Ryanair Case

Main problem: Müşterilerin şirket hakkında olumsuz düşünceleri

One of the most important things in managing an airway company is to have all its operational features(such as reliability, clarity of fees, availability of fares, on-board comfort, service, etc.) under control, which Ryanair cannot handle in various ways, resulting in negative thoughts of customers about this company.

Related problems:

Ryanair accumulates ‘hidden’ taxes and other fees, restricted customer services, and deceiving advertisements. Ryanair imposes charges for anything from checking bags into the hold, up to £40, to changing the name on your ticket, for £110.

Assuring quality service, which the customers refer as ‘the biggest headaches’. Standing seats, paid toilets, inflight entertainment options and more recently flying with only one pilot, are some of the things that are not seen as a ‘problem’, according to boss, Michael O’Leary.

The company is faced with different unsolved issues because of lack of strategic decision making in several areas of human resources particularly in relation to trade union policies. For example, some employees are not guaranteed the same workers’ right with others, and Ryanair defends themselves by saying that their workers are employed on Irish air territory and under Irish contracts, and have no interest in negotiating with any trade union.

Strategic Options

4.1 Growth/Share Matrix (BCG Matrix)

Market ShareMARKETGROWTH

Stars
-Ancillary products like in flightshopping, non-flight scheduled services etc. offers a very high margin

Question Marks
-Ryanair’s investment in Aer Lingus stock could loose money for it, as Aer Lingus has all the problems of a legacy carrier with very less benefits of a large legacy carrier (e.g. economics of scale)

Cash Cows
-Lucrative short hop routes (e.g. Dublin-London)

Dogs
-At present it seems that Ryanair does not have any dogs

Cash cows
No doubt, the scheduled service is still Ryanair’s cash cows in future years as it has obtained the highest market share 28.67% in LFA market; and the LFA s stood for 19.5% in 2007 of the total air transport supply according to seats, and it is growing rapidly during the recession.

Stars
Ancillary service brought huge revenues to Ryanair in the recent years, accounting for 20.33% in 2010. As an important step to realize free fare flight, ancillary service is reasonable to develop. The recent situation of Ryanair’s ancillary service is high market share, as the additional result of scheduled service’s high market share. Moreover it faces much more fierce competition, because firstly, the promotion activity and new service items are easy to copy by rivals; secondly, customer’s commitment and switching cost is very low; thirdly, as discussed before, ancillary service promotion may meet calcification. Further more, as analyzed before, ancillary service is the major approach of differentiation strategy, certainly it will increase the costs of operation, therefore the investment risk is relatively high.

U.K. market service is another star to Ryanair. U.K. market has high market growth rate, and the company’s growth has been largely dependent on flights to or from the U.K. such flights represented 28.6% of total flights in the 2009 fiscal year. [10] However, According to the annual report in 2009, Ryanair has decided to freeze its development in the U.K. market and curtail certain U.K. operations. This decision may expose Ryanair to risk in operation and finance, moreover may affect U.K. labor relations.

Question marks
Aer Lingus, acquisition of which was an important step to Ryanair as it can improve the long route service ability, open the route to USA‘s even Asian Market, increase its advantages in EU market, now become a sick child to Ryanair. During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus. The Company increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total aggregate cost of € 407.2 million. On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus, but the Company was unable to secure the shareholders’ support and, accordingly, on January 28, 2009, it withdrew its new offer for Aer Lingus. [10]

4.2 Ansoff Matrix

Market Penetration & Consolidation

This should be (and is) one of the key strategic directions for Ryanair, that is consolidating existing routes and increasing market share on existing routes

Product Development

Ryanair’s expansion into Ancillary products is a good strategic fit

Market Development

Developing new routes, flying to new destinations can be profitable strategy for Ryanair -Expansion outside of Europe might not be a strategic fit for Ryanair

Diversification

Diversification into long haul flightsor flying more than point-to-point flights would be a bad strategic choice for Ryanair

Ansoff Matrix

Ryanair seems to successfully attract and penetrate the markets by offering its products in a most affordable and reasoning price. The product here refers to its services offered in flights and the most significant of them offering a low-fare scheme. Since, Ryanair became the leading carrier across Europe, it forces itself to define further its development and its expansion made them known internationally, required divergence of employees and culture. Ryanair with its operations in various locations and destinations have diversified people and management in which they operate and the success of making them unite and one is a great factor to further penetrate and develop their products to existing and new markets.

5. Strategic Choice & Implementation— Market Development

there are opportunities for continued growth by Initiating additional routes from the U.K. or Ireland to other locations in continental Europe that are currently served by higher cost, higher-fare carriers, increasing the frequency of service on its existing routes, starting new domestic routes within EU countries, connecting airports within its existing route network and establishing more new bases in continental Europe.

6. Results & Recommendations

The company should increase their market by identifying new routes in Europe and expand the other market to other areas in Europe well and as well as outside the continents rather remaining in niche market; Ryanair can increase its revenue. And also it can build the customer loyalty and train their employees to maintain the level of customer satisfaction.The development of an appropriate advertising and promotional campaign can be conducted using marketing talent or through third-party alternatives. The company must understand elements of consumer behaviour theories prior to developing a viable, aggressive promotional campaign under the assistance of knowledgeable professionals. Questionnaires or consumer surveys, along with a strategic analysis of sales revenues per region, will help to choose the most profitable target market.