Ryan Air

1) We can see that Ryanair’s launch strategy is moving towards a focused cost leadership type and they tried to have competitive levels of differentiation by delivering first rate customer service and a simple ticket with no restrictions which helps create value for passengers. They are targeting only on specific travel between Ireland and England. There are some factors the Ryan brothers took into consideration before launching their strategy. Firstly, there are many Irish residents in the UK due to the long history of emigration and they tend to travel home for occasions such as weddings and funerals. Next, they chose one of the most lucrative routes possible for their competitors (Dublin – London is the only route on the Aer Lingus network that has the volume of business that allows a reasonable return on capital). In addition, they think that they will be able to attract passengers that travel by train or sea ferries through the lower pricing which helps increase the overall size of the market. Thirdly, using a lower price than their competitors will help penetrate the market by gaining market share quickly. Last but not least, they have a huge capital from their father’s investment that will help them to maintain their prices. These are the factors that make the strategy feasible.

Nonetheless, the success of this cost leadership strategy would require Ryanair to manage and keep costs low relative to other competitors by constantly rethinking how to complete their primary and support activities to reduce costs further while maintaining the competitive levels of differentiation. This will help prevent rivals from competing on the basis of price. Based on exhibit 4, if Ryanair is to charge half the price of BA and LA for a ticket, they are likely to make a loss or have low profit margins unless they can decrease their operating expenses. Assuming a generous 50% savings on variable cost as compared to BA and Aer Lingus, Ryanair will still find it very...