Reasons behind Ryanair’s success
There are number of reasons that helped Ryanair in becoming successful in the intensely competitive airline industry. One of the major reasons identified is the initiation of the early mover strategy in the market. This is due to the reason that Ryanair entered in the market of the United Kingdom when the concept of low cost and no frills airlines is new (Creaton 2014). At the time of foundation of Ryanair, majority of the airliners are expensive and they do not serve no-frills services. Thus, initiation of the early mover strategy by offering the low cost services helped Ryanair to have major market share and identity from the initial stage. They attracted more customers by offering distinctive services compared to their existing competitors and offering flight in lower cost (Thomas 2015). They have also positioned their brand accordingly and with the tagline of “This is a cheap airline, expect nothing else”. This positioning helped Ryanair to have to cater to a completely new target customer segment that is previously not being targeted by other players in the market. Thus, the major reason of success for Ryanair is the availability of a largely untapped market to operate.
The two major sources of gaining business competitiveness are gaining more market revenue and reducing internal cost. Market revenue got increased by the distinctive service offerings of Ryanair. They also initiated different cost cutting initiatives in order to reduce their cost of operation. This helped them to gain more profitability from the market (Barros and Couto 2013). One of the major initiatives being taken by them is maintaining the commonality in fleet. According to the given information, Ryanair maintains a single type of aircraft that is Boeing 737 across all their operation. This is helping them to initiate single and universal approach of training for the staffs without having the requirement for the diverse training facilities. In addition, ground staffs such as aircraft maintenance engineers are also being given training for the single type of aircraft. This helped in enhancing their effectiveness in providing fast and accurate services and reducing the cost for the company. Periodical up gradation of the aircrafts is also important in maintaining the competitiveness. In the case of Ryanair, it is reported that they have up graded their aircrafts by acquiring more fuel efficient ones. This helped them in further reducing the cost of fuel and increasing the profitability.
Changes done by Ryanair in regards to their customer service are also contributing in the success for them. One of the changes initiated by them is web based check in facility. This helped them to enhancing the satisfaction level of the customers by providing them more convenience and reducing their waiting time in the airport. On the other hand, this also helped in reducing the staffs and assets involved in the check in facilities. Thus, Ryanair also saved a good amount of cost from this step. In addition, it is also stated that Ryanair has started the concept for charging extra for baggage (Barrett 2016). This caused reduction in the baggage being carried by the customer, which caused in increase in the speed and efficiency in airport management and reduction in the cost for the passengers who pay for complementary provision for baggage even without carrying one. Therefore, these are the major reasons for Ryanair in becoming successful in the market.
Cost cutting initiatives and commonality in fleet
The business strategy for Ryanair can be termed as sustainable to a certain extent and not sustainable beyond that. This is due to the reason that the concept of low cost and no frill airline can be sustainable only in the short term. The key source of gaining profitability for Ryanair is regulating the cost of operation (Lawton 2017). However, it should be noted that price of jet fuel will rise continuously in the coming days and fuel is one of the major streams for expenditure for the airliners including the Ryanair. Thus, the concept of offering low cost flights will not be viable enough with the continuous increase in price. Offering lower cost to the customers and increase in the price of jet fuel will lead to reduction in the profitability. Thus, the competitiveness of Ryanair will get affected. However, on the other hand, this concept can still be sustainable if the price being offered by Ryanair will be lower than that of the market oriented price. This is due to the reason that increase in the fuel price will affect all the airliners and average fare will get increased (Caputo and Borbely 2016). Thus, if Ryanair can still maintain the lower price in the industry as compared to others, then it will become sustainable for them in the long term also.
Furthermore, profitability of Ryanair is based on the volume or traffic of the customers rather than their value. In accordance to that, the business strategy of Ryanair is designed to attract more customers and increase their volumes. However, with the relevance of different external factors such as emergence of new competitors in the market and change in the taste and preference pattern of the customers will lead to fluctuations in the sales volume. With having the higher threat of emergence of new competitors, it is highly probable that new players will bring more economical services that will affect the business potentiality of Ryanair (Budd et al. 2014). However, it should also be noted that the business strategy of Ryanair is sustainable in the short term due to the reason that market of the United Kingdom is still having the major presence of legacy airlines and offering cost effective services will still help Ryanair to cater to a different customer segments. Moreover, the brand resonance between Ryanair and their target customers is more due to the reason that target customers of Ryanair are having the preferences for lower fare over other services. On the other hand, Ryanair also position their brand based on the economic services (Dobruszkes 2013). Thus, the service portfolio is designed in accordance to the requirement and preferences of the customers. This will maintain the sustainability for Ryanair in the market of the United Kingdom.
