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Dogfight over Europe: Ryanair. Harvard Business School - Essay Example

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The strategy taken by the Ryan brothers would surely make money at the 98 fare that they propose and for valid reasons. The airline launched by the Ryan Brothers by the name Ryanair is basically a low cost economic airline. The Ryan brothers publicized in the month pf April 1986 that they were about to launch an air service between London and Dublin…
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Dogfight over Europe: Ryanair. Harvard Business School

Download file to see previous pages... The best possible strategy for countering this competition was based on a movement the supported a low cost economic fare structure. The 98 fare structure was to make money because the initial infrastructure of this airline lacked huge overhead costs generally incurred by an established airline company like British Airways and Aer Lingus. This was more relevant because the move of economic fare structure was based on the strategy that it was indented to make an entry into an already populated route of air service between London and Dublin with established competitors like British Airways and Aer Lingus. This was the best possible method of penetrating the market by luring the customers with extremely low fare. It is obvious that the 98 fare structure would yield profit because it would have two specific advantages along with being about 50% to 90% lower rate than its competitors. First, with the lower fare system the company would be able to attract better amount of customers and thus would be able to penetrate the market which is expectedly advantageous for the long run and secondly, with lower cost infrastructure like lower number of employees the company would be able to sustain its position and plough back profit margin in a gradual manner. (Rivkin, 1986) The cost advantage of this company can be enumerated as follows:
(Bhagavan, 18)
On the other hand it would surely prove to be costly for Aer Lingus and British Airways to retaliate against Ryanair's entry into the market rather than accommodate it. The Ryanair was to make an entry with a recognizable stamp with their extremely low fare in the market of populated route of air service between London and Dublin surely it would be a challenge for company like British Airways and Aer Lingus to confront it. These present carriers were to respond in a positive approach to counter the advent of this new market entry. It is easily anticipated that the existing company would hardly allow any substantial price cut to compete with this new entrant in the field of fare structure because Ryanair was already offering a rock bottom fare and price would not be made possible to drop further for British Airways and Aer Lingus. However, the existing companies British Airways and Aer Lingus are sure to cut prices at least for an eye wash to make a substantial impact on the customers' impression. Never the less, even this eyewash is to prove costly because for long serving companies like British Airways and Aer Lingus it is obvious that the cost analysis and the fiscal balance would be demanding for the two companies. With a huge infrastructure and great number of employees it would certainly be difficult for these two companies to cope with the initial coup.
The overall assessment of Ryanair's launch strategy is clear:
Ryanair's basic intention is to penetrate an already populated air market.
Ryanair is trying to access into the existing customer strata of Aer Lingus and British Airways
Ryanair is trying to create a new breed of passengers with its economy price structure.
Ryanair is confident about sustaining with this price structure.
Ryanair is trying to drive away the existing airline companies from having the prime market share of the industry.
Ryanair is looking for a long term market goal and thereby ...Download file to see next pagesRead More
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