With the increased competition in the airline industry, especially in the low fare segment, Ryanair, the initiator if this segment in Europe, is faced with various pressures, coming from its competitors, external environment or industry trends. While the company has the resources to manage the challenges of the 21st century, which tops with the necessity to become a global brand, it also requires a sound strategy. This report starts with analysing the internal and external environment of Ryanair, in order to identify the strategic directions that it can pursue in its globalization approach and it further proposes a global marketing strategy that would enhance the company’s global and domestic competitiveness. With a focus on Egypt, as the targeted country for Ryanair’s globalization objectives, the report also presents an overview of this market’s environment. In analysing Ryanair’s internal and external environment, frameworks such as SWOT analysis, TOWS matrix, resource and competence analysis or Porter’s Five Forces, PESTLE and Industry trends are utilized, which further lead to generating global marketing strategy.
Key words: airline industry, low fare, Ryanair, global, internal and external environment, global marketing strategy, Egypt.
Ryanair Global Marketing Strategy
Ryanair started as a family business, opening its operations in 1985, with a flight that connected Waterford, in Ireland, to London Gatwick, England, and it is currently the Europe’s top performance airline, operating in 31 countries, from 200 airports (Ryanair, n.d.). Positioned as a low – fare airline, the company has the best punctuality score (90%) among European air travelers organizations (Ryanair, n.d.). The airline’s operations are mostly focused on Europe. However, the company has a significant growth potential, by exploring other markets, outside Europe. Having operations in Turkey and Israel would allow Ryanair to enter a new market in its global expansion that would enhance its profitability, which is Egypt. This report proposes to apply a set of conceptual frameworks and processes for evaluating Ryanair’s micro and macro environment, as well as its suitability for extending in Egypt, creating and evaluating a strategy for approaching this market.
In creating a global marketing strategy, there needs to be assessed the internal situation of the organization, in order to identify its strengths, weaknesses, opportunities and threats (SWOT) in relation to its market. Besides, the internal analysis should also examine the company’s resources, by applying a resource – based analysis.
Ryanair’s low cost positioning makes it the most accessible airline in Europe and one of the cheapest in the world;
Ryanair is the leader in the airline industry in terms of punctuality, with 92% flights arriving on time (Ryanair official website, n.d.);
Effectiveness is another strength of this organization, operating on short distances but also longer routes, with limited wasted time at the airport;
Ryanair’s flights are safe for over 30 years (Ryanair official website, n.d.);
It introduced innovations that changed the flying behaviour for clients seeking value for money: it initiated the low cost concept in Europe, the direct on-line seat distribution, online check – in, automated bag drop and travel by hand luggage only, simplifying the flying experience (CAPA Centre for Aviation, 2014);
While imitating Southwest Airline’s business model for Europe, Ryanair lacks the customer engagement that the American company delivers through interactive programs (Southwest official websit, n.d.);
Ryanair’s performances are seasonal, registering high sales in the summer time (July to September) and low earnings in the cold period (October to March) (CAPA Centre for Aviation, 2014);
Very small hand luggage allowed and paid bag drop complete Ryanair’s weaknesses;
Improving customer service for creating a connection between passengers and Ryanair brand;
Entering in new territories and launching new routes;
Enlarging the available fleet with more modern aircrafts that would allow larger hand and hold luggage;
Developing strategic partnerships (with reputable European airlines like Tarom, Air Turkey, Air France, etc. ) for enhancing its brand value;
EU regulations that pressures its operations in terms of carbon emissions or customer safety protocols;
Increased competition in the low fare segment;
Fuel costs, dependent on the international combustible price fluctuations;
Economic instabilities that reflect in Ryanair’s uncertain customers;
Connected with the SWOT framework, TOWS matrix indicates the strategic options that the company can pursue for achieving growth, which are combinations between each two components:
SO – attack and grow option combines strength maximization with opportunities seizing;
Ryanair can optimize its low cost positioning in combination with its existent operations in Israel or Turkey for seizing global expansion, targeting Egypt, Israel’s southern neighbour (Taylor, 2015).
ST – defence option uses the internal strengths to minimize the external threats;
The company should enhance its know – how and experience gained from being the best low fare player in the European airline industry, for minimizing the threat of increased competition in the low fare segment.
WO – defence and attack option seizes opportunities for minimizing the weaknesses;
For minimizing the poor customer service, the airline could create on – fleet programs for increasing the connectivity with customers and enhance its brand value.
WT – the survival or withdraw option minimizes the weaknesses and avoiding threats (Leeman, 2015).
This option would posit Ryanair in an exit or merging situation.
Ryanair’s threats are not so high in order to approach the WT option. While WO option would improve customer satisfaction, and ST would strengthen its low fare positioning, they would not reflect Ryanair’s global expansion objective. Therefore, the most suited strategic option for Ryanair is attack and grow option (SO), which would permit its extension in Egypt.
