichaelO‘Leary) andnine none executives.ThisisintegratedwithRyanairholdings,enablingthe boardtomake changesthroughout the organisation.(Ryanair,2015) Ryanairruns operationsinthe UKand across Europe,as a resultof thisthe companyundertakesa formof growth,thisisdone by settingupnew activities(internal growth)butcanalso be undertakenbybuyinganotherfirm(acquisition),thisisknownasdiversification. (De Wit&Meyer 2012). There are twotypesof diversificationmoves;horizontal andvertical. Verticaldiversificationiswhen a firmentersotherbusinessesupstreamordownstreamwithinitsownindustry. AccordingtoPorter (1987), enteringintoanotherbusinessshouldonlybe done if the propositionisattractive,financially beneficial andthe companywill be betteroff inthe longterm. Ryanairdemonstrated thisbyacquiringAerLingus,anIrishairline towhichtheyown30% inan attemptto getintothe mainairports. Thiswasalsothe case when the companydecidedtobuyBuzz as it enabledthemtooperate more planes,effectivelyincreasingoperationsfromStanstedairport. (Daily Mail ,2003) Ryanairannually move vertically byenteringnew countrieswiththe producttheyhave.Firmscan alsoenterhorizontallyforinstance,Virginpossessmanydifferentoperationsthroughthe same company.(Gyms,trainsplanesetc.) Thisisknownashorizontal diversificationastheyare entering businesses outsidetheirindustry. Ryanairtendto use internal growth,astheirstrategyiseasilyadaptable toothercountries,thisis highlightedthroughthe newcountriesthe companynow flytosuchas Russia. “Ryanairhas announcedplanstobeginregularflightsfromDublintoMoscow andSt. Petersburg. Expertsbelieve thatthe newroutescouldincrease trafficbetweenthe citiesby35-40 percentand revive competitioninthe market.”(RBTH,2013) We can see thatRyanair have attemptedtoexpandbydifferentmeansinthe airline market.Thisis done annuallybyofferingtheirlowcostproductindifferentmarkets.Now Ryanairtendstokeepto thistype of growth howeverhave alsotriedtogrow throughthe assistance of othercompaniessuch as AerLingusand Buzz to increase theiroperationsandmarketshare. Financials Ryanair’snearestcompetitorisEasyJet,appendixbshowsa graphof profitaftertax for the two companies.AsEasyJetprofitscontinuedtoincrease (EasyJet,2015),Ryanairsprofitsincreaseduntil 2014 whentheydecreased,thisindicatedthat thisindicatesthatthe strategyinplace neededtobe tweakedtopreventdeclining profits.
  • 5.
    BCG Matrix Market Growth- Ryanairintermsof the BCG matrix is evolvinginto a“cash cow,thisisbecause ithas a highmarket share and withdevelopmentintonewcountriesannuallythere isplentyof potentialtocontinue achievingmarketgrowth., howeverwithlesscountriestomove intothe growthmayslow down hence the decisiontoimprove customerservice toincrease customerretention. BusinessStrategy Internal Analysis Accordingto Porter(1985) the conceptof value creationliesat the heartof competitive advantage ? Ryanair Market Share 
  • 6.
    “Dividingthe organisationupintoseparate valueaddingactivitiesbymeansof the value chaintool allowsthe analysttoidentifywhatthe companydoesmore cheaply orbetterthanitscompetitors (Porter,1985). Essentially, bybreakingupall the operationsthatgoonwithin an organisationsuchas Ryanair enablesthe companytobreakdowntheirservicesandlookatwhere theycanimprove inaccordance withtheirbusinessstructure.Thisisalsoknownasoperational excellence asitisanalysinga businessineverydetail. Managers adoptinganinside outperspective believethatstrategiesshouldnotbe builtaround external activities,insteadtheyshouldbe builtaroundacompany’s strength;itisarguedthat a build-upof strongresourcescandeterminethe successfulnessof acompany.(De Witand Meyer 2012) PrimaryActivities Inboundlogistics Inboundlogisticsare placedfirstonthe value chainasit isthe firstopportunityfora businessto create value.Ryanair’sinboundlogisticsare measuresputinplace tomake sure the companydrives downcost. FirstlyRyanairchargesitsstaff for initial training(Dispatches),thisnotonlykeepsthe costlow for the companybut alsoensurescommitmentfromthe staff,as it iscomingout theirownpocket,soif someone wastodrop outit isat nodirectcost to the company. A factor keyto Ryanair’scostdrivingstrategyisthe sourcingof planes.Asthere are onlytwomajor airline manufacturers,adeal withRyanairismajorlybeneficialtoeitherairline manufacturer,this givesRyanairandChief Michael O’Learythe bargainingpowertonegotiate adeal bestsuitedto Ryanair.Alsoitenablesextraseatingdue tothe planesbeinglargerandmore efficientonfuel fitting inwithRyanair’sstrategy. InSeptember2014, Ryanairnegotiatedadeal withBoeingworthnearly £14 billion,thiswill “Offermore seats,18pc fuel savingsandallow the low costairline toalmostdouble insizeoverthe nextdecade,”(Telegraph,2014). Anotherfactorfor drivingdowncostsisthe use of secondaryairports,thisisbecause itischeaperto pay groundrentthenthe main airports. “The low-costmodel motivatesairlinestonegotiatecontractsthatsignificantlyreduce aeronautical revenues,leavingairportstocompensate byseekingcommercial revenuesfromthe increase in passengers”(Francis,2003) OperationsManagement At the centre of Ryanair’soperationsisthe tagline “low costnofrills” ,everytaskundertakenis cateredtowardsdrivingdowncostinan attemptto make the ticketprice as cheap as possible for the customer.
