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How does Ryan Air's Cost Leadership Strategy Play a Role in the Way
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 How does Ryan Air’s Cost Leadership Strategy Play a Role in
the Way Customers Perceive the Level of Service in Relation to
Benefits and Price?

By
Pakzad Saleh
A Dissertation submitted to the faculty of the
University of Huddersfield

In partial fulfilment of the requirements for the degree

Masters of Science in Management with Marketing
September 2016
 2

Abstract
The primary aim guiding this study as a direction discipline is why some businesses get
greater efficiency as compared to others in the same industry. In this regard, there is an
increased level of competition in all the areas of the Airline industry which has subsequently
led to better focus on investigations behavior. The research concentrates on the external
characteristics and various aggressive techniques are applied to this effect. The objective of
this research paper is to analyze the relationship between the customers’ perception towards
the services and cost of leadership strategies. Explaining the practical aspect of Porter’s
standard methods in building companies, the strategic management team and the stakeholders
having a financial interest can comprehend the same entities performance. The performance of
each entity can be studied in comparison with their competitors in the same industry as well as
the operations that make their performance better than other companies. Simple random
sampling technique was used in the study and test performance of the same entities.
The data employed in the sampling method was collected through surveys and later
subjected to statistical regression, and correlation analysis. The research paper reviews the
results on the relationship existing between clients satisfaction based on the prices charged on
the services offered as well as cost management employed by the Airline Industries.
Furthermore, the research paper will check on the significant effects of the cost management,
differentiation, as well as the strategies on functionalities. In the final part of the research paper,
precise and well elaborate aggressive methods that should be incorporated in the management
strategies of Ryan Air to compete favorably form the core of the discussion on the research
topic. The intended result in the research paper is achievable using quantitative analysis to get
into the bottom line of the objectives.
 3

Table of Contents
Abstract 2
Table of Contents 3
Chapter One: Introduction 5
1.1 Focus of the Study Error! Bookmark not defined.
1.2 Conceptual Framework Error! Bookmark not defined.
Chapter Two: Literature Review 15
2.1 Introduction 15
2.2 Overview of Sustainable Competitive Advantage 15
2.3 Significance of Customer Expectations in the Aviation Industry 16
2.4 Low-cost carriers and competitive advantage18
2.5 Cost leadership strategy 19
2.6 Cost leadership strategy, customer expectations, and competitive edge 22
2.7 Areas of improvement in airline 24
2.8 Perceptions of customer to service prices and benefits 24
2.9 Changes in aviation industry due to changing prices 25
2.10 Porter’s Five Forces Model and generic competitive strategies 27
2.11 Strategies for addressing customer expectations 28
2.12 Strategies for maintaining competitive edge 28
2.13 Airline pricing behaviour in limited competition 30
2.14 Summary 31
Chapter Three: Research Methodology 33
3.1 Introduction 33
3.2 Research Philosophy 33
3.3 Research Design 33
3.4 Theoretical Framework 34
3.5 Hypothesis of the Study 35
3.6 Data Analysis Aspects 35
3.7 Question Layout in the Questionnaire 37
Chapter Four: Results and Analysis 39
4.1 Introduction Error! Bookmark not defined.
4.2 Demographic Data Error! Bookmark not defined.
4.3 Perception of Customers Error! Bookmark not defined.
4.4 Customer Perception on Ryanair products Error! Bookmark not defined.
4.5 Conclusion Error! Bookmark not defined.
 4

Chapter Five: Discussions 51

Chapter Six: Conclusions 52
Chapter Seven: Limitations and Future Research 39
References Error! Bookmark not defined.
Appendices 59
Appendix 1: Online Survey 59
 5

Chapter One: Introduction

1. INTRODUCTION

1.1 Focus of the Study

This research paper analyzes the effect of low-cost leadership on customers’ perception
on satisfaction and benefits as far as prices charged on the services and goods are offered. The
low-cost leadership strategy in business has a long history that dates back to Airline Southwest
in the early 1970s. Since then, several companies and firms in different sectors have
incorporated the techniques into their operations to provide essential goods and services at
minimum cost. In recent years, the economic crisis has been affecting the normal activities of
t businesses. The concept of low-cost has been used in various enterprises of airline industries.
Businesses would implement this concept even without conducting strategic research on its
success rate. Most commonly, it is used to entice and create loyalties among the customers
(Bilotkach, Gaggero & Piga, 2012).

During the mid 1970s, the term low-cost had become popular and several chains of
techniques such as price discounts and after sales service found their way into the sector. Since
then, it was necessary to differentiate between low-cost strategies and other techniques that
referred to commercial prices. In any case, such methods of lowering costs are apparently not
supported with well-elaborated transparent procedures and restructuring of company
operations. Moreover, some detrimental effects on the same entity activities might occur
(Bilotkach, Gaggero & Piga, 2012).

Moreover, the research paper seeks to address low-cost from a perspective of

management, and analyze the conceptual framework on which its development is anchored.
Considering the essential traits of low-cost strategies that have been analyzed by the early
academicians in the literature work, the analysis is geared towards some businesses, which
have been successful after applying the techniques. Finally, the research presents some
 6

conclusions regarding the significance of cost management in companies and firms intending
to implement the low-cost strategies in the near future (Bowman & Faulkner, 1997).

1.2 Rationale

The concept of low-cost leadership strategy is found in diverse fields of literature

related to both academic and managerial work. Low-cost leadership strategy is a term that is
particularly popular within research on firms and corporations. In addition, the term was used
in many of the studies that were conducted by different academicians in relation to Porter’s
generic competitive strategies. Porter presumes and analyses that differentiation and cost
leadership strategies can create as well as maintain a competitive advantage. The company or
the firm has to choose one of the two strategies if it is unable to use both due to the high expense
and extra human resources associated with the strategies. In general, it is understood that a
target market strategy is the third approach that applies to a niche market or segmented market
(Bowman & Faulkner, 1997). Porter claims that the low cost leadership strategy is achievable
when the firms or companies have first preferential access to raw materials, superior
technology. Such businesses or corporations can achieve economies of scale. Companies
enjoying incentives in their operations, for instance, better access to employees with high
expertise, reducing workers turnover and bulk purchases of goods under significant discounts
can easily penetrate sensitive markets. Such firms can adjust the prices they charge for goods
and services as per the price sensitivity of the market (Barney & Hesterly, 2012).

However, some researchers and academicians differ on the concept of low-cost

strategies by providing some variations on key aspects to take into consideration. For instance,
the achievement of competitive advantage is not only tied to charging low costs on goods and
services but by examining methods of maximization on the level of income. Revenue
maximization is only achievable if expenses diminish with the increase in the volume of sales
while fixed costs remain constant. Also, direct and indirect cost of production or manufacturing
incurred in any industry must be maintained as low as possible. In addition, the cost comprises
of distribution and marketing which in most cases affect the prices charge on the final products
offered in the market. The strategy needs control systems that allow efficacious management
 7

of costs inculcating a culture among stakeholders. Through this, firms applying the techniques
are in a better position of having an efficient management of the goods, inventories both long-
term and short-term as well as the supply chain used by the same entity (Bowman & Faulkner,
1997).

The above strategy has been incorporated in small and large enterprises, which
contradict some of the past literature reviews which accentuate that these practices are
applicable only to multinational firms and large corporations. The argument is affixed on the
view that large businesses are in good position of getting the best human resources, raw
materials, as well as favourable terms of purchase that subsequently contribute to economies
of scales. Currently, small firms also apply the same strategy since recruiting and retaining
personals with the right expertise is simple due to the abundance of a skilled labour force.
Secondly, the availability of raw materials of a firm depends on its proximity to the source of
raw materials as well as the relationship existing between the enterprise and the supplies.
Hence, the current studies on the technique override the early studies on the same subject matter
(Fedorco & Hospodka, 2013).

On the other hand, Porter refers to the differentiation as a strategy technique with the
objective of ensuring products and services offered in the market are perceived as unique in
some features. The product features considered in this matter include product design, brand
image in the market, the technology used in the production or the assembling, and the mode of
displaying the products for consumers’ accessibility. These features warrant the higher prices
of the goods as customers will perceive the products to be of high quality and unique. The
strategy is very active in differentiated markets where the price of the product has a low impact
on its demand. Despite the market requirements, monopolistic firms that have the sole power
of controlling the raw materials used in manufacturing the product can rapidly increase the
prices without facing stiff competition (Diaconu, 2012).

In addition, Porter highlights the dangers of companies losing their objectives when
they try to achieve the low cost leadership and differentiation strategy at the same time. Porter
 8

continues to point out the contradiction existing between the two strategies since they are
antagonistic in their objectives. The differentiation strategy of any firm in most instances will
generate the cost that low-cost approach strives to eliminate by all means. Over decades, the
two generic strategies have been progressively revised by several corporate management
professionals and experienced authors to create a hybrid plan. In the context of airline
industries, firms such as Ryanair Easyjet, Clickair, Southwest Airlines, and Vueling apply cost
reduction as differential elements for their services (Bambang-Baroto, Bin-Abdullah & Wan,
2012).

In the United States of America and Europe, there are emerging trends among various
Airline companies offering high quality services at affordable costs. The trend has influenced
other related companies offering Airline services to also follow the trend to remain competitive
in the same industry. These companies have to use the two strategies efficiently to avoid the
conflict between satisfying clients’ needs and minimization of expenses. The idea of
combining both techniques was supported by authors such as Hill, Hall, and White in the early
and late 1980s. They conducted their studies based on empirical work to confirm the
combination of the two strategies in providing competitive positioning in the market. The final
report of the survey indicated that under certain scenarios, firms using low-cost approach could
also use differentiation technique to attract the customers. Its application was supported by the
fact that clients who purchase high-cost services often associate them with good quality. For
such enterprises, to maintain high performance, Kim (1999) and Maugborgne (2004) proposed
that these companies should maintain a high level of innovation to remain competitive and
relevant in the market. In the world where resources for production are scarce in their nature
and supply, change has compelled the introduction of lean manufacturing methods as a way of
mitigating cost of production and low-cost strategy leadership. The technique allows such firms
to remain competitive in all types of operational environments. According to Naranjo (2009),
for lean manufacturing to be effective, efficient management information system must be set
and developed in the same plant to guarantee proper and timely planning of the operations
(Naranjo, 2009).
 9

The works of early researchers such as Alamdari and Fagan in 2005 regarded the
Southwest Airlines launched in 1971 as the initial model company of low-cost airlines. The
characteristics of its operation, which several authors have considered different from traditional
companies, are in line with the strategies of low cost leaderships. Features such as a fleet of a
single model practiced by Airbus A320 or Boeing 737, high utilization of a fleet of 11-12 hours
in a single day and unnumbered squares without catering free services on board are examples
forming the basis of reducing operational expenses. Other fleet firms such as Ryanair and
EasyJet followed the same method of operations to aid in their healthy competition with the
Southwest Airline industry. These companies could reduce unit cost by 30% in comparison to
traditional firms operating under the same capacity. Globally, airline corporations in Europe
tend to follow original models, which have been designed earlier, whereas U.S. firms have
changed their operations. The change in the U.S. airline companies is evident since these
entities tend to use hybrid operation methods. Therefore the entities are capable of offering
products and services of better features but at low costs (Bambang-Baroto, Bin-Abdullah,
Abdullah & Wan, 2012).

