Ryan_air Global Strategy

8/3/2019 Ryan_air Global Strategy

http://slidepdf.com/reader/full/ryanair-global-strategy 1/16

1

Course BUSI1271: Global Strategy: Analysis & Pr Course School/Level BU/PG

Coursework Team assignment Assessment Weight 30.00%

Tutor WE Hearne, VJ Torlo, N Brady Submission Deadline 18/11/2011

000636607

000695956

000697944

000352183

Coursework Header Sheet 187485-104

Coursework is receipted on the understanding that it is the student's own work and that it has not,

in whole or part, been presented elsewhere for assessment. Where material has been used from

other sources it has been properly acknowledged in accordance with the University's Regulations

regarding Cheating and Plagiarism.

Tutor's comments



2

Contents

Coursework Header Sheet ............................................................................. 1

INTRODUCTION............................................................................................. 3

STRATEGIC POSITION ................................................................................. 3

PESTEL ANALYSIS ........................................................................................ 3

PORTERS‟ FIVE FORCES ............................................................................ 5

Threat of entry (Weak).................................................................................... 5

PARTIAL SWOT ANALYSIS (Opportunities and Threats) .......................... 6

MARKETING ANALYSIS ................................................................................ 7

STRATEGIC PURPOSE ................................................................................ 8

STRATEGIC CAPABILITY ............................................................................. 9

STRATEGIC DIRECTION .............................................................................. 9

BCG MATRIX (Boston Consulting Group Matrix) ...................................... 10

CRITICAL SUCCESS FACTORS:............................................................... 11

FINANCIAL ANALYSIS ................................................................................. 14

REFERENCE LIST ....................................................................................... 16



3

INTRODUCTION

The aim of this report is to look at the airline industry within Ryanair that Christy Ryan,

Tony Ryan and Liam Lonergan founded in 1985. This report will analyse the strategy that

Ryanair consists of. This report will also analyse the data within the Ryanair annual report and

several case studies to determine the strategy that has been adopted as of this date. Ryanair

will be analysed and recommendations will be made for the forecasted strategy of Ryanair.

Ryanair is the World‟s favourite airline. There are more than 1400 flights flying every day.

In addition, Ryanair is also one of the lowest priced airline companies, more than 1100 cheap

fare routes pass through 27 countries, connecting 160 destinations (Ryanair, 2011a).

STRATEGIC POSITION

According to Johnson and Scholes (2005) the strategic position is defined as the influence

on strategy of the external environment, internal resources and competences, and the

opportunities and power from stakeholders. With all these factors on board and the addition of

strategic capability, contemplation of the environment, and the prospects of the cultural and

political structure of the organisation delivers the foundation for grasping the strategic position

of an organisation.

PESTEL ANALYSIS

The PESTEL framework highly influences the companies‟ business successful or failure.

There are six elements included in the PESTLE framework. These are Political, Economic,

Social, Technological, Environmental and Legal factors. (Johnson, schools and Whittington,

2009)



4

Political:

Climate protection charges, 'green' trading schemes1

Multilateral trading agreements

Security controls

Variable international taxation rates

Global Tariff rate issues

Government supporting national carrier Air France-KLM2

Economic:

Fuel price increases3

Depreciation of US dollars

Varying national growth rates

Illegal subsidies of airports4

Social:

Change in the travellers‟ trends

Rise in travelling lifestyles

Rise in business travelling

Student international study exchanges

Technological:

Fuel-efficient engines and aerodynamic airframes

Ryanair allows mobile phone use5

Heightened security check technologies

Internet sales and internet check ins

1BBC News,(2007) Ryanir hits back in 'green' row (Source: http://news.bbc.co.uk/1/hi/uk_politics/6233019.stm)

2Airport-technology.com (2006) Runway Wars, (Source: http://www.airport-technology.com/features/feature667/ )

3 Wembridge and plimmer (2011) Rising fuel prices clips Ryanair’s wings(Source:

http://www.ft.com/cms/s/0/5549021a-b693-11e0-ae1f-00144feabdc0.html#axzz1cf3Nd3bv) 4

Presseurop ,(2010) Ryanair flies high on subsides, (Source:http://www.presseurop.eu/en/content/article/255241-ryanair-flies-high-subsidies) 5