  • 7.
    Thisapproach had beeneffectiveasitenabledRyanairtoestablishitself asa marketleader (Appendix A).Thisalsoenabledthe companytogrow instature and increase theirprofitsyearon year.In 2013, Ryanair’sprofitdropped(seeappendixB) thisindicatesthatthe strategyinplace neededtobe tweakedtopreventdeclining profits.Thisadaptationmayhave beendowntobad reputationdue tonegative pressandsocial media,becauseof badcustomerservice andpoor customerretention. OutboundLogistics Ryanairdidholdthe biggestshare of the low costairline market,theirclosestrival isEasy Jet.(appendixa) EasyJetseemto offerbettercustomercare butRyanairdifferentiatebybeing more efficient(Mintel,2014),one of the waysRyanairachieve thisisthroughthe quickturnaroundof planes(Panorama).ThisenablesRyanairtochartermore flightsthenitsnearestcompetitors.With the introductionof improvedcustomerservice andmore efficientplanes,indicatesthatRyanairwill be perceivedtobe strongcompetitorsinthe nextfew years.Thissectionof the value chainis importantfromRyanairas it helpsachieve whathasbeenpromisedtothe consumer.If outbound logisticsissuccessful thenRyanairare able tocontinue offeringhighlevelsof efficiencyand maximise theirprofitsenablingthemtocontinue theircompetitive rivalry. Marketingand Sales FiguresfromOAG(AppendixA) showthatRyanairownsthe biggestmarketshare forlow cost airlines.Ryanairhave shownincreasingnetprofitfrom2009- 2012, howeverin2012 netprofit droppedslightly(Fame) (Appendix b).Thismayhave been because of negative mediafrom newspapersandprogrammessuchasPanoramaand Dispatches. Ryanairoperate online meaning that no moneyisspentonpremisesenablingthe companytodrive downcost.Throughtheirwebsite theyare able toofferlowcost promotions,althoughthisisseenbymanyascontroversial asextra chargesmisleadsthe customerandoftenleadsthe consumerintopayingmore thanexpected.(BBC News,2010). However,due toa mixture of mediapressure anddropinnetincome,Chief executiveMichael O’Learyhas enforcedsome changestomake iteasierforcustomerswhenbookingonlineand decreasingchargesforforgettingonline boardingpasses.Thishasinturnledto an increase insales inthe lastquarterof 2014. “If I hadknownthat beingnicertoour customerswasgoingto resultinhigherloadfactors[a measure of howfull itsaircraftare],I wouldhave beenniceryearsago,”Mr O’Learysaid.“Noone is goingto be nicerto our customersnowthan me.” (Financial times,2014). It seemsRyanairhave alsosteppeduptheirattemptstochange people’snegative perceptionof the companythroughmarketing.Inearly2014, Ryanairbroughtout theirfirstadvertfor25 years highlightingthe recentchangesmade towebsite,baggage allowance andintroductionof allocated seating.(Smith,2014) Service As Ryanairoperate online,the costof offeringthisserviceisverylow,thisisanessential partof the Ryanairbusinessplanasitfurtherincreasesoperatingthe companiesoperatingcosts.
  • 8.
