Decoding Ryanair: Unveiling the Value Chain for Low-Cost Aviation

The Value Chain

In addition to studying the external environment characterized by threats and opportunities, it is also essential to analyze the internal environment of the company, to identify the types of activities that form the production process. An analysis tool that helps identify what are the key activities of the production process of Ryanair and which are auxiliary or complementary is the analysis of the value chain (value chain). The value chain, in fact, lets to consider the enterprise as a system of value-generating activities.

This value is defined as the price that the consumer is willing to pay if the service meets and satisfies fully their needs. Within the value chain it is possible to identify a set of five primary activities that directly contribute to the final output and secondary activities that support the process.

Primary Activities

Inbound logistics

Aiming to negotiate favorable agreements with its suppliers in order to achieve the low-cost strategy. Dependency on suppliers to deliver fuel as well as food, drinks and duty-paid products to be sold on-board; they need to be stored, handled and controlled upon delivery Fuel surcharges are not applied following the hedging strategy Choice of secondary airports away from urban centers of reference in order to reduce airport fees by reference to reduce airport taxes

Operations

Development of a policy to reduce costs on all fronts (no frills philosophy) Homogeneous fleet of aircraft (Boeing 737 only) reducing the cost for training, maintenance, purchase and storage of spare parts.

Get quality help now

KarrieWrites

Verified writer

Proficient in: Values

5 (339)

“ KarrieWrites did such a phenomenal job on this assignment! He completed it prior to its deadline and was thorough and informative. ”

+84 relevant experts are online

Hire writer

Quick turn-around times for aircraft that enables high aircraft utilization Point-to-point flights to offer direct non-stop journeys, avoiding the cost of providing through services for connecting passengers and delays caused by late arrival of connecting flights Maximizing the number of passengers per flight

• Outbound Logistics
• Check-in is almost exclusively online
• Choosing secondary airports that guarantees a quick turnaround time and provide a reliable service in terms of punctuality of flights
• Minimize lost or delayed luggage
• Marketing And Sales
• Purchase of the service

Using very few advertising agencies doing internal management (in-house advertising)

Low fares promotions

Controversial advertising: disseminate declarations of future controversial intent at issue is not actually brought to a conclusion, with the goal of "making news" and then generate free publicity

Services

Customer service simple and basic (low-cost), which uses few resources additional services for a fee during the flight (food, magazines, telephone, bathroom) agreements with hotels, car hire, insurance, guides etc .

..

Support Activities

Firm Infrastructure

In 1991 Ryanair lived an big change of culture and structure, when Tony Ryan decided to nominate Michael O’Leary such as new CEO who started to guide a young and expert team. He has a great charisma and he brought innovative ideas that determinated the succes of the company. From that moment the strategy of Ryanair was very clear: do high profits minimizing the costs (no frills), according to the idea that for the consumers the price is more important than the quality. Continuing the policy of cost reduction, the company has reduced the cost of the administrative offices in the area, lowering the number and the size.

Technology development

Ryanair is a pioneer in the application of new technologies, especially if they lead to actual savings. The use of the internet is a key element to its business, indeed the sales are handled almost entirely through its Internet website, from the booking of the flight until the time of check-in. It also uses modern technology (change tabs) for the reduction of noise pollution that also ensures a higher performance and a reduction in fuel consumption by 2%.

Human resource management

Ryanair currently has a team of more than 9,500 professionals. Low-cost strategy regarding to their staff is:
Staff Training low-cost; aircrew limited; contracts pay based on performance. It does not give discounts on the tickets to employees and some training costs, food, water, and uniforms are paid by the employees. Ryanair has been accused several times of the non-recognition of trade unions and poor working conditions (eg. Charging phones, acceptance obligation contracts, lawsuits)

Procurement

The fleet consists of aircraft from a single supplier (Boeing), which provides discounts on the price; Ryanair buys fuel. The price of that one increases from year to year, but despite this, the company does efforts to not put increase its rates, trying to buy at a relatively fixed price and to reduce the other costs. In addition, the company has outsourced complementary activities such as baggage handling and ground staff.