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2. Table of Contents
1. Main page .................................................................................................................................................. 1 2. Table of Contents ...................................................................................................................................... 2 3. Table of Figures ......................................................................................................................................... 3 4. Executive Summary ................................................................................................................................... 4 5. Business Mission ....................................................................................................................................... 4 6. Introduction............................................................................................................................................... 5 7. Marketing Audit ........................................................................................................................................ 5 7.1 The External Environment................................................................................................................. 5
7.2.1 SWOT Analysis ............................................................................................................................. 8 7.2.2 VRIO Framework: ......................................................................................................................... 9 7.2.3 Value Chain Model ..................................................................................................................... 10 8. Competitors Analysis ............................................................................................................................... 10 8.1 Evaluating Competitors.................................................................................................................. 10
8.1.1 EasyJet........................................................................................................................................ 10 8.1.2 Aer Lingus................................................................................................................................... 11 8.1.3 bmibaby ..................................................................................................................................... 12 8.2 8.3 BCG Matrix ..................................................................................................................................... 13 Porters Five Forces........................................................................................................................ 14 Barriers to Entry (High) .......................................................................................................... 14 Bargaining Power of Customers (High) .................................................................................. 14 Negotiation Power of Suppliers (Medium) ............................................................................ 14 Substitute for Product (Medium)........................................................................................... 14 Threats of Competitors (Medium) ......................................................................................... 15
9. Marketing Objectives .............................................................................................................................. 15 10. Core Strategy ........................................................................................................................................... 16 10.1 Ansoff Matrix ................................................................................................................................. 17
11. Marketing Mix ......................................................................................................................................... 17 11.1 Product........................................................................................................................................... 17 Sameh Ashraf Nassar - M1005955 2
Marketing Plan for Ryanair 2011 11.2 11.3 11.4 Price ............................................................................................................................................... 17 Place ............................................................................................................................................... 17 Promotion ...................................................................................................................................... 18
12. Financial Budget ...................................................................................................................................... 18 13. Implementation....................................................................................................................................... 20 14. Control ..................................................................................................................................................... 20 15. Conclusion ............................................................................................................................................... 20 16. Bibliography............................................................................................................................................. 21
3. Table of Figures
Table 1: Ryanair keyfacts . ....................................................................................................................... 5 Table 2: SWOT Analysis ............................................................................................................................ 8 Table 3: VRIO Model ................................................................................................................................ 9 Table 4: EasyJetkey facts........................................................................................................................ 11 Table 5: Aer Lingus Key facts ................................................................................................................. 11 Table 6: bmibaby key facts .................................................................................................................... 12 Table 7: International Scheduled Passengers Carried ........................................................................... 12 Table 8: BCG Matrix ............................................................................................................................... 13 Table 9: Ansoff Matrix............................................................................................................................ 17 Table 10: Ryanair Financial Facts ........................................................................................................... 18 Table 11: Airlines net profit figures for 2011 ......................................................................................... 19
4. Executive Summary
Ryanair is the most popular and successful low cost airline in the European market, well-known to be travellers favourite choice. However, this success is based on well identified objectives, strong and focused strategic management. This marketing plan focuses on all the factors facing Ryanair in the current environment, highlighting the most recent challenges, and frequent change in the market; By using various modern methods of marketing analysis, as a result clear effective objectives are identified setting strategies for Ryanair to adopt, in order to increase their profitability and improve their reputation in the market.
