Analysis of Strategic Capabilities
Ryanair for 20 years has moved itself into a cost-leadership and focused carrier strategy (Akan et al, 2006), which has provided it’s distinguish competitive advantage (Barrett, 2004) and in the following section will contain some of these areas. Firstly, the aspects of Ryanair fundamental will be covered using implementation of strategic value through the value chain analysis (Walters & Lancaster, 2000) and its operational cost comparison will be covered in benchmarking Ryanair against some of its main rival (Fry et al, 2005).
Value Chain Analysis
The value chain analysis (Appendix C) shows that the organization’s core competencies remains in its operating strategy to keep cost down at the basic level, while able provide the service to the customer. Ryanair main mission would be to transport passengers safely from A to B at the lowest cost possible. This is achieved through frequencies of flight with short turnaround at the low utilized secondary airports and travelling from point-to-point, which is contrast to traditional service of super hubs in the hub-and-spoke systems; therefore enable Ryanair to make use of its aircraft to the maximum, which would lower the cost per mileage per passenger (per year). High human capital productivity is another source of core competency that the company possesses, while being able to service up to 10,000 customers per employee.
Another distinctive capabilities that Ryanair possess is the used of Information System, “Flightspeed” remain at the core Ryanair operations. Customers are able to purchase flight ticket via “Skylight” online through the company website and also the ability to check-in online before arriving to the airport. Airfares are dynamically calculated using the demand and supply mechanism, therefore enable Ryanair to retain a profitable margin on high demand flights. Also the capabilities continue in the form of ancillary through the same system, including hotel reservation, travel booking, car rental, and flight insurance via extension to the company’s core product.
EasyJet is Ryanair closest rival the budget airline sector. In 2008, EasyJet revenue has grew by 31%, while profit before tax declined by 36% (EasyJet, 2008). While Ryanair whom revenue only increased by 21% and profit before tax declined by only 16% (Ryanair, 2008a) during this great recession (Grossberg, 2009). EasyJet and Ryanair has scheduled passenger of 44.6 million and 57.7 million, respectively. Both these companies account for 68% of European low-cost air transportation market (ELFAA, 2008).
Among the mostly considered cost factor that should be taken upon is the productivity, Ryanair and EasyJet are among those top elite in the European aviation landscape, showing 10,050 and 6,293 passengers per staff member (Barrett, 2004). This rank is achieved through well carefully planned strategy of maintaining operational cost, make cost-leadership a core competency to the business.
Main Strengths and Weaknesses
Ryanair main competitive strength is in the ability to control its cost, through cost efficient operating strategy. The business model that is cultivated from Southwest Airline in understanding how to develop a low cost airline (Calder, 2002). The strength has been gain through flying short-haul flights (Ryanair, 2004) of robust network routes of low landing charge secondary airports (Barrett, 2004), while eliminating the need to provide unnecessary frills (Strategic Direction, 2006a). Fast turnaround times at the airport are the key element to make maximum usage of their single fleet operations of Boeing 737-800 fuel efficient airplanes (Standard & Poor’s, 2009). While operating in a single economy class structure enable Ryanair to simplify its layout with assistant of unarranged seating, therefore making passenger board the plane at much greater speed. The down side is that their competitors can imitated these competencies, rivalry like EasyJet had made proof this through its benchmarking tactics (Mackenzie-Williams, 2005).
The company only has made innovations in how its charge customer more for the less offering possible, while the true product innovation have been limited under the cost-leadership model. The necessity of Ryanair being competitive in efficient cost management shows absence of sustainability through rivalry imitation capabilities, therefore making it a long-term weakness.
Ryanair’s alternative strength is in their highly visit website, which is unforeseen intention of lowering ticket issuing transactional cost. Therefore, through the use of information system to enhance customer relationship and intelligence data minding created a competitive strength for the business. Thus, making Ryanair.com a highly visit online travel market place and enabling it to generate ancillary revenues (McIvor et al, 2003).
(For SWOT analysis summary, see appendix D).