Strategy management Essay Example | Topics and Well Written Essays - 1500 words

Strategy management - Essay Example RyanAir is recognized for its rapid expansion due to deregulation of the aviation industry in 1997 in Europe and the notable success of its model, which is the low-cost business model (Palepu, 2007, p. 350). It was established in 1985, and it is the most successful and oldest low-cost airline in Europe. RyanAir was the first European budget airline having modeled itself after the success of Southwest Airlines, which is a low cost carrier in the US (Johnson, Whittington and Scholes, 2011, p. 47). The Porter’s five Forces at RyanAir Competitive Rivalry According to Johnson, Whittington and Scholes (2011, p. 89), due to deregulation, an increase in rivalry and competition on most routes create an overcapacity of various airlines from different competitors. This ultimately leads to an increase of the buyers’ power. As a result, the airlines ultimately try to counter increasing rivalry by forming various acquisitions and mergers as well as periodical and different strategic alliances. A number of airlines maintain a database of frequent flyer program so that they can increase the number of passengers. Airlines also offer discounts and unique offers to frequent flyers to increase customer loyalty. The recession and the US economic downturn combined with overcapacity among different competitors on the North Atlantic routes have forced carriers to concentrate their rivalry on the European countries. This is a significant threat to RyanAir. However, RyanAir has taken advantage over this challenge and has continued to offer low cost flights through an ambitious strategy aimed at reducing the fares further down. This inevitably gives the airline a competitive edge above its competitors (Albers, S., Auerbach, S., Baum, H., and Delfmann, 2005, p. 166). Threat of Entry of New Firms According to Boesch (2007, p. 124), a regulation was passed in the European countries that removed barriers for different and new competitors in the Airline industry. This led to a f ierce completion between newly based competitive airways and existing European based airlines. Landing slots in many European countries were used or reserved by national carriers and this led to scarcity of landing slots to new airlines. Despite the looming threat, the RyanAir has continued to attract more passengers and is opening up more routes to diversify its market share. This is at a time when other competitors are closing shop on some routes. Supplier Power There has always been, a high supplier power in the airline industry since there are only two suppliers of aircrafts, these are Airbus and Boeing. This has led to the high influence of the suppliers playing the dominant role in the industry. The cost of switching from one supplier to another has led to RyanAir retaining pilots and mechanics for usage of other supplier’s products. Fuel price has a direct proportion to the cost of oil and therefore the cost of fuel for RyanAir has been varying because of oil cost fluc tuation. Airport charges are also high therefore, being a significant concern for RyanAir (Johnson, Whittington and Scholes, 2011, p. 71). Buyer Power The buyers can be in charge of the acquiring authority and have additional choices to choose better services from the various airlines. RyanAir is fully aware of this major factor. It is the main reason it has come up with numerous promotions and offers for its customers in order to stay afloat and retain its renowned reputation in the airline in