Ryan Air versus The easyGroup : A comparison of business strategy 1. What are the main sources of economies of scale, scope and learning that underpin the strategy of Ryanair? The Ryanair business strategy is to be the cost leader in the airline industry. The cost structure of the airline industry is predominantly one of fixed costs. The Ryanair strategy is to keep paring away at fixed costs and increase the passenger load per aircraft to improve profitability.
If this year the sales mix is different than the historical average, explain what affect this would have on the breakeven point. Any change in proportion in which the products are sold has significant impact on the break-even point. ("Sales mix and break-even point analysis - explanation and example | Accounting For Management", n.d.) If the sales mix changes, the effect on the breakeven point will depend on the unit contribution margin. If the sales mix were changed in favor of the type of aircraft with the higher unit contribution margin than the breakeven point will actually be reduced because of the higher total revenue. Conversely if the sales mix were changed in favor of one of the lower contribution margin aircraft then the volume of aircraft sold would need to be increased in order to make up for the reduced profit per aircraft.
Essay SILVERJET: “A FALLEN STAR” Market segmentation is one of the most pivotal factors in the air freight market. Only if markets are properly segmented can airlines find the basis for their product, price and promotional policies. It involves dividing up a whole market so that products and services can then be developed for each part of the market. Practically, a lot of companies were successful with reasonable market segmentations, many others failed as they have made improper market segmentation. Airlines Silverjet is a good example for this, we will understand deeply how important of market segmentation with the success or failure of a company.
We found that Cost of Equity has a much larger impact on PPS than Growth. Therefore JetBlue should be much more concerned about the cost at which they issue the equity than the growth they expect to receive from new investments. From this finding we suggested keeping the number of planes the same because when we analyzed the trailing EPS of .51 and the forward EPS of 1.5, we see this generous increase may come from increased amount of assets available after an IPO. After we found this key point we compared the relative forward stock price of $43.19 and the price per share price valuation of $65.63 to derive our final recommendation for the IPO stock price offering of $54.41. Our range of prices for the IPO would be between $53-55.
It depends on the industry barriers to entry. If the potential entrance is high, it may lead to increase the degree of industry competition. The industry attractiveness therefore is less due to low profitability (Tutor2u, n.d.). There are number factors of barrier to entry however the key barriers to entry can include: * Economics of scale * Production differentiation * Capital requirements * Customer switching costs * Access to industry distribution channels * Government policies (eNote, 2012) a. Economic scale: European airline industry has achieved economic scale in which it creates a barrier of entry that the new entrants have to compete on a large scale (eNote, 2012).
Boeing is the largest exporter by value in the United States. The manufacturing process experienced a major change and there was less production delays than before which not only helped in keeping an efficient flow when it came to their supply chain but also helped in better customer service which of course helped them hold on to crucial market share. Gaining market share of course hugely elevated their problems of losing customers or market share to Airbus (who in order to turn away customers from Boeing had initially adopted the strategy to lower prices of their products). Of course the customers were airline companies. Boeing’s success depended directly on the success of those airline companies.
Analysis of Issue 1: Should Flyaway report its ticket revenue on a gross basis (as a principal) or net (as an agent)? Flyaway.com (“Flyaway” or the “Company”) must determine whether its ticket sales revenue should be reported gross (for the amount billed to the customer) or net (for the amount retained after remitting customer payments to the airlines). ASC 605–45 (Revenue Recognition—Principal Agent Considerations) addresses transactions and activities including: 15-2(b). Services offered by an entity that will be provided by a third-party service provider. In this case, since the airline will be providing the actual services (flights) to customers, this arrangement is within the scope of this subtopic.
Describe the different stakeholders who influence the purpose of two contrasting businesses Describe how two contrasting organizations impact the goals and aims of the company. The key stake holders of easy jet consist of: Customers: the customers of easy jet want the services of a company to be the best of them; this means that the customers want the company to provide the best service possible. The point of view from the customer is that if they are buying a ticket they want to be taken from A – B as fast and cheap as possible so if the company raises prices or goes green and such it affects them and they wish to be taken into consideration. These people wish to get cheaper flights from the company. They have influenced the goals of the company by trying to get it to be cheapest yet profitable flight provider.
PRICE DISCRIMINATION IN THE AIRLINE INDUSTRY Frode Steen and Lars Sørgard Department of Economics Norwegian School of Economics and Business Administration Helleveien 30, 5045 Bergen NORWAY Emails: frode.steen@nhh.no and lars.sorgard@nhh.no Abstract: The purpose of this report is to discuss the welfare effects of different kinds of price discrimination schedules that are used in the airline industry. We distinguish between versioning, discount to large consumers, and frequent flyer programs. It is argued that versioning is probably welfare improving, especially in a competitive setting. Furthermore, it is argued that discounts to large firm has an ambiguous effect on welfare in monopoly, while it is likely that it is detrimental to welfare in a competitive setting or in a setting with a dominant carrier threatened by entry. Finally, we argue that frequent flyer programs have anticompetitive effects in an oligopoly, and especially in a setting where an established is threatened by entry, so that such programs are expected to be detrimental to welfare.
Having already filled the market with 747s, Boeing is looking to capitalize on the demand for direct flights and medium capacity requirements. Airbus on the other hand is producing the A380, an aircraft capable of carrying up to 800 people. Airbus is looking to replace the ever growing old Boeing 747s in the market with a higher capacity more fuel efficient plane. Its easy to compare the two aircrafts in terms of size and primary use. The A380 is a high capacity aircraft capable of transoceanic flights, while the 787 has relatively the same traveling distance, but a maximum passenger count of 280.