5. Business Mission
Ryanair does not publish a formal vision or mission statement. however, Ryanairs CEO Michael OLearys, announced in a public statement, that their mission is to simply continue on being the most profitable low cost airline in all markets where they operate, while constantly working to lower their costs and increase the number of passengers. (Box, 2007)
6. Introduction
Ryanair was established in 1985 by the Ryan family and was the first company to introduce the
LCC model in the European market, adapting the No-frills2 approach from Southwest Airlines in United State. Ryanair has adapted this strategic approach and gained the market leadership and is considered to be the most favourable airline company in the European market. Ryanair currently operates more than 1,400 flights daily from 44 bases and over 1300 routes across 27 countries, connecting 160 destination together daily (Ryanair, 2011). Ryanair presently owns a 272 aircrafts fleet, consisting only of new Boeings 737-800, with 64 new aircrafts in the pipeline within the next two years. Ryanair employs over 8,000 employees and expecting to transport more than 75 million passengers by 2012. The main operations are focused on the European continent; facing competition from traditional and charter airlines, while approximately 50 other low-cost companies are replicating their no-frills approach. The following table outlines Ryanair key facts:
Table 1: Ryanair key facts (Ryanair, 2011)
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Ryanair Highlights
Total fleet number Number of Routes and airport bases Number of Passengers Total revenue Employees Headcount 272 Boeings 737-800 aircrafts 1300 Route from 44 bases across 27 countries 72.1 million in 2011 (8% increase from 2010) 896 ( Million) 8,063
7. Marketing Audit
The marketing audit analyses the external and internal environment separately as to be aware of all the factors that might affect Ryanairs situation in the airline industry. As a result, more information will be obtained; making their future strategic decisions more effective, while developing the companys awareness of the market dynamics.
LCC: Low Cost Carrier No-Frills Approach: To provide only the basic services and necessities without special or additional features. (I.e. Meals, etc)
Marketing Plan for Ryanair 2011 Social Environment Logistics is no longer a concern as it used to be in the past, many people now travel frequently for business purposes, also students globally are travelling abroad for studies in different countries, aside to that, people all over the world are regularly seeking to travel to new destinations for vacations. Ryanair target all the three segments of the market. Moreover, the European culture is different from any other, where all European citizens are usually travelling to different countries in Europe without restrictions, as easy as going to any city within their homeland, which is not the case in any other culture, where citizens do not have this advantage. Technological Environment Ryanair is strongly focused on using technology in their operations, as it assists prominently in applying their low cost strategy. The internet booking rate at Ryanair is enormously high, up to 95% of their tickets are booked through their website (Ryanair, 2011), therefore they rely less on outsourced travel agents, also their online check in systems supports in decreasing the cost of airport personnel; in addition to faster check in, consequently maintaining a quick turnaround. Last but not least, is the use of GPS3/GBAS4 technology, several airlines already started switching to the GPS guided digital system; using satellites to constantly calculate the aircrafts speed, altitude, and proper approach, resulting in better synchronisation for flight operations, and more organized take offs and landings. Aviation consultant Michael Boyd estimates that the U.S. airlines alone waste up to $9 Billion yearly on flight delays beyond their control, which proves that the use of this technology allows airlines to fly better, and more efficiently. (LINDSAY, 2009) Environmental Analysis The main concerns about the impact of aviation on the environment is the level of CO2-emission, and noise pollution caused by aircrafts, however Ryanairs current fleet age is averaged to 3 years, therefore such modern fleet is not threatened by any of the EU regulations regarding these environmental factors. (Ryanair, 2011) Moreover, On November 19, 2008, the European Council of Ministers added aviation to the EU Emissions Trading Scheme as of 2012. This scheme is a cap-and-trade system for CO2 emissions to encourage industries to improve their CO2 efficiency. As per the legislation, airlines will be granted initial CO2 allowances based on historical revenue ton kilometres and a CO2 efficiency benchmark. To address any further requirement, allowances need to be purchased in the open market and/or at government auctions. This can affect Ryanair's cost management based on the allowances to be needed in 2012. (Ryanair, 2011)
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Marketing Plan for Ryanair 2011 In addition, other environmental disasters like last years volcanic ashes disruptions, and airport snow closures, resulted in the cancellation of more than 10,000 of Ryanair flights, the financial loss was estimated to 29 million as they were obligated to compensate all customers according to EU261 regulation right to care, although it was a natural disaster and completely beyond the control of Ryanair.