The rising number of worldwide passengers using these air fleets indicates the
development of the air transport market including low-cost companies. The indisputable
profitability is fueled by the implementation of both low-cost and differentiation strategy in the
sector. The total market shares of Europe comprise of more than 80 million passengers. In the
U.S. the number is slightly low due to stiff competition from Canadian firms offering the same
services (Barbot, 2006). However, the study finds the high volume of users of the services not
to be significant in any economy if high profitability does not accompany the operations of
these entities. Ryanair and EasyJet were the two European companies to be more profitable in
the disastrous year the sector experienced, 2001, (with operating margins of 26% and 12%,
respectively). Southwest is the only airline in the history of aviation that enjoyed benefits for
30 consecutive years (Anonymous, 2006).

However, there also have been unsuccessful attempts with the same strategy; Buzz and
Virgin Express are the two companies that departed from the original model, but the outcome
was worse as compared to those firms that applied the original design strategy (Alamdri &
 10

Fagan, 2005). Conclusively, it is worth mentioning that a critical factor of success in the airline
business has been in the management policies and regulations. Low-cost model formulation
and implementation form a core factor in businesses with high fixed costs and limited capacity.
The control of the rates by the demand is a critical element for the profitability of the firm.
Moreover, the experiences in other sectors have been studied in depth by other professionals
as there is the case in the automobile industry (Malighetti, Paleari & Redondi, 2009). The
market is deemed to be mature enough to overcome any operational and final crises as it had
done in the past during the world’s greatest economic depression of the 1930s.

The automobile sectors have incorporated lean production and are going green in their
production to reduce the overall costs of the companies’ maintenance and servicing. Some
investors in the automobile industry have resorted to Henry Ford, a visionary of the low-cost
concept cars; the strategy reduced the competitiveness in the market through differentiated
while charging low prices to create loyalty among the current clients as well as attracting new
customers. In the long-run, the industry could make some supernormal profits. During the
1950s, some automobile industries in the second world economy such as India had the process
of launching the projects frustrated by red tape bureaucracies. The lengthy regulations and laws
requirements lead to several foreign investment firms having an interest in automobile looking
for investment opportunities in other countries. The shift by these investors was on the ground
that such economies could not allow the application of the two strategies in their operations
(Heywood & Kenley, 2008).

Weiss (1973), a renowned expert, raises the possibility of the expansion of the car
market in third world developing economies if the strategy of low-cost could be used without
incorporating differentiation aspects. He substantiated his arguments on the ground that these
economies had little market growth and hence comprising of customers of low purchasing
power. The main aim of the investors is to find the best ways of penetrating the market, which
has been constrained by several obstacles of tapping the semi-skilled labor force in the market.
In the event that such barriers were removed, the companies could expand their operations and
produce goods at low cost to attract the existing market. Also, the strategy would allow
 11

accessing the markets of the same products that were blocked by the restrictions posed by their
respective governments (Bilotkach, Gaggero & Piga, 2012).

The two cases that highlight Costa’s (2008) ideas on new trends in low-cost strategies
in the automobile sector are the Logan of Renault and the project Nano Tata. The combination
of two strategies, according to the sectorial experts, will allow the forecasting of the benefits.
The benefits are expected to rise shortly by increasing participation from 8% to 10% within a
span of four years from the year 2008 to 2012 of production capacity. The first car built of low-
cost modern is the Renault Logan launched in the year 2004, and by the end of the year 2007,
its sales had increased above 460,000 units in 51 countries. The model represented the most
sold model of the company and represented 15% of its sales (O'Doherty, 2008), and its parallel
projects developed by Mahindra specifically meant for reducing costs. Simplifying the total
number of the components, as well as deleting some electronic systems used in the process
could mitigate the cost incurred. The simplification acted as incentives for companies based in
Eastern Europe for the manufacturing process before distributing the final products to other
nations in Africa and Latin America (Niththyananthan, 2009).

The second case analyzed is the launch of Tata Nano Indian supplier in the category of
so-called ultra-low-cost. The products developed were meant for the consumption of pyramid
consumers from the third world economies, which were characterized by emerging markets.
Though the market for such products was growing gradually, the main challenges for ultra-low
cost products were the issues of security. The available insurance companies appeared to cover
the risks as premium, such firms paid low in comparison to what was offered by the same firms
in first world countries in Europe and the United States (Prahalad, 2004).

In both cases, the automobile sector shows a layout of each of its components and a
process of innovation in product and technology, which adjusts the costs to make a viable and
desired final price. The desired final price is required to be in line with the concept of design-
to-cost which attempts to estimate the cost of products/services from the start of its design and
is alligned with the desired price (Michaels & Wood, 1989). In addition, both cases have
 12

generated the idea that many providers strive to invest in low-cost technologies to enter into a
segment of high potential growth by applying alternative uses of components designed for other
models such as injection systems, braking systems, anti-lock systems or radios for both models,
and the airbags or EPS systems.

Another notable aspect in both cases is the decision to bring the development and
production processes to emerging countries. Edmondson (2007) points out how R. N. Tata has
been defined as a key factor of success in the Indian engineers market due to its ability to reduce
the cost of accessories. This is a skill developed after years of directed commercial activities at
the base of the pyramid of consumption. In the hotel sector, for its part, business models
with low-cost strategies can be found in brands like Formula 1. Formula 1 is probably one of
the pioneers in the sector in European markets followed by Sidorme, and Travelodge.

In the hotel sector, the management of costs can lead to the ability to offer low prices
for services and products. However, this strategy does not match with the low-cost, although
they are offered as such by issues of fashion. In the United States, the hotels’ budgets are clearly
the basis of low-cost strategy. These are cause by associated with the elements of differentiation
in the design, the style of the decoration, the common spaces, purchases on the Internet, and
location, which is not necessarily outside the big cities.

Travelodge is an exemplary case of application of low-cost strategy in a string of

medium size operations. Its goal is to eliminate any unnecessary element in the rooms, promote
an online reservation system that avoids intermediaries (85 percent of sales
are online at Travelodge), and develop a staff with a great flexibility and a comprehensive
measurement of each of the actions that are carried out. Client satisfactions are achieved by
reducing unnecessary costs without losing quality or hygiene. To make reservations, there is
an online payment made. Therefore, the process insures a fast check-in and illuminates the
need to check-out. Moreover, there are no extras in the rooms, which saves the cost of
purchasing materials, management of suppliers and the cost of staff responsible for
replenishing these items. The chain has more than 390 hotels in the United Kingdom and plans
 13

on building 200 more hotels as an objective of improving its competitiveness in the Spanish
market. The chains have achieved a recognized brand in the segment and have a level of
occupation of 80% that guarantee their profitability.

The large part of the marketing budget is devoted to public relations and to work on the
positioning of search engines. There are constant studies to determine the behavior of the
customer, whom they seek to build loyalty with through different marketing actions that are all
measured by the profitability levels. The marketing budget emphasizes on the business model,
the management of rates, and the yield management, which are typical instruments in the
business of perishable products and services with a fixed capacity. Therefore, practicality,
simplicity and new technologies allow the low prices (35 euros) charged for goods and services
and low prices offered for advance bookings (10 euros). These are very significant in measuring
the customer objective (Armendia, 2010).

1.3 Formulation

1.3.1 Aim

Air transport is becoming a dominant method of transport among passengers. For this
reason, low-cost airlines are becoming very popular in recent times. This literature reveals that
there has been a number of studies conducted on the effect of cost-leadership strategy on
consumer perception towards an entity’s level of service. As a result, this research specifically
concentrates on the customer’ perception towards an entity’s level of service in terms of price
and benefits. The results of the study will be used to provide recommendations for RyanAir to
improve the quality of their and maintain low costs.

1.3.2 Objectives

The research objectives are:

 14

1. To assess how RyanAir uses cost leadership strategy to remain a market leader in the
low-cost airline industry.
2. To assess customers' perception on the level of service provided by RyanAir.
3. To analyze the effect of RyanAir's implementation of cost leadership strategy in the
way customers perceive its level of service in terns of price and benefits.

1.3.3 Research Question

How does Ryan Air’s Cost Leadership Strategy Play a Role in the Way Customers
Perceive the Level of Service in Relation to Benefits and Price?
 15

Chapter Two: Literature Review

2.1 Introduction
In this section of the research, a review of prior studies that have investigated cost
leadership strategy and its influence on the way customers perceive price and benefits. Several
works published by authors who have explored cost leadership strategy in airline industries
have been reviewed. The main areas addressed include significance of customer expectations,
cost leadership strategy, changes the aviation industry faces because of changing prices,
strategies the airlines adopt for meeting the expectations of the customers, growth of customers
perceptions in terms of service concerning price and benefits and strategies for having a
competitive edge in the market in terms of cost.

2.2 Overview of Sustainable Competitive Advantage

In marketing, it is challenging to accomplish sustainable competitive advantage (Alen
and Helms (2006). To gain a competitive advantage over the major competitors, an
organization offers the customers greater value through the provision of greater services,
lowering the prices or offering high-quality services. Cost leadership strategy is among the best
methods for sustaining competitive positions. Allen et al. (2007) pointed out that a cost
leadership strategy is successfully implemented when the enterprise designs, produces and
markets similar products or services more efficiently compared to the major competitors. The
firm may access raw materials or better proprietary technology to lower the costs.
According to Aydemir and Haytural (2015), the airline's industry is faced with growing
costs of operations and evolving expectations of the customers. Bubalo and Gagger (2015)
point out that because of stiff competition in the airline industry, companies have prioritized
on customer satisfaction and royalty relations. The aviation sector adopts several strategies to
survive in the competitive markets as well as maximize the market shares (Alen and Helms,
2006). One of the strategies to achieve such goals has been the focus on cost leadership
approach (Malighetti, Paleari, &Redondi, 2009).
Ryanair is a prominent Irish airline of low-cost stature having a primary base of
operations in London Stansted and Dublin airports. Ryan Air is a major low-cost airline with
its headquartering in Ireland. It has the primary bases for operations in London Stansted and
Dublin (Malighetti, Paleari, &Redondi, 2009). It has expanded from being a small airline to
one of the largest carriers in Europe. European Pioneer of Budget Ryanair airline was
established in 1985 to provide scheduled airline service between Ireland and the UK as the best
option to AerLingus, the major national Irish carrier (Chung & Whang, 2011). The company
 16

experienced significant challenges through the early 1990s. By 2007, Ryanair flew out of 18
European airports with a fleet of over 100 new Boeing 737800 aircraft. In a bid to continue this
aircraft to experience impressive growth, Ryanair publicized plans to double in size by 2012.
Much of Ryanair's success was attributed to cost leadership strategy.
In order to keep costs down, Ryanair reduced airport charges by avoiding congested
major airports, selecting regional and secondary airport destinations that were anxious to
increase passenger throughput (Malighetti, Paleari, &Redondi, 2009). Still not yet satisfied
with the low-cost position, Ryanair introduced cost-cutting measures for passenger check-in
and luggage handling in 2006. The primary premise was that the airline would provide
exceptionally no frills, basic service and that consumers would pay for any extra products or
services they needed such as excess luggage, snacks, or drinks (BambangBaroto, Bin Abdullah,
& Wan, 2012).
Ryan Air is a preferred airline by customers. Ryan Air operates on the philosophy of
low fares, few cancellations, and few losses in passenger baggage and on-time record
(Malighetti, Paleari, & Redondi, 2009). Such unique commitments and explain why customers
demand it. With low charges on the fare, the costs reduce; hence the planes fly without empty
seats. The airline structures the prices such that the planes fly when full of passengers. The
airline saves of costs by using online booking platforms. The cost for paying travel agents is
thus eliminated. Additionally, using a single type of planes helps the airline incur low
maintenance costs, keeping fuel and other bills as low as possible (Chung & Whang, 2011).
The aims of the study were to understand the significance of customer expectations in
the aviation industry, evaluate the level of service that a customer expects from the air travel
provider and evaluate the cost - leadership strategy adopted by Ryanair for meeting the
customer expectation and be ahead of the peers. Moreover, the study sought to determine areas
of improvement in the adopted strategy of Ryanair regarding customer satisfaction.

