Strategic Analysis for Ryanair to Enter China

strategicalal comp demise for Ryan melody to Enter china Submitted in spokesperson fulfilment of the Master September 2010 STRATEGIC BUSINESS ANALYSIS (ULMS 719) University of Liverpool counsel School 17 September 2010 Abstract Ryanair, the leader of dispirited-f be carriers in Europe, testament expand its line of merchandise by pith ofout the world. This traverse discusses the strategies which Ryanair entre the Chinese grocery store.through and through PESTEL abstract and drudgery analysis to read sophisticated sagacitys of the Chinese commercialize situation and the urbane s stipulate environs, then after a series of conside proportionalityns, dismantletually, Ryanair prepargons the closing to get together with china gray picniclines in the form of a control stick venture. ground on this, Ryanair has lay up mess of adequate business strategies that are com generated of securities industry targeting scheme, wrong system and food grocerying str ategy in army to success in luxuriant premise the Chinese merchandise. severalizewords Ryanair mainland china Strategic analysis T adapted of Con xtsAbstract -i List of circuit cards and Figuresiv 1. Introduction-1 2. Overview of Ryanair -2 2. 1 General innovation of Ryanair-2 2. 2 Ryanairs belligerent advantages -4 3.Strategic analysis 6 3. 1 distant purlieu-PESTEL Analysis -7 3. 1. 1 Political 7 3. 1. 2 Economic8 3. 1. 3 Social 10 3. 1. 4 Technology11 3. . 5 Environment-12 3. 1. 6 Legal 13 3. 2 Internal Environment- gussy 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 Entry personal manner Strategy21 4. 1. 1Problems that may cause 21 4. 1. 2 join peril 22 4. 1. 2. 1 abbreviated introduction of Joint Venture 22 4. 1. 2. 2 Partner-China south well-nighern Airlines 23 4. 2 Market Targeting strategy 25 4. 3 Pricing Strategy 26 4. 3. 1 The train of highest toll 27 4. 3. T he train of lowest price 27 4. 3. 3 The level of median(a) price -27 4. 3. 4 Price choice on peak-time of year and off-season 28 4. 4 Marketing Strategy -28 4. 4. 1 Co carrying into action with Mass dialogue -28 4. 4. 2 Cooperation with topical anaesthetic anaesthetic authorities 28 4. . 3 Cooperation with China southerly Airlines -29 4. 5 Summary-30 5. inference-30 References-32 List of Tables and Figure Table1. The tuition of finishd Aviation in Recent Years 9 Table2.Ryanairs tog up Analysis - 15 Table3. Highlights of Ryanairs Finances 16 Table4. Key Statistics compare amidst Rail looks, High elbow rooms and complaisant Aviation19 Figure1. Comparison of Average Fares in four airways 16 1. Introduction Low- bell carriers mainly operate high-volume passenger occupation on terse-distance routes, use trice-level airports, and strait no extra function. effrontery their sharp geldd exists, normally inexpensive carriers offer fares considerably impose than that of traditional air lanes. The trend began in America, with Southwest Airlines as the chief representative. Since 1990, numerous low-fare air lanes hit sprung up on a world commodious scale. Among these, Ryanairs actionments stand out. As the most profitable airline party in the world, Ryanair is ren holded for its low-priced and low fares to perish destinations passim most European countries. However, current airline routes and trades tramp buoy non mate Ryanairs long-term cultivation.To achieve its expanding ambitions across a global range, Ryanair decided to start with the Chinese market. Aviation in China is march on at a staggering rate. Because of improvements in the existent standard, much and to a greater extent guests are get outing to spend money on high-fare air hold ups to guide through cartridge clip and obtain excellent service, whereas the majority of middle-class individuals would sort of travel by former(a) vehicles than by plane ascribab le to its high price. Without doubt, the low- salute carrier is the badepose way to remunerate the growing requirements of the market in the conterminous several(prenominal) eld.Ryanair sees Chinas high-potential market and change magnitude demands. It moldiness, therefore, address these paramount issues how to stick out out appropriate strategies and combine Ryanairs avouch advantages with the framework of intertheme regulations and the Chinese governments policies. If Ryanair enters the Chinese market successfully, it volitioning gather in a special meaning and wedge on Ryanairs sustainable development and will bring intimately a enceinte change in current Chinese gentle wind patterns. This show will suggest proper(postnominal) notices for Ryanair to enter the Chinese market.The study low gear introduces Ryanairs history, its considerable achievements, and unique predominance. From these aspects, we green goddess substantiate dimer disposition of Ryanair. The n, this study will apply PESTEL and SWOT models to analyze the internal and outside(a) environments. found on environmental assessment, during the entire entering process, most temporary problems will be generated. In accordance with these problems, this study will offer relative solutions. More specifically, it offers an initiation-mode and business strategy.Last scarce not least, the study concludes by offering a look at Ryanairs experiences and improvements during the analysis process, and shows its draw backrests as well. Finally, the study offers suggestions to minimize the risks of entry into and for making profits in China. 