Micro Environment Review: A Case of Ryan Air

Introduction

Developing a long-term business model for Ryanair entails planning for the airline’s future. Ryanair’s tactics and continual expansion have effectively transformed the firm from just a single route airliner to Europe’s leading low-cost carrier over the previous decades. To prepare for the future, one must have a thorough understanding of the present. This is the beginning point for a micro environmental assessment, which discovers the internal characteristics of the specific environment in which an organization operates and converts this information into actionable plans and choices. All elements that have a direct impact on the organization are included in the micro-environment. Porter’s Five Forces approach will provide a comprehensive analysis of the aviation business and its appeal.

Porter’s Five Forces

Bargaining Power of Suppliers

Due to the industry’s razor-thin profit margins, good negotiation is vital. Determining supplier and buyer negotiating strength is critical. Aviation suppliers include fuel suppliers, aircraft and component manufacturers, maintenance providers, and airports. Boeing and Airbus are the two main aircraft manufacturers. Its market share is substantial. A strong supplier position results from the two firms focusing on a coordinated approach that can effect price. The all Boeing fleet of Ryanair has resulted in considerable cost reductions when it comes to new planes and replacement parts. They cannot afford to lose Ryanair as a customer. Even with strong negotiating power, the hefty expenses of pilot retraining make Ryanair’s supplier switching costs unacceptably high.

Bargaining Power of Customers

When customers band together to put pressure on producers to lower prices or improve quality, they have negotiating power. When a large number of customers are concentrated, switching costs are low, and buyers are generally price sensitive, customers are thought to have more negotiation leverage. Traveling for pleasure or business is governed by one’s price sensitivity. Due to the fact that their tickets are often paid by their companies, business passengers are less susceptible to swings in ticket prices. Due to their frequent travel, large corporations may be able to get higher prices for their staff, which compensates the lack of sensitivity of business class passengers. Overall, Ryanair consumers have relatively high bargaining power because they can easily, and at no extra cost, switch to new airlines.

Threat of Substitutes

As long as the consumer gets the same value out of the substitute, it’s a replacement. Substitute products for the airline industry and Ryanair in particular include rail networks, marine transports, coach transportation, and car rental companies. In contrast, Ryanair plane tickets are less expensive than taking the train, buses, and ferry tickets. Since Ryanair has opted to rely on low prices as its principal source of competitive advantage, this is what has transpired. Comparatively, Ryanair’s exposure to substitute products and services is minimal.

Threat of new Entrants

The ease with which new players might enter and compete with current market members is known as the “threat of entrants (Rodríguez-García, Orero-Blat, & Palacios-Marqués, 2020). It’s difficult for new entrants to enter the airline business because of the high entrance barriers that must be overcome. Ryanair is minimally exposed to the threat of new entrants. Economic size, financial needs, distribution routes, and other variables are some of the factors that contribute to these hurdles.

Rivalry amongst Existing Firms

The airline industry is known for its hefty entrance fees, but exiting the market is just as expensive, with many companies choosing to operate at a loss. As a result, the number of competitors remains constant. The undercapitalized are weeded out, and the survivors are pushed to be as cost-effective and profitable as possible. While the number of existing airlines looks to be steady, another factor to examine is the expansion of new routes. Low-cost airlines fight intensely to deliver the lowest fares possible in order to acquire market share.

Important Stakeholders

Stakeholders include other airlines, staff/employees, passengers/customers, governments, local communities, and the suppliers, as well as the media and unions.

References

Rodríguez-García, M., Orero-Blat, M., & Palacios-Marqués, D. (2020). Challenges in the Business Model of Low-Cost Airlines: Ryanair Case Study. International Journal of Enterprise Information Systems (IJEIS), 16(3), 64-77.