Strategic Management A1 MBA-USQ 11: MGT8002

Transcription

1 2012 Strategic Management A1 MBAUSQ 11: MGT8002 University of Applied Sciences Zurich (HWZ) Switzerland Supervised by: Dr. Georges Ulrich, MBA Anja Anastasja Keller U Word count:

2 Foreword In this report you will find the strategic positioning pattern for Cathay Pacific. I have chosen Cathay Pacific out of my personal experience and because it has one of the highest quality and service standards I have ever experienced. During my travelling activities around the world I was flying with several airlines, such as Russian Air, Lufthansa, Delta Airline and Air Emirates. E. g. even Air Emirates has a great entertaining program on board, they are not providing the same customer friendly service as Cathay Pacific does. E. g. I will never forget one incident on my last journey through Asia. I was on my way from the hotel to Hong Kong airport when I realized that I forgot my passport. After rushing back to the hotel, lucky enough that my passport was still there, I went right back to the airport, of course missing my plane. As you can imagine with most airlines this were the problems would start. Not so with Cathay Pacific. Besides, that the customer support was very forthcoming and supportive they changed my flight to the next plane in the afternoon for a little fee in no time. Most other airlines would not be that generous in this kind of situation and charge you a lot of money; you would lose a lot of time and nerves with a very unsatisfying result. Another point to consider which you feel by heart when you are choosing Cathay Pacific is that the economy class does not exist instead is replaced by business standard. Cathay Pacific is the world s best ranked airline with a lot of space for your comfort. You pay for economy class, but in return you get the treatment and comfort you are used from the business class. i

3 Table of Contents Foreword... i 1 Executive Summary (162 words) PESTEL analysis of an airline industry (336 words) Politics Economic Social Technological Environnemental Legal Five forces analysis of the airline business (175 words) Environmental Forces Internal forces External Forces SWOT analysis of Cathay Pacific (272 words) Strengths Weaknesses Opportunities Threats Conclusion (51 words) List of References Appendix Index of Figures Index of Tables PESTEL Analysis template for Cathay Pacific ii

4 1 Executive Summary (162 words) Figure 1: Cathay Pacific The purpose of this report is to outline the strategic positioning of Cathay Pacific airline by evaluating external factors on macro economical aspects and on a from a microeconomic point of view by analysing the corporate objectives. The elected methods will be proceeding how and wherefore it has been chosen, in particular the process of development of a position strategy itself. In the first part of the report we will discuss the PESTEL analysis, which is a model of the external environment factors where each category may have an effect on the airline industry and helps to analyse the market and their opportunities. The second aspect will be the outlook of the Porter s five forces analytics, which is a framework for industry and business strategy where we will take into account the competition from external sources and remains to the internal threats. Finally, the last part will be the SWOT analysis, which is a structured planning method to specify the strategic objectives. 2 PESTEL analysis of an airline industry (336 words) The PESTEL analysis combines external microenvironmental factors with internal drivers, which can be classified as opportunities and threats in a SWOT analysis afterwards. It is a useful tool to start with a strategy analysis where you can understand the big picture of the environment of an airline industry. By knowing the business in which you operate, you can take advantage of the opportunities and minimize the threats. It s a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization. (Kottler 2006) Table 1: PESTEL Analysis 2.1 Politics One of the external factors that have big effects on the operation of Cathay Pacific is government regulations. Because Cathay Pacific operates worldwide, it is greatly affected by different policies. The company continuously evaluate the political environment and prepares itself for any possible problems and issues concerning the political sector. 1

5 2.2 Economic Economic factors also affect the company. Cathay Pacific was greatly affected by the exchange rate and cut back in commodity trade. For the past years Hong Kong experienced economic growth as well as other Asian countries. The growth of other Asian economies pushed Cathay Pacific to expand its operations. Internally, the company is doing well. It constantly assesses the economies of the countries where it operates as economy affects the decisionmaking process and buyer behaviour of the customers. 2.3 Social The company makes sure that the service it offers and the technology it uses to tender its services will be accepted by the public. It makes sure that it has a very good relationship with different sector in the society. The company also put a lot of effort into customer satisfaction to evolve a better customer relationship. 2.4 Technological The company offered new innovations in its technological aspect and introduced new concepts with regards to its industry. Since technology rapidly changes the company makes sure they are updated to what is happening and they can adjust to these changes. Cathay Pacific provides services which are constantly updated in conjunction to the latest technology standard to tender their services. 2.5 Environnemental New regulations affect the company because Cathay Pacific operates globally and new standards influence their business sector. Customer acceptance in sustainable business gets more important which influences Cathay Pacific position in the marked. The company provides transparency on information and develops innovation which improves the sustainable rating. 2.6 Legal The company is influenced by international legislation; however the high regulated business sectors force the company ongoing to establish new procedures, which is one of the industry specifications. Cathay Pacific makes sure that the compliance risks are covered and inherent risks are identified and protected. 9

