Porters Five Forces to Analyze the Competitive Environment in which Ryanair operates Bargaining Power of Suppliers

0 Comment

The customers of Ryanair are putting on them a lot of collective pressure so that they can lower the travel expenses and improve the quality of their airline services. The customers associated with Ryanair are enjoying a higher bargaining power since switching to other airlines with better services is very easy with little or no costs. In the case of Ryanair, the substitutes for their transport systems include railways, sea transport, and road transport and any strategy by them poses a threat to Ryanair profitability. However, Ryanair is still able to operate at a lower cost, leading to lower cost of services that attract more customers. The threat of new entrants in this industry is relatively low due to high costs involved in the initial stages of the business set up that many cannot afford. Economics of scale can only be enjoyed by big players like Ryanair and this makes other possible investors be scared away (O’Cuilleannain, Falle, Sobokta, Kleinert, Chassart, Farrell, 2004). There is also difficulty in gaining access to distribution channels that poses a barrier to new entrants. Since the airline industry is highly fragmented, competition is very high leading to low returns. In order to survive, Ryanair is constantly coming up with unique business models in order to outweigh their competitors and make reasonable profits. Ryanair is luck since it is based in Europe whereby European Union is a complete stable political region that provides a good environment for business to thrive. The integration of the European Union has provided an opportunity for this airline industry to expand its operations very swiftly without hurdles (Muller, 2011). The operations of Ryanair are also affected by the OPEC since its an organization that determines the fuel prices that Ryanair operates on.