2. Overview of Ryanair 2. 1 General introduction of Ryanair Ryanairs legend dates back to 1985 when the Ryan family set up the friendship with entirely ? 1 donation capital and 25 provide in Ireland. At that time, the Ryan family mainly operated scheduled passenger airline service between the UK and Ireland. At initiative, this mini-airline fail ed to draw the globes concern.In the meantime, due to art business intricacy, Ryanair opened up unseasoned routes and purchased refreshfully aircrafts deliberateless of risk, resultanting in unendingly increasing expenditures and making huge losses for four years running. The meaningful year for Ryanair was 1990. Under the leadership of a untried CEO, Michael OLeary, Ryanair introductory introduced low fares and low- be operation modes, found on the Ameri bum South West Airlines successful experience. The move has proven a wise decision. From then on, Ryanair began to make a profit and gradually became the leader in low-fare air tickets in Europe.After more than than 20 years of continual efforts, Ryanair is recognized as the worlds favorite airline (Ryanair yearly base, 2009). In addition, in accordance with its latest fiscal year report, Ryanair has developed into the largest low-fare airline, with over 7,000 employees, 43 bases and 1,100 routes between 26 coun ties (Ryanair. com). Also, Ryanairs go includes 250 new Boeing 737-800 aircraft. Its number of passengers served reached 66. 5 million, which took the lead in the industry. In the next several years, Ryanair will console enlarge its fleet to deliver more passengers.In novel years, the treasure of Ryanair shares has gone up more than 10 times compared to 1997 when Ryanair issued shares to the public( Ryanair yearbook piece of music, 2010). This continued, so far after the events of September 11, 2001, when global air travel changed dramatically. Although most airlines become been largely hazarded, Ryanair has retained profits for 12 years. In 2003, Ryanair successively merged and acquired Hollands low-cost airline, Buzz, the budget airline subsidiary of KLM and the Dutch national airline. These moves led to the organizations general say-sos and risk bulwark for besides improvement.The 2010 fiscal report illustrated Ryanair earned 305. 3 million in 2010. In consequence , Ryanair was named as the most profitable airline in the world by The Economist magazine in 2005. Meanwhile Ryanairs stock share is very(prenominal) popular with investors and shareholders. In addition, one reason why Ryanair continues to achieve milestones is that it has maintained its business philosophy of providing its customers with a lowest price ticket even no fares, on the premise that Ryanair cuts into the whole confederacys operating outlay and nigh other unnecessary cost (Johnson, 2004) 2. Ryanairs competitive advantages It is universally markd in business that superior enterp bring ups will strike whereas inferior ones will be eliminated. That is to say, survival of the fittest. The main points allowing a follow to wear 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 square is able to generate more scotch value than rival firms, it has a competitive advantage.In other words, not only could it bring eudaimonias to customers, but besides its opponents would find it cloggy to imitate and surpass it (Barney and Hesterly, 2007). In the competitive low-fare aviation market, Ryanair gradually created its profess competitive advantages. They are as follows A. Purchasing a single aircraft type Ryanair only operates Boeing 737 and Boeing 737-800 next generation. Ryanair took goodly advantage of its own bargaining power and durable reputation to gain favorable contracts. This advantage helps Ryanair save costs.At the same time, Boeing aircraft not only oblige the demands of European countries but also saves a large amount of fear and the costs of repair and rung employment. B. High efficiency in staff work Employees efficiency at Ryanair is relatively higher than those at other airlines. For exemplification, at Ryanair, an airhostess is responsible for service on the plane and for cleaning as well. Productive -based remuneration system of rules is broad(a) applied in Ryanair. It consists of the number of on-board sales of products on the leakage and their working hours.To arouse enthusiasm and initiative among staff, Ryanair distributes companys stock as dividend and rewards. C. Masterful exploitation of punt-level airport resources In some European areas, use of second-tier airports is very low. Therefore, to raise the usage ratio and boost frugal improvement, local governments have offered some favorable policies. establish on Ryanairs large volume of passenger traffic and its quick growth, Ryanair obtained great contracts and even some subsidies from local areas, leading to a cliff in airport access fees. D.Taking advantage of the Internet To save spot commission fees and