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Ryanair Swot Analysis

Autor:   •  October 19, 2017  •  1,116 Words (5 Pages)  •  598 Views

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Porter’s 5 forces framework

Threat of new entrants: Low

- Large barriers to entry exist for airline industry associated with the large fixed cost for operations and start-up, economies of scale, access to distribution channels and many more.

- Restricted airport slots availability also makes it difficult for new entrants.

Threat of Substitutes: Low to Medium

- Substitutes to air travel are primarily land and water transportation such as car, bus, railways and boats. However, air travel continues to dominate the market mainly due to its much faster speed of travel.

- In Europe, road transport and high-speed rail put further competitive pressure on airlines.

- Threat of substitute will then depend on the distance, speed of travel and choice of travel.

Bargaining power of Suppliers: High

- Main suppliers are the aircraft manufacturers.

- Top 2 manufacturers are Boeing and Airbus.

- Bargaining power of suppliers is high.

- Very few suppliers (aircraft manufacturers) due to the amount of money and expertise required to make an aircraft.

- High switching cost to another supplier as it required retraining of pilots leading to high operational cost.

Bargaining power of Buyers: Low

- Buyers have a wide array of choices in terms of the aircraft carrier. However, buyers usually look for efficiency and value for money and competitive pricing.

- Low switching cost.

Competitive rivalry: High

- Availability of other low cost carrier such as Easyjet, Aer Lingus.

- Easy to imitate the low cost model.

SWOT Analysis

SWOT provides a general summary of the Strengths and Weaknesses explored in an analysis of strategic capabilities, and the Opportunities and Threats explored in an analysis of the environment.

Strength

- Ability to offer the lowest base cost in the European airline industry by :

- Operating a young, homogeneous, medium-sized fleet

- Charging ancillary fees to raise extra revenues

- Paying less for labour than other airlines

- Flying in and out of smaller regional airports avoiding congested main airports to reduce airport charges

Weakness

- ‘Obsessive’ focus on bottom line dented its public image.

- Faced criticism for some of its ancillary fees, customer service and employee relations.

- Touted as a no frills airline yet has extra charges on many unavoidable services allegedly made Ryanair more expensive than other European low cost carriers.

- Ryanair refuses to recognise trade unions and negotiates with Employee Representatives Committees (ERCs) instead.

Opportunities

- Advanced Technology able to increase work productivity and convenience for the consumer

- Minimise pollution emission used by environmental-friendly technology

- Expanding the market, operating beyond the current short-haul, point to point flights within Europe.

- Market share gains and market growth→ European aviation sector remains a growth industry in the medium to long term.

Threats

- Global recession lead to unemployment rate and decrease in consumer buying power

- EU established rule and regulation that increase restrictions in the airline industry

- Fuel price and currency movements

- Jet fuel prices subjected to wide fluctuations.

- Fuel cost subjected to exchange rate risks as international prices for jet fuel are denominated in US Dollars.

- Risk associated with the Euro

- Ryanair reporting currency is the Euro. With its extensive route system within Eurozone countries, Ryanair will be adversely affected by a break-up of the Euro or if a number of countries were forced to leave the Eurozone.

- Air travel taxes: Due to price elasticity, an increase in air travel taxes reduces demand.

- Loss of management focus.

- Other uncontrollable factors such as economic shocks and natural disasters.

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