This research will use the theory of competitive strategy using both qualitative and quantitative information, SWOT and Porters Five Forces to analysis and explore how low-cost carriers can obtain success in the Chinese airline market. Using existing information, research can be undertaken to discover what the major impact is on the low-priced airline carrier business in China and how to select desirable competing strategies to accomplish higher market share.
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This research take advantage of both quantitative and qualitative methods. Strauss 1987 cited in bell (1999) postulated that the qualitative study technique employing a grounded theory approach would provide the basis of an idea. This is an alternative view considering that it furnishes an alternative technique to the confirmation or refutation of a hypothesis. The method takes advantage of analysis traits specified in such a way that the study doesn’t state an exact hypothesis to be disclosed. A qualitative statement of the information is accepted for specific research exploration. With the “creation of an idea” construct provided by bell (1999) we can assume the method and objective of the research means to generate hypothesis unlike proving the case that the underlying hypothesis is unknown. The qualitative research technique becomes of value when performed this way. In this research we actively look for answers from academics on the foundation of past and present papers. By looking into the story of Chinese Airlines We can see how things have changed since the Chinese government had more of an open door policy in respect of inclusion of other airlines, outside the scope of the nationalised version run by the government.
3.1 Case Study
The case study technique is applied if there are several sources of information (yin 2003a). This differs to the quantitative study approach. Effectively, the case study technique is broadly deeper and hinges upon the context of the investigation. Unavoidably, this idea applies additional variables, and these inevitably bring up additional sources of information. Then again, the context of the investigation is significant to the case study prototype, and incorporates the investigation of communications between the theory and the surrounding it’s held within (yin 2003a). It’s distinguished as a process of choice if the “phenomenon under study is not readily distinguishable from its context” (yin 2003a:4). A case study analysis is inclined to be assessed instead of mathematically dissected (bell 1999), and it is also dependent on intuition and valuation.
The case study analysis conceives specified environments, as well as the parts and wholes of the method. Patton (2002) conceives the case study needs to be detailed and describes the situation, however, a different opinion is provided by miller and salkind (2002) contemplating that important issues and ideas need to be acquired as the researcher observes. The effect of this is that complexity of aspects increase, although (miller and salkind 2002) offer a different analysis where the researcher is an enquirer and produces written evidence producing a documented set of information. The case study analysis is to a great extent contingent on the circumstances and state of affairs. Patton (2007) expresses that a case study moulds an approach specified in such a way that it is a “totality or unifying nature of the particular settings” (patton 2007:59). Another perspective provided by Creswell (2003) determines actors and theory appropriate to particular research.
3.2 Questionnaires
Questionnaires are often used to obtain information for research purposes. Open-ended questions used in this way alongside interviews can provide an insight into information not available via other techniques. However, when questionnaires are used they must be carefully designed so the data provided is not subjective and only provides an even-handed objective analysis. Design of questionnaires is a skill in its own right, as they must provide useful data for the purpose of research. This is why questionnaires provided for marketing purposes, other than subjective research must be viewed with suspicion.
3.3 Quantitative/Qualitive Research Techniques Discussion
In contemplating quantitative and/or qualitative research as an aspect of research methodology, it is demonstrated that there are two cases of validity namely, “measurement” and “design” validity. Measurement validity is a criterion evaluated on a quantitative footing, but this is believed to be only as useful as the technique used to assess such data (newman benz 1998). The effect is widely considered to be only as valuable as the extent a variable can change. On the other hand we can also conceive design validity, as this comprises other independent variables, extending to the compartmentalization of outcomes viewed relevant (newman benz 1998).
The two facets of quantitative and qualitative research are not mutually exclusive. In qualitative exploration there can be an inclination to generalise outcomes, especially if it’s impractical to find specified and useful evidence on the topic in question. Consequently, there’s frequently an approximation supported by the most balanced method validity can be established. It is declared that enforcing measurement validity has priority, as “solid measurement rigour decreases the threats to internal validity” (newman benz 1998). Put differently, if there’s a possibility of extracting accurate, and verifiable outcomes it provides firmer grounds to demonstrate a case, compared to the alternatives used via the quantitative technique.
