Strategic Marketing and Branding Analysis of Ryanair

This is a case study of Ryanair’ marketing and branding strategies in

Master level.

INTRODUCTION

Ryanair an Irish based carrier was founded in 1985 by the Ryan family. Its entering into the market gave airline passengers in Europe an alternative to the state owned monopoly Aer Lingus. It operates in over twelve thousand destinations in twenty seven countries with a customer base of over seventy million annually. Ryan air penetrated the market with a low cost strategy that has seen its survival in the turbulent European industry to date.

CORPORATE STRATEGY PERSPECTIVE S

According to Legace (2004) a company can base its corporate strategy on four perspectives that is; customer’s value, cost measure, internal processes and learning and growth. These factors can help an organization to gain competitive advantage in the market.  An organization success depends on how they combine the four perspectives to give it competitive edge over the competitors in the industry.

Cost Measures

Cost measures evaluate an organizations ability to operate profitably at low cost as put in Legace (2004). Ryan air adopted a low cost strategy that offered its customers low fares. This is based on the assumption that customers were only interested in travelling as fast as possible at the low fares. Low fares will help stimulate demand for the airline which will enable it to operate profitably and maintain its position as the leading low fare airline in Europe. The low fares are achieved through ensuring that Ryanair operates at low cost by eliminating non essential services and maintaining low cost of operation.

Customer value

A company can base its corporate strategy on value derived by the customer from the organizations product by ensuring that customer value is maximized as put in Legace (2004). Ryanair has brought revolution to the air line industry by introducing budget airlines that have accorded ordinary airline passengers the luxury of travelling to Europe and enjoying weekend getaways at reasonably low prices. This strategy perspective by Ryan air is

Learning and Growth

Learning and growth is achieved as a organization gains experience in the market that help to venture into new markets and achieve economies of scale as put in Legace (2004). Ryanair growth strategy is based on its ability to penetrate new routes with its low fares.  The carrier added additional routes in Europe and other internal routes in U.K. Ryanair targeted this routes because they are characterized by high cost carriers. This gives Ryan the opportunity to attract customers on the routes using low fares.

It also engage in extensive promotional strategies that helps it to boost its sales ensuring survival and profitability of the airline in an industry characterized by airline closure due to bankruptcy and reliance on government aid. For example Ryanair gives its passengers free seats as promotional strategy.

Internal Processes

Internal processes are the functions that an organization engages in so as to offer the consumer a final product or service as put in Legace (2004). Ryanair internal processes entail ticketing, baggage handling and in flight services to the airlines passengers.

The airlines low cost strategy is dependent on its ability to operate on low cost budget. Ryan air achieves this by ensuring that all its internal processes are operated in a manner that results in cost reduction. For example it uses a one aircraft type to reduce maintenance and repurchase cost associated with using a variety of air crafts, it contracts its ticketing and baggage handling services, ensure staff cost are reduced by pegging them on productivity and also closely motors its marketing and promotional cost.

RYANAIR’S STRATEGIC ENVIRONMENT

According to Doyle (2010, p.7) the organizations strategic environment plays a major role in the organization failure or success. It also determines the strategies adopted by an organization.The strategic environment consist of economic, technological, political, industry factors, competitive factors and the organizational internal factors as put in Stonehouse et al (2004, p.115).

The strategic environment can be analyzed using tools for analyzing the macro and micro environment. Stonehouse et al (2004, p.115) says that the analysis of the organizations macro and micro environment form the basis for the organization strategy formulation.

Political Environment

The political environment refers to the level of government intervention in the industry. The government may liberate an industry, exercise tight controls in regulation of an industry or only intervene where necessary.

The European airline industry was liberated in 1990 by eliminating government intervention and privatising state owned Aer Lingus enabling fair industry competition and non government interference in an industry that was a monopoly with only one state carrier before Ryanair Joined the market in 1985.

