Ryanair: Europe's Largest Low Fares Airline
Ryanair is a European bases low fare airline that connects 160 destinations in its global operations. The airline has 44 bases covering 1100 route over 27 nations. Tony Ryan established the airline in 1985. He introduced low fare operations following successful models used by southwest airlines in 1995 under the supervision of a new management team. Some of the policies implemented by the airline include the adaptation of a single aircraft, low fares, direct booking and no frills. These policies allowed the company to benefit from an increase in its customer base since 1991. The company plans to replace the current aircraft used with a Booing Dreamliner to cater for the targeted customer growth to 80 million passengers. The airline also plans to invest in technology to enjoy the benefits associated with e-business. The use of technology such as the internet enables the organization to market its products, facilitate payment and communicate with its customers. As the competition in the airline business coupled with the unpredictable economic growth, Ryanair should implement strategies to secure its competitiveness in the business (Nankervis, 2005).
PESTLE analysis of Ryanair
The pestle analysis used in evaluation of the macro-environmental factors affecting a business, enables the organization to understand the challenges affecting the business. The analysis used in strategic management covers political, economic, social, technological, environmental and legal factors.
Political
Economic
1. There is an increase in pressure from trade unions in Europe.
2. The expansion of the European Union has affected the environment.
3. The European Union has abolished duty free sales increasing the prices of commodities sold by the airline.
4. The company faces stern security measures and restrictions (Kernchen, 2007).
1. Increasing fuel prices increase the operating cost.
2. The increase of cars and high-speed trains affect the airline business.
3. Depreciation of the U.S. dollar negatively affects the operations of the company.
4. Regional subsidies increase the operational costs of the airline.
5. European union commission ruling on compensation influences the business negatively.
Social
Technological
1. There is an increase in grey market in the region.
2. The travel lifestyle in the region is increasing market for the company.
3. Increase in business in the region has resulted to an increase in business traveling.
4. An increase in substitutes traveling modes affects the business through competition.
1. The improvements in technology facilitate technological expansion of the organization. Technological expansion involves satellite television, low fuel cars, high-speed trains and internet sales (Kernchen, 2007).
2. Improved technology enables the organization to compete adequately with its rivals in the global market.
environmental legal
1. The business faces challenges from environmental agencies and the government to reduce pollution.
2. Noise pollution levels control needs monitoring.
3. Control of carbon emissions (Kernchen, 2007).
1. The company faces allegations of misleading advertisements.
2. The company faces numerous lawsuits from subsidiary Airports and wheelchair charges.
The external environment provides threats and opportunities for the growth of the organization. The presence of technology and the unpredictable economy ensure that the business grows. The organization should evaluate the threats and ensure that the management is prepared. Competition from other forms of transport needs minimizing to ensuring that the products provided by the airline are competitive. The environment poses more threats that opportunities thus the need for the business to implement strategies to ensure that it attains a competitive advantage. The factors impact the business strategy negatively as growth of the business depends on many variables. The adaptation of the Dreamliner will increase the number of customers and reduce the cost to the company. The external factors increase the price of the discounted product affecting the strategy (Brassington & Pettitt, 2006).
Ryanair's price strategy is very clever, as the company's prices are low enough to be appealing to customers, but are not low enough to cause the company any serious financial damage in the medium term or long-term. This price strategy seems sustainable for at least a medium period of time. The company can afford this reduced ticket fare due to its continuously increasing number of customers. However, there are a
Ryanair Case Analysis Vella, O'Leary, and Kelly (PPS Publications, 2008) Ryanair certainly has had an interesting history and represents an extraordinarily successful company. The company has pioneered the low cost leader strategy and crafted a niche for themselves in the European market in record time. Furthermore the company developed this niche to become the industry leader. Despite the company's success however, the industry is evolving and new challenges are constantly emerging. It
By the turn of the century, though, these low-costs carriers had become profitable or at least had significantly reduced their losses due in large part to concomitant increases by major carriers that were increasing their prices in response to decreasing yields and higher energy prices (Doganis 2001). By and large, passenger traffic across the board increased significantly prior to September 11, 2001 and all signs indicated it was continue to
On the price dimension of the marketing mix, the company continues to compete with low-end and state-funded carriers, who arguably have a competitive advantage due to their funding source. Nonetheless, 1 Time is fighting the good fight of customer service and delivering value at their price points (Mantshantsha, 2007). Of all aspects of the company's marketing mix, this one is struggling the most as it strives to capture more of the
S. are seeing modest improvements in economic indicators. The social environment is favorable for air travel. The mode still holds tremendous cachet with consumers and is favored when consumers can afford it. There is some consideration that the airline business is a major contributor to greenhouse gases and therefore global warming, but as of yet the industry has not come under serious public pressure as it is generally viewed by the
Bargaining power of suppliers Price of aviation fuels is directly related to the cost of oil. Regional airports have little bargaining power as they are heavily dependent on one airline. 4. Bargaining power of customers Customer are price sensitive and switching to another airline is relatively simple 5. Threat of substitutes a. UK -- none b. Europe c. Driving holidays d. High- speed trains e. No loyalty of customers (Ryanair, 2009) B. Ryanair - Value chain analysis Cost-containment is the focus
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