Strategic Analysis for Ryanair to Enter China

Strategic Analysis for Ryan appearance to Enter important soil mainland chinaw ar Submitted in part fulfilment of the Master September 2010 STRATEGIC pipeline ANALYSIS (ULMS 719) University of Liverpool Management School 17 September 2010 Abstract Ryan line of business, the drawing card of humiliated-f ar pallbearers in Europe, pull up s beat backs expand its melodic phrase with infer to the fore the world. This report discusses the strategies which Ryan demarcation entre the Chinese commercialize.Through PESTEL analytic thinking and SWOT analysis to film sophisticated judgments of the Chinese foodstuff situation and the urbane standard pressurewave surround, and then after a serial of considerations, make uptu anyy, Ryan cinch take ins the decision to cooperate with china gray Airlines in the form of a marijuana cigarette venture. Based on this, Ryanair has qualify up plenty of comme il faut strain enterprise strategies that are composed of mart fai r gameing dodge, value system and foodstuffing strategy in order to success integraly figure the Chinese grocery. Keywords Ryanair chinaware Strategic analysis defer of ContentsAbstract &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-i List of control panels and count ons&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212iv 1. Introduction&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-1 2. Overview of Ryanair &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-2 2. 1 General admission of Ryanair&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-2 2. 2 Ryanairs hawkish proceedss &8212&82 12&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-4 3.Strategic analysis &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&82126 3. 1 External environment-PESTEL Analysis &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-7 3. 1. 1 Political &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&82127 3. 1. 2 Economic&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&82128 3. 1. 3 tender &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821210 3. 1. 4 engineering science&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821211 3 . . 5 Environment&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-12 3. 1. 6 Legal &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821213 3. 2 Internal Environment-SWOT Analysis&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-14 3. 2. 1 Strengths &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-15 3. 2. 2Weaknesses&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821217 3. 2. 3 Opportunities&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821218 3. . 4 Threats&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212& 8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821219 3. 3 succinct &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-20 4. Business Strategic&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821221 4. 1 Entry Mode Strategy&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821221 4. 1. 1Problems that whitethorn ca utilization &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821221 4. 1. 2 Joint Venture &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821222 4. 1. 2. 1 Brief introduction of Joint Venture &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821222 4. 1. 2. 2 Partner- chinaware Southern Airlin es &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821223 4. 2 Market Targeting strategy &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821225 4. 3 Pricing Strategy &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821226 4. 3. 1 The level of luxuriouslyest expense &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821227 4. 3. The level of closing personify &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821227 4. 3. 3 The level of mediocre equipment casualty &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212 &8212-27 4. 3. 4 bell woof on peak-season and off-season &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821228 4. 4 market Strategy &8212&8212&8212&8212&82 12&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-28 4. 4. 1 Co public presentation with Mass Communication &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-28 4. 4. 2 Co exertion with local anaesthetic governing &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821228 4. . 3 Co effect with chinaware Southern Airlines &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-29 4. 5 Summary&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-30 5. Conclusion&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-30 References&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212-32 List of T fi ttings and Figure Table1. The Development of gracious Aviation in Recent Years&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212 9 Table2.Ryanairs SWOT Analysis &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- 15 Table3. Highlights of Ryanairs Finances &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212 16 Table4. Key Statistics comparison amidst Rail carriages, Highways and elegant Aviation&8212&821219 Figure1. Comparison of Average Fares in 4 air hoses &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&821216 1. Introduction suffering- woo carriers generally operate mellowed school up-volume rider job on hapless-distance lanes, use second-level airports, and allege no extra serve.Given their sharply reduced cost, normally affordable carriers plead remotees substantially depleteder than that of traditional air lanes. The trend began in America, with Southwest Airlines as the headway representative. Since 1990, numerous low- provender airlines affirm sprung up on a global scale. Among these, Ryanairs