Economic Environment

Economic factors include the economic growth rate, exchange rate and inflation rate. These factors have a direct effect on the organizations operations and determine the strategies an organization uses to compete in the market. The economic growth rate and inflation rate determines the consumers purchasing power and hence the demand for the organizations products or services according to Doyle (2010, p.7).

 

The European airline industry has been affected by the global economic recession and high oil prices. This has greatly affected the purchasing power of consumer’s world wide. Ryanair has adopted a low cost strategy that enables ordinary airline passengers to travel outside Europe and engage in weekend getaway despite the economic crunch. This has enhanced Ryanair’s survival in the industry by positioning its services to suit consumer needs.

Consumer’s purchasing power has been greatly affected by week economic conditions in Europe and UK. Consumers are very cautious on how they spend their income and savings. This has further been worsened by the governments increase in airplane passenger’s duty which has greatly affected tourism and airline industry in the UK and Europe. Ryanair has accorded airline passengers the luxury to continue travelling in and out of Europe through its low fares.

The exchange rate is determined by the strength of the currency that the organization is headquartered in relation to currencies of other countries according to Doyle (2010, p.8). This has a direct effect on the organizations profitability when it is engaging in international business as put in Stonehouse et al (2004, p.116). The foreign exchange is critical in determining a countries economic performance. It also has a direct effect on organizations doing international trade. In 2000-2007 the number of British airline passengers declined due to the euro loosing value considerably in relation to the sterling pound.

Social Cultural Environment

This refers to countries demographic, work ethic, birth and death rate, education levels and income distribution. This factors influence the consumer’s choice of product ad their purchasing power according to Doyle (2010, p.8). Understanding the social cultural environment helps an organization to select strategies that strategically position an organization product in the market giving it competitive advantage over other player in the market.

The European airline industry has undergone evolutionary changes over the years moving away from the traditional travel patterns due to change in behavioural  and psychological patterns of travellers.

Technological Environment

This refers to the level of innovation in an industry and the rate at which other competitors in the market adopt new technology released in the market. A company must reinvent its product and service regularly to ensure it keeps up with the dynamic needs of consumers and keeps with market trends according to Doyle (2010, p.7).  This is achieved through investment in research and development department of the organization.

Ryanair has been constantly reinventing its processes to ensure that it maintains its low cost strategy. It eliminated its baggage handling services and introduced a carry on policy that allowed it to further reduce its fares.

Legal Environment

The legal environment refers to the rules and regulations governing an industry. The organization must adhere to the industry rule and regulation Stonehouse et al (2004, p.116). To ensure that the organization does not run into legal problems which could be very expensive in the long run management has to ensure it understands the legal environment in which it operates.

In 2004 Ryan air was faced by legal challenges when a subsidy arrangement with the government at its base at Belgian Charleroi was declared illegal by European legislators in Brussels. This forced Ryanair to pay a fine of three million pounds and its appeal against decision of the European legislators in Brussels was denied in 2008.

Ryanair was also found guilty six times due to breach of consumer protection act and they were forced to pay twenty four thousand pounds. They were accused of misleading customers with its low fare offer. Ryanair was also penalized for failure to offer a disabled passenger with a wheel chair in at Stansted airport.

Michael O’Leary Ryanair’s spokes person was found guilty of lying to the to a transport minister in a letter. He was also involved in a libel action with the founder of rival airline Easy jet and was found guilty of lying about punctuality statics. He was fined fifty thousand dollars.

Environmental Factors

This is the physical factors such as the climate and climate in the religion that the organization operates. Factors such the weather have a direct influence on industries such as transport, tourism and agriculture.

Due to severe weather conditions and a volcanic ash cloud there was a decline in the number of airplane passengers at UK airports.

Competitive Environment

The competitive environment is analyzed using porters five forces frame work. According to Henry (2008, p.69) porters five forces frame work determines threat of new entrants, threat of substitute product, buyers bargaining power, suppliers bargaining power and competitive rivalry among players in the market. The frame work helps to determine the attractiveness of the industry based on the five forces.

