MKT 101 Lecture

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    Ryanair

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    Ryanair

    Europes first low-fare, no frills airline launched in 1985

    by March 2008, one of Europes largest and most profitable airlines (over 51 million passengers

    a year, over 481 million euro in net profit, from a revenue of 2.7 billion euro)

    Corporate strategy: exclusive focus on providing low-cost transportation for consumers within the European

    Union; seeks competitive advantage by offering the lowest fares of any airline

    operating in Europe

    Low price competitive strategykeeping costs low

    own rather than lease airplanes; 15% more seats per aircraft than traditional airlines

    nearly all planes are Boeing 737s => standardization of maintenance activities and parts inventories

    concentrate flights to and from underutilized regional airports (lower taxes and fees, less congestion)

    no fees to computer reservation systems and no commissions to travel agents

    Advertising and promotion are among the few areas where Ryanair has not tried to cut costs below its

    competitors.

    At the beginning of 2009, the company was operating 180 Boeing 737s but was negotiating to buy as

    many as 400 more planes in order to double its passengers and revenues by 2012

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    3

    Ryanair easyJet Norwegian Air Berlin Spirit SouthwestStaff 5 8 15 14 16 33

    Airports

    & Handling8 18 8 26 15 22

    Route

    Charges6 6 13 8 - -

    AircraftOship &

    Maint.

    6 8 17 20 16 17

    Sales &

    Marketing2 6 12 31 4 2

    Total 27 46 65 99 51 74

    % vs Ryanair - +67% +137% +262% +86% +170%

    Source: CAPA - Centre for Aviation and latest available accounts via Ryanair presentation 28 January 2013

    Costs per passenger (EUR, ex fuel)

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    Foundation for the Marketing Strategy:

    System of Company Objectives

    Business

    mission

    Company

    objectives

    Functional objectives

    Instrumental

    objectives

    SBU

    objectives

    Referring to

    n Product decisions

    n Pricing decisions

    n Sales decisions

    n Communication

    decisions

    According to Homburg/Kuester/Krohmer 2008

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    Ryanair: Components of Strategy

    Corporate strategy mission and scope:

    focus on the price-conscious segment of airline passengers travelling in Europe

    Specific goals and objectives for corporate growth:

    double number of passengers and revenues

    Allocation of resources:

    invest in new planes to enable it to schedule more flights; invest in advertising and

    promotion to help build customer awareness and market share

    This well-defined corporate strategy influences and constraints the strategic decisions that

    marketers and other functional managers can make at lower levels

    Pricing decisions Cost cutting policy of avoiding travel agent commissions forced Ryanair to be a pioneer

    in the direct marketing of tickets over the Web

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    6Source: http://centreforaviation.com/analysis/ryanair-swot-analysis--michael-olearys-maniacal-focus-on-being-the-lowest-cost-

    Ryanair passenger numbers (mill) FY2001 to FY2013f* and 2022 target**, and passenger

    growth rates

    Ryan Airs Growth

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    Top 10 Airlines (3-Jun-2013 to 9-Jun-2013, Europe to Europe, System traffic), ranked by Seats

    Source: http://centreforaviation.com/analysis/ryanair-swot-analysis--michael-olearys-maniacal-focus-on-being-the-lowest-cost-

    Ryan Airs Growth

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    Scope and Mission of the Organization

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    A corporate mission statementshould clearly define the organizations strategicscope.

    What is our business?Who are our customers?

    What kinds of value can we provide to these customers?

    What should our business be in the future?

    Example: PepsiCo

    Mission statement early 90s: marketing superior quality food and beverage products forhouseholds and consumers dining out

    Acquire Frito-Lay, Taco-Bell, Pizza Hut

    More recently: narrowed its focus on package foods and beverages distributed through supermarket andconvenience store channels

    Divest all fast-food restaurant chains; acquire Tropicana, Lipton and Gatorade;develop new brands targeted at rapidly growing segments such as Aquafina

    Most recently: continues to focus on package foods and beverages, but seeksperformance with purpose(health, environment)

    Naked Juice

    Scope and Mission of the Organization

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    On the Importance of Plans/Planning

    A man who does not think and plan long ahead will find trouble right at

    his door.Confucius (551 B.C.E. 479 B.C.E.)

    By failing to prepare, you are preparing to fail.Benjamin Franklin (1706 1790)

    A good plan today is better than a perfect plan tomorrow.General George S. Patton (1885 1945)

    Plans are of little importance, but planning is essentialWinston Churchill (1874 1965)

    1010

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    Macro Trend Market Analysis

    Five major global demographic trends:

    1.Aging

    2.AIDS

    3.Imbalanced population growth (Asia, Africa)

    4.Increased immigration

    5.Declining marriage rates

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    Macro Trend Market Analysis

    Sociocultural trends are those that have to do with the values, attitudes, and

    behavior of individuals in a given society.

