Case Study: Ryanair Essay

1) Whats your judgment of Ryanairs erect dodging?In 1986, the Ryan siblings ar getting ready to lead up competing against British Airways and Aer Lingus on the Dublin- cracking of the United Kingdom r verbotene. This route was unmatchable of the most traveled air routes inEurope, which meant that Ryanair was fetching a big risk by deciding to enter this market. At the chip the air passage passenger market was a complex match little, since the governments would super control it. Additionally, the skyway industry has high fixed be, which was almostthing that Ryanair indispensable to take into ac rate if the comp whatever(prenominal) valued to face its already go through competitors. dismantle so the Ryan br a nonher(prenominal)s knew that it was important to fly this route, and so they trenchant to follow an aggressive scheme portion out cheaper Dublin-London tickets (PRICE). The problem with this strategy was that they did not highly differentiate from their c ompetitors, and as a answer a outlay war took place. By 1989 hurts were as low as 70 pounds, and even though Ryanair fited flying opposite routes, by 1991 it seemed that bankruptcy was around the command for the airline.The main problem that led Ryanair to this worthless performance was that the companys strategy directioned on competing on operating(a) efficiency, without altering its constitute structure against figured and somehow protected companies by some of their stakeholders.The strategy followed by the airline could barely now enhance the war-ridden advantage Ryanair had (operational efficiency), because at that moment the airline did not claim a inviolable amount of customers andadditionally it did not realize that its competitors could easily reduce their equipment casualty to the fringy cost, which they were already able to cover. The strategy was not sustainable by any means. Another problem that arise thank to the poor strategy chosen by the company, wa s that it did not gave the client a sealed level of added value that would be hypnotic for him/her. Therefore Ryanair lacked a clear competitive positioning, whichenabled a quick retaliation from BA and AL. And as a result, if Ryanair wanted to save in billet, it had to completely change its strategy and revise is goals by figuring out a way in which the sensed added value they could give to the customers was good becoming to, later on, capture value from them.2) How do you expect Aer Lingus and British Airways to respond? why? twain Aer Lingus and British Airways were already well-established in the Dublin-London route and this route provided a high-volume of personal credit line and return on capital, especially for Aer Lingus. still thenRyanair appe ard and, as we know, the entry of a new competitor represents an entry price below the markets price. So now what? What should these ii companies do? Aer Lingus and British Airways micturate two options either they honour th eir current level of prices, or opening a price war. In grade to decide which way to go, they have to cipher how dearly-won it would be for them to vindicate against Ryanairs launch rather than prevail it. Both companies have a signifi canfult disadvantage, they have a cost structure really difficult to cut (staff + accommodation, ground+ change + handling and catering represents more than 45% of the costs per passenger, approximately 90 and they make to add landing fees and oil). As if this wasnt enough, it is also very difficult to start a strategy based in differentiation because Ryanair, at that time, was trying to fissure a return of a resembling quality to these companies (first-rate customer service.) Both Aer Lingus and British Airways ar supported and hence policies are also controlled by respective governments. crack low cost airfare requires whole general change which is not practically executable just for the reason of retaliating Ryanair. However, these t wo companies are competitors with deep pockets and theres a possibility of them driving Ryanair out of business by reducing price to their marginal cost, even if that marginal cost would be higher than marginal benefits. So, considering all of this increase the fact that Ryanair is a very emerging to fully fledged airline service and the very volatile revenues of Airline industry, we come back that Aer Lingus and British Airways willing not strike back on Ryanairs price strategy.3) How costly would it be for Aer Lingus and British Airways to retaliate against Ryanairs launch strategy rather than accommodate it?Both for British Airways and Aer Lingus, retaliating against Ryanairs launch strategy would end in a price war as Ryanairs only if focus is cost leadership. The costs of entering thisprice war would be higher than potential advantages. British Airways calls itself The innovations favorite airline a clear differentiation statement and has a successful flotation and priv atization as one of its mail goals. Entering a price war would show its abilities to fight against competitors, barely price pressures can cut network margins to the bone, especially as the airline capability have to face not only Ryanair but more low-cost competitors in the future. Restoring its high fares might result in operating losses. After Colin Marshall fall in the company, British Airways focused on pleasurable full-fare business customers. If it were to retaliate against Ryanair, it might move back those business class customers and its reputation for safe, good flights and an outstanding customer service.International journeys accounted for two thirds of British Airways interchange seats and 90% of its revenue. As Ryanair is commission on short-haul, intra-Europe flights, British Airways focus should be on overseas flights which typically receive more coin. British Airways has the advantage of an all-encompassing network and its location at London Heathrow Air port which distinguishes it from Ryanair as a low-cost operator. Exhibit 4 in the theme shows that British Airways had 140.9 cost per passenger. So if it were to retaliate against Ryanair, it would have to cut costs by almost 30% which would result in a harsh decline in perceived value by its high-end customers. If the airline accommodates Ryanairs launch strategy, it can focus on its differentiation strategy and experience in international flights which makes Ryanair a less dangerous competitor as tail end groups are different. The costs of retaliation are similar for Aer Lingus. If it enters a price war, it will probably lose more money because it cannot even operate profitably with the prices supercharged above Ryanair levels.Furthermore, it would need high capital expenditures to modernize its fleet. Although it might lose some passengers to Ryanair, the disadvantages of retaliation would still exceed affirmable gains. The airlines goal is more often than not to promote nat ional interests and be safe, efficient, tested and predictable. As Aer Lingus can be seen as a public good, it can count on extensive government support. Furthermore, it even has the chance to break even with its versatile portfolio that includes maintenance services and engineer trainings to other services. In order to keep its good reputation, accommodating Ryanairs launch strategy would be the best thing to do despite potential lostcustomers. Aer Lingus would, just like British Airways, be confronted with a tough price war which it can barely win because of its inefficient cost structures and its differentiation strategy appealing to its incorruptible customers.