1.

From an industry-based view, assess the strength of the five forces and determine the extent
to which Ryanair is positioned against those forces.

a) Threat of New Entrants:

Strength: This force is fair. While the airline industry does have high entry barriers due to
factors like capital requirements, regulation, and economies of scale, it's not something that
cannot be expected. New entrants can enter this niche market or operate with a new unique
value proposition.
Ryanair's Position: Due to its extensive route network, well-known brand, and cost conscious
leadership strategy, Ryanair has a comparatively strong position against new entrants. It enjoys
economies of scale, which makes it challenging for new competitors to match its low-cost
structure.

b) Bargaining Power of Suppliers:

Strength: The strength of this force is fair to high. Airlines rely on suppliers for aircraft, fuel, and
maintenance services. There are only a few major suppliers in these industries making the
business requirement mutual, giving them some bargaining power.
Ryanair's Position: Ryanair has a significant fleet of aircraft which is 737-800 and thus making
them a loyal customer and so can negotiate favorable deals with suppliers. However, it is still
somewhat vulnerable to price fluctuations in fuel markets.

c) Bargaining Power of Buyers (Customers):

Strength: This force is also fair to high. Customers have the power to compare prices easily
and switch between airlines. Loyalty programs and brand reputation can mitigate this force to
some extent.
Ryanair's Position: Ryanair competes primarily on price, which aligns with the price sensitivity
of its customer base. Though its strong brand help retain customers, it must continuously offer
low fares to maintain competitiveness. But when it comes to premium customers due to the
ancillary cost involved, they are more likely to go with a different carrier that can offer better
luxury and service.

d) Threat of Substitutes:

Strength: This force is fair. While there are alternatives to air travel, such as trains or buses for
short distances, there are limited substitutes for long-haul international flights.
Ryanair's Position: Ryanair primarily operates in the short-haul and point-to-point markets,
where substitutes like high-speed trains, buses or sea transport are more viable. To counter this
force, Ryanair focuses on convenience, low prices, and frequency.
 e) Competitive Rivalry within the Industry:

Strength: This force is high. The airline industry is highly competitive, with many players from
different countries competing aggressively on price, routes, and services.
Ryanair's Position: Although,the market for low-cost airlines in Europe is dominated by
Ryanair. Other low-cost carriers like EasyJet and conventional carriers like British Airways are
fierce competitors. However, its effective operations and cost leadership strategy aid in
preserving its competitive position.

Generally speaking, Ryanair has a strong position against the majority of Porter's Five Forces
thanks to its cost leadership strategy, extensive route network, and name recognition. It still has
to overcome obstacles in a very competitive market, particularly when it comes to coping with
customer bargaining power and ongoing rivalry.

2. From a resource-based view, what explains Ryanair’s success?

The resource-based view largely concentrates on the internal strengths and weaknesses of the
firm (Peng, 2022, p. 14). If we use this analysis we can see that the company has strengths and
weaknesses that explain its success:

Internal Strengths

Cost Leadership: The company has been a cost leader since the beginning, competing in low-
cost and getting extra revenue on ancillary services.

Ancillary Revenues: Ryanair has diversified its revenue streams with fees like checked
baggage, priority boarding, and onboard sales, their website also offers car rentals, hotels,
credit cards, cruise holidays, and others, these ancillary revenues were EU663 million in 2009

Efficient Operations: They use a single model aircraft, as the main method of cost control,
because it allows to minimize the maintenance cost and be more flexible with the scheduling of
flight crews, they also use secondary and regional airports, reduce services like personal check-
in, checked bags, in-flight meals, that are expected from other airlines, these strategies began
since 1991 when CEO Michael O’Leary decided to adopt the low-cost strategy for the airline.

Strong Leadership: Michael O’Leary has taken the concept of a low-cost airline like Southwest
and evolved it to what Ryanair is today, a successful company, with growing revenue, utilizing
innovative methods to generate revenue.

Internal Weaknesses

Poor Customer Service Reputation: Ryanair has a well-known reputation for poor customer
service, which can deter passengers and lead to negative publicity. Customer service quality is
part of Michael O’Leary’s strategy to reduce costs, and improve in other areas, for example,
Ryanair’s December 2011 customer service statistics state that 89% of flights arrived on time,
and complaints were less than one per 1,000 passengers.

Reliance on Ancillary Revenues: The company has strong financial results, that depend in
great regard on ancillary revenues, If there were a switch in customer preferences towards
better service and more flexibility there could be an impact on their revenue.

Ryanair is proving that Michaels O’Leary’s strategies are working, they are increasing profits
year over year, and it’s due primarily to the ancillary revenues.

