final international business plan report ii tui & thomas cook

Saxion University of Applied Science

International Business Plan

December 15

2011

Group E4 Floris Neuman (2426688) Ivander Atmojo (2430243) Pham Thuy Duong (155031) Yao Deng (133810)

Project IBMS 6

Project IBMS6_ Business Plan Group E4

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Contents Executive Summary

Thomas Cook Business Overview in Comparison with TUI – Thomas Cook’s biggest competitor ...... 5

I. Companies General Overview .................................................................................................... 5

1. TUI Travel plc ......................................................................................................................... 5

2. ThomasCook Group plc .......................................................................................................... 6

II. DEPEST Analysis (European Market) ....................................................................................... 6

1. Demographic factors ............................................................................................................... 6

III. Companies Internal Analysis .................................................................................................. 8

1. Business strategy ..................................................................................................................... 8

2. Human Resource Management (HRM) .................................................................................. 9

2.2. Recruitment Diversity ........................................................................................................... 10

2.3. Diversity ................................................................................................................................ 11

2.4. Health and Safety .................................................................................................................. 11

3. Sustainability strategy and management ............................................................................... 12

4. Financial Analysis ..................................................................................................................... 14

IV. SWOT (European Market) ........................................................................................................ 17

V. Recommendations ......................................................................................................................... 17

Thomas Cook Business Strategic Plan of Expanding to Chinese Tourism Market .............................. 19

I. Chinese Tourism Market - Current status and Future Potential Developments ........................ 19

1. PEST Analysis ...................................................................................................................... 19

2. China Outbound Tourism ...................................................................................................... 20

II. Strategy Formulation for Thomas Cook to entry China ............................................................ 21

1. Competitive Analysis - Thomas Cook operate in China Porter’s 5 forces ........................... 21

2. Key external Factors ............................................................................................................. 22

3. Key internal Factors .............................................................................................................. 24

III. Strategy Analysis and Choice ............................................................................................... 26

1. SWOT Matrix ....................................................................................................................... 26

3. Cost of “Strategies” ............................................................................................................... 27

4. The Quantitative Strategic Planning Matrix (QSPM) ........................................................... 29

IV. Strategy Implementations ..................................................................................................... 30

1. Finding Partnerships in China ............................................................................................... 30

2. Human Resource Management ............................................................................................. 31

3. Product Development ............................................................................................................ 31

4. Operation ............................................................................................................................... 32


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5. Marketing .............................................................................................................................. 32

6. Finance .................................................................................................................................. 33

7. Legal Issues ........................................................................................................................... 33

V. Expected Joint Venture Result .................................................................................................. 34

Appendices

A. Appendixe1: References .............................................................................................................. 36

B. Appendix 2: Regulation on Travel Agencies in China ................................................................ 38

C. Appendixe3: Cost Analysis .......................................................................................................... 43

D. Appendixes4: Personal work statement ....................................................................................... 44


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Executive Summary

This report is a Business plan for Thomas Cook to enter the Chinese Tour Operator Industry to

become an outbound tour operator, to bring Chinese travelers to Europe, through a joint venture with

Chinese Southern Airline.

This report consists of two parts, the first part consisting of the analysis of Thomas Cook in Tour

operator industry in the European market in the comparison with TUI. The analysis follows several

key concepts the DEPEST, Business strategy, Human resource Management, Sustainable business

and Ethics and the financial aspect.

The advantages come from strategy, Human Resource Management strategy and Recruiting and

financial aspects. Their strategy advantage comes from a decentralized structure, where more is asked

of the employees to make decisions with in their working team or by themselves, it has shown that the

centralized and leader oriented way of TUI is less flexible especially when fast decisions should be

made. Towards the strategic part we feel that Thomas Cook is better since it also works with owned

hotels and other facilities that give an edge in costs since the profit is for Thomas Cook.

The financial aspect shows that Thomas Cook, profitability, and Operating ratio were better over the

last 3 years. Especially the gross profit is higher for Thomas Cook and although after that the

operating profit margin and Net profit margin are just higher due to lower costs.

Based on the conclusion of part one, we decided to continue with Thomas Cook to develop an

International Business plan. The market we chose is China due to its rapid growth of economy and

fast changing in quality of live. Moreover, due to the political and economic hurdles in the European

fronts in the last year, and this may be only the beginning, China is a very lucrative market for

Thomas Cook.

We believe that the our strategy to joint venture with China Southern Airlines is expected bring

Thomas Cook out of the sluggish financial situation in the European Union. This strategy is expected

to double Thomas Cook’s net profit margin, increase 40% current ratio, and established 6 Thomas

Cook China outlets in 6 biggest cities in Mainland China by 2017. However, in order to realize this

strategy Thomas Cook need to invest € 3.000.000 in consecutive years to cover the expenses for the

first 3 to 4 years. An aggressive marketing campaign is to be implemented in order to gain brand

recognition and to gain substantial market share in Chinese tour operator industry.


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PART I

Thomas Cook Business Overview in Comparison with TUI – Thomas

Cook’s biggest competitor

I. Companies General Overview TUI and ThomasCook are 2 leading companies in the global tour operating business. With operating

activities around the world, TUI and ThomasCook are not only preforming as tour operators, but also

own a fair share hotels and airlines (under different brands).

1. TUI Travel plc

Together with TUI hotels & Resorts and Cruises, TUI Travel plc is daughter firm of TUI AG

Corporation. Operating in over 180 countries, serving more than 30 million customers in over 27

source markets, obtaining £13,525 million revenue (2010), TUI is known as number 1 player in the

travel industry.

Company Vision & Mission

Competitive Advantages

TUI group treat sustainable development as much important as economic goals. Their annual report

shows us the ecological and social activity is a significant part of TUI corporate culture. As the result,

TUI group will be listed as an industry leader in the Dow Jones Sustainability world index and

receives top marks for its climate strategy.1

1 Dow Jones Sustainability World . (2011, September 08). TUI Group. Retrieved from http://www.tui-

group.com/en/media/press_releases/archiv/2011/20110908_djsi


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Another competitive advantage of TUI group is TUI built a mature supply chain. For instance, TUI’s

services cover the holiday plans, tickets, or hotels; customer will get everything they need from TUI

group. And TUI group will be the one and the only one take care of customers’ holiday.

2. ThomasCook Group plc

ThomasCook Group plc is well known travel firm, which is known with the reputed history. After the

successful merger with MyTravel Group plc in 2007, ThomasCook is also a leading player in the

market, with sales of £8.9 billion and 22.5 million customers over 21 coutries.

Company Vision & Mission

Competitive Advantages

Thomas Cook has long history and got sufficient experience about tourism and travel business.

Moreover, Thomas Cook has successful entrepreneurial idea which is making travel simple, easy and

a pleasure with dynamic portfolio of marketing leading travel brand in 21 markets. In addition, the

novel management theory and efficient operation mode is also another competitive advantage.

II. DEPEST Analysis (European Market)

1. Demographic factors

The global recession and uncertain economic environment have had an effect on consumer travel

spending habits in 2009/10, however, for most consumers holidays continue to be of considerable

importance and a planned annual expense.

Consumers are more discerning in their choice of holidays, looking for a greater variety of products

and destinations, flexibility of duration and value for money. The economic insecurity and uncertainty

also make last minute booking and travel insurances more preferable. The result is a trend for last

minute, online bargaining hunting by customers that further squeezes the slim margins of tradition

holiday companies.

Consumers increasingly turned online to research and book their holiday. Social media and customer

travel review sites gained in popularity and prominence and are a key influencer on the consumer’s


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decision making process. Changing lifestyles, globalization and new technology have a habit of

destroying consumer backs by historic brands.

2. Economic factors

The economic uncertainty continued into 2011 from the 2008 crisis with concerns that there would be

a double-dip recession and ongoing volatility in fuel prices and currency. Despite this, as 2010

progressed there has been recovery. GDP growth has taken place in most major operating markets

with Germany at 2.2% and the UK at 1.6%2. However, the levels of growth have not been enough to

offset the global recessionary environment of 2008 and 2009. Unemployment has continued to rise

with German and UK rates at 7.6% and 7.8% respectively 2.

The economic outlook for 2012 remains uncertain with different markets at different points of the

beginning phase of the European crisis. The losing value of the Euro (€) may lead to the decrease in

European customer consuming power.

3. Political factors

Travel and tourism are heavily regulated industries. Tour operators, especially the multinational ones,

should be aware of the impacts caused by political factors on their operating activities. Recently there

following issues have assumed particular importance

Air passenger rights - the European institutions having focused heavily on this issue during

the year.

Aviation Taxation.

Financial protection of air passengers continues to be an issue, particularly in the UK.

Extension of the scope of the European Package Travel Directive, EC Treaty.

Political crisis in European Union, especially in Geek, Spain and Italia.

4. Ecological and Social factors

Travel and tourism are responsible for around 5% of global carbon dioxide emissions3 and

increasingly national and international carbon legislation is coming into force. Since environment is

becoming high concern of the society, green travel now is popular trends of travellers. Sustainability

is embraced as a business issue on which the future health of the tourism industry depends. This fact

challenge tour operators to create travel experiences special by providing holidays that cause minimal

environmental impact, respect the culture and people of destinations and offer real economic benefit

to local communities.

5. Technological factors

The age of travel brochures and pamphlets is quickly fading, giving way to electronic promotions.

With high internet penetration rates, the technological advancements of Internet make e-commerce the

new development trend of the travel industry.

2 (2010, June). Trading Economics. Retrieved September 2011, from http://www.tradingeconomics.com/

3 United Nations World Tourism Organisation (UNWTO), United Nations Environment Programme (UNEP) and World

Meteorological Organization (WMO) (October 2007) Climate Change and Tourism: Responding to Global Challenges.

Madrid.

http://www.tradingeconomics.com/


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III. Companies Internal Analysis

1. Business strategy

TUI Travel plc.

Be consistent with the vision of the company “Making travel experience special.” TUI follows the

differentiation business strategy, which has been set to generate first class image for the company.

TUI is developing a portfolio of exclusive products that no competitor can easily match or replicate

and which is tailored to include additional services and facilities that customers want on their holiday.

The strategy is proven it’s effectively and profitability, which not only improves the competitive

power of TUI by distinguishing from the market, also give higher profit margins. When delivering

more added-value, unique experience with their content products, TUI gain customer’s higher

satisfaction levels - drive repeat bookings and customer retention, build up highly trusted brands

represent excellent value for money.

The differentiation business strategy is fostered by the heavy assert model of the company. TUI has

ownerships in every part of the travel industry value chain. The heavy asserts are financed with heavy

investment thank to the generous financial capacity of the company. It not yet mentioned the fact the

TUI travel plc is the division of the giant corporation TUI AG. In the other words, TUI has strong

fundamental base to penetrate the market.