    SupportActivities Ryanairoperate througha traditionalboardmade upof a chief executive and nine none executives.( Ryanair,2014) These figureheadsformthe basisof how the companyisran. Through keeping the strategysimple andcheap,the companycan maximise itsprofitseasily,thisishighlightedthrough the online systemprovidedofferingcompetitive advantageoverthe firmswithshopsnationwide. Ryanairalsoemploytheirstaff onperformance contractswithflightattendantsoncommissionfor sellingproductsonflights,thisenablesstaff toworktowardstargetschemeseffectivelyincreasing companyprofits.(Panorama,2009) External Analysis
  • 9.
    Porters5 forces Porter’s5 forcesframeworkshowsthingsfromadifferentperspective.Itallowsacompanytobe viewfroman external perspective.The outside inperspective believesfirmsshouldnotbe self- centredandtake intoaccountthe environmentwhencreatingtheirstrategy,itisarguedbysome that successful companiesare externallyorientatedandmarketdriven(Day,1994). Competitive Rivalry The industryas a whole offersbroadcompetitionwithlotsof companiesofferingdifferent parameterssuchas price,comfort and efficiency.(Appendix c) Threat of newentrants WithRyanair’spricingstrategytwinnedwiththe cheapdealsalreadybeingnegotiatedwithairports and manufacturers,makesathreatof a new entrantseemunlikely,astheyare not likelytobe able to compete onprice. “The number ofpeople flying with the Irish carrier climbed 20 per cent on the same period in 2013 to 6.02 million. Seat occupancy rose 7 per cent to 88 per cent and in the year to December itcarried 86.4million passengers.” The onlythreat would be onquality;however, more people are willingtosacrifice thiscommodity for cheaperflights.(See appendix c) Competitive Rivalry High Threat of New Entrants Low Suppliers Bargaining Power Medium Buyers Bargaining Power High Threat of Substitution Low
  • 10.
    Newentrantswouldhave todifferentiate onstrategyandhavemassive financial powertoindent themselvesonthe market. Newentrantsmayneedtooffersomethingunique andhave lotsof equitytocompete inthe market. Threat of substitution Threat of substitutionislowasalternativemethodsof transportare generallylessreliable, expensive andmore time consuming.Airlines,especiallylow costcarriers offerthe cheapestand mostefficienttravel aswellasone of the quickest.Alternativetransportwouldbe more thanlikely indirectandmore costly,as well asmore likelytoencounterdelays. Buyersbargainingpower As there are so manyairlinesinthe sector,buyerscanchoose the bestparametersof whichtofly e.g.luxury,time of flight,cost,bestcustomerservice etc.(appendix c) Thissignifiesthatbuyers bargainingpowerishighdue tothe highlevel of competitionbetweenfirminthe sector. Suppliersbargainingpower Airline operatorsare reliantonfuel,if fuel pricesfluctuatethiscanhave a detrimental effectonthe operator. “Fuel priceshave a profoundeffectonthe airline industry.Muchof an airlinescoststructure is basedon fuel beingavailableata certainprice”. ( EHow,2014) Anotherfactoroperatorshave to consideriswhere tosource theirplanes.There are currentlytwo majorplane manufacturers,BoeingandAirbus.The biggerthe operatorthe more theyare able to negotiate withthe operatordue tofearof loss.Operatorsalsohave toconsiderthe competitionandthe offersonpurchases,thiscouldcause anoperatorto examine their strategy.
  • 11.
    CSR /SustainabilityStrategy Ryanairhave beenatthe forefrontof bothmediaandcustomerattentionformanyyears,thisisdue mostlytothe waythat the companyhave acted intryingto get the mostmoneyoutof their customersina viewtomaximisingcostsandadheringtotheirstrategy.Thishasbeendone inmany differentcircumstances,firstlywhenbookingonline Ryanairtendtohide hiddencosts,soalthougha flightmayappearto be cheap bythe time baggage,creditcard feesandvariousotheroptionsare added,the figure increasesmuchfurther. ResearchsuggeststhatRyanairislesslikelytobe trusted by consumers,perhapsbasedonnegativenewscoverageearnedfrombeingprofitcentric.(Mintel, 2014)(Appendix E) “…is because of Ryanair’spoliciestocharge for..well,justaboutanything.O’Learycharged customersif theyhadn’tprintedouttheirboardingpassorif theylostitbetweencheck-inand arrivingat the airport,if theyhad an extrabag, andfor failing tocheckinonline”( Thisis money.co.uk,2014). Dispatches (2012) alsoclaimedthatRyanair’schangeroundwastooquickto cleanthe planesanddo the necessary safetychecks,puttingpublicsafetyatriskhoweverthisclaimwasdismissedbyRyan air claimingthatthe BBC showwas biasedanduntrue. “It’ssurprisingthatdispatchesare againinventingfalseandunsubstantiatedclaims”(Kiely, 2013) ResearchsuggeststhatalthoughRyanairhasdismissedmostclaims,the amountof negative attentionbroughttothe companybelieve thatCSR wasnot initiallyapolicythattheyfeltwas beneficial tothe company.Ascompanyfigureshave droppedthishasforcedthe companytorethink the strategyand tailoritmore towardsthe needof the customer. Evaluationof Strategy
  • 12.