simplify the purchasing process, Ryanair set up online reservations and spent a large amount of money on promoting online implementation wide. The Skylight system offers a platform for Internet users to book and confirm their ticket through Ryanairs website promptly. Consequently, its Internet operation has significant march on to reach 99% of ticket sales. E. Reducing expenses and making profits from other aspects Ryanair no time-consuming provides free meals, and Ryanair cancelled first and business classes to offer more seats.Apart from this, Ryanair limits free weight of luggage to decrease fuel expenditure. During the entire operation process, Ryanair always puts cost decreases in first place, and also attempt to seek a way to earn more money. For grammatical case, Ryanair supplies several(predicate) kinds of products and services including food, as well as instruction in terms of evaluatei and warmingel booking for passengers. Simultaneously, the advertisements for colorful Ryanair aircraft and websites for other companies offer major sources of revenue enhancement. F.Unique corporate culture Ryanairs headquarter was built in a rural area at a small locating in Ireland . In the beginning, the entire company comprised only eight administrative workers. At times, the firms CEO and department managers would help customers hit in and even load and upload their baggage. Every Thursday the company would hold football matches between various company departments. The corporate culture 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 international environment. Similarly, Ryanair should grasp if the internal environment is in force(p) or detrimental to Ryanair. Only in this way, will Ryanair be able to exploit its own laborious points to fulfill its potential and avoid some influences that may give rise to shortcomings. Meanwhile, environmental analysis offers a determining(prenominal) factor to est ablish specific strategies. The following steps might be interpreted. . 1 External environment PESTEL analysis Johnson pointed out the PESTEL framework as an in force(p) tool for analyzing the macro-environment. Moreover, it helps the company to know what is going on outside the organization and how external factors are the likely to change in the future. PESTEL refers to sise points political, sparing, social, technological, environmental and legal (Johnson, 2008). It is clear that this framework includes all external aspects. Through this framework, Ryanair could get a better understand of the unfamiliar Chinese market.Then, on the basis of this, Ryanair could carry out accurate methods that are sheathable for Chinese customers. 3. 1. 1 Political issues The political point is related to political and claim systems, policies and regulations. Aviation is an industry that is very sensitive to political changes. In the meantime, aviation is strictly regulated by government. Chin ese aviation started late, therefore its laws and regulations have several shortcomings. With the gradual deepening of its economic remediates in recent years, the gracious Aviation governing of China opened the door for non-state owned endeavours in 2004.After that, a series of loosening policies regarding airline routes have been put onwards to provide more chances for low-cost carriers. Up through late 2007, the Chinese government concluded 110 bilateral agreements with foreign states (The Report of Chinese Aviation, 2008). On the one hand, this move indicated that the Chinese aviation industry was at the international stage to seek further development. On the other hand, it means that the Chinese market relaxed rules on foreign ownership of airline. Through corporation, the monopoly concerning a reservation in fuel price, tending fees or tickets would be scurvy up.In addition, there has been a dramatic increase in space resources. As of 2007, Chinese aviation implemente d the Reduced Vertical Separation marginal (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 flights would be unobstructed. Beyond a new regulation applied regarding airline tickets in 2004, the Chinese government gradually relaxed price control. The footprint was of great significance in long-term development of airlines. 3. 1. 2 EconomicIn 2009, the financial crisis brush through the global, and the world economy has been greatly affected by it. However, even under this circumstance, the Chinese GDP was 33. 5 meg yuan, up by 8. 7 percent over the former year. Fiscal revenues reached 6. 85 trillion yuan, an increase of 11. 7 percent (Report of the Work of the Government 2010). Constant economic growth provides an attractive environment for aviation industry. The following table indicates the development of courtly aviation in recent years Tab1e 1 The Development of Civil Aviat ion in Recent YearsYear Item 2004 2005 2006 2007 2008 Length of trance Routes (10 000 km) 204. 94 199. 85 211. 35 234. 30 246. 18 Total Passengers transaction (10,000 persons) 12,123 13,827 15,968 18,576 19,251 Total Passage-Kilometers (100 million passenger-km) 1,782. 3 2,044. 9 2,370. 7 2,791. 7 2,882. 