When carry out an external analysis it is generally accepted to use the PESTEL model, and for the assessment

of industry
attractiveness P5F is used. I both these models we look at the impact of external environment factors as possible threats and
opportunities for the business. PESTESL ANALYSIS: POLITICAL: Brexit referendum is a major factor which has greatly affected the
business environment in Europe. With the decision of UK to exit the EU, there is now a lot of uncertainty about the future of the
aviation industry in the region. With uncertainty over whether UK will be able to secure favorable exit terms with EU, the business
community is negatively effects as investors and customers are losing faith. Also with Brexit, the European customer loyalty with UK
airline is likely to disappear creating a halt in demand from the region. This poses a major THREAT for RyanAir as the main operating
hubs of the airline were between UK and EU. ECONOMIC: related to the Brexit referendum, the economic growth in both UK & EU
has become stagnant. With fluctuating currency and downward growth, the EU and UK environment have become more price
sensitive. This is predicted to result in the overall fall in demand for air travel and the demand for low fares from customers.
However, since RyanAir works as a LCC, it may experience a growth in number of passengers travelling with them, as more customer
look for cheaper air fares. This can become an OPPURTUNITY for RyanAir. LEGAL: The direct impact of Brexit will be the cancelation
of the Open Skies agreement which allows EU and UK airlines, to operate in each other’s countries. This may result in the increased
sanction for UK air carriers and result in the loss of European customer. If bi-literal agreements are not negotiated there will be high
chance that there could be no flights in and out of the U.K. to EU for a period of time. This poses a THREAT as not only is there a
chance of losing business but also of facing increased legal and license costs in future if RyanAir chooses to operate between EU and
UK.

PORTERS5FORCES: Existing Competition-HIGH (THR): the competition of LCC in European market is very concentrated with a few
companies competing aggressively for market leadership. The basis of competition is low fare cost as customers are highly price
sensitive. This means if RyanAir is not able to offer lower fares it will not remain competitive. The close rivals of RyanAir are EasyJet,
Norwegian, Air Berlin and other P2P LCC carriers. THREAT of ENTARNTS-LOW: due to high initial investment required to buy a fleet,
gain license and start operations, new entry is very low. Also to compete in LCC, economies of scale are needed to offer competitive
fares which is not possible for new entrants I short term. BUYER POWER-MED: individual passenger do not exercise much power
over airlines as they are not significantly increasing income. But since the switching cost for passengers is low and they can easy
choose to fly with some other airline at no opportunity cost, airlines tend to listen to customers. SUPPLIER POWER – MED (OPP):
suppliers for airline are usually the airports which provide landing and parking space. In European markets the primary airports have
high power as they have many airlines as customers and each add to the revenue. However for secondary airports the power is low
as they do not have many airlines landing and so the customers are few. For this airlines are able to negotiate better airport taxes
with secondary airports and not with primary airports. This is an OPPORTUNITY for Ryanair as it operates with secondary airports
and is able to get better airport fee rate. SUBSTITUTES-LOW: the only substitute to air travel are train and ferry which are not close
rivals.

For internal analysis we use Value Chain Analysis and VRIO to look into internal factors which effect business and see how each
factor is a strength or weakness for the business. VCA: the primary activities have a direct impact on cost generation and profit
margin of a business while secondary activities are support activities which aid/hurdle business from making a good profit margin.
Looking at RyanAir the following were considered the most important aspects of VCA. Primary Activities–OPERATIONS: for Service
Company like RyanAir process design and operations is most important. The operations are a STRENGTH of RyanAir, the reason is
that all process are aligned to generate least costs. ryanair has the lowest per seat cost(annexure II) which has allowed it to gain
profits, more so it has a turnaround time of 25 mins which has improved its operations capacity. Additionally use of one-type aircraft
fleet has also added to improved operations as maintenance costs are low and allows it to offer best low fares in the industry. SALES
AND MARKETING: this is a WEAKNESS of RyanAir, it has a bad public image for offering poor quality and charging for every extra
service, as was given in case study, a bad brand image is the marketing weakness of RyanAir which can result in loss of business in
future. On the secondary activities side, the strongest point for RyanAir is INFRASTRUCTURE: Management Focus and the culture of
drving all departments to lower costs at all steps of the process has been a major STRENGTH of Ryan Air so far. The vision of CEO
O’Leary to keep cutting costs has now made RyanAir a market leader. However, it will become difficult for Ryan Air when they have
to replace O’Leary. HRM: RyanAir has a very STRONG HRM system which has allowed for more economical contract with employees
and working environment which has promoted efficiency. This can turn into a problem in future if Ryan Air continues to operate
strict employee contracts as employees may get resentful. PROCUREMENT: is a STRENGTH of RyanAir. At present RyanAir has very
effective supplier relationship and contract management system which allows it to strike very economical deals with secondary
airports. This allows for RyanAir to land at airports at very low fee in bargain for a high passenger traffic. This can be used in the
future to form good strategic alliances with airports as was the intention of O’Leary.

