Studying and understanding the strategy of a firm, is an analysis of both the internal as well as external influences on the company. Indeed, all elements present around the company have an influence on its activities and its strategic choices. Thus, it is essential to study the market as a whole with precision. This includes all agents within it, such as the competitors, customers, suppliers, government, etc.
Moreover, while a point by point analysis reveals elements which need attention, the company must also perform a dynamic analysis. In identifying the similarities and differences in policy with respect to a competing firm or firms, we can highlight new possibilities for the company studied.
These successive analyses will reveal the key factors of success of the firm and therefore the competitive advantage that any business needs, to stand out from the competition.
The study of the airline Ryanair will therefore be an analysis of the airline market as a whole, followed by a more accurate analysis of the firm itself. Tools such as Porter's model, the analysis of strategic groups and life cycle, and the key success factors, help boost an objective, and the accurate strategic choices of Ryanair, and therefore understand how the business, while enjoying a competitive advantage which is well known but which demands a more detailed study, has been a tremendous success, and according to forecasts, is not about to stop.
Ryanair, founded in 1985 in Ireland, began as a conventional aircraft company. The company offered flights between Ireland and England with the goal of providing competition to the monopoly of Aer Lingus, a few years ago. In the 90s, Ryanair suffered large financial losses though the company carried a lot of passengers. This was because of a shift in corporate strategy.
Hired as the Chief Executive, Michael O'Leary began negotiations with Southwest Airlines in the United States. Shortly after, Ryanair was launched in the U.S. market as Southwest Airlines, and was the beginning of the success of the low-cost airline. In 1997, the European aviation market was fully liberalized, and Ryanair quickly became the market leader of low-cost airlines.
The aviation market in Europe was initially dominated mainly by domestic airlines which together held more than 70% of passenger traffic.
Events like those of September 11, 2001, resulted in a decline in demand in 2002, but the European aviation market recovered quickly, and in recent years, we have witnessed tremendous growth in companies' of low-cost carriers in Europe. This was done at the time when the traditional airlines suffered huge losses and the results were well below expectations.
Since the liberalization of the aviation market in Europe, many players have come onto the market. These new "low cost" operators were often supported by either financial investors or by large air transport groups (e.g. GB which is the "low cost" airline set by up British Airways, and Buzz created by KLM).
Tags: Strategic position of Ryanair, competitive strategy of Ryanair, "low-cost" airline
[...] Strategic group analysis In terms of its definition, the authors put forward a principle of similarity of strategies to characterize the strategic group. Thus, a strategic group is often defined as a set of firms that are similar to each other and different from firms outside the group, on one or several key dimensions of strategy (Porter, 1979). A. Strategic groups present on the low cost market Many companies are present on the low cost market, and we can present a partial list of major airlines in Europe. [...]
[...] Indeed, more and more destinations are served by Ryanair but most of them are also accessible by train. We must first assign this phenomenon to the opening to competition in the area of the European Union, which has resulted in the densification of the railway network. Thus, for example we can consider the Thalys and Eurostar, which offer obvious advantages. These are relatively quick means of transport, benefiting from boarding procedures which are much simpler than for air transport. To that is added comfort and space that is not present in air travel, due to some degree of reduced mobility. [...]
[...] Ryanair plays on the phenomenon of market capitalization to increase its capital and avoid any aggressive takeover bid. In addition, Ryanair has the confidence of markets, including the actors who consider it as the company of the future. II. The Five Forces Model: Porter Professor Michael Porter developed the Five Forces model in 1979, a model which is now commonly called "Porter's model."The five elements of this model are used to identify factors influencing the performance of a firm. These five forces are: the bargaining power of customers the threat of potential entrants, the bargaining power of suppliers, Threat of substitute products, intensity of intra-industry competition. [...]
[...] Tools such as Porter's model, the analysis of strategic groups and life cycle, and the key success factors, help boost an objective, and the accurate strategic choices of Ryanair, and therefore understand how the business, while enjoying a competitive advantage which is well known but which demands a more detailed study, has been a tremendous success, and according to forecasts, is not about to stop. I. Presentation of Ryanair and the aviation market A. The present and the past of Ryanair The history of the leading “low-cost" airline Ryanair, founded in 1985 in Ireland, began as a conventional aircraft company. [...]
[...] The strategic elements that control Ryanair and explain its position as market leader in low costs are: Pricing Policy: Prices are based on a single class, or single fare for short distances. Subcontracting: It concerns the management and maintenance of equipment for recording, and labeling of luggage, some types of maintenance, and provides a simplified structure thus making savings in payroll. The service at secondary airports: The service at secondary airports allows the company to save money on airfare taxes. [...]
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