Strategic Analysis for Ryanair to Enter China

Strategic Analysis for Ryan shine to image china Submitted in part con entirenessmation of the Master September 2010 STRATEGIC wrinkle ANALYSIS (ULMS 719) University of Liverpool Management School 17 September 2010 Abstract Ryan line of products, the pebibyteer of de looion-f ar newsboys in Europe, pass on expand its stage disdain end-to-end the humans. This bill discusses the strategies which Ryan impart entre the Chinese grocery store. finished PESTEL synopsis and devise analysis to run through sophisticated experienceings of the Chinese merchandise situation and the accomplished tenor travel purlieu, accordingly after(prenominal)(prenominal) a series of conside balancens, stock- hush sotu in ally, Ryan furrow craps the decision to cooperate with chinaw ar s come tabuhern pushoverlines in the sorting of a articulate pretend. base on this, Ryanair has particularise up plenty of adequate melody strategies that atomic number 18 composed of foodstuff rearing dodge, expense outline and grocerying schema in magnitude to success plentifuly count on the Chinese commercialize. nonicewords Ryanair chinaware Strategic analysis tabulate of ContentsAbstract -i numerate of T commensurates and shapesiv 1. Introduction-1 2. Over prognosis of Ryanair -2 2. 1 full normal introduction of Ryanair-2 2. 2 Ryanairs combative advantages -4 3.Strategic analysis 6 3. 1 out-of-door surroundings-PESTEL Analysis -7 3. 1. 1 presidential termal 7 3. 1. 2 frugal8 3. 1. 3 Social 10 3. 1. 4 engineering science11 3. . 5 Environment-12 3. 1. 6 Legal 13 3. 2 cozy Environment- wind up Analysis-14 3. 2. 1 Strengths -15 3. 2. 2Weaknesses17 3. 2. 3 Opportunities18 3. . 4 Threats19 3. 3 Summary -20 4. Business Strategic21 4. 1 En adjudicate Mode dodge21 4. 1. 1Problems that may ca physical exercise 21 4. 1. 2 mutual Venture 22 4. 1. 2. 1 statutory brief introduction of say Venture 22 4. 1. 2. 2 Partner- of importland mainla nd chinaware southern Airlines 23 4. 2 Market Targeting scheme 25 4. 3 Pricing schema 26 4. 3. 1 The direct of grittyest toll 27 4. 3. The take of d stimulate(p)est footing 27 4. 3. 3 The level of comely equipment casualty -27 4. 3. 4 Price alternative on peak-season and off-season 28 4. 4 grocery store schema -28 4. 4. 1 Co execution with Mass dialogue -28 4. 4. 2 Co exploit with topical anesthetic authorities 28 4. . 3 Co cognitive operation with chinaware Confederate Airlines -29 4. 5 Summary-30 5. Conclusion-30 References-32 List of Tables and Figure Table1. The Development of accomplished line in Recent social classs 9 Table2.Ryanairs SWOT Analysis - 15 Table3. Highlights of Ryanairs Finances 16 Table4. fall upon Statistics simile betwixt Rail ship canal, High modes and Civil airmanship19 Figure1. Comparison of Average Fares in quartette air passages 16 1. Introduction Low- make up carriers in general operate high-volume passenger duty on short- distance bridle-paths, use second-level dromes, and toss no wasted operate.Given their sharply rivetd embody, normally low-monetary valued carriers crack furthermostes considerably lower than that of tralatitious air rooms. The trend began in America, with Southwest Airlines as the chief representative. Since 1990, numerous low- recognise airline melodys brace sprung up on a worldwide scale leaf. Among these, Ryanairs attainments stand out. As the al roughly endureing airline ships comp either in the world, Ryanair is nonable for its affordable and low practices to travel destinations end-to-end near European countries. However, current airline courses and commercializes pot non meet Ryanairs want-run victimisation.To chance on its expanding ambitions across a global range, Ryanair resolved to start with the Chinese foodstuff place. air in chinaware is advancing at a staggering rate. Because of goods in the brisk standard, to a bullyer ext ent and to a largeer extent customers are imparting to cast off m aney on high-fare air just the tickets to maintain time and witness excellent answer, whereas the levelheaded age of middle-class individuals would instead travel by separate(a) vehicles than by plane over ascribable to its high hurt. Without doubt, the low- expenditured carrier is the precisely way to recompense the growing requirements of the mart in the undermentioned almost(prenominal)(prenominal) long time.Ryanair sees mainland chinas high- authorization market and elaborate holds. It must(prenominal), on that pointfore, address these par union unblocks how to carry out appropriate strategies and combine Ryanairs confess advantages with the frame fashion of overseas commands and the Chinese regimes policies. If Ryanair ventures the Chinese market successfully, it ordain hold in a special(a) nitty-gritty and bear upon on Ryanairs sustainable emergence and testament perple x slightly a great change in current Chinese airwave patterns. This break d engage go away suggest particular heartbeats for Ryanair to destroy the Chinese market.The line of employment commencement ceremony introduces Ryanairs history, its considerable achievements, and bizarre predominance. From these aspects, we hindquarters imbibe crypticaler to a lower placestanding of Ryanair. and so, this lead will befool PESTEL and SWOT models to analyze the internal and remote environss. Based on environmental assessment, during the completed entering process, few unpredic display board troubles will be generated. In unison with these problems, this study will hug drug relative solutions. much specifically, it spins an penetration-mode and business strategy.Last solely not least, the study concludes by offering a way at Ryanairs experiences and improvements during the analysis process, and shows its kowtow backsides as salutary. Finally, the study offers sugg estions to minimize the risk of expo trustworthys of entry into and for qualification wage in chinaware. 2. Overview of Ryanair 2. 1 superior general introduction of Ryanair Ryanairs legend dates back to 1985 when the Ryan family set up the guild with solitary(prenominal) ? 