Internal Environment
External Environment
Strengths First LCC in the market Strong brand name (Ryanair the low cost airline) Good deals with suppliers ( i.e. aircrafts, airports) Single brand of aircrafts (Boeing 737-800) Most flights are fully booked Fuel Hedging leading to stable fuel prices High internet booking rate (94%) Punctuality (No.1 on time airline award) Fast Turnarounds (average 25 minutes) Efficient fleet utilisation Proficient management team Not vulnerable to economic recession Opportunities European Union Expansion Increase market share Acquisition of smaller LCCs Expand operations and assign more routes to the global market Innovate and develop more ancillary services
Weaknesses Sensitive to any increase in charges (Fuel, tax, airport charges) Airports bases located faraway from destinations Poor customer relationship management Low employee moral leading to less loyalty Constantly observed by the press Limited access to landing slots in major airports
Threats Aggressive competition from both traditional and low cost airlines Customers only loyal to the best price Oil market not stable Other substitutes for traveling can be more practical for several locations Strict Environmental rules and compensation policies. Risk of suppliers raising costs when renewing contracts 8
Physical: Ryanair currently possess 275 Boeings 737-800 aircrafts, rather than its major opponent Easyjet whos currently operating 196 aircrafts of multi brands, leased and owned, and expected to reach 220 by 2013. (EasyJet, 2010), Ryanair is still ahead in fleet size, market share, and number of passengers, but still has to continually innovate and develop their strategy to retain their edge. Reputation: No frills Service, budget carrier, cheerful crew, also gains a lot of publicity across Europe as a result to several publicity stunts by their CEO Michael OLeary, however such stunts sometimes result with law suit and enemies due to his brash and arrogant attitude. (Moores, 2010) Organisational: Simple and focused on the basic flying service, no meals or seats allocation provided. Also relinquished their outsourced agent, and depend on Internet bookings, they maintain a quick turn-around time of flights (Avg. 25 minutes), also rely mainly on secondary airports; lowering their operational costs. Financial: holds a strong financial position in the market, Ryanairs net profit after Tax in 2011 is 401 million, with a 26% rise over last years 319 million. While the average fares rose 12%. Unit costs rose by 11% due to higher oil prices and a 10% increase in sector length. Excluding fuel, (up 37% to 1,226m) unit costs rose by just 3%. (Ryanair, 2011) Intellectual: Ryanairs management board with the lead of their CEO Michael OLeary, they have a highly focused vision, and always put forward new innovative ideas to help secure their position as a leader in the industry. Technological: the use of technology in Ryanairs operation has proven their dominant effect of lowering cost and easing their operation, more details will follow in this report.
8. Competitors Analysis
Although Ryanair is the leader in the LCC market, however they are facing tough competition from other Major Low budget and traditional carries, in this section we will highlight on 3 of their major rivals in the industry, following by BCG matrix (also known by Portfolio Analysis)
8.1.1 EasyJet
Easyjet was born out of the liberalisation of European aviation by 'Open Skies'. Over the past five years, easyJet has grown from a UK centric airline to develop a significant presence in mainland Europe built around valuable positions at slot constrained airports. The main strength of their business model over Ryanair is offering almost the same low fares but to more convenient airports. Sameh Ashraf Nassar - M1005955 10
EasyJet Highlights
Total fleet number Number of Routes and airport bases Number of Passengers Total revenue Profit before tax Employees Headcount 196 aircrafts 509 routes serving through 129 airport, in 59 Countries 56 Million, 2010 (6% increase from 2009) 2,973.1 ( million) 188.3 ( million) 6,887 as of 2010
Starting 2010, they are continually expanding their presence across Europe; EasyJets current strategy is to build stronger positions throughout major airports. As advertised their strategy is Turning Europe Orange, a simple and clever advertising that states their determination of extending all over the European continent.
