Ryanair Case Analysis Notes - Coursework Example

Ryanair Case Study This paper conducts an assessment to Ryanair, a leading low cost airplane carrier service. Ryanair isa low-cost carrier service that was found in 1985. Currently, it has more than 232 aircrafts serving more than 153 destinations. Various framework and concepts will be applied to give extensive information on the impact of external environment on Ryanair’s low cost-strategy and its economic viability. Strategic frameworks that will be used are Porter’s Five Force Model, PESTEL and SWOT analysis. Porter’s Five Force Model enables one get overview of an industry in a general way by analyzing barriers to entry, supplier power, buyer power, threat of substitution and competition. Threat of new entrant into the industry is extremely low. This is because large capital is required for other aircrafts to enter the market. Additionally, the period for required for other firms to market themselves, is long (Creaton, 3). Finally Europe is extensively industrialized therefore getting space to build a new airport may be impossible. Ryanair face relatively stiff competition from substitutes. There exist alternative and affordable methods of transportation like high-speed electric trains and ferries. Furthermore, a bigger population of Europe residents own personal cars. This means that they can easily switch to driving. Buyers bargaining power is medium. As with many businesses, customers are always sensitive to prices. If Ryanair increases its prices, customer will shift to other planes whose prices are lower. In other words, Ryanair has not worn its customer’s loyalty. The power of suppliers to Ryanair is extremely high. All aircrafts owned by the company are Boeing. If the manufacture of Boeing denies Ryanair its services, Ryanair will undergo extensive loss. Jet engine fuel is controlled by few companies in Europe. As a result, Ryanair controls it through hedging (Creaton, 8). Finally, regional may decide to increase their charges on planes. In order to avoid this, Ryanair has come up with policies that make them avoid such regions. Finally, there is stiff competition in the market. Other flight companies like Easyjet and Aer Lingus have also adopted the tactic of offering low cost to passengers. Since this low cost model may become a trend, Full Service airline may also imitate the model posing more competition to Ryanair. Through PESTEL framework, the political, economic, social cultural, technological, ethical and legal environment impacting Ryanair will be discussed. Political environment affecting Ryanair is high due to the stern political stability in Europe. High political stability is associated with tight regulations like increased security measures around airports and tight screening of passengers. With a stable government, laws governing labor can easily change. Finally, subsidies for the airport come from regional or local government. Ryanair is highly affected by economic factors. In 2008, it was greatly affected by the financial crisis that hit Europe. Ryanair major clients come from U.S. In the past few days, U.S dollar has been falling compared to the European euro and this affects Ryanair carrier charging system. Furthermore, fuel prices fluctuate from high to low and vice versa. On the other hand, Ryanair is less affected by social cultural environment. The airline enjoys access provides its services to a large population of businessmen who take the advantage of affordability and speed of the airline. Due to business activities, a lot of people can afford to travel using planes thus making the industry popular. Affordability of Ryanair’s service enables people to travel over and over again making the culture of travelling, using aircrafts, become a lifestyle to many. Technologically, research and development in aircraft industry has led to discovery of quieter aircrafts that effectively and efficiently maximizes usage of fuel. Elsewhere, level of technology has increased (Mayer, 5). Europe boasts of a wide network of electrical trains and increase of ferry services. Finally, development of internet technology in Europe has led to reduction of overhead charges and creation of business opportunity within the airline industry. Worldwide concern for the environment affects airlines in Europe. All airlines in Europe are mandated by law to ensure that all their activities are environmental friendly and so is Ryanair. Primary objective is to reduce carbon emission and concerns on global warming. Moreover, legislation demands that airports control their noise pollution level (Mayer, 10). Legally, airlines are prohibited from discriminating their passengers for instance wheelchair fees, and fat taxes. Airline companies, due to competition, they are required by law not to undertake false advertisements. Ryanair has adhered to this. Through SWOT analysis, strength, weakness, opportunity and threats to Ryanair will be assessed. Ryanair is strongly recognized as a low-cost airplane. Furthermore, management of Ryanair is extremely sensitive to cost and as a result their financial experts come up with innovative cost reduction mechanisms when other airlines reduce cost. Flight operations carried out in Ryanair makes them efficient and this ensures punctuality in their flights. Ryanair owns Boeing fleet of flight. As a result, they manage to offer first mover advantage and fantastic customer experience. In spite of the above strengths, Ryanair has weaknesses. There is so much negative publicity against Ryanair which destroys its brand name. The main reason why customers prefer Ryanair is because it is affordable and not because it is luxurious. Furthermore, aircraft from Ryanair does not fly to major airports. Threats to the industry are that, due to its consistent low-cost model, it may one day collapses or fail to offer its services. As it has been mentioned above, existence of electrical trains and cars is a threat to it. If prices of substitute decrease substantially, Ryanair may lose customers. The government of Europe may come up with a policy to unionize the firms, if that happens, Ryanair will no longer decide how it will charge its consumers. Ryanair has an opportunity to grow. Europe, especially the London city, has become major attraction to tourist. Increase in tourism means more customers for Ryanair and other airlines. Eastern side of Europe is expanding, this means increase in businessmen and finally new customers and destination for Ryanair. From the above frameworks, it is evident that Ryanair exists amidst of a competitive and unfavorable business environment. As a result, they should develop strategies to enable them maintain the low-cost model and also expand and gain stable market positions in other nations. Works Cited Creaton, Siobhán. Ryanair. London: Aurum Press, 2004. Print. Mayer, Sascha. Ryanair and its Low Cost in Europe. Munchen: GRINN, 2007. Print. Read More