RYANAIR Case Study
Business Strategy Prof. Sebastian Raisch
Mr. Jonathan Schad
MBA Session 2014
HEC University of Geneva
RYANAIR- The Low Fares Airline: Whither Now?
Student: Roi Lavi
May 5th 2014
1. Evaluation of the Competitive Situation in the Industry1:
1/5 The Bargaining Power of Low-Fare flight ticket buyer is LOW-MEDIUM:
The low cost airline company’s buyers are mostly individual passengers that book 99% of tickets by Internet, without agents or other third parties and thus there is no dominant buyer. Analyzing their bargaining power shows: Low Concentration of buyers; Medium dispersion of low budget airline companies- in Europe and the US there are dozens of competitors that provide similar service, without a dominant market leader; Supply (mainly jet fuel and airport’s fees) represents an important part of overall customer costs; NO Switching Cost between low cost companies, since there are no loyalty programs; Very Low risk that buyers will integrate backward into the airline business- due to very high entrance cost and high regulation. However, the Internet has increased the bargaining power of the consumer as it has made it easy to search for the cheapest available fare between dozens of airlines.
2/5 The Bargaining Power of Suppliers is HIGH:
Suppliers play an important role in the airline industry. We can identify the following as suppliers- Jet fuel prices are the greatest concern in input costs; Aircraft manufactures- two (strong) players in the market; Governments and regulators- control routes and indirectly determine destinations, safety requirements (high expanses can be high entrance barriers), taxes and passenger compensation policy; Airports can determine passenger taxes (high effect on low cost ticket price), flights hours and quality of service the passengers/staff receive (selecting terminals, cargo treatment and etc.); Pilots/staff work unions control salaries, work hours, professional training (costly), retirement conditions and etc.
Mr. Jonathan Schad
MBA Session 2014
HEC University of Geneva
RYANAIR- The Low Fares Airline: Whither Now?
Student: Roi Lavi
May 5th 2014
1. Evaluation of the Competitive Situation in the Industry1:
1/5 The Bargaining Power of Low-Fare flight ticket buyer is LOW-MEDIUM:
The low cost airline company’s buyers are mostly individual passengers that book 99% of tickets by Internet, without agents or other third parties and thus there is no dominant buyer. Analyzing their bargaining power shows: Low Concentration of buyers; Medium dispersion of low budget airline companies- in Europe and the US there are dozens of competitors that provide similar service, without a dominant market leader; Supply (mainly jet fuel and airport’s fees) represents an important part of overall customer costs; NO Switching Cost between low cost companies, since there are no loyalty programs; Very Low risk that buyers will integrate backward into the airline business- due to very high entrance cost and high regulation. However, the Internet has increased the bargaining power of the consumer as it has made it easy to search for the cheapest available fare between dozens of airlines.
2/5 The Bargaining Power of Suppliers is HIGH:
Suppliers play an important role in the airline industry. We can identify the following as suppliers- Jet fuel prices are the greatest concern in input costs; Aircraft manufactures- two (strong) players in the market; Governments and regulators- control routes and indirectly determine destinations, safety requirements (high expanses can be high entrance barriers), taxes and passenger compensation policy; Airports can determine passenger taxes (high effect on low cost ticket price), flights hours and quality of service the passengers/staff receive (selecting terminals, cargo treatment and etc.); Pilots/staff work unions control salaries, work hours, professional training (costly), retirement conditions and etc.