In contrast, facing the down turn phase of the world economic, it is the heavy assert of TUI the things

create extreme difficulties, and reduce their profitability. The required maintaining and operating

costs of asserts now become serious pressure for TUI. Moreover, while keeping most of the

supporting activities, such as marketing, finance, HRM, in-house can give the company better control

in overall activities, it drive the fixed costs of TUI going remarkable high, decrease the profit margin

of the firm.

ThomasCook Group plc.

ThomasCook develops low cost business strategy which emphasize not only on the quality of the

products, also on the cost effectiveness. In order to achieve that, ThomasCook maximizes the value of

the mainstream business through cost efficiencies, light assert business model and through increasing

the proportion of higher value product such as all-inclusive board basis, four and five star properties,

and medium haul destinations.

The company is working constantly on improve product mix, whilst reducing costs, thus driving an

improvement in margin. In the year 2010, ThomasCook made good progress in managing their

accommodation and aviation costs despite the non- stop climbing of oil price. Accommodation and

non-fuel aviation costs are £2.9bn and £2.5bn respectively4, so a relatively modest saving can have a

big impact on Thomas Cook’s performance. With the same objective of cutting the operating costs,

ThomasCook chose to outsource all the business supporting activities. In 2007, ThomasCook signed a

4 ThomasCook PLC Annual Report & Accounts 2010. (2011). ThomasCook PLC. Retrieved May 2011, from http://www.thomascookgroup.com/investors


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£192m outsourcing deal with provider Accenture5. The contract covers human resources services,

finance, accounting, and technology infrastructure management.

Thomas Cook is trying to develop dynamic travel packages which allow consumers to customaries

their own travel plan with the support from the tour agents, or even via the website of Thomas Cook.

Together with the out sourcing strategy, it sets for Thomas Cook a low cost flexibility business model,

can satisfy exact they want and the need of consumers.

Seeing the sharp grow of online booking trend, Thomas Cook, they invest to develop in our e-

commerce capabilities to strengthen position as an online travel agent, make them one of the best

online retailers of the world.

Though the core business of Thomas Cook is tour operating, they also are putting efforts in

developing new strategic business unit (SBU) – financial service related to traveling. Financial

services such as travel cheque, travel insurance, or credit card are proven as highly profitable, as well

as, light invest required contents. Moreover, financial services can generate higher margin level for

the company.

However, our group also sees there are problems in Thomas Cook strategy. In general, there is not

much change dramatically in company business strategies. Thomas Cook is still sticking for its

traditional business model of buying hotel rooms and aircraft seats in advance, and selling them back

as package via travel agents and booking website, which is out of date and cannot be proactive with

the change of the market.

2. Human Resource Management (HRM)

Tour operator industry success depends on many factors, but human resources are the most crucial

aspect of operations. Thomas Cook and TUI Travel implement different strategies to manage their

employees, different visions, and different mission on how to approach their goals.

5 Client Success_ThomasCook. (n.d.). Accenture. Retrieved October 2011, from http://www.accenture.com/us-en/outsourcing/Pages/outsourcing.aspx?tab=4


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2.1. Company Culture / Strategy

TUI Travel approach with their strategy of Human Resources,

Thomas Cook

ThomasCook has “PROUD” as their company culture,

vision, and mission.

The main difference between them is that Thomas Cook appeared to be more decentralized compared

to TUI Travel PLC. This shows in their sites that Thomas Cook shows more towards employee

demands and critics that Thomas Cook has a special program called “VOICE” which is a forum to

address and improve work qualities. TUI Travel also implemented a program called “BLUE VOICE”

but only on Nordic countries. TUI Travel appeared more centralized and leader oriented that they

focused on management and more performance, which does not show very well in terms of financial

performance.

2.2. Recruitment Diversity

Both consider human resource is the most valuable asset of the company, TUI and ThomasCook,

however, have different way to approach their future colleges. As mentioned earlier in this report,

TUI tends to keep all of the activities in house for better control, so they have themself an HRM to

take care of administrating personnel.

ThomasCook, conversely, outsources HRM to save costs. They corporate with Accenture - a global

management consulting, technology services and outsourcing company, to create an outsourcing

Centre, which helping ThomasCook to performance all activities involved HRM. This outsourcing

relationship enhances their margin makes a significant contribution to the profitability and continues

to create further competitive advantage.


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2.3. Diversity

One of the most crucial elements of great human resource management is diversity. Both companies

implements and emphasized that they are not tolerating any discrimination or harassment on the

grounds of race, color, national origin, gender, sexual orientation, gender re-assignment status, being

married or a civil partner, religion, belief disability or age.6 Although TUI does not describe as clear

as Thomas Cook, the point is clear that both companies diversity are a part of their strength.

2.4. Health and Safety

Both companies engage health and safety very seriously.

Thomas Cook has a group-wide Health and Safety policy7, and Human Resource team of each country

make sure that legal requirement are met and training is provided as appropriate to local standard.

A risk management program for company car drivers, including license checking and training

An ongoing health surveillance program for aircraft engineers

Raising employee awareness of health and safety risks and precautions through e-learning

packages and other media

The continued development of retail health and safety management software enabling online

access to our asbestos surveys for retail locations.4

TUI Travel conducts a continuous workplace risk assessment highlighting areas where additional

control measures need to be implemented. Where significant risk exists, risk assessments are used as

the means of understanding the various hazards involved and identifying and implementing

appropriate control measures, whether this be additional training, personal protective equipment or a

change in the work process8.

Both company reports internal accidents based on the RIDDOR9 criteria where applicable.

1.1. Training and Career Development

There are significant differences between TUI Travel and Thomas Cook in this.

TUI Travel seems more focused on management, leadership and expert training and workshops. Their

“Group-wide Leadership Programs” and “TUI Horizon Programs” show their strategy in their slogan

“To attract talent and the leaders of tomorrow.” However, they also offer a “Group-wide International

Management Trainee Program”.10

Thomas Cook employees receive training when they join the Group, then their training and

development needs are assessed at personal development reviews. The frequency of these varies

6 Diversity. (n.d.). ThomasCook Group plc sustainability Report 2010. Retrieved October 2011, from http://sustainability2010.thomascookgroup.com/employees TUI Travel PLC Annual Report 2010. (n.d.). TUI Travel PLC. Retrieved 2011, from http://ara2010.tuitravelplc.com/tui-ar2010/dlibrary/documents/TUI_Annual_2010.pdf 7 Health&Safety. (n.d.). ThomasCook Group plc sustainability Report 2010. Retrieved October 2011, from http://sustainability2010.thomascookgroup.com/downloads/pdf/policy-health-safety-statement.pdf 8Strategic-overview. (n.d.). TUI travel plc . Retrieved October 2011, from http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/hands 9 (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) 10 Strategic-overview. (n.d.). TUI travel plc . Retrieved October 2011, from http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/ourcolleagues

http://sustainability2010.thomascookgroup.com/downloads/pdf/policy-health-safety-statement.pdf

http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/hands

http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/hands

http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/ourcolleagues

http://ara2010.tuitravelplc.com/tui-ar2010/en/strategic-overview/ourpeople/ourcolleagues


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between Thomas Cook Group companies. Thomas Cook offers plenty of career development

programs give the employee training that support their current roles as well as their longer term career

aspirations.11

2. Sustainability strategy and management

As tour operators, sustainable development is a really important part of company strategy for both

TUI and Thomas Cook. Furthermore, from their annual report and company website, we can see that

sustainable and responsible development are no longer only related with environment protection, but

also concern in social commitment, employees, customers, even suppliers.

2.1. Corporate Social Responsibility (CSR)

TUI and Thomas Cook try to protect the flora, fauna and animals in their travel destinations. They

also respect the local culture and keep a good relationship with local government. What they did is

find the balance between economic goals and social and ecological needs. TUI and Thomas Cook

want more people travel around the world and have more different travel experience without damage

the local ecological environment.

Moreover, both companies focus on climate change. Two main part of climate change are energy cost

and emission. For instance, most important environmental impact is the aircraft emissions, because it

uses the fossil fuels. TUI and Thomas Cook issued several strategies due to reduce the airline

emissions. Such as technological innovation from both companies, fleet renewal programmers and

reduction target from TUI group.

In addition, the energy cost of operating the company buildings and hotels and resources cost is

another part we have to pay attention. Thomas Cook approach is to minimize the total amount of

11Employees development. (n.d.). ThomasCook Group plc sustainability Report 2010. Retrieved October 2011, from http://sustainability2010.thomascookgroup.com/employees/development.html

http://sustainability2010.thomascookgroup.com/employees/development.html


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waste those kinds of resources. Furthermore, lots of TUI retail & tour shops are using green

electricity. According to the research, nearly all locations of TUI Nordic are supplied by green

electricity, and more than 230 First Choice shops in the UK are supplied by green electricity. They

avoid the emissions of around 6000 tons of carbon dioxide12.

2.2. Corporate Social Responsibility (CSR) & Public Relation (PR)

Being a successful company, the responsibility of society is a significant factor which we can’t

ignored. TUI and Thomas Cook have some society activities foundations and projects. Thomas Cook

pays most of their attention of Thomas Cook Children’s Charity which makes those sick and

disadvantaged children’s dream come true. However, TUI operates different kinds of projects,

foundations, sponsorship etc. “drink water for Africa”, Nests for life for Haiti”, “Charitable welfare

project in Hanover” etc. There are all part of TUI society activities.

2.3. Conclusion

Comparing the sustainability development of TUI and Thomas Cook, it is clear to see that both two

companies treat it seriously. However, in my opinion, TUI is better than Thomas Cook in this part.

Thomas Cook is a smaller company than TUI. As the result, they only focus on few projects.

TUI, however, is more comprehensive and diversification. They already focus on mostly factors of

sustainability development. In addition, TUI invests a large number of capitals, human and material

resources. Moreover, on 19 September 2011, TUI was listed as an industry leader in the Dow Jones

Sustainability World Index and receives top marks for its climate strategy. The sustainable and

responsible development is not only concern the long-term strategy, but also embody in TUI’s day to

day operations.

12 Retail & Tour Operator. (2011). TUI Group. Retrieved from http://www.tui-group.com/en/sustainability/env_management/climate/to_vertrieb


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3. Financial Analysis

Within this financial analysis we will compare Thomas Cook with TUI Travel PLC within Europe

with several different ratios which will measure both companies performance for three years since

2008 to 2010.

Profitability Ratio

Gross Profit Margin

Formula: Gross profit/sales

Thomas Cook has since 2008 maintained and increased their gross profit from 2008 until 2010, 2008

was year of cost savings, capacity cuts, a completed merger near the end of the financial year and a

troublesome year for tour operators.

