Strategic Management
Cathay Pacific Airways
Cathay Pacific Airways is a Hong-Kong based airline that has a comprehensive network of flights to over 90 destinations around the world. It is considered as one of Asia’s biggest and most regarded airlines. The company was founded in 1946 in Hong Kong. The company since then has continued to develop Hong Kong’s airline industry and supported Hong Kong’s position as a major transportation center in the region. The airline company was founded by (American) and (Australian). Cathay Pacific was founded in Hong Kong on the 24th of September, 1946. The founders used ‘Cathay’ because it was the medieval name given to China and Pacific because they believed that someday they would cross the Pacific to the US. In 1948, the company was registered as Cathay Pacific Airways and began its operations in that same year. In 1948, Butterfield and Swire, a trading company in Hong Kong acquired 45% share of Cathay Pacific. Butterfield and Swire (Swire Group) held the company’s management. In 1970, Cathay Pacific employed a computerized reservation system and flight simulators. During the 1980s, Cathay Pacific expanded its international network to London, Brisbane, Frankfurt, Vancouver, Amsterdam, Rome, San Francisco, Paris, Zurich and Manchester. During the 1990s when the airline industry was having a difficult time, Cathay Pacific pressed on bearing in mind that Hong Kong is the best location for an airline industry. The company commenced a new program to improve its service.
Cathay Pacific’s headquarter in Hong Kong (Cathay Pacific City) finished in 1999. The Company’s biggest challenges in the new millennium were the 9/11 attack, Gulf War and SARS. However, the company continued to aim for stability and growth by introducing different campaigns such as “World’s Biggest Welcome” and “We Love Hong Kong”.
SWOT Analysis
Internal Strength
Employee Development
One of the advantages of Cathay Pacific over its competitors is the quality of service that the staffs provide to its customers. Service has a big impact on the customers’ perceptions about the company’s product. Employee development through proper and effective training is one of the company’s strengths.
Employee development can be an essential ingredient of an organization’s competitive advantage. Employee development includes all of the education and training that organizations might invest in their employees such as training employees to perform effectively in their current jobs, orienting employees to the workplace, developing them for advanced positions or programs, and building organizational capability for future success.
Internal Weakness
Inadequate Employee Performance Management
The employee performance management process that Cathay Pacific uses is not adequate to support the company’s goals. It does not encourage the employees to take responsibility and does not help them to improve. The system that the company uses creates a standardized process. However, this process also supports wrong values around performance management.
External Opportunities
Technology
Cathay Pacific has decided to Internet-enable its entire global business operations. This advancement in technology is expected to provide a global internet platform for Cathay Pacific’s e-business applications in the future. The new internetworking infrastructure that Cathay Pacific uses will provide a cost-effective platform with global connectivity. The infrastructure will also support the company’s e-business strategy and will make Cathay Pacific the major e-business airline in Asia. The new technological advancement will initiate the company’s development and deployment of e-business initiatives that will improve the quality of passenger services and increase its efficiency and effectiveness. Cathay Pacific uses the power of the internet to reduce communication costs and increase the flexibility of its operations. The delivery of supporting technology across Cathay Pacific has been improved by a more adequate IT infrastructure.
2008 Summer Olympics Games
Cathay Pacific sees the 2008 Summer Olympic Games as a new opportunity to grow, extend its market reach and attract new customers.
Airfreight
Cathay Pacific is committed to reinforce Hong Kong’s position as one of the world’s major airfreight centers. Cathay Pacific continues to expand its freighter fleet and increase the number of its operation destinations. On international routes, where distances are greater and air transport becomes more competitive, freight comes into its own. Its share rises to well over one third of output. Moreover, this share has been slowly increasing. Freight’s share is much less on domestic services. This is because surface transport, road and rail, is generally more competitive in domestic freight markets. It is significant that while freight accounts for over a quarter of total airline production, it generates only about one-eight of total operating revenue. This means that the average revenue per tonne kilometer of freight must be very much lower than the average revenue or yield generated by passenger tonne kilometers. Despite this, freight revenue makes an important contribution to many airlines’ overall profitability. Over the airline industry as a whole, the carriage of freight is a significant factor, both in terms of the amount of productive resources it absorbs and in terms of its contribution to overall revenue. For an individual airline, the split of its activities between passengers and freight clearly affects both its marketing policy and the structure of its revenues. Cathay Pacific continues to invest in additional freighter aircraft and expand its network to ensure Hong Kong’s position as the leader in air cargo business in Asia.
Collaboration with Walt Disney Company
Cathay Pacific and Walt Disney Company began introducing an exclusive range of in-flight products last January 2007. The collaboration is the first deal that was made between the two companies. Cathay Pacific now holds the first direct licence, given to an airline to merchandise, Walt Disney consumer products. The company will merchandise a total of 12 Disney-branded products with an aviation theme. Limited edition items like watches, T-shirts, charm bracelets and jewelry are featured.