2.3 Significance of Customer Expectations in the Aviation Industry

The majority of the customers in the airline industry raise concerns over employee
interactions, seating packages, and priority treatment, forcing many airlines to re-think more
about service retailing. Customers in the present era are not ready to get low-priced products
or services (Güreş, Arslan, & Yılmaz, 2015). They demand high standards of services delivered
for responding to diverse expectations. Customers now demand high quality because
customer's needs and perceptions have changed throughout the years following technological
developments, globalization, and increased competition. With globalized aviation industry, the
 17

majority of the airlines are competing for the customer base. There exist several low-cost
carriers’ airlines competing with Ryanair (Jeddi, Renani, Khademi, Shokri&Noordin, 2014).
Thus, customers select airlines offering high quality of services.
The airline industry faces major problems including dynamic customer needs,
increasing operation costs and global challenges. Customers have diverse needs regarding
business needs and leisure. Their wants are shaped by attitudes, preferences, and behaviors.
The emerging markets are increasingly fuelling cultural distinctions and travel growth.
According to Jeddi, Renani, Khademi, Shokri and Noordin (2014), since the aviation industry
is very competitive, airline companies must comprehend and determine the significance of
customer satisfaction, loyalty relationships, and passenger expectations. Metwally (2013)
states high competition in the airline industry has led to companies being concerned with
customer loyalty and satisfaction.
Passengers require a high level of services from the air travel providers. For instance,
Namukasa (2013) states quality of airline services including in-flight, pre-flight and post-flight
significantly affect passenger satisfaction. According to Rao and David (2015), customers like
to see airlines as retailers instead of being a transport mode with their expectations ranging
from staff interaction, seating package, priority treatment and other airline requirements. The
demands from customer’s call for consideration strategies relates to exceeding the expectations
of diverse customers. Most of airline businesses suffer from efficiency. In some cases, high
drive for business efficiency interferes with the delivery of good services to the customers. As
many airlines strive to lower their operation costs, they standardize services for several
customers. Therefore, by standardization airlines suffer from losses whereby customers are
treated in the same manner in a dynamic customer’s needs industry. Since many consumers in
the airline industry are not generic, it is imperative for firms to realize this and react flexibly to
diverse types of customers and their behaviors. Thus, successful businesses achieve high
effectiveness levels by delivering appropriate products or services to the consumers and
operative at effective costs.
Alignment of all business sections is vital in ensuring a match between customer
expectations and experiences. The majority of the firms in the aviation industry struggle with
the management of diverse expectation by customers. Moreover, they have different
disconnection linking management expectations to actions the service team performs to meet
customer requirements. This illustrates the difference between speed and or productivity with
service quality. To enhance positive experiences among customers, companies’ priority must
 18

be customers and employees. Also, companies must design their processes, systems and
promotional messages bearing in mind customer expectations. For Ryanair to remain
competitive in the global market, it has always prioritized on flexibility rather than efficiency
(Malighetti, Paleari, &Redondi, 2009). This guarantees customer prioritizing, hence improving
customer satisfaction (Jeddi, Renani, Khademi, Shokri&Noordin, 2014).

2.4 Low-cost carriers and competitive advantage

Since 1973, people prefer low-cost carriers in comparison to other traditional airlines
(Chung & Whang, 2011). Regarding air freedom in Western Europe, adjustments in networks
are imminent. The preference of low-cost carriers to other airline networks relates to changes
to the liberalization of the market. The entrance of low-cost carriers in the airline industry leads
to increase in profit. They also generate profit from parking fees and allowances.
Ryanair has managed to execute its low-cost model. The low-cost generic strategy
framework has particular operating and product attributes. Common attributes of the products
are: a) simple and low fees; b) point to point flights; c) high occurrences; d) high-density
seating; e) lack of free drinks and meals; f) lack of interlining; and g) ticketless travel and even
considering charging for toilets on board. Operating attributes are a) secondary airports with
short turns; b) short routes; c) single aircraft having high utility; and d) competitive salaries
with improved productivity. While the Ryanair’s cost leadership strategy has undergone some
changes, it has effectively implemented the low-cost strategy framework (Wall, 2016;
Malighetti, Paleari, &Redondi, 2009).
Most of the efforts to establish low-cost carriers are operating with no frills have not
been successful (Chung & Whang, 2011). Applying cost leadership strategy with other
strategies such as differentiation in airline industry may result in discouraged employees,
dissatisfaction among the customers and poor quality of services as mentioned by Michael
Porter’s‘’Generic Strategy Stuck in the middle’’ rule. The investigation by Graf (2005) is a
qualitative study of five firms that sought to examine the establishment of airlines adopting the
low-cost strategy. The study concludes that low-cost airline activities do not meet the needs of
high-end consumers who demand extra onboard frills and convenience in return for a higher
airfare. As a result, adjustments are necessary. However, this can negatively affect low-cost
carriers. The study is considerable as it explains the disadvantages of having a low-cost fleet
line within an airline group. It gives a different perspective leading to a better critical
understanding of the airline industry.
 19

The research presents evidence in which it is apparent that low-cost carriers lack a
specific segment, and the attitude of travelers creates the division instead (Chung & Whang,
2011). The study also concludes that low-cost carriers such as Southwest have a competitive
edge over companies that focus on high-end consumers in operations. While citing efficiency
in coordination as critical, the scholar states that affordable airlines will easily penetrate
European markets (Chung & Whang, 2011).
Requesting services from numerous destinations or airports enable airlines such as
Ryanair to discuss good terms and in the interest of the airline which is achieved through long-
term contracts with major airports. Formation of partnerships in this context results in increased
profits. Some airlines such as EasyJet in Europe attempt to create more competition in the midst
of airports and alter perceptions by negotiation with major airports, only to announce that they
aim at only adding fewer routes compared to the airports requested (Murakami, 2011). Airports
subsequently compete on conditions not different from the policy competition amid nations
using investment incentives aimed at attracting foreign investment (Chung & Whang, 2011).
Therefore, numerous airports have paid Ryanair to provide services as the airline attracts a
great number of travelers. Airports including Stanstead are better positioned in regards to
bargaining position since more than one low-cost carrier runs from the Stanstead airport.

2.5 Cost leadership strategy

Cost leadership deals with the organization of all resources around the production of
goods or services through minimum possible costs in comparison with major competitors
(Jeddi, Renani, Khademi, Shokri&Noordin, 2014). The strategy includes exploitation of
production scale and definite economies to produce high-quality products with improved
technology (Althonayan& Sharif, 2010). Having the minimum cost related to service or good
production help in positioning the business in an exceptional position for charging customers
lowest prices in the current market (Murakami, 2011). Furthermore, cost leadership as the
establishment of competitive advantage operates based on company size, efficiency,
cumulative experience and operational scope (Heywood & Kenley, 2008). Organizations that
fully adopt cost leadership must offer leading products and high quality of services at
affordable costs to diverse customers and apply economies of scale which is key for a cost
leader. Since organizations using cost leadership do not compete solely based on prices, they
derive their effectiveness from management and cost structures.
Low-cost businesses prove to be effective when the buyers are sensitive to prices and
customers in the market have more interest in price rather than brand name. Product
 20

differentiation is therefore attained through simple processes and the presence of many buyers
with high bargaining power (Michael, 2013). The basic idea in this situation involves the airline
having lower prices compared to its major competitors (Murakami, 2011). This will help in
gaining more market sales and shares, surpassing other competitors from the market
(Althonayan& Sharif, 2010). Organizations with cost leadership strategy have managed to
remain competitive such that major competitors have difficulties matching them and the
prevention of new entrants. The organizations may not survive or compete in the market when
the competitors can duplicate their strategy while implementing cheaper costs or uniqueness
(Jeddi, Renani, Khademi, Shokri&Noordin, 2014). For successful cost leadership strategy, the
available resources must be rare, precious, difficult to substitute and complex to copy (Michael,
2013).
Successful application of cost leadership strategy requires that the organization’s
overall value chain total costs are lower compared to main competitors (Jeddi, Renani,
Khademi, Shokri&Noordin, 2014). This can be accomplished through execution of value chain
models and reconstruction of the organizational value chain. Implementation of value chain
models should be efficient, effective and difficult to duplicate in comparison with competitors
(Murakami, 2011). Some appropriate initiatives in this regard include utilization of common
components in dissimilar products, modification of plan layout, implementation of newer
technologies, using simpler product designs and using alternative operations (Althonayan&
Sharif, 2010). Reconstruction of organizational value chain help in the elimination of several
cost producing activities. According to Michael (2013), the following conditions enable
effective application of cost leadership strategy:
i. Dynamic price war amongst the competitors
ii. Similar products among the competitors with similar distributors and suppliers
iii. Few methods for product differentiation attainment
iv. Similar use of goods or services by customers
v. Openness of consumers to low costs
vi. Numerous buyers with stronger bargaining power
vii. New entrants using low prices as means for establishing customer loyalty and attracting
many customers
Factors that underline cost leadership strategy used for competitive advantage as well
as relate to costs include accessibility to energy and raw materials, technological software and
economies of scale (Jeddi, Renani, Khademi, Shokri&Noordin, 2014; Althonayan& Sharif,
2010). Using cost leadership strategies has enabled Ryan Air and other airlines as low-cost
carrier operators to succeed in the airline industry. As economies of scale are key as a cost
leader, the company size influences the economy of scale, implying that larger companies can
 21

leverage on cost advantage over the smaller ones because of larger economy of scale in several
business sections including service, marketing, and distribution (Barney &Hesterly, 2012).
Also, larger organizations have an advantage regarding been flexible and capable of reducing
overhead costs and another cost which smaller organizations are not able to, resulting in
increased profits.
In the airline industry, passengers traveling through the airline and number of seats
present define the company size (Merkert& Morrell, 2012). The larger the company size and a
high number of seats, the larger customer base the organization attracts. Therefore, increasing
the number of airplanes results in an increase in the market share. In the market with high
demand, increasing the number of airplanes result in increased profits and flexibility while
reducing the overhead costs or cost per unit. Additionally, it permits the airline to operate using
additional routes, increasing the market share (Jeddi, Renani, Khademi, Shokri&Noordin,
2014).
Ryanair focuses on measures for expansion or growth. The airline has additional routes
connecting United Kingdom to several locations or countries in Europe (Wall, 2016). By
increasing the rate of services delivered on current routes, the company has encouraged
expansion. The strategies adopted by Ryanair in expansion and growth efforts focused on
delivery of high services, hence increased the level of customer satisfaction with minimum cost
(Malighetti, Paleari, &Redondi, 2009). The airline has achieved expansion through the
establishment of new and domestic routes in European Union nations, creating more bases in
Europe as a continent (Wall, 2016). Availability of common flights from one point to another
within short routes before accessing regional and secondary airports is a cost leadership
strategy for encouraging competitive edge (Michael, 2013). Providing frequent flight services
and the availability of short flights eliminate the need for frill services among major low-cost
carriers.
Cost leadership strategy influences the way customers perceive service to deliver
regarding price and benefits (Güreş, Arslan, & Yılmaz, 2015). It influences the way customers
perceive price and benefits since the majority of the passengers prefer low prices charged for
better beneficial services. The aviation industry provides guidelines on how to establish pricing
strategies while maintaining customer satisfaction and quality of services (Wall, 2016;
Gustavo, 2013). Thus, there is a need for a framework of establishing a cost leadership strategy
for ensuring that customers perceive service levels and highly satisfying regarding price and
benefits (Namukasa, 2013; Metwally, 2013). This literature highlights the role of cost
 22

leadership strategy by Ryanair airline in customer perceptions of service levels regarding

benefits and prices.

