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RYANAIR CASE STUDY ANALYSIS

1. Strategy of Ryanair
Overview of the Company
Ryanair started in year 1985 with only 57 staff members and with
one 15 seater turboprop plane from the south of east of Ireland to LondonGatwick which carried 5000 passengers on one route (Harrison, 2002). In
1986, inspired from the story of David and Goliath the company go after
the big guys for a slice of the action and end up smashing the Aer Lingus
or British Airways high fare cartel on the Dublin-London route. The staff
increased from mere 57 to 120 staff members and the plane carried for
about 82,000 passengers on two routes. In 1989, the company employed
350 staff and their average maximum passengers increased to 600,000. In
1990-1991, the company has 700,000 passengers.
However, despite of the increase of passengers, the company is not
so good in managing cost that the company has lose its money. A new
management team is brought in to sort it out and re-launch as a low fares
or no frills airline, closely modelling the Southwest Airlines model in the
U.S. And in 1994, Ryanair bought its first Boeing 737 aircraft which carried
over 1.5 million passengers. In 1995, Ryanair is the biggest passenger
carrier on Dublin-London route, the largest Irish airline on every route
being operate and carried 2.25 million passengers in the year (Harrison,
2002).
In 1997, the EU air transport deregulation allowed the airline for the
first time to open up new routes to Continental Europe with over 3 million
passengers on 18 routes carried. Ryanair launched services to Stockholm,
Oslo, Paris and Brussels and took time out to float Ryanair plc on Dublin
and NASDAQ Stock exchanges. The company was awarded as Airline of
the Year in 1999 by the Irish Air Transport Users Committee.

In 2000, they announced the launch of 10 new European routes for

the summer 2000 after much deliberation and watching others burning
money. The company has also jump onto the internet with the launch of
their new online booking site and in just 3 months the site is taking over
50,000 bookings a week. By 2001 there are more than 1500 employees
working for Ryanair and more than 10 million passengers are carried to 56
cities in 13 European countries. The company has opened Frankfurt-Hahn
in 2002 as their second continental European base and announce a long
term partnership with Boeing which will see the company acquiring up to
150 new Boeing 737-800 series aircraft over an eight year period from
2002-2010.
The booking in their web accounts have increased to 94% which
has probably has something to do with opening another 26 routes. In year
2003, the company is characterised by rapid expansion and the start the
year by announcing that the company has ordered an additional 100 new
Boeing 737-800 series aircraft to facilitate the rapid European growth
plans (Binggeli and Pompeo, 2002). They acquired Buss from KL M in
April and re-launched 13 buss routes in May. In February they opened
their first base in Italy at Milan-Bergamo and launched their Stockholm
Skavsta base in Sweden with six new European routes. In all 60 new
routes are added throughout 2003 to bring the company a total of 127
routes. By 2004, the company is named as the most popular airline on the
web by Google and they launched their 10 th and 11th bases in Rome
Ciampino and Barcelona Girona and continue to add more routes to their
already extensive network. The company has also passed out British
Airways to become the UKs favourite airline in United Kingdom and
throughout Europe (Binggeli and Pompeo, 2002).
Critical Success Factors
Although the company had encountered different problems,
specifically in line with its cost structures, the company had been able to
survive and grow in the marketplace. Ryanair implement different
marketing strategy to make the company survive in the competition and to
be able to gain competitive position in the airline market. It is said that the
company was regarded recently as the most punctual airline between
Dublin and London. And because of the strategy of the industry, Ryanair is
now recognised as the second largest airline in United Kingdom and
Europes largest low-fares airline having a network of over 57 routes in 11

countries and served by a fleet of 31 Boeing 737-200 and -800 aircraft

with over 1,400 staffs and personnel.
In order to position itself in the marketplace the company
continuously concentrates on driving own its costs to offer the lowest fares
possible and remain profitable. In addition, Ryanair offer minimum
standards of service and very low prices for point-to-point, short haul
flights. The goal of Ryanair is to meet the needs of travelling at the lowest
price. The Critical Success Factors (CSFs) are as follows in airline
industry: the strategic focus of having the lowest prices, being reliable
within the marketplace, comfort and service and frequency.
It is noted that low-cost companies concentrate on this first critical
success factor by trying to offer the lowest prices. Although Ryanair has
eliminated extras such as in-flight meals, advanced seat assignment, free
drinks and other services, it still prioritises features which remain important
to its target market. Such features include frequent departures, advance
reservations, baggage handling and consistent on-time services.
Cost Reduction Strategy
To achieve its goal of having a competitive position in the airline
market, Ryanair uses a cost reduction strategy. Such cost reduction
strategy relies on five main aspects like fleet commonality, contracting out
services, airport charges and route policies, managed staff costs and
productivity and managed marketing costs. In terms of fleet commonality,
the company used only one kind of plane which limits the cost for staff
training, maintenance services and facility of obtaining spares, facility in
scheduling aircraft and crew assignment. With their purchase of aircraft
Boeing 737, Ryanair has been able to gain capacity and reduces the
average age of fleet which means savings on maintenance costs and
avoiding the fit of European Union-conform equipment on old feet.
The next factor under the cost reduction strategy of Ryanair is
contracting out services. In this manner, aircraft handling, ticketing,
handling and other functions are contracted out by Ryanair to third parties.
In addition, in order to limit their expenses engine and heavy maintenance
are also contracted out whereas the staff of Ryanair carries out routine
maintenance.
Another factor for the cost reduction strategy of the company is in
terms of airport charges and route policies. Herein, Ryanair has made

