analysis of ryanair's competitive advantages
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Ryanair's Competitive Advantages
Last Update:15.Sep.2009
About Ryanair Founded in 1985:
2 Aircrafts Carried 82,000 Passengers
1991: Michael O’Leary Appointed Transformed to Low Cost Airline 1997: Floated on Dublin SE and Nasdaq Rapid Expansion (2008 Figures):
169 Aircrafts 794 Routes 148 Destinations, Across 26 European Countries 58 Million Passenger AnnuallySource: European Low Fares Airline Association,2009
Ryanair’s Integrated Business Strategy
Resource-BasedView
(Inside out)
Marketing View
(Outside in)
Variety of Destinations &Routes
Competitive AdvantageCompetitive position
Low Cost Airline Business Model(Passes the costs directly to Ryanair’s
customers)
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
External Analysis, PEST Analysis
POLITICAL(Low impact)• Inside Europe Political stability • Outside Europe Middle East OPEC ,a political force
ECONOMICAL(Low impact)• Inside Europe Stable economy Stable consumers
• Outside Europe (undeveloped market) non- stable economy non -stable
External Analysis, PEST Analysis(Cont’d)
SOCIAL(Highly Impact)• Changing consumer
demographics • Fluctuating consumer
preferences
Technological(Low impact)• Aircrafts
• Supply chain software's programs
Ryanair: Value Chain
Infrastr.HRMTech. Dev.Proc.
Margin
Mar
gin
Minimum Corporate HQLow Cost Training
InternetBoeing 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-houseLow Tech Marketing
Internet Sales
Private
Performance Contracts
n/a
Low Cost
Business Model
Full Service( Traditional)• Using Hub& Spoke network• Congestion during peak hours• Delay of only a few inbound
flights Will spill over across large portions of the network
• Low average daily utilization of aircraft, higher costs per seat mile
• Enormous transaction costs• Complex fare structure
Low cost(LCC)• Non-stop point-to-point services• High seating density and load
factors• Uniform aircraft types (usually the
737-300)• Direct booking (internet/call centre
- no sales commissions)• No frills such as “free” food/drinks,
lounges or ‘air miles’• Simple systems of yield
management (pricing)• Use of secondary airports to cut
charges and turnaround times
Average cost per seat Mile Low Cost (LCC) vs. Full service (Traditional
)
Breakout :, Cost per seat Mile Gap Low Cost (LCC) vs. Full service (Traditional )
Break Down of Cost SavingLow Cost (LCC) vs. Full service
(Traditional )
RYANAIR Competitive Advantages
Online Bookings One Class Travel Ticketless Boarding Unallocated Seats Flying to Secondary Airports Point-to-Point Flying In-house Marketing No Frills Reduced Turnaround Times No Refund Policy Corporate Partnerships
No Cargo Service Bargaining Power New Aircrafts Owns Own Fleet Operations Denominated in
Euro Hedge Fuel Risk Highly Successful Ancillary
Service Offering Outsourcing of Services at
International Airports
Limited Airport Transportation
Advertising on Airplanes Yield Management Uniform Fleet High Productivity High Service Levels General Cost Reductions
Eliminating seatback pockets
No blankets or pillows Airsickness bags
distributed on request Charges larger penalties
for overweight luggage
RYANAIR Competitive Advantages(cont’d.)
Cutting costs:“Race to bottom”
Ryanair, the World’s favourite airline, today (9th 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
Europe short haul market(TOP.6)• Lufthansea
Passengers – 5.53m Market share – 7.8%
• Ryanair Passengers – 5.12m Market share – 7.2%
• Air France Passengers – 4.64m Market share – 6.6%
• easyJet Passengers – 3.53m Market share – 5%
• Iberia Passengers – 3.3m Market share – 4.7%
• SAS Passengers – 3.23m Market share – 4.6%
Ryanair, World’s N0.1 CarrierRanked By IATA(2008)
Ryanair’s Future Plans
Cutting Costs No Window Blinds No Reclining Seats,
Leather Seats Velcro Headrests Carry-on Luggage
Revenue Enhancement Satellite Television Internet On-board Rented In-flight
entertainment
Ryanair’s Future Plans(cont.)
“Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe.
The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers
Pay for access to them, is the internet in the same way that websites earn money for delivering click-through
traffic or other sites.”
Michael O'Leary ,Chief Executive Officer of the Irish airline Ryanair
Conclusion
Ryanair rapid growth is due to:
• Low cost Airline Business Model that restructured European Aviation Industry
• Pioneer innovative cost reduction methods
• Creative alternative revenue generation &free flights goal in next phase evolution
Q&A
Questions ?
Thank you!
References• www.ryanair.com• Analysis of Ryanair’s competitive advantage ,November ,2008 by Jess Mun www.associatedcontent.com/1159874
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