Ryanair Business Strategy - Fly for Free!
What is the Ryanair Business Strategy?
The Ryanair Business Strategy is one of operational excellence.
Ryanair is the largest airline in Europe as defined by passenger numbers and is the largest in the World for International passengers. Founded in 1985, it has expanded rapidly capitalising on the opportunity ( see SWOT ) of European deregulation of the air industry in 1997.
It is an Irish company headquartered in Dublin and has about 1000 routes, 40 bases and about 200 aircraft. Their business model is based (i.e. copied - a strategy in itself) on Southwest airlines in the USA.
Cost Focused - Used SouthWest Airlines Model
It really addresses the market for flyers who looked for a cheap basic and efficient service rather than luxury.
It does not try to complete in all market segments and so is focused. It could be said their strategy is 'cost focused'. They fly point to point to mid-sized cities using secondary airports.
After about 5 years of operation they were making a loss but under the direction of their now CEO Michael O'Leary they rejigged their strategy to one of low cost following the
SouthWest airline model.
Disciplines of Market Leaders
Treacy and Wiersema in the great book 'Disciplines of Market Leaders' state three steps to be a market leader - Choose your Customers, Narrow your Focus and so dominate your market
According to the consultants Treacy an Wiersema, there are three ways to determine or classify a Competitive strategy. They call them value disciplines and they are:
The idea is to become best in one of these disciplines and good in the others. Ryanair Business strategy fits the Operational Excellent Model of high reliability and dependability with fewer flight cancellations, great punctuality and fewer lost bags than most airlines.
It operates on a highly efficient basis too with high aircraft utilisation, minimum staffing, and maximising their use of the Internet to keep booking costs down. The turnaround time on the ground again is minimised. The Ryanair strategy attempts to keep costs low by gaining discounts and concessions from plane suppliers (Boeing) and Airports.
They operate only one type of aircraft to keep maintenance simple and cost effective with bulk buying of a single set of spares.
The flying crew are interchangeable as they only have one aircraft type and consequently their training is reduced and simplified. They outsource where they can to keep their productivity high and have their computer systems well integrated.
Leadership Makes a Difference
In terms of low marketing costs, their CEO Michael O'Leary gets a lot of free publicity with stunts and being publicly aggressive against the competition and authorities.
They use full page ads to promote themselves offering bargain prices and often attacking the competition. They are sometimes accused of hidden costs but claim that this is false as it is clearly stated on their Internet Sales system.
So far they have also a good safety record, have made good efforts in noise level control and Green House Gas carbon emissions.
Making the most of Add On Sales
They maximise the opportunity to make ancillary revenue with the sale of car hire, ground transportation, hotels and travel insurance, as well as on board sales (food, beverages and scratch-cards) and excess baggage revenues. This revenue now accounts for about 15 to 20% of total current revenues ( 2010).
In summary, the Ryanair business strategy is one of fanatical cost reduction and efficiency such they can offer a basic low cost reliable and dependable service which is in high demand.