Introduction

Ryanair is an airline company with headquarters located in Ireland and was founded in 1985. The company is well known for offering low-cost airline services while maintaining varied quality proponents. Ryanair is among the most successful airlines within this category in Europe. The airline has grown significantly over the years. It currently boosts of employing more than 10,000 staff members and carries close to over 120 million passengers every year (Grant, 2016). Ryanair’s success has mostly been attributed to the strategic position it has acquired in the market. The company has come up with ways of creating a competitive advantage that makes it stand out among other entities in the industry.

The paper aims at exploring how the company has positioned itself to the current status that it enjoys. This will help in assessing how Ryanair competes with the rivals by using varied relevant models. The models will be helpful in understanding the operations taking place in the organisation. The airline industry is recognised under the service sector, and this makes it important for organisations to ensure there is consumer satisfaction at all times. When consumers are satisfied, it is an indication of service management excellence which is a key ingredient in the service industry.

Positioning in the Industry

Ryanair is among the leading companies in the airline industry in Europe. The company is at the top end of the industry given the business statistics that have been registered over the years. Ryanair’s position can be identified by the number of passengers that use its services on an annual basis. In 2016, the company registered a number that was around 120 million passengers that used the services of the airline in that year. This number ensured that the airline overtook Lufthansa; who are its major competitor when it comes to the number of customers served per annum. Lufthansa registered around 110 million passengers in that financial year (TravelFree, 2017). This showcases that the company has positioned itself right there at the top of this industry in Europe.

There are several factors that attribute to this positioning. Ryanair has always had the objective of becoming the greatest in Europe when it comes to scheduled passengers. The company has been aiming to achieve this by providing more offerings and improvements while maintaining low fares. The concept of offering low fares aims at ensuring the company attracts as many passengers as possible. While pursuing the prospect, the company also works to enhance quality and maintain the operational costs as low as possible in an environment that is challenging. Among the key factors in the company’s strategy is low fares and customer service (Budd and Ison, 2016). There is the push to provide quality customer experience in all the business’ aspect. This is by ensuring that the number of flight cancellations is as low as possible, time punctuality is great and reduced loss of passenger luggage. The fulfillment of passenger expectations is actualized using the company’s website, varied types of surveys and random passenger visit checks.

The low price approach is meant to attract passengers that are on low budget and have the intention of saving money. Ryanair tends to determine the prices for tickets depending on the demand of a certain flight and the number of days left before departure (De Wit and Zuidberg, 2016). From time to time, the company introduces a promotional fare campaign that helps to attract more people. Ryanair’s main competitors include Lufthansa, Air France, Alitalia, British Airways and EasyJet. Aspects of fair competition in this industry are viewed in price discounting, increased capacity, price matching, and ticket sale promotions. Experiencing variations in pricing and passenger flows tends to have a negative impact on the company’s operations and finances.

Ryanair introduced a customer experience programme in 2013 known as “Always getting better” (De Wit and Zuidberg, 2016). The program was initiated to ensure that the company listened to the grievances that its consumers had regarding the services that they were receiving. The move helped the company to improve a poor reputation that had been established regarding the provision of answers to customers’ feedback and suggestions for improvement. Through this method, the company has been able to offer second carry-on luggage, which was being demanded by numerous customers. The company has also renewed the “Business Plus” and Family extra” services and re-established relationship with the global distribution system.

Porters 5 Forces

Bargaining Power of Buyers

The bargaining power of buyers is reasonably high. Buyers can easily switch to using the competitors’ services without incurring any extra costs. There are other companies offering services to low budget customers within the industry. Most airline companies have realised that the model of offering low prices is working well and have embraced it significantly.

Threat of New Entrants

Entering the low fare airline industry is quite difficult. Cost leaders such as Ryanair have already put the bar too high. The companies involved have devised ways of ensuring that their operational costs are as low as possible while maintaining profitability prospects at the same time. New entrants would find it difficult to operate within these costs given that their infrastructure will not have developed as it would be expected hence requiring more resources (Kesting and Günzel-Jensen, 2015). In this industry, new entrants are blocked out by the access to distribution channels, prices and capital requirements that would enable in the establishment of economies of scale.  This shows that the threat of new entrants to Ryanair is quite low.

Rivalry between Competitors

There are several competitors within the industry that help to keep Ryanair on their toes. However, the intensity of the rivalry that exists between these companies is medium. The competitors are using different strategies to gain a competitive advantage in the industry. Several companies are trying to copy Ryanair’s strategy of being cost leaders. Ryanair has been able to build its reputation around this strategy hence there is no chance that the company would find it difficult to broaden its strategy (Thomas, 2015).

Bargaining Power of Suppliers

The bargaining power of suppliers is high in the industry. This is because in Europe there are two major aircraft manufacturers; Airbus and Boeing. The bargaining power becomes high since the switching costs involved are quite high. High switching costs are attributed to the need of high capital investments and the necessity to institute new training for pilots. The company’s major supplier for airplanes is Boeing.

Threat of Substitutes

In Europe, major substitutes in the travel industry include railroad networks, car renting companies, railroad networks and sea transport. Airlines face more threat from trains given the fact that the other options are quite expensive. Euro Express is a good example of an alternative can threaten the airline industry given that it is cheaper. The railroad network in Europe is well-established too hence making connections to different parts of the continent (Thomas, 2015). However, it takes long to travel from one place to another using the train. Using trains results to higher opportunity costs and transaction costs. As a result, threat of substitutes is low for Ryanair since the close substitutes cannot offer services of similar quality.

