Marketing Environment of Ryanair - Case Study Example

MARKETING PLAN By Name Course Instructor Institution Location Date Table of Contents 1.0Introduction 3 2.0Company analysis 4 2.1Pestle Analysis 4 2.1.1Political 4 2.1.2Economic 5 2.1.3Social and Cultural factors 5 2.1.4Technology 5 2.1.5Legal Aspect 6 2.1.6Environmental Factors 6 2.2Micro Five Forces 6 2.2.1Bargaining Power of Suppliers 6 2.2.2Bargaining Power of Customers 7 2.2.3Threat of Substitute Products and Services 7 2.2.4Threat of New Entrant 7 2.2.5Existing Competition 7 3.0Stakeholder’s Analysis (Internal Stakeholders) 8 4.0Ryanair 7S Mckinsy Analysis 8 4.1Strategy 8 4.2Structure 9 4.3System 9 4.4Shared Values 9 4.5Style 9 4.6Staff 10 4.7Skills 10 5.0Ryanair Company SWOT Analysis 10 6.0Objectives of Ryanair Company 11 7.0Segmentation, Targeting and Positioning 12 7.1Segmentation 12 7.2Positioning 12 7.3Targeting 12 8.0Promotional Plan 12 8.1Product 12 8.2Price 12 8.3Place 13 8.4Promotion 13 8.4Physical 13 8.5People 13 8.6Process 13 9.0 Conclusion 13 Reference List 14 1.0Introduction Ryanair, an Irish low-cost airline was founded on 28th November, 1984 and currently has 2008 destinations (Tran et al, 2015). It has its headquarters in Swords, Dublin, Ireland. Over the year it has seen its operations grow consistently. The revenues it recorded in the year 2016 for example hit a high of 6.536 million Euros (Moreno et al , 2015). However in recent time, various technological, economical, political and social changes have taken place which raise the need for Ryanair to come up with marketing strategies in order to maintain its brand in the aviation industry (Moreno et al , 2015). This report therefore seeks to analyze the marketing plan of Ryanair using pestle analysis, SWOT, Porter’s five forces, promotional mix and positioning, targeting and segmentation. 2.0Company analysis 2.1Pestle Analysis The external marketing environment of an organization has a great impact on the functioning of an organization (Scott and Davis, 2015) thus creating the need to analyze the respective external factors which make up a PESTLE analysis. 2.1.1Political The operations of Ryanair are largely dependent on the political stability of the country and the safety of the population which is reliant on many political factors (Bertels et al, 2015). The Brussels Airport terrorist attack for instance in March 2016 led to the cancellation of several flights which affected the normal running of business by Ryanair (Sarma, 2016). Ryanair is additionally affected by decisions from the European Union such as the directive to deny subsidies from the government to the airlines in their region to ensure that the level of the playing field is fair. Aside from political stability and political related alliances, extensive corruption, lobbying activities in the home market and trade union activities are major political factors that have a large impact on Ryanair. 2.1.2Economic The performance of Ryanair is directly affected by the economic climate such as the inflation rate and the currency exchange rates (Bertels et al, 2015). Furthermore, the cost of fuel directly impacts on the business operations in that low costs of fuel benefits the airline while high costs increase the expenses directed towards fuel. Ryanair has also experienced an economic downturn due to falling revenues that are increased by passengers who make last minute bookings and low ticket values. There is equally intensive competition in the airline market that forces Ryanair to lower its prices. 2.1.3Social and Cultural factors The social and cultural factors that affect Ryanair include change in consumer attitudes such as the awareness of other transportation alternatives and the demand by customers for lower travel costs from airlines (Bertels et al, 2015). This attitude change is a result of the financial crisis that has forced consumers to manage the spending more closely as opposed to previous times. There is a change in lifestyle as well that has affected consumer perception and preferences and this has been brought about by increased information globally. This affects Ryanair as the company is expected to meet the demand of different customers as per their lifestyles in order to maintain business. 2.1.4Technology Technology is a major player in the business environment of Ryanair as with other airlines (Bertels et al, 2015). Changes and developments in the technological field affect the structure of any organization as the models mostly keep changing. The input of technology has however improved the efficiencies of systems within Ryanair such as the service system, the engineering system and security. Despite the benefits of the technological input in Ryanair, its pace is very fast and expensive thus making operations of the company more costly. Technological innovations in rail networks that have high speed are an additional factor that has reduced the preference to travel by air among diverse consumers. 2.1.5Legal Aspect There are numerous laws involve in airline business which have to be upheld for business to be steady. Employment laws, competition laws, advertising laws, safety laws and security laws surround the Ryanair and these aspects keep the management on toes as they have to avoid litigation arising from the required laws (Bertels et al, 2015). One particular legal dilemma that affects Ryanair is trade disputes from trade unions which have seen the organization face litigation time and again. 