2.6 Cost leadership strategy, customer expectations, and competitive edge

The cost leadership strategy has a major effect on the perception of customers on the
subject of services the airlines provide regarding price and benefits. In the environment with
high competition, where EasyJet, South Western Airlines, and other airlines have a
considerable portion of the market share, Ryanair has dramatically developed as a leader in
Europe’s low-cost airline industry. Being a cost leader in the market, Ryanair sought to gain
competitive advantage. With customers being price sensitive, the airline gained a larger market
by being the cheapest in the short haul routes with low price strategy (Malighetti, Paleari,
&Redondi, 2009). This ensured continual investment because of large market share. Business
strategies within organizations demonstrate how companies develop and sustain their
competitive advantages in the relevant sector. Ryanair’s main major strategic objective involve
establishing the company as leasing airline in Europe with low fare traveling through
continuous improvement and provision of services at a lower price (Wall, 2016; O’Higgins,
2007). Additionally, the company’s objective is to provide low fares to passengers to ensure
an increase in customer base through continuous improvement of operating efficiencies and
cost containment (O’Higgins, 2007). The success of the airline can, therefore, be attributed to
the existence of several locations with dissimilar time occurrences, online booking process,
new routes and lower fare (Jeddi, Renani, Khademi, Shokri&Noordin, 2014; Malighetti,
Paleari, &Redondi, 2009).
To remain competitive in the market, Ryanair has significant elements. Firstly, low-
cost strategy serves as a significant element of the business framework (Malighetti, Paleari,
&Redondi, 2009). Low costs stimulate demand from business travelers and leisure individual’s
sensitive of fares and have other alternatives forms of transportation or movement (Wall, 2016).
According to Malighetti, Paleari and Redondi (2009), Ryanair is prominent in Irish airlines,
offering low cost in its primary base of operations in London Stansted and Dublin airports and
other regions. It is known for rapid expansion achieved through the business strategy of
leadership in cost, a strategy for attracting and retaining customers demanding products or
service at low cost (Cowden and Sellnow 2002). Secondly, the airline focus on incurring low
operating costs by majorly controlling personnel productivity, aircraft equipment, accessibility
and handling costs in airports and customer service cost (O’Higgins, 2007). The third key
element is customer service; the company aims at delivering best services to customers with
 23

low budgets. Furthermore, the airline has accomplished few cancelations of flights, few
luggage loss and better punctuality in comparison with competitors. Effective focus on
customer service delivery and running relevant operations in are key determinants of achieving
improved customer service satisfaction (Zhang, Hanaoka, Inamura, &Ishikura, 2008).
The low-cost strategy enforced by Ryanair plays a positive role in customer perception
towards service level concerning benefits and price (Wall, 2016; O’Higgins, 2007). The low-
cost business model contains four major elements, including value architecture, value
proposition, culture and values and revenue model (Zhang, Hanaoka, Inamura, &Ishikura,
2008). Value architecture examines the way of creating value for consumers. Using new and
modern routes help the airline focus on operational efficiency and cost containment. The airline
uses point-to-point flights, short haul and monopolizes majority of its routes (Malighetti,
Paleari&Redondi, 2009). In the secondary airport, the company ensures bargaining power,
lower charges and less over the crowd. Regarding employee related costs, it is more
considerable to focus on cost savings rather than management and staff relationships. To ensure
lower costs of service delivery to major customer’s and Ryanair has agreements with
contractors and uses internet booking facilities. Revenue model emphasizes on how the
company earns their income. This is mainly through subsidies, ancillary revenues and main
revenues. Some major sources of revenue are fees from tickets, additional charges, compulsory
charges and mandatory fees.
Value proposition deals with the; creation of particular value for customers. For
instance, the cost leadership strategy of Ryanair as a low-cost carrier entails charging low fares
targeting customer’s sensitivity of fare, hence considered as value creation. To accomplish this
goal, the airline maximizes on ancillary revenue and continuous maintenance of cost
containment efforts (Fallert, 2012).
Lastly, the culture and value elements indicate the values the company communicate
and pursue. Customers expect the company to charge affordable prices on all aspects
highlighted while delivering high-quality value.
Jeddi, Renani, Khademi, Shokri and Noordin (2014) used the AirAsia case study to
examine factors influencing low-cost strategy in the airline industry. The study concentrated
on cost leadership strategy of low-cost carriers in South East Asia to remain competitive and
regional elements influencing competition capability. Also, the researchers examined major
success factors responsible for AirAsia superiority amongst other highly competitive airlines
in Asia. The research suggested that regulations are surrounding aviation business industry act
 24

as major obstacles to low-cost carrier development. They include charging rates and tariffs
(Jeddi, Renani, Khademi, Shokri&Noordin, 2014).

2.7 Areas of improvement in airline

Some of the major weaknesses of Ryanair are reliance on subsidies, poor service
provision and low-frequency departure timing causing problems for most business travelers.
Common threats to the company include increasing navigation and airport charges, volatility
of fuel prices, regulations by the European Union, for instance, hidden costs and denied
boarding reimbursement and investigations on subsidies. Such weaknesses and threats can be
seen negatively by customers, hence developing negative perceptions towards the company.
Addressing the threats and weaknesses highlighted may help in improving Ryanair operations,
customer base, and competitive edge.
Customer satisfaction is a major area that requires improvement (Zhang, Hanaoka,
Inamura, &Ishikura, 2008). Research suggests that for ensuring increased and constant
customer satisfaction, organizations need to improve continuously the general quality of
relating with customers (Ramaj& Ismaili, 2015). Comparison of relationship marketing basics
indicates that airlines have the ability to determine the effort and attention level for each
relationship with diverse customers. According to Mosavi and Ghaedi (2012), airlines need to
develop and maintain high-quality relationships with their customers. (Güreş, Arslan, and
Yılmaz (2015) points out that companies that meet the diverse needs and expectations of
customers remain highly competitive. Accordingly, airline managers and employees must
comprehend correlations among service quality, customer loyalty and customer satisfaction
(BambangBaroto, Bin Abdullah, & Wan, 2012). Some of the main strategies to maintain a
positive relationship with the airline customers include service recovery, proper
communication, customer orientation, customer trust and quality expertise (La & Yi, 2015).
Ryanair airline developed effective techniques useful in enhancing quality and efficient
relationships with customers and implement training programs for allowing managers and
employees effectively build relationships and provide quality services to customers with a
maintained low cost (Ramaj& Ismaili, 2015).

2.8 Perceptions of customer to service prices and benefits

Ryanair has been successful in its operations by having flights to the main cities and
capitals in Europe; it exclusively flies to secondary airports within the main cities and most of
their flight have no transits which gives a competitive edge (O’Higgins, 2007). Therefore, the
company negotiate for cheaper fees upon landing and cutting down on costs to be able to offer
 25

lower prices in comparison with competitors (Castillo - Manzano, López - Valpuesta, &
González-Laxe, 2011). Ryanair provides low fare while minimizing service offerings, and have
extra air charges services for food, water and another service which generates revenue
indirectly. The reduced fares attract a considerable number of passengers and consequently
generating considerable revenue. The company thus runs greenest, quickest and newest planes
within the European Union market. Utilization of modern new planes that deliver customer
services enables the company to offer high-quality services to the customers. Modern plans
provide a variety of services to customers; hence, the low-cost strategy is still appropriate for
revenue generation. Common factors that have contributed to Ryanair’s success include
maximization of online services, route choices, and low price fares, point to point flights at
frequent rates, growth initiatives and quality maintenance and safety management
commitments.

2.9 Changes in aviation industry due to changing prices

The pricing strategies used by major airlines depend on company decisions and revenue
management (Castillo - Manzano, López - Valpuesta, & González - Laxe, 2011). The pricing
for tickets is developed based on external factors such as operational costs, demand, and market
structure. Internal relations, market competition, environmental economics and government
laws affect the airline industry and its environment (BambangBaroto, Bin Abdullah, & Wan,
2012). Fedorco and Hospodka (2013) discuss the pricing dynamics in the airline industry and
explain how pricing affects decisions made by travelers regarding the airline they prefer to
travel with. The price dynamics include fuel costs, peak period, market type, competitors,
environmental costs and seasons. The qualitative study links administrative obligation to
adjustments in aviation business while using tariff changes as a variable.
A study by Gabor (2010) found that policy changes led to the adjustments in the
aviation industry networks, which affects the dominance of low-cost carriers. The research also
implies that liberalization of the markets is vital in the establishment of network structures for
airlines in the future. The study is relevant as it sets the context for the research on effects of
pricing strategy. It gives a comprehensive view of the European airline industry and focuses
on network structures, providing policy implications and changes in the airline industry. It also
highlights all significant aspects related to the growth of low-cost airlines because of
enlargement of the European Union.
Some airlines may take advantage of others because of the domination of the market.
In the market with high competition, policies due to change in prices should protect the
 26

consumers (Castillo - Manzano, López - Valpuesta, & González - Laxe, 2011). The best policy
for airline companies is there to offer consumers appropriate services based on quality and
pricing (BambangBaroto, Bin Abdullah, & Wan, 2012). According to Gustavo, (2013)
transformations in the European airline industry due to privatization led to diverse approaches
and frameworks in regulating airports. For instance, the introduction of liberalization for air
services put a lot of pressure on airports for improved services and increased aviation
competition (BambangBaroto, Bin Abdullah, & Wan, 2012). Gustavo (2013) examines the
legislative implication of competition law in activities of low-cost carriers. In the comparative
analysis, airline records lead to Gustavo’s conclusion that reinforcement of policy to improve
standards is mandatory.
Bowman’s Strategy Clock diagrammatically represents strategic alternatives for
businesses as indicated in figure 1 (Bowman, C., & Faulkner, 1997). The framework has a
customer value map indicating competitor positions in the market. The clock has eight potential
moves any business can adopt. Organizations make decisions based on price comparison with
competitors instead of cost. To add on, the price is easier to compare, able to adapt to the
dynamic environment and change strategy over time.

