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Every company has a specific strategy it follows to thrive in the market. The strategy involves positioning the brand in a certain place within the marketplace. Strategic positioning refers to how a company sets itself apart from the competition and delivers a product to the customers. In this case study, we will examine the strategic position of Ryanair, a leading European airline.
To learn more read our explanation about strategic positioning.
Introduction to Ryanair
Ryanair Holdings plc is an Irish airline group and a parent company of Ryanair, Ryanair UK, Buzz, Lauda and Malta Air. It was founded in 1984 by Christopher Ryan, Liam Lonergan, owner of Irish travel agent Club Travel, and Irish businessman Tony Ryan , founder of aircraft leasing company Guinness Peat Aviation.
Ryanair started its operations in 1985 and began flying between Waterford and Gatwick Airport to compete with British Airways and Aer Lingus.
In 1986 the firm added the Dublin - Luton route.
In 1990 what it relaunched as 'Europe's first low fares airline' by implementing frequent flights, moving to a single aircraft fleet type and removing free drinks and expensive meals on board. Currently, Ryanair is Europe's largest airline group. It connects over 240 destinations in over 40 countries. Offering the lowest fares in Europe,
Ryanair brand positioning
Ryanair positions its brand as a low fare airline. The company does not try to place itself among airlines such as British Airways, Lufthansa or Air France which offer a relatively high-quality service at a higher price. Instead, Ryanair aims to satisfy people who are looking for the cheapest service possible, no matter the quality. Because Ryanair promotes its brand as:
The Low Fares Airline" (ryanair.com)
Many customers have built trust in the company and believe that its prices are the lowest. In doing so, they might not bother checking offers from other providers as they know that Ryanair will still be cheaper. This way Ryanair has created many loyal customers. However, such a brand position puts off more demanding customers who do not mind spending more money to get better service. Such customers are less likely to opt for Ryanair and instead, they go for other, full-service airlines.
Ryanair's business strategy
Every company has a specific strategy that places it in a certain position in the market.
According to Porter's generic strategy matrix, all markets operate in the same way. They can be segmented in two ways based on four factors: narrow or broad scope and cost or differentiation source of competitive advantage.
Based on these factors, companies can choose a suitable strategy to follow. As a result, are three main types of strategic positioning strategies: cost leadership, differentiation and focus strategy.
To revise this concept, take a look at our explanation on strategic positioning.
Ryanair. Fly cheaper. "(Ryanair.com)
Ryanair Holdings plc uses the focus strategy, particularly the cost focus strategy.
Companies using a cost focus strategy aim to provide the cheapest product or service within the industry.
As a result, Ryanair offers the cheapest flights in Europe. It addresses the market for people who look for a cheap, basic and efficient service. Ryanair's competitors include EasyJet, Aer Lingus Group, Vueling Airlines and Wizz Air.
Since Ryanair is cost-focused, it does not attempt to compete in all market segments. This means that it does not offer flights for customers with higher requirements, looking for high quality and luxury service. Instead, the airline targets those who have lower requirements and do not mind the lower quality of service for a cheaper price.
There is no business or first class on Ryanair, as the company does not attempt to satisfy customers who look for the best quality, luxury flights.
What is more, contrary to many other airlines, there are no free drinks on board. Food that customers can enjoy during the flight is very simple, such as heated sandwiches and ready meals. Ryanair flies point to point to mid-sized cities using secondary airports. Therefore, demanding customers are very unlikely to use Ryanair's service. Instead, they will go for airlines such as British Airways, Lufthansa or Air France, which are higher cost airlines that Ryanair does not compete with.
How does Ryanair make it so cheap?
Ryanair offers the cheapest fares across Europe. The company sells flights for as little as £ 7, sometimes even cheaper. Flights are not cheap to operate. Each flight is associated with expenses such as airport, aircraft and staff. Additionally, in the United Kingdom, airlines are charged a fee called Air Passenger Duty which is a tax applied to each passenger on each flight. For Ryanair, this comes in at £ 13 per passenger. In such a case, how does Ryanair make any profit?
The company charges additional costs for all additional services at a high price.
The price for an extra legroom seat costs at least £ 15. What is more, priority boarding is at least £6. Both of these services together cost at least £ 21 for the passenger, meanwhile, the airline does not incur additional costs.
This means a pure profit for Ryanair.
If you wanted to order some drinks or water to consume on board, you would face high prices.
The price for preordering Ryanair's small hot breakfast box is £ 10. The breakfast includes bacon, white pudding, sausage, hash browns, tomato, bread, orange juice, and a coffee which altogether do not cost £ 10.
Secondly, there are many additional fees.
If you do not check-in online, the airline will charge you £ 45 at the airport to do that for you. If you want to change your flight, you will have to pay a flight change fee of £ 35 per person. Also, if you want to book a flight which is in a day or two, the price will be several times higher than if you booked it in advance.
Thirdly, Ryanair flies to and from cheap secondary airports.
It flies to London Stansted which is almost 32 miles from the London city center. The airline also does not pay to use the airport's jet bridges that airports charge extra for.
Lastly, there is only one aircraft type at Ryanair which is B737. In doing so, the company needs to keep parts in stock for one type of aircraft only. Furthermore, the crew only need to be trained on one aircraft.
To conclude, Ryanair positions itself as a low-cost and non-full-service brand. This makes the brand stand out from other full-service airlines to customers who are looking for the cheapest, most basic flight options. While offering low fares, Ryanair makes a profit on all additional services such as seat allocation, priority boarding, and food and drinks on board. It also charges extra for check-in at the airport and any flight changes. Moreover, Ryanair sees all the possible options to cut costs. It flies from secondary airports, does not pay to use jetbridges and uses one type of aircraft only. This way the airline implements the cost focus strategy.
Ryanair Strategic Position - Key takeaways
- Ryanair Holdings plc is Europe's largest airline group connecting over 240 destinations in over 40 countries.
- It uses the focus strategy, particularly the cost focus strategy, meaning that it aims to provide the cheapest product or service within the industry.
- Ryanair competitors include EasyJet, Aer Lingus Group, Vueling Airlines and Wizz Air.
- The airline makes profits by charging customers for everything at a high price. It also charges many additional fees, flies to cheap secondary airports and operates one type of aircraft only.
Sources:
https://corporate.ryanair.com/
https://www.managementtoday.co.uk/brief-history-ryanair/food-for-thought/article/1449458
https://www.comparably.com/companies/ryanair/competitors
http://www.rapid-business-intelligence-success.com/ryanair-business-strategy.html
https://simpleflying.com/why-is-ryanair-so-cheap/
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Frequently Asked Questions about Ryanair Strategic Position
What competitive strategy does Ryanair use?
Ryanair is using a cost focus strategy which aims to provide the cheapest airline service within the industry.
What was Ryanair's positioning strategy?
Ryanair's positioning strategy is to promote itself as a low-fares airline. This puts the brand in favour of price-conscious customers. However, those who do not mind spending more for better service will be less likely to opt for Ryanair.
Is Ryanair's strategy sustainable?
The low-cost model of Ryanair reduces the amount of carbon dioxide released during flights, resulting in sustainability.
What is Ryanair's business model?
Ryanair's business model is a low-cost and non-full-service model. The airline offers the cheapest price with minimal services for customers looking for basic flight options.
What are the major contributors to Ryanair's profitability?
Despite the low fares, Ryanair makes a profit by charging additional fares for extra services such as extra legroom or priority boarding. Those who wish to order food or beverages onboard also face relatively high prices.
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