Ryanair is an Irish low-cost airline that has a big share in the European airlines’ industry. The airline provides good services to the customers and has a big share in the international market. This case study will analyze all the factors that can affect the company development and progress and also recommend some strategies to improve the current state of the company. The key issues faced by the Ryanair are a bad image to the company and most revolve around low costs, poor customer services and ecological damage to the environment. The SWOT and TOWS analysis for the Ryanair is also given in this case study. Moreover, the strategic options and proposed strategic plan and SAF analysis are also given along with the conclusion and recommendations at the end of the study.
Ryanair is a famous and first low-cost budget airline that introduced new low-cost packages in the airline industry. The airline was founded in 1985 by the Ryan family with an aim of providing scheduled low cost passenger services between Ireland and UK. The airline was targeting to operate as an alternative to the state owned monopoly Aer Lingus. Over the years, the airline has gone through drastic changes dating back from inception in 1985. The CEO of Ryanair, Michael O’Leary adopted the business model of Southwest airlines that is low cost and strong leadership. The strong leadership of the Ryanair is famous all over the world. However, the airline experiences inconsistencies in areas such as poor customer service and bad working conditions. In the recent years, Ryanair has been improving its services, bettering its image and introducing necessary changes to attract more passengers and customers.
The Strengths, weakness, opportunities, and threats (SWOT) analysis of Ryanair’s is given below.
Ryanair Strengths (Internal factor)
The brand name of Ryanair is its strength itself. Ryanair always provided the facilities to the customer with low costs and high levels of punctuality. The one-time service provided by the Ryanair is a plus point for this airline. It is the largest airline in Europe and it transports passengers more than other airlines in this region. The presence of Ryanair in the European markets acts as the defensive system against the competing airlines. The low-ticket cost is due to its large size as they can exploit the economy of scope and scale.
The online air ticket reservation system is also a big plus point for this organization. The young staff and crew members are also one of its biggest strengths. The customers can buy their tickets without paying extra cash to the agents. The expenses are controlled by the bargaining power of Ryanair because of its large presence. The large size of the airline that is 16,00 routes in 30 Europe and North Africa countries, 69 bases for Ryanair aircraft and crew and about 186 airports, ultimately make this airline a strong icon in the market.
Weaknesses (Internal factor)
Despite the fact that Ryanair holds a good position in the International markets, there are many threats that can affect the capacity of the airline. The earnings of Ryanair are highly seasonal and the profit increase depends on the climate of the strong northern hemisphere. As the summer approaches from July to September, the profits get high while in winters that is from October to March the profit decreases. The company faces a big loss due to this seasonality issues. Moreover, the poor customer service and tricky service agreements such as ambiguous baggage policy and other unfair pricing practices for the increase in revenue damage its position. Moreover, the increasing market presence of the airline in the UK caused Brexit risks to the organization and because of this, the owners have decided to focus on Europe to combat this weakness in the future.
Opportunities (External factor)
In 2013, Ryanair focused on improving its customer service to enhance the interactions quality of the customers with the airline. The new attractive website and booking with few clicks increase the airline’s strengths. Moreover, the new app, relaxation in the baggage restrictions and new seating makes it a good airline.
To improve the customer services, the Ryanair also launched its business class and it also has many features such as fast lane service, booking flexibility, single fee features and a choice for reserving the seat in the premium rows and checks the bed. More primary airports are being added to the Ryanair to improve its services.
Ryanair is also planning to add one hundred Boeing 737 MAX200 aircrafts to its air fleet. The aircraft will have 197 seats and they will be operational after 2019. The seats in the current aircraft are 187. The increased fuel efficiency of the plane will also increase the profits by 18% and reduce the noise pollution by 40%.
Threats (External factor)
Accidents are the major threat to any airline. Ryanair’s track record shows that it has a robust safety record. There are fewer suggestions to improve safety but Ryanair has a strong image and continuously growing its plans. However, the loss of focus from any of its management corner could damage its track record. The real threat lies in the foray into the Irish rival Aer Lingus. This would be a major threat to the airline because the business model, fleet, and network of the new airline were not the optimal business option. The competition regulators and Irish government threatened this attempt.
Other airlines are not able to compete with Ryanair on price because of its level of unit cost. However, there are some other areas such as quality of airport and the customer level of satisfaction on these modifications that can be threatening to Ryanair. Moreover, with the ambitious growth plan, the external factors such as fuel prices, currency movements and terror threats are always the risk factors for the airline.
The tows analysis of Ryanair gives the recommendations to increase its capacity in all aspects.
Ryanair must fulfill its upcoming project of buying one hundred new airplanes and increase its 146 routes which the company decided to launch in 2010. Expanding further can increase the company role in the market to achieve the goal and they can use this to decrease their fair more. Moreover, Ryanair should use its young staff to improve its customer service and give a good image to the customers. More revenue can be generated by increasing the sales over the attractive website.
Ryanair should keep buying the new aircraft. The increase in the fuel price is always the risk for the airlines. The new airplanes are fuel efficient and they can save a lot on fuel thus increasing the profits. In case of an increase in the fuel prices, the airline will compete in a more healthy and profitable regime. The airplanes are also environmentally friendly as they have low noise and spread less pollution. The economic hold of the airline can help in this situation. When the others are increasing prices the low costs of this airline can increase its profits by a good amount.