The flexibility Thomas Cook is striving for does pay off in 2009 and 2010. They invested in this

already before 2008 to cut costs. Besides cutting costs Thomas Cook manages to increase revenue in

its division (Although the inter-segment sales are increased due to the revision of the geographical

divisions.) there is no division that is performing extraordinary the company has a consistent

performance over the 3 years.13

Operating Profit margin

Formula: Operating

income/Sales

Thomas Cook performed better than TUI and operating profit increased a little since 2008. Operating

costs as seen in the graph have decreased again after 2009. Cost decreases have mainly been made in

the accommodation sector through the new group destination management function, splitting the

13 Thomas Cook (2010/2009/2008). Annual report & accounts, Segmental performance

1.66% 1.69% 1.88%

-1.32%

0.27% 0.60%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

2008 2009 2010

Thomas cook

TUI Travel

23.07% 23.57% 21.21%

7.33% 8.35% 8.83%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2008 2009 2010

Thomas cook

TUI Travel


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continental Europe division, synergy across airline segments, fuel efficiency improvements and joint

tendering. 14

Net Profit margin

Formula: Net

income/Sales

Net profit has decreased over 3 years in 2009 decreased drastically, this is mostly because the increase

in financial costs and decrease in financial income. Obviously Thomas cook is better than TUI Travel

since TUI Travel is making a loss for the last 3 years. However, this trend is considered good as

revenue is decreasing. In the end, the financial income decrease and increase have a great effect on the

net profit of Thomas Cook and TUI Travel PLC.

Revenue (in £m)

The main conclusion we can perceive from this is that Thomas Cook did better during the last 3 years

of financial unrest and disasters. Despite TUI Travel PLC ratios is much lower, TUI Travel PLC

revenue is still higher compared to Thomas Cook.

14 Thomas Cook (2010).Thomas Cook Annual report & accounts, 10

8,111.50 9,268.80 8,890.00

13,932.00

13,863.00

13,400.00

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

2008 2009 2010

Thomas cook

TUI Travel

0.54%

0.10% 0.03%

-1.91%

-0.17%

-0.78%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

2008 2009 2010

Thomas cook

TUI Travel


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Liquidity Ratio

The current assets have since 2008 decreased, mainly attributed to much lower cash and cash

equivalents since 2008 and a decrease in financial instruments the other side is that the current

liabilities of Thomas Cook have decreased over the years especially the borrowings and financial

leases have decreased.

Total liabilities have increased over the past 3 years mainly due to an increase of long term

borrowings. The gross of them being need to be repaid after between 2 and 5 years or even later. This

is the main reason why the long term liabilities have increased. In 2010 Thomas Cook started to

increase its investments in synergy within the organization that it halted after 2008 also they invest in

the future to increase cost savings.

Operating Ratio

Return on Asset

Formula: Net income before

taxes/Total assets

What we can say is that the total assets have grown since 2008; Thomas Cook did not stop investing

in their current assets across the board they invested in aircrafts and new property coupled with that

the net profit has decreased leads to a lower return on assets in the last 2 years. It also means that the

increase in assets is not helping improve their net profit at the moment.

2.10%

0.57%

0.20%

-3.06%

-0.45%

2%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

2008 2009 2010

Thomas cook

TUI Travel


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IV. SWOT (European Market)

After analysis the two selected companies – TUI and Thomas Cook- externally and internally, our

group come up with an SWOT to present the Strengths, Weaknesses of the two companies, the

opportunities for their business, as well as, the threats that they may face.

Strengths 1. Portfolio of strong brands

2. Top retailer in tour booking online

3. Dynamic product contents

4. Strong financial position

5. Light asset

6. Cost Efficiency

1. Market leader in European Travel

Industry

2. First class brand image

3. Vertically integrated company

4. High level of diversity

5. Strong financial position

6. Strong multi distribution channels

Weaknesses 1. Too dependent on the European

travel Market.

2. Undifferentiated package products

1. Heavy asset business model

2. High costs pressure

Opportunities

1. Emerging market

2. European market shown signs of

recovery

3. E-commerce development –Greater

booking online penetration

4. Rapid demand growth of East Asia

Market

5. Business Expansion through

further Acquisition and Mergers

1. Emerging Market

2. European market shown signs of

recovery

3. E-commerce development –Greater

booking online penetration

4. Business Expansion through

further Acquisition and Mergers

Threats

1. Euro crisis and unemployment

2. Online competition

3. Trend for last minute booking

squeeze the margin of travel firms

1. European crisis and unemployment

2. Price Completion is intensive

3. Political Crisis in Europe.

V. Recommendations As we have analyzed above, with different criteria, we have concluded that Thomas Cook is doing

fine financially. They are more pricing competitive compared to TUI Travel PLC. However, Thomas

Cook may face lot of problems in short future it they don’t have any adjust with the business strategy.

European market has stopped developing, high competitions is hitting on the company’s margin.

Company goodwill is no longer as important as before with low budgeted customers. Under the

forecasted situation of decreasing demand, Thomas Cook even exposes with higher risks of contract

or owns air craft need to fill in.


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In order to strengthen the competition power and reach for further development, there are not many

options left for Thomas Cook, but shirking their business in Europe differentiating their products, and

more important looking for the new fresh capital from other geographical areas.

The European crisis, and the losing value of the Euro (€) though may cause difficulties in Europe –

Thomas Cook core market, also make Europe become more attractive with foreigner traveler.

It is the best time for Thomas Cook to consider expanding their operation to other potential markets.

The best candidate right now may be China, due to the rapid growth in both economy and consuming

demands.


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Part II

Thomas Cook Business Strategic Plan of Expanding to Chinese

Tourism Market

I. Chinese Tourism Market - Current status and Future Potential

Developments

1. PEST Analysis

1.1. Economic Factors

The overall recovery of Chinese economic development was encouraging and the disposable income

of people is continued to increase. The total GDP of China is 6.5 trillion last year. And the report

from China economic census showed the GDP of Beijing is 1377.79 billion in 2010, and the GDP

grows is same as last year which is 10%. The GDP of Shanghai is 1687.2 billion and the GDP grows

is 9.9%. Another city we are really caring about is Guangzhou. The GDP of it is 1060.4 billion and

the GDP grows is 11.5%.

1.2. Political Factors

Until Jan 2011, there is 1,108 travel agencies are allowed organized outbound tour by national tourism

administration. According to promises China made for entry into the WTO, May 1, 2009 the new

regulation stipulates that in addition to Chinese-foreign equity and contractual joint ventures, foreign

investors can also set up foreign travel agencies.

1.3. Social Factors

The growing sharply of the economy has higher significantly the living quality and education in

China. Together with improvement in wealth of people (especially in the big metropolitans), smaller

family size and less heavy pressure on saving also make people tend to enjoy life more.

Customer behavior has changed significantly in the Chinese travel market over the past three decades.

Today’s customers demand more sophisticated holiday and leisure products. Their diverse needs

range from luxury vacations to business travel to adventure tours.

1.4. Technological Factors

Driven largely by the fast-growing consumer demand, travel related technologies have seen a

tremendous growth in the past decade. The Internet has brought about fundamental changes to travel

research, planning and purchasing by Chinese travelers. According to a 2009 report from Research in

China, 67% of China’s total Internet users choose the Internet as their main source of tourism

information. More than 70% of customers made a hotel reservation or booked an air ticket online in

2008. The report also said that 20% of all Chinese citizens use online channels to complete their

purchases.


20

2. China Outbound Tourism

As part of China’s impressive economic

growth, it has developed from just being an

exotic destination to also representing the

biggest Asian outbound tourism source

market. Chinese tourist groups can get visas

now for almost all countries in the world,

and the affluent, mostly urban, part of the

society can easily obtain foreign currency.

Growing Chinese overseas investment, more

reachable destinations, increased

diversification, and sophistication of the

travel market and the continuing need to gain

prestige through conspicuous consumption

will support the further growth of business

and leisure outbound tourism.

Just within the last decade, the annual number of border crossings exploded from 10 million to 50

million, which means in increasing number of people are willing to travel abroad and this service is

becoming more profitable in the future. When global tourism contracted due to the economic crisis in

2009, China’s outbound tourism still managed to rise by 4%, both in number of travelers and in terms

of spending.

The China outbound market will capture 10% of the global international tourism market within the

next decade15. Though the potential growth is promising, the demand seems to surplus the supplies.

The market now is still running with medium and even small agencies.

Europe continues to remain the most aspired-to destination for Chinese. Recent surveys suggest that

the medium- to longer-term prospects for Chinese travel to Europe are also excellent. Chinese people

in both Shanghai and Beijing have ranked Europe at the top of their lists of foreign destinations they

realistically intend to visit – someday.

15 Chinese Outbound Tourism market. (n.d.). COTRI. Retrieved December 2011, from http://www.china-outbound.com/index.php?option=com_content&view=article&id=48


21

Thomas Cook is, like many airlines and tour operators, suffering from weak consumer demand as

Europe's financial crisis. Shares in Europe's second-largest tour operator sunk 75 percent of their

already depressed value. It is more crucial than ever for them to finding new source of business and

capital. And the finest answer for them now is indeed Chinese outbound travel market.

Socio-economic forecasts for high annual GDP growth, rapidly growing disposable income for many

sectors of the population, appreciating Yuan rising levels of education and the strengthening of

vocational training, all suggest continued dynamic growth in demand for travel and tourism . We can

see China Tour Operator Industry is very profitable potential market, which Thomas Cook should

take swift action to gain the advantages of the early-entry players.

II. Strategy Formulation for Thomas Cook to entry China

1. Competitive Analysis - Thomas Cook operate in China Porter’s 5 forces

1.1. Rivalry among competing businesses

Rivalry among competing businesses is low.

Even though China outbound tourism achieve

fast growth rate, the concentration of the industry

is not really intense, since there are still not many

competitors that can be compared to Thomas

Cook. There is only one clear leader, which is

Crip -TUI China - joint venture between TUI and

the Chinese Tour Operator CTS (Chinese Travel

service Head office Co. Ltd), play a significant

role in Chinese outbound tourism.

1.2. Potential Entry of New Competitors

The more firms can enter the market the higher the competitiveness. Entry barriers enforced or of

natural origin, can influence the level of market entrants.16 There are only few rules regarding market

entry and basically any business can enter. Since China is proven to be attractive, plus the difficult

forecast in Europe in next few years, many travel firms have already taken China in to serious

consideration. Potential entry of new Competitors is quite high.

1.3. Potential Development of Substitute Products

Deals with the level of competition between a firm in a certain industry and its competition which

produces substitute products in another industry, competitive pressure increases when prices of

substitute products drop.