Currently, the business approach of Ryanair is more oriented to selling and product concept over the marketing concept. This is due to the reason that determination of the requirement and preferences of the customers is given lower concentration by Ryanair. Thus, it is recommended that Ryanair should initiate marketing concept more in their business operation (Vidovic, Simac and Vince 2013). This will help to understand the change in the behavior of the customers and Ryanair can design and modify their service design accordingly. It should be noted that airline industry is witnessing rapid growth in the competition with the entry of new competitors and newer strategies initiated by the existing ones. One of the major determining factors in the recent time for the airliners is the customer loyalty. With the increase in the competition in the airliner market, majority of the airliners are focusing more on retaining their existing customers. Thus, it is recommended that customer loyalty program such as frequent flyer program should be initiated (Terblanche 2015). Currently, the major revenue of Ryanair comes from the flying customers rather than the loyal customers. With the initiation of the frequent flyer program more effectively, customer retention will get increased and it will immune Ryanair from the probable onslaught of new budget carriers in the market.
Web-based check-in facility and baggage charges
One of the major reasons for recommending the change in service approach of Ryanair is changing in the customer preferences. In the current time, customers are having number of options in terms of low cost airlines in the market and thus their bargaining power is also more than ever. However, in the initial stage of the commencement of Ryanair, only they offered the low cost services and customers had low bargaining power. Thus, Ryanair had the luxury of skipping different service elements just by offering lowest cost in the market. This also led to little focus on determining the need and preferences of the customers. However, in the recent time, there are number of low cost carriers entered in the market and they are offering more services apart from the low cost. These services include cuisines by choice in flight, entertainment system, more comfort and increased customer convenience (Han 2013). Hence, if Ryanair cannot get changed with the change in the market, then they will face more loss in the market and as stated in the case study, they are already facing loss in the market.
As of now, the key positioning element for Ryanair is their price. However, it is recommended that positioning elements should be made more diverse and varied in order to cover more customer segments. This is due to the reason that in the current time, sustainability cannot be gained by focusing only on the price (Akamavi et al. 2015). Positioning elements should also be focused on the service quality apart from the price. This will help to attract the customers who till now stayed away from Ryanair. In addition, focusing more on service quality other than the price in the branding process will also ensure that Ryanair will have more competitiveness against their contemporary competitors.
Bid for Aer Lingus makes strategic sense due to the reason that according to the concept of horizontal integration, merging or acquiring close competitors helps in easing out the competition in the market. In the case of Ryanair, Aer Lingus is the closest competitor for them in the route between Ireland and Britain (Fageda and Perdiguero 2014). Thus, bidding for them can be termed as strategic move due to the reason that if Ryanair would have acquired Aer Lingus properly, then they would become the market leader in the said route. In addition, this move can be termed as strategic also due to the reason that acquiring Aer Lingus would have helped Ryanair in gaining the brand value and identity. This is also important for Ryanair due to the reason that Ryanair was introduced in the market quite recently while Aer Lingus was the flag carrier of Ireland. Hence, acquiring them would have helped Ryanair to gain the market identity that they need in their initial days of operation. It can be concluded that bidding for Aer Lingus is a strategic move in terms of minimizing the competition in the market, gaining more market value and market share and becoming the market leader in the particular region (Dobson and Piga 2013).
Sustainability of Ryanair’s business strategy
However, there are number of negative factors also being identified in the bidding process of Aer Lingus, which denotes that bidding process was not a strategic move. One of the major factors is the clash of culture. Prior to the bidding for Aer Lingus, it was important for Ryanair to determine the potential consequences in aligning the cultures of two different entities. This is due to the fact that Ryanair is a low cost airliner with having the organizational culture focused more on providing basic services to the customers (Nortilli and Wong 2014). On the other hand, Aer Lingus was a legacy carrier with their focus mainly on the service quality and niche customers. Thus, acquiring the stocks of Aer Lingus caused the clash in cultures between the two different organizational cultures. It is reported that that Aer Lingus was not ready to accept the price oriented approach in their business operation. While on the other hand, Ryanair was not having the experience of higher end flight services. This led to the clash in culture. In this case, it can be concluded that bidding for the Aer Lingus was not a strategic mover due to the reason that organizational culture of two brands is different and poles apart and mergers and acquisitions are not possible by aligning two different cultures (Lenartowicz, Mason and Foster 2013).
In addition, it should also have being considered that before the bidding process for Aer Lingus, Ryanair mainly competed with them for years. Thus, it is having higher probability that management of both the organizations may not be able to work together (Stuhmeier 2016). They will have clash in terms of approach and strategies. Thus, it can be concluded that bidding for Aer Lingus makes strategic sense in terms of external factors and vice versa in terms of internal factors.
References
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