BBC NEWS(2009) Ryanair allows mobile phone use.(Source: http://news.bbc.co.uk/1/hi/technology/7899446.stm)

http://news.bbc.co.uk/1/hi/uk_politics/6233019.stm



http://www.airport-technology.com/features/feature667/



http://www.ft.com/cms/s/0/5549021a-b693-11e0-ae1f-00144feabdc0.html#axzz1cf3Nd3bv


http://www.presseurop.eu/en/content/article/255241-ryanair-flies-high-subsidies


http://news.bbc.co.uk/1/hi/technology/7899446.stm










5

Environment:

Noise pollution controls

Emission of carbon controls

Land for enlargement of airports

Legal:

Restrictions on mergers

Allegations of misleading advertisement6

PORTERS’ FIVE FORCES

Threat of entry (Weak)

Scale and\\ Experience are required to compete with large airline industries

Brand image and loyalty to low fares

Legal restraints on new entries

High restrictions on landing required in the airport.

Threat of substitutes (Moderate)

Ryanair is the cheapest airline

Easy to switch to other safer and

quicker transport tool

.

Buyer power (Strong)

Customers may switch to other

6 BBC NEWS (2010)Ryanair reprimanded for ’misleading’ advertisements.(Source: http://www.bbc.co.uk/news/10626652)

http://www.bbc.co.uk/news/10626652






6

cheaper mode of transportation.

Many alternative choices.

Supplier power (Strong)

High switching costs, due to the Boeing and Airbus

High supplier competition threats

High fuel prices.

Competitive rivalry (Strong)

High exit barriers

High fixed costs.

Based on this analysis of the Porter‟s “f ive forces,” the position for Ryanair within the

European air transport market can be ascertained. The three strong forces, one medium force

and one weak force are representing the competitive ability of Ryanair‟s industry. Ryanair is

the cheapest airline, consumers have strong brand loyalties, and however, buyers within the

market have the threat of easily switching to the safer and quicker mode of transportation.

Boeing and Airbus are the major suppliers for Ryanair and the fuel price is higher, therefore,

Ryanair have extremely strong supplier power. According to these reasons, it makes Ryanair

successful in the currently market.

PARTIAL SWOT ANALYSIS (Opportunities and Threats)

Using a SWOT analysis will help to identify the internal factors and the external factors of

a company. These factors are; Strength; Weakness; Opportunities and Threat.



7

Opportunities:

The economic recession can be exploited. Most people due to lack of disposable

income were rather looking for bargains than leisure spending. The inclusion of more

countries in the EU also gave rise to new air routes which the airline industry exploited. This

helped Ryanair, as it is a low budget airline.

Threats:

The competition in the low budget airline industry is a major threat for the company.

Customers who look for bargains may switch to other airline companies such as Easy Jet

which provide better services than Ryanair even though the price rate are slightly different.

The increase in the fuel price can be a major problem to sustain in the industry with this low

price strategy.

MARKETING ANALYSIS

Airline Industry is a very large and global industry with high number of competitors. While

entering into this market, a company would be requiring a huge amount of capital. As a result

the risk involved is very high. Before entering into the airline industry the company should

know its market well, should identify the best suitable location and its target customers. A

market analysis of the industry would help the company to know the current and future market

situation. This will help the company to make their strategies for the business to run

successfully

Recovering Global Market:

With the global market slowly improving, the market situation for the airline companies is

also increasing accordingly. As the economy grows the number of people travelling will also

rise. In Japan, the effects of tsunami and nuclear problems are slowly receding. Three low cost

carriers are planning to launch service in 2012 (Airline leader, 2011).

Competition

It is also very important to know the rivals of your firm. The companies have to analyze if it



8

can compete with its rival in the market. Michael O‟Leory, CEO of Ryanair Inc. in an article

published in “economist.com” has warned of a „bloodbath‟ in the low fare airline industry.

Ryanair‟s rival EasyJet is formulating strategies to stay on in this market. Since both the

airlines focus mainly on low fare travels they have to keep the ticket price low regardless to the

increase in competition. In Europe there are around 50 low cost carriers, some of them go bust,

while some new carriers are started.

Price

In a low fare carrier industry the most important aspect is price. The average price per

travel in the market is increasing in the airline industry (Advito, 2011). With the increase in fuel

prices, it is a big challenge for the airline companies in this industry to keep the prices down

and survive in this market situation. However with the increase in demand from the people

means that the market still hold good news for low fare carrier companies.

STRATEGIC PURPOSE

Stake Holder Mapping:



9

STRATEGIC CAPABILITY

Strategic capabilities are the resources and proficiencies of company required for it to survive.

STRATEGIC DIRECTION

Strategic direction is a procedure leading to the goals set in a firm‟s strategy being achieved.