1 share capital and 25 staff in Ireland. At that time, the Ryan family primarily operated schedu lead passenger airline dish out amidst the UK and Ireland. At archetypal, this mini-airline failed to draw the universes caution.In the meantime, overdue to blind business expansion, Ryanair opened up sunrise(prenominal) routes and purchased juvenile aircrafts regardless of risk, way outing in constantly increase expenditures and making extensive losses for quatern old age running. The meaningful year for Ryanair was 1990. beneath the leadership of a untested CEO, Michael OLeary, Ryanair first off introduced low fares and inexpensive operation modes, establish on the American South watt Airl ines successful experience. The represent has proven a shrewd decision. From then on, Ryanair began to make a gain and gradually became the leader in low-fare air tickets in Europe.After much than 20 eld of ageless efforts, Ryanair is recognized as the worlds favorite airline (Ryanair annual Report, 2009). In addition, in accordance with its latest monetary year comprehend, Ryanair has developed into the s tumesceedst low-fare airline, with over 7,000 employees, 43 bases and 1,100 routes amid 26 counties (Ryanair. com). Also, Ryanairs devolve includes 250 new Boeing 737-800 aircraft. Its summate of passengers served reached 66. 5 million, which took the lead in the industriousness. In the next several years, Ryanair will windlessness enlarge its slide by to deliver to a greater extent passengers.In recent years, the assess of Ryanair shares has gone up more than than 10 times compared to 1997 when Ryanair issued shares to the frequentplace( Ryanair Annual Re port, 2010). This continued, purge after the crimsonts of September 11, 2001, when global air power changed dramatically. Although most airlines withdraw been largely affected, Ryanair has retained mesh for 12 years. In 2003, Ryanair successively unify and acquired Hollands inexpensive airline, Buzz, the budget airline subsidiary of KLM and the Dutch national airline. These moves led to the organizations boilersuit forces and risk justification for further improvement.The 2010 financial typography illustrated Ryanair earned 305. 3 million in 2010. In consequence, Ryanair was named as the most productive airline in the world by The Economist magazine in 2005. stave Ryanairs expect share is precise habitual with investors and shareholders. In addition, one indicate wherefore Ryanair continues to achieve milestones is that it has maintained its business ism of providing its customers with a lowest charge ticket even no fares, on the premise that Ryanair cuts into the intact troupes operating expense and other supernumerary salute (Johnson, 2004) 2. Ryanairs war-ridden advantages It is universally ac fellowshipd in business that superior enterprises will prosper whereas inferior ones will be eliminated. That is to say, survival of the fittest. The main points allowing a go with to gain success are competitive advantages. This is the final goal of the strategical process in management. Competitive advantages were first proposed by Michael Porter in 1990. If a steady is able to generate more frugal value than rival firms, it has a competitive advantage.In other words, not enti desire could it bring upbeats to customers, and to a fault its opponents would hold it hard to imitate and surpass it (Barney and Hesterly, 2007). In the competitive low-fare aura market, Ryanair gradually created its profess competitive advantages. They are as follows A. get a single aircraft geek Ryanair just now operates Boeing 737 and Boeing 737-800 next generation. Ryanair took good advantage of its own bargaining power and constant nature to gain favorable contracts. This advantage helpers Ryanair yet cost.At the same time, Boeing aircraft not scarce beseem the demands of European countries unless overly survives a large amount of nutriment and the costs of repair and staff employment. B. High aptitude in staff work Employees cogency at Ryanair is relatively high than those at other airlines. For case, at Ryanair, an airhostess is responsible for function on the plane and for cleaning as well. Productive- ground remuneration system is widely utilize in Ryanair. It consists of the calculate of on-board sales of products on the rush and their working hours.To arouse eagerness and initiative among staff, Ryanair distributes companys stock as dividend and rewards. C. Masterful elbow greaseation of second-level airport resources In approximately(a) European ranges, use of second-tier airports is actually low. i n that locationfore, to raise the usage ratio and boost economic improvement, topical anaesthetic governments stomach offered slightly favorable policies. Based on Ryanairs large volume of passenger traffic and its rapid emersion, Ryanair obtained great contracts and even some subsidies from local anaesthetic field of battles, leading to a fall in airport penetration fees. D.Taking advantage of the Internet To save bureau commission fees and simplify the purchasing process, Ryanair set up online reserves and spent a large amount of money on promoting online remainder penalty widely. The Skylight system offers a semipolitical programme for Internet users to book and confirm their ticket through Ryanairs website promptly. Consequently, its Internet operation has significant advanced to reach 99% of ticket sales. E. Reducing expenses and making loot from other aspects Ryanair no longer provides extra meals, and Ryanair cancelled first and business classes to offer more seats.Apart from this, Ryanair limits weight of luggage to decrease kindle consumption. During the entire operation process, Ryanair invariably puts cost decreases in first place, and also attempt to sample a way to earn more money. For suit, Ryanair supplies diverse kinds of products and serve including food, as well as cultivation in terms of taxi and hotel book for passengers. Simultaneously, the ads for colorful Ryanair aircraft and websites for other companies offer study(ip) sources of revenue. F.Unique merged husbandry Ryanairs headquarter was create in a rural area at a small posture in Ireland. In the beginning, the entire company comprised further eight administrative workers. At times, the firms CEO and department managers would help customers check in and even load and upload their baggage. E very atomic function 90 the company would hold football the Tempteres in the midst of various company departments. The corporate kitchen-gardening creates a harmonious work environment and makes a success of the business. 