Resource and competencies analysis
Companies possess tangible (personnel, equipment, technology, etc.) and intangible (know – how, culture, brand reputation) resources, which distinguish from their competencies, which are skills and abilities programmed for developing the resources (Johnson, Scholes and Wittington, 2008). The competencies can be threshold, specific and required by the industry standards, and critical, which are skills and competencies that cannot or are difficult to imitate or achieved (Johnson, Scholes and Wittington, 2008; Ireland, Hoskisson and Hitt, 2008).
Ryanair’s tangible resources include: its 1600 routes operated from 200 airports, its fleet composed of 300 Boeing 737 – 800 aircraft and its human resources of over 10.000 aviation personnel (Ryanair official website, n.d.). Its intangible resources include its low fare know – how gained in 30 years of business, its 7.7 million customer database and its punctuality (Ryanair official website, n.d.).
In terms of competences, Ryanair possesses the online operations or safety standards to meet the industry requirements. As unique, core competencies, Ryanair masters the cheap flying and the punctuality capability.
The analysis of the external environment comprises the industry overview and the macro environment. The industry overview will be analysed using Porter’s Five Forces framework, while the analysis of the macro environment will be conducted with PESTLE framework.
Porter’s Five Forces
The five forces that influence the industry’s attractiveness were conceptualized by Michael Porter in 1985. These are the existing rivalry, the bargaining power of suppliers, the bargaining power of customers, the threat of new entries, the threat of substitute products (Porter, 1985). For Ryanair, the existing rivalry is moderate, as the company competes against both low cost and standard airline companies, having as its major competitors EasyJet and WizzAir in the low cost segment. Yet, Ryanair is still the most recognized and successful in terms of low fare offers, carrying more passengers than EasyJet (Geler, Folan and Shain). With only 2 aircraft suppliers, Boeing and Airbus and considering that Ryanair’s fleet is100% Boeing, the bargaining power of supplier is very high. Because customers are price sensitive, they take advantage by the carriers that serve similar routes, pressuring them to decrease prices, hence this force is a considerable one. Because of its impressive number of daily flights (over 1,800) and routes (more than 1,600), Ryanair annual customer rate overpasses 100 million (Ryanair official website, n.d.). This indicates that it is capable of achieving economy of scale, reducing the threat of new entrants, because it commercializes better offers. Finally, the substitute products are the trains and the legacy airlines, who are introducing cheap flights to attract customers. Although the rail transportation has modernized with the high speed trains that unite far away cities or countries, the price for this service s quite high, while the traditional trains do not meet the speed capacity to be considered a real threat for Ryanair. Also, the legacy airlines do not have the potential to provide cheap flights throughout the year, while also maintaining their high quality standards and extra services such as free food and drink, hold luggage, without hurting their brand reputation.
EasyJet is already operating flights in this Egypt, hence it has established a local market share. Ryanair will be acting as a new entrant, threatening EasyJet’s market share.
This framework analyses the factors outside the industry (political, economic, social, technologic and environmental) that can influence firms’ operations (Hollenssen, 2007; McCabe, 2012).
The recent political environment in Egypt, the targeted destination, is characterized by instabilities, which echo the Arab Spring and Mubarack overthrow revolution, still lingering in personal freedom attacks (Brown, 2013; Lynch, 2014). This aspect could impact Ryanair’s routes in Egypt, as customers might be reluctant to visit an Arab country with political instabilities. Due to recent bombings associated with terrorist attacks, the tourism fell severely and important operators like British Airways refusing to fly in touristic areas. In the last decade, the economy of Egypt opened up, creating reforms such as reducing entry tariffs, enhancing transparency to attract foreign investors. Furthermore, since 2006, Egypt is member of European Free Trade Association (EFTA).
The sociological factors indicate a high unemployment rate of over 9%, but a rich history and culture, which makes Egypt one of the top touristic attractions in the world (Ezzat, 2011). Technology is rather immature, but reforms are applied to modernize the Egyptian IT market, facilitating the technology transfer of foreign investors (Ezzat, 2011). The environmental regulations are centralized, meaning that Ryanair’s activities will be subjected to local rule. The legal system in Egypt is based on Islamic civil law with judicial review by a Supreme Court and a secular constitution that promotes gender equality and freedom of religion (Central Intelligence Agency “Egypt”).
Because foreign investors are encouraged to do business in Egypt, Ryanair’s entrance in this market will be facilitated by political tax reduction regulations. Still, the socio – political tensions are significant threats to Ryanair’s entry on this market.
