Case Study of Ryanair

Ryanair was founded in 1985 by Christopher Ryan, Liam Lonergan, and Tony Ryan. Ryanair was one of the first independent airlines in Ireland. By the late 1990’s, it was the largest low-cost airline in Europe.

The growth of Ryanair from a 15 seat airplane to a great competitor in Europe was based on a strategic plan set by its upper management. Ryanair realized that it could capitalize on the market by offering cheap fares. The price was 20% lower than the cheapest fare of its competitors. Ryanair thrives on volumes rather price margins.

The components of Ryanair’s operational model follow a strategy of cost focus. The operational model of the airline includes an entire fleet of 737’s; this focused on standardization as it was a key feature in keeping the costs of the airline low, thus allowing it to offer low fares. Also, Ryanair uses secondary airports. Using airports outside of city centers saved time and money for the airline as secondary airports had relatively lower landing charges. Faster turnaround times allow Ryanair to fly a plane more times a day rather than spending time on the ground. Basically, it allowed the airplanes to increase efficiency. Ryanair used fewer employees per plane than other airlines. This increased the productivity per employee for the airline and also helped keep the wage bill low. Online sales allowed the airline to make booking processes cheaper as transaction costs came down considerably. Also, Ryanair doesn’t serve food or drinks on its flights. Since Ryanair charged for all the optional parts of a flight, it was able to fix the basic ticket very low. Ryanair focused on filling its planes to capacity. If tickets did not sell at a high price, it tried to sell them by lowering prices. Adding to the operational model was simplified operations. This meant that the airline didn’t assign seat numbers; this simplified the ticketing and administration processes. Adding to this was Ryanair’s choice to fly short and medium haul point-to-point flights, enabling the airline to work with a smaller number of personnel. Lastly, Ryanair entered into partnerships and agreements with car rental companies and hotels so that it could earn commissions by selling these products to passengers.

Ryanair’s publicity helped exponentially in creating brand awareness. Ryanair’s attack on easyJet was one of the typical publicity exercises of Ryanair. The CEO of an airline blatantly waging war against another airline was a topic guaranteed to generate publicity.

One of the biggest low cost competitors for Ryanair is easyJet however Ryanair has the competitive advantage. Ryanair has brand name advantage and is known as being the first low-cost airliner. Not to mention, Ryanair has unique advertising technique. Long run sustainability for both airliners is being attacked due to the growing competitors as all airlines are trying to imitate a low cost scheme in order to be competitive.

Porter’s Five Forces Model of Wal-Mart

Porters 5 Forces Model can be described as a model to evaluate industry structure according  to rivalry, threat of entry, supplier power, buyer power, and the threat of substitutes. Porter referred to these forces as the micro environment. These forces also help to determine an industry’s weaknesses and strengths. Below you will see Porters 5 Forces Model and it’s relationship to Walmart.  Each force is broken down specifically to hypermarkets and supercenters.

Threat of New Entrants

Hypermarkets such as Wal-Mart, benefit from significant scale of economies in purchasing, distribution, and advertising. In order for Wal-mart to set up a larger super center, there had to be significant capital in which to purchase merchandise, buy/lease property, and to hire and hire employees. New entrants in this sector is moderate.

Buyer Power

The hypermarket/supercenters sector have a wide variety of potential customers, which weakens buyer power. Because of the such diversity of products that are sold; it increases the customer base of companies hence reducing buyer power.

Threat of Substitutes

The threat of substitution to hypermarkets and super centers comes from a large variety of products that are offered. In turn, hypermarkets offer a convenience of shopping for many different products in one location. Threat of substutitutes is moderate.

Supplier Power

This sector includes manufacturers and distributors. In order to ensure that retailers aren’t relying on any particular suppler, they buy from a large number of suppliers. Supplier power is moderate in this sector

Degree of Rivalry

This center is quite fragmented with a large number of players operating. However, Wal-Mart accounts for about about 25% of the global revenues. The industry is beginning to diversity to include financial services and online purchasing. Rivalry is moderate.

The Five Forces Model is a tool that can help companies and potential entrants to decide if an industry is worth their business.