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Generic Strategies - Airline Industry
Transcript of Generic Strategies - Airline Industry
Monday 14th September 2013
1) Porter's Generic Strategies and Airline Industry
2) Low Cost Strategy - Ryanair
3) Differentiation Strategy - BA
4) Who's winning?
Lower cost structure
Sell goods or services cheaper than competitors
Set up 1985 by the Ryan Family
Operating more than 1,600 daily flights (over 500,000 per year)
Across 1,600 low fare routes
Connecting 180 destinations in 29 countries
Average fare €48 (incl. bag)
Cost Leadership Strategy
Low Fares to stimulate demand
Best Customer Service
Frequent Point-to-Point Flights on Short-Haul Routes
Keep costs low
Enhancement of operating results through Ancillary Services
Ryanair's Business Model
Internet booking & check-in
Limited spend on advertising
Revenue from ancillary services
Ryanair‘s Low-Cost Strategy
Functional Air Travel
Strategy is employed to increase the perceived value of a brand or products as a way to entice buyers to choose their products over similar products offered by their competitors
Depends on industry
Typically involves: features, functionality, prestige, reliability and brand image
"To be the world’s leading global premium airline”
The UK’s largest International Airline and one of the world’s leading global Airline
Principal place of business is in London, with significant presence at Heathrow, Gatwick and London City Airports.
Vision: To be the most admired airline across the world’s key cities
BA flies to more than 400 destinations worldwide.
Basis for Differentiation
A value added, differentiated service that customers want, which provides a basis for premium prices.
Orchestrating a high quality service to fill customer’s value-driven needs is their basis of differentiation.
Tries to make the experience of flying as effortless as possible.
Staff attend customer service training programmes
Introduction of fast track check in
Cabin crew are highly visible
Different products/services for different customer segments
Strategy and Objectives
Total Revenue €m
Breakdown of expenses
Remove toilets in order to create extra seats
Standing - only plane
Eliminating a co-pilot
Michael Porters Generic Strategies
The Big Picture : Airline Industry Overview
Factors affecting the airline industry
• Fuel prices
Fuel Prices Impact on Operating Costs
Industry Players : Legacy Airlines Vs Low Cost Airlines
Operating Expenses €M
Operating Profit €M
How much do you think you really pay?
Expenses as % of Revenue