Threat of substitute product reduces demand for the organizations product according to Henry (2008, p.71). High speed tunnels and bridges construction in Europe have reduced demand for Intra- European short distance routes. Passengers travelling for less than five hundred kilometres pot to travel by road or train.

Threat of new entrants is mitigated by economies of scale. This is created by established organizations ability to enjoy economies of scale and operate at cost lower than the new entrants as put in Henry (2008, p.71). Threat of new entrants is mitigated by the congestion in European airports and skies which make even well established airlines like Ryanair have difficulties operating and forces new entrants to smaller airports located far from metropolitan cities. Airports further away from the metropolitan cities are less favoured by travellers because they have to travel back to the city. This renders new entrants at a disadvantaged position when competing with well established carriers.

Inter company rivalry as put in Henry (2008, p.69) among airlines in the European airline industry is based on low cost strategy. New entrants into the market have low cost strategy coupled with very dynamic and flexible business strategies. Most major carriers have also repositioned their product and services by offering cost services and products because of the treat of being faced out by the airlines using low cost strategy in the industry. New entrants into the market are penetrating the market with very aggressive promotional strategies which are increasing the rivalry among airlines in the European airline industry.

Rivalry among airlines has further been fuelled competitors merging has raised competition in the European airline industry. The response by other lines to the consolidation has been to lower their fares further so that they can survive the highly competitive environment.

Competition is also fuelled by the bargaining power of buyers as put in Henry (2008, p.69). Ai9rline passengers in the European airline industry have bargaining power due to presence of many airlines in the market. The passengers have the luxury of window shopping for the lowest prices in the market because the European airline industry is no longer a monopoly as it was before Ryan air joined the industry in 1985.

Bargaining power by suppliers is a major threat to organizations according to Henry (2008, p.69). The European airline industry is characterized by high cost of fuel, high landing, ground handling and traffic control cost and increased worker benefit and protection. The carriers have no bargaining power to reduce operating cost. The government has also increased taxes in the industry further driving operational cost upwards.

Industry Factors

According to Henry (2008, p.70) industry factors are the factors external to an organization affecting all players in the market equally. The European Airline industry is characterized by high fares, high operating cost, and high taxes by the government and high cost of fuel due to exercise charges on fuel, high landing, ground handling and traffic control cost and increased worker benefit and protection.

The industry is also coupled by low survival rate by airlines to high operational cost. Between 2004 and 2011 airline carriers in European airline industry have reduced from sixty to forty.  Some like Futura and LTE (Spain) have closed down due to bankruptcy and others have made strategic alliances with stronger airlines in the market to increase their survival rate. It is speculated by year 2018 there will be four major airlines in the European airline industry

The Organization Internal Environment

This are factors within the organization such as finances, human capital, geographic location that gives an organization competitive advantage or puts the organization at a disadvantaged position in the market. The organization internal environment is analyzed using SWOT analysis that determines the organizations strengths and weakness, product life cycle that determine the strategies an organization can use in the different stages of the organizations life cycle and the BCG growth share matrix that determines the strategies an organization can employ to its product lines.

According to Henry (2008, p.70) SWOT analysis is company specific tool. For an organization to be successful it is critical to carry out SWOT analysis to determine the organizations strengths weakness opportunities and threats.

Ryanair’s spokes person Michael O’Leary is a major weakness to the organization and poses a major threat to the organizational survival in the future. He portrays a bad public image to the public which might affect the airline negatively in the near future. He portrays a very staunch look to the public and has been depicted as unapproachable due to his tough business look. He is also described as a person who is also looking for a fight. He has also been found guilty of lying in two instances which is not good for the public image of Ryan air.  He banned his staff from recharging their mobile phones while at work and made them work on Christmas Eve as a strategy to achieve five thousand free one way flights to the passenger. Some investors feel that he should step aside as he is impacting negatively on the image of Ryan air.