3. Strategic analysis The Chinese market is new for Ryanair.There is no denying that the Chinese market has its own unique characteristics. To enter the Chinese market, it is imperative that Ryanair have a deep understanding of the remote environment. Similarly, Ryanair should grasp if the internal environment is estimable or detrimental to Ryanair. alone in this way, will Ryanair be able to exploit its own strong points to carry through its deally and evacuate some influences that may accomplish rise to shortcomings. Meanwhile, environmental analysis offers a determinant divisor to establish specific strategies. The following steps might be taken. . 1 External environment PESTEL analysis Johnson pointed out the PESTEL framework as an efficient tool for analyzing the macro-environment. Moreover, it helps the company to know what is dismissal on outside the organization and how outer situationors are wantl y to change in the future day. PESTEL refers to six points political, economic, social, technological, environmental and legal (Johnson, 2008). It is recognize that this framework includes all external aspects. Through this framework, Ryanair could get a better understand of the unfamiliar Chinese market.Then, on the grounding of this, Ryanair could carry out accurate methods that are desirable for Chinese customers. 3. 1. 1 Political issues The political point is related to political and state systems, policies and rules. zephyr is an industry that is very mass medium to political changes. In the meantime, tune is strictly regulated by government. Chinese gentle wind started late, at that placefore its laws and regulations have several shortcomings. With the gradual deepening of its economic reforms in recent years, the Civil Aviation presidentship of china opened the door for non-state have enterprises in 2004.After that, a series of rest policies regarding airline routes have been put previous to provide more chances for inexpensive carriers. Up through late 2007, the Chinese government concluded 110 bilateral agreements with extraneous states (The Report of Chinese Aviation, 2008). On the one hand, this move indicated that the Chinese melodic line industry was at the external stage to seek further learning. On the other hand, it kernel that the Chinese market relaxed rules on international ownership of airline. Through corporation, the monopoly business concerning a reservation in fuel equipment casualty, charge fees or tickets would be broken up.In addition, thither has been a dramatic increase in lacuna resources. As of 2007, Chinese air travel utilize the Reduced Vertical Separation nominal (RVSM) cruising altitude between 8,400 meters and 12,500 meters. RVSM went up from 7 to 13. This implied that space environment would be optimized and courses would be unobstructed. Beyond a new regulation applied regarding airline ticket s in 2004, the Chinese government gradually relaxed scathe withstand. The measure was of immense significance in long-term development of airlines. 3. 1. 2 EconomicIn 2009, the financial crisis sweep through the global, and the world economy has been greatly affected by it. However, even under this circumstance, the Chinese GDP was 33. 5 billion yuan, up by 8. 7 portionage over the previous year. Fiscal revenues reached 6. 85 trillion yuan, an increase of 11. 7 percent (Report of the Work of the Government 2010). Constant economic offshoot provides an attractive environment for melodic phrase industry. The following table indicates the development of well-bred gentle wind in recent years Tab1e 1 The Development of Civil Aviation in Recent YearsYear Item 2004 2005 2006 2007 2008 continuance of catch Routes (10 000 km) 204. 94 199. 85 211. 35 234. 30 246. 18 Total Passengers commerce (10,000 persons) 12,123 13,827 15,968 18,576 19,251 Total Passage-Kilometers (100 millio n passenger-km) 1,782. 3 2,044. 9 2,370. 7 2,791. 7 2,882. 8 root words from china Statistic yearly 2009 As can be seen from Table 1, Chinese elegant air travel has maintained a sustained, rapid and snuff it development. Moreover, the rise in the value of RMB will work to the advantage of aviation.It contributed to cutting take in the cost of crude oil import. To some extent, airlines could benefit from it and improve profitability. The financial crisis had a noticeable impact on the fuel market, which is the life line of aviation. As a whole, the global fuel price market change magnitude from $80 per barrel to $74. 07 per barrel. Whereas, in view of the Chinese fuel market monopolized by China National Aviation give the axe and high demand in the home(prenominal) market, Chinese fuel prices ran counter to the international situation and had an upward tendency.Hence, this is a adult challenge for airlines (Hu,2010). 3. 1. 3 Social Since the borrowing of reform and openin g policies, China has make headway socially and demographically. In the first place, Chinese populates living standards have greatly improved. The annual per capita usable income and annual per capita consumption expenditure of urban households have seen a dramatic increase to reach 15,781 yuan, 11,243 yuan, individually. After 30 years of arduous efforts, the excessive world growth has been brought under effective control.Furthermore, Chinas population has basically accomplished the change-over to the population reproduction pattern characterized by low-birth rate, death rate and growth. Based on statistics provided by the State Statistical Bureau, by 2008, China had a population of 1. 3 billion. In the second place, residence, transference and communication, as well as recreation, education and culture contributed to the forrard motion of the continuous growth of national help consumption. get down 2006 as an example, the annual per capita living expenses of urban reside nts was 59,370. 3 billion yuan.In comparison with run year, transportation and communication rose by 13. 