(Clark P. 2007)
b) Ryan Air decided to buy aircrafts of the model Boeing 731 only. This reduced the company’s inventory volume as less stock of spare parts was required to store. The pressure on crew training was also less and the maintenance staff could easily repair the aircrafts resulting into quick service.
c) In order to reduce the landing costs, the company used airports like, Alghero (Sardinia) and Dinard (Brittany), which are not at all popular airports. These airports were looking forward to grow their business and thus offered competitive landing charges to Ryan Air.
d) The company reduced the cost of outsourcing its services to third parties like travel agents for booking their flights. This helped the company to reduce cost by 10%-15%. So far the company facilitates only its official website and its own call center service for booking of the flights.
e) Advertising is a vital part of growing business. Ryan Air reduced this cost as well by writing its low airfare captions on the aircraft body and relied more on the word-of-mouth advertising of the customers.
2. According to Michael Porter there are two basic kinds of competitive advantage- Cost advantage, where a firm delivers the same benefits as that of its competitors but at a lower cost, and differentiation advantage, where the competitive advantage of a firm lies in providing benefits that exceed those of the competitors. Among the positional advantages Ryan Air focused on cost advantage for reaping higher profits. Ryan Air’s rival firms were British Airways and Ager Lingus and both airlines possessed higher financial position than Ryan Air. Moreover the company went into a rapid loss that called for its restructuring during 1991. Hence, focusing on differentiation advantage for increasing the firm’s profit would have been a major mistake by Ryan Air. The company used its capability of rigorous cost minimization and introduced the surprisingly low airfares in the market. Thus the various measures of cost minimization by the company formed its distinctive competencies and helped the firm make a better place for itself in the industry. (Competitive Advantage, n.d.)
The decision tree above shows expected long-run profits of Lynne taking into account its decisions (square boxes) and the uncertainties (circles) in the economy.
Lynee has two options before it:
Staying in the present location
Relocating to cheaper premises
Hence both the decisions have a probability of .5. In both the situation it is faced with three different conditions of the economy and they have their respective probabilities of occurrence.
In the aforementioned case, there are 6 distinct situations Lynne can face,
Situation 1. Lynne stays in its present location and there is a downturn in the economy.
Situation 2. Lynne stays in its present location and there is an upturn in the economy.
Situation 3. Lynne stays in her present location and the economy remains the same.
Situation 4. Lynne moves into a cheaper premise and there is
(Clark P. 2007)