In order to overcome the bad image of the airline resulting from poor customer services and controversial advertisements, Ryanair must engage in a dialog with the customers and labor unions. The successful dialogues must be publicized through advertisements. There must be a feedback area for the customer’s complaint and the company must take notice of the complaints by reviewing and responding to them effectively and diligently.
The public image of the airline must be optimized. The airline’s poor customer services must be improved and the safety risks must be eliminated. To release the pressure from the staff new qualified staff should be hired.
Porter’s generic strategies are given by Michael porter who wrote a book about the competitive strategies, which are widely used in strategic management. According to Porter, competitive strategy is the tool for the allocation of suitable competitive positions. Companies are built and destroyed on the basis of their alternative strategies. Michael Porter’s conceptual model was based on three major categories and these are differentiation, focus and cost leadership strategy. In the model the Michael Porter compares the successful and unsuccessful business organizations. If the company does not fit in the strategies set by the porter model then they are unable to compete in the competing environment (Porter, 2014).
The cost leadership strategy represents the activity of the organization by keeping their costs low and giving the best in the low cost within the industry. In this case, because of its low cost, Ryanair has attracted many customers travelling within Europe from point A and point B. With the recent recession and other factors, the customers go for the cheaper option in providing the better-quality service. At inception, Ryanair was a normal airline with same fairs and charges. However, the company reduced its cost by keeping the external recession in mind. Therefore, the airline faces issues transitioning from a high cost airline to then emerge as the best low-cost airline in the Europe.
Differentiation strategy is also good for the firm in that it highly utilizes technology. Some problematic areas are associated with this strategy is the estimation of the extra cost, which can be recovered from the customer through the high pricing. The successful differentiation strategy works if the company introduces a different product. Ryanair already faced losses and therefore, the CEO adopts the American Southwest airlines policy. However, Ryanair strategy in this case remained unclear. The low-cost policy greatly aided in the accomplishment of differentiation as well as cost leadership and thus the airline emerged as a successful game changer in the airline service industry. The use of secondary airports by Ryanair helps in maintaining its low prices.
Focus is also one of the three generic strategies but it was considered as the moderator for the other two strategies. The company focuses on the areas in the markets with the areas of least competition. The focus of the Ryanair is to get the customers through low cost from point to the point. Therefore, Ryanair is the best choice for the people who want to travel through the secondary airports on low prices. The holiday clients who just wanted to move from point A to point B are the major target of the airline. Good quality service on low cost is the major focus of Ryanair and this makes it a completely different airline in the market.
New strategic Implementation
Christensen disruptive innovation is the suitable suggested model for Ryanair. Christensen disruptive innovation model establishes new market and value network and then after the time disrupts the current value and market network gets to the market leader. Ryanair runs on low-end disruptions if considered in Christensen’s disruptive innovation mode (Christensen, 2015). The figure below shows this model. For example full service airline such as British Airways are disrupted by the Ryanair.
The disruptive innovation model is given above. The red line indicates how products and services are improved over the time as compared to the customer demands/ which are represented by the blue line. The incumbent company provides the high number of products to satisfy the high demands of the customers. These companies overshoot the demands of the low-end customers and this leaves the opening for the entrants. The entrants later challenge the incumbent companies on the market.
This model is suitable for Ryanair current situation and the disruptive issues can be resolved with the help of this model. Moreover, as the time will pass on, the weaknesses of the airline will transform in to its strengths, which will be improved through this model. The model is suitable in that there is new management in the airline and they will easily adopt this model.
There are chances that this model is accepted by most of the stakeholders because of its easy adoption and great results. Ryanair stakeholders are well aware of their weaknesses. Thus, this is the best model to take their company out of risk in order to attain a high position in the market. As the customer interest increases, it will also increase the profits of the company.
Ryanair is a big organization with good human and financial recourses. The implementation of Christensen model is easy to implant in the organization. New staff management staff may be required to implement this model in a more effective manner. The weaknesses can be overcome through this model.
Recommendations and Conclusions
- Ryanair must improve its marketing communication strategy. The analysis shows that the Ryanair has a strong competitive advantage in the market and it can be directly related to the competitive process of the airline operator. However, not only this can keep the level of satisfaction for the customers and it does not provide the sufficient level of effectiveness. Ryanair management should improve the quality of the integrated marketing communication by introducing several programs and measures. It should ensure that the marketing strategy combines all the components of marketing communication mix so that the company can deliver its target customer segment in an effective and efficient way.
- The airline ought to improve and modify its web based check in system. This is because as the online ticket purchase is increasing the ticket purchase form for agents is drastically decreasing. The management is recommended to adopt a viable approach to improve its website and take full advantage of its competitive advantage. Innovative functions and features are needed to be introduced in the website. The website should give comprehensive information to the customers in an effective way. In addition, the online transactions system must be safe and secure.
- The Ryanair management should launch new programs and initiatives which show its greener image. According to a recent report, the pressure on the airlines and transportation companies is increasing from the government and non-government organizations to reduce their emissions because of the ecological damage caused by airline companies to the atmosphere. Taking in to consideration the current business strategy of Ryanair, neglecting this issue on environmental damage can cause a serious damage to the organization in the future. The Ryanair management is increasing the focus to the environmental projects and buying the new airplanes is part of that. The new innovations to the business and technical processes are needed.
- The brand image of the Ryanair needs to be improved. The business strategy of increasing marketing share and profits by offering competitive prices has impacted the image of the brand. The concept of being cheap introduces new perception of the quality of the service and customers give prevention about the poor service in the cheap rates. The image of the Ryanair must be focused on giving value rather than cheap.