In qualitative research, it is necessary to observe the most frequently applied formula, as it can extract greater significance when used with research techniques such as questioning or document analysis (newman benz 1998). A questionnaire can be used to extract delicate data, but within this environment, the observation technique is less desirable. The observation method can sometimes skew the information as the researcher could have expectations which may be subjective, instead of objective i.e. it may be subjective depending on their personal experience thus causing the study to be invalid (newman benz 1998). Complications of this type may be created if the researcher doesn’t have a road map document upon which to base their research, resulting, in a bias investigation of the state of affairs (newman and benz 1998).
4.0 Introduction
The airline industry in China in the last decade has grown substantially and modernised in a global setting. According to the Civil Aviation Administration of China 2008 report, there were 387 million Chinese passengers. It expanded by 16.8% in 2008 compared to 2007. A recent forecast predicts that the number of Chinese passengers is expected to be 600 million in 2011. The net worth as a result of this is conceived to be CNY37.6 billion (CAAC 2008).
Evidently, it seems that the Chinese airline industry has a predictable and assuring future. However, from an investigation carried out by Li and Zhao, the air transport requirement for low cost airlines is still substantially down in comparison to the entire transport marketplace in China (Li and Zhao, 2007). In reality, the price of air travel in China is a primary factor. Most of the Chinese are not in a position to afford air travel. This can be evidenced by comparing the Chinese market to the US market. In the US citizen averages 2.2 air trips every year, but in China, only one person travels by air per thirteen people (Lei, 2008).
The Chinese airline industry has been changed substantially, since China joined the World Trade Organization (WTO) in terms of international air carriers participating in Chinas marketplace. The government now permits commercial airlines controlled by competing organisations (Cao, 2005).
The largest airlines in China are currently, Air China, China Easter Airlines and China Southern Airlines, and some are subsidised by the Chinese government. In the present position, increasingly private and low-priced airline companies are operating in the Chinese airline marketplace. They rely on their small-scale resources to compete with the existing large airline business’s all being state-owned. At the other end of the spectrum, however, China is a massive potential airline market.
The continuing trend to implement market deregulation in China is currently in progress. New, budget airlines have to discover ways to compete with the larger airlines. In recent times, the low-cost airline industry has evolved speedily in most modernised countries, such as Europe, America, Japan and Korea. The low-cost airline industry emerged recently in China where it has a large number of prospective customers in the marketplace. The low cost model should add an interesting aspect to the Chinese Airline market.
4.1 Recent Activity in the Chinese Airlines Market
According to the International Air Transport Association, air travel globally decreased last September after months of increases preceding this period for the first time in five years. However, passenger traffic overall was twenty-nine percent less year on year. Of these, Asia-Pacific carriers have taken the highest loss, with a 10.6 percent fall. A particular trend of note is that during the past three years, Chinese business travellers switched from being practically non-existent to fourth place on a top-ten listing of aviation markets. This was well documented by the Air France-KLM brand. At the current time when passenger counts are decreasing globally, the Chinese market for business travel has been dealt a comparatively soft hit states Eva He cited in Fitch (2009).
China’s economic slowdown is now anticipated to diminish and once again increase momentum towards the end of 2010. Therefore there needs to be a concerted push to grab opportunity while it is still rife. Experience in the field with Chinese travellers is essential, says Mark Arxhoek, of Air France-KLM. Mr Arxhoek has wide experience of the nature of this type of business and is the regional commercial director for Greater China (Fitch, 2009).
This new breed of Chinese travellers have different demands to Western business travellers, including on board comfort, outstanding customer service, and facilities. They require carrier brands that deliver “a secure experience of comfort and an unforgettable journey experience”. Chinese business travellers are frequently obtained by individualised services that denote status and standing in the business community. Local brand China Southern, for example, have introduced the High-End Customer Service scheme, where the airline records specific data such as seat details, food or magazine preference so its premium clients don’t need to be delayed standing in the queue in order to check in for their flight (Fitch, 2009).