Ryanairs major strength is its ability to maintain low operational cost. The carrier has been able to successful maintain a low cost strategy despite the harsh economic times and still operates profitably. This has been achieved through use of a single airplane to reduce purchase and maintenance cost, pegging employee salaries on their productivity to maintain a low base salary, contracting services like ticketing and baggage handling, reducing airport charges by landing at away from metropolitan cities which are less busy and close monitoring of its marketing costs. Ryanair has also had the opportunity to cost operating cost through elimination of in flight comforts such as blind ad reclining chairs. The airline has also been able to reduce fairs further by eliminating their baggage handling services by instituting a policy where passengers are required to only carry a small baggage that they handle themselves. The move was received positively by consumers who view the policy as an opportunity to save money.

The ability of the carrier to maintain low operating cost has given the airline two major opportunities. Ryanair’s ability to maintain low cost has enabled it to concentrate on features important to its customers such as availing frequent departures to its customers, allowing customers to have the opportunity to reserve seats in advance, handling customers baggage and  availing timely services through strict observation of departure time. The airline also has the opportunity to penetrate new routes with its low fares to its ability to maintain low operational costs.

The product life cycle shows how the trend of the sales of the organization product from inception until the time they are withdrawn from the market. During the introduction stage Ryanair used a low cost pricing strategy to penetrate the market and has continued to use this strategy to grow its market share in the airline industry.

The BCG growth Share matrix determines how an organization should distribute its resource among its product lines. Ryanair has dedicated most of its resources to its airline services and outsourced its auxiliary services such as ticketing and baggage handling.

 

BRANDING

Branding is the process of creating a unique product and service line that is easily distinguishable from the competitor’s products and service as argued in Rai (2011). According to Dinnie (2008, P.62) there are two major brand perspectives that is, consumer perspective and financial perspective.

Consumer perspective focuses on the consumer’s awareness of the brand according to Dinnie (2008, P.62). Ryanair engages in intense promotional and marketing activities to ensure that consumers are aware the services its offers.

As put in Dinnie (2008, P.62) financial perspective aims to attach value to the organizations brand. Ryanair since its inception in 1985 has aimed to create value for the consumers through ensuring that its services are affordable even to the ordinary consumer through its low cost strategy.

BRAND INDENTITY PRISM

CONSUMERS PERSPECTIVE

A product would lack meaning and value without a brand as put in Kapferer (1997, p. p56). The products or service brand helps consumers to identity with and value a product.  Airline passengers in the European industry perceive Ryanair as a cheap alternative unlike the traditional airlines whose fares are relatively high.

Brand identity prism helps to distinguish between brands of competing firms in the market according to Rai (2011). This is achieved through establishment of the identity of the brand, personality of the brand, brand culture, brand public image and brand equity.

PHYSICAL FACET

Understanding the brand identity, culture and personality will help an organization in managing the product brand as put in Rai (2011) and represent the physical facet.

Brand Identity

Brand identity is derived from the unique features of an organization’s products and services as put in Kapferer (2008, p. 183).The brand identity is depicted through the name of the organization, the products and services names, emblems or logos and the corporate colours of the organization according to Rai (2011). These elements help customers to recognize the organizational and can be expressed during promotional campaigns or through the product or services of the organization. For the organization to create a well established brand indentify they require to constantly market the brand identity both internally and externally through promotional campaigns and advertising as put in Kapferer (1997, p. p58).

Brand identity can be established through indentifying the vision of the brand, the unique features of the brand, feature that enable consumers to recognize the brand in the market, the competence of the brand and value of the brand according to Kapferer (2008, p. 183).

Ryanair has developed a low cost brand identity since it was founded by the Ryan family in 1985. This has been communicated through its promotional campaigns and the airlines ability to maintain a low cost strategy since its inception in 1985.Ryanair is lowest cost airline in the European airline industry and its vision of is to grow and expand through its low cost strategy.

Brand Personality

When well communicated a brand builds a personality that be recognized globally by consumers as put in Kapferer (2008, p. 183).

