Strategic Analysis of Ryanair and Its Business Model
Introduction
Business organizations exist in a complex environment, which forces them to devote increasing attention to an array of indispensable aspects. This matter is particularly important in the 21st century, as globalization leads to a growth in competition and complexity. Practical analysis of successful company strategies allows for a clearer understanding of the internal processes that define the nature of business activities. Ryanair serves as a practical example of an organization that managed to expand its operation through appropriate strategies and decisions, becoming a worldwide player in the affordable air travel market. The purpose of this study is to examine the case of Ryanair in the context of six essential aspects of business management, analyzing its leadership, resources, competition, innovativeness, structure, and adaptation capability.
Resource Management
In the 21st century, companies operating on the worldwide levels have access to a considerable amount of resources due to new trade opportunities. Nevertheless, most resources remain finite, whereas competition grows along with global opportunities. Therefore, their effective management remains the cornerstone of successful business operations. In the case of Ryanair, resource management is a matter of high priority, as it contributes to the low-fare capability of the airline. The organization uses common, relatively cheap airplanes to avoid unnecessary competition in this respect (O’Higgins, 2005). However, while technical aspects play a role of paramount importance for an airline, the planes are flown by people, which emphasizes the importance of human resources. Harvey and Turnbull (2020) state that human resource management is recognized as an essential profit-generating mechanism. Ryanair acknowledges its importance by encouraging extra work on behalf of its employees, allowing them to increase their income despite the company’s low-expense policy (O’Higgins, 2005). Simultaneously, all workload norms and regulations are respected to avoid fatigue and professional burnout, which is especially critical for pilots. Overall, Ryanair effectively utilizes its resources, striking the right balance between costs and profits.
Strategic Pricing
Ryanair has aimed at conquering the low-fare airline market since the moment of its foundation. While pricing strategy is an essential component of all business operations, it has gained special significance in the discussed case. The objective of Ryanair is to offer its customers maximum value through unprecedentedly low fares. However, to enable minimal prices, the company had to make several strategic choices. First of all, Ryanair relies on fleet commonality as the primary source of cost operation reduction (O’Higgins, 2005). All of its aircraft are Boeing 737s, the most commonly used airplane in the world, which facilitates maintenance and repair work through cheap, interchangeable spare parts. Secondly, the company carefully regulates its salary expenditures, keeping base payments to a reasonable minimum but allowing employees to earn more through a bonus system (O’Higgins, 2005). While reducing the expenses, Ryanair maintains profits through additional services, excluding most of them from standard packages. Customers who pay considerable sums for extra luggage and offline check-ins at the airport ensure stable revenues, while passengers who do not need these services can travel cheaply because of Ryanair’s effective pricing strategy.
Customer Value and Critical Success Factors
As mentioned earlier, Ryanair managed to earn the respect and loyalty of its customers. This position is achieved by critical success factors, suggesting that the company should correctly evaluate the needs of its target audience to form a competitive advantage in this area. In other words, it is crucial to determine what customers expect in a particular market segment and provide a high-value product that would effectively meet their requirements. Ryanair focused on the low-cost travel segment to a full extent. While competitors attempted to expand their operations and encompass other segments, Ryanair opted for a qualitative approach in this respect (O’Higgins, 2005). As far as critical success factors are concerned, organizations often make the mistake of basing their policies on internal perception instead of in-depth market research. Ryanair managed to avoid this situation by creating their customer value policy around actual customer feedback. Rodríguez-García et al. (2020) mention that the company still received complaints from passengers dissatisfied by poor service. However, Ryanair’s outstanding performance proves that it managed to draw adequate conclusions and generate superior value, outweighing possible service-related disadvantages.