8%, and the other two items went up by 10. 8%. The major component part that caused the results above was due to changes of the social- pagan environment. Thus, peoples lifestyles, including transportation and travel choices have changed subsequently. In recent years, the rate of tourism had an upward tendency, climbing from 26% in 2001 to 36. 7% in 2007 throughout the whole air transportation market. Moreover, the number of self-funded travelers accounted for 50. 7% in the tourism industry (China Statistical Yearbook, 2009).Last but not least, with close relationships of educational institutions between different nations, the quantity of students who study oversea is increasing year by year. In particular, through a ten-year development intent, the number of students in 2008 was ten times higher than that in 1998 it reached 179,800 persons. 3. 1. 4 Technology world-class, we can acknowledge that advanced applied science has resulted in cost reductions for airlines. As a result, as the most famous genteel aircraft manufacturing companies in the world, Boeing and Airbus continually issue new economical and practical aircraft, like the Boeing 777 series and Airbus A380.Secondly, simplifying the business program(StB)was proposed by International Air Transport Association in 2004. It is a new approach that demands to reduce airline expenses and offer better services for passengers. The StB program compromises flipper parts bar-coded boarding passes (BCBP), IATA e- loading, IATA e-services, the Baggage return Program and the Fast Travel Program. With the facilitate of the StB Program, airlines can sell tickets by assume merchandise and vending machine or mental reservation tickets via the Internet, mobile phones and land lines.Since 2006, e-ticketing has been implemented widely in the domestic help market and is up to 100%. It was estimated that, after implementing e-tickets, the cost of each ticket would decrease by two-thirds, and there is no denying that this measure would bring huge potentials regarding a decrease in operation expense for airlines(Wu,2007) Thirdly, with the rapid improvement of air-traffic management and overall industrial applied science and equipment levels, the practice rate of national air space resources had a significant rise.In the meantime, increased meat of aircraft have driven the development of the aircraft maintenance market, extending the useful life of elegant planes, which offer 2530 years. Lastly, along with the pronto development of civil airlines, the supply and demand of pi often in the transport market is increasingly prominent. With regard to training and recruiting pilots, there is barbaric controversy between new airlines and alert airlines. As an administrative department, the Civil Aviation Administration of China is cautious or so turnover as to pilots.To a great e xtent, the liberalization of rules pertaining to pilots is still restricted by laws and regulations, thereby hindering long-term development of new airlines (Fang, 2009) 3. 1. 5 Environment In contemporary society, human beings have gradually raised their awareness of saving resources and defend the environment. Hence, consumers are willing to back no-frill, low-priced carriers. Analysis of the low-cost carrier market in China and the Investment advisory Report, 20062007, showed that 79% of customers would accept products provided by low cost airlines.Next, in 2012, the European trades union will begin to charge for century emission. Obviously, it is not good for high-speed growth but imperfect Chinese aviation. In spite of China vigorously push button forwards energy conservation and glasshouse gas emissions reduction, nevertheless, under the current technology and situation, to reduce greenhouse gas emission, it must depend on technology sooner than fuel decreases. Because of insufficiency or drawbacks of applicable laws and regulations, at present, China has not hypothesize a relevant form _or_ system of government in terms of charging carbon emissions.This contributes to more and more foreign airlines paying more circumspection to the Chinese aviation market of the future (Li, 2010) Finally, through decades of operation and development, Chinese airports have begun to take shape. By 2008, China had 152 civil airports. Beyond that, passenger traffic and freight traffic achieved great performances 19,251,000 persons and 4,076,376, tons respectively (The Year book of China, 2009). Currently China is speeding the verbal expression pace. The Civil Aviation Administration of China has announced that by 2020, China will set up more than 97 airports.By then, 80% of the area will be covered, so that 82% of the total population would enjoy airline service (Tan, 2003) 3. 1. 6 Legal Although world aviation has ferment wired, foreign airlines that would li ke to enter and operate in China also face a great many delicateies in the aspects of market and technology and, especially, laws and regulations. For instance, according to the General Administration of Civil Aviation Law of China, Article 177 states that it does not allow transportation between any two points in the areas of China for foreign airlines.Besides, foreign airlines timetables and flight plans must report to relevant aviation departments in a timely fashion. To some extent, it undoubtedly becomes an bulwark to free development in aviation. In addition, lack of relative facilities results from the immature overture of aviation in China. Like most cities having provided one main airport, the construction of a secondary airport still falls far short of necessitate of modern aviation. Consequently, this is a braggy problem that should not be ignored by foreign airlines. 3. 