Competitive Advantage

The company has several competitive advantages that help it to stand out among competitors in the industry. They include:

Customer Service: the company ensures that it provides its customers with the best customer service performance compared to what is available in the industry. This is the aspect that has made it possible for the company to actualize the aspects of fewer lost bags, better punctuality and fewer flight cancellations compared to other companies. The company responds quite well when the customers are trying to reach out.

Low Operating Costs: The operating costs in the company are believed to be among the lowest being incurred in this industry in Europe.  Among the primary expenses that Ryanair strives to control include personnel costs as per productivity, aircraft equipment costs, airport access and handling costs, and customer service costs (Kesting and Günzel-Jensen, 2015).

Frequent Point to Point Flights: These flights are provided on short-haul routes to regional and secondary airports around major travel destinations and population centres. This aspect enables the company to offer frequent services to its customers on direct routes and avoids the costs involved with connecting passengers to different routes (Alderighi et al., 2016). This works well since faster turnaround is vital for the company’s prospects of maximizing aircraft utilisation.

Low Fares: The fare prices are usually dependent on the demand as of that period. The company tends to sell one-way tickets hence eliminating the minimum stay requirements on scheduled services.

Safety: Ryanair is committed to ensuring that safety is enhanced at all times. This commitment is showed in how the company employs and trains its cabin crews, maintenance personnel, and pilots according to the set European airline industry standards. It is rare to hear of incidents involving major injuries to crew members or passengers. Routine aircraft repair services and maintenance are mandatory.

Business Response to the Market

Ryanair has responded positively to the existing market as it has embraced matters as they are at every given moment. The market has even become more competitive over the years since more players have joined the industry. The level of competition is even higher now given that existing companies are starting to adopt Ryanair’s model of being cost leaders. However, this aspect has not made Ryanair change its position. The company strives to use cost leadership as its major strategy in acquiring a substantial market share in this industry for the foreseeable future. The resources that are at the disposal of the company are likely to make this happen.

The things that the company aims to change are improving existing services and introduce new ones that will help complete the ones that are already in use. Among the services to initiate is the introduction of new routes to ensure that the company is serving people within wider geographical locations while enhancing convenience to these people (Alderighi et al., 2016). Increasing the frequency of services in existing routes is also viewed as a way of increasing convenience to customers hence bringing more satisfaction. Ryanair also considers making acquisitions in future in case they became available. The types of businesses that the company is willing to acquire are the ones that seem to operate within a similar framework or ones that can be easily converted to the company’s model.

Ryanair has no need of changing the existing model of operation. The model seems to be working quite well for the organisation as it has become a cost leader in Europe’s airline industry. Making changes would only work to destabilise the existing operations. This could be detrimental to the organisation given that it already commands a substantial market share in the industry. When a system is working to the advantage of the organisation, the management should be focusing on enhancing improvements and not overhaul changes.

Conclusion

Over the years, Ryanair has been working to enhance its operations to increase customer satisfaction. Among the issues that the company has concentrated on is customer service, reducing operational costs, offering low fare packages, safety, and frequent point to point flights. These are the things that have enabled Ryanair to create the competitive advantage that it enjoys at the moment. Putting more focus on the consumers has helped the company to establish loyalty since the company is taking their needs into consideration. When a company acts upon the feedback of employees, it makes them have a feeling of belonging. They feel like part of the organisation and are likely to consume the company’s services for the foreseeable future. The strong cost leadership position that the company enjoys makes it hard for new entrants hence assuring the company will remain profitable for the desired period.

To make the company even more successful for the upcoming years, the management should launch more effective programs that will complement the existing operations. The company should also exploit tourism trends to help increase the number of passengers being served. Improving in-flight food service and protecting itself from oil process will also boost the business prospects. Making more improvements to the “Always getting better” programme will ensure more satisfaction to consumers, which means more business to the company.

References

Alderighi, M., Nicolini, M. and Piga, C. (2016). Targeting leisure and business passengers with unsegmented pricing. Tourism Management, 54, pp.502-512.

Budd, L. and Ison, S. (2016). Air transport management: An International Perspective. 1st ed. Park Drive: Taylor & Francis.

De Wit, J. and Zuidberg, J. (2016). Route churn: an analysis of low-cost carrier route continuity in Europe. Journal of Transport Geography, 50, pp.57-67.

Grant, R. (2016). Contemporary strategy analysis: Text and Cases Edition. 1st ed. Chichester: Wiley.

Kesting, P. and Günzel-Jensen, F. (2015). SMEs and new ventures need business model sophistication. Business Horizons, 58(3), pp.285-293.

Thomas, M. (2015). Ryanair: success before love. Strategic Direction, 31(8), pp.1-3.

TravelFree. (2017). Ryanair is Europe’s biggest airline by passengers in 2016, overtaking Lufthansa – TravelFree. [online] Available at: http://travelfree.info/2017/01/ryanair-europes-biggest-airline-passengers-2016-overtaking-lufthansa/ [Accessed 6 Jun. 2017].

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