Resources, competences and competitive advantage
* Provides the basis to outperform competitors or demonstratably provide better value for money
A set of threshold resources are needed to exist as a provider to any market segment. As can be seen in the figure above, threshold resources are the same as the competitors’ or easy to imitate.
Threshold resources for Ryanair are:
- Fleet of 36 aircrafts
- Enough financial resources
- Employees
- Airports to land on
- School to train employees
- A headquarter
Unique resources are those resources which critically underpin competitive advantage. They sustain the ability to provide value in the product, are better than competitor’s resources and are difficult to imitate.
- Michael O’Leary
- Website Ryanair.com is the only internet travel site to offer a “lowest fare guarantee”
- Number 1 on time-flight service
- Fleet of 36 Boeing 737’s, a fleet consisting of the same aircrafts assure efficiency.
Competences
Activities that underpin the meeting of threshold product features
Threshold competences are the same as Ryanair’s competitors and consist of all the competences that are needed to have the company operating. Ryanair has to have for example pilots who know how to fly an aircraft, financial employees who have the competence of making an economic forecast, a management team who can keep Ryanair operating et cetera.
Activities that underpin the meeting of critical success factors and hence give competitive advantage
- Cost cutting policy
- Innovative
- Employees work as a team
Value for money
Customers do not value product features at any price. Price is also an important product feature and, therefore, organisations must be competent in managing cost. Otherwise they will not be able to meet customer price expectations and/or generate sufficient profit and therefore, in the long run, survive financially.
- Sources of cost efficiency
Cost efficiency is a measure of the level of resources needed to create a given level of value. Customers can benefit from the cost efficiency in terms of lower prices or more product features for the same price. Cost efficiency is determined by a number of factors called cost drivers. These cost drivers are:
In effort to keep operating cost low Ryanair have chosen to operate with only one type of Aircraft, Boeing 737. The benefits of the same aircrafts are: time sparing due to same layout of every aircraft, less training on employees and a versatile and productive workforce.
Supply costs influence an organisation’s overall cost position. Ryanair is a no-frill airline company. It eliminated extras included advance seat assignments, in-flights meals, multi-class seating, access to a frequent flyer programme, complimentary drinks and other amenities. Ryanair bargains always over a price. So it gets the best deal possible.
Product/process design also influences the cost position. For Ryanair marketing special offers and having the IT capability to analyse and optimise revenue are important competences to prevent unfilled seats in the plane. Ryanair’s main focus is on the process of bringing people from one place to an other. When it succeeds in this it does not need any after sales service.
Experience can be a key source of cost advantage. Ryanair was the first low-budget airline, and one of the fastest-growing and profitable carriers in Europe. Other new low-budget airlines can only try to equal the success of Ryanair. They will hardly become better than Ryanair. Ryanair is very innovative and has a lot of experience as a low-budget company.
The success of an organisation is also related to how well it is able to provide product features that are valued – at a given price. If organisations are to be profitable this requires an ability to operate effectively. Effectiveness is the ability to meet customer requirements on product features at a given cost.
Ryanair offers a flight at a very low cost. It does only offer the required service, no extras. Therefore effectiveness can be assured. The return time is shorter because no meals have to be prepared and no baggage has to be checked in by Ryanair. The reason that people prefer a Ryanair flight to another airline’s flight is the very low cost.
- What is valued varies with time
Nowadays a low price of flights is highly valued by customer. Due to the economic slump, people’s disposable income decreased, so they are willing to spend less money on a flight. Another aspect that people value is punctuality. Customers want their flight to leave on time, have their baggage within half an hour and so on. Safety is also very important after September the 11th, because people are more afraid to fly.
Ryanair fulfils all the above mentioned requests. The flights are cheap; Ryanair has the number one on-time flight service and meet all the safety regulations directed by the government.
- Providing value in new markets and new arenas
Ryanair could stretch its low-budget strategy also to other markets. For example to the market of other vehicles, like cars. Ryanair could be a cheap car dealer, selling cars for a low price and offering only the service that is required. The cost-cutting policy of Ryanair could be successful in a lot of other arenas.
Performing better than competitors
Historical comparison looks at the performance of an organisation in relation to previous years in order to identify any significant changes. Ryanair is operating in a very fast-changing industry, so looking back to the past is not very useful. Being innovative is the way to achieve the most profit. Of course Ryanair can look back at previous years, but must not use historical comparison alone.
Industry norms compare the performance of organisations in the same industry or sector against a set of agreed performance indicators.
Comparing Ryanair to other airline companies is almost impossible, while the airline industry is blurring through competitive activity and industry convergence. Airlines offer nowadays a lot of extra services, for example, car rental, internet access in the plane et cetera. All those extra services don’t belong to the core product, the flight. Because of every airline company offering something else it makes it hard to compare Ryanair with them. Ryanair could compare itself to other low-budget airlines, despite the product Ryanair offers is very unique and Ryanair is one of the most profitable low-budget airline.
- Best in class benchmarking
Best in class benchmarking compares an organisation’s performance against ‘best in class’ performance- wherever that is found. Ryanair could compare itself with a rollercoaster. People are waiting to ‘check-in’, take their seat, make the ride and ‘check out’. Employees of a theme park also try just like Ryanair to make the most rides as possible on a day. They try to keep the queue short and transport the most people as possible.
Robustness
Michael O’Leary has a lot of experience and knowledge that can be seen as a unique resource for Ryanair. Ideas can not be patented; they are in the public area. So advantage of Michael O’Leary will be short-lived and only if Ryanair is good at learning, adapting and moving to new bases of competition, Ryanair will be the long-term winner.
Another rarity of Ryanair is the extremely low costs and low prices. This can be imitated by other airlines by introducing a new cost-cutting policy and by doing a lot of research.
Entering the airline industry is very hard. Surviving in the airline industry as a low budget company maybe even harder. While Ryanair is so unique, innovative, with a very aggressive marketing policy, Ryanair is impossible to imitate.
Ryanair operates only in Europe, so the cultural differences are not so big, and does not give any problems.
Other airline companies know that the basis of success for Ryanair is the cost-cutting policy. But how Ryanair manages this policy is unclear to them. It is hard to imitate.
After all, it can be concluded that Ryanair is a robust company, it is not easy to imitate and equal the success of Ryanair.
Strengths and weaknesses
Strenghts
- Large brand-awareness
- High customer satisfaction
- Experience with direct selling by internet
- Unique organisation (culture)
- Cost cutting policy
Weaknesses
- Use of secondary airports (are often far away from customers’ destination)
- Limited destinations
