Ryanair's Business Level Strategy: A Cost Leadership Strategy

2491 words - 10 pages

A company's business model is management's model of how the strategies they pursue will allow the company to gain a competitive advantage and achieve superior profitability.Business strategies are the actions management take to execute a business model.At the heart of any business level strategy is the objective of developing a firm-specific business model that will allow a company to gain a competitive advantage over its rivals in a market or industry. (Hill and Jones 2004 ). Ryanair's cost-leadership strategy is based on the intent to outperform competitors by doing everything it can to establish a cost structure that allows it to provide its air travel service at a lower unit cost than they can. At the very heart of this strategy is the intent to keep its fares as low as is conceivably possible and thereby live up to its name as "The Low Fares Airline". Ryanair, in pursuing this cost-leadership strategy seeks to achieve a competitive advantage and above average profitability by primarily focusing its attentions on lowering its cost structure. A company is said to have a competitive advantage over its rivals when its profitability is greater than the average profitability for all the firms in that industry. The greater the extent to which a company's profitability exceeds the average profitability for its industry, the greater is its competitive advantage.Hill and Jones propose that two major advantages accrue from a cost-leadership strategy. Firstly, they say, that if industry rivals that compete in the same price range or market segment charge similar prices for their products or services, the cost leader achieves superior profitability than these competitors because of its lower costs. Secondly they argue that because of its lower cost structure, the cost leader is able to charge a lower price than its competitors, and this gives it a competitive advantage. This is precisely what Ryanair strives to do. Although they offer customers slightly less in terms of customer service than the competition offer, essentially the value from the service is the same, and the considerably lower price attracts many more customers. Despite the fact that Ryanair has opted for the lower price option, the increased volume of its sales of seats to passengers will cause the company's profits to surge. Or so it is hoped. Hill and Jones also point out that the only way competitors can hope to win back passengers is through following suit and by lowering their prices to match those of the cost- leader. When this happens the cost-leader, in this case Ryanair, will be better equipped to withstand competition because of its lower cost structure. Because of this the cost-leader is likely to win any competitive struggle and continue to earn above average profits.The case-study informs us that the company realises that the achievement of its objective of being the leading no-frills airline in Europe depends on being the lowest cost airline. This, we are told "demands a...

Find Another Essay On Ryanair's Business Level Strategy: A Cost-Leadership Strategy

How to Build Brands within Framework of Low Cost Leadership Strategy

2890 words - 12 pages achieve this optimal level of production where fixed cost could be shared among produced units. The concept is also referred as Economies of Scale, a term demonstrating large production as a source of decreasing the total cost.Successful implementation of cost leadership strategy also gets benefit from Experience Curve effect.Despite of the fact that each firm requires to strengthen its resources according to its product and business environment

Market Driven Leadership and Strategy Essay

4819 words - 19 pages stock relevant products and have a higher stock turnover.By being able to predict the future, their sales and profits have remained high and this has enabled TRU to grow and become the largest toy retailer in the US. Since they are able to keep their large market share they kept their competitive advantage.Historic and present strategiesIn the past TRU's strategy was focused on a national level. There aim was to grow as much as possible within the

Pricing strategy of low cost airlines

5130 words - 21 pages routes while Ryanair generally has a larger share of the markets in which they operate. The table shows that Ryanair and buzz chose markets that tend to have less competition while easyJet and Go with their focus on developing business oriented markets face a much higher number of competitors in the markets they serve.Table 1: Low cost airline activity from London, Summer 2001Source: OAG2. Research ObjectivesThis study aims to investigate the

Knowledge Mangement: A Business Strategy

597 words - 3 pages Knowledge management is the main element of a business strategy that will allow an organization to increase the rate that it is able to handle new market challenges and opportunities. It does this by leveraging its most valuable resources; collective know-how, wisdom, talent and experience, or, intellectual capital. It gives the organization increased ability to find innovative solutions, compete and connect with its customers. This is the type