Figure 1: Bowman’s Strategy Clock

✓ The movement to the west results in a reduction in price. The company’s products have a
strong position because of competitive advantage over other major competitors. The
movement, however, is short-lived as a price war may result from price reduction due to
competitor responses.
✓ The movement to the north increases customer value perceptions through market
communication and signaling. The company products are more appealing. Customer value
 27

may take a longer time to imitate, hence high chances of remaining competitive for longer
periods.
✓ The movement to the east involves increasing the prices. The movement puts the company
at a competitive disadvantage if not for competitors to follow the company’s pricing. The
movement is appropriate when customer value is higher compared to prices.
✓ The movement to the south reduces customer value. The movement also puts the company
at a competitive disadvantage. Some business cut down their costs creating low value for
customers to stay competitive.
✓ The movement to the southwest involves reducing both prices and value. If the current
market becomes constrained by prices because of external pressures such as recession, then
it is effective to implement the policy of deliberating value aimed at taking costs out of the
product and meet lower prices.
✓ The movement to the northeast involves increasing both prices and value. Ryanair adapts
to the low-price strategies (no frills) by offering low benefit and low price for customers.
One of the major reasons why Ryanair offers more value than other airlines is due to the
brand image and what the image portrays about the company.
✓ The movement to the southeast involves increasing the prices and reducing customer value.
The movement makes the company’s products uncompetitive.
✓ The movement to the northwest involves price reduction and increasing the value. The
move guarantees increased market share. Nevertheless, it is a very aggressive competitive
move since competitors are forced to respond rapidly. Therefore, the organization should
have the lowest cost position to retain its market share gains in the long term.

2.10 Porter’s Five Forces Model and generic competitive strategies

Every industry has companies providing similar goods or services, hence competitors.
Analyzing the competitive forces helps in determination of the opportunities and threats
companies face. Michael. E. Porter (1979) therefore developed a framework for analysing
external environment. The framework helps organizations to realize and evaluate the
competitive forces in the industry’s environment. The main threats are bargaining power of
buyers, bargaining power of suppliers, new entrants, rivalry and threat of substitutes. The threat
of new entrants comprises of difficulties a firm experience as it starts to compete with others.
In case the suppliers are few, product substitutes are absent. Strong buyers push businesses into
offering high-quality services or goods at lower prices. Product differentiation is the best
strategy to address the threat of substitutes. Lastly, rivalry manifests in the launch of new
products, advertising a war, a price war, and scramble customers.
The five competitive strategies include cost focus, differentiation focus, differentiation
and cost leadership. Using the cost leadership strategy, the organization sets out to be a low
producer in the whole industry. Through differentiation strategy, a company offers a unique
experience to the customers; provide what buyers value most. Focus strategy concentrates on
 28

choosing the narrow scope for competition. Through differentiation focus, a company goes
after the distinction, targeting a given segment (Michale, 1985).

2.11 Strategies for addressing customer expectations

Organizations must have appropriate strategies for maintaining competitive advantages
(Heywood & Kenley, 2008). Common competitive advantages for Ryanair include online
bookings, landing flights in secondary airports, point to point flying, corporate partnerships,
and lack of frills, bargaining power, service outsourcing in international airports, lack of cargo
services and using new aircraft. Additionally, the company leverages on advertisements on
planes, limited airport transportation, high service levels, reductions in overall costs, high
productivity and uniform flight. To meet the expectations of different customers, Ryanair has
cut on costs such as window blinds, leather seats, and carry on luggage. It can also enhance its
revenues through internet onboard, satellite television and charged in-flight entertainment.
While standard carriers concentrate on offering excellent services to various customers,
low-cost carriers concentrate on cost reduction via value chain strategies (Gaggero&Piga,
2010). Sarker, Hossan, and Zaman (2012) explored the value chain using interviews and case
studies to predict customers’ preference. Their goal was to predict low-cost airline
sustainability and determine alternatives for future expansion. The authors analyzed customer
service quality using Gatwick and London Stansted airports with their clients using low-cost
carriers to travel to diverse destinations. They stated that the services offered by these airlines
are of high significance to travelers and that the quality of service offered should be high
(Sarker, Hossan& Zaman, 2012).
The study is significant because it gives a global perspective demonstrating customer
preferences in high competitive airline industry. It provides a comprehensive view of the airline
industry and focuses on sustainability and growth. It also highlights all significant aspects
related to the growth of low-cost airlines and sheds some light on the services side of low-cost
carriers.

2.12 Strategies for maintaining competitive edge

Studies suggest that employee branding is an effective strategy for having a competitive
advantage. Whereas many managers have majorly concentrated on benefits of employee
branding with its related importance, they have failed to use the appropriate conceptualization
(Rao & David, 2015). According to Miles and Mangold (2004), employee branding refers to
the process through which employees internalize required brand image and get motivated to
demonstrate the organizational brand to customers. It is apparent that the success of the airlines
 29

is attributed to developing the new products, and the strong culture that prevails within the
employee organization branding is thus useful in this context.
According to Rao and David (2015), employee branding is essential in airline industries
as managers must therefore analyse employee branding process and make changes to gain
competitive advantage (Heywood & Kenley, 2008). The role of employee branding is to
encourage employees being identified as organizational brands image. Organizations attempt
to figure out the way workers define themselves to help in exhibiting behaviours enhancing
brand image, increasing consumer satisfaction. Companies also use brands with the goal of
projecting their services and products as major identities for differentiating them from major
competitors. Employees can help in building, creating and strengthening of brand image for
organizational services or products. Some of appropriate behaviours for employee branding
initiatives include honesty, openness, empathy, dependability, helpfulness and civility. These
actions enhance consumer perceptions of quality of services and products, increasing customer
retention or loyalty.
Collaborating with other service providers may help Ryanair remain competitive.
Strategic alliances in airline industry are best for meeting diverse needs of passengers.
According to Graham (2013), low cost carriers collaborate with airports depending on the
operational model. The nature of relationships between carriers and airline has changed over
time due to growth of low-cost carrier sector and commercialization of airports. However,
academic literature on the relationships does not provide definite evidence indicating the
general effects of low cost carrier operations in airports, calling for investigation of long-term
influences (Graham, 2013; Castillo - Manzano, López - Valpuesta, & González - Laxe, 2011).
Lin, Mak and Wong (2013) study examined the correlation between low cost carriers
and airports in terms of business relations and how they affect mutual dependence and balance
of power during interactions. The researchers adopted some case studies and studied mutual
dependence and power imbalance scenarios and found that relationships between low cost
carriers and airports use of peak points in the airports. Because of capacity gaps at the airport,
relationships were established through negotiation method. Differences in power balance
dictates equality and inequality for exchanged support and compromises. Dependence dictates
provision of support and readiness to compromise. Lastly, mutual dependence dictates total
attachment strength for both parties therefore indicating relationship unity (Lin, Mak& Wong,
2013).
 30

Opening new routes within European Union can help Ryanair meet customer
expectations. For instance, Wall (2016) notes that Ryanair targets Germany as a new
destination as the company began flights between Berlin and Cologne, adding 50% seats within
the German market. The strategic plan for reaching between 15% and 20% in the Europe
market, up from the current 5% may help the company grow and retain its competitive position
(Wall, 2016). Exploitation of tourism trends is the best strategy for increasing customer base
(Pulina& Cortés - Jiménez, 2010).

2.13 Airline pricing behaviour in limited competition

In the current liberalized market, airline markets have stiff competition (Alderighi,
&Piga, 2010). Thus, airline carriers can compete with existing low-cost carriers by establishing
low-cost subsidiaries or reducing brand costs (Pulina& Cortés - Jiménez, 2010). Fageda,
Jiménez, and Perdiguero (2011) explored a strategy of low-cost subsidiary establishment using
Iberia airline in Spain’s domestic market by exploring the effect of pricing and rivalry on
airlines; the authors stated that competition is intense in the airline industry as customers have
numerous choices. Data analysis and pricing estimation equation provided in the research study
suggest that Iberia has implemented the low-cost subsidiaries to charge customer’s lower prices
in comparison with major rivals. The study suggests the future of airlines lies in the use of low-
cost services and automation. The study also suggests that Spanish network’s pricing policy
has been specifically applied in shorter and less dense routes (Fageda, Jiménez, &Perdiguero,
2011).
Bergantino and Capozza (2013) cite three major types of competition sources within
the airline market. First, intra-modal competition (one mode of transport) is experienced
within-pair markets in similar cities. Secondly, intermodal completion (from diverse
transportation modes) considers other systems such as cars and rails. Lastly, fares set before
departure serves as a major source for competition. Market power plays a crucial role in the
intermodal competition. As such diverse airlines implement differentiated strategies to remain
competitive. When there is a high competition in the market, most airlines apply inter-temporal
price discrimination (Bergantino and Capozza, 2013).
A study by Bergantino and Capozza (2013) aimed at studying short haul flight
(transportation over short distances) flight pricing within the context lacking intermodal
completion so as to account for pricing behaviour as a reaction to air related competition. After
analysing the market in southern Italy, the researchers found that since other modes of transport
are slower, airline is thus the main option for customers and the study also demonstrated that
 31

airline companies have variable pricing behaviour, resulting in airline competition. The
differentials indicated in the study are relevant as they demonstrate evidence suggesting that
market power affects intermodal competition (Bergantino and Capozza, 2013).
The low-cost business strategy centers on reduced costs aimed at the elimination of
some comforts and services provided, through the provision of lower fares (Pulina& Cortés-
Jiménez, 2010; Castillo - Manzano, López - Valpuesta, & González - Lake, 2011). Studies have
suggested that cost reduction attributes to success in low-cost carriers (Alderighi, &Piga, 2010).
Malighetti, Paleari, and Redondi (2009) carried out an investigation to analyze Ryanair’s
pricing policy as a major low-cost carrier operating in Europe. By using some hyperbolic price
functions, the authors estimated the optimal pricing curve for all routes. The findings suggested
that average fare price for every course and the corresponding lengths, occurrences of flights
on the routes and rate of flights with full bookings were positively related. The results also
suggested a decrease in airline fares following an increase in the share of seats that carriers
provide at both departure and arrival airports.
Moreover, the researchers found negative relations between dynamic pricing regarding
route length and flight occurrence and the results suggested the increase in discounts provided
on fares is applied due to competition (Malighetti, Paleari, &Redondi, 2009). The study is
relevant because of its strengths, and empirical study is used involving sample and descriptive
analysis. Statistical formulas are also used to support the text, and historical trends are
employed to facilitate the findings. The study is strong because it is not vague, is very specific
and uses a direct approach to analyzing Ryanair’s pricing model. It gives a comprehensive
insight on the determinants of pricing strategy and the factors considered by people when
making choices regarding airlines.

