RYANAIR CASE STUDY

Ryan Air case study

RyanAir Case study

Part A

Porter's Five Forces: Threat of New EntrantsThreat of new entrants into the tourism industry is very high; there were a handful of low-priced carriers in the UK, flying mostly to holiday destinations. The market valuation of Ryan air become more than that of British Airways. Since then, there are many more new entrants in the low-cost carrier sector, posing major threats to the front runners, Ryan air and Easy Jet. A shake-out of the low-cost segment is taking place. The share price of Ryan air has begun to decline because of the threat of new entrants (Beech and Chadwick, 2006).

Factor 1

Economies of ScaleNew entrants have to match existing providers to be able to survive and grow. One appeal for new airline entrants is the forecast increases in UK air travel from 200 million at present to 500 million journeys in 2030. The World Tourism Organisation estimates the doubling of air journeys over the same time period. Matching the cost base of existing new careers, new entrants could control a share of the air journeys. Within this long-term trend, there are likely to be reductions caused by events of and the wars in Afghanistan and Iraq. This can lead to consolidation through takeovers, as this happened through the merger of Klm and Air France, TUI taking over Thomson and Thomas Cook merging with German-based tour operators. These have led to companies with a global presence in the tourism market (Robert M Grant 2008 Pp. 44)

Factor 2

Product DifferentiationA new entrant has to have a unique selling point to attract customers. In tourism, there is a major tendency among tourists to be tempted by special offers in the form of discounts, add-ons and novelty value. Tourists have changed destinations, or choose different offerings in the same destination, depending on what was on offer and at what price and quality, or have moved from high-cost to low-cost carriers for their travel. There are companies that look to develop a unique product and branding, such as Thomas Cook (offering Club 18-30) and Saga (providing holidays and other products for the 50+ age group), and ecotourist holidays by TUI (Robert M Grant 2008 Pp. 44)

Factor 3

Switching CostsThese are one-time for the customer in switching from one supplier to another. In booking a holiday, travel agents' shops tend to be in close immediacy to one another, and can be accessed by the internet and the telephone. Customers are used to shopping around and especially, in a culture driven by bargain hunting. Selecting which country to visit is influenced by whether it offers value for money (Robert M Grant 2008 Pp. 44)

Factor 4

Capital Investment and Working CapitalThis can be a considerable entry barrier. For example, Iberostar are expanding by creating resorts in Croatia and the Caribbean. These require large capital investment and operating costs and a long-term commitment, which is predicted on an assessment of economic and political stability in these ...