Cathay Pacific: Evaluation the Performance and Strategy

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Table of Contents

Resource Analysis
External analysis
PESTLE Analysis
Segmentation/ Key Success Factor/ Customers
Strategic group analysis
References

This is the analytical evaluation of the strategies of Cathay Pacific. The main purpose of this study is to highlight the company’s arrears of strengths and weaknesses as well opportunities and serious threats for the company. This paper has mainly focused on the related years of the case study. At first, the past strategies of the company have been indicated with special reference to the company’s motives and objectives. Then, the new strategies in response to the change in the environment of the airline industry, including socio-economic factors, have been selected for the company to aid in achieving goals and objectives (Schaik, 2002);. In addition to indication and selection, all of these strategies have been given specific value to attract the attention of the company to the core and sensitive issues to convince the company for modifying strategies in their areas of weakness. Similarly, the functional, corporate, and competitive strategies have also been indicated in this part of the paper in which SWOT analysis has been drawn for the company to enhance the company for further growth. The basic purpose of this part of the paper is the strategic evaluation of the company in terms of the competitive advantages of the company in the context of SWOT analysis (Schiffmann & Kanuk, 2000. Then, a conclusion has been drawn at the end of the paper in which the comparison of all the strategies of the company has been made based on internal and external analysis.

Resource Analysis

The resource analysis technique helps to analyze the availability of healthy resources. The main resources are Human, Capital, Money, and Infrastructure. Human resources constitute an important dimension in the management of services in their role both as performers of their services as costumers. People as performers of service are important and therefore the firm must recognize that each employee is a salesman for the company service (Booms and Bitner, 1981).

The importance of customers in service stems from the fact that most services imply active and involved customer organization and interface. Service personnel are important in all organizations but more so in an organization involved in providing services. The behavior and attitude of the person providing service is an important influence on the customer’s overall perception of the service and he can rarely distinguish between the actual service rendered and the human element involved in it. Costumers are very important for the firm because they are going to influence other customers. The kind of customers that you attract exerts an important influence on prospective customers (Doole and Lowe, 2004).

External analysis

Michael Porter put forward 5 forces of competition that affect an industry. A Cathay Pacific airway is also affected by these forces in the industry of Aviation. The forces of completion as decided by porter were the supplier power, threat off substitutes, buyers power, degree of rivalry, and barriers to entry (Winer, 2007). These forces influence the aviation industry because the aviation industry has many competitors who compete with Cathay pacific airways.

About the forces of the supplier, the aviation industry requires resources such as fuel, manufacture of aircraft, labor, and other supplies. These obligations lead to a supply buyer relationship between the aviation industry and the firms that provide resources to these companies. The suppliers of fuel are very influential and have put the industry players in a situation that we are forced to change their prices from time to time. Cathay Pacific airline has agreed with suppliers of fuel to provide the fuel continuously but when it comes to pricing oil-producing countries decide the price(Kotler, 2005).

In the barrier to entry to trade to entry to the industry it is not only the existing company that produces a threat to Cathay Pacific airline but coming up firms are a major threat to the industry. This is because it will affect competition among the competitors and other players. The industry is not an industry where there is a free entry and exit as in theory. Because the industry posses some uniqueness which makes it impossible for easier entry of new competitors, this ensures that there is the maintenance of high profits by a good competitor in the market(Mohammed, Fisher, Jaworski & Paddison 2003).

To begin with, the industry requires huge investments in aircrafts this nobody can wake up in the morning and think of starting an airline business. The airline industry also requires competitors to apply some safety regulations in various countries. These regulations are very expensive to implement and in some countries like West Africa, the safety of the airports is always in question therefore you find it is very difficult for some airlines to operate in those countries. At times in those counties with poor sky visibility due to factors such as the mangrove forests and heavy rains, have caused many airline accidents. Barriers to entry to the industry are more than the usual equilibrium the market makes. The increasing of profits or falling of products does not automatically attract a new entry or cause exit in this specific industry because of the losses that will be incurred in the long run or the cause of entering into the market (Kotler, 2005).

The threat of substitutes is not well pronounced in this industry therefore Cathay Pacific airways services only face threats from existing competitors. However, from the economist’s point of view, a threat of a substitute occurs when service consumption is influenced by the price adjustment of substitute services. Service price elasticity is affected by alternative services but in this case, the alternative service may be road transport, sea transport, and rail transport. This being the only substitutes available to the airline industry can the airline should concentrate more on rivalry among the competitors (Mohammed, Fisher, Jaworski & Paddison 2003).

Another force that is affecting the industry is the power of buyers. This is the impact felt by Cathay Pacific airline that the consumers have on the industry or the company. When the buyers are very powerful, they will have the negotiating power on the prices charged on service but in the airline industry rate consumer are not organized to the point that they can influence the pricing which is left to the market forces to decide. And the marker forces for this industry are influenced by these mattes (Johnson, Scholes, and Whittington, 2006).

The degree of rivalry among the industry players affects competition even price. In a very competitive industry, you find that profit at times can be reduced to zero due to heavy competition. Hover it should be noted that the airline industry in which Cathay Pacific airline Operates has very few competitors and in most cases, the competitors are from different countries therefore the ability to reduce the profit to zero is limited. To strengthen rivalry among the industry players Cathay Pacific airline. Should analyze and pay attention to the quality of services offered by competitors such as British services (Armstrong & Kotler, 2007).

