Please enable JavaScript.
Coggle requires JavaScript to display documents.
PORTERS 5 FORCES: RYANAIR - Coggle Diagram
PORTERS 5 FORCES: RYANAIR
Threat of new entrants
new entrants come into the market when profit margins are attractive and the barreir to entry are alow
barriers
high capital investment
restricted airport slots availability
need for low cost base
some new entrants dont always last a long time due to the reactions of existing players who ousted many of them with sustained price compietiton and other measure
slot system in operation in many airports means that new players couldn't get a strong foothold from the beginning
Economies of scale are crucial to the success of an airline
profit margins are thing and hard for any airport to turn a profit
extremely difficult for new players to enter considering the amount of capital required and the low level of profitability
This was in significant decline due to the pandemic
Fixed costs are high, buying or leasing planes is a large cost and the purchasing and maintenance of slots is costly, staff costs are high, airline often have difficulty turning a profit if market conditions re not favourable
demand shocks are also dictated by safety issues regarding terrorism or the socioeconomic stability of a countries destination
industry is vulnerable to macroeconomic changes
overall the threat of new entrants in the airline industry is relatively low, especially for a well-established however the company must remain vigilant and continue to innovate in order to stay ahead of any potential new entrants that may seek to disrupt the industry
Bargaining power of suppliers
Any business required inputs - labour, parts, raw materials and services. 5 main suppliers for airline industry: aircraft producers, airports, fuel suppliers, grocery suppliers, travel/advertising agencies
Aircraft producers/manufacturers
Boeing and Airbus
switching costs from one supplier to the other is high due to mechanics and pilots being retrained
overall, Boeing become dependent on Ryanair's success therefore the partnership with Boeing is very important.
Manufacturers form an oligopoly
highly capital intensive and therefore very few players in the industry
comparatively there is a large number of suppliers in the small jet market but the choice is still limited
Airports
little bargaining power as they are heavily dependant on one airline
competitors at bigger airports have greater bargaining power, Ryanair's policy is to try and avoid these airports
Ryanair have a reputation for delivering a consistently high volume of passenger traffic growth and has allowed for negotiated favourable contracts with airports
Fuel suppliers
there are a few main fuel suppliers
price of aviation fuel is directly related to the cost of oil
Ryanair controls these through hedging
commodities jet fuel weakens supplier power
Grocery suppliers
grocery suppliers have little bargaining power
Travel and advertising agencie
s
Ryanair does not use travel agents so it does not pay agency commissions
it uses direct marketing techniques to recruit and retain customers to extend products and services (customer relationship management) this reduces costs
use of simple and concise adverts that tell passengers that Ryanair has low fares
Overall strong supplier power
The prices are governed by world trade, therefore Ryanair cannot attempt to bargain the prices of jet fuel from the suppliers, therefore the bargaining of power of the supplier is high against Ryanair
Bargaining power of customers
Customers are price sensitive
it is possible to buy all airline tickets on line, customer know about the cost of supplying the service and theres almost no loyalty
Ryanair product is much the same as that from other competitors, so for customers it is easy to switch form one carrier to another
business account holders
travel agencies
consumers
only travel agencies have small bargaining power against airlines
consumers are mainly driven by price however the air travel is rarely bought for its own sake, highlighting service quality, and punctuality in regards to marketing material
Low cost carriers tend to attract mainly price sensitive consumers
Customers are only loyal to the low fares rather than Ryanair. If any player attempts to increase fare, buyers will shift to other airlines therefore this makes the bargaining power of the customers high
Competitive rivalry
most cost advantages can be copied immediately
not much differentiation between services, price is the main differentiating factor
low levels of existing rivalry as the two major low cost airline shave avoided direct competition by choosing different routes to serve
there may be some market growth but the majority from the the existing European airline carriers because it is difficult to differentiate services competition and is essentially price-based and difficult to ensure customer loyalty
Ryanair remain comparatively cheaper than its closest rivals in the European short-haul market despite the price increases due to its punctuality, fewer cancellations and least lost bags
large size of competitors operating in the industry, alongside high fixed costs and difficulties in exiting, contribute to strong rivalry
overall the degree of rivalry can be seen as strong
Competitors include Easy Jet, Wizz Air, Aer Lingus Group, Alitalia Compagnia Aerea Italiana and Vueling Airlines
In order to deal with the increase in rivalry, Ryanair should continue focusing on its competitive advantages and invest in its brand image in order to get rid of its competitive disadvantage
Threat of substitutes
no brand loyalty of customers
no swithcing to the substitue costs for the customer
other modes of transport e.g. Eurostar
due to Ryanair's low cost strategies it is not easy for others to enter the market and charge the same low fares
Can depend on route in question and varies according to cost and benefit of the alternative therefor particularly long distances and virtually no practical alternative to travelling by airplane
overall the threat of substitutes in the European airlines industry is weak because the industry is so specific and particular and tailored
Train fares are not cheap and take a considerately long time; Ryanair provides a comparison of their rates and the train fares over a number of routes encouraging people to use their services over non-flying means of transport