2.14 Summary
In this section, the researcher reviewed current as well as relevant literature, which
provides a solid foundation for the whole research study. The section addressed in the review
include significance of customer expectations, cost leadership strategy, changes the aviation
industry due to changing prices, strategies for meeting the expectations of the customers,
growth of customer’s perceptions in terms of service with regard to price and benefits and plans
for having a competitive edge in the market in terms of cost. Customer expectations were found
to drive the aviation industry. Metwally (2013) argued that due to high competition, companies
must struggle with customer loyalty and satisfaction. From the literature, it was apparent that
the cost leadership strategy focuses on reducing to eliminate some comforts and services
 32

provided, by providing lower fares (Pulina& Cortés-Jiménez, 2010; Castillo-Manzano, López-

Valpuesta, & González-Laxe, 2011).
In efforts to understand the significance of customer expectations in the aviation
industry, evaluate the level of service customers expects from the air travel provider, evaluate
the cost - leadership strategy for remaining competition and seek areas of improvement, this
study was guided by two hypotheses. The literature has set the foundation for your research
which will look at Ryan Air’s Cost Leadership Strategy Play a Role in the Way Customers
Perceive the Level of Service about Benefits and Price. This study sought to understand the
significance of customer expectations in the aviation industry, evaluate the level of service that
a customer expects from the air travel provider and evaluate the cost - leadership strategy
adopted by Ryanair for meeting the client's expectation and be ahead of the peers.
The study was hypothesized that low cost strategy enforced by RyanAir plays a decisive
role in customer perception towards service level concerning benefits and price (Wall, 2016;
O’Higgins, 2007). This is evident from the literature reviewed, which indicated measures for
effective cost leadership strategy in the airline industry.
 33

Chapter Three: Research Methodology

3.1 Introduction
In this third chapter, the methodology is described with the goal of identifying the way
Cost Leadership Strategy Play a Role in the Way Customers Perceive the Level of Service
about Benefits and Price. The chapter provides the research design, target population and
sample determination, measurement variables, research instruments, data collection procedure,
data analysis procedures, analysis of questionnaires, validity and reliability, and research
ethics.
In deciding about the sample, the researcher chose to know about passengers using
RyanAir airline by sampling a population of the main passengers in the airline. Since the
researcher needed 100 responses, a larger sample was essential in yielding more accurate
results.

3.2 Research Philosophy

The research employed positivism paradigm. This method attempts to uncover the truth
regarding the way things are (Saunders, Lewis & Thornhill, 2012). The philosophy is
appropriate for quantitative research. As a structured paradigm, it integrates logical deduction
and empirical observations. The philosophy is helpful in determining a causal relationship. To
confirm a causal relationship of Ryanair cost leadership strategy with the customer perception
of the level of service about benefits and price, the philosophy was appropriate in indicating
whether the relationship was negative or positive.

3.3 Research Design

This study will employ descriptive statistics. For the reason that it is easy to describe
ways in which Cost Leadership Strategy Play a Role in the Way Customers Perceive the Level
of Service about Benefits and Price. Descriptive survey research design is also valid in
collecting quantitative results regarding price and benefits associated with service level
(Gubrium& Holstein, 2012). This type of research design was chosen because of the descriptive
data collected, organized, tabulated and interpreted. Statistical tools are used to help organize
data into patterns during analysis, which in turn helps in understanding qualitative studies
(Dickson-Swift, James, Kippen&Liamputtong, 2006). According to Bernard (2011), the
research design forms the frame of the entire research. Survey research design was best suited
for the undertaken study for relating the findings of the research to the research objectives.
 34

Survey research design also helped in answering the research question (Fox, Martin & Green,
2007).
Quantitative surveys will be used to collect expressive data from the primary
participants. A survey research was performed to determine Cost Leadership Strategy roles in
terms of price and benefit perceptions. As noted by Leeuw and Dillman (2008), a study research
plan is quantitative in nature, therefore suitable for use of survey questionnaires. In this modus
operandi, the researcher determines the sample, collect primary data using questionnaires, and
analyze the data by use of descriptive statistics to provide answers to main research questions.
Then again, this will give the research the ability to test hypotheses formulated to reach valid
conclusions or make inferences (Maxwell, 2013). It will also make it easier to make statistical
inferences using quantitative data. Generalization to a given population is easy because of a
large number of the study population that will be surveyed.
The participants will have predefined categories for choosing their preferred answers.
The study will end up with statistically inferable data as responses are categorized into
predetermined choices (Leeuw & Dillman, 2008). The advantage of survey research design is
that it is significant to collect and measure the findings for the whole population, determining
changes manifested through behavior and attitude (Polkinghorne, 2005). The survey design is
suitable for the investigation because it helps in collection of personal information not likely
accessible at other places, helping in making a reliable generalization (Creswell, 2013).

3.4 Theoretical Framework

On the basis of the aforementioned theoretical models relating to cost leadership and
the customer perception especially with respect to Porter’s generic strategies model, the study
developed a theoretical framework that aimed at relating the main aspects of the investigations.
Based on the study interest, the research focused on establishing how customers perceive the
cost leadership strategy of Ryanair on the benefits and prices. The following theoretical
framework illustrates the specific variables that were reviewed in this study and consequently
investigated with the aim of achieving the study objectives:
 35

Figure 2: Theoretical Framework of the Study

3.5 Hypothesis of the Study
The hypothesis of this study is;
H0: There is a positive customer perception on the benefits and prices of air services
and products as occasioned by the cost leadership of Ryanair
H1: There is a negative customer perception on the benefits and prices air services
and products as occasioned by the cost leadership of Ryanair

3.6 Data Analysis Aspects

Gathered Data will be analysed on the basis of the following aspects:
Demographics: The demographics are summarized with the help of frequencies and
cumulative frequencies from the results.
Correlation and Regression: Regression and correlation are two techniques closely
related and comprise a form of estimation. As the more specific analysis of correlation and
regression analysis includes sample data to know that is and how they relate to each other two
or more variables in a population. Correlation analysis produces a number that summarizes the
degree of correlation between two variables, and the regression analysis results in a
mathematical equation that describes the relationship. Correlation analysis useful for scanning
a job as a researcher or analyst tries to determine which variables are important potential; the
interest lies primarily on the strength of the relationship. The correlation measures the strength
 36

of a between variables; regression results in an equation describing this relationship

mathematically The data needed for regression analysis and correlation derived from
observations of related variables.
Unit of Analysis: The Data is gathered from the regular customers of Ryanair.
Survey: The first stage in creating this survey was choosing a sample group from the
population to become survey respondents. The sampling method used for the survey is a
random sampling. Random sampling is a technique where all group members have an
independent and equal chance of being chosen. This sampling method was used for this study
because it facilitates unbiased research. Moreover, it provides results that represent a wider
range of audience. However, random sampling can be costly regarding money, effort or time.
For this study, only 100 individuals responded to the survey. This is a limitation because this
number does not accurately represent the entire population.
The second stage includes giving detailed instructions and information for the
respondent to interpret with ease. The purpose of the survey is to understand the significance
of customer expectations in the aviation industry, evaluate the level of service that a customer
expects from the air travel provider and determine improvement areas to enhance customer
satisfaction. Additionally, the study sought to determine the way the perception of customers
grows regarding service concerning price and benefits. At the beginning of the survey,
respondents were provided with a brief about Ryanair to increase their knowledge about the
airline. This will guide the respondents in providing answers that are more relevant. The
purpose of the survey was also mentioned to help the respondents understand their role in
participating in the survey. Furthermore, the confidentiality of the respondents was considered
while designing the survey. This was clearly stated in the survey to reassure the respondents
that their privacy is respected. As such, questions including personal details, such as academic
levels, places of birth and income levels were avoided. To add on, clear instruction were
provided on how to answer each question. For example, providing additional comments,
ticking the appropriate box and rating each statement.
The third step required deciding the type of questions to be used. Both open ended and
closed ended questions were used in the questionnaire. Open-ended questions were used
because they encourage full and meaning full answers from the respondent. This provides more
entail on the respondent’s feelings and perception. Specifically, individuals can provide
answers using stories, lists, and full sentences. Closed-ended questions were also used. As such,
it allows the participants to answer using a simple yes or no, or selecting a suitable answer out
 37

of several options that are given. These questions provide the respondent with choices to help
the individual provide appropriate and relevant solutions.
The fourth step includes the order of the questions used. The survey started with easy
and non-threatening questions to attract the attention of the respondents. Specifically, it
progressed from general to specific questions. Furthermore, the fifth step is shaped on the
layout of the survey, as this is a factor that encourages individuals when responding to the
questionnaire. A font of size 12 was used to ensure that the respondent could easily read the
questions. Moreover, the format of each question kept changing throughout the survey to retain
the respondent’s attention and avoid losing his/her interest. The final step consists of how the
survey was to be distributed. The survey was launched off an Internet website called
surveymonkey.com and the link was posted on social media sites.

3.7 Question Layout in the Questionnaire

Questions 1 – 2 obtain demographic data from the respondents. The main variables of
interest were age and gender. Such data was vital since it was indicated in the literature review
that females and males have different perceptions towards services offered in the airline
industry. Thus, this dissertation examines the various perceptions of service level with regards
to price and benefits from both male and female respondents.
Questions in Section 3 – 10 ask about the way passengers perceive the airline. Data
related to customers’ frequency of using Ryan Air services and their perception on the
importance of Ryan Air assisting the passengers as well as their families is important as it is
indirectly analyzing the company’s use of cost leadership strategy (Barbot, 2006). In the prior
research, it was established that customers use airlines with high-quality services and low
prices, particularly those who are price conscious (Malighetti, Paleari, & Redondi, 2009; Wall,
2016). According to O’Connell and Williams (2005), customer perception and satisfaction
levels in low-cost airlines and full-service airlines are dissimilar. Therefore, this research was
focused on determining how consumers perceive the cost leadership strategy adopted by the
companies in the airline industry.
Questions 3 – 10 are also related to customer issues and their perception towards pricing
and benefits. From the literature review above, it is apparent that organizations face various
challenges when making efforts to meet customer needs (Jeddi, Renani, Khademi,
Shokri&Noordin, 2014; Barbot, 2006). Therefore, gathering information on consumer
perception would provide a clear image on whether customers are satisfied with Ryan Air’s
prices and quality of service.
 38

Questions 11 – 18 are related to the customer’s perception of Ryan Air’s products,

services, and prices. From the literature review stated above, it can be seen that previous
research revealed that cost leadership strategy capitalized on reducing overall costs of the
organization (Barbot, 2006; Malighetti, Paleari, & Redondi, 2009). Collecting specific
information on the customer’s perception of service quality, flight times, customer service,
would help verify the success of the airline’s cost leadership strategy.
 39

Chapter Four: Results and Analysis

4.1 Introduction
This Section presents data analysis and discussion of findings related to Ryanair cost

leadership strategy role relative to customer perception on levels of service in the light of

accrued flight benefits and price. The focus of the study focus was to analyse the impact of

low-cost leadership on customers’ perception of satisfaction and benefits as far as prices

charged on the services and goods offered. Different questions were asked during the survey.

Based on the questionnaire four section; demographic data, perception of the passengers on the

Ryanair, perception of customers to pricing and benefits, perception of the customers on

Ryanair products. The following sections provide the results and analysis obtained as per the

responses from participants. The data obtained were analysed by use of SPSS software version

20. To begin with, the data were checked for any outlying values and consistencies with the

questions asked to ensure the answers were a true representative of study aims. In total, 88 out

of 100 questionnaires are analysed which is a representative 88% response rate, as the

remainder had either not used Ryanair products or were incomplete. The following present a

summary of the findings.