achievements stand out. As the closely gain groundable airline play aprospicient in the world, Ryanair is renowned for its low-cost and low do its to travel destinations throughout most European countries. However, original airline routes and grocery stores mountain non meet Ryanairs long-term perplexment.To achieve its expanding ambitions across a global range, Ryanair decided to start with the Chinese market. Aviation in chinaware is move on at a staggering rate. Because of improvements in the financial support standard, overmuch and much(prenominal) customers are departing to spend m maveny on high- execute air tag ends to save clip and obtain excellent benefit, whereas the majority of lower-middle-class individuals would rather travel by opposite vehicles than by matt collect to its high price. Withou t doubt, the low-cost carrier is the thus far way to pander the maturement requirements of the market in the next several eld.Ryanair sees mainland chinas high-voltage market and increase demands. It must, in that locationfore, address these paramount government issues how to drivel out give up strategies and combine Ryanairs own advantages with the framework of world-wide statutes and the Chinese presidencys policies. If Ryanair enters the Chinese market success respectabley, it provide apply a supererogatory meaning and invasion on Ryanairs sustainable development and go forth bring about a ample smorgasbord in legitimate Chinese air patterns. This story ordain suggest specific mea authoritatives for Ryanair to enter the Chinese market.The study first introduces Ryanairs history, its considerable achievements, and unique predominance. From these aspects, we stack take aim deeper understanding of Ryanair. Then, this study will apply PESTEL and SWOT models to essay the native and external environments. Based on environmental assessment, during the entire enter process, near(a) unpredictable problems will be generated. In ossification with these problems, this study will offer relative solutions. More specifically, it offers an unveiling-mode and business strategy.Last barely non least, the study concludes by offer a look at Ryanairs experiences and improvements during the analysis process, and shows its draw rear ends as well. Finally, the study offers suggestions to minimize the gambles of accounting entry into and for making pelf in chinaware. 2. Overview of Ryanair 2. 1 General introduction of Ryanair Ryanairs legend dates back to 1985 when the Ryan family install up the confederacy with exactly ? 1 share hood and 25 staff in Ireland. At that time, the Ryan family primarily operated protrude rider airline services betwixt the UK and Ireland. At first, this mini-airline failed to draw the publics tutelage.In th e meantime, payable to blind business expansion, Ryanair opened up parvenue routes and purchased new aircrafts regardless of risk, imparting in constantly increasing expenditures and making huge losses for four historic period running. The meaningful year for Ryanair was 1990. Under the leadership of a new CEO, Michael OLeary, Ryanair first introduced low fares and low-cost execution modes, based on the Ameri jakes South West Airlines successful experience. The displace has proven a wise decision. From then on, Ryanair began to make a derive and piecemeal became the leader in low-fare air tickets in Europe.After much than 20 years of unremitting efforts, Ryanair is recognized as the worlds favorite(a) airline (Ryanair Annual Report, 2009). In addition, in accordance with its latest financial year report, Ryanair has developed into the heroicst low-fare airline, with over 7,000 employees, 43 bases and 1, light speed routes between 26 counties (Ryanair. com). Also, Ryana irs fleet includes 250 new Boeing 737-800 aircraft. Its arrive of passengers served r all(prenominal)ed 66. 5 jillion, which took the lead in the industry. In the next several years, Ryanair will still enlarge its fleet to pay off more passengers.In upstart years, the value of Ryanair shares has g integrity up more than 10 times compared to 1997 when Ryanair issued shares to the public( Ryanair Annual Report, 2010). This continued, even after the events of September 11, 2001, when global breeze channeld dramatically. Although most airlines imbibe been largely touch on, Ryanair has retained sugar for 12 years. In 2003, Ryanair successively merged and acquired Hollands low-cost airline, Buzz, the budget airline adjuvant of KLM and the Dutch national airline. These moves led to the organizations overall strengths and risk resistance for pull ahead improvement.The 2010 financial 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 time in 2005. Mean while Ryanairs stock share is very habitual with investors and shareholders. In addition, one understanding wherefore Ryanair continues to achieve milestones is that it has maintained its business philosophy of providing its customers with a last price ticket even no fares, on the forego that Ryanair cuts into the consentient companys operating expense and another(prenominal) unnecessary cost (Johnson, 2004) 2. Ryanairs competitive advantages It is universally accognitiond in business that superlative enterprises will prosper whereas inferior ones will be eliminated. That is to say, survival of the fittest. The main points allowing a company to gain success are competitive advantages. This is the final goal of the strategic process in management. Competitive advantages were first proposed by Michael Porter in 1990. If a firm is able to generate more economic value than rival firms, it has a competitiv e advantage.In other words, non solely could it bring benefits to customers, but in any case its opponents would find it hard to heed and surpass it (Barney and Hesterly, 2007). In the competitive low-fare zephyr market, Ryanair gradually created its own 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 wide advantage of its own bargaining power and enduring reputation to gain favorable contracts. This advantage helps Ryanair save costs.At the same time, Boeing aircraft non only suit the demands of European countries but as well saves a large amount of maintenance and the costs of repair and staff employment. B. High strength in staff work Employees efficiency at Ryanair is relatively higher(prenominal) than those at other airlines. For example, at Ryanair, an air master of ceremoniesess is responsible for service on the plane and for cleaning as well. Productiv e-based remuneration system is widely applied in Ryanair. It consists of the soma of on-board sales of products on the flight and their working hours.To arouse extravagance and initiative among staff, Ryanair distributes companys stock as dividend and rewards. C. Masterful growth of second-level airport resources In most European areas, use of second-tier airports is very low. Therefore, to rising the usage ratio and boost economic improvement, local governments use up offered nigh favorable policies. Based on Ryanairs large volume of passenger dealing and its rapid growth, Ryanair obtained great contracts and even some subsidies from local areas, tip to a decrease in airport regain fees. D.Taking advantage of the net profit To save agency commission fees and simplify the purchasing process, Ryanair set up online reservations and spent a large amount of money on promoting online writ of execution widely. The Skylight system offers a plan for Internet users to book and backup up their ticket through Ryanairs website promptly. Consequently, its Internet operation has world-shattering move to reach 99% of ticket sales. E. Reducing expenses and making profits from other aspects Ryanair no longer provides quit meals, and Ryanair cancelled first and business classes to offer more seats.Apart from this, Ryanair limits weight of luggage to decrease force out consumption. During the entire operation process, Ryanair always puts cost decreases in first place, and also attempt to try on a way to earn more money. For instance, Ryanair supplies different kinds of products and services including food, as well as information in wrong of taxi and hotel meshing for passengers. Simultaneously, the advertisements for colorful Ryanair aircraft and websites for other companies offer major sources of revenue. F.Unique integrated culture Ryanairs headquarter was built in a rural area at a small location in Ireland. In the mystifyning, the entire company comp rised only eight administrative workers. At times, the firms CEO and discussion section managers would help customers check in and even load and upload their baggage. all(prenominal) 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 slipistics. To enter the Chinese market, it is peremptory that Ryanair have a deep understanding of the external environment. Similarly, Ryanair should grasp if the innate environment is right or detrimental to Ryanair. tho in this way, will Ryanair be able to exploit its own strong points to fulfill its tellingness and avoid some influences that may give rise to defraudcomings. Meanwhile, environmental analysis offers a determinant itemor to establish specific strategies. The hobby stairs m ight be interpreted. . 1 External environment PESTEL analysis Johnson pointed out the PESTEL framework as an effective tool for analyzing the macro-environment. Moreover, it helps the company to know what is handout on outside the organization and how external instruments are comparablely to change in the future. PESTEL refers to six points semipolitical, economic, 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 with(predicate) Chinese market.Then, on the basis of this, Ryanair could carry out accurate methods that are suitable for Chinese customers. 3. 1. 1 Political issues The political point is relate to political and state systems, policies and regulations. Aviation is an industry that is very huffy to political changes. In the meantime, aviation is strictly regulated by government. Chinese aviation started late, i n that respectfore its laws and regulations have several shortcomings. With the gradual deepening of its economic reforms in recent years, the Civil Aviation political science of china opened the opening for non-state owned enterprises in 2004.After that, a series of loosening policies regarding airline routes have been put forward to provide more chances for low-cost carriers. Up through late 2007, the Chinese government concluded 110 bilateral agreements with international 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 message that the Chinese market relaxed rules on immaterial possession of airline. Through corporation, the monopoly concerning a reservation in furnish price, maintenance fees or tickets would be broken up.In addition, there has been a dramatic increase in office resources. As of 2007, Chinese aviation ru n throughed the Reduced tumid Separation Minimum (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 measure was of immense significance in long-term development of airlines. 3. 1. 2 EconomicIn 2009, the financial crisis swept through the global, and the world economy has been greatly affected by it. However, even under this circumstance, the Chinese GDP was 33. 5 million yuan, up by 8. 7 percent over the previous year. financial revenues reached 6. 85 trillion yuan, an increase of 11. 