Caso Ryanair

RYANAIR CASE STUDY
16 OCTOBER 2012


GLOBAL STRATEGY

INTERNATIONAL BUSINESS DEVELOPMENT MASTERS

-IntroductionRyanair is a low-cost airline operating since 1985 in the the low-cost carriers strategic activity
domain. Its core business activity can be summarized with the green path of the business
strategy model in figure 1 : a low cost carrier operating in the European market toprovide
point-to-point and short-haul connections at low fares and no-frills, as an independent
company, whose information systems are operations, passengers and logistics focused.

figure1

-Question 1The 5+1 Porter’s forces analysis provides fundamental information to understand Ryanair’s
business environment and attractiveness. Here is a description of each force intensity (FI), theargumentation behind, as well as a graphical representation of their intensities.
Threat of new entrants
Economies of scale, special capabilities and product differentiation: huge Rayanair's
advantage in terms of costs repartition per seat. The optimal efficiency of its fleet thanks
to the economies of fuel resulting from night flies and high turnover (enabled by the
smart selection of uncrowdedairports and luggage reduction). Even if the airports are
open to all new companies and the competition of new low-cost airlines supported by
recent European, liberal-oriented regulations, the capital requirements are a consequent
barrier to the market penetration: state of the art fleets competing with those of current
market airlines' efficiency are very expensive and their logistics managementrequire a
critical size not to be a burden. Ryanair's service differentiation is so extreme by its low
price and fare focused that the threat is relatively weak, an assertion confirmed by the
high new entrants failures of the past ten years. FI: 3

Threat of substitutes
High risk substitute services to the low-cost flights are high-speed trains like TGV or
even car transport forshort/middle-distance flights. In spite of the low transfer costs to
switch from one service to another (it's free to decide to take the car and train tariffs are
not so far from Rayanair's) the flights and overall journey rapidity confer an important
advantage to Rayanair and thus reducing the substitutes' threat. Sometimes railway
transports are also more expensive than a flight, the optimalefficiency of fuel
consumption is once again a limitation to threat. FI: 3.5

Bargaining power of customers
In spite of an atome-to-company relationship the wide number of competitors and
extreme focus on prices the elasticity to price of the customers is very important in the
low-cost market. The pressure towards a maximal cost reduction for travelers squeeze the
benefits margins and some errortowards market expectations can destroy the company to
the competitors' benefit. The phenomenon is visible at Ryanair's commitment to ''best
price guaranteed'' and cash compensation if any equivalent offer is at lower price.
Moreover despite the increasing customers number (12.4% average increase per year
since 2007) the target segment is not universal, Ryanair needs therefore to retain theselatter to be sustainable on the long run. Hence we consider the bargaining power a
relatively ( but not critically) high threat. FI: 6.5.

Bargaining power of suppliers
One the one hand, one of the most important costs for a low-cost airline is fuel price: its
suppliers are very concentrated and Ryanair has almost no influence on it. The proportion
in the unitary cost of a ticket is high andthus represents a real threat factor. On the other
hand airports tend to raise their tariffs and taxes as soon as the passengers' frequency

increases, here too Rayanair has little to do as the airports have customers alternatives.
Rayanair has thus not many alternatives or BATNA's with its suppliers, for these reasons
the power and threat is considered critically high hence we scored it...