Ryan Air - Environmental Analysis, Discussion of
Core Competencies and Strategy proposal

by: Judith Hoffmann

Creating a sustainable marketing strategy for Ryanair means to organise its future. To plan the future one has to know the present in a broader perspective. This is the starting point of an environmental analysis, which identifies the internal and external parameters of the particular environment an organisation is operating in (Drohan, 1997) and translates it into useful plans and decisions (Albright, 2004). The environmental analysis gives Ryanair the opportunity to identify the main factors affecting the industry it is operating in and to find its opportunities and capabilities. Above all it is important to answer the question “What business are we in?” by defining the industry the organisation is competing in since this gives the opportunity to identify competitive advantages relatively to others (Kay, 1993). Ryanair is positioned as being in the European low-budget airline industry. This creates a competitor group consisting of other European no-frills airlines and low-budget sub brands of traditional airlines but excludes full-service airlines.

Macro-Environmental Analysis

The macro-environment describes all factors which influence the company as a whole but are out of their direct control including wider social, political and economic factors (Hooley, Saunders, Piercy, 2004). The analysis of those factors is therefore often known as Pest analysis (Johnson, Scholes, 1999).

Since the airline industry is very much influenced by changes taking place in the environment and has undergone rapid and dramatic changes during the last decades (Kaynak, Erdener; Kucukemiroglu, Orsay, 1993), this analysis is especially important for Ryanair.

Ryanair as the largest and most successful of Europe’s low fare airlines targets in the first instance leisure travellers and the visiting friends and relatives segment (Gillen, Lall, 2004) of the market. Describing itself as “lowest cost scheduled airline” means basing the airline’s financial strategy on the average number of seats sold per flight instead of on the revenue made per sold seat (Lawton, 1999). Therefore every environmental issue which either affects basic costs of flights or affects the likeability of customers to book a flight is important for Ryanair.

The recent past has brought many events which affected flight security in the eyes of the customers. 11th of September and “Sars” have shown that global dangers heavily affect global air-travel. As an European airline and following an effective promotional strategy Ryanair sales grew irrespective of this danger. Nevertheless the unstable political global situation is a major factor of insecurity in the airline business. Ryanair, still being a main carrier between UK and Ireland and heavily using London Stansted is especially affected by the fact that more terror attacks are predicted for Great Britain (Der Spiegel, 2004).

“Sars” has shown that an epidemic can have a heavy influence on the airline business (cnn.com, 2003). The World Health Organisation (WHO) has already forecast a global epidemic within the next years. This will certainly have a larger influence on Ryanair’s business, relying as it does on a high number of sold seats among leisure travellers than do traditional airlines whose clients merely fly for business reasons and which are operating in term of yield management. Similar events happening within Europe would nevertheless influence its business heavily while the growing fear against air travelling is already a problem to face. Low price, value for money and efficiency are core values of Ryanair. Those core values should not change regardless of environmental turbulence Collins and Porras (1996). This means that cost reduction and other profit sources than travel fares are important factors in Ryanair’s strategies since they cannot compensate its expenditures by increasing travel fares.

For the low cost strategy prices of fuel, taxes, and government regulations are especially important. The airline deregulation not only helped Ryanair but also increased competition and air traffic. This has lead to increased regulations by the EU government in terms of safety and environmental rules. This again increases operating costs within the EU. When Ryanair wants to maintain its low fares it has either the possibility to cut costs elsewhere in order to compensate increasing costs for safety and environmental taxes or it has to finance those costs by increasing ancillary services revenue.

Efficiency and low prices are due not the least to the company’s lower labour costs. Ryanair controls these costs through a performance related pay structure. This system is of course also dependent on EU social/employment legislation which is always subject to change. A major problem is the uncertainty of the oil price, which is again tied to political developments. Since the political situation in most major oil producing countries will stay unstable for the foreseeable future, the oil prize will remain a major problem for airlines. The fuel cost difficulty is exacerbated by unpredictable currency exchange rate fluctuations since aircraft fuel prizes are denominated in US dollars. Nevertheless the weak dollar has compared to sterling has had a positive impact for Ryanair.

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