In conclusion, Aer Lingus were obligated to position itself as a value carrier because the pure low Cost/low fares model is not sustainable, whilst a full service model would not be competitive in the Irish market. The pure low cost/low fares model, in the image of Ryanair, is not sustainable for Aer Lingus for the following reasons: Exceptionally discounted aircraft deals are no longer available. Market proposition and customer expectation is for central not secondary airports. The higher cost of Aer Lingus staff.
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8.1.3 bmibaby
bmibaby is a low cost airline, formed as part of the British Midland International group. The bmi group consists of three airlines British Midland International, bmi Regional and bmibaby, which each cover different markets and customer groups. The core markets for all 3 airlines are situated in the UK. bmibaby was Launched in 2002, bmibaby flies from: East Midlands, Birmingham, Manchester, Cardiff and Belfast City to 39 European destinations. Since November 2009, Lufthansa has been the sole shareholder of British Midland Ltd. (bmi)
Table 6: bmibaby key facts (Lufthansa, 2010)
Since November 2009, Lufthansa has been the sole shareholder of British Midland Ltd. (bmi) via the British holding company LHBD Holding Ltd. In 2010 the company was successfully integrated into the Lufthansa Group. At the same time extensive restructuring was carried out to bring bmi to profitability in the medium term. (Lufthansa, 2010)
Table 7: International Scheduled Passengers Carried (IATA, 2011) IATA airlines PAX report, 2010 Rank 1 2 3 4 5 6 7 8 9 10 Figure 2: Competitors strategic positions Airline Ryanair Lufthansa EasyJet Air France Emirates British Airways KLM Delta Airlines American Airlines Cathay Pacific airways PAX (M) 71.2 44.4 37.6 30.8 30.8 26.3 22.7 21.1 20.3 19.7
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Star
Question Mark investment on Aer Lingus the expected ROI is the nature of Aer Lingus Dog
Ryanairs ancillary services, generates a lot of Ryanair made a huge extra revenue to their basic service; helping shares; meanwhile in continually increasing their market share. unpredictable due to operations. Cash Cow
Short point to point flight, and baggage Ryanair could face this situation, but internally with policy generates additional revenue, without one of their routes that might be not generating any extra cost for the company. adequate revenue, so assigning the aircraft to another destination will generate more profits
High
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Market Share
-------------------------->
Low
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The European market is full of potential, however there are some complications that would face any new entrants to the market, first would be the long authorization procedure to acquire the licenses to operate in the market, in addition to the high investment required in capital, before even starting operations, besides the tough negotiation process with suppliers for low cost deals, as it will reflect directly on their prices. On the other hand Ryanair and other major LCCs consolidated their position in the Industry; making it almost impossible to any new entrant to compete, as it will lead to an immediate price war, in order to ensure a considerable chance in gaining a market share, there has to be a unique selling point to that organisation to stand out from the crowd.
8.3.2 Bargaining Power of Customers (High)
At the present time, travellers have an enormous variety of choices to browse over the internet, with almost (number of airlines in industry), with all the fares and services clearly available online for the customer to compare, therefore there is no loyalty to a specific brand, customers are more concerned about the best deal they can catch. On the other hand, Travellers whom are targeting Ryanair are always expecting to get the lowest prices in the market due to the no frills service, however, if this is not always maintained then the comparison will be according to the quality of service, where many other airlines have a more respected reputation.
8.3.3 Negotiation Power of Suppliers (Medium)
For Ryanair to maintain their low cost prices, they are mostly forced to deal with secondary airports, due to the high costs and strong bargaining power of primary airports, which is already occupied with other traditional carriers. Globally there are only 2 aircrafts suppliers (Boeing and Airbus), Ryanairs fleet is entirely exclusive to Boeing, where it saves costs in maintenance and training of employees, however, that is a weak point in further negotiation with Boeing, as switching to another aircraft supplier will require major additional costs to Ryanair.