judicious choice of dealing with secondary and regional airports, where the
traffic is not jammed and fees incomparably lower. Since Ryanair, is a true
windfall for such airports, the airline company has a bargaining power
which enables it getting favourableaccess fees. In addition, Ryanair
provides only a point-to-point service, thus, it has no cost concerning
connecting passengers. Moreover, the company pays special focus to ontime departures because it means maximising aircraft utilisation.
Managing staff costs and productivity is another factor used for
reducing the cost for Ryanair. In this manner, the company pays its staff
on modest salary but has set up a performance related pay structure
which urges employees to maximise the number of sectors flown daily.
This way, Ryanair both controls productivity and keeps staff costs down.
Lastly, managing marketing costs is another factor that makes the
company reduces it costs. Ryanair advertises mainly on it website with its
logo Ryanair.com, the Low-Fare Airline. In addition, it is also advertised
in national and regional Irish and UK newspaper, on radio and on
television.
Porters Generic Strategy
Aside from it cost-reduction strategy, Ryan has also been able to
use Porters generic strategies to position itself in the
marketplace. Accordingly, a company positions itself by leveraging its
strengths. Today, more and more people and organization are striving to
be recognized in the business arena. With this objective, these
organizations had been able to competently and effectively adapt to the
situation in the market place by using generic strategies that enhanced
their competitiveness. There are five different generic strategies that a
business can choose.
These include cost leadership, differentiation, focused cost
leadership and integrated cost leadership/differentiation. Each generic
strategy helps the company to establish and exploit a competitive
advantage within a particular competitive scope (Hitt, Ireland &Hoskisson
2003). By applying these strengths, three generic strategies are resulted:
cost leadership, differentiation and focus (Johnson & Scholes 1997). The
strategies used by the company include cost leadership, differentiation
strategy and focused differentiation.

Cost leadership strategy is based upon a business organising and

managing its value-adding activities so as to be the lowest cost producer
of a product within an industry (Campbell, 2002). Cost advantage may
achieve in terms of how product or services is designed or in terms of its
quality. Differentiation strategy is based upon persuading customers that a
product is superior to that offered by competitors (Campbell, 2002). The
value added by the uniqueness of the product or services may allow the
company to charge a premium price for it. However, the danger associated
with differentiation may include imitation by competitors and changes in
customer tastes.
Focus-differentiation strategy is aimed at a segment of the market
fro a product rather than at the whole market or many markets (Campbell,
2002). The successful way using focus strategy is to tailor a broad of
product or service development strengths to a relatively narrow market
segment that they know very well. The risk may include imitation and
changes in the target segments. In the case of Ryanair, these three
generic strategies had been utilised. First, the company offers the lowest
cost of fare than its competitors in the airline. On the other hand, Ryanair
has also become a focuser because it concentrated on a narrow customer
segment which include Irish and UK business people or travellers who
could not afro to fly major airlines.
The main goal of the company is to provide a no frills service with
low fares designed to stimulate demand. At the time, it did not aim to offer
the lowest fare on the market. However, the company expanded to
continental Europe and had to focus on critical success factors to survive.
Nowadays, it can be said that Ryanair has shifted generic strategies to
become more of a cost-leader not only in terms of passenger volumes but
being the lowest cost operator in the airline industry.
Ryanair has restyled itself and shifted from a full service
conventional airline to the first European low fares, no frills carrier. In
1985, it provided scheduled passenger airline services between Ireland
and the UK. By the end of 1990 and despite a growth in passenger
volume, the company had experienced some trouble and had to dispose
of five chief executives, recording losses of IR20 million. Ryanair had to
fight to survive and the new management team, headed by Michael
OLeary, decides to restyle the company on the model of successful
American Southwest Airlines.