16

Strategic Management, Concepts and Cases, Twelfth Edition, Fred R. David p. 120


22

Operating in tour operator industry, there always serious threat of alternative products. Many tour

operators will try to entry the market with my services to attractive customers.

1.4. Bargaining power of customer

Travelers will not purchase holidays in large quantities. In case of tours, the tour operator will group

the travelers together into several bigger groups. The group tour that we are proposing is not standard,

and will be very competitive in price, the product is much differentiated. Currently, there are not

many competitors that offer such all in one tour with very specific and coordination. Price is as

important as quality in this case, as we will offer very competitive price but deliver highest quality of

services possible. Bargaining power of customer is medium.

2. Key external Factors

Within this matrix we will give, based on the importance of each aspect, weights to all opportunities

and threats. The rating will describe the ability of Thomas Cook to react to the opportunities and

threats. The weight multiplied by the rating then gives us a weighted score whose total sum

demonstrates if ThomasCook lies below or above the average of 2.5.

Key external factors Weight Rating

Weighted

score

Opportunities

1 Growing wealth and improving living quality of the Chinese population 15% 3 0.45

2 Fast growing in outbound travel demand to Europe 15% 3 0.45

3 Changes in Chinese regulations opens the door for foreign investors 14% 3 0.42

4 The losing value of the Euro 10% 2 0.2

5 High Internet Penetration in China 14% 3 0.42

Threats

1 European Union debt and political crisis 12% 1 0.12

2 The intensive competition in Chinese Market 5% 2 0.1

3 Jet fuel crisis (raising fuel prices) 5% 2 0.1

4 Cultural differences. 10% 3 0.3

(1) Poor, (2) Below Average, (3) Above Average, (4) Superior

Total 100%

2.56

Opportunities

1. Growing wealth and improving living quality of the Chinese population

China is the fastest growing economy with GDP growth rate 500% in 10 years, and has been growing

steadily on 8% - 10% every year17.

2. Fast growing in outbound travel demand to Europe18

17 Chinability (2011, November 5). China Gross Domestic Product Growth. Retrieved December 8, 2011, from

http://www.chinability.com/GDP.htm

http://www.chinability.com/GDP.htm


23

Europe remains number one travel destination of Chinese outbound travel for more than 20 years. In

the last 10 years, the number has doubled from 1.000.000 to over 2.000.000 Chinese Travelers to

Europe. 35% of Chinese travelers went to France, for shopping.

3. Changes in Chinese regulations open the door for foreign investors19

Recent changes in Chinese regulations have created big opportunities for business expansion for

foreign investors, which also made China GDP grow rapidly.

4. The losing value of the Euro20

With the current debt crisis, which certainly just the beginning, this is somewhat a good news for

Chinese travelers who travels to European countries.

5. High Internet Penetration in China

With the rapid increase of Chinese Internet users exceed 500 Million, and expected to grow more,

Thomas Cook great web interface will only need to be translated and customized to fit the Chinese

travelers need.

Threats

1. European Union debt and political crisis

The biggest threat for Thomas Cook is the recent EU debt

crisis, which will not get better soon. This also can be a big

threat to future Chinese travelers if the violence in Greece

and Italy and other parts of Europe continues.

2. The intensive competition in Chinese Market

Even with Thomas Cook’s assets and great web interface,

Chinese tour operator industry has already many established small to international tour operators

3. Jet fuel crisis (raising fuel prices)

Recent fluctuations in oil prices have caused jet fuel prices to increase in China, which in turn will

affect the ticket prices of flights in China. If oil prices continue to raise, this can pose a serious threat.

4. Cultural Differences

As Thomas Cook has never enter Chinese Market before, Cultural differences in working, and

communication can pose to be a threat. Understanding and working with a partner company will

easily overcome this threat.

18 Insights.org.uk (2009, June). The Chinese Outbound Travel Market. part 2 and 3. Retrieved December 8, 2011, from

http://www.insights.org.uk/articleitem.aspx?title=The+Chinese+Outbound+Travel+Market%3A+Parts+2+and+3 19 COTRI Essential China Travel Trends. Retrieved from http://www.china-

outbound.com/index.php?option=com_content&view=article&id=48 20 Exchangerates.co.uk (2011, June 10). Euro Continues to lose ground. Retrieved from http://www.exchangerates.org.uk/news/557/euro-

losing-value.html


24

3. Key internal Factors

Within this matrix we will give, based on the importance of each aspect, weights to all strengths and

weaknesses. The rating will describe the ability of Thomas Cook to react to the strengths and

weaknesses. The weight multiplied by the rating then gives us a weighted score whose total sum

demonstrates if Thomas Cook lies below or above the average of 2.5.

The overall score is 2.8 which show that Thomas Cooks has done well internally.

Key internal factors Weight Rating

Weighted

score

Strength

1 Strong Brand recognition in Europe and North America 15% 4 0.6

2 Solid distribution and travel facilities. 15% 4 0.6

3 Deep knowledge and highly experienced in travel industry 15% 4 0.6

4 Highly trained and motivated employee 5% 4 0.2

5 Top retailer in online travel bookings 10% 3 0.3

Weakness

1 Limited knowledge for Chinese Tour Operator Industry 15% 1 0.15

2 Highly dependent on European Market 15% 1 0.15

3 Undifferentiated package products 10% 3 0.3

(1) Major Weakness, (2) Minor Weakness, (3) Minor Strength, (4) Major Strength

Total 100% 2.9

Strengths21

1. Strong Brand recognition in Europe and North America

With passengers over 7.5 Million in UK mainland and over 15 Million passengers from West, North,

Central and East Europe in 2010 only, Thomas Cook is the second largest tour operator in Western

Hemisphere.

2. Solid distribution and travel facilities.

Thomas cook operates in all European countries with more than 1011 retail outlets in UK alone, 1321

retail outlets in Central Europe, 1105 Retail outlets in West and East Europe. As Thomas Cook

operates in all European countries, Thomas Cook offers a very wide range of hotels for every travel

destination in Europe.

3. Deep knowledge and highly experienced in travel industry

Thomas Cook has operated in the Tour Operator industry since 1855, and legally established in 1924.

Thomas cook has merged with several different tour operators throughout the years and the latest

merger is with My Travel Group PLC in 2007. Thomas Cook also creates a very user friendly and

highly customizable travel experience for more than 10 years.

21

Thomas Coook (n.d.). Group overview. Annual Report 2010. Retrieved from http://ara2010.thomascookgroup.com/overview/group_overview/group_5.shtml


25

4. Highly Trained and Motivated employee22

As we have mentioned above in the human resource part, Thomas Cook trained their Employee with

their PROUD strategy that also motivates and train employees to give better service.

5. Top retailer in online travel bookings23

Although such recent Euro Economic Crisis has created a drastic plummet of confidence, Thomas

Cook website still rated number 4 along with other top UK online travel booking services.

Weakness

1. Limited knowledge for Chinese Tour Operator Industry

Thomas Cook has not tried to enter Chinese Tourism industry yet, which we are proposing to do since

China is a fast growing economy that makes it very lucrative in these hard economic times.

2. Highly dependent on European Market24

As mentioned above, Thomas Cook main revenue is coming from UK and Europe, with small SBUs

on North America and India. This is currently a very big weakness when the European market has a

very sluggish economy.

3. Undifferentiated package products

ThomasCook does not have differentiated products and services compared with the competitors in the

market. It reduces dramatically ThomasCook’s competitive strength. When there is no significant

difference among tour operators, customers have more choices, and result heavy price pressure on

ThomasCook. In the long run, this will also impact the customer loyalty the profitability of the

company.

22

Diversity. (n.d.). ThomasCook Group plc sustainability Report 2010. Retrieved October 2011, from http://sustainability2010.thomascookgroup.com/employees 23

Tnooz (2011, November 19). Thomas Cook traffic remains steady – Top UK travel sites. Thomas Cook traffic remains steady. Retrieved December 8, 2011, from http://www.tnooz.com/2011/11/24/data/thomas-cook-traffic-remains-steady-top-uk-travel-sites-november-19-2011/ 24

Thomas Coook (n.d.). Group overview. Annual Report 2010. Retrieved from http://ara2010.thomascookgroup.com/overview/group_overview/group_5.shtml


26

III. Strategy Analysis and Choice

1. SWOT Matrix

Strength Weakness

1. Strong Brand awareness in

Europe and North America

2. Solid distribution and travel

facilities.

3. Deep knowledge and highly

experienced in travel industry

4. Highly trained and motivated

employee

5. Top retailer in online travel

bookings

1. Limited knowledge for

Chinese Tour Operator

Industry

2. Highly dependent on

European Market

3. Undifferentiated package

products

Opportunities SO Strategies WO Strategies

1.Growing wealth and

improving living quality of the

population

2. Fast growing in outbound

travel demand to Europe

3. Changes in Chinese

regulations opens the door for

foreign investors

4. The losing value of the Euro

5. High Internet Penetration in

China

1. Enter China Market by joint

venturing with strong Chinese

travel firm.

(S1,S2, S3,O1,O2,O3,O4,)

2. Enhance brand awareness of

Thomas Cook from online

marketing campaign

(S1, S3, S5, O5)

3. Build an Travel Online

Booking website in China.

(S1,S3,S5, O5)

1. Expand to Chinese market

(W2, O2, O4)

2. Cooperate with more

suppliers (W3, O2)

3. Establish a market research

through online sources and

database to obtain essential

knowledge (W1, O5)

Threats ST Strategies WT Strategies

1. European Union debt and

political crisis

2. The intensive competition in

Chinese Market

3. Jet fuel crisis (raising fuel

prices)

4. Cultural differences.

1. Create marketing media and

online campaign to enhance

Thomas Cook’s brand

recognition, experience of

European market.

(S2, S3, T2)

2. Develop new dynamic

services packages with

customizable options.

(S2,S3,T2)

1. Establish a partnership with

a Chinese tour operator.

(W1,T4)

2. Recruit and train local

employees (sales and tour

guides) to improve

competitive advantages

(W1,T2,T4)

From 10 strategies come up with above, our group has decided select 6 of them to follow which are:

1. Enter China Market by joint venturing with strong Chinese travel firms (S1, S2, O1, O2, O3,

O4,).

2. Create media and online marketing campaign to enhance Thomas Cook’s brand recognition,

experience of European market. (S2, S3, T2)

3. Build a Travel Online Booking website in China. (S1,S3, S5, O5)

4. Develop new dynamic services packages with customizable options for customers (S2, S3,

T2)

5. Recruit and train local employees (sales and tour guides) to improve competitive advantages

(W1,T2,T4)


27

2. Cost of “Strategies”

2.1. Enter China Market by joint venturing with strong Chinese travel firms

Joining a venture is obligated if Thomas Cook want to operate outbound travel in China, since

wholly foreign-owned agencies are still banned from arranging for outbound business in China.