7 percent (Report of the Work of the administration 2010). Constant economic growth provides an attractive environment for aviation industry. The following table indicates the development of civil aviation in recent years Tab1e 1 The Development of Civil Aviation in Recent YearsYear point 2004 2005 2006 2007 2008 Length of Transport Routes (10 000 km) 204. 94 199. 85 211. 35 234. 30 246. 18 Total passengers Traffic (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 civil 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 down 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 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 do mestic market, Chinese fuel prices ran counter to the international situation and had an upward tendency.Hence, this is a large-than-life challenge for airlines (Hu,2010). 3. 1. 3 Social Since the dupeion of reform and opening policies, China has made headway socially and demographically. In the first place, Chinese pecks 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, singly. After 30 years of arduous efforts, the excessive population growth has been brought under effective control.Furthermore, Chinas population has basically accomplished the change-over to the population counter 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, get offation and communication, as well as recreation, fosterage 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 uttermost(a) year, carry-over and communication rose by 13. 8%, and the other two items went up by 10. 8%. The major factor that ca apply 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 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 culmination alliances of educational institutions between different nations, the quantity of students who study abroad is increa sing 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 engineering first of all, we can acknowledge that advanced technology has resulted in cost reductions for airlines. As a result, as the most famed 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 International Air Transport Association in 2004. It is a new approach that suffers to reduce airline expenses and offer better services for passengers. The StB program compromises five parts bar-coded boarding passes (BCBP), IATA e-freight, IATA e-services, the Baggage Improvement architectural plan and the Fast Travel Program. With the aid of the StB Program, airlines can sell tickets by lead trade and vending machine or booki ng tickets via the Internet, mobile phones and 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 function rate of national airspace resources had a significant rise.In the meantime, increased numbers of aircraft have driven the development of the aircraft maintenance market, extending the utilizable life of civil planes, which endure 2530 years. Lastly, along with the expeditious 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 fierce competitor betw een new airlines and subsisting airlines. As an administrative department, the Civil Aviation Administration of China is cautious about turnover as to pilots.To a great extent, 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, gentle 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 carbon emission. Obviously, it is not good for high-speed growth but imperfect Chinese aviation. In spite of China vigorously get-up-and-go forward energy conservation and greenhouse gas emissions reduct ion, nevertheless, under the current technology and situation, to reduce greenhouse gas emission, it must depend on technology rather than fuel decreases. Because of insufficiency or drawbacks of relevant laws and regulations, at present, China has not formulated a relevant insurance in terms of charging carbon 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 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 become wired, foreign airlines that would like to enter and operate in China also flavor a great many delicateies in the aspects of market and technology and, especially, laws and regulations. For instance, concord 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 overture of aviation in China. Like most cities having only one main airport, the construction of a secondary airport still get offs far short of needs of modern aviation. Consequently, this is a big problem that should not be ignored by foreig n airlines. 3. 2 Internal environment SWOT analysisSWOT was first put forward by Albert Humphrey in the mid-sixties 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 before 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 constituteing 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 bypass 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 brand support2. Low fares3. Low operation cost and high ancillary incomes4. High efficiency, flexible operation Weakness 1. Service quality 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. maddened competition and pressure from other civil airlines3. Excessively depends on one thousand fuel market and low price 3. 2. 1 StrengthsAfter 20 years of arduous efforts, Ryanair has already built up an enterprise image and employ the brand with its own characteristic in the European LCC market. The Economist magazine called it the best airline which could earn a lar ge amount of money. smother Street Daily considered Ryanairs stock as the most popular and the most valuable to purchase (Wang, 2008) It has made marked achievements in every 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 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 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 passen gers came out to 66. 5 million. With such cheap fares, Ryanair can still make profits. The reason is attributed to an fierceness on minimizing operations costs, which includes aircraft purchasing, daily maintenance and pickaxe of airports, online booking and personnel expense. Apart from these, Ryanair tries to earn more from ancillary service while reducing costs. For example, customers could book cars or hotels, and even some low fare tickets of concerns from Ryanairs websites well.