2.1.6Environmental Factors The importance of environmental impacts has increased in the current globe with the presence of movements and massive media coverage and talks (Epstein and Buhovac, 2014). The requirement of environmental practices and reporting affects the business as these practices may not substantially promote business such as use of alternative fuels and cutting down of carbon emissions. 2.2Micro Five Forces 2.2.1Bargaining Power of Suppliers The bargaining power of suppliers in the airline industry is high due to the low number of suppliers in the market (Moreno, 2015). Boeing is the main supplier of airplanes and other plane parts for Ryanair (Moreno, 2015). The airline has maintained a satisfactory relationship with its supplier based on its fleet and expansion of the line. The bargaining power of fuel suppliers is equally high and the fuel market is dominated by Middle East. Ryanair basically relies on hedging to meet its policy for low fares. 2.2.2Bargaining Power of Customers Consumers have a high bargaining power due to a wide range of airline alternatives. The low price policy by Ryanair additionally gives consumers power over the company as they have enough influence on the prices (Moreno, 2015). Consumers may also choose to board other flights if they attribute the low prices to poor quality thus giving them a higher bargaining power. 2.2.3Threat of Substitute Products and Services Despite the available alternatives such as the high speed train and personal cars, the threat of substitutes to Ryanair is low as the high speed trains have higher fare as compared to the airline prices while personal vehicles take a lot of time and wear in traveling from place to place. 2.2.4Threat of New Entrant The airline industry is capital intensive and requires massive starting costs thus making the threat of entrants low. Ryanair is equally a strong brand with excellent marketing and fair prices that makes it difficult for new entrants to be a significant threat (Moreno, 2015). 2.2.5Existing Competition Ryanair faces competition from other airlines but has an advantage due to its low prices (Check Fig. 2) (Moreno, 2015). The strong brand as well as its long time experience in the industry makes it easier for the company to deal with intense competition and maintain its business. Fig 1. RyanAir Competitors and passenger turnout yearly Source: (Fehrm, 2017) 3.0Stakeholder’s Analysis (Internal Stakeholders) The main internal stakeholders of Ryanair Company have one set of involvement that is power and interest as illustrated by Dusseldorf, (2016, Pg. 44). In regards to this, the internal stakeholders all have high power in the operations of the company as well as high level of interest. The stakeholders include Ryan family, Ryanair employees and the CEO of Ryanair Company, Michael O’Leary. 4.0Ryanair 7S Mckinsy Analysis 4.1Strategy Ryanair applies the low-cost strategy as a way of gaining competitive advantage. One very important mechanism of dealing with competitive pressures is by practicing barrier to entry mechanism as suggested by Dutta & Santra, (2016, Pg. 89). The prices that the company charges are too low for another company to charge and still remain viable in the market. 4.2Structure The Company is lead by a CEO who is the highest authority. He is assisted by a team of directors who answer directly to him. Below the directors are the various departmental and branch managers who work together with a team of supervisors to direct work and operations of the Company by giving instructions to workers. 4.3System The Main control authorities from whom most cooperative decisions come from are the CEO Michael O’ Leary and his deputy Michael Hickey. The Company operates 397 Boeing 737-800 aircraft with a single 737-700 used primarily as a charter aircraft. 4.4Shared Values Ryanair is committed to ensuring that services they are providing are of the highest possible level despite the fact that the charges are relatively low as compared to the charges of other flight companies (Tran et al, 2015). Since being put under scrutiny over their policy on shares, they are dedicated to a more inclusive and diverse approach to their shares administration. More people will be allowed to acquire shares. 4.5Style The CEOs are expected to practice a mix of autocratic and charismatic leadership style as shown by Grant, (2016, Pg. 33). The most sensitive decision are made by the owners and brought up for adoption by the company’s employees. However, least sensitive issues are tabled for discussion among the various departmental heads and then passed to the CEO for ascent. 4.6Staff Having over 200 destinations, Ryanair has over 10000 employees of varying capacities and levels of training. 