Code-Share Arrangement with Dragonair
Passengers will benefit from the new code-share arrangement between Dragonair and Cathay Pacific. This new scheme is seen to be beneficial for passengers that travel to and from different key regional destinations. This initiative resulted from the integration of Cathay Pacific and Dragonair. The integration of Cathay Pacific and Dragonair has already caused significant benefits to the passengers and the Hong Kong aviation hub as a whole. The chief goal of Cathay Pacific’s integration with Dragonair is to bring benefits to the passengers and secure Hong Kong’s spot in the International Airline Industry. SO Strategy
The success of Cathay Pacific is primarily caused by customer retention. Service is a very critical aspect of the company. The company needs to improve the service that it offers in order to maintain its leader status in the airline industry.
The company continuous to develop its self help strategy in order to encourage growth among its employees. Self-help benefits are seen to make career management, career planning including blended learning opportunities possible within the company. The employees of Cathay Pacific need a more directed development program. One of the most significant improvements that Cathay Pacific can employ is incorporating human touch in its high quality, reliable, and predictable service. The company wants to achieve growth through sustained, profitable growth. The company is committed to employee development and continues to enhance service and equip the employees with the ability to control the means of increasing the company’s productivity, reduce costs and ensure customer loyalty by focusing on the areas that matter most to the customers. Emerging business needs and organizational challenges inevitably require improved performance from employees. Providing learning and development that are focused on critical performance improvement needs is one of the methods by which managers continuously improve organizational effectiveness. A good ED system will generate substantial opportunity for performance improvement and serve to remedy deficient performance. Employee development also has an impact on employee morale. Cathay Pacific needs to make its employees feel important and show concern for the personal health and welfare of the employees. The employee development of Cathay Pacific helps employees to define career opportunities, assess career choices and clarify career paths and milestones to help the employees plan their advancement. The employee development of Cathay Pacific provides learning linked to career growth that will increase the likelihood that employees will remain satisfied and that competent people will be available to fill new openings, reducing the costs of external recruitment and selection.
WO Strategy
Cathay Pacific wants to develop competencies among its staff. Cathay Pacific needs to create a development plan that will improve the service of the company. The development plan needs to have clear goals and the management must let the employees to participate in the creation of the development plan. After setting the goals of the development plan, the next step is to develop options of how employees can achieve their goals. Activities such as coaching, job rotation, training courses, e-learning, reading, mentoring and teaching must fit the employees learning style, life style, commitment, time constraint and budget. Performance management deals with the creation of goals; development of objectives and plans that the employees can use in order to drive business results; and development of employees and alignment. Performance management generally involves an annual or periodic performance plan that consists of objectives for the employee. The performance plan is composed of strategies and methods for employee development and new skill acquisition; both the employee’s and the manager’s goals for development and am assessable bonus program.
External Threats
Competition
The major competitors of Cathay pacific are:
1. China Southern is the major airline in South China. It has a strong government background.
2. Qantas Airways is the world’s leading long distance airlines.
3. British Airways is one the world’s leading airline that offers full service experience. British Airways also has a long history of Europe and Hong Kong service.
4. All Nippon Airways is an old airline in northeast Asia.
5. United Airlines is an airline company that carries more international passengers than any airline in Hong Kong.
ST Strategy
Service Straight from the Heart
Cathay Pacific believes that their business is selling experience to the passengers. The emotional bonding with the passengers is the key to building loyalty and one of the major factors that encourage the customers to repurchase the airline products. The biggest difference of Cathay Pacific to its competitors is its people. The employees at Cathay Pacific are the ones who bridge the gap between product development and customer expectation. The passengers in Cathay Pacific always feel welcomed, appreciated and reassured. Passengers that travel with Cathay Pacific know that they are in good hands. Service Straight from the Heart is a programme that aims to develop cultural change within the airline focused on improving customer service. Service is the principal means of differentiating between airlines and is highly influential in customer choice. Cathay Pacific has expressed within its programme its understanding of the importance of the people within the organization and its recognition of the contribution of those people to its success. Cathay Pacific provides excellent customer service by:
1. Creating a climate for positive behaviour
Cathay Pacific’s corporate culture instills in the employees the understanding of the company’s big picture. The corporate culture that the company has encourages innovation, constant improvement and personal responsibility. The service philosophy of Cathay Pacific – Service Straight from the Heart, encourages the employees to render quality service with human touch.
2. Recruiting the right people and offering proper Training
Cathay Pacific uses a holistic approach for managing its people. Better understanding and continuous learning are achieved by involving the staff in the job rotation scheme. Each employee in Cathay Pacific is a flag barer of the company. Every member of the Cathay Pacific family can represent the whole company.
3. Continuous Improvement
Cathay Pacific always bears a sense of urgency and crises. Present successes are not allowed to create complacency. Cathay pacific absorbs any good ideas from different companies, governments or organizations.
WT Strategy
Acquisition
Cathay Pacific strengthened its position as Hong Kong’s top home carrier in 2006 by integrating Dragonair and enhancing its partnership with Air China. This strategic move propelled Hong Kong’s status as the leading aviation center and gateway to mainland China.
Co-operation with Competitor
Cathay Pacific holds 10% shares of its second largest competitor in North Asia – Air China. To create more opportunities, Cathay Pacific is pursuing strategic partnerships and collaborations with Air China.
Credit:ivythesis.typepad.com
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