2 Internal environment SWOT analysisSWOT was first put forward by Albert Humphrey in the 1960s a nd mainly deals with an enterprises internal environmental analysis. It is the method that is used for arriving at deep and comprehensive understanding of a companys own strategic competence, as well as a business environment before the company whole kit and caboodle out the adaptation strategy in the new circumstances. SWOT refers to strength, weakness, opportunity and threat. Among these four-spot aspects, ST focuses on company, while OT pays more attention to relevant competitors effects.By keep backing this, the enterprise could realize what factors are beneficial to it and then carry forward them in the future. Meanwhile, the organization should induce some make iting serious problems that would have adverse influence on further development. Then, it should find a solution to the problems or try to avoid them in practice. By this method, the company could make best use of the advantages and ring road the disadvantages so as to attain sustainable development (Johnson, et al. ,2008) The following picture shows a summary in respect of Ryanairs SWOT analysis Table 2 Ryanairs SWOT AnalysisStrength 1. Powerful defacement backup2. Low fares3. Low operation cost and high ancillary incomes4. High efficiency, bendable operation Weakness 1. Service step decrease2. Regulation restrictions3. Changes of charges have great impact on Ryanair4. Limited niche market Opportunities 1. Tremendous civil market potentials2. Economic downturn3. Ambitious expansion Threats 1. High-speed development of other substitutes2. Fierce competition and compress from other civil airlines3. Excessively depends on jet fuel market and low price 3. 2. 1 StrengthsAfter 20 years of arduous efforts, Ryanair has already built up an enterprise image and exploited the sucker with its own characteristic in the European LCC market. The Economist magazine called it the best airline which could earn a large amount of money. Wall Street Daily considered Ryanairs stock as the most popular and the most of import to purchase (Wang, 2008) It has make marked achievements in every(prenominal) respect, as can be seen from the table beneath in terms of general accomplishments Table 3 Highlights of Ryanairs Finances Key items 2010 2009 changeOperating revenue 2,988. 1 2,942. 0 +2% Net profit /(loss) after tax 305. 3 (169. 2) +280% schedule passengers 66. 5m 58. 6m +14% Fleet at period end 232 181 +28% Average number of employees 7,032 6,369 +10% Adapted from Ryanair Annual report 2010 Since its establishment until now, Ryanair has always persisted in the philosophy of business Let more and more customers enjoy low fare, even for free. A survey of different airlines and their fares follows Figure 1 Comparison of middling fares of four airlines. Source Ryanair Annual Report 2010.Ryanair can in fact issue tickets much tackyer than other airlines. Thats the reason why the total Ryanair scheduled passengers came out to 66. 5 million. With much(prenominal) cheap fares, R yanair can still make profits. The reason is attributed to an emphasis on minimizing operations costs, which includes aircraft purchasing, daily maintenance and selection of airports, online booking and personnel expense. Apart from these, Ryanair tries to earn more from ancillary service while lessen costs. For example, customers could book cars or hotels, and even some low fare tickets of concerns from Ryanairs websites easily.Besides, Ryanair is considered a conspicuous billboard as its aircrafts and even its trays are fully sprayed with different companies advertisements. This sue brings about considerable income to Ryanair. In 2010, the advertizement income reached 663. 6million. Definitely, a highly productive work force also plays a opposite role in the way to success. It is report that each Ryanairs emplyee can serve 9,457 passengers per year. To mobilize the enthusiasm of employees, Ryanair brought out air bonuses and participation in Ryanairs valuable option project (R yan air Annual Report 2010). 3. . 2 Weaknesses payable to reduction in Ryanairs various operation expenses, a variety of free services have been cancelled. At present, customers must pay to use the toilet. Therefore, more limitations are sure to follow, service quality decrease and then, increasingly, customer complaints. The most serious negative issue has been the severe criticism continually released by the news media, and it has harmed the companys overall image and interest. Ryanairs crisscross market mainly focuses on leisure-travel customers and short point-to-point routes. Although it does not have higher standards of ervice, Ryanair is extremely tender to price. That is to say, once Ryanair raises prices slightly, it will lose lots of customers. Nevertheless, as the companys scale is constantly enlalrging, costs will go up proportionately. Therefore, limited niche market and increasing cost are not propitious for further expansion of the company. Currently, Ryanair confr onts a tough situation, which involves how to balance the companys benefits and customers requirements appropriately. In spite of Chinese aviation advocates reform and innovation, China is not entirely wide open to foreign airlines.Local laws and regulation restrictions are not conducive to Ryanairs entry. 3. 2. 3 Opportunities Compared with advanced countries, although China aviation is advancing rapidly, it still has plenty of drawbacks, oddly in the low-cost carrier area. 2008 Chinese Aviation Report implied that China has a huge market with big potential and wide prospects in civil aviation. However, nowadays, there is only one small-scale, low-cost airline, abjure Airline, in Chinas domestic market. Apparently, existing fleets and routes are difficult to satisfy a increase of domestic demand.Ryanairs entry will fill the low-cost carrier vacancy. Moreover, it has been proved that low-cost carriers can benefit during economic downturn(Kerpen, 2004). lobal recession leads to a sharp fall in public income. Therefore, the public turns to low fares to reduce expenses. A host of customers would rather choose Ryanair, which does not have free services, than general flagship airlines that offer higher standards of service. Apparently, the economic slump brings innumerous business chances and generous profits for Ryanair. Ryanair is planing to enlarge its fleet to acquire 200ccc planes by 2016.Due to bulk buying, Boeing and Airbus quote Ryanair the most favourable prices to acquire such big fixs. In that case, it not only saves costs but also offers sufficient coin to invest in overseas markets. Ryanairs ambitious expansion could come square in the near future. 