4.7Skills Skills needed are acquired via training and cut across flying planes, working as cabin crew, air hostesses and flight attendants. The Company’s employee’s team is known for their hospitality 5.0Ryanair Company SWOT Analysis Strengths: Ryanair has a well-known brand in all Europe and other continents. Low flight charges makes it attractive to the customers thus it has high number of passengers, it also hasinternet sites that eliminate the need of travel agents and enables online booking thus saving the passengers’ time. The high-density seat provides more comfort to the passengers not to forget that Ryanair provides best services, on-time arrival, and low loss of luggage paint a good picture of the company to all the people Since Boeing is the main supplier, their aircraft are unified thus lowering the maintenance and training cost. It as well have modern fleet that also lower the maintenance cost Weaknesses: Ryanair has a bad report of being arrogant in responding to news. It has a very limited area for expansion It is considered to have poor interpersonal skills and it is very sensitive to the changes in fare value. Opportunities: By the expansion of EU, it will provide many destinations for the Ryanair. There is a potential to even double the market share in the LCC It has less exposure to geopolitical risks thus it has an opportunity to expand Threats: The fuel price depends on the oil price thus it difficult to budget for it There is increased competition due to implementation of low fares by other airline companies The southern European market has a slow and limited growth The laws and regulation placed by the EU may cause difficulties in expansion of Ryanair. The environmental fees may limit their growth STRENGTHS Largest airline in Europe Low airport charges High safety record Modern aircrafts WEAKNESSES Low consumer loyalty Threats from the industry Few suppliers Negative reputation OPPORTUNITIES Expansion in Russia and Asia Expansion in new European Union countries THREATS New entrants in the industry Economic crises Source: Dusseldorf (2016) 6.0Objectives of Ryanair Company I. Continue offering low prices in a way that is sustainable in the sense that it keeps them in business without necessarily putting them out of business. II. Provide quality customer services thereby keeping their customer base and attracting new customers. To make use of the latest technology such as acquisition of ultra modern plane and renovating the existing ones 7.0Segmentation, Targeting and Positioning 7.1Segmentation Ryanair’s segmentation is basically on the type of customer (Tran et al, 2015). The main types of customers are business, family and agents who book on behalf of consumers. 7.2Positioning Based on one of Kotler’s winning value propositions that uses less for much less (Rozenberg et al, 2014), Ryanair has similar attributes as its prices are very low, its target market is price sensitive and few people view air travel as affordable. 7.3Targeting The company targets individuals, business persons and families as they are the most sensitive to prices (Tran et al, 2015). The low prices by the company address the expectations of these consumers as business people travel frequently while family people are very price conscious. 8.0Promotional Plan 8.1Product Ryanair offers flight services as its main product (Creaton, 2014). Investing in a plan to develop the existing services of the company is important for the promotion of the company’s services. This may include the expansion of its flight services to Asian countries. 8.2Price Price plays a significant role in marketing and Ryanair being the cheapest is bound to attract more customers especially outside the country where flights are cheap. The flight prices of Ryanair flash sales can go as low as 2.66 Pounds (Creaton, 2014). 8.3Place Ryanair offers its services over the internet as the place of its operations (Creaton, 2014). Expansion of its services to other countries especially third world may however require the use of travel agencies as most people do not use the internet as much as in Europe. 8.4Promotion Ryanair remotely markets itself through advertisements (Olischer and Dörrenbächer, 2013). Most of the airline advertisements are done in house. 8.4Physical The airline’s main asset is its airplanes which are procured at a fair price due to its cordial relationship with its main supplier Boeing and previous willingness to buy aircraft when other airlines declined. 8.5People Employees at Ryanair are highly trained to keep the image of the company powerful. Pilot cadets are first recruited then promoted to pilots as they work for the company (Tran et al, 2014). 8.6Process Ryanair has no check in process (Tran et al, 2014). The passenger is expected to show their passport and reference number and sit as per the time they arrive since there is no selection of seats. 9.0 Conclusion From the marketing analysis done above, Ryanair remains a stable entity in the airline industry as it has managed to function with and against internal and external environments and still remain the largest airline. The airline however needs to develop new approaches such as expansion and use of promotions to assert itself strategically in the industry and maintain its statue. Reference List Bertels, H.M., Koen, P.A. and Elsum, I., 2015. Business models outside the core: Lessons learned from success and failure. Research-Technology Management, 58(2), pp.20-29. Creaton, S., 2014. Ryanair: How a small Irish airline conquered Europe. Aurum Press. Düsseldorf, I., 2016. Ryanair. SWOT Analysis of the Leading Low Fare Airline. Dutta, G. and Santra, S., 2016. An exploratory study of price movements along booking profiles in the airline industry in the Indian domestic market. International Journal of Revenue Management, 9(1), pp.72-88. Epstein, M.J. and Buhovac, A.R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers. Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. 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New Delhi: Indian Council of World Affairs. Scott, W.R. and Davis, G.F., 2015. Organizations and organizing: Rational, natural and open systems perspectives. Routledge. Tran, N.B., Perkinson, J., Sinnenberg, C., Tarcia, L. and Harrison, J.S., 2015. Ryanair Holdings. Read More