Brand personality can be determined by indentifying the physical characteristics of the brand that portray a certain image to the consumer as argued in Kapferer (2008, p. 183). This helps the organization express what the product does, what it looks like and what it is to the consumer using the brand. Ryan air services are characterized by low fares, departures that are frequent, reservations can be made in advance and carry on baggage. These brands features have enabled Ryan air to successfully maintain its low cost brand and still operate profitably.

REFLECTION

Brand Culture

The personality of the brand also portrays the culture of the brand. This can be indentified through evaluation of how an organization communicates its product and services and what they represents to the consumer as put in Kapferer (2008, p. 183). Well established brands are founded on a culture that is represented through the brand. Ryan air adopted a culture that aims to get airline passengers from one destination to another at the lowest fares possible. The brand culture ensures that low operational costs are achieved through elimination of non essentials that only serve to drive operational costs upwards. For instance the airline eliminated its baggage handling service and introduced a carry on policy so that it could reduce its fares further.

 

Brand Relationship

According to Kapferer (1997, p. p57) a brand creates relationship between the consumer and the organizations products and service. This is achieved through repetition of the brands culture that helps the consumers to create the association.

As put in Kapferer (2008, p. 187) brands communicate and if they are silent for a considerable amount of time they become obsolete because the consumer forgets them. A brand as a communicator helps the organization to target a certain market segment. Ryanair advertises its services but closely monitors its marketing cot to ensure they do not increase operational costs. The airline also offers free seats to passengers occasionally to promote its services. Ryanair brand targets ordinary airline passengers who would not travel by air if affordable airplane fares are not available.

Brand Image

According to Kapferer (2008, p. 183) a brand creates an image in the consumers mind. Brand personality of a product determines the consumer’s perspective towards the organizations product. Competitors in the market aim to create their own brand personality and avoid imitating an organizations brand personality Kapferer (1997, p. p54). The economic downturn has greatly affected the consumer’s purchasing power. The consumer can relate positively with Ryanair services as they give them the luxury f travel despite the harsh economic times. Ryan air offers no frills low cost services to its airline passengers. It has also established low cost budget flights that enable ordinary consumers to travel in and out of Europe and also afford weekend getaways at low prices despite the economic crunch.

Brands Equity

According to Dinnie (2008, P.62) brands equity is expressed through the value derived by consumers from the organizations products and services. Ryanair brand equity is derived by the consumer’s ability to travel at affordable rates.

 

 

 

A GLOBAL BRAND STRATEGY

The European airline industry has been characterized by high failure rate due to the harsh economic conditions. The major problem facing Ryanair is ability to survive in the turbulent environment in the long run.

Ryanair the lowest cost carrier in Europe wants to continue growing but still be in a position to operate profitably despite the harsh economic conditions worldwide. This can be achieved by adopting a global strategy. The strategy will help the airline to grow and expand its business outside Europe.

Most organizations have gone global. Engaging in international marketing has given local organization the opportunity to expand its markets from already saturated domestic markets. Global markets also increase an organizations survival rate because of the diversity in business environments that help to cushion down turns in one economy as put in Gelder (2002, p.2).

A global strategy will help Ryanair to provide to airline passengers from diverse cultural backgrounds and ethnic groups. Currently Ryan air operates in twenty seven countries with one thousand two hundred routes mostly in Europe. To be able to develop a global brand strategy Ryanair needs evaluate the current brands competencies and capabilities then identify areas that need to be modified in order to accommodate the expected brand perspectives by the global community as put in  Gelder (2003, p. 2).

According to Karder et al. (2005, p.136) the unified theory that explores social cognition can be used to evaluate and change consumers attitude toward the airlines services and products. The theory identifies four factors that an organization has to take into consideration in order to build a competitive brand strategy that is concept building, association, strengthening and activation.

A global strategy can be established through expanding the current brand domain, increasing the existing brand affinity, expanding and strengthening the current brand reputation and increasing consumers affinity towards the existing brand as put in Gelder (2003, p. 3).