It is recognised that although cost is a factor, in-flight services are also important when choosing a specific airline . Air China are very competitive in this arena as they consistently offer a higher standard of food and drinks than other airline brands. This can be contrasted to American carrier Northwest Airlines, whose in-flight staff provide small helpings of instant noodles as meals. Airline brands in the Chinese industry fair better when they devote attention to detail. An example is provided of Emirates Airlines, painting starry night skies in their cabins (Fitch, 2009).
Chinese passengers appreciate Mandarin speaking staff that can assist passengers to complete customs forms, supply information, or can attend to hotel reservations and transportation. Given China’s size and lingual diversity, occasionally Mandarin isn’t enough. The Finnair company assures clients there are a minimum of two cabin crew members on each flight leaving from China acquainted with the departure region in question, so there is provision for the localised dialect in addition to Mandarin. To allay marketing problems, the government is subsidising costs and proposing coupons and vouchers for tourist sites in destination cities for passengers who travel by air (Fitch, 2009).
There are wider European implications of the changes in the Chinese airline market. Helsinki Vantaa Airport, Finnair’s chief hub, was the first airline in the EC to display Chinese signboards and Mandarin-speaking employees to greet clients as they arrive from China. Air France-KLM adopted the same idea, declaring the Focus on China project, a primary objective with the function of tailoring in-flight services and training cabin crews and airport staff to match the expectations of Chinese clients (Fitch, 2009).
Chinese travellers are also creating a need for new destinations. In response Air France-KLM intend to provide services to Panama, and Trieste, in Italy, while American carrier Delta Airlines has declared they are merging with Northwest Airlines, connecting its Latin American to Northwest Asian destinations (Fitch, 2009).
Domestic travellers are seeking the cheapest and most trouble-free tickets available. In direct contrast to international business travellers who book seats based on the best services available. At the other end of the scale, even for domestic clients the average ticket price for a flight inside China is expensive, being roughly RMB 800-RMB 900 (US$ 117 to US$ 131) in a single direction (Fitch, 2009).
Online bookings are available in China, but the process is often long and lengthy, due to existing visa application and approval procedures. Domestic clients (approximately 20%) tend to use online booking sites such as ctrip.com or elong.net to reserve tickets. Small, private carrier brands are appearing in China. The most successful has tended to be Spring Airlines, in connection with three planes that fly from Shandong to disparate tourist destinations around China. Spring Airlines will fly from Shanghai to Tianji with bus services to Beijing at half the price of a ticket on another airline. However, it is challenging for private airlines to compete with state-sponsored airlines that already claim much of the available space at airports. Some airlines, such as OK Airlines and Eastern Star, Spring Airline’s chief competitors have already gone bankrupt (Fitch, 2009).
Private airlines are in severe difficulties, and cannot compete with larger established airlines. Perhaps only experienced airlines have the resources to exist in such a complex industrial environment during such a complex time of radical change in China? Regardless of these potential pitfalls, the challenges for either of the domestic and international airlines in China also demonstrate indisputable opportunities and airlines must learn to get in touch with Chinese clients before the Chinese clients buy into flights (Fitch, 2009).
4.2 Aims and Objectives
Due to the current situation of low-cost airline business in Chinese market, it is interesting to study its opportunities of development in the future. The question of this dissertation research could be: how can low-cost carriers get success in Chinese market? What are the competitive strategies suitable for the low-cost carriers in China?
Objectives of the research:
Key issues of development difficulties for low-cost airlines in China
Identify the competitive strategies for the low-cost airlines business in China
Discuss and analysis the effects of the Chinese government policy and regulations on the low-cost airlines industry
Compare and analysis the situation of low-cost airline in Asia, such as Japan, Korean and Singapore
Adopt the business competitive strategies into low-cost airlines business model in China.
5.0 Discussion
5.1 South East Asia
6.0 Conclusions
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