8 Sources from China Statistic Yearbook 2009 As can be seen from Table 1, Chinese civilized aviation has maintained a sustained, rapid and sound development. Moreover, the rise in the value of RMB will work to the advantage of aviation.It contributed to cutting push down the cost of crude oil import. To some extent, airlines could benefit from it and improve profitableness. The financial crisis had a noticeable impact on the fuel market, which is the lifeline of aviation. As a whole, the global fuel price market decreased from $80 per barrel to $74. 07 per barrel. Whereas, in view of the Chinese fuel market monopolized by China National Aviation Fuel and high demand in the dome stic market, Chinese fuel prices ran counter to the international situation and had an upward tendency.Hence, this is a large-minded challenge for airlines (Hu,2010). 3. 1. 3 Social Since the adoption of reform and opening policies, China has made headway socially and demographically. In the first place, Chinese peoples living standards have greatly improved. The annual per capita disposable income and annual per capita consumption expenditure of urban households have seen a dramatic increase to reach 15,781 yuan, 11,243 yuan, respectively. After 30 years of heavy(a) efforts, the excessive population 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, tape drive and talk, as well as recreation, education and culture contributed to the advance of the continuous growth of domestic consumption. Take 2006 as an example, the annual per capita living expenses of urban residents was 59,370. 3 billion yuan.In comparison with last year, exile and communication rose by 13. 8%, and the other two items went up by 10. 8%. The major factor that caused the results above was due to changes of the social-cultural environment. Thus, peoples lifestyles, including transportation and travel choices have changed subsequently. In recent years, the rate of touristry 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 abroad is increasing year by year. In particular, through a ten-year development period, the number of students in 2008 was ten times higher than that in 1998 it reached 179,800 persons. 3. 1. 4 Technology First, we can acknowledge that advanced technology has resulted in cost reductions for airlines. As a result, as the most famous civil 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 external Air Transport Association in 2004. It is a new begin that aims to reduce airline expenses and offer better services for passengers. The StB program compromises tail fin parts bar-coded boarding passes (BCBP), IATA e-freight, IATA e-services, the Baggage Improvement Program and the Fast operate Program. With the aid of the StB Program, airlines can sell tickets by direct marketing and peddle machine or booking tickets via the Internet, mobile phones a nd land lines.Since 2006, e-ticketing has been implemented widely in the domestic 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 technology and equipment levels, the recitation rate of national airspace resources had a significant rise.In the meantime, increased verse of aircraft have driven the development of the aircraft maintenance market, extending the useful life of civil planes, which endure 2530 years. Lastly, along with the quick development of civil airlines, the supply and demand of pilots in the transport market is increasingly prominent. With regard to training and recruiting pilots, there is grating competition between new airlines and live airlines. As an administra tive department, the Civil Aviation establishment of China is chary about turnover as to pilots.To a great extent, the liberalization of rules pertaining to pilots is still dependent by laws and regulations, thereby hindering long-term development of new airlines (Fang, 2009) 3. 1. 5 Environment In contemporary society, sympathetic beings have gradually raised their awareness of saving resources and protecting the environment. Hence, consumers are willing to back no-frill, low-cost 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 Union will begin to charge for ascorbic acid emission. Obviously, it is not good for high-speed growth but imperfect Chinese aviation. In nastiness of China vigorously pushing forward talent conservation and greenhouse gas emissions reduction, nevertheless, under the current technology and situation, to reduce greenhouse gas emission, it must depend on technology quite an than fuel decreases. Because of insufficiency or drawbacks of relevant laws and regulations, at present, China has not formulated a relevant form _or_ system of government in terms of charging degree Celsius emissions.This contributes to more and more foreign airlines paying more attention 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 construction pace. The Civil Aviation judicatory 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 servi ce (Tan, 2003) 3. 1. 6 Legal Although world aviation has become wired, foreign airlines that would like to enter and operate in China also face a great many heavyies 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 obstacle to free development in aviation. In addition, lack of relative facilities results from the immature advancement of aviation in China. Like most cities having only one main airport, the construction of a secondary airport still falls far short of needfully of modern aviation. Consequently, this is a big problem that should not be unattended by foreign airlines. 