8.3.4 Substitute for Product (Medium)
Trains, Cars, and Coaches can be more effective to travel to many locations, where these modes of transport become a major competitor to air transport, not only in prices, but also in logistically, where trains for example have an advantage of direct access to most city centres, which saves travellers the hassle of transportation from and to the airport or about the baggage size and weight.
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The LCC market is a highly competitive battle ground, the major competitor to Ryanair is Easyjet which follows the same no-frills strategy, and it is not easy for both airlines to advance with innovative ideas, as it can be copied by others straightway. However, both companies agreed on avoiding head to head competition, by concentrating on different routes to serve, in order to avoid any price wars, which will affect both companies mutually.
Entry Barriers
Low
Suppliers Power
Competitor Threats
Customers Power
Medium High
Product Substitutes
9. Marketing Objectives
Ryanairs objective is to firmly establish itself as Europes leading scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on costcontainment and operating efficiencies. On the other hand, Ryanair is working on extending their fleet and in accordance flying to more routes across Europe, and the rest of the world.
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Products Existing M A R K E T S Market Penetration & consolidations Ryanairs main strategic direction. low cost flights and high market share Diversification New Market development Extend routes and bases Expand Globally Traditional and 2 way flights model would not be a successful approach for Ryanair New Product Development Ancillary Products
11.2 Price
For Ryanair to keep maintaining their position in the industry and increase sales margin, they have to keep sustaining the lowest prices in the market since it is their unique selling point; by continuously enhancing their operations cost effectively to support such strategy.
11.3 Place
Ryanair should continue investing in their online booking system, and encourage all passengers to use the system for booking tickets, since it was proven in previous analysis to be a highly effective solution, meanwhile expand their bases in strategically suitable airports
Existing
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11.4 Promotion
Ryanair current promotion are quite successful for their needs, with help of Michael OLearys regular publicity stunts. However, it is recommended to keep following such strategy without increasing investment in advertising, but focus on improving their image and reputation
3,629.5 Operating revenue 374.6 Net profit after tax 400.7 Adjusted net profit after tax 25.21 Basic EPS () cents 26.97 Adjusted basic EPS () cents Estimated costs, related to volcanic ash disruptions Investments in Aer Lingus shares -----
As a result of Ryanairs net profits in 2011, it was publicly announced by Air Transport World in July 2011 to be The worlds most profitable low fares airline. Moreover, Ryanairs adjusted profit after tax increased by 26% to 400.7m compared to 318.8m in March 31, 2010, primarily due to a 12% increase in average fares and high ancillary revenues. on the other hand, there was a 37% increase in fuel costs while the total operating revenues increased by 21% to 3,629.5 m as average fares rose by 12%. The most significant increase was the ancillary services revenue, which grew by 21%, aside to the 8% increase in passenger numbers. Total revenue per passenger, as a result, increased by 12%, whilst Load Factor was up 1% to 83% during the year.
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Marketing Plan for Ryanair 2011 On the other hand, their total operating expenses increased by 20% , due to an increase in fuel prices, the higher level of activity, and the higher operating costs associated with the growth of the airline, where Fuel represents 39% of Ryanairs total operating costs. The final adjusted net margin was 11%, similar to year 2010, and adjusted earnings per share for the year were 26.97 cent compared to 21.59 cent in 2010. (Ryanair, 2011) 10.1 Operating Revenues 1) Scheduled Revenues: The main source of revenue to Ryanair 2) Ancillary Revenues: As shown in the previous figures, this source of revenue generates significant extra profits; such services below should be constantly updated with new and innovative ideas
a. b. c. d. e.
In-flight Revenues Car Rentals Internet booking income Non-flight scheduled revenues Charter revenue
10.2 Operating Expenses 1) 2) 3) 4) 5) 6) Salaries Maintenance and materials Compensations Marketing budget Airport Charges Fuel
Finally, Ryanair was ranked as the most profitable airline in the international Low Cost Carriers market, and was followed by southwest airlines which was the first company to introduce the low cost model into the airline industry, and below is a list with the worlds leading low cost airlines net profit figures in 2011.
