Business Stragey - Vueling Vs Ryanair

Business Strategy

Ryanair vs. Vueling
Final Project

01/03/2012

Group-members:
Virginia Petala
Benjamin Alders
Javier Valdez
Maria Pawlowska

CONTENT

1. The airline industry 1
A. The competitive environment of the airline industry 1
B. The analysis of the 5 forces 1
C. The major competitors 2
D. The evolution of the distribution of market shares 3
2. Ryanair Vs. Vueling4
A. Ryanair: 4
B. Vueling: 5
C. Ethical Practices: 6
D. General Environment: 7
E. Portfolio of Strategic Business Units 7
F. Company's competitive position within the industry 8
G. SWOT Analysis 8
H. Strategy of the Strategic Business Unit 9
3. Comparative Analysis 11
A. Strategy summary 11
B. Recommendations for the two companies: 12
4. Appendix 13
5. Bibliography 141. The airline industry
A. The competitive environment of the airline industry
Stage of life: The first airline of the world was the German company DELAG (Deutsche-Luftschifffahrts-Aktiengesellschaft), which started in 1909. Even after 100 years, the airline industry is not a saturated market, which you can see in the static growth of the number of transported passengers and the continuous entryof new competitors like some low-cost-carriers in the recent years.

Evolution: During the last 100 years, there was a static growth from the beginning up to 2,75 billion transported passengers in 2011. Despite some setbacks due to the financial crisis and the terrorism attacks in 2009, the industry is still growing. At the beginning of the aviation, companies started with zeppelins, which wasto dangerous and to slow. The change to airplanes was one of the biggest evolutions, but the airline industry is still working on improvements in technology, like IT-systems, distribution systems, etc.

Dynamism: Due to these changes, the airline industry is a high dynamic industry. One of the main drivers is technology. E.g. the use of the Internet has changed the way of the distribution.Tickets are sold online instead of booking through a travel agency. This leads to a higher competition between the airlines. This led to new competitors, which are focused on the low-cost sector. This new type of business model has changed the competitive environment of the airline industry and has built the base for new companies like Southwest.
Another driver for the dynamism is globalization. Togrow further, lots of airlines are planning to achieve new markets, like Air France. Their focus is to increase the traffic between Europe and China.
B. The analysis of the 5 forces
a) Threat of substitutes Medium threat
* Use of Internet for business meetings could make it superfluous to travel (e.g. with the help of videoconferences)
* If you could not avoid physical transportation,there are few alternatives to avoid using an airplane as a passenger. Especially for bigger distances, like transatlantic flights, travelling by ship or train/car would take you too much time and effort. This could be only a real threat for small and medium distances.
b) In terms of industrial transportation, it depends on the value and the condition of the products. For example you can’tfind a substitute for perishable products (e.g. the transportation of Kiwi’s from New Zealand to Europe). Threat of new entrances Medium threat
* The amount of money, you need for entering the airline business is huge, because you have to make an extremely high investment to start.
* But this money could be borrowed from a bank. Therefore the possibility of the entrance depends on theconditions for a loan at the very moment
* Beside new entrances, you could get a new competitor through existing competitors. They have the capital and the know-how to set up a new company in order to saturate a different market. E.g. Lufthansa could invent a new airline with an aggressive low cost strategy to compete with Ryanair.
c) The power of buyer’s Low power
* Airlines normally do...