Today, the company has only one major competitor on the market of low-cost flights, and it is likely to retain its competitive advantage. At the same time, the company has many complaints from customers due its focus on making profits. This paper will analyze Ryanair’s competitive advantage and competitive strategy as well resources, used for sustaining its competitive advantage since Ryanair has become the leading low-cost company in Europe due to its low fares and routes to numerous destinations.
Background
Ryanair was founded in the UK in the 1980s. Initially, the company had only one small plane and a limited number of routes. It even had to shift to charter flights to search for passengers. However, the company gradually managed to increase the number of routes and expanded its fleet. The key success factor was low prices (Leadbeater, 2017). In the times of the company’s foundation, passengers had to use slow and expensive trains. Therefore, since the company offered a cheap and fast kind of transportation to customers, it was able to gain success on the market. On the other hand, the way to leadership was not easy for Ryanair. The company had losses on some routes due to lack of customers. Moreover, it needed time to expand its routes and find money to purchase better planes. Today, the company offers flights around entire Europe and continues its expansion (Leadbeater, 2017). For example, Ryanair has announced the launch of new flights from Ukraine in autumn; particularly, it will have flights to six European countries. Ukraine will become the 34th country in Ryanair’s route map (Leadbeater, 2017). The company still relies on online sales and charges for all additional services (Bamber, Gittell, Kochan, Von Nordenflycht, 2013). For companies like AirFrance or Lufthansa, Ryanair is not a competitor because target audience of the low-cost company is leisure travelers who care only about prices. Moreover, Ryanair does not try to attract all customer groups. It prefers to focus on customers who share its philosophy about flights.
Competitive Advantage of Ryanair
The major competitive advantage of Ryanair is low fares. The organization utilized a range of ways of gaining it. First, it decided to make flights from secondary airports (Bamber et al., 2013). Although such flights are not convenient for travelers, Ryanair can keep low operating costs by paying lower airport fees. In addition, making flights to secondary airports is the greatest issue only for business travelers who do not belong to the company’s target audience. Second, Ryanair has gained the ability to offer low price by making a simple fleet. It operates only Boeing 737-800 (Ryaniar, n.d.b). As a result, the company needs less money for maintaining aircrafts and training pilots. Instead of preparing pilots for working on different planes, it can train them only for Boeing 737-800. Initially, Ryanair preferred using older planes, but then, it shifted to using new ones. This change also helped the company gain a competitive advantage because new aircrafts required less maintenance works. Therefore, the company could minimize its operating costs. Third, gaining short turnaround time (25 minutes) helped to increase the number of flights to nine per day, which significantly raised productivity. Moreover, relying on online sales has led to the reduction of transaction costs. Ryanair also decided to charge for all services, which helped to cover operating costs and offer lower costs. Finally, partnerships with car rental companies, hotels, and insurance companies also helped to deal with expenses even in case of a small number of passengers for a certain flight.
Overall, the building blocks of Ryanair’s competitive advantage are the simple fleet, secondary airports, a short turnaround time, high productivity, online sales, fees for everything offered, simple operations, and partnerships with other companies. All these components help the organization to minimize its operation costs so that it could offer tickets for lower prices. The company even gains profits when the half of a plane is full. At the same time, its focus on discount market helps to avoid unnecessary spending. For example, the company does not try to attract business travelers by flights to primary airports or free snacks. Despite constant critics for charging for everything, Ryanair continues to use the same instruments for maintaining its competitive advantage.
Ryanair definitely can support its competitive advantage. The market of low-cost flights has huge entry barriers so the company is not at risk of the appearance of new powerful competitors in the near future. In addition, it has even better conditions than EasyJet, its major competitor. Moreover, the company uses numerous tools for creating its competitive advantage so that even loss of some component would not destroy the system. For example, the insignificant growth of airport fees would not lead to the immediate increase of prices. Another supporting argument is that Ryanair continues to expand its route map. The presence in 34 countries means that the company is less dependent on local changes (Leadbeater, 2017). For example, increasing taxes in some of countries would not lead to significant financial losses. Apart from that, the company has been for almost 20 years on the market. Therefore, it has many resources and experience for sustaining its competitive advantage. For example, it has a number of new aircraft that do not need a frequent expensive repair. Therefore, the company has enough tools to keep its competitive future.
