Table of Contents
2 Key External Influences
3 Key Internal Influences
4 Market Structure
5 Competitor Analysis
6 Development of Strategic Direction
7 International Marketing Strategy
The choice of studying the Ryanair Company is driven by the fact that Ryanair is undoubtedly one of the most remarkable entrepreneurial stories of the past 10 years in Europe. Furthermore that Ryanair has developed a very outspoken communication style, using advertising and media to a great deal to publicize its ‘revolution’ in air travel.
Ryanair was Europe’s original low-fares airline and it is still Europe’s largest low-fares carrier. In the current year Ryanair will carry over 35m. passengers on 300 low fare routes across 21 European countries. Ryanair has 15 European bases and a fleet of over 100 brand new Boeing 737-800 aircraft, with firm orders for a further 125 new aircraft, which will be delivered over the next seven years. These additional aircraft will allow Ryanair to double in size to over 70m. passengers p.a. by 2012. Ryanair currently employs a team of 2,700 people, comprising over 25 different nationalities. Furthermore Ryanair continues a rapid growth in 2005. They started the year by launching two new bases at Liverpool John Lennon Airport and at Shannon in the West of Ireland. In February Ryanair announced orders for a further 70 firm aircraft from Boeing as well as 70 options. This takes Ryanair’s total order with Boeing to 225 firm aircraft and 200 options. These new aircraft, which will be delivered between 2005 and 2012, will allow Ryanair to grow to over 70m. passengers per annum, proving that Ryanair is not just Europe’s original low fares airline, but remains Europe’s biggest low fares airline, as well as the only airline offering the lowest fares in every European market.
This study looks at external and internal key influences of the environment of the Ryanair Company. This is as a first step important to come up with strategies, which Ryanair could take to stay as successful as they are right now.
The first chapter starts with an analysis (PESTEL) of the external environment (macro-environmental), which includes all the external factors such as economic, political, legal, technological, ecological and sociocultural, that can exert direct and indirect pressure on both domestic and international marketing activities. The second chapter goes on with a critical evaluation of the firm’s current and anticipated internal environment (micro-environmental) with respect to its objectives and performance, allocation of resources, structural characteristics, and political power. Therefore the SWOT Analysis is used as well as the Value Chain Analysis. The last point in this part is the identification of core competencies of Ryanair. Furthermore the Porter’s Five Forces Method is used for identifying the market structure in which Ryanair is operating. The Competitor Analysis follows this. Finally, the last section gives a brief summary with important concluding remarks.
What has to be stated is that in the following 15 pages just a rough overview of the main points of this assignment is given. Further details are important to evaluate everything and this is given in the appendix.
2 Key External Influences
In this part all factors, which influence the company as a whole but are out of their direct control including wider social, political and economic factors shall be explained. The analysis of those factors of the macro-environment is therefore often known as PESTEL analysis.
PESTEL is an acronym for the six key strategic areas of change: Political, Economic, Social, Technological, Ecological and Legal and a technique for understanding the various external influences on a business. Each single area has the potential to fundamentally change the competitive environment your company operates in.
Due to the fact that the airline industry is very much influenced by changes taking place in the environment and has undergone rapid and dramatic changes during the last decades, this analysis is especially important for Ryanair.
A detailed matrix of all single points of the areas of change – Political, Economic, Social, Technological, Ecological and Legal – can be found in the appendix. Furthermore the PESTL Analysis is made within the important points of the airline industry.
Ryanair targets in the first instance, as the largest and most successful of Europe’s low fare airlines, leisure travellers and the visiting friends and relatives segment of the market. Describing itself as “lowest cost scheduled airline” means basing the airline’s financial strategy on the average number of seats sold per flight in place of on the revenue made per sold seat. As a result every environmental issue, which either affects basic costs of flights or affects the likeability of customer to book a flight is important for Ryanair.