Going into joint venture with a strong Chinese Travel firm allow Thomas Cook to enjoy a higher

degree of marketing control which would shorten the time taken to obtain local market

information.

It provides great flexibility to arrange business relationship in a way that benefits both parties.

This applies to the management of the joint venture and it’s financing.

Joining a venture also means cost and risk sharing. Thomas Cook would be able to save money on

business operating costs. Comparing joint venture with wholly foreign-owned enterprise, joint

venture investing reduces capital expenditure as well as manpower. With joint venture, it is easier

to obtain the capital, the technology as well as local society, preferential tax, and government

supports.

However, beside the advantages, Thomas Cook also should be awarded with culture differences

and profit sharing issues impacts on the decision making process, which should be considered

carefully before enter joint venture.

2.2. Create media and online marketing campaign to enhance Thomas Cook’s brand

recognition, experience of European market

Building media and online marketing campaign to enhance Thomas Cook’s brand recognition and

service quality would be the very first step they have to do. Invest on large scale national

marketing promotion campaign can build up the image of the company in the population. This can

be done though both the traditional communication ways such as newspapers, magazines, radio,

TV etc, or through new powerful tool – The Internet.

2.3. Build a Travel Online Booking website in China

25The Internet has brought about

fundamental changes to travel

research, planning and

purchasing by Chinese travelers.

Encouraged by the huge success

of online travel agency C-trip,

which dominates the online

travel booking market in the

international capital market,

investments into technological

and business model innovations

in online travel in China

continues.

25 China Online Travel Update Q1 2011. (2011, April). China Internet Watch. Retrieved November 2011, from

http://www.chinainternetwatch.com/1033/china-online-travel-q1-2011/


28

The tour online booking market in China is still on the developing phase. Chinese travelers use

the Internet heavily to make their purchase decisions, but still using travel agents for most final

transactions, due to convenience. However, there is notable shift in travel buying behavior

together with high Internet penetration rate.

At the moment, these are several players in the flied, which the golden chance for Thomas Cook

to take action. With their position as top retailer in online travel bookings in Europe, it would be

advantages to set e-commerce in China.

2.4. Develop new dynamic services packages with customizable options for customers

China’s tourism market development is supported by one strong fundamental element: growth in

the number of travelers. As this foundation expands, it creates a challenge in improving quality

and efficiency. Especially with Internet, now product information now is transparent with both

customers and competitors. Customers have chance to compare the offered packages from

different providers. So differentiation of products and services is highly important with company

competitive power.

The solution requires producing a dynamic product, following these principles:

1. Learn about the customers’ demands beyond the superficial

2. Engage travelers with varied options and customized service.

2.5. Recruit and train local employees (sales and tour guides) to improve competitive

advantages

As a travel companies, personnel is the fundamental asset of the companies. Recruit and train

local employees, can help Thomas Cook approach better with the China market. Local employees

understand better cultural, behavior and purchasing customs of the Chinese Customers.

3. The Quantitative Strategic Planning Matrix (QSPM)

THOMASCOOK

ALTERNATIVE STRATEGIES

1. Enter China

Market by joint venturing with strong Chinese

travel firms

2. Create media

and online marketing

campaign to enhance

Thomas Cook’s brand

recognition

3. Build a Travel

Online Booking website in

China

4. Develop new

dynamic services

packages with customizable

options for customers

5. Recruit and train local employees

(sales and tour guides) to improve

competitive advantages

Key External Factors Weight

Opportunities AS TAS AS TAS AS TAS AS TAS AS TAS

1. Growing wealth and improving living quality of population 0.15 3 0.45 - - - - - - - -

2. Fast growing in outbound travel demand to Europe 0.15 4 0.60 - - - - - - - -

3. Changes in Chinese regulations with foreign investors 0.14 3 0.42 - - - - - - - -

4. The losing value of the Euro 0.10 3 0.30 - - - - - - - -

5. High Internet Penetration in China 0.14 - - - - 4 0.56 - - - -

Threats

1. European Union debt and political crisis 0.12 - - - - - - - - - -

2. The intensive competition in Chinese Market 0.05 - - 3 0.15 - - 3 0.15 2 0.30

3. Jet fuel crisis (raising fuel prices) 0.05 - - - - - - - - - -

4. Cultural differences. 0.10 - - - - - - - - 4 0.40 SUBTOTAL 1.77 0.45 0.56 0.15 0.70

Key Internal Factors Weight

Strength AS TAS AS TAS AS TAS AS TAS AS TAS

1. Strong Brand awareness in Europe and North America 0.15 3 0.45 - - 2 0.30 - - - -

2. Solid distribution and travel facilities. 0.15 4 0.60 3 0.45 - - 4 0.60 - -

3. Deep knowledge and highly experienced in travel industry 0.15 2 0.30 2 0.30 3 0.45 3 0.45 - -

4. Highly trained and motivated employee 0.05 - - - - - - - - - -

5. Top retailer in online travel bookings 0.10 - - - - 4 0.40 - - - -

Weaknesses

1. Limited knowledge for Chinese Tour Operator Industry 0.15 - - - - - - - - 4 0.60

2. Highly dependent on European Market 0.15 - - - - - - - - - -

3. Undifferentiated package products 0.10 - - - - - - 4 0.40 - - SUBTOTAL 1.05 0.75 1.15 1.45 0.60

TOTAL 3.12 1.2 1.71 1.65 1.30

The QSPM matrix gives us an indication of how attractive the chosen strategies are. According to our

results, the most attractive strategies score 3.12, which enter China Market by joint venturing with

strong Chinese travel firms. With the score of 1.71, to build a Travel Online Booking website in

China is the next most attractive strategy that Thomas Cook should pursue. The next strategy, namely

develop new dynamic services packages with customizable options for customers score 1.65 is thus a

strategy ranked on the third place. The fourth ranked strategy is to recruit and train local employees

(sales and tour guides) to improve competitive advantages scored 1.30. Finally, to create media and

online marketing campaign to enhance Thomas Cook’s brand recognition, experience of European

market scored 1.2 as the fifth rank. With this priority ranking, we can go in the following more into

detail on how to pursue these strategies in the best way.

III. Strategy Implementations

1. Finding Partnerships in China

Based on your research, enter China Market by joint venturing with strong Chinese travel firms is

proven to be profitable for Thomas Cook. Cooperate with a strong reputed travel firm will bring many

advantages for Thomas Cook. The first question if Thomas Cook wants to bring Chinese travelers to

Europe may be related to transportation. Though Thomas Cook has their owed airlines, they are just

operating in short haul around Europe. Thomas Cook need a partner that not only share the tour

operator market knowledge, but also can operate the long haul flight from China to Europe. Based on

our research about the Chinese Market, Chinese Southern Airline would be the best candidate.

Established on October 11, 2002, China Southern Airlines, as one of the three major air transport

groups under direct management of State-owned Assets Supervision and Administration Commission

of the State Council, China Southern Air Holding Company specializes in air transport service, and is

engaged in air passenger and cargo agencies, import and export trade, financial planning and wealth

management, construction and development, media advertising and other industries. China Southern

Air Holding Company has more than 70,000 employees and total operating assets of over RMB

150billion. As China's largest airline, China Southern Airlines has 53 International offices located in

major metropolitan markets around the world. China Southern Airlines also operates as tour operator

with approved license from China National Tourism Administration (CNTA).

China Southern Airline

Global Network


31

Chine Southern Airline report a 33% year-on-year increase in net profit to RMB 2.76 billion (USD

431.6 million) in the first haft of the year 2011 supported one- off gains and “robust growth of

domestic and international market demand stimulated by a fast growing Chinese economy ” for an

operating profit margin of 6.1%.

China Southern Airline Revenue

Growth

Together with China Southern Airline, Thomas Cook would build a new joint venture company

(Thomas Cook China) specialize in outbound travel to Europe.

2. Human Resource Management

One of the most critical factors in the success of a company's international success is its hiring

program. Recruit and train local staff would be an obligation for Thomas Cook. Having Mandarin-

speaking staff and tour guides (or Cantonese-speaking staff in the Guangdong province) is essential

since most of Chinese barely speak English. Not just employees, but first-level supervisors and

possibly some of the middle managers will also be members of the local community.

Since Thomas Cook at the moment has not yet familiar with China Labor Market, and to be more cost

effective, the recruitment should be outsourced. Job agency would be an option to find the best

matched candidates.

The training programs are also important to ensure the quality of the new staffs meet with Thomas

Cook famous standards. Though the cultural adaptation is crucial, the local staffs should understand

the global vision and sprit of Thomas Cook. By that way, employees would feel more motivated and

connect with the company, which absolutely positively effected on the working performance.

3. Product Development

3.1. Destinations offer and length of tour

Thomas Cook should create the dynamic tour package with flexible choice of destinations and time

spending, which fit with the demand of the new as well as and repeated visitors. The packages which

offer fewer destinations visited but spend longer time in each place, will be more favorable for

customers.


32

3.2. Travel products offered

The tours can be categorized in to 4 levels of accommodation used: Business, Luxury, Standard, and

Budget. Generally, Chinese travelers often have not much requirements about accommodations, but

spend more on shopping. That is why the tour packages which are exclusively tailored to customer’s

specifications will be good option. Visitors have the right to choice what activities they what to spend

time the most. Types of most common preferred activities may be:

1. Sightseeing

2. Shopping

3. Cultural exploration

4. Sport

3.3. Payment method

Although Chinese internet penetration has rapidly increased, Chinese preferred method of payment is

still cash. According to PhoCusWright FYI’s October 2009 newsletter, 25% Chinese purchased their

travel online, and the 25% through call center, and 50% through the Travel outlet.

4. Operation

Chinese travelers still have not widely adopted online booking. Traditional channels such as physical

sales outlets and call centers still handle more than 90% of the country’s US $60 billion in annual

gross travel bookings. Even C-trip, the undisputed market leader which dominates the online travel

market with over 50% of market share, still processes about 70% of its bookings through a call center.

Follow the trend, in the first year, Thomas Cook China will open 3 outlets in 3 biggest cities of China

(Beijing, Shanghai, and Guangzhou). Together with these stores will be a 24/7 call service. Chinese

expect their requests for quotes to be responded to on a 24/7 basis. They also commonly ask for tips to

be included in the package price; business or official travelers do not want to put their hands in their

pockets to pay tips and leisure travelers prefer to know how much they will have for shopping and

other extras.