Table 11: Airlines net profit figures for 2011 (Ryanair, 2011)
Rank 1 2 3 4 5 6 7 8 9 10
Airline Ryanair Southwest Airlines AirAsia Berhad easyJet Cebu Pacific WestJet Gol IndiGo Airlines JetBlue Airways Air Arabia
Million $ 565 459 346.5 191.6 158.5 136.7 128.6 122.2 97 84.3 19
13. Implementation
In order to achieve the objectives developed in this marketing plan, it is essential for Ryanair to successfully complete the delivery of the new --- aircrafts and the expansion of their new routes according to the set schedule.
14. Control
The following areas will have to be cautiously monitored by the management team, if they want to control their performance and current position in the market. a. b. c. d. Fuel hedging strategy Lowering operational costs Invest in technology Punctuality and reliability
15. Conclusion
Throughout this entire research, all the organization functions was observed and evaluated with all the environmental factors Ryanair is exposed to in the market, followed by identifying their competition and comparing the strategic differences between them, meanwhile highlighting the main financial elements. As a result of this information and analysis, a proper awareness about the market dynamics was generated, therefore assisting in a developing a tailored strategic direction for Ryanair to follow in the current and future market environment, while focusing on developing the existing effective strategies to maintain their performance and enhance their position in the whole industry.
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16. Bibliography
Aer Lingus (2011) Aer Lingus: About Us, 6 November, [Online], Available: http://www.aerlingus.com/aboutus/alliances/ [7 November 2011]. Box, T.M. (2007) 'SUCCESSFUL LOW COST LEADERSHIP', Journal of the International Academy for Case Studies, vol. 13, no. 3, November, p. 67. EasyJet (2010) Reports and accounts, 30 September, [Online], Available: http://corporate.easyjet.com/~/media/Files/E/easyJet/pdf/investors/resultcenter/easyJet_AR10_18_1_2011.pdf? [5 November 2011]. easyJet plc (2010) http://corporate.easyjet.com, 30 September, [Online], Available: http://corporate.easyjet.com/~/media/Files/E/easyJet/pdf/investors/resultcenter/easyJet_AR10_18_1_2011.pdf? [6 November 2011]. IATA (2011) Publication & Interactive Tools, January, [Online], Available: http://www.iata.org/ps/publications/Pages/wats-passenger-carried.aspx [8 November 2011]. IMD (2007) 'Ryanair Case Study', RYANAIR: Defying Gravity, vol. 03.09.2007, no. IMD431, September, p. 21. LINDSAY, G. (2009) www.fastcompany.com, 1 May, [Online], Available: http://www.fastcompany.com/magazine/135/ground-control.html [4 November 2011]. Lufthansa (2010) Lufthansa Investor Relations, 30 December, [Online], Available: http://reports.lufthansa.com/2010/ar/groupmanagementreport/businesssegmentperformance/passe ngerairlinegroup/britishmidland.html [6 November 2011]. Moores, V. (2010) 'Low-Cost Leadership', The Power of Flight, 1 August, p. 30. Philip Kotler, K.K. (2006) Marketing Management, 12th edition, New Jersey: Pearson Prentice Hall. Ryanair (2011) Ryanair - About Us, 17 October, [Online], Available: http://www.ryanair.com/en/investor/download/2011 [17 October 2011]. Ryanair (2011) Ryanair Website, 17 October, [Online], Available: www.ryanair.com/en/about [17 October 2011]. Y.GOOSSENS, E. (2008) http://www.europarl.europa.eu/, Jun, [Online], Available: http://www.europarl.europa.eu/parliament/expert/displayFtu.do?language=en&id=74&ftuId=FTU_4. 10.6.html [27 Oct 2011].
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