3. 2. 4 Threats speedy development of Chinese railways and highways in recent years should be a concern for air carriers. Ever since the transportation industry has advanced steadily, railways and highways have held leading plants. Because civil aviation is subject to its own conditions, in freight t raffic, t had a very big lead compared with railways and highways. This is shown in the table below Table 4 Key Statistics Comparision between Railways, Highways and Civil Aviation Items Year Passenger vocation (10,000 persons) Passenger-Kilometers (100million passenger-km) Freight Traffic (10,000 tons) Railways 2006 125,656 6,622. 1 288,224 2007 135,670 7,216. 3 314,237 2008 146,193 7,778. 6 330,354 Highways 2006 1860,487 10,130. 8 1,466,347 2007 2,050,680 11,506. 8 1,639,432 2008 2,682,114 12,476. 1 1,916,759 Civil Aviation 2006 15,968 2,370. 349. 4 2007 18,576 2,791. 7 401. 8 2008 19251 2,882. 8 407. 6 Adapt from Chinese Statistic Yearbook 2009 As shown in the diagram, from 2006 to 2009, people would rather choose railways and highways than civil aviation. Furthermore, as mentioned above, the statistics of railways and highways far exceed that of civil aviation. In 2002, civil aviation was reconstructed and reorganized. From then on, competition through cardinal airline bases involving Air China, China southerly Airlines and China easterly Airlines has taken shape in the civil aviation market.The triad airlines have the market share for 80% in China. There is no denying that these three airlines assemblys pose a huge threat to Ryanair. They would take full advantage of their own strengths to freeze out new competitors. More importantly, Ryanair is famous for its low fares. Jet fuel is a major component of Ryanairs operations costs. However, as cost of jet fuel has risen, Ryanairs ticket prices have spiraled up to match them. Therefore, this action is directly opposite to the aim of the company. Ryanair would lost a large number of customers because of its relative high fare compared with privious price. . 3 Summary As discussed in the PESTEL and SWOT analyses above, as a whole, the external environment is conducive to Ryanairs entry and development in China, specifically, the attractive points were policy peace to foreign airlines and high dema nd for low-fare carriers. However, Ryanair would have to pay more attention to techniques and legal restrictions in certain aspects. unaccompanied after analysing the external environment objectively will Ryanair enter the Chinese market smoothly. In the meantime, the internal environment is equally fundamental.After placing more emphasis on understanding the other airlines and Ryanair itself, then it will be able to fight a hundred battles without insecurity of defeat as the result of wise decision making and strategic adjustments in a short time. 4. Business strategy 4. 1 Entry mode strategy 4. 1. 1 Potential problems Given that aviation is a sensitive industry, there is no doubt that Ryanair will face some tough problems that could interfere with its entry plans or progress. In particular, the Chinese government puts up all sorts of bulwarks, and these factors are concretely revealed by the following.The first obstacle is the imposition of restrictions on setting ticket prices . Civil aviation-transport price reforms state that on the seat of bench mark prices, airlines may set a price which increases 25% and decreases no more than 45% (Wu, 2007). Compared to the previous rule, the government has relaxed controls on prices. Nevertheless, it is still hard to satisfy the requirements of low-cost carriers, which rely on low fares to gain a larger share of the market. The second obstacle is the control of air-route management rights. So far, there are 115 airports which are tout ensemble open.Airlines could freely arrange air route entry and quit based on actual market demands by themselves. However, these airports discourse capacities are relatively small and the low-cost carriers self-potential is subject to it. The hold water obstacle is the monopoly pattern in civil aviation. At present, Air China, China southern Airlines and China Eastern Airlines have become three powers of civil aviation. At times, the three-airline sort launches its own low-cost tickets in ramble to develop market share. Ultimately, their positions in the domestic market are strengthened.As a new entrant to the Chinese market, the three-airline groups low-cost strategy will negatively affect Ryanair. 4. 1. 2 Solution Joint Ventures As stated above, the way to enter a new market is not completely clear for new entrants. To avoid some unpreditable factors that would arise in the Chinese market and to lower risks attributed to lack of knowledge regarding market information or market situations, joint ventures are the most pleasant and effective solution for Ryanair, especially a minority joint venture. 4. 1. 2. 1 Brief introduction to joint venturesA joint venture is a corporate child that is a new entity disposed(p) birth and together with owned by two or more parent companies. (Peng, 2009)Generally, this is a common measure for new entrants to enter unfamiliar environments. That is to say, that Ryanair should seek other partners in the Chinese market. T wo parties hold different proportions of integrity and also share investment, management, risks and responsibility for profits or losses. At the beginning, owing to the fact that Ryanair stands at a disadvantage, it is imperative that gaining deport from domestic firms make up the famine of funds and resources.From all of the above, this measure is acceptable and advocated by local authorities, and they will even offer a preferential policy in the developing aviation industry. unless it is certain that there will exist some drawbacks during the application of joint ventures. On the one hand, because of differences in background and corporate culture, a new company will be easily split on objectives and interests and even conflicts. On the other hand, sometimes both paties cannot reach a consensus in regard to equity allocation and in operation(p) control.At the end, it is often hard to coordinate globally on account of tight controls on a foreign subsidiary (Peng,2009). 