How Does Ryanair Porter's Five Forces Model

Ryanair was established in the year 1985 by the RYAN family and has grown from a small airline flying a short hop from Waterford to London, into one of the Europe’s largest carriers. The company expanded and within 4 years it had 350 employees, 14 aircraft, and carried 600,000 passengers a year. It is currently serving to 26 European Countries with 148 destinations. It operates on 794 different routes daily serving by more than 1050 flights in a day. It has totally 169 aircrafts running for different routes with 5986number of employees working in it However, Ryanair’s costs rose drastically and it recorded losses of £20 Million sover four years despite its growth. Although consumers were continuing to fly Ryanair

They started off absolutely focused on cost, then they focused on choice and then they improved the service. As is displayed below, while Ryanair may have isolated pockets of cost disadvantage, such as Route charges or Airport handling, however at an overall level, the cost advantage for Ryanair is much more than its other LCC fraternity. Ryanair enjoys a whooping 76% cost advantage over its nearest competitor EasyJet. This cost differential helps Ryanair to pass the value benefit to its end customers. (Please refer Exhibit 2)

The strategic plan of Ryanair has been to establish itself as Europe’s leading low-fares airline.” Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.” (www.ryanair.com)

Generally speaking, the launch strategy of Ryanair was not the best one for that moment in time. They began operations between Dublin and London, in a very saturated market, which was already served by two competing and very experienced companies owned by the governments:

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

Low costs- Ryanair has the lowest unit costs in Europe and one of the lowest when compared to international airliners. Lower costs can be passed onto customers in the form of cheaper prices, which Ryanair will need to offer in order to compete. Research from the Centre for Aviation showed that whether it was cost per seat or cost per passenger, Ryanair costs were less that of their competitors.

All this was just a way of coming up with a good strategy that the company could use so that they can offer significant personal services, create a state-of-the-art revenue management system. From their strategy, the airline was focusing on offering a single class of services to their customers with a fare averaging at 65% less than the competition. Through taking this step, they could be utilizing all their resources since no seat would remain ticketless. The ticket could be one way thus relieving the travelers the burden of paying two ways of which would be one a major challenge to them. The other strategy that the airline comes up with to enhance their customer services was to give a voucher of $159 in the case of any delay in flight for more than an hour for any reason apart from unfavorable weather conditions or air traffic. They were also to give out a voucher of $25 for misplaced bags. From these strategies that the airline built helped it to have more travelers contributing to their development.

Promotion: The airline must communicate with the potential customer in order to let the consumer know the product is available at the right price, place and time. This is the major goal of

Ryanair’s emphasis on offering the cheapest price has been supported throughout primary and secondary research conducted. Focus groups showed that a majority of people felt that Ryanair was offering the lowest fares (see Appendix_ Q5). Hence it can be said this value is powerfully and effectively communicated to customers.

Ryanair is one of the most profitable low-cost and low-fare airlines in the world. Even though it was merely bankruptcy in 1991, it could stand up and become very successful by 1999. An issues was what led Ryanair to huge losses in 1991, how did it re-gain its position, and what lay ahead in the next century.

The aim of this report is to carry out a strategic analysis of Ryanair. This will involve investigating the organisation’s external environment, to identify opportunities and threats it might face, and its strategic capability, to isolate key strengths and any weaknesses that need dealing with. Finally, a SWOT analysis will be carried out to assess the extent to which Ryanair’s strategies are suitable to what is happening in its task environment.

The needs though would be the same for many travellers. Needs such as helpful check-in staff. Lots of check-in desks to reduce queuing times, though Ryanair unfortunately don’t offer this compared to an airline such as British Airways, easy boarding, comfortable seats/comfortable flight. One of Ryanairs’ is that they get you from A to B. Thus a lot of the features of their aircraft are very basic. For example there are no seatback pockets, so that passengers are able to put newspapers and other possessions.

This reaction of Ryanair’s competitors will be discussed more lately in this paper. Given that Ryanair is a new airline, chances of survival will be slim if they engage in a price war.

This analysis developed by Michael Porter. The Porter’s Five Forces Model are buyer power, supplier power, threat of substitute products and services, threat of new entrants and rivalry among existing competitors.

In a way, the competitive advantage of Ryanair would be the low fare, as there is not much differentiation on airline services. As long as the passengers reach the destination safely, there would be no problem; therefore price is the main factor.