10

BCG MATRIX (Boston Consulting Group Matrix)

The BCG Matrix model bases its theory on the life cycle of products. It enables to have an

understanding of the opportunities and the correct direction to distribute resources in order to

maximise profit in the organisation

Analysed BCG Matrix for Ryanair:

STRATEGIC CLOCK

Bowman‟s Strategic clock is based on the work of Cliff Bowman. The strategy enables the

organization to study its competitive position when comparing it to competitors‟ ways of

competitive positioning.

* Bowmans Strategy Clock taken from http://www.mindtools.com/pages/article/newSTR_93.htm

http://www.mindtools.com/pages/article/newSTR_93.htm






11

Ryanair ‟s low fare and no frills strategy is its key to success placing it at Point 1 on the

Strategic Clock. The airline company ensures lowest ticket prices by keeping other costs as

low as possible. More baggage allowance should be considered and Ryanair could possibly

provide basic in-flight frills like Easyjet to refrain customers from switching over. With Easyjet

being its competitors, Ryanair could be at risk to losing market value.

CRITICAL SUCCESS FACTORS:

In this high competitive industry, Ryanair and its management still maintain sustainability

without even having to add sub-fuel charges to its customers. The following points are the

main factors for Ryanair‟s success

Low fares:

Ryanair‟s low fare policy attracts low bargaining customers. They use a method of

advanced booking to attract customers. The farther away from date of departure the cheaper

the flight fares are. This is the method in which Ryanair fix their ticket prices.

Low operating cost:

The management of Ryanair keep operating cost as low as possible. The

company operates on a single aircraft type which is Boeing 737-800s. This helps them to

reduce the maintenance cost and also the training cost given to its employees.

Customer service:

Ryanair maintain the policy of a good relation with its customers. Their success is

attributed to a better punctuality in flight timings, fewer baggage losses and fewer flight

cancellations..



12

Frequent Point-to-Point Flights on Short-Haul Routes:

Ryanair‟s frequent short distance flights help them offer low cost flights and

therefore avoid in-flight superfluous services.

PARTIAL SWOT (Strength and Weakness)

Strength:

The major strength Ryanair has over its competitors are its brand name and low fare

policy. Ryanair uses the same air craft from Boeing 737-800. By doing this the company is

able to reduce the fuel expenses and maintenance expenses. The online check-ins introduced

by Ryanair also helps to reduce the queues at the airport which inconveniences‟ its customers.

Weakness:

The lack of health customer and employee relation is Ryanair‟s major weak point. Ryan

also allows only lesser baggage allowance than the other airlines. This also creates customer

dissatisfaction.

OPERATING ANALYSIS

Ryanair has its strategies well laid out to execute the business successfully. Since

Ryanair fall under the low fare airline industry, they seek to provide low fares which will result

in the increase in number of customers. It also focuses mainly on containing costs and

operating efficiencies. Some of the long-term strategies adopted by Ryanair are listed below. It

is also very necessary to know the results of the strategies adopted by the company.

Reduced Fares : The prime focus of Ryanair is to increase the number of customers by

reducing its fares. Ryanair eliminates the minimum stay requirement by selling seats on one

way basis. Ryanair generally sets its price depending upon the demand of the flights. It also

considers the time when the ticket is booked. If the ticket is booked nearer to the departure

date, they will increase the price of the ticket.

Customer Satisfaction : Even though there are no frills attached to the journey, Ryanair

make sure that they try to deliver the best customer service among its peers. As per the data

published by Association of European Airlines (AEA), Ryanair has improved its punctuality;

there have been less number of cancelations, less number of lost bags. Ryanair has also

successfully reduced the percentage of delay flights with their new and improved strategy.



13

Point to Point Flights : Ryanair also facilitates point to point service to secondary and

regional airports on short haul routes. With the introduction of this strategy Ryanair flew

average flight duration of 1.69 hours and an average of 727 miles. This also eliminated the

need to provide unnecessary “frills”

Reducing Operating Costs : Ryanair aims to reduce its operating costs by controlling its

primary expenses such as aircraft equipment costs, employee costs, customer service costs

and the cost required for accessing various airports . The development of Ryanair‟s own

internet booking facility has allowed them to eliminate commission and the third party costs. 99%

of Ryanair‟s revenue is generated through direct sales as of now

Improving the safety : The management of Ryanair consider safety of the crew and

passengers as their primary priority. As per the report published by Ryanair, (2011) they have

not ever had a single passenger or flight crew fatality due to accidents in its operating history.