Besides opening outlets, build a tour booking website in Chinese is also primary. As we have

mentioned earlier, although the sale though traditional channel is still dominated, online booking more

become more and more trendy, and Thomas Cook should be able to catch up with.

The new tour booking website designed in Chinese with a friendly interface with Chinese users. It

will be contain many flexible options, which allows customers to easily customize their owe trips.

5. Marketing

5.1. Internet & Social Media

Strategic use of social media to increase brand awareness is extremely powerful in China. For this

reason, it is important to adapt Thomas Cook campaign to fit with the terms and conditions of

whichever social networking system execute it on, and understand the behavior of Chinese customers

so you can listen, monitor, moderate, and engage.

The marketing campaign will be carried on the traditional media channel is essential, such as

magazines, newspaper, TV, and radio.

Beside, Internet is proven a powerful channel to communicate with Chine consumers. The power of

the Internet in China has never been stronger with the domination of long-running, multiservice


33

portals like Sina, QQ and Sohu. According to CIC Data, a Shanghai–based company that researches

Chinese consumer behavior online, 48% 26of Chinese travelers use online travel discussion forums to

fine-tune plans.

However, Thomas Cook should consider the content and calculate carefully impact of the marketing

plan, since the creating social media campaigns in China may be trickier due to government red tape

and less freedom to express the brand message.

5.2. Other tools for promotion

Travel fairs

There are a number of annual travel trade fairs in China. Perhaps the most important is the China

International Travel Market (CITM), which alternates between Shanghai and Kunming every year in

November. However, at least 75% of the fair is given over to inbound and domestic tourism and the

Kunming event has in the past not been as well attended as the Shanghai fair.

A more dedicated outbound tourism event is the China Outbound Travel and Tourism Market

(COTTM) in Beijing, last organized in July 2011 and will be hold again on 18-20 April 2012.

Credit card companies and banks

The Bank Association of China announced that in 2010 China had over 2.4 billion bankcards in

circulation growing approximately 16% from the end of 2009.

Various commercial institutions offer all kinds of preferential treatment to gold and silver

cardholders, among which travel is an important item. Banks have issued dual-currency cards or debit

cards that can be used abroad.

Debit cards in Yuan (RMB) can currently be used in many Asia Pacific destinations. Airlines have

also moved into the market, so that Chinese people can accumulate mileage by using their cards for

shopping or obtaining cash.

6. Finance

To realize this proposal, Thomas Cook has already borrowed a long term debt from European banks

to cover the expenses due to the EU economic and Political Crisis. To realize the plan to expand to the

Chinese Tour Operator Industry, and create a joint venture with China Southern Airlines to open

Thomas Cook China, we will need €3.000.000 investment to cover the first 3 to 4 year expenses.

More details regarding financing will be explained in Expected Results.

7. Legal Issues

On May 1st 2009, Chinese government removed its restrictions and also lowered the thresholds for

foreign-invested travel agencies. According to the new Regulations for Travel Agencies issued in

2009 by the State Council, foreign travel companies can establish travel agencies in China

independently (wholly foreign-owned enterprise) or in cooperation with one or more Chinese partners

(Sino-foreign equity joint venture or cooperative joint venture). The requirement for minimum

registered capital is only RMB 300,000, compared to RMB 4 million stipulated in the former rules.

On 29 August, 2010, the new policy about conditions for the foreign invested travel agencies to

operated outbound business27:

26

Nielsen Outbound Travel Monitor


34

(0.20)

-

0.20

0.40

0.60

0.80

1.00

200920102011201220132014201520162017

Growth rate

Net Profit Margin

Current Ratio

1. The travel agencies must take the form of a Sino-foreign equity joint venture;

2. The travel agencies must have obtained the travel agency business license issued by China

National Tourism Administration (CNTA)

3. The travel agencies do not any record subject to any administrative punishment more serious

than fines due to the impairment of the legitimate rights and interests of tourists.

In order to opera online business, an ICP (Internet Content Provider) license is also required.

IV. Expected Joint Venture Result

With the current economic hurdles in European Union, Thomas Cook joint venture with China

Southern Airlines is expected to turn the tide and more. We expect to double Thomas cook’s net profit

margin, raising Thomas Cook’s Current ratio by 40%, and establish 6 outlets in Mainland China by

2017

In order to realize this aggressive expansion, Thomas Cook needs to finance their expansion through

long term debt, in the sum of € 6.000.000 to finance the first 3 to 4 years of the expansion. Chinese

27 China allows foreign travel operators to set up outbound travel agencies. (2010, September 20). CMS . Retrieved

November 2011, from http://www.cmslegal.cn/foreign_travel_operators

Ratios 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Actual Results Expected Results

Growth Rate

-3% 6% -2% 4% 9% 12% 15% 18% 20%

Debt/Equity

Ratio -5.02 3.12 2.980 2.92 3.708 4.265 5.032 4.05 2.98 2.5

Lower

better

Net Profit

Margin 0.171 0.165 0.175 0.178 0.185 0.202 0.226 0.260 0.307 0.368

Higher

better

Current Ratio 0.55 0.4 0.43 0.44 0.46 0.50 0.56 0.64 0.76 0.91 Higher

better

Quick Ratio 0.55 0.39 0.42 0.43 0.45 0.49 0.54 0.63 0.74 0.89 Higher

better


35

(0.03) 0.06 (0.02) 0.04 0.09 0.12 0.15 0.18 0.20

3.12 2.980 2.92

3.708 4.264

5.032

4.05

2.98 2.5

(1.00)

-

1.00

2.00

3.00

4.00

5.00

6.00

2009 2010 2011 2012 2013 2014 2015 2016 2017

Growth Rate

Debt/Equity Ratio

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Net Income

Cost

Revenue

Regulation required new business to own at least € 35.630 or RMB 300,000 in the time of

registration.

We expect to start renovation for Thomas Cook China Outlet in Beijing, Shanghai and Guang Zhou in

early 2012. As the graph shows, the funds will be used in terms, and we expect to pay back the long

term debt by 2017.

Expected Yearly Costs 2012 2013 2014 2015 2016

Beijing Facility € 190,000.00 € 90,000.00 € 90,000.00 € 90,000.00 € 90,000.00

Employee € 84,000.00 € 84,000.00 € 84,000.00 € 84,000.00 € 84,000.00

Shanghai Facility € 190,000.00 € 90,000.00 € 90,000.00 € 90,000.00 € 90,000.00

Employee € 84,000.00 € 84,000.00 € 84,000.00 € 84,000.00 € 84,000.00

Guang Zhou Facility € 164,800.00 €64,800.00 € 64,800.00 € 64,800.00 € 64,800.00

Employee € 63,000.00 €63,000.00 € 63,000.00 €63,000.00 € 63,000.00

New outlet 2013 € 230,000.00 € 130,000.00 € 130,000.00 € 130,000.00

New outlet 2014 € 230,000.00 € 130,000.00 € 130,000.00

New outlet 2015 € 230,000.00 € 130,000.00

New outlet 2016 € 230,000.00

Website € 9,200.00 € 5,000.00 € 5,000.00 € 5,000.00 € 5,000.00

Marketing Campaign €2,000,000.00 €1,800,000.00 €1,600,000.00 €1,600,000.00 €1,500,000.00

Total Cost / year € 2,785,000.00 € 2,510,800 € 2,456,800.00 € 2,570,800.00 €2,600,800.00


36

Appendixes

A. Appendixe1: References

1. (2011). Theme book IBMS Project I6: Supply Chain Management. Enschede: Saxion

University of Applied Sciences.

2. F. David (2010). Strategic Management. (13rd ed.). Pearson Education.

3. Mr H. Wevers- J.Keizer “A basic guide to international business law”. Wolters/Noordhoff.

4. Jay Heizer, Barry Render Operations Management. (9th ed.). Pearson Higher Education.

5. (2010). Personnel Practice (People & Organisations). (2nd ed.). Chartered Institute of

Personnel & Development.

6. Robbins, S. P., & Coutler, M. (2009). Management. (tenth ed.). New Jersey: Pearson

Education,Inc.

7. McLaney and Atrill (2010). Accounting, An Introduction, (5th ed.). Pearson Education

Limited.

8. Lawrence J. Gitman & Chad J. Zutter (2008). Principles of Managerial Finance. (12th ed.).

Pearson Education.

9. Kotler, Armstrong, Wong and Saunders (2008). Principles of Marketing. (5th

European edition .). Prientice Hall.

10. Saunders, Lewis and Thotnhill (2009). Research Methods for Business Students. (5 th

ed.). Prientice 11. TUI Travel PLC Annual Report 2010. (n.d.). TUI Travel PLC. Retrieved 2011, from

http://ara2010.tuitravelplc.com/tui-ar2010/dlibrary/documents/TUI_Annual_2010.pdf

12. ThomasCook PLC Annual Report & Accounts 2010. (2011). ThomasCook PLC. Retrieved

May 2011, from http://www.thomascookgroup.com/investors

13. Market research for the travel and tourism industry. (2009). Euromonito. Retrieved May

2011, from http://www.euromonitor.com/travel-and-tourism

14. (2010, June). Trading Economics. Retrieved September 2011, from

http://www.tradingeconomics.com/

15. Client Success_ThomasCook. (n.d.). Accenture. Retrieved October 2011, from

http://www.accenture.com/us-en/outsourcing/Pages/outsourcing.aspx?tab=4

16. Retail & Tour Operator. (2011). TUI Group. Retrieved from http://www.tui-

group.com/en/sustainability/env_management/climate/to_vertrieb

17. EU, America and Australia travel report 2011. (n.d.). out-bound tourism. Retrieved from

http://www.outbound-tourism.cn/detail.asp?newsid=News_1402&class=215

18. outbound travel market research in the 1st period of 2010. (2010, May 15). out-bound

tourism. Retrieved from http://www.outbound-

tourism.cn/detail.asp?newsid=News_1116&class=215

19. GDP data of 2010. (n.d.). China economic census. Retrieved from

http://www.stats.gov.cn/zgjjpc/cgfb/

20. top 100 Chinese travel agency 2010. (n.d.). 360 library . Retrieved from

http://www.bwenw.cn/shenghuobangwen/lvyoubangwen/

21. travey agency survey 2010. (n.d.). national tourism Administration of China. Retrieved from

http://www.bwenw.cn/shenghuobangwen/lvyoubangwen/20110803/lybw5832.html.