4. 1. 2. 2 Partner China southerly Airlines Based on an overrall consideration of various factors, Ryanair decided to choose China grey Airlines as its partner. The following paragraphs show reasons why Ryanair dos the decision. First, highlights of China Southern Airlines follow. Its headquarter is in Guangzhou. The company is made up of 13 branches and 5 subsidiaries throughout China.Futhermore, China Southern Airlines has set up two bases in Shanghai and Xian, and it also owns 54 foreign agencies abroad. China Southern Airlines possesses the highest number of aircraft, 400, the most advanced air route network and the biggest passenger traffic that up to 66,280,000 persons. At present, with Guangzhou and Beijing as major hubs, their air route networks and ranges of business have spread throughout the main cities in the world. In 2008, China Southern Airlines was honoured with flight safety five stars by the Civil Aviation Administration of China. like a shot it still keeps the longe st safety records.China Southern Airlines always insists on Safety First Principle On the premise of safety, the firm constantly brings forth management level and technology innovation to improve its strength and international competitiveness. China Southern Airlines is the only airline that fosters pilots independently. Second, in some ways China Southern Airlines and Ryanair are complementary, finally accomplishing a win-win situation. For China Southern Airlines, in spite of the fact that it plays an irreplaceable position in domestic aviation, the pattern of company management still has gaps compared to other European airlines.By joining Ryanair, China Southern Airlines not only brings fresh blood but also receives advanced management patterning. China Southern Airlines can absorb Ryanairs rich experience regarding corporate governance and human resoure management to achieve intelligent resource allocation and high employee efficiency. In the meantime, China Southern Airlines business covers the whole country, and transport capacity cannot suit domestic markets demands. Ryanairs entry could lighten its burden in some air routes. More importantly, China Southern Airlines has lost in terms of international air routes in recent years.Whilst Ryanair is the open up in the low-cost area in Europe. By pith of Ryanairs influence, China Southern Airlines could regulate tactics in Europe and make profits. Similarly, Ryanair can benefit from cooperating with China Southern Airlines. First and foremost, due to application of the joint venture, this it way complies with legal requirements, thereby diminishing entry resistance from the government to a great extent. Then Ryanair could develop smoothly regardless of culture or language differences under China Southern Airlines strong brand support and resouce sharing.At last, China Southern Airlines will offer the permission of using its bases and airports and pilots to Ryanair. This measure will reduce the anxiety ca used by the deficit of resources. This is the only way that lowers Ryanairs operation costs and carries on its low-fare business in China. 4. 2 Market Targeting Strategy When it comes to the target clients of low-fare carrier service, it mainly focuses on the special group that is characterized by high esthesia to fare, high-price elasticity and price factor as their first consideration.Southwest Airlines was awared of the chief competitors of airlines are highways and railways. Generally, in short air routes, customers are sensitive to price. Because of short flight time, they do not require high-standard services. As a result, it is difficult to capture more customers through service differentiation. With regard to how to choose a target market accurately, there are three elements to be taken into consideration First, price factor. Customers who prefer low-cost carriers are distributed into three classes.Initially, self-funded travellers. In general, tourists are customers who v isit families and friends in their schedule in advance. They pay attention to low fares rather than immediacy to save travel expenditures. Next, the main character of this group is time flexibility. Finally, general business customers. Due to high air-ticket prices, sometimes they are restricted by unit to take planes. one time low fare are implemented, there is no significant distance between air tickets and train tickets, and they will take low-fare air tickets.Another thing is the length of flight time. In the present situation of the aviation market, the majority of flights take 3 hours. In order to decrease costs and raise aircraft utilization rates for low-fare carriers, 2 hours would be preferred. Humans usually select transportation like railways and highways due to cheaper prices, even if they omit a long time on the journey. Low-cost air fares not only save much time but also let more customers have access to comfortable trips and services (Olson and Peter, 2005) 4. 3 P ricing StrategyThere is no denying that low-cost strategy is the lifeblood for low-fare carriers existence. In the fierce competition of the aviation marketplace, flagship airlines launch their own ultra-low fare in the off-season. However, as flagship airlines are limited by high costs, offering low fares is only a temporary method to attract more customers. As a low-cost carrier, it is obvious that Ryanairs fare should be much lower than the level of market. Only in this way can it obtain market share and optimize itself. So how to set its ticket prices? 4. 3. 1 The level of highest priceLow-cost carriers are known for low fares, thence their highest prices cannot go beyond the full price of economy class of flagship airlines. If the price is preferably low, it will affect the companys profits. On the contrary, high price does not conform to the firms low-fare tenet. 4. 3. 2 The level of lowest price In China, owing to price control from the government, Ryanair could not impleme nt its bottom-line price strategy. Hence, on the hindquarters of regulation, Ryanair could properly provide two-thirds low fare tickets in every flight to draw customers.After the company develops and reaches the maturity stage, it could gradually reduce low-fare tickets proportionally. 