    The strategyput inplaceby Ryanairfocussedonlow cost deals andefficiency.The proceduresputin place such as 30 minute turnaroundsandthe introductionof online checkinsallowedRyanairto achieve bothbeingthe cheapestin the marketaswell asthe mostefficient. Howeverpunishingthe customerswithfinesandnotseemingtobe “sociallyresponsible”ledtoa decline inprofitsduring 2013 . Thisway of acting had eventuallycaughtupwithRyanair,thismeantthatRyanairhad to adapt theirstrategy. Asa resultof this, Ryanairhad to tailorthemselvesmore toretaining the customerwithbetterservice skills,after puttingthisintopractice in2014 there hasbeena record highinsales I will evaluate thisstrategy withaSWOT analysisshowingRyanair’sstrengths,weaknesses, opportunitiesandthreats.Thiswill be assessedonthe internal andexternal analysisIhave conducted. Strengths  Leading low cost airline  Good aggressive strategy under Michael O ‘Leary  Quick, Efficient Cheap and direct routes  Established for over 20 years in the industry( good foot hold in the market)  Profits set to increase after increased customer care  New aircraft  Strong financial performance Weaknesses  Cash flows could fluctuate by taking on new routes  Customer service still needs improving  Treatment of staff could be investigated.  Fluctuating cash flows, increases till last year, this year has shown improvement but this year’s annualreport yet to come out.  Flights to secondary airports Opportunities  Plan to expand out of Europe, also increasing flights on routes already established.  New fleet of planes will help the company expand and become more efficient  Increase market share as low cost leader.  Growing industry Threats  Ryanair still have a bad reputation through customers, media and social media (may take time to repair).  In a competitive market, lots of discounts and competition  Bad relationship with media may lead to being exposed for anotherissue  Britain a recovering economy  Customer retention, although customer service has improved its early days in terms of figures. Conclusion
  • 13.
    In conclusion,myfindingshowthatthe strategyusedbyRyanairhasbeenveryeffective.Ryanair insteadof concentratingonthe customer aimedtogrow theirbusinessfortheirexceptionallycheap flights.A parametermirroredbythe consumer (see appendix),thisworkedasitenabledthemto become the leadersof thatsectorwhichhelpedthem innegotiation. O’Learyfeltbyofferingthese cheapdealsandmakingextramoneyonextracharges and inair saleswouldmake the strategybe a success.For manyyearsthiswas successful,andalthoughitwasgivingRyanairabad reputation amongstcustomers,saleswere increasing.Whenthe numbersdroppedin2013, the strategythen neededadaptingtobe more tailoredtowardsthe customers’needsratherthansolelythe companies.This approachclearlyworkedasit enabledRyanairtoretaincustomerseffectively contributingtorecordsalesinDecember2014. References Academic.mintel.com. (2015). [online] Available at: http://academic.mintel.com.ezproxy.mmu.ac.uk/display/716352/?highlight#hit1 [Accessed 19 Jan. 2015]. Academic.mintel.com. (2015). [online] Available at: http://academic.mintel.com.ezproxy.mmu.ac.uk/display/716353/?highlight#hit1 [Accessed 19 Jan. 2015]. Academic.mintel.com. (2015). [online] Available at: http://academic.mintel.com.ezproxy.mmu.ac.uk/display/716354/?highlight#hit1 [Accessed 19 Jan. 2015]. Academic.mintel.com., (2015). [online] Available at: http://academic.mintel.com.ezproxy.mmu.ac.uk/display/716351/?highlight#hit1 [Accessed 3 Jan. 2015]. Airport-Airline Interraction. (2003). Journal of Air transport management, 9(4), pp.267- 273.
  • 14.