22. Chinese Outbound Tourism market. (n.d.). COTRI. Retrieved December 2011, from

http://www.china-outbound.com/index.php?option=com_content&view=article&id=48

23. Outbound Market Share Analysis China. (2010, April). Retrieved December 2011, from

http://www.tourism.australia.com/en-au/documents/Corporate%20-

%20Markets/China_Market_Share.pdf

http://ara2010.tuitravelplc.com/tui-ar2010/dlibrary/documents/TUI_Annual_2010.pdf

http://www.euromonitor.com/travel-and-tourism

http://www.accenture.com/us-en/outsourcing/Pages/outsourcing.aspx?tab=4

http://www.tui-group.com/en/sustainability/env_management/climate/to_vertrieb

http://www.tui-group.com/en/sustainability/env_management/climate/to_vertrieb




http://www.stats.gov.cn/zgjjpc/cgfb/

http://www.bwenw.cn/shenghuobangwen/lvyoubangwen/

http://www.bwenw.cn/shenghuobangwen/lvyoubangwen/20110803/lybw5832.html

http://www.china-outbound.com/index.php?option=com_content&view=article&id=48

http://www.tourism.australia.com/en-au/documents/Corporate%20-%20Markets/China_Market_Share.pdf

http://www.tourism.australia.com/en-au/documents/Corporate%20-%20Markets/China_Market_Share.pdf


37

24. Chinability (2011, November 5). China Gross Domestic Product Growth. Retrieved

December 8, 2011, from http://www.chinability.com/GDP.htm

25. Insights.org.uk (2009, June). The Chinese Outbound Travel Market. part 2 and 3. Retrieved

December 8, 2011, from

http://www.insights.org.uk/articleitem.aspx?title=The+Chinese+Outbound+Travel+Market%

3A+Parts+2+and+3

26. COTRI Essential China Travel Trends. Retrieved from http://www.china-

outbound.com/index.php?option=com_content&view=article&id=48

27. Exchangerates.co.uk (2011, June 10). Euro Continues to lose ground. Retrieved from

http://www.exchangerates.org.uk/news/557/euro-losing-value.html

28. China Southern Airlines’ first half profit jumps 33%; fleet and international expansion ahead.

(2011, August 30). CAPA. Retrieved November 2011, from

http://www.centreforaviation.com/analysis/china-southern-airlines-first-half-profit-jumps-33-

fleet-and-international-expansion-ahead-57930

29. China Online Travel Update Q1 2011. (2011, April). China Internet Watch. Retrieved

November 2011, from http://www.chinainternetwatch.com/1033/china-online-travel-q1-2011/

30. International Management - duties, benefits

http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-

Management.html#b#ixzz1gTmvDRDb

31. New Regulations on Travel Agencies. (2009, March). China Briefing. Retrieved November

2011, from http://www.china-briefing.com/news/2009/03/31/new-regulations-on-travel-

agencies-effective-may-1.html

32. China allows foreign travel operators to set up outbound travel agencies. (2010, September

20). CMS . Retrieved November 2011, from http://www.cmslegal.cn/foreign_travel_operators

33. Tiaona 全国旅行社工资收入水平. Retrieved December 10, 2011, from

http://www.tiaona.com/salary/工资-旅行社_地区-全国

34. Beijing Real Estate Retail For Lease - Wangfujing & Chongwenmen Area. Retrieved

December 10, 2011, from http://www.china-

realestate.cn/retail_Lease_sub_detail.asp?CategoryID=352

35. Host Gator Host Gator Dedicated Servers. Retrieved December 11, 2011, from

http://www.hostgator.com/dedicated.shtml

36. 国家外汇管理局关于调整中国公民出境旅游购汇政策的通知. (2002). State

Administration of Foreign Exchange. Retrieved November 2011, from

http://www.safe.gov.cn/model_safe/laws/law_detail.jsp?ID=80303000000000000,10&id=4

37. Regulation on Travel Agencies. (2009, February 20). MINISTRY OF COMMERCE

PEOPLE’S REPUBLIC OF CHINA. Retrieved November 2011, from

http://english.mofcom.gov.cn/aarticle/policyrelease/announcement/201003/20100306818799.

html

http://www.exchangerates.org.uk/news/557/euro-losing-value.html

http://www.centreforaviation.com/analysis/china-southern-airlines-first-half-profit-jumps-33-fleet-and-international-expansion-ahead-57930

http://www.centreforaviation.com/analysis/china-southern-airlines-first-half-profit-jumps-33-fleet-and-international-expansion-ahead-57930

http://www.chinainternetwatch.com/1033/china-online-travel-q1-2011/

http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Management.html#b

http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Management.html#b

http://www.china-briefing.com/news/2009/03/31/new-regulations-on-travel-agencies-effective-may-1.html

http://www.china-briefing.com/news/2009/03/31/new-regulations-on-travel-agencies-effective-may-1.html

http://www.cmslegal.cn/foreign_travel_operators

http://www.hostgator.com/dedicated.shtml

http://www.safe.gov.cn/model_safe/laws/law_detail.jsp?ID=80303000000000000,10&id=4


38

B. Appendix 2: Regulation on Travel Agencies in China

Chapter I General Provisions

Article 1 The Regulation is formulated for the purpose of strengthening administration of travel agencies, ensuring the

legitimate interests of tourists and travel agencies, maintaining the tourist market order and boosting the healthy

development of tourism.

Article2 The Regulation shall apply to the establishment and operation activities of the travel agencies in the People’s

Republic of China.

Travel agencies herein refers to the business entities engaging in such activities as soliciting, organizing and receiving

tourists, providing services related to tourism and conducting domestic travel business, inbound travel business or outbound

travel business.

Article3 The competent tourism administration under the State Council shall be responsible for the supervision and

administration of the travel agencies across China.

The travel administrations under the local people’s governments at or above the county level shall be responsible for the

supervision and administration of travel agencies in the administration areas according to responsibility.

Relevant departments including industry and commerce, pricing, business and foreign exchange under the people’s

governments at or above the county level shall conduct supervision and administration of travel agencies according to

responsibility by law.

Article 4 Travel agencies shall adhere to the principles of free will, equality, fairness and good faith in the operation

activities, improve the quality of service and safeguard the legitimate rights and interests of tourists.

Article 5 Trade organizations of travel agencies shall in accordance with the articles of association provide service for travel

agencies and exert the role of coordination and self-regulation to guide travel agencies to conduct legal, fairly competitive

and bona fide operation.

Chapter II Establishment of Travel Agencies

Article 6 For applying for establishment to operate domestic travel and inbound travel business, a travel agency shall be

qualified for the following requirements:

(1) Fixed place of business;

(2) Necessary business facilities; and

(3) Registered capital no less than RMB300, 000.

Article 7 For applying for establishment to operate domestic travel and inbound travel businesses, a travel agency shall file

an application to the competent travel administration in the province, autonomous region or municipality directly under the

Central Government where it is domiciled or the competent travel department in the city divided into districts which has

been entrusted and submit related documents as prescribed in Article 6 herein. And the competent travel administration

accepting the application shall make a decision whether or not to approve within 20 working days upon receiving the

application. Where an approval is given, the administration shall grant the travel agency business license to the applicant,

and the applicant may hold the license to handle registration of establishment in the industry and commerce administration;

where no approval is given, the administration shall notify the applicant and explain reasons in written form.

Article 8 In case a travel agency operates for two years after acquiring the license and is imposed a fine or more severe

penalty by administrative organs for infringing on the legitimate rights and interests of tourists, it may apply for outbound

travel business.

Article9 For applying for outbound travel business, a travel agency shall file an application to the competent travel

administration under the State Council or the competent travel administration in the province, autonomous region or

municipality directly under the Central Government which is entrusted. And the administration shall make a decision

whether or not to approve within 20 working days upon receiving the application. Where an approval is given, the

administration shall renew the travel agency business license to the travel agency, and the travel agency shall hold the

renewed license to handle registration of alteration in the industry and commerce administration; where no approval is given,

the administration shall notify the applicant with reasons thereof in written form.


39

Article 10 In case a travel agency sets up a branch, it shall hold the duplicate of the travel agency business license to handle

the registration of establishment in the industry and commerce administration where the branch is domiciled and conduct a

filing in the competent travel administration where it is domiciled within 3 working days upon its registration of

establishment.

The establishment of a branch is not restricted by area, and the business scale of a branch shall not exceed that of the travel

agency that establishes it.

Article 11 In case a travel agency sets up the service outlet specially soliciting tourists and providing travel consultation

services (hereinafter referred to as travel agency outlet), it shall handle the procedures of establishment registration in the

industry and commerce administration and conduct a filing in the travel administration where it is domiciled.

Travel agency outlets shall be uniformly managed and shall not engage in other activities other then soliciting and

consultation.

Article 12 In the event the alteration of such registration items as name, place of business and legal representative of a travel

agency or its business is terminated, it shall handle corresponding alteration registration or cancellation of registration in the

industry and commerce administration and conduct a filing in the former travel administration within 10 working days upon

the completion of registration to renew or hand back the travel agency business license.

Article 13 One travel agencies shall open special accounts of quality deposit in the bank designated by the competent travel

administration under the State Council deposit the quality deposit or submit to the travel administration giving approval the

bank guarantee of guarantee quota acquired by law no less than corresponding quality deposit within 3 working days upon

acquiring the travel agency business license.

Where a travel agency engages in domestic travel business and inbound travel business, it shall deposit the quality deposit of

RMB200,000; and a travel agency engaging in outbound travel business shall increase of the quality deposit of RMB1.2m.

The interest of quality deposit belongs to the travel agency.

Article 14 A travel agency that sets up a branch engaging in domestic travel business and inbound travel business every time

shall increase the quality deposit of RMB50,000; for setting up a branch engaging in outbound travel business, it shall

increase the quality deposit by RMB300,000.

Article 15 The travel administration may utilize the quality deposit of travel agencies in any of the following circumstances:

(1) In case a travel agency violates tourist contract and infringes the legitimate rights and interests of tourists, which has been

verified by the travel administration; or

(2) In case a travel agency inflicts the loss of tourist expenses paid in advance by tourists for dissolution, bankruptcy or other

reasons.

Article 16 In case a travel agency impairs the legitimate rights and interests of tourists in the judgment and ruling of the

people’s court or other valid legal documents but rejects or has no finance for compensation, the people’s court may

appropriate compensation from the quality deposit account of the travel agency.

Article 17 In case a travel agency is not imposed a fine or more severe penalty for infringing on the legitimate rights and

interests of tourists within three years upon paying or making up for the deficiency of the quality deposit, the travel

administration shall lower 50% of quality deposit by the travel agency and issue an announcement to the public. And the

travel agency may hold the voucher issued by the travel administration in the province, autonomous region or municipality

directly under the Central Government to lessen its quality deposit.

Article18 In case a travel agency whose quality deposit is utilized by the travel administration to compensate for the loss of

tourists or lessened by law is imposed a fine or more severe penalty for infringing on the legitimate rights and interests of

tourists, it shall make up for the deficiency of the quality deposit within 5 working days upon receiving the notice of make-

up quality deposit by the travel administration.