The global trends in aviation reveal a strong proliferation of the low cost carriers, which control 25% of the worldwide market (PwC Strategy “2015 Aviation Trends”). The fall of the oil prices has increased the operational effectiveness for airlines around the world, creating opportunities for lining more cities and carrying more passengers (Boeing, 2015; Pearce, 2015). However, customers expectancy shows higher sophistication of services demand and lower prices, which challenge airlines, especially the ones confronted with security issues or natural disasters, such as volcano eruptions (PwC Strategy “2015 Aviation Trends”; Sorell and Avagyan, 2015). Traffic towards and within Africa is forecasted to grow by 6% yearly in the next 20 years, sustained by the launching of new routes and enhanced hard product (fleet) technology (Boeing, 2015).
Global Strategic Marketing
In its global expansion objectives, Ryanair’s capabilities need to be aligned with the external environment, global trends and the targeted country’s profile. The marketing mix analysis helps identify whether the company should choose an adaptation or standardization strategy.
This framework analyses the 4Ps, namely product, price, placement and promotion, which gives a clear vision on what it needs to be modified in order to reach the marketing objectives (Hollensen, 2007). Ryanair’s product is based on the low fare flight, mostly serving Europe, combined with paid on – fleet food and paid hold luggage and customer service generally perceived as poor (Gupta in Subramanian, 2014). The price component shows low cost for Ryanair’s main service – flying, but normal industry costs for additional services. In terms of placement, the company is 100% online, having no travel agents or agencies, which reduces is costs. It keeps its fleet mostly on secondary airports, which are cheaper, or on air. Ryanair incorporates as little advertising as possible; hence its promotion efforts are minimal, mostly focused on direct marketing or on word of mouth.
Based on the current marketing mix analysis, the organization needs to work on its product, improving its customer service, which is an internal weakness that could affect its global expansion. Because of the low fare positioning, Ryanair is dependent on the paid add on services, therefore it cannot offer free food and carry luggage for free unless its ticket prices go up. The placement component demonstrates operational efficiency, although it might lose Ryanair a small portion of the technically uneducated travellers, not accustomed or frightened about purchasing tickers online. Finally, the company should approach more promotional strategies, especially in the online environment, because there is the environment where its customers are. Without investing heavily, Ryanair could increase customer engagement through social media campaigns, targeting the conversion of the potential customers into paying passengers (Bailey, Baines, Wilson and Clark, 2009).
Standardization versus Adaptation
Standardization is the process of externalization using the same marketing mix component everywhere, whereas adaptation implies customizing some or all the components on the international local markets’ specificities (McCabe, 2009). In the aviation industry, product and price adaptation is costly and ineffective, as it would result in differences of treating passengers across different markets. However, the promotion, more specifically the communication should be sensitive to local markets and to their cultural specificities.
Therefore, Ryanair should approach standardization as the main global marketing strategy, incorporating the promotion component adapted to the targeted international market. Using its internal resources and competencies (capabilities), namely its low fares, extensive industry expertise, customer base and punctuality, in a standardized strategy will allow the globalization of Ryanair capabilities, strengthening its positioning on the Egyptian market. With flights towards and from Egypt, the company could also enhance its domestic competitiveness, by serving more customers, which would allow Ryanair to decrease its offers even more.
The standardization strategic marketing approach should incorporate the TOWS recommendation (SO – attack and grow option) for using its strengths to seize the opportunities. Nevertheless, the company should also approach the defence and grow strategic option (WO), for minimizing its weaknesses for grasping opportunities, in order to gain competitive advantage. Like this, by improving its customer service and engaging customers in direct communication (on fleet) and promotional strategies (social media communication) and by creating a loyalty package, the company could gain more a stable market share from loyal and returning customers.
Based on the Porter analysis, EasyJet is already a competitor in Egypt. As a new entrant on this market, Ryanair will have to propose a sophisticated offer. The strategic partnership approach could be an effective way for entering Egypt together with a touristic agency, offering customers low fare touristic packages for traveling with Ryanair and visiting the local attractions at affordable prices.
The global marketing strategy for Egypt is both a strategic and a risky move. According to the PESTLE analysis, the socio – political context in Egypt is unstable, exposed to political tensions, social unrest and security issues. On the other hand, as the industry trends reveals, the African market is an emerging one for the airline industry, with a high growth potential. Ryanair’s proposed global marketing strategy is sensitive to both the external environment and on the industry trends. Nevertheless, not exploiting Egypt would allow other companies to open routes in this market, making Ryanair’s entry more difficult as the competition would be higher.
Aligned with Ryanair’s global extension plans, the proposed global marketing strategies analysed the company’s internal and external environment, matching strong resources and competences with the industry and global market demands, while also proposing a correction of the weak capabilities to effectively grasp the growth opportunities. Ryanair’s extension into Egyptian market would allow the company to grasp an important market share from a market that has a high growth potential, according to the industry trends analysis (Boeing, 2015). By applying a standardized marketing mix with a promotion component adapted on the local communication and cultural specificities, using its strong capabilities (low prices, industry know how and punctuality) and correcting its weaknesses (improving customer service and creating customer loyalty and retention programs) Ryanair will increase its global and domestic competitiveness.
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