3. 2 I nternal environment SWOT analysisSWOT was first put forward by Albert Humphrey in the 1960s and 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 forward the company works out the adaptation strategy in the new circumstances. SWOT refers to strength, weakness, opportunity and threat. Among these four aspects, ST focuses on company, while OT pays more attention to relevant competitors effects.By applying this, the enterprise could realize what factors are beneficial to it and then carry forward them in the future. Meanwhile, the organization should find some existing beneficial 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 bypass the disadvan tages 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 brand support2. Low fares3. Low operation cost and high ancillary incomes4. High efficiency, elastic operation Weakness 1. benefit tint decrease2. Regulation restrictions3. Changes of charges have great impact on Ryanair4. extra niche market Opportunities 1. Tremendous civil market potentials2. Economic downturn3. wishful amplification Threats 1. High-speed development of other substitutes2. Fierce competition and haul 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 brand 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 ef fortless considered Ryanairs stock as the most popular and the most invaluable to purchase (Wang, 2008) It has made marked achievements in both respect, as can be seen from the table below 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% Scheduled 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 yearly 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 average fares of four airlines. Source Ryanair Annual Report 2010.Ryanair can in fact issue tickets much cheaper than other airlines. Thats the reason why the total Ryanair scheduled passengers came out to 66. 5 million. With such cheap fares, Ryanair can still make profits. The reason is attributed to an speech pattern on minimizing operations costs, which includes aircraft purchasing, daily maintenance and infusion of airports, online booking and force expense. Apart from these, Ryanair tries to earn more from ancillary service while minify 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 action brings about considerable income to Ryanair. In 2010, the advertising income reached 663. 6million. Definitely, a highly productive work force also plays a diametric role in the way to success. It is reported 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 Ryan airs valuable option project (Ryan air Annual Report 2010). 3. . 2 Weaknesses Due 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 abominable criticism continually released by the news media, and it has harmed the companys overall image and interest. Ryanairs target 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 sensitive to price. That is to say, once Ryanair raises prices slightly, it will lose lots of customers. Nevertheless, as the companys scale is eternally enlalrging, costs will go up proportionately. Therefore, limited niche market and increasing cost are not propitious for further expansion of the compa ny. Currently, Ryanair confronts 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 completely 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, particularly 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, cringe 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 sort of prefer Ryanair, which does not have free services, than general flagship airlines that offer higher standards of service. Apparently, the economic slump brings infinite business chances and generous profits for Ryanair. Ryanair is planing to enlarge its fleet to acquire 200300 planes by 2016.Due to bulk buying, Boeing and Airbus quote Ryanair the most favourable prices to acquire such big orders. In that case, it not only saves costs but also offers sufficient silver to invest in overseas markets. Ryanairs ambitious expansion could come true in the near future. 3. 2. 4 Threats Rapid 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 positions. Because civil aviation is typese tters case to its own conditions, in freight traffic, 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 Traffic (10,000 persons) Passenger-Kilometers (100million passenger-km) incumbrance 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. Fro m then on, competition through trinity airline groups involving Air China, China gray Airlines and China Eastern Airlines has taken shape in the civil aviation market.The collar airlines have the market share for 80% in China. There is no denying that these three airlines groups 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. thousand 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 bemused 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 we re policy relaxation to foreign airlines and high demand for low-fare carriers. However, Ryanair would have to pay more attention to techniques and legal restrictions in certain aspects. Only after analysing the external environment objectively will Ryanair enter the Chinese market swimmingly. 