Enhancing operating results through Ancillary services : Ryanair has various

contracts with agencies for hotel reservations, providing rental houses, camping etc. They

have also contracts for car rental services and they also sell bus and rail tickets as well. These

ancillary services accounted for nearly 22% of Ryanair‟s total operating income in both 2010

and 2011 (Presentation of financial and certain other information, 2011)

Effective implementation of these strategies resulted in an increase of profit for the

company. According to the financial report published by Ryanair, the profit after tax increased

from €93.7 million in 2010 to €139.3 million in 2011. The operating profit of the company

increased to €169.9 million in the recently completed quarter in 2011 from €121.1 in first

quarter. There was an increase in operating costs by around €200 million mainly because of

the increase in fuel prices by 49%. The company‟s cash and cash equivalent also increased to

€3213.8 million as at June 2011 from €3072.8 which was recorded in June 2010



14

FINANCIAL ANALYSIS

Consolidated Statement*

Year ended

March 31,

2011

Year ended

March 31,

2010

Year ended

March 31,

2009

€M €M €M

Profit (loss) of the year 374.6 305.3 (162.2)

Other comprehensive income:

Net actuarial gain (loss) from retirement benefit plans. 5.0 - (7.5)

Cash-flow hedge reserve effective portion of fair value

changes to derivatives:

Effective portion of changes in fair value of cash flow

hedges......................................................... 227.1 129.8 256.8

Net change in fair value of property, plant and

equipment.......................................................... (15.2) (16.7) (1.0)

Net change in fair value of cash-flow hedges

transferred to profit or loss................................ (14.8) (50.8) (115.6)

Net movement in cash-flow hedge reserve 197.1 62.3 140.2

Available for sale financial asset:

Net (decrease)/increase in fair value of asset sale (2.2) 23.0 (222.5)

Impairment of available for sale asset written of



15

income statement......................................... _ 13.5 222.5

Net movements in available for sale financial asset

reserve................................................................

(2.2) 36.5 -

Total other comprehensive income of the year 199.9 98.8 132.7

Total comprehensive income/(loss) for the year- all

attributable to equity holders of parent

574.5 404.1 (36.5)

* Retrieved from 20 F statement released by Ryanair, www.ryanair.com

Ryanair recorded a profit on ordinary activities after taxation of €374.6 million in the 2011

fiscal year, as compared with a profit of €305.3 million in the 2010 fiscal year. This profit was

primarily attributable to an increase in revenues driven by a 12.3% increase in average fares

and a 20.8% increase in ancillary revenues, partially offset by a 37.3% increase in fuel and oil

costs from €893.9 million to €1,227.0 million.

Ryanair„s scheduled passenger revenues increased 21.6%, from €2,324.5 million in the

2010 fiscal year, to €2,827.9 million in the 2011 fiscal year, primarily reflecting an increase of

12.3% in average fares. The number of passengers booked increased 8.4%, from 66.5 million

to 72.1 million, reflecting increased scheduled passenger volumes on existing passenger

routes and the successful launch of new bases at Barcelona (El Prat), Gran Canaria, Kaunas,

Lanzarote, Malta, Seville, Tenerife and Valencia in the 2011 fiscal year. There was a

one-percentage-point increase in booked passenger load factors from 82% in the 2010 fiscal

year to 83% in the 2011 fiscal year.

Passenger capacity during the 2011 fiscal year increased by 18.5% due to the addition of

40 Boeing 737-800 aircraft (net of disposals), as well as a 7.8% increase in sectors flown and

a 9.9% increase in the average length of passenger haul. Scheduled passenger revenues

accounted for 77.9% of Ryanair„s total revenues for the 2011 fiscal year, compared with 77.8%

of total revenues in the 2010 fiscal year.



16

REFERENCE LIST

Advito, 2011, „Industry Forecast Index‟ http://www.bcdtravel.com [Accessed on 15 Nov 2010]

Johnson, G., Schocles, K. and Whittington, R. (2009) Fundamentals of Strategy .England:

Pearson Education Limited [Accessed on 20 Nov 2010]

Ryanair,(2011a) About us [online] [Available from] http://www.ryanair.com/en/about [Accessed

on 04 Nov 2011]

Wembridge, G.P. and Plimmer, M. (2011) Rising fuel prices clips Ryanair‟s wings

[online][Available from]


[Accessed on 04 Nov 2011]

http://www.bcdtravel.com/


http://www.ryanair.com/en/about






Ryan_air Global Strategy

Documents