INNOVATION AND COST LEADERSHIP

Cost leadership is a concept introduced by Michael Porter, in which the organisation portrays itself as the cheapest seller of a particular product or service among competitors. For an organisation and its management, using this strategy can be highly complexed and difficult as the organisation must constantly work on reducing cost at every level of their operations to gain the competitive advantage. Ryanair is an example how an organisation can use cost leadership strategy to gain a sustainable competitive advantage. Ryanair provides their customers airline tickets with the lowest prices as compared to any other airline. To increase the demand and to keep the price low they provide a no-frills service with low fares designed, and that has actually become their ultimate goal. At first, their strategy was not to be the cost leader but now they have shifted their generic strategies and they have become the cost leader of the market, which actually worked out for them as their customers are highly satisfied by the value that they get at such a low price. They are currently one of the lowest cost operators in the airline industry.

How Does Ryanair Do It?

Now to achieve all their goals and gain a sustainable competitive advantage, they took some measures.

  • They began to employ only a single type of aircraft, the good old Boeing 737
  • No free snacks or drinks. If a customer wants something, he/she has to buy it
  • Sells 98 % of tickets online which saves the administrative cost
  • The flight crew has to buy their uniforms
  • Headquarter staff provide their own pens
  • Removing seatback pockets to reduce weight

According to the president of Ryanair, they want to become the Wal-Mart of flying, as Wal-Mart provide stuff with the lowest prices, they want to be like this giant retailer, so by these measures they try to cut out the cost as much as they can. They were the first to charge customers for in-flight refreshments, a move that generates tens of millions of dollars revenue each year. And it was also the first to charge customers a bag checking fee which also resulted in tens of millions of dollars revenue, so you can see they are also extremely aggressive when it comes to making a profit. The Organisation utilised only one specific type of aircraft which decreased the cost of training and several other things. With their purchase of aircraft Boeing 737, a company was able to reduce a huge amount of cost, which resulted in the decrease in their ticket prices, which became very reasonable, in fact, the lowest price among all the airlines.

Highly innovative strategy to Earn through Advertising

Ryanair also displays advertisements on their airlines of such companies like Vodafone group, Jaguar, and Hertz etc. and earns through advertising their products. Once in the air, flight attendants hawk everything from scratch card games to perfume and digital camera and cell phones to their captive audience. To learn more about innovation and cost leadership, aspiring young entrepreneurs may opt. for several entrepreneurship courses on several renowned several online academic websites. These websites also provide help with essay writing services to the students of UK

Using the Information Technology to Cut the Costs

Ryanair also uses the Information technology support to reduce their overall cost, as the famous IT product manufacturers, Dell did by selling their computers and laptops online, they reduced the inventory cost, similarly with the help of the website Ryanair sold their tickets online which saved a huge amount of administrative cost. Ryanair is also planning to offer in-flight gambling in the near future, which predicts to double their earnings. Customers might really love that. But it is not the end over here, they also envision the day when customers can be charged for the ability to use their cell phones in the air. Plus they are also planning to in partner with operators of airport parking and concession stands to capture a bigger slice of the cash that customers are spending on the ground getting to and from the plane. As the president of Ryanair says “For Ryanair, not even the sky is limit”.