3. From an institutional-based view, assess the opportunities and threats presented by the
current and future institutional environment (both formal and informal). How should Ryanair
proceed?

Ryanair faces challenges in the evolving institutional environment as well as opportunities to

thrive by adapting to regulations, improving customer service, diversifying ancillary services,
and potentially expanding globally. Success will depend on the airline's ability to balance its low-
cost model with evolving industry dynamics and customer expectations.

Some of their threats and opportunities are as follows:

Threats
⇒ Competition
⇒ Unstable fuel prices
⇒ Government’s regulations

Opportunities
⇒ Cost efficiency that coil lead to offer competitive fares
⇒ Different sources of revenue that could support any change made in the near future

4. What is your evaluation of the proposal that Ryanair offer free flights in perpetuity? Draw on
the three views in your answer.

We consider that the most relevant point of view for this company is the Industry-based view.
For a couple of decades now, they have been able to use their resources with little restriction
and have been able to act mostly free as an institution. However, when it comes to economic
and external factors, they have to conduct some research before making such a decision, most
likely using the five forces framework which forms the backbone of the industry-based view of
strategy (Peng, 2020, P. 35).

Industry-based view
Offering free flights would be disruptive compared to the industry's traditional pricing model and
could potentially attract more customers. However, several implications could impact the
company’s results in many ways: operating costs would increase due to free flights, and the
company would have to find alternative revenue streams to cover those costs; if the customer
base didn’t significantly increase, that could represent a threat for the company’s profits; they
should consider implementing this idea as a temporary (and even periodic) project, offering free
flights all the time may not be sustainable.

Resource-based view
As mentioned before, free flights would impact the company’s profits and they would have to
find alternative sources of income to cover the costs. To increase those regular incomes would
require a larger customer base, which is possible but it could take years and operating
efficiencies of almost 100%.

Institution-based view
Government regulations could be the hardest obstacles for Ryanair to offer free flights, basically
regarding fair competition and the company’s main purpose in doing so.
Competition might also be an issue, when considering fair pricing practices.

All this would have to be addressed by Ryanair before going ahead with their idea of offering
free flights. Overall, it seems like a bold strategy that could increase loyalty among their regular
customers and even increase that large number, but those kinds of actions require significant
research time and resources.

5. ON ETHICS: Evaluate Ryanair’s behavior, especially in light of the questionable practices

discussed in the case. What changes, if any, would you recommend to CEO Michael O’Leary?

The behaviour of Ryanair, as mentioned in the case study raises several ethical issues,
especially in advertising methods and customer services. These are as follows:

1. Misleading advertising- Ryanair has come under scrutiny for its misleading
advertisements, which include claims about flight availability at advertised prices that do
not include taxes and fees. Such practices can be seen as deceptive and unethical, as
they can lead customers to believe they are getting a deal that is not actually available.

2. Customer service- Ryanair’s approach to customer service has also been a

subject of controversy. While the airline argues that it prioritizes on-time departures and
arrivals, it has been criticized for poor services like cancellations, missing bags and
denied boardings as well.

3. Aggressive ancillary fees- Although the generation of this fees is a conventional

practice in the airline industry, Ryanair’s strategy concerning fees has been perceived
as assertive and occasionally unfair. The imposition of high charges like boarding pass
reissuance and lack of upfront disclosure of ancillary fees could be seen as taking
advantage of customer’s lack of awareness and potentially unethical.

4. Environmental responsibility- Ryanair is also confronted with ethical challenges

associated with environmental matters. Ryanair like other airlines must comply with the
regulation and how it addresses its environmental impact can be considered as ethical
concern.

Considering these concerns, CEO Michael O’Leary and Ryanair could consider the
following changes to improve their ethical standing. These are as follows:

1. Transparency- Ryanair should prioritize transparency in its advertising practices

by clearly disclosing all fees and charges upfront. Customers should have a clear
understanding of the total cost of their ticket when booking.

2. Customer service- Ryanair should adhere to ethical advertising standards and

avoid making exaggerated claims that could mislead customers. Advertising should be
accurate and not depend on deceptive tactics.

3. Environmental responsibility- Given the environmental concerns in the aviation

industry, Ryanair should actively work to reduce its carbon footprint, explore more
sustainable practices, and invest in eco-friendly technologies.

4. Ethical leadership- CEO Michael O’Leary could promote a culture of ethical

behaviour within the organization by leading by example and setting high ethical
standards for employees.

REFERENCES

1. Peng, Mike W. (2020). Global Strategy (4th Edition) [2.5.8484.0]