Indeed, when one considers Porter's original framework, Ryanair's

generic strategy used to be unclear: it situated itself somewhere between
a cost leader and a focuser, although we can consider it was closer to a
focuser. The problem with such niche strategies is that they involve a
number of risks, the most obvious being that the niche can get saturated
and competitors invade the segment. As long as Ryanair was the only
European no frills airline, it did not have to distinctly define its strategic
position. It used to try and mix focus and cost leadership and was muzzy
about which one it wanted. But as soon as competitors started blooming, it
had
to
decide
which
strategy
it would stick to. This was the very strategy of Michael O'Leary: he decided
to ruthlessly pursue cost leadership. This strategy was a success and by
1997, Ryanair was floated on the Dublin Stock Exchange and on
NASDAQ.
Expansion strategy is another factor that enables Ryanair to
position itself in the marketplace. The company has been known to be an
airline which launches new routes since its operation begins. In addition,
under the expansion strategy, company acquires Buzz in February 26,
2003. Such acquisition enables Ryanair to gain immediate access to11
new French regional airports and makes the company the largest airline
operating at London Stansted Airport. In addition, the company continues
to expand by opening two new Continental European bases with low-fare
flights from Milan Bergamo and Stockholm. In the year, 2003, the
company has been able to launch 73 new routes and carry over 2 million
passengers in one month (July). In addition, the company website has
been able to make the company position itself in the global market.
2.

Strategic Options

The case study has provided the problems and issues encountered
by the Ryanair, in spite of its strategies. One of the problems is in terms of
handling customers or target market. In addition, another problem is
assuring quality service. In this manner, the strategic option that can be
used by the company for satisfying both internal and external customers
and marketing environment is the use of total quality management. The
industrial competitions in airline industry worldwide are at brisk, making
companies in this field across the globe search for extensive strategic
management procedures that would keep them in on the business world.
The tasks of crafting, implementing, and executing company strategies are

the heart and soul of managing business enterprise. A companys strategy

serves as the game plan management and is use to stake out a market
position, conduct its operations, attract and please customers, compete
successfully, and achieve organizational objectives. Thus, TQM as a
strategy is certainly appropriate for such situation.
Total Quality Management is a philosophy of management that is
driven by the constant attainment of customer satisfaction though the
continuous improvement of all organizational processes (Robbins, 1998).
It is a management philosophy that seeks to integrate all organizational
functions such as marketing, finance, design, engineering, production,
customer service, and others to focus on meeting customer needs and
organizational objectives (Hashmi, 2000).
It is known that every organizations primary purpose is to stay in
business, so that it can promote the stability of the community, generate
products and services that are useful to customers, and provide setting for
the satisfaction and growth of organization members. From this
perspective, it can be said that TQM strategy for achieving its normative
outcomes is rooted in four interlocked assumptions: quality, people,
organizations, and the role of the senior management (Wageman, 1995).

Total Quality Management is a planned procedure for satisfying

internal and external customers and suppliers by integrating the business
environment, continuous improvement, and come through with
advancement, growth, and safeguarding the cycles while changing
organisational culture. Furthermore, TQM is an array of management
system throughout the organisation, geared to ensure that the
organisation to continuously attain or surpass customer requirements.
TQM places strong focus on process measurement and controls as means
of continuous improvement (McNamara, 1999). Moreover, Total Quality
Management is infinitely variable and adaptable. Although originally
applied to manufacturing operations, and over the years only used in that
area, TQM is now being recognised as a standard management
instrument, just as applicable in service and public sector organisations
like the airlines industries (Hashmi, 2004).
The Total Quality Management (TQM) philosophy of management
is customer-oriented. Hence, the airline operations must be developed in
order to steadily deal with the improvement of their operation through the

ongoing participation of all employees in problem solving efforts across

functional and hierarchical boundaries. TQM incorporates the concepts of
service quality, process management, quality assertion, and quality
perfection. Consequently, the airline company must be able to control all
transformation processes with regards to their operations and services to
better satisfy customer needs in the most economical way.
In order to apply the TQM to Ryanair especially to be used in its
airline operations and services, the management of the airline company
must be able to accept the whole concept of the improvement, which
means that all the people of the airline company must agree that there is a
need for a total transformation especially for the quality of operations and
services that the industry will be offered. Furthermore, the management
should be willing to participate to all the improvement, value each and
every ones opinion in order to achieve total quality management and
provide a total quality operations and services to satisfy their customers.
Managers and experts disagree about how to effectively implement Total
Quality Management to their organisations.
Eventually, customer satisfaction has always been regarded as the
driving force behind quality improvement; others suggest quality
management is achieved by internal productivity or cost improvement
programs. In other applications, Total Quality Management is regarded as
a technique to introduce the context of participative type of management
(Schlenker, 1998). Thus, the management should be more straightforward
to provide the potential role of applying the Total Quality Management to
their operations and services.
In addition, since Total quality management is based on internal or
self-control, which is embedded in every element of the work system
(technology and people), the employees or the people behind the
operation and services being offered to the passengers and customers of
the airline must be able to determine the problems beforehand, to
anticipate its occurrences.
Pushing problem solving and decision-making down in the Ryanair
especially to their operations and services may allow people who do the
work to both assess and take remedial action in order to deliver an
operation or service that meets the needs of their customer. In applying
total quality management to airline operations, they must be able to
combine it with the core strategy of the industries; this does not mean that

such airline companies must have total changes. It is important that in

application of the Total Quality Management to the Ryanair operations and
services they must also consider that an appropriate strategy should be
used in order to employ a total quality operations and services that would
satisfy all clients and customers.

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