RyanAIR Case Study.
Case 5 - A Dogfight over Europe: Ryanair
Key Issue:
The key issue in this case is that Ryanair’s competitive advantage is based on offering customers an easy-to-imitate low price. While it may be operationally effective, they have no strategic positioning.
Supporting Arguments: Ryanair’s low prices were not a strategy to gain market share. They were simply out of necessity to stay afloat as their sales plummeted. However, as their prices dropped to increase sales, they did manage to generate revenue and pay their bills. They continued with this “low-cost, low-fare strategy,” using Southwest Airlines as a guide and within a year they returned to profitability. In 1993, a year after Ryanair reached profitability the European Union gave airlines the freedom to set fares. It was this airline liberalization measure that brought increased competition to the low-cost, low-fare airline industry. Using the five forces model, we can analyze Ryanair’s competitive market. The industry rivalry was high due to the deregulation of the airline industry. Competitors such as EasyJet, British Airways’ Go (which was created in an effort to gain market dominance, weed out competition, and eliminate the budget airline industry altogether), Virgin Air’s Virgin Express, and Debonair were all vying for market share in the budget sector of the industry. Because of such high rivalry, the buyers had high bargaining power and the sellers had low bargaining power. The threat of substitutes was low because apart from trains and buses, there were no alternative modes of transportation. The risk of entry into the industry was high because of the deregulation efforts by the European Union. Ergo, it is easily discernible that Ryanair was up against tough competition. As defined by Porter in the article “What is Strategy?” operational effectiveness is performing the same activities as rivals, only better. He defined strategic positioning as performing different activities
Key Issue:
The key issue in this case is that Ryanair’s competitive advantage is based on offering customers an easy-to-imitate low price. While it may be operationally effective, they have no strategic positioning.
Supporting Arguments: Ryanair’s low prices were not a strategy to gain market share. They were simply out of necessity to stay afloat as their sales plummeted. However, as their prices dropped to increase sales, they did manage to generate revenue and pay their bills. They continued with this “low-cost, low-fare strategy,” using Southwest Airlines as a guide and within a year they returned to profitability. In 1993, a year after Ryanair reached profitability the European Union gave airlines the freedom to set fares. It was this airline liberalization measure that brought increased competition to the low-cost, low-fare airline industry. Using the five forces model, we can analyze Ryanair’s competitive market. The industry rivalry was high due to the deregulation of the airline industry. Competitors such as EasyJet, British Airways’ Go (which was created in an effort to gain market dominance, weed out competition, and eliminate the budget airline industry altogether), Virgin Air’s Virgin Express, and Debonair were all vying for market share in the budget sector of the industry. Because of such high rivalry, the buyers had high bargaining power and the sellers had low bargaining power. The threat of substitutes was low because apart from trains and buses, there were no alternative modes of transportation. The risk of entry into the industry was high because of the deregulation efforts by the European Union. Ergo, it is easily discernible that Ryanair was up against tough competition. As defined by Porter in the article “What is Strategy?” operational effectiveness is performing the same activities as rivals, only better. He defined strategic positioning as performing different activities