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 danger 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 obstacles, and these factors are concretely revealed by the following.The first obstacle is the imposition of restrictions on displace ticket prices. Civil aviation-transport price reforms state that on the basis of benchmark 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 cxv airports which are completely 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 pass on to it. The last 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 group launches its own low-cost tickets in order 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 convenient and effective solution for Ryanair, especially a minority joint venture. 4. 1. 2. 1 Brief introduction to joint venturesA joint venture is a corporate pincer that is a new entity presumption birth and jointly 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. Two parties hold different proportions of equity and also share investment, management, risks and obligation for profits or losses. At the beginning, owing to the fact that Ryanair stands at a disadvantage, it is imperative that gaining support from domestic firms make up the shortage 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. Yet it is certain that there will exist some drawbacks during the industry 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 operational 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 Southern Airlines Based on an overrall consideration of various factors, Ryanair decided to choose China Southern Airlines as its partner. The following paragraphs show reasons why Ryanair mades 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. Now it still keeps the long est 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, eventually 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 transmission line but also receives advanced management patterning. China Southern Airlines can absorb Ryanairs rich experience regarding corporate governance and human resoure management to achieve rational resource allocation and high employee efficiency. In the meantime, China Southe rn Airlines business covers the whole country, and transport capacity cannot suit domestic markets demands. Ryanairs entry could lighten its essence 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 in the low-cost area in Europe. By means 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 coating 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 disregarding 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 th e anxiety caused by the shortage 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 sensitivity to fare, high-price shot 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 custom ers who name 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. Once low fare are implemented, there is no significant distance between air tickets and train tickets, and they will welcome 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 spend 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 Pricing 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, therefore their highest prices cannot go beyond the full price of economy class of flagship airlines. If the price is quite low, it will affect the companys profits. On the contrary, high price does not set 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 implemen t its bottom-line price strategy. Hence, on the basis 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 news topics, magazines, and television. Through a lot of press publicity, more and more people would be evoke 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 promotion plans to stimulate customer interest. . 4. 2 Cooperation with local authorities Low fares are the lifeline of Ryanair, without thi s advantage, it is unrealistic 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 inequitable competition. Once having set up a good relationship with local authorities, Ryanair can obtain more benefits like use of second-level airports at very reasonable 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. Theref ore, setting up regular 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 healthy 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 leave a good exposure 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, out front Ryanair decides to enter the Chinese market, it should anticipate 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 wi th 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 inevitable that Ryanair will face a rarified chance for development as well as tough challenges. Therefore, this paper firstly summarized Ry anairs own competitive advantages and showed why Ryanair possessed the mental ability to extend its low-cost business in China. On the basis of this, Ryanair must have a profound 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 A irline. 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