4.2 Demographic Data

The demographic characteristics of the respondent’s gender and ager, were captured by

use of the first and second question in the survey. This was important because Smith (2008)

finds that response behaviour of male and female respondents in an online environment setting

is a product of their respective values and opinion, in which case, they are always different.

Additionally, it is critical to ensure that the survey captures a substantive proportion of each

group in analysis and is a representative of all age groups of Ryanair customer base.
 40

4.2.1 Gender of the participants

43%
57%

Male Female

Figure 3: Gender of the respondents

An analysis of the 100 participants that took part in the survey with respect to gender

shows that 57% were males whereas the remaining 43% were female (figure 1). Hence, data

was obtained from a diverse sample with both genders being represented.

4.2.2 Age of the Respondents

40%
35%
35%

30%

25%
Percentage

21% 22%
20%
14%
15%

10% 8%

5%

0%
20 years and below Between 21 to 30 Between 31 to 40 Between 41 to 50 Above 50 years
Age Category

Figure 4: Age of the respondents

Out of 100 respondents 35% belonged to the age bracket of between 31 and 40 years
followed by 22% of the participants who were aged between 41 and 50 years. Whereas 21% of
the participants belonged to the bracket of between 21 and 30 years, 14% were 20 years and
 41

below while the remaining 8% were above 50 years. The implications are that the middle-age
group are the majority of people accessing the use of airlines.

4.3 Perception of Customers

This section presents a summary of responses of the passengers towards the Ryanair as
one of the airlines on one hand and on the other hand establish the customer issues and their
perceptions on the pricing and benefits associated with the airline and its products. Analysis of
the 88 responses from the respondents who have used Ryanair is presented. Regarding the
Length of using the Ryanair services, the study sought to find out the length of time the
respondents have been using Ryan air.

40

35

30

25
Percentage

20

15

10

0
Less than one (1) Between 1 and 5 Between 6 and 10 Between 11 and Over 15 years
year years years 15 years
Tima of Ryan air Usage

Figure 5: Length of Respondent's usage of Ryan air services

Based on the 88 responses 34.1% confirmed that they have used the services between

6 and 10 years, 27.3% between 1 and 5 years, 21.6% between 11 and 15 years, 9.1% less than

1 year, and the remaining 8.0% over 156 years. For the frequency of using Ryanair services or

products, the participants were asked how often they use the Ryanair services or products, the

responses that they gave are summarised in the following figure

 42

Frequency of using Ryanair services or products

60
48.9
Percentage 50
40
28.4
30
20 15.9
10 4.5 2.3
0
Once in a year Twice in a Thrice in a More than Never used
year year three times in Ryan air
a year products
Number of times

Figure 6: Frequency of using Ryanair services or products

From the responses it has been established that 48.9 % use the products thrice in a year,

28.4% more than three times a year, 15.9% twice in a year, and 4.5% once in a year. In addition,

the study established that whereas 2.3% have never used their products despite the fact that

they know of their existence. The study also analysed the responses to find whether the

respondents had any experience with Ryanair.

14%

86%

No Yes

Figure 7: Bad experience with Ryanair

According to the above results, 86.4% said that they have never had a bad experience

with the airline whereas 13.6 % stated that they have had bad experiences in the past. Ro the
 43

question on the reason for using Ryanair as opposed to other airlines the study sought to

quantify the preferences for the choice of Ryanair as opposed to other airlines.

45 42
40
35
30 28.4 27.3
Percentage

25
20
15
10
5 2.3
0
Cheap Friendly Air crew Convenient Good Customer care
Reason

Figure 8: Reason for using Ryanair as opposed to other airlines

Responses obtained indicated that 37 of 88 (42.0%) indicated that they prefer it due to

the fact that it is cheaper, while 2 of the valid 88 (2.3%) said that it is due to good customer

care. On the other hand, rratings of customer service experience at Ryanair is summarized in

the pie chart below.

Rating customer service experience at Ryanair

1.1

6.8

48.9

43.2

Very positive Somewhat positive Neutral Somewhat negative

Figure 9: Rating customer service experience at Ryanair

Results confirm that out of the 88 valid responses, 48.9% rated the customer services

are very positive, 43.2% rated the services as somewhat positive, 6.8% were neutral. In
 44

addition, 1.1% of the 88 participants rated the customer services of Ryanair airline as somewhat

negative. Also, regarding the likelihood of recommending colleagues of friends to Ryanair, the

study aimed at establishing the possibility of the respondents in recommending Ryanair to

friends and colleagues.

60

48.9
50
39.8
40
Percentage

30

20
10.2
10
1.1
0
Not likely at all Likely Very likely Extremely likely
Likelihood

Figure 10: Likelihood of recommending colleagues of friends to Ryanair

Based on the responses, 48.9% of the valid response stated that they are extremely

likely, 39.8% stating that they are very likely, 10.2% stating that they are likely, whereas the

remaining 1.1% stating that they are not likely at all.

4.4 Descriptive Statistics for Customer Perception on Ryanair products

The influence of cost leadership strategy on perception of customers towards the
Ryanair is descriptively evaluated by use of 88 responses who acknowledged and to know and
utilised Ryanair products. After the data were checked for consistency, completeness and
certainty ensured that no outlier values existed the data was analysed by use of SPSS software.
To assess the service quality dimension a five point Likert scale was used ranging from 1 to 5
with 1 representing strongly disagree and 5 representing strongly agree in favour quality of
service offered by Ryanair. The Mean response of all the cost leadership strategy variables
ranged from 3.92 to 4.44 .This is an indication that most of the respondents mostly agree in
favour of the questions in the survey. Further, the minimum value is 2 indicating that none of
the respondent strongly disagreed with the cost leadership strategy questions posed. The
 45

standard deviation of the responses were fairly similar across all the questions ranging from
0.684 to 0.814. A summary of result tabulation is given in table 1.

Table 1: Descriptive statistics

Min Max Mean Std. Skew Kurto
Dev ness sis
z-
score z-
score

Customer Perception 3 5 4.19 .684 -1.46 -1.97

Price Sensitivity 2 5 3.92 .784 -1.09 -1.18

Development of new products 3 5 4.30 .697 -1.86 -1.66

Customer Contact: Access to booking

2 5 4.07 .814 -1.32 0.86
flights

Customer desire: Service has improved

2 5 4.44 .623 -1.70 1.67
in the airline

Customer behaviour to standardisation:

Ryan Air provides better flight times 2 5 4.39 .702 -0.96 0.78
and days

To evaluate the normality of the responses, the skewness and kurtosis are calculated for
both dependent and independent variables. The skewness and kurtosis z-score are obtained by
dividing the statistic by the std error (Table 1). The skewness for the customer perception, price
sensitivity and development of new products cumulative scores (-1.46<±1.96, -1.09<±1.96 and
-1.86<±1.96 respectively. The cumulative skewness scores for customer contact, customer
desire and customer behaviour to standardisation are -1.832<±1.96, -1.70<±1.96 and -
0.96<±1.96 respectively. These findings from the skewness analysis show that all the variables
are insignificantly skewed leading to the conclusion that the data is fairly normal. Further the
kurtosis of the customer perception, price sensitivity and development of new products
cumulative scores are -1.97<±1.96, -1.18<±1.96 and -1.66<±1.96 respectively. Additionally
the cumulative kurtosis scores for customer contact, customer desire and customer behaviour
to standardisation are 0.86<±1.96, 1.67<±1.96 and -0.78<±1.96 respectively. With the kurtosis
z-scores of all the variables values within the accepted less than 5% error margin, the data from
the responses were concluded to be fairly normal and suitable for parametric tests for both
correlation and regression analysis.
 46

4.5 Correlation analysis

With all the data found to be normally distributed, correlation analysis was done for
three major reasons; to establish the type of relationship between each pair of variables,
establish the strength of the relationship between each pair of variable and establish the
significance of the correlations obtained. It is found that the response variable (customer
perception) is correlated with all independent variables; price sensitivity, development of new
products, customer contact, customer desire and customer behaviour to standardisation. A
summary of these correlations is presented in table 2.
Table 2: Correlation
1 2 3 4 5 6

1 Customer Perception 1

2 Price Sensitivity` .367** 1

3 Development of new products .686** .390** 1

4 Customer Contact: .358** .135 .248* 1

5 Customer desire: .471** .144 .410** .212* 1

6 Customer behaviour to standardisation: .573** .004 .422** .175 .472** 1

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).
The correlation analysis in table 1 shows that there exist a strong positive relationship
between customer perception and development of new product; r =.686; p<.01. This strong
relationship is also evident in customer perception -customer behaviour to standardisation r
=.573; p<.01. However, customer perception relation with price sensitivity, customer contact
and customer desire is positive but the correlation obtained shows that these variables are weak
positively correlated (r =.367; p<.01 r =.358; p<.01 and r =.471; p<.01 respectively)

4.6 Regression Analysis

In order to deeply evaluate and understand the relationship between customer
perception towards Ryanair and price sensitivity, development of new product, customer
contact, customer behaviour and customer behaviour to standardisation a regression analysis is
carried out. The summary of findings are presented in table 2 and 3.
Table 3 : Regression analysis
Model Summary
 47

Std. Error of the

Model R R Square Adjusted R Square
Estimate
a
1 .793 .629 .607 .429
Predictors: (Constant), Customer behaviour to standardisation: Ryan Air provides better
flight times and days, Price Sensitivity, Customer Contact: Access to booking flights,
Customer desire: Service has improved in the airline, Development of new products.
Std
Collinearity
Unstd Coefficients Coefficie
Statistics
-nts
t Sig.
Tol
Std.
B Beta era VIF
Error
nce
(Constant) -.501 .435 -2.152 .053
Price Sensitivity .152 .065 .174 2.331 .022 .811 1.232
Development of new
.394 .083 .401 4.733 .000 .629 1.591
products
Customer Contact: .133 .059 .158 2.250 .027 .920 1.087
Customer desire: .101 .087 .092 2.154 .042 .714 1.401
Customer behaviour to
.324 .079 .332 4.086 .000 .685 1.460
standardisation:

An analysis of the model obtained in table 2 shows that indeed, the independent
variables are reasonable predictors of response variable accounting for 62.9% of the response
variable (R2 = .629). The analysis also shows that the coefficient of the all the predictor variable
are significant at α=0.05 and the collineality analysis shows that the Variance Inflation Factor
is small enough to warrant non-existence of multicollineality. i.e Price sensitivity (β=.174;
p<.01 ,VIF=1.232), Development of new product (β=.401; p<.01, VIF=1.591), customer
contact (β=.158; p<.01, VIF=1.087), customer desire (β=.092; p<.01, VIF=1.401) and
customer behaviour to standardisation (β=.332; p<.01, VIF=1.40).
 48

