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Case Study: Ryanair Business Strategy Analysis
Ryanair is an Irish low cost airline headquartered in Dublin founded in 1985. It operates 181 aircrafts
over 729 routes across Europe and North Africa from 31 bases. Ryanair has seen large success over
the recent years due to its low-cost business model and has become the world’s largest airline in
terms of international passenger numbers. Taking Porter’s generic business strategies into
consideration, Ryanair operates a cost-leadership strategy to drive itself into achieving its mission of
being the leading European low-cost carrier (LCC). Throughout this essay the business strategy of
Ryanair will be analysed and the sustainability of their model evaluated.
Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger
airline through continued improvements and expanded offerings of its low-fares service. Considering
their objectives and mission, Ryanair’s decision on their cost-leadership strategy was based on a few
main factors which are discussed below.
A major influence was the deregulation of the airline industry in 1978 which removed government
intervention within the European continent. Under the new rules, routes and fare decisions were
made by individual airlines which meant that they could compete on other factors besides food,
cabin crew and frequency. As a result of deregulation, a large number of new airline start-ups
emerged within the EU and competition among airlines increased dramatically resulting in downward
price pressures. Ryanair was established to take full advantage of these market conditions. By
offering low prices, Ryanair entered a huge and virtually unlimited market.
Having seen the major success of the low cost carrier Southwest in the United States, Ryanair
decided to follow in their footsteps by establishing a LCC for the European continent that targeted
fare conscious leisure travelers and regular low cost business travelers. By doing this Ryanair became
the first low-fare airline in Europe. However, they took the Southwest model further by offering no
drinks and snacks at all and abolishing the frequent flyer program which Southwest up to this day
offers its customers.
The evaluation of Porters five forces influenced Ryanair’s choice of a cost-leadership strategy, as the
threat presented by new entrants and the threat of substitutes could hinder their success. The threat
of new entrants is high within the aviation industry which meant that low fares would help drive
away any further competition. The threat of substitutes to Ryanair had to also be carefully examined.
Their primary market, Europe, had the availability of high speed trains and car holidays. For Ryanair
to be successful, prices had to be low to attract the public, and resist strong competition from
substitutes like Eurostar.
As Europe’s largest low fare airline, Ryanair’s competitive advantage remains in their ability to
continue as cost leaders; providing the cheapest fares to its customers. This dictates that the
company must minimize its own costs to ensure that they are able to offer customers the service at a
price below their direct competitors. This leads us to consider some key functional strategies which
directly help Ryanair towards their ultimate goal to be Europe’s leading low fares airline.
The marketing strategy is perhaps the most obvious and significant functional strategy of Ryanair.
Low fares are designed to stimulate demand, attracting fare-conscious travelers, those who may
have used alternative forms of transportation or even those who may have not traveled at all.
Penetration pricing as it is called helps gain market share and simply, more customers equals more
revenue. Tickets are almost solely sold on their website ‘www.ryanair.com’ which very importantly
keeps sales costs to a minimum since very few phone operators are employed and computers are
able to cheaply handle all functions of sales. With ever increasing accessibility of the internet globally
anybody with internet access can buy airline tickets from Ryanair, so distribution practically takes
care of itself through this medium. Ryan Air relies on low cost promotions and in recent times has
concentrated on their ‘One million seats at one pound’ which is usually advertised through their
internet site, national press and bulletin boards. It is the simplicity of this promotion which helps
keep costs low since expensive advertising agencies can be entirely avoided and advertising can be
dealt with in house.
Ryanair’s operations strategy determines how the airline will deploy its resources and the policies it
will operate by. To keep costs low they operate a ‘no frills’ service onboard aircraft. This means the
fare only includes the flight. There are however a number of other measures directly related to a no