VRIO: Vrio model looks into those capabilities which generate competitive advantage for a business and looks if they are sustainable
in future. For RyanAir the two strategic capabilities are Management Focus and Learning Curve Effects due to Economies of Scale.
(VALUE): If a resource adds value by enabling a firm to exploit opportunities or defend against threats. (Rarity): Resources that can
only be acquired by one or very few companies are considered rare and offer competitive advantage. (Imitation): A firm that has
costly to imitate or inimitable resources can achieve sustained competitive advantage. Organization: A firm must organize its
management systems, processes, policies, organizational structure and culture to be able enjoy competitive advantage.
MANAGEMENT FOCUS: (Value) The management focus offered by O’Leary of cost cutting, drives the entire organization towards
efficiency and is the core behind competitive adv of RyanAir. (Rarity) This is rare as management focus as it is driven from the unique
personal traits of a leader. (Imitation) Since it is based on the individual traits and leadership style of a person it could not be
replicated or copied. (Organization) The management focus has been set in into the culture because of which the organization has
been driven towards cost cuts. LEARNING CURVE: (Value) A valuable capability of RyanAir is to operate with economics of scale due
to its vast operations which has led to learning curve benefits. This is the main reason behind its success as LCC. (Rarity) In the LCC it
is rare to achieve such economies of scale and requires many years to build up such passenger traffic. (Imitation) The learning curve
cannot be imitated as it is a result of extensive operations and not a purchasable resource. (Organization) The learning curve has its
impact on all process and operations all together.

CURRENT STRATEGY: Focused Cost Leadership: is a strategy used by businesses to become competitive by low cost operation within
their industry. The focus is only on providing minimal services in exchange for the lowest price charge. Ryan Air is a no frills airline
which provides either no ancillary services or provides each additional service at surcharge such as excess baggage surcharge and
use of toilet on flight fee. The use of this strategy is primarily to gain an advantage over competitors by reducing operation costs
below that of others in the same industry and offering low prices to the customers. Reason why RyanAir is able to follow cost
leadership is due to its cost drivers; Low input cost, economies of scale, Experience curve gains and Process design. LOWER INPUT
COSTS: the low input cost for Ryan Air is generated from two aspects, one is the aircraft fleet and second is the employee cost.
RyanAir has a single type of aircraft fleet of which has allowed it to reduce its aircraft equipment costs and maintenance which
allowed it to keep the overall operating costs low. Secondly, RyanAir has very strict employee contracts which allows it to keep the
cost of labour at minimum. Controlled labour cost and increased efficiency helps RyanAir in reaching cost leadership. ECONOMIES
OF SCALE: the biggest advantage to Ryanair in the industry is that it has a very large passenger base as customers, due to repeated
flights into EU of around 30 a day, and of each flight flying with fully booked flights, the per unit cost of operating is greatly reduced.
It is due to this that Ryan Air has the lowest per seat operating cost then all the other LCC airlines operating in the industry
(Annexure ii). This has allowed it to attain at least 50% more cost savings then rivals and made it the leader in the market.
EXPERIENCE CURVE: also allows a company to become a market leader. In case of RyanAir, the long time since it is operating has
created many benefits. PROCESS DESIGN: Ryan Air’s main strength which has allowed it to be successful with a focused cost strategy
has been the excellence of its process design. From the internet booking systems, to the effective handling of baggages, punctuality
of flight schedule and fast turnaround time have all contributed towards RyanAir reducing its operating cost, using resources to the
maximum and attaining higher profit levels.

Ansoff Matrix: The Ansoff Growth matrix is another marketing planning tool that helps a business determine its product and market
growth strategy.

For Ryan Air to move into the future, it is important to come up with a strategy which is
responsive to the current enxternal enrviroment conditions, that is effects and consequences
of Brexit. And focus on the internal strengths to remain competitve. The strategic options
available for Ryan Air is to try for MARKET PENETRATION: the ost apparent option for future
strategy for RyanAir is to stick with its existing cabalities such as managemnt focus and
learning curve, strong relationship with secondary airports and process low cost efficiencies in
further penetrating the LCC segment and try to attract other customer segments apart form
holiday-goers. For exmaple, the best segment to target are the bsuiness travels who normally
prefer to land at primary airports and so are reuctant to use RyanAir. For this RyanAir could try
and attact them by offering priority boarding servies, airport to city transfer and other such facilities at low cost to motivate them to
use RyanAir. This is the safest strategy at present as it required little investment and does not change the exsting bsuiness model and
processd design operating in RyanAir. RELATED DIVERSIFICATION: RyanAir could decide to operate withn related industries which
link to travela nd holiday sector to gain from more revenues from different streamn. This could include offering holiday plans and
cheap road travel options to its pessangers whenthey book flight with RyanAir. RyanAir is already expanding into related revenue
streams as recently RyanAir has started using new technologies and applications to introduce a cheap flight comparison system for
other airlines as well and acting like Amazon for the airline industry. STRATEGIC PARTNERSHIPS: a strategic alliance that Ryan Air
could built is with the European aviation authorities to reallocate the RyanAir fleet to EU and operate within EU. RyanAir has already
expressed this in recent news where they warned that if Brexit produced unfavorable terms, will take its fleet away from UK and
operate from EU. This may be sensible option as with Brexit, the fall out of Open Skies Agreement may close the EU market for UK
carriers or else result in high taxes and license fee which will increase costs for RyanAir. However if this option is actually feasible is
questionable as will require high costs to move entire operations from UK to EU.