    App.newscron.com, (2015). Newscron.[online] Available at: http://app.newscron.com/render/3003318/362985535 [Accessed 19 Jan. 2015]. BBC News,(2010). Ryanair reprimanded over offers.[online] Available at: http://www.bbc.co.uk/news/10626652 [Accessed 27 Jan. 2015]. Kiely. (2013). Check out Ryanair’s heated exchange of letters with ‘Dispatches’…. [online] TheJournal.ie. Available at: http://www.thejournal.ie/ryanair-channel-4-letters-1035331- Aug2013/ [Accessed 3 Dec. 2014]. BusinessDictionary.com, (2015). What is corporate strategy? definition and meaning. [online] Available at: http://www.businessdictionary.com/definition/corporate- strategy.html [Accessed 19 Jan. 2015]. Day, G. (1994). The capabilities of market driven organisations. The journal of Marketing, pp.37-52. De Wit, B. and Meyer, R. (2012). Stategy An International Perspective. 5th ed. Thomas Rennie, pp.245-260. De Wit, B. and Meyer, R. (2012). Strategy An International Perspective. 5th ed. China: Thomas Rennie, pp.237-245. De Wit, B. and Meyer, R. (2012). Strategy An International Perspective. 5th ed. Thomas Rennie, pp.265-269.
  • 15.
    Financial times, (2014).Ryanair raises full year guidance as being nice pays off. [online] Available at: http://www.ft.com/cms/s/0/0613430a-632d-11e4-9a79- 00144feabdc0.html#axzz3PH2YZ32y [Accessed 19 Jan. 2015]. Johnson, G., Scholes, K. and Whittington, R. (2008). Exploring corporate strategy. Harlow: Prentice Hall. Porter, M. (1985). Competitive strategy. New york Free press. Porter, M. (1987). From Competitive advantage to corporate strategy. Harvard Business Review, 65(3), pp.43-59. Porter, M. (1996). What is strategy?. Harvard Business review, 61. Proactiveinvestors UK, (2015). Ryanair - Annual Financial Report - Proactiveinvestors (UK). [online] Available at: http://www.proactiveinvestors.co.uk/companies/rns/140730rya7552n [Accessed 19 Jan. 2015]. Rbth.co.uk, (2013). Ryanair to enter Russia Ryanair to enter the Russian market | Russia Beyond The Headlines. [online] Available at:
  • 16.
    http://rbth.co.uk/news/2013/11/27/ryanair_to_enter_the_russian_market_32055.html [Accessed 19 Jan.2015]. Rumelt, R. (1980). The evaluation of business strategy. Business policy and strategic management, pp.359-367. RUMELT, R. (1980). Corporate Strategy. Journal of Business Strategy, 1(2), pp.63-65. Ryanair annual report 2013. (2015). [online] Available at: http://corporate.ryanair.com/docs/corp/investor/2013/final_annual_report_2013_130731.pdf [Accessed 19 Jan. 2015]. Ryanair.com, (2015). Ryanair annual report 2014. [online] Available at: http://corporate.ryanair.com/docs/corp/investor/2014/final_annual_report_2014.pdf [Accessed 19 Jan. 2015]. Ryanair.com, (2015). Ryanair Places Order For Up To 200 New Boeing 737 Max 200 Aircraft Worth Up To $22bn. [online] Available at: http://corporate.ryanair.com/news/news/14908-ryanair-places-order-for-up-to-200-new- boeing-737-max-200-aircraft-worth-up-to-22bn/?market=en [Accessed 19 Jan. 2015]. Smith, O. (2014). Ryanair unveils TV advert - will it convince you to fly with the airline? - Telegraph. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/travel/travelvideo/10754299/Ryanair-unveils-TV-advert-will-it-convince- you-to-fly-with-the-airline.html [Accessed 27 Jan. 2015]. Strategy An International Perspective. (2012). 5th ed. Thomas Rennie, pp.300-360.
  • 17.
    This is Money,(2014). Ryanair loudmouth Michael O'Leary admits: We can learn from easyJet. [online] Available at: http://www.thisismoney.co.uk/money/news/article- 2631283/Ryanair-loudmouth-Michael-OLeary-admits-We-learn-easyJet.html [Accessed 2 Jan. 2015]. Thomas, N. (2014). Ryanair: $22bn Boeing order will usher in 'new era of price wars in Europe' - Telegraph. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/finance/newsbysector/transport/11082057/Ryanair-22bn-Boeing- order-will-usher-in-new-era-of-price-wars-in-Europe.html [Accessed 19 Jan. 2015]. Appendix Appendix A Appendix B
  • 18.
    Appendix c 0 100 200 300 400 500 600 700 2010 20112012 2013 2014 2015 Graph comparing Easy Jet and Ryanair Profitafter Tax Ryanair Easy Jet
  • 19.