    Two major current trends:

    1.Fitness and nutrition

    Food industry (production and retail), health and fitness clubs and equipment, new services

    2. Greater interest in ethical behavior by businesses

    Companies must adjust their strategies to incorporate consumers concerns about business

    ethics

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    Corporate Social Responsibility Statement :

    Providing capital, expertise and products to manage the transition to a low-carbon economy. Since 2007, the company has

    invested $11.6 billion in solar and environmental projects as part of a larger $20 billion, 10-year Environmental BusinessInitiative

    Loaning more than $92 billion to small and medium-sized businesses, $10 billion more than in 2009

    Spending $4.1 billion with thousands of small and medium-sized diverse suppliers

    Providing $200 million in philanthropic giving, making the bank the second largest cash giver in the U.S.

    Providing $168.5 billion in community development lending and investments in 2010, the second year of a 10-year, $1.5

    trillion community development goal

    Launching the Bank of America Merrill Lynch Art Conservation Program, a unique program that funds the conservation of

    essential works of art that are significant to the cultural heritage of a country or important to the history of art

    Continuing its leadership in promoting volunteerism and service, with employees donating more than one million hours ofvolunteer service in 2010. In 2011, this goal has been increased to 1.5 million hours

    Providing more than $12.6 billion in loans to veterans and continuing its commitment to customer and employee diversity

    and inclusion initiatives

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    Corporate Social Responsibility

    http://www.helpthehoneybees.com/

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    Practicle Example Household Segmentation (1/3)

    Nielsen PRIZM Features and Benefits

    Household segmentation model that groups consumers in 66 segments (for all US households)

    Aim: highly comprehensive insights into consumer behavior

    Input: demographic data, consumer behavior, geographic data, shopping patterns, media preferences

    Output: by further clustering the 66 segments, social groups and lifestyle groups can be

    generated

    o Social groups: level of urbanization (horizontal axis) & affluence (vertical axis)

    o Lifestyle groups: stage of life (horizontal axis) & affluence (vertical axis)

    Advantages:

    o Supports marketers in identifying, understanding and targeting their customers with

    tailored messages and products

    o Segmentation is intuitive and easy to understand (supported by catchy names and images

    for each segment)

    http://www.claritas.com/MyBestSegments/Default.jsp

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    Practicle Example Household Segmentation (2/3)

    Nielsen PRIZM Social Groups

    Urbanization:

    o Defined by the population density of the

    area as well as its relation to the highest

    density center in the area

    o Categories: Urban, Sub-Urban, Second City,

    Town & Rural

    Affluence:

    Each segment is assigned a socioeconomic rank

    that combines neighborhood data for income,

    education, occupation and home value

    Input Output

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    Practicle Example Household Segmentation (3/3)

    Nielsen PRIZM Lifestage Groups

    Lifestage Classes

    o Younger Years

    o Family Life

    o Mature Years

    These Lifestage Classes are used to describe segments

    rather than strictly defining them

    Lifestage Groups

    o by combining Lifestage Classes and social

    groups a matrix grouping the 66 segments

    into 11 Lifestage Groups is created

    Input Output

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    Example SWOT Analysis

    18

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    SWOT Analysis (Ryan Air)

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    Scope and mission: To firmly establish itself as Europes leading low-fares scheduled

    passenger airline through increased passenger traffic while maintaining a continuous focus on

    cost-containment and operating efficiencies.

    Strengths:- Low operating costs

    - Fast turnaround times- Etc.

    Weaknesses:- Not serving major

    airports- Weak brand

    - Etc.

    Opportunities:- Market growth

    - Consumer increasedprice sensitivity

    - Etc.

    Threats:- Fuel cost increases

    - Airport chargesincreases

    - Etc.

    Add 20 new airports to the 180 locations currently served;

    Continue offering 0.99 Euro fare promotions for uncongested routes

    Capture 20% of the priceconscious traveler segment

    within the EU by 2018

    Purchase only Boeing aircrafts as a single manufacturer strategy helpsreduce costs associated with personnel training and aircraft maintenance

    Increase the pay-per-performance component of employeecompensation

    Maintain the rate of yearlyoperating cost increases under

    10% of total operating costs

    Improving customer satisfaction by partly outsourcing customer servicesto local airports

    Participate in charitable initiatives supporting local communities in the

    markets served

    Improve brand perception:ranking in the top 5 most liked

    brands in its category by 2018

    POTENTIAL OBJECTIVES POTENTIAL IMPLEMENTATION DECISIONS

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    Marketing Warfare

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    Art of War: Doctrine

    Before the battle:

    Win without fighting, if possible

    Know the battlefield; Know yourself; Know the enemy Plan & strategize; Strategy before tactics

    During the battle:

    Develop teamwork; whole team works as a unit

    Attack from strong position / high ground

    Take the Offensive: Occupy the battlefield first & wait for the enemy

    Use surprise; Use unexpected routes & methods

    Avoid enemys strength, attack his weakness

    Take advantage of enemys unpreparedness

    After the battle: Build on your success

    While in peace, train for war

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    Formulation of Marketing Strategy Central Questions

    Centralstrategicquestions

    According to Homburg/Kuester/Krohmer 2008

    Strategic marketingobjectives/target groups

    addressed bymarketing strategy

    Customer benefits andpositioning as compared

    to competition

    Innovationorientation

    Customerrelationship

    management

    Competitive andcooperative conduct

    Basic design andstructure of marketing mix