A Study On Price Competition Mechanism Of China Travel Agency

Research purpose: First, this thesis expatiates on the inevitability and unrationality of price competition, put forward the concept what travel agency should possess in face of price competition. Second, price union departs from market mechanism's regulation, doesn't enable travel agency to increase profits and reduce lose. Third, the paper studies travel agency mechanism for continuable development and analyses non-price competition strategy primarily.Research method: This thesis uses synthetical knowledge of SCP model theory, game theory, economics theory, price-demand elasticity theory, transaction cost theory, human capital theory, in order to analyze price competition status quo of domestic travel agency from the angle of theory and demonstration. The organic integration of theoretical and empirical analysis, establishes a solid foundation for an in-depth study, provides scientific basis for appropriately adjusting competition mechanism, promotes steady increase of profit and rapid development of tourism economy.Research result and conclusion: In recent years, there are some good news in macro and also bad news in micro of China travel service industry. As the industry expansions, it accompanies with lower income profits. From a macro level perspective, travel agency as a new kind of tourism, the size of market grows rapidly and the layout of industry space expands constantly. But from the micro-level perspective, travel agency as an important tourism industry, when the number of enterprise and revenue increases at the same time, industry total profits and profit margins have declined year by year. For this situation, one of the most important factors is over price competition. In order to get maximum and most favorable market shares, some travel agencies don't consider profit earnings and make price lower blindly, so to compete with other travel service industry for profits. But others also have to take the same way to keep or get their own places in market competition. So repeatedly in a vicious cycle, leading to serious damage to the interests of travel agency, even it is difficult for travel agency to maintain simple reproduction.In these cases, some travel agencies in order to avoid causing destruction to both sides, they determine to make a price alliance. These travel agencies think that they can avoid vicious dropped price competition through joint limited price to get stable prices or more profits. However, the fact shows that travel agency doesn't achieve the desired result. Price alliance out of market mechanism's regulation is not only unable to avoid vicious competition but also not conducive to development of travel agency, so travel agency must find other way to eliminate unhealthy competition.In fierce market competition, the disadvantage of price competition appears day after day, non-price competition has already showed strong force and become a important method in market competition. The aim of non-price competition is to increase attraction of business product itself and concern how much consumers like the products, which is able to adapt the requirement of unceasing economy development, as well as is on behalf of market-selling competition. With the development of our opening trade, more and more products will be brought to the world market, so it is hard to catch up with the development of international trade nowadays, if we want to win just depending on low price. Non-price competition can meet different needs of consumers by way of increasing technology investment, developing new products, improving the quality of products and providing high-quality service. This kind of competition is fair, reasonable and public, also good for business development. Besides, it is easy for non-price competition to combine many corporations, cooperate with each other and reform good market competition environment.To sum up, we should run in accordance with the principle of market economy, act according to relevant laws and regulations, exert the role of travel agency and other industry association fully. We can attempt to use non-price competition strategy, avoid firming price impetuously by tourism administrative department. In the near future, China will be faced of a modern tourism market system with orderly and standardized. Through reform, opening, introducing and governance, China will surely become a powerful tourism country in the world.