Competition Management
While Ryanair is one of the pioneers of low-fare airlines, this market segment has seen increasing competition throughout the 21st century. The organization is regularly compared to EasyJet, a British low-cost airline, in the context of their financial results, and O’Higgins (2005) states that Ryanair usually performs better than its counterpart does. As for competition management, the company central to this study relies on travelers as its target audience. Accordingly, Ryanair opts for cheaper locations in terms of airport expenditures. At the same time, EasyJet, along with other rivals, devote attention to business travelers, as well, actively using centrally-located airport hubs, such as Schiphol in Amsterdam. Such a model entails higher operation costs, for which the competitors hope to compensate by increased revenues from a high purchasing power customer group. Nevertheless, Ryanair remained loyal to its original vision, generating more considerable revenues for a lower cost than its rivals (O’Higgins, 2005). Rodríguez-García et al. (2020) note that such an approach helped the company achieve admiration from both customers and competitors. Therefore, Ryanair executes competition management by following its vision instead of dispersing the resources.
External Relations
While internal processes within a particular company are important, all organizations exist in a complex business environment. Ryanair experiences increasing competition, and modern airlines often tend to form alliances to accumulate their competitive advantages and ensure sustained growth. The organization uses such models to a moderate extent, focusing on its internal operations instead. Nevertheless, it uses code-sharing and other means of collaboration without active participation in alliances. As described in the previous sections, Ryanair remained loyal to its original business model, allowing competitors to explore adjacent market segments. Therefore, it is possible to state that Ryanair emphasizes its customers, as far as external relations are concerned. Rodríguez-García et al. (2020) write that superior customer value is often achieved at the expense of internal relations. There have been union strikes and complaints from the company’s employees, as Ryanair’s employment model does not guarantee a high average income level. However, the majority of customers disregard possible internal issues, and their perceived value primarily considers the external aspect. Accordingly, Ryanair’s external relation strategy can be deemed successful, as it retains its customer base despite perturbations.
Innovation and Adaptation to Change
The 21st century has introduced an increased level of progress as technology develops at a rapid pace. Practical observations show that successful modern companies manage to maintain a similar development rate in terms of the use of technological advancements. Rodríguez-García et al. (2020) state that Ryanair exhibits a strong spirit of innovativeness. The company was among the pioneers of online booking, even introducing it before large international airlines. At the same time, Ryanair’s website remains informative and user-friendly, thus creating a positive image with the customers. Along with improving passenger experience through technology, the company manages to increase profits. It was among the first airlines, which introduce higher fees for airport check-in, encouraging customers to use the website. As a result, Ryanair was able to reduce the expenses on check-in counters and personnel. Accordingly, the company’s management has created an innovative strategy, which allowed Ryanair to increase profits while making the services convenient for customers. The very nature of the company reflects its high adaptation possibility, as its affordable business model has become particularly relevant in recent years, as customers’ purchasing power has dropped following several economic crises.
Conclusion
In conclusion, Ryanair serves as an excellent example of a company, which managed to ensure sustained growth through correct strategic decisions. The organization’s approach to resource management, strategic pricing, and innovation has ensured its competitive advantage in the segment of low-fare airlines. At the same time, Ryanair manages to oppose growing competition by adhering to its vision without being distracted by rivals’ initiatives. A low-cost company cannot provide excellent customer service and high wages, but possible conflicts are mitigated by the superior value. Overall, Ryanair’s management has created a viable business model, which has proved successful across several decades, and the company continues its growth in the 2020s.
References
Harvey, G., & Turnbull, P. (2020). Ricardo flies Ryanair: Strategic human resource management and competitive advantage in a Single European Aviation Market. Human Resource Management Journal. Web.
O’Higgins, E. R. E. (2005). Case study: Ryanair: The low-fares airline – future directions? In Johnson, G., Whittington, R., Scholes, K. Angwin, D., Regner, P. (2014). Exploring strategy: Text & cases. (10th ed) pp. 612-624. Pearson.
Rodríguez-García, M., Oreto-Blat, M., & Palacios-Marqués, D. (2020). Challenges in the business model of low-cost airlines: Ryanair case study. International Journal of Enterprise Information Systems, 16(3). Web.