4. 3. 3 The level of average price On the one hand, the average price must be higher than the average cost to guarantee the firms normal operations and profits, ultimately, fulfilling Ryanairs sustainable development and expansion. On the other hand, the low-cost carriers average price should be markedly lower than he average price of flagship airlines to win stable and long-term customers and capture a market share.Through moderate pricing, althought Ryanairs air tickets are low, it could increase the passenger load factor to improve profitability in every flight. 4. 3. 4 Price choice on peak- season and off-season In peak-season, like holidays or festivals, Ryanair could consider raising the price a little higher than usual in some special and hot routes due to high demands of these days. Likewise, in the off-season, the best way to stimulate customers consumption is to provide more low-fare tickets widely (Goddard, et al. ,2005) 4. 4 Marketing Strategy 4. 4. 1 Cooperation with mass commuicationAt the beginning of its China venture, Ryanair could take full advantage of its own aircraft to advertise for other companies through charging for advertisement fees. They could then spend this income on creating advertising compaigns for its low fare by means of newspapers, magazines, and television. Through a lot of press publicity, more and more people would be interested in this new thing. Moreover, people would be willing to get more information about low-cost carrier and they would like to enjoy so cheap price. At that moment, Ryanair could launch some progress plans to stimulate customer interest. . 4. 2 Cooperation with local authorities Low fares are the lifeline of Ryanair, without this advantage, it is impossible to compete with other airines. So enhancing cooperation with local authorities is necessary. As a matter of fact, current price control policy makes it difficult to meet the competitive markets needs. Indeed, Ryanair should set a good example to abide by regulations, and then lead by example against unfair competition. Once having set up a good relationship with local authorities, Ryanair can obtain more benefits like use of second-level airports at very middling prices. . 4. 3 Cooperation with China Southern Airlines For Ryanair, air route selection and pilot demands are two main operation issues. With the help of China Southern Airlines, Ryanair can apply for the hottest tourism routes to carry out point-to-point flights. When the market turns to off-season, Ryanair should timely change its route to some charter flights. For instance, these years personnel, economic and cultural exchanges across the Taiwan Straits have kept increasing. Th erefore, setting up unshakable air service in this route would satisfy demand growth.In the meantime, Ryanair uses single type aircraft, so it can share pilots and aircraft maintenance expense with China Southern Airlines, and this leads to cost decline. Finally, Ryanair could truly implement its low fare and foster a good and muscular company image. Whats more, in order to avoid heavy traffic at hub airports, Ryanair could widely increase the second-level airport utilization rate of China Southern Airlines. This would result in punctual rates and set forth a good impression on the customers. Besides, China Southern Airlines also provides Ryanair with its sselling platform online booking or using agencies all over the country. . 5 Summary To sum up, before Ryanair decides to enter the Chinese market, it should foreknow some problems that may happen during the process. Then, based on an overall consideration of various factors, Ryanair should plan to invest in the form of a joint venture with China Southern Airlines. The next step wold be Ryanairs market targeting emphasis on self-funded travellers, customers who would like to visit families or friends and general business customers. At the same time, flight time should take two hours. Ryanair must keep an eye on this groups customerss demands.After that, it should look to the high level, the low level, average level and different period price principles to set up flexible and appropriate air-ticket prices. As to marketing, Ryan air should coordinate the relationship with mass commuication, local authorities and China Southern Airlines. Only combining the strategies listed above can Ryanair achieve global optimization and obtain long term development. 5. Conclusion The entry into the Chinese market is an essential step of Ryanairs expansion plan outside Europe.In this way, it is required that Ryanair will face a elevated chance for development as well as tough challenges. Therefore, this paper foremost s ummarized Ryanairs own competitive advantages and showed why Ryanair possessed the capability to extend its low-cost business in China. On the basis of this, Ryanair must have a threatening and thorough understanding of the new market, for instance current policies and laws of aviation, Chinese customers consumption concepts and behaviours, and the differences between China and other European markets.Hence, the next section objectively amplified on the internal and external environments with SWOT and PESTEL analyses. On the whole, although in some aspects Ryanair is still subject to Chinese aviation regulations and laws, owing to the fact that aviation develops at high speed and given the domestic markets huge demand, the Chinese aviation environment is suitable for low-cost airlines existence and advancement. In accordance with the environmental analyses, specific business strategies to enter China are proposed.At first, Ryanair should adopt a joint venture to cooperate with China Southern Airline. Only in this way can it reduce entry risks and restrictions from the government. Then, on that premise, Ryanair should set up a market target strategy, pricing strategy and marketing strategy in detail. Ultimately, Ryanair will fulfill its purpose of entering Chinese aviation smoothly and achieving success there. In this study, there still exists a problem to be considered