Chapter Five: Discussions

The present study focused on establishing the impact of low-cost leadership on
customers’ perception of satisfaction and benefits while concentrating on both prices that are
charged as well as the products or services offered by Ryanair. The hypothesis was that there
is a positive customer perception on the benefits and prices of Ryanair products and services
as a result of the cost leadership strategy. On the basis of the results or findings illustrated in
the earlier chapter, it has been established that from the diverse sample, consumers have been
using the airline services and products of Ryanair for a long time now. Such findings are
confirmed by both O’Connell and Williams (2005) and Rao and David (2015) noting that
Ryanair has been providing low cost airline services and products since its inception in 1985
as a Low Cost Carrier (LCC). It therefore means that the airline has continued to provide a
number of services and products to its customers for more than three decades.
The findings illustrated in chapter four have also indicated that the customers that have
used the services and products of Ryanair are adequately satisfied. With very little bad
experience as noted from a few of the participants, the results have confirmed that Ryanair has
continued to enhance the experiences of the customers. Such findings are also echoed by
scholars including Namukasa (2013), Rao and David (2015), and Metwally (2013) noted that
despite offering low cost services and products, Ryanair has never compromised on the quality
of customer experiences. It is on the basis of the high levels of customer experiences that
Ryanair has continued to attract more customers. The idea here is that through increasing and
enhancing the experiences of customers, Ryanair has succeeded in not only commanding larger
market shares but also achieving its marketing objectives of increased sales volume and
profitability as confirmed by Jeddi et al. (2014), and Aydemir and Haytural (2015).
In justifying the low cost services and products, the findings of the present study, which
are consistent with those of Bubalo and Gagger (2015), Alen and Helms (2006), and Allen et
al. (2007), have confirmed that amongst the many reasons that make customers to continue
using Ryanair services and products are affordability, convenience, friendliness of the crew,
and good customer care. However, the idea of being cheap has been established as the most
influencing factor for customers to continuously use the Ryanair services and products. In
similar cases, Edmondson (2007) and Costa (2008) noted that Ryanair continues to attract more
customers and beating its competitors through the cost leadership strategy that has seen the
prices charged for the services and products to be very low and affordable.
 49

From the results indicated in chapter four, the study has confirmed that rating of
customer service experience is high, which makes a number of customers to be able to
recommend the services and products of Ryanair to friends and colleagues. A very positive
rating and the extremely likely tendencies of the customers to recommend the services and
products of Ryanair are clear indications that there is a positive perception of the customers
towards the said products. Positive perception amongst the customers towards the products and
services of Ryanair is also reiterated within the findings of Naranjo (2009), Maugborgne
(2004), and Aydemir and Haytural (2015). According to Aydemir and Haytural (2015), a
number of customers are price sensitive. Therefore, by offering low cost airline products and
services, Ryanair is capable of winning the hearts of many customers as noted by Naranjo
(2009). What’s more, Maugborgne (2004) explained that the positive perceptions of the
customers towards the products and services of Ryanair, which have also been confirmed in
the present study, have since translated into higher market share, sales volume, and profitability
within the airline.
In terms of the general perceptions of the consumers relating to the products of the
airline, the present study has established that a number of participants agreed and strongly
agreed with the fact that the airline influences customer perception (80.7%), many passengers
agree that the services provided are of high quality (80.7%), airline provides cheap flights
(77.3%), Ryanair is easy to access during booking of flights (80.7%), customer service has
improved in the airline (86.4%), Ryanair provides better flight times and days (77.3%), price
is affordable compared to other airlines (72.7%), and that the firm has been successful in the
development of new products (76.1%). With the high percentages of the participants
confirming that they agreed and strongly agreed with the statements, the implications are that
the customer perceptions towards Ryanair, its products, services, and prices are very positive.
Therefore, such results confirm the hypothesis that indeed there is positive perception of
customers towards the products, services, and prices of Ryanair.
With reference to the perception of the customers in the light of cost leadership strategy
implemented a correlation and regression analysis is done in chapter 4. The existence of strong
positive correlation between customer perception and development of new products for Ryan
air is an indicator that the continuous evolving new product development strategy at low cost
improves customer perception on the airline. Indeed, these results are similar to the findings of
Boshoff and Staude (2003) that the ability of an airline to develop new product as in line with
the customer needs and dynamic culture of air passengers improves customer perception. In
 50

taking care of customer needs while still ensuring that the Ryanair operates its flight efficiently,
standardisation of flight program indicated by Ryanair flight time and days improves customer
perception as found out through correlation and regression analysis. These findings are similar
to that of Tsang et al (2011) who found out that standardisation of airline product including
flight time and days facilitate reliable decision making by customers and improves customer
flight predictability and hence perception. Price of air flight remains the front competing edge
for airline and affects the decision of the passengers. The low flight cost strategy adopted by
Ryanair in the findings that price sensitivity is positively correlated with customer perception.
This means that the provision of cheap flights by Ryanair relative to other airlines improves
customer perception. These findings are similar to those of Aydemir and Haytural (2015) that
low cost airline experience better customer perception from short distance traveller and those
who are under strict budget. Air passengers spend the largest proportion of time with their
attendant and therefore the quality of service given has a great impact on customers’ perception
towards an airline. For Ryan air an improvement in customers’ perception is in line with
customer desire as found out by Young, Cunningham and Lee (1994). The positive correlation
between the customer contacts indicated by the ease of access to booking flights and customer
perception points out the important of this strategy in improving Ryanair business performance.
This fact is substantiated by Ryanair ability to offer direct booking of flights and omitting the
work of agents minimising the costs while still ensuring process efficiency and reliability.
These findings are similar to those of Alen and Helms (2006).
The multiple regression analysis of the cost leadership strategy with customer
perception is another evidence that cost leadership improves customer perception at Ryanair.
These variables account for 62.9% of the customer perception variations at Ryanair.
Development of new product is the leading source of variation in customer perception with a
coefficient of 0.41 followed closely by customer behaviour to standardisation, price sensitivity
and customer contact. Customer desire has the least source of variation with a coefficient of
0.92. All the variables are significant at a 5% error rate indicating their importance in customer
perception effect.
Similar findings about customer perception are also echoed by researchers such as
Bubalo and Gagger (2015), Aydemir and Haytural (2015), and Rao and David (2015). While
agreeing with Metwally (2013), Rao and David (2015) noted that as one of the low cost carriers,
Ryanair has been able to come up with a strategy that makes customers satisfied. Customer
satisfaction is identified by both Bubalo and Gagger (2015) and Aydemir and Haytural (2015)
 51

as the source of positive perception towards the products, services, and products of an
organisation or firm. In other perspectives, Allen et al. (2007) and Aydemir and Haytural
(2015) also agreed with the assertions of Alen and Helms (2006) claiming that Ryanair has
been able to attract more customers owing to its cost leadership strategy. The cost leadership
strategy adopted by the airline has gone a long way in making sure that the firm achieves its
marketing objectives such as high market share, high sales volume, and profitability. Therefore,
there is no doubt that through its low cost leadership strategy, Ryanair airline has been able to
invoke positive perception amongst its customers.
 52

Chapter Six: Conclusions

The present study has been able to provide an understanding on the cost leadership
strategy that is employed by a number of organisations with reference to Ryanair. Ryanair is
considered a low cost carrier ever since its inception in 1985. Courtesy of a survey conducted
amongst 100 participants selected through simple random sampling, the present study has
established a number of aspects especially with respect to cost leadership that is employed by
Ryanair. The main aspects identified in this study include the fact that there is positive
perception amongst the customers towards the products, services, and prices of Ryanair. The
study has established that the airline influences customer perception, many passengers agree
that the services provided are of high quality, airline provides cheap flights, the airline has easy
access to booking of flights, customer service has improved in the airline, it provides better
flight times and days, price is affordable compared to other airlines, and that the firm has been
successful in the development of new products. It is on the basis of these aspects that Ryanair
as a Low Cost Carrier has been able to achieve customer satisfaction; hence, resulting into
positive perception amongst the customers.
 53

Chapter Seven: Limitations and Future Research

Despite having attained its objectives, it is important to note that constraints in
resources including time and resources limited the depth and scope of the study. The study
owing to limited time and other resources has only focused on one low cost carrier when in
reality there are a number of low cost carriers across the globe. What’s more, the study design
limited the research to surveying only 100 participants when Ryanair as an airline serves
millions of the customers. Even though it is difficult to survey the millions of customers, a
good representative sample should have been arrived at in order to make the findings more
valid and reliable. Furthermore, there were limitations with the survey research design, which
included low validity owing to the fact that closed-ended questions were used that prevented
the participants from giving their views and the risks of different types of errors owing to the
fact that the entire survey was customised. As a result, the present study recommends for further
researches. While conducting further researches, the present study recommends that there is a
need to compare two or more low cost carriers besides adopting a more robust methodology
that would allow the participants to give their views, opinions, and perceptions regarding the
idea of cost leadership strategy.
 54

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Appendices

Appendix 1: Online Survey

Ryan Air: Online Survey
Ryan Air is a major low-cost airline with its headquarters in Ireland. The primary bases
of its operations are London Stansted and Dublin. The company has expanded from being a
small airline to one of the largest carriers in Europe. Ryan Air is a preferred airline by many
customers because it operates on the philosophy of low fares.
Below this description, there are a few questions that can help us understand the
significance of customer expectations in the aviation industry, evaluate the level of service that
a customer expects from the air travel provider and determine improvement areas to enhance
customer satisfaction.
Please note that your identity and answers will remain confidential and anonymous.
1. Gender
o Male
o Female
2. Age
o 20 years and below
o Between 21 to 30
o Between 31 to 40
o Between 41 to 50
o Above 50 years
3. Have you ever heard or known about Ryanair?
o Yes
o No
4. Have you ever used Ryan air's products?
o Yes
o No
5. How long have you used services provided by Ryanair airline?
o Less than one (1) year
o Between 1 and 5 years
o Between 6 and 10 years
o Between 11 and 15 years
o Over 15 years
6. How often do you use Ryanair services or products?
o Once in a year
o Twice in a year
o Thrice in a year
o More than three times in a year
o Never used Ryan Air products
o Never heard of Ryan Air
7. Have you ever had a bad experience with Ryan air?
 60

o Yes
o No
What was the experience? .....................................................................
..........................................................................
8. Why do you use Ryanair instead of other
airlines?.................................................................................................................................
...............................................
9. How can you rate customer service experience at Ryanair?
o Very positive
o Somewhat positive
o Neutral
o Somewhat negative
o Very negative
10. How likely is it that you can recommend your colleagues of friends to Ryanair?
o Not likely at all
o Likely
o Very likely
o Extremely likely
Tick appropriately
11. The airline influences customer perception
(1) Strongly agree
(2) Agree
(3) Neutral
(4) Disagree
(5) Strongly disagree

Impact Score Strongly Agree Disagree Strongly

Agree Disagree
12. Many
passengers agree that
the services provided
are of high quality
13. The
airline provides
cheap flights
 61

14. Ryan Air

easy access to
booking flights
15. Customer
service has improved
in the airline
16. Ryan Air
provides better flight
times and days

17. Do you find Ryan Air’s price affordable in comparison to other airlines?
(1) Strongly agree
(2) Agree
(3) Neutral
(4) Disagree
(5) Strongly disagree
18. The airline is successful in developing new products
(1) Strongly agree
(2) Agree
(3) Neutral
(4) Disagree
(5) Strongly disagree
Thank you for your time and effort.

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