Competitive Strategy
Despite some differences from Southwest’s HR strategy, Ryanair attempted to copy many elements of this company’s competitive strategy. Thus, it repeated the strategy of choosing city pairs with potentially considerable number of passengers and serve these destinations with frequent low-cost flights to win the competition on a route-to-route basis (Bamber et al., 2013). For example, it has two flights per day between Santiago de Compostela (Spain) and Barcelona (Spain), and the aircraft are normally full of passengers because these are popular destinations among leisure travelers. The quick turnaround for maximizing aircraft and labor forces productivity is also the element of Southwest’s competitive strategy. For example, Ryanair’s employees work more hours than other companies’ workers. The organization has fewer personnel in its planes. Therefore, Ryanair has copied at least two elements of competitive strategy of this American low-cost company.
At the same time, Ryanair has ignored two of critical components of Southwest’s competitive strategy. First, Ryanair could have low prices and an excellent customer service. Second, it could achieve this by putting the interests of labor forces first (Bamber et al., 2013). However, Ryanair prefers putting profits first, which makes it customer service of lower quality. For example, a small number of employees on a board and more hours of work reduce the productivity of personnel. They are simply not able to provide appropriate customer service as their competitors do. Moreover, even reliability measures do not improve the image of the company. Despite high punctuality and baggage handling, the company still has a negative publicity due to the way of treating its customers and employees (Bamber et al, 2013). The most common complaints are fees for everything and long hours of work for employees. Therefore, Ryanair’s competitive strategy presupposes minimizing all operating costs to be able to offer the lowest prices on the market.
Resources and Capabilities
Ryanair has few valuable resources and capabilities that help it in following competitive advantage. The first important resource is fleet. Today, the air company operates 350 planes, with plans to increase its fleet to 564 by 204 (Ryanair, n.d.b). The fleet expansion will strengthen the dominance of the company in small airports (Eide, Cunningham, Hargreaves, 2016)Начало формы. According to the company’s website, the average age of aircrafts is 5.5 years, which allows a safe transportation of about 117million people per year (Ryanair, n.d.b). The second resource is beneficial agreements with airports. The company’s strategy to use secondary airports enables it to demand low fares for serving passengers in the airport. Therefore, the company has an outstanding bargaining power because secondary airports work with smaller number of airports so they are interested in working with Ryanair. The third resource is a popular website, which allows the company to make most of its sales online. Online sales are more beneficial for the company because it does not have to pay a commission to travel agents and other intermediaries. The fourth capability is the ability to find passengers for its flights. Therefore, it can cover its operating costs. Ryanair uses various ideas to avoid many free seats. For example, it regularly makes sales to receive at least some money for its services. The fifth capability is its labor force for serving 2,000 daily flights connecting 200 places in more than 30 countries (Ryanair, n.d.a). Particularly, the company currently has 15,000 trained employees (Ryanair, n.d.a). Therefore, the key resources and capabilities are its fleet, cooperation with cheap airports, a popular website, and a considerable number of trained employees.
Conclusion
In conclusion, Ryanair has gained its competitive advantage due to minimizing operating costs and making frequent flights to popular destinations. The company uses all opportunities for reducing costs; particularly, it charges for all services, including drinks and baggage. It forces its employees to work more than in other companies. At the same time, it has a large fleet of the same aircraft, which helps to reduce their maintenance and HR costs. Ryanair has all chances to sustain its competitive advantage because the market of low-cost flights has huge entry barriers. As for the competitive strategy, it is similar to that of Southwest’s. The only difference is putting profits above its employees.
This text was written by Charles Pfeifer who is a writing editor at https://advanced-writer.com/