The past decades have brought many events, which affected flight security in the eyes of the customer. 11th of Septembers and “Sars” have shown that global dangers heavily affect the air-travel. As an European airline and following an effective promotional strategy Ryanair sales increased irrespective of this danger. However the unstable political global situation is a major factor of insecurity in the airline business. Ryanair, still being a main carrier between UK and Ireland and heavily using London Stansted is particularly affected by the fact that more terror attacks are predicted for Great Britain.
“Sars” or “Bird Flu” have shown that an epidemic can have a heavy influence on the airline business. The World Health Organisation (WHO) has already forecast a global epidemic within the next years. This will certainly have a larger influence on Ryanair’s business, relying as it does on a high number of sold seats among leisure travellers than do traditional airlines whose clients merely fly for business reasons and which are operating in terms of yield management.
Low price, value for money and efficiency are core values for Ryanair. Those core values should not change regardless of environmental turbulences. This means that cost reduction and other profit sources than travel fares are important factors in Ryanair’s strategy since they cannot compensate its expenditure by increasing travel fares.
For the low cost strategy prices of taxes, fuel, and governmental regulations are especially important. The airline deregulation not only helped Ryanair but also increased competition under different airlines and air traffic. The result of this is increased regulations by the EU government in terms of safety and environmental rules. This again raises operating costs within the EU. When Ryanair wants to maintain its low fares it has either the possibility to cut costs elsewhere in order to compensate increasing costs for safety and environmental taxes or it has to finance those costs by growing ancillary services revenue.
Efficiency and low prices are due not the least to the company’s lower labour expenses. The Ryanair Company controls these costs through a performance related pay structure. This special system is of course also dependant on EU social/employment legislation, which is always subject to change.
A main problem is the uncertainty of the oil price, which is again tied to political developments. Since the political situation in most major oil producing countries will stay unstable for the foreseeable future, the oil prize will remain a main problem for airlines. The fuel cost difficulty is exacerbated by unpredictable currency exchange rate fluctuations because aircraft fuel prices are denominated in US dollar. Nonetheless the weak dollar has compared to sterling a positive impact for Ryanair.
Finally Ryanair as a major European airline has to consider the travel regulations within the European Union. The falling obstacles of travel and trade have certainly had an influence on inter-European travel rates. Flying has become much easier, faster and convenient. This can be seen as an advantage for Ryanair operating in mainland Europe. The recent and potential continuing expansion of the European Union eastwards will therefore offer a growing market in terms of passenger volumes, destinations, and suppliers, particularly as the new markets become more fully integrated, including membership of the Euro zone.
3 Key Internal Influences
3.1 SWOT Analysis
After identitfying and analysing the external environment (macro-environment) of the company the internal environment has to be analysed. A SWOT Analysis is an instrumental framework to identify the Strengths Weaknesses, Opportunities and Threats for a particular company. The Strengths and Weaknesses are internal value creating (or destroying) factors such as assets, skills or resources a company has. The Opportunities and Threats are external value creating (or destroying) factors a company cannot control, but emerge either from the competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors. SWOT Analysis for the Ryanair company:
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3.2. Value Chain Analysis
The Value Chain Analysis describes the activities that take place in a business. It relates them to an analysis of the competitive strength of the business. The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. Michael Porter suggested therefore that the activities of a business could be grouped under two headings:
(1) Primary Activities – those that are directly concerned with creating and delivering a product or service
(2) Secondary/Support Activities – those that are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management)
A detailed explanation of the primary and secondary activities can be found in the appendix.
The following picture shows the ‘Value Chain Analysis’ for the Ryanair Company according to Porter.
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Chart: Porter; Competitive Advantage: Creating and Sustaining Superior Performance
More details to the Value Chain Analysis of Ryanair can be found in the appendix.
 Dogains, R.: Flying off course; p. 3 ff.
 Steininger: Gestaltungsempfehlungen für Airline Allianzen; p. 16 ff
 Tjon, F.: Wirtschafltichkeitsanalyse von Luftverkerhsunternehmungen; p. 97 ff.
 Tretheway, M.: Marketing the Airport-When the Network Air Carrier Model is Broken
 Neu, M.: Marketing-Strategien für den International Wettbewerb von Luftfahrtgesellschaften