One of the concepts in the unified theory is concept building that relate to building a brand personality and identity that is unique. This can be achieved through creating and expanding a global brand domain as put in Karder et al. (2005, p.136) and can be easily recognized among other. To expand Ryanair’s brand domain, Ryanair need to evaluate the needs of international consumers. This will help the airline establish how to reposition its existing brand in order to meet the needs of consumers globally. It will also need to expand its operations base by innovating some of its processes for instance adopting e-ticketing in order to serve all its global customers efficiently as put in Gelder (2003, p. 3). Ryanair needs to develop innovative ways of making its service accessible to the global consumer.

As argued in Karder et al. (2005, p.136) another concept in the unified theory is brand concept activation. This is achieved by ensuring that your brand reputation is constantly communicated on an international platform. Brand reputation relates to the established brand personality and identity as put in Kapferer (2008, p. 187). Ryanair will need to reinvent the brand personality to suit the international consumer and brand identity to incorporate the global culture. To be able to spread its brand reputation Ryan air will need to expand its promotional and marketing strategy to be able to reach the global consumer as put in Gelder (2003, p. 3).  This can be achieved through use promotional media that is accessible to the global community by use of media such as the internet.

According to Kapferer (2008, p. 183) the organizations brand enables consumers to develop positive or negative image towards the organizations products and services. The public image towards the organizations product and services determines the level of demand for the organizations product. Brand concept strength ensures that an organization keeps up with the needs of the global consumer through constantly reinventing their product, services and processes according to Karder et al. (2005, p.136). To increase consumer’s affinity towards its services and auxiliary product Ryanair will need to help the global consumer build a positive image towards its product and services as put in Gelder (2003, p. 3).  Increasing affinity towards the organizations product will help Ryanair to gain a large market share in the international market.

Another concept in the unified theory is brand association that ensures that an organizations products and services can be recognized through their brand globally as put in Karder et al. (2005, p.136).According to Gelder (2003, p. 3) brand recognition will help Ryanair to raise the awareness of its product and services. This can be achieved through reinventing the brand identity culture and personality to accommodate the needs of the global consumer according to Kapferer (2008, p. 183). Ryanair will also need to increase its brand communication channels and frequency in order to increase consumer’s awareness of its products and services internationally.

References

Dinnie, K. (2008), Nation branding: concepts, issues, practice. Elsevier, USA.

Doyle, E. (2010) Back to Business Basics: Six Useful Toolkits for small to Medium Enterprises. Xlibris, USA. Gelder, S.V. (2002), ‘General Strategies for Global Brands. As Retrieved on 30th May from http://www.placebrands.net/_files/General_Strategies_for_Global_Brands.pdf Henry, A. (2008), Understanding Strategic Management. Oxford University Press New York. Kardes, F.R., Herr, P. & Nantel, J. (2005), Applying social cognition to consumer-focused strategy. Lawrence Eribaum associates, New Jersey. Kapferer, J. (2008), ‘The new strategic brand management: creating and sustaining brand equity 4th ED. Kogan Page, London. Kapferer, J. (1997), Strategic brand management: creating and sustaining brand equity long term 2nd ED. Kogan Page, London. Legace, M. (2004), Mapping Your Corporate Strategy As Retrieved on 30th May from http://hbswk.hbs.edu/item/3888.html Rai, J. (2011), Brand Identity Prism (Joel Neol Kapferer) As Retrieved on 30th May from http://www.scribd.com/doc/4654258/Brand-Prism Stonehouse, G., Hamill, J., Tony, P. & Campbell, D. (2004), Global and transnational business: strategy and management. John Wiley & sons West Sussex, England. Appendix Product Life cycle Figure1: showing product life cycle as viewed on http://www.samcarrara.com/marketing/marketing/wp-content/uploads/product-life-cycle.gif Brand Identity Prism Figure2: Showing Brand Identity Prism as viewed on http://bp0.blogger.com/_RRH3vmny2gI/Rya8yK