Article 19 In case a travel agency no longer engages in travel business, it may withdraw the quality deposit from the bank

with a voucher issued by the travel administration.

Article 20 The specific measures for the deposit and utilization of quality deposit shall be separately formulated by the

competent travel administration and the finance department under the State Council together with relevant departments.


40

Chapter III Foreign Investment in Travel Agencies

Article21 Foreign investment in travel agencies shall be subject to the provisions in this chapter; where no provisions are

made in this chapter, it shall be subject to other relevant provisions of the Regulation.

The aforesaid foreign investment in travel agencies includes Chinese-foreign equity joint venture travel agencies, Chinese

foreign cooperative travel agencies and wholly foreign-owned travel agencies.

Article 22 If establishing a foreign-invested travel agency, the investor shall file an application to the competent travel

administration under the State Council and submit the qualified documents related to Article 6 herein. The administration

shall finish examination and review within 30 working days upon accepting the application, and issue the examination and

approval opinion for permitting foreign investment in travel agency if approval is given; if no approval is given, it shall

notify the applicant and explain the reasons thereof in written form.

The applicant holds the examination and approval opinion for permitting foreign investment in travel agency, the Articles of

association, and contract signed by both parties of Chinese foreign joint venture and cooperative business operation to apply

to the competent commerce administration under the State Council for establishment of a foreign-invested enterprise. The

administration shall in accordance with relevant laws and regulations make the decision whether or not to approve. If

approval is given, it shall grant the approval certificate to the foreign-invested enterprise and notify the applicant to acquire

the travel agency operation license from the competent travel administration under the State Council, and the applicant may

hold the license and the approval certificate for foreign-invested enterprises to handle registration of establishment in the

industry and commerce administration; if no approval is given, it shall notify the applicant and explain the reasons thereof in

written form.

Article 23 Foreign-invested travel agencies shall not engage in Chinese mainland residential travel business abroad and

Chinese mainland residential travel business in Hong Kong Special Administrative Region, Macao Special Administrative

Region and Taiwan, but except otherwise the decisions by the State Council or free trade agreements and the Mainland and

Hong Kong and Macao Closer Economic Partnership Arrangements signed by China.

Chapter IV Travel Agency Operation

Article 24 Tourist service information provided by travel agencies shall be authentic and reliable and no false advertising is

allowed.

Article 25 The travel agencies engaging outbound travel business shall not organize tourists to travel in the countries and

regions out of the list of Chinese citizens’ outbound travel destinations publicized by the competent travel administration

under the State Council.

Article 26 The travel activities for tourists arranged and introduced by travel agencies shall not contain any content in

violation of the relevant laws and regulations.

Article 27 Travel agencies shall not solicit tourists at the price lower than the tourist cost or provide other paid services

beyond the tourist contract without consent of tourists.

Article 28 Travel agencies shall, while providing service for tourists, sign with tourists the tourist contract, stating the

following items:

(1) Name, business scope, address, contact number and business license number of travel agency;

(2) Name and contact number of travel agency operator;

(3) Place and date of signing;

(4) Departing place, stops and destination in tour schedule;

(5) Arrangement of Service and standards for transportation, accommodation and catering in tour schedule;

(6) Specific content and time of tours uniformly arranged by travel agencies;

(7) Time and times of free activities of tourists;

(8) Payable tourist expenses and means of payment by tourists;


41

(9) Times of shopping, stay time and names of shopping places arranged by travel agencies;

(10) Tours and prices separately paid by tourists;

(11) Conditions of cancellation and alteration of contract and deadline of notice in advance;

(12) Dispute settlement mechanism for violation of contract and corresponding responsibility;

(13) Phone number of supervision and complaints on and about tourist service; and

(14) Other content consulted by both parties.

Article 29 Travel agencies shall make authentic, accurate and full explanations on the specific content of the tourist contract

while signing the tourist contract with tourists.

Where there is vagueness in the tourist contract or dispute over the understanding of the form clauses, the travel agencies

shall conduct explanations according to usual understanding; where there are two or more explanations on the form clauses,

travel agencies shall give explanations beneficial to tourists; and where form clauses and non-form clauses are inconsistent,

travel agencies shall adopt the non-form clauses.

Article 30 In case a travel agency organizes Chinese mainland residents to conduct outbound tourism, it shall arrange full-

process guides for the tourist group throughout the tour.

Article 31 Tour guides entrusted by the travel agency to receive tourists or the lead guides entrusted for organizing tourists

in outbound tourism shall hold the tourist certificate and lead guide certificate as prescribed by China.

Article 32 Travel agencies shall by law sign a labor contract and offer the pay no less than the local lowest salary standard

while employing tour guides and lead guides.

Article 33 Travel agencies and their entrusted tour guides and lead guides shall not conduct any of the following behaviors:

(1) Decline to fulfill the obligation in the tourist contract;

(2) Alter the tour schedule arranged in the tourist contract not for force majeure; or

(3) Cheat or threaten tourists to do shopping or participate in tours that shall be separately paid.

Article 34 Travel agencies shall not require tour guides and lead guides to receive the tour groups that fail to pay for receipt

and services or offer the fees lower than the cost of reception and services or require tour guides and lead guides to undertake

the expenses related to the received tour groups.

Article 35 In case a travel agency violates tourist contract and impairs the legitimate rights and interests of tourists, it shall

adopt necessary remedy measures and timely report it to the travel administration.

Article 36 In case a travel agency is required to entrust travel business, it shall entrust it to the travel agency with

corresponding quality, solicit the agreement of tourists and sign a commission contract with the entrusted travel agency on

issues of receiving tourists to decide the arrangements of services and standards for receiving tourists and agree on the rights

and obligations of both parties.

Article 37 In case a travel agency which entrusts its travel business to other travel agency shall offer fees no less than the

cost of reception and service to the entrusted travel agency; and the entrusted travel agency shall not receive the tour groups

which fail to pay for or insufficiently pay for the reception and services.

Where the entrusted travel agency violates contract and impairs the legitimate rights and interests of tourists, the travel

agency that conducts entrustment shall undertake corresponding liability of compensation and thereafter may charge

compensation from the entrusted travel agency.

Article 38 Travel agencies shall insure the travel agency liability insurance. And the specific plan for travel agency liability

insurance shall be separately formulated by the competent travel administration under the State Council together with

insurance supervision and administration bodies under the State Council.

Article 39 Travel agencies shall conduct authentic explanations and explicit warnings to tourists for the items likely

endangering the security of tourists and property and adopt necessary measures to prevent hazards from occurring.

In the event there are situations endangering tourists’ safety, the travel agency, and its entrusted tour guides and lead guides

shall adopt necessary measures and timely report to the travel administration; in the event such situations happen abroad,

they shall timely report it to the embassy of the People’s Republic of China in the country, related Chinese institutes in the

country and local police.


42

Article 40 In the event tourist fails to return from abroad, the guide entrusted by the travel agency shall timely report it to the

embassy of the People’s Republic of China and related Chinese institutes in the country. And the travel agency shall timely

report it to the travel administration and the public security organ of China upon receiving the guide’s report and coordinate

to provide information of the illegal immigrant.

In the event there occur the situation that tourist stays illegally in China while a travel agency receives inbound tourism, it

shall timely report it to the travel administration, the public security organ and foreign affairs departments and coordinate to

provide the information of the illegal immigrant.


43

C. Appendixe3: Cost Analysis

Capital needed: more than RMB 4.000.000 = €400.000

1. Open 3 outlets in 3 biggest cities in China mainland

Outlets from 450 -650 Sqm

Basic salary for workers, 15 – 2028

Minimum: 1500 RMB/ month = € 178

Average: 3000 – 5000 RMB / month = € 356 - €593

Beijing & Shanghai

Facility: 300 sqm x €25 = € 7500 /Month x12 = € 90,000 /Year29

Employee: 20 x €350 /month = € 7000 x 12 = €84,000 /year

Guang Zhou

Facilty: 300 sqm X €18 =€ 5400 /Month x 12 =€ 64,800 /Year

Employee: 15 x €350 /month = € 5250 x 12 = € 63,000 / Year

2. Set up online Website for booking30

a. R&D for Website and Online booking system € 5000 /year

b. Web Hosting and Chinese Dedicated Servers: € 350 / month = € 4200 /year

c. Salary operators for call centers. 1200 -3000 rmb /month

Chinese holiday’s period: May, July, August, October (national holiday – mid autumn Festival)

Expected results:

1. At least double the amount of Chinese travelers to Europe from China airlines

a. Currently:

i. Western Europe 9,044 Passenger /week x 52 =400,000 - 470,288 Passenger /

year

ii. East/Central Europe 6294 / week x 52 = 280,000 - 327,288 Passenger / year

iii. Currently using 75% of capacity

b. Target : we will bring

28 Tiaona 全国旅行社工资收入水平. Retrieved December 10, 2011, from http://www.tiaona.com/salary/工资-旅行社_地区-全国 29

Beijing Real Estate Retail For Lease - Wangfujing & Chongwenmen Area. Retrieved December 10, 2011, from http://www.china-realestate.cn/retail_Lease_sub_detail.asp?CategoryID=352 30

Host Gator Host Gator Dedicated Servers. Retrieved December 11, 2011, from http://www.hostgator.com/dedicated.shtml


44

D. Appendixes4: Personal work statement

Ondergetekende(n) / The undersigned:

[Naam student/ namen studenten][Name student / Names students]

[1]……………………………………………………..[2]………………………………………………

[3]……………………………………………………..[4]………………………………………………

verklaart /verklaren ondubbelzinnig dat: / Hereby unequivocal declares / declare that:

1. het volgende werkstuk eigen werk is en derhalve geen inbreuk maakt op het

auteursrecht van een ander, / The following paper is a personal paper and is

therefore no infringement of anyone’s copyright;

2. alle gebruikte bronnen (waaronder internet-pagina’s) zijn voorzien van

bronvermelding (APA systematiek), / All sources used (including websites) have

been referred to (according APA referencing system).

3. het verslag voor niet meer dan 5% aan overgenomen passages uit “werk van

anderen”bevat. / The paper is not to include more than 5% of “third parties” excerpts.

Plaats/ Place: ……………………………

Datum/Date:…………………………….20..

Handtekening(en) / Signature(s)

N.B. Schending van bovengenoemde “Eigen werk verklaring” wordt als fraude aangemerkt

als bedoeld in Art. 14 OER

NOTE: Violation of the above mentioned “Personal work statement” shall be deemed

fraudulent, the latter being stipulated in Art. 14 OER

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