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 pivotal 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 bonuse s and participation in Ryanairs 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 invalidating issue has been the severe 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 constantly enlalrging, costs will go up proportionately. Therefore, exceptional niche market and increasing cost are not benignant fo r further expansion of the company. 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 trigger, 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, Spring 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 dur ing 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 take up 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 absolute majority 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 property 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 give in 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) 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 fade that of civil aviation. In 2002, civil aviation was recon structed and reorganized. From then on, competition through ternary airline groups involving Air China, China Southern Airlines and China Eastern Airlines has taken shape in the civil aviation market.The three 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. 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 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. lonesome(prenominal) 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 violence 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 impudence 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 foll owing.The first obstacle is the imposition of restrictions on put ticket prices. Civil aviation-transport price reforms state that on the basis 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 completely open.Airlines could freely arrange air route entry and quit based on actual market demands by themselves. However, these airports handling capacities are relatively small and the low-cost carriers self-potential is subject 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 avi ation. 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 stem 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 child that is a new entity given 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 sh ould seek other partners in the Chinese market. Two parties hold different proportions of equity 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 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 application of joint ventures. On the one hand, because of differences in circumstance and corporate culture, a new company will be easily split on objectives and interests and even conflicts. On the other hand, sometimes both(prenominal) paties cannot reach a consensus in regard to equity tryst and useable control.At the end, it is often hard to coordinate globally on account of close-fittin g 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 Admini stration of China. Now it still keeps the longest 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, ultimately accomplishing a win-win situation. For China Southern Airlines, in spite of the fact that it plays an unexpendable 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 rational resource allocation and high employee efficie ncy. 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 pioneer 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 application of the joint venture, this it way complies with legal requirements, thereby lessen 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 perplexity 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 elasticity and price factor as their first consideration.Southwest Airlines was awared of the important 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 visit 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 continuance 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 comfor table 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 rather 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 c ontrol from the government, Ryanair could not implement 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 obtain 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 festiva ls, Ryanair could consider summit 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 promotion plans to stimulate customer interest. . 4. 2 Cooperation with local author ities 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 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 undertake flights. For instance, these years personnel, economic and cultural exchanges ac ross the Taiwan Straits have kept increasing. Therefore, 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 really implement its low fare and foster a good and florid 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 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 anticipate some problems that may happen during the process. Then, based on an overall consideration of various factors, Ryanair shoul d plan to invest in the form of a joint venture with China Southern Airlines. The next footmark 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 cartel 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 rare chance for development as well as tough challen ges. Therefore, this paper firstly summarized 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 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 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