PESTLE Analysis

Cathay Pacific airline does not operate in one country but operates in many countries. Each country has its own rules and regulations, these rules and regulations influence the operations of the airline. For Cathay Pacific airline to succeed in any country they must adhere to all trade regulations imposed by countries.. In some countries have unstable political airlines which make Cathay Pacific airline avoid trading in those countries. Take for example the current case in Madagascar. There is no stable government and therefore a company trying to operate in that country will find it very difficult to invest there. In brief Cathay, Pacific Airlines is affected by political factors which range from bad governance to corruption institutes such as those in Colombia and Kenya (Elder, 2005).

Economical:- The consumption of airline facilities is influenced by the purchasing power of the people or the target market. The current economic crisis has contributed to the downfall in profits of the company because most people reduced unnecessary traveling in the country while others change substitutes such as road transport. Although the company reported an increase in sales they were not stable because the number of routes was reduced. When examining the revenue collected in the month of 2008, it will be interesting to note that Cathay Pacific airline has an interest in sales although 42% increased by 49.2%. Most revenues were generated from the middle-class target group which demonstrates that the financial crisis did not affect the middle-class consumption of the airline services(Cathay Pacific, 2007 Annual Report).

Social:-The social culture of the people in different counties has had an impact on the marketing strategies of Cathay Pacific Airlines. The company has considered these social cultures of various countries and they can structure their marketing strategies to feed the diverse cultures. When Cathay Pacific airline is traveling to China or the Middle East they have understood the types of meat to be served to the customers. This has also affected their human resource policy because when you are traveling to various cultures you must have one or two people who understand the cultures of that country. Therefore ethnocentricity has a great impact on the type of media they use in advertising the product in various places (Crane, Kerin, Hartley, & Rudelius 2008).

Technological:-The introduction of business and Premier Class features seats that unfold into a flatbed. Each seat also has direct aisle access. The Premium Class is in a devoted compartment, which shares lavatories with the Business Class cabin. The class has some mood lighting, wine selection, and in-seat power as the Business Class cabin. All the seats have more legroom than in the standard Economy. Owing to positive reviews and high demand after its introduction, Cathay Pacific then re-launched its Premium cabin with added business-class services, including amenity kits and improved dining services. Premium Class has an innovative cohort seat design with added space(Cathay Pacific, 2007 Annual Report).

Legal:-There are various legal issues that are affecting Cathay Pacific airline especially the trading rules that are always a thorny issue in the industry. The industry is being affected by issues such as drug trafficking they should implement strict rules which are deterring criminals from using their services across borders (Keegan and Green, 2002).

Environment:-As a social responsibility issue Cathay Pacific Airlines has implemented environmental protection such as helping in some countries to plant trees as well as when they are serving the trees they serve in disposable utensils this ensures that the environment is protected (Kotler, 2005).

Segmentation/ Key Success Factor/ Customers

The key success factors for this industry are the consolidation various factors and overcoming weakness within the industry. The company has insurance that they have a strong market position by implementing technology and entering into collaboration in various countries. They have used innovation and service development in ensuring that they remain focused on the market. The company has remained focused through establishing various goals such as maintaining a specific growth rate. They have segmented their market into economic class, business class (Ries & Trout, 2006). It is upon the customer to decide which segment fits him.

Strategic group analysis

The recent strategy implemented by industry players is enhancing research and development in ensuring air safety for customers. Cathay Airlines has reached to overseas market and this has enabled them to become an international company. They have developed an aggressive marketing strategy that ensures that their product reaches the market in an acceptable form. International collaboration has been another strategic position for the company (Williamson, Cooke, Jenkins, & Moreton, 2003).

References

Armstrong G. & Kotler P. (2007). Consumer Markets: Influences on consumer behavior: Principles of Marketing, pp. 272-292

Booms, B. and Bitner, M. (1981) Marketing strategies and organizations structures for service firms. In J. Donnelly and W. George (eds), Marketing of Services. An American Marketing Association, New York.

Crane, F. G., Kerin, Hartley, & Rudelius (2008). Marketing: 7th Canadian Edition. USA: McGraw-Hill Ryerson.

Doole, I. and Lowe, R. (2004) International Marketing Strategy, Analysis, Development, and Implementation. Forth edition, Thompson Leaning

Elder, A. 2005. Straying from the Flock: Travels in New Zealand. New York: John Wiley & Sons.

Grant, R. M. (1991). Contemporary Strategy Analysis: Concepts, Techniques, Application. Cambridge, MA: Basil Blackwell.

Johnson G, Scholes K and Whittington R, (2006); Exploring Corporate Strategy, Prentiance Hall, 7 th Enhanced Media Edition,

Keegan and Green (2002); Global Marketing Management; Prentice Hall. pp.326-339

Kotler, P. (2005). Principles of Marketing. New York, Melbourne Press, pp. 170-194

Mohammed, R., Fisher, R. J., Jaworski, B.J., Paddison G.J. (2003). Internet Marketing: Building Advantage in a Networked Economy, 2^nd Edn, International Edition, McGraw-Hill.

Ries, A., Trout, J. (2006), Positioning: The Battle for Your Mind, McGraw-Hill Inc., New York, NY, pp. 421-426

Schaik J.L., (2002); The Task of Marketing Management; (Pity) ltd, pp. 124-138

Schifmann L. G, and Kanuk L. L, 2000, Consumer Behavior, Chapter 16, Page 437-443, Prentice Hall

Williamson, D., Cooke, P., Jenkins, W. & Moreton, K. 2003. Strategic Management and Business Analysis. New York: Butterworth-Heinemann.

Winer, R.S. (2007). Marketing Management, Prentice Hall, Upper Saddle River, NJ pp.125-126

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