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The strategy of the 'Ryanair', the pioneer of low cost airlines (2007)

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  1. What are the key elements of Ryanair's strategy as of 2007? What type of competitive advantage is Ryanair trying to attain over rivals? Which of the five generic competitive strategies discussed in chapter 5 best matches the competitive strategy that Ryanair is employing?
  2. What grade would you give Michael O'Leary for the job he has done as CEO of Ryanair? Be prepared to support your answer based on how well (or not so well) he has performed the five tasks of strategic management discussed in chapter 2
  3. What was Tom Ryan's original strategic vision for Ryanair? How does Michael O'Leary's strategic vision for Ryanair differ from Ryan's? Why did the strategic vision change? Is the company's strategic vision likely to undergo further evolution?
  4. What is your assessment of Ryanair's financial performance from 2005-2007 and operating performance in 2005 and 2006? Does the company's performance indicate that Ryanair's strategy is working well? How does the company's performance compare with that of rivals?
  5. What forces are driving changes in the European airline industry?
  6. What are the key success factors in the European airline industry?
  7. What are the key policies, practices, business principles, and procedures that underlie how Michael O'Leary and Ryanair's management have implemented and executed the chosen strategies?
  8. What issues confront the company as of 2006? What should Ryanair's management be worried about?

In 2006-2007, Ryanair has become the world's most profitable airline on the basis of its operating and net profit margins and on a per-airplane and per-passenger basis. Indeed, the profits expected for the first half of fiscal 2007 were 329 million euros, which is a record for the Irish budget airline company. In addition to that, the air traffic grew by 23 percent to 22.1 million passengers, and yields increased by 9 percent and the total revenues have been improved by 33 percent to 1.256 billion euros. Companies can use five different generic competitive strategies. The one that best matches the competitive strategy that Ryanair is employing is a "Low-cost provider strategy". Ryanair strives to be the industry's overall low-cost provider, which is a powerful competitive approach in markets, such as the airline market, which has many price-sensitive buyers. Ryanair is the low cost provider because it is the company that provides the lowest cost on the European airline industry and not one of the companies that provide the lowest cost. This strategy is very difficult to copy for rivals which have high operating costs. Even other European budget airlines do not try to copy the Ryanair strategy. Moreover the brand image of big national carriers will be damaged if they choose to adopt a low cost strategy. Ryanair's success in matching this strategy is possible the firm is doing a better job, than rivals, of managing value chain activities cost-effectively and finding innovative ways to bypass high operating costs. This strategy works well because in the airline industry there are not many ways to offer high value to consumers.

[...] Thus, budget airlines will play on their low prices and the rapidity of the check-ins and boardings, whereas big companies will play on the aircraft seating space, class of service offerings and the aircraft type. - An effective management of the fleet: It is essential to manage the aircrafts utilization in an effective way. To maximise the profit making, airline companies must fill their aircrafts with the most passengers the airplane capacity allows. The best is to fill all the airplane seats for every flight. [...]


[...] We can say that Ryanair is the low cost provider because it is the company that provides the lowest cost in the European airline industry and not one of the companies that provide the lowest costs This strategy is very difficult to copy for rivals which have high operating costs. Even the other European budget airlines do not try to copy Ryanair's strategy. Moreover, the brand image of big national carriers will be damaged if they choose to adopt a low cost strategy. [...]


[...] As seen in the first case, US airline industry in 2002', the deregulation entailed the submission of the airline industry to the market regulation and to the economic liberalism which implies a total competition between the airlines companies. Another example of the driving changes that the regulatory influences and the government policy changes can force is the ?Rome treaty' which establishes the freedom of circulation in European countries for the people and for the goods. This treaty has also increased the rivalry among competitors. [...]

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