Business Strategy

6167 words - 25 pages employees.This report conducts an analysis and strategic plan for Electrolux by several techniques to keep developing and successfully penetrating in Vietnamese market that this company has already expanded in the early of the 1990s.CONTENTSDefine the context of Electrolux business strategy and explain the significance of stakeholder analysis.The context of Electrolux business strategy.Every organization needs a plan to develop their business

Business Strategy

2091 words - 8 pages organization reduce the time that would have been wasted in using trial and error methods which could also be a waste of resources (Duggan, n.d). Resources Required to Implement New Strategy Finance In any field of business including Sony Ericson requires finance for the achievement of the strategies outlined. Formulating a budget which contains the total finance requires is the best place for the management to start working on. The management must

It strategy vs business strategy

988 words - 4 pages In most organizations IT expenditure is considered as one of the larger if not the largest contributor to capital investment and expenditure. Technology has a significant effect on the business landscape of most organizations and the market place they operate in. The goal of IT as such should be directed toward the alignment of IT strategy with an organization's overall business strategy (Mulcay, 2001). It is argued though that the inability to

Business Strategy Models- A Critical Review

3712 words - 15 pages strategic business unit (SBU) in a diversified corporation. According to Michael Porter, a firm must formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries. Alternatively, according to W. Chan Kim and Renée Mauborgne, an organization can achieve high growth and profits by creating a Blue

Marketing & Strategy of A start-up Business

2884 words - 12 pages ." (Gurdal. T). Moreover, apart from yogurt, a lot of artificial sweetness is also used in bottled juice. Take the co-operative pure juice sold in the convenience store for example, it contains to be pure juice, however "it contains just as much calories and sugar as sugary soft drinks and sometimes, even more." (Mill. J and Sattar. N, 2014) Now an opportunity is given to start a business based on UEA campus, so the idea of opening a healthy and cost

Dell Business Strategy Change

1901 words - 8 pages prices. To reflect this, Dell's new business strategy aims to gain a sustainable competitive advantage by producing personal computers at a lower cost and better quality than their competitors. This essay now considers the customer value proposition of this new strategy. Dell's previous strategy saw customisation and delivery time as the most important customer features, but their new strategy sees cost and quality as the most important product

Cisco Systems Business Strategy

9630 words - 39 pages factors as: value added to the company, cost of implementation, organizational fit and risks involved, it was determined that developing a generic Globally Networked Business system with an accounting information system would be the corporation's best option.When evaluating the strategy along with the SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), the third strategy, being the development of a Globally Networked Business with an

Similar Essays

Cost Leadership Strategy Essay

1872 words - 7 pages relations among labor and management, an organization's culture, the quality of managerial controls). All these characteristics of a firm have an impact on a firm's economic costs.•Policy ChoicesIn general firms that attempt to implement a cost-leadership strategy will choose to produce relatively simple standardized products that sell for relatively low prices compared to the products and prices of firms pursuing other business or corporate

Nokia Business Level Strategy Essay

903 words - 4 pages corporate-level strategy was applied?What were the advantages to apply this strategy and what were the risks?What was the implementation method for the new business?Why do you think this method was preferred and why were the other methods not adopted?For this week's discussion board, I chose to analyze the corporate-level strategies that Nokia has adopted to reach the present level.Nokia currently is in the telecommunications solutions business

Easyjet Cost Strategy Essay

1846 words - 7 pages cost cutting strategy fit with its environment?· Absence of catering: short hauls, catering not necessary. It allows for faster turnaround. It is linked to shaping customers' expectations. Stelios's strategy is logical: he compares taking a plane to taking a bus. It is consistent that there should be no catering if the whole process is speeded up and if the event of taking a plane is more banal.· Absence of business class: this gains

Ibm: Corporate Level Strategy Essay

616 words - 2 pages IBM operates primarily in a single industry using several segments that create a value by offering a variety of solutions that include, either singularly or in some combination, technologies, systems, products, services, software and financing. This may lead you to believe that IBM has adopted a corporate level strategy of concentrating on a single business unit, but this is only half the picture. For IBM there is not one general type of