6 3 Five forces analysis of the airline business (175 words) Porter's five forces accomplish and analyse by considering not only the external factors, moreover to include horizontal competition such as threat of substitute products, the threat of established rivals, the threat of new entrants and on the vertical competition such as the bargaining power of suppliers and customers. (Porter 2008) Table 2: Porter s five forces analysis With five forces as an accomplishment to PESTEL which apply to Cathay Pacific core competences, business model or distribution network to achieve corporate objectives. 3.1 Environmental Forces Environmental forces are something that is intangible but somehow it still affects your firm s operation. Therefore, these environmental forces can be divided into groups such as internal and external forces. In the Cathay Pacific airline case, the internal forces can be considered as its human resource management, since the labor cost is its main concern. In addition, government policies, competitors and customer satisfaction will be considered as its external forces. 3.2 Internal forces Cathay Pacific is currently paying extremely high salaries to its employees. This situation is not only causing Cathay Pacific to lose profits. It is also one of their highest disadvantages. According to research Cathay Pacific has been known to be the highest salary paying airline. 3.3 External Forces Government policies are the most common external forces for international airline companies. Airlines which operate globally need to invest a lot of money into foreign operational costs such as airport fees etc. In addition their cargo transportation turned into a highly unprofitable business sector. These external factors are lowering the profit and force the airline to expand in other markets. 10

7 4 SWOT analysis of Cathay Pacific (272 words) Cathay Pacific is using SWOT analysis to achieve a market leader position, to strengths its brand and to increase the customers satisfaction. A key part of the corporate reputation for the future points to the communication with its staff and getting them involved in delivering a more sustainable growth path (Flattoau, Matthews and Lott, 2006). Table 3: SWOT Analysis 4.1 Strengths ly motivated employees and the highest quality in service are one of the key factors to a happy and satisfied customer. These are one of the two main aspects that separate Cathay Pacific from its competitors. Furthermore the airline is also committed to Hong Kong. Their substantial investments in that region lead to a new developments in the industry and enhanced the company s position as a regional employee and transportation hub. 4.2 Weaknesses Cathay Pacific s weakness is the complexity in its organisational structure. This prevents the ability to manage its international network of subsidiaries and other alliances. Prior to acquisition of Dragonair, Cathay Pacific has lost its competitive advantage which resulted in a declining sale because of intensifying competition. During the 2000s, Cathay Pacific realised that there is the need to overcome the challenges of competition thus acquiring Dragonair. Cathay Pacific will be confronted with future challenges of additional competition if they can t resolve strategic options. (Page, 2007). 4.3 Opportunities There is a great opportunity for Cathay pacific to expand and strengthen their brand by introducing new campaigns. It s important that their campaigns include slogans such as "Great service, great people, and Great fares". In addition an increased focus on the European and US market would also open new distribution channel and opportunities to position itself among the airlines. 11

8 4.4 Threats One of the major threats for Cathay pacific airlines is the rapid growth of competing brands like Singapore, Qatar, Asiana airlines and many more. Cathay pacific is also facing terrorism threats as it has suffered from hijacked and shot down planes in the past. Environmental threats are always present as well as rapid changes in oil prices. 5 Conclusion (51 words) Cathay pacific strategic goal setting should be (i) to extend to new emerging markets through acquisition and expansion e.g. CIS flights, (ii) increasing partnerships in order to offering codesharing and (iii) to increase the productivity in the cargo business by outsourcing not used capacity to partner networks or cancelling lease contract. 12

9 6 List of References Akkermans, Joost; Leung, Wendy (2009). "Cathay Pacific s Tyler doesn t expect recovery soon". Bloomberg Beckford, J 1998, Quality: an introduction, Routledge, London. Boeing (1998). "Boeing and Cathay Pacific Airways Celebrate First Delivery". Press release. Cathay Pacific information, Retrieved: 25 November 2012 Cathay Pacific, Air China and Citic Pacific, Landing rights, Retrieved: 25 November 2012 Chan, D 2000, Air wars in Asia: competitive and collaborative strategies and tactics in action, Journal of Management Development, vol. 19. no. 6. Flattoau, J, Matthews, N & Lott, S 2006, Big Deal? Aviation Week & Space Technology, vol. 164, no. 5, pp Kotler Philip, 2006, Marketing Management, 12 Edition, Prentice Hall. Page, S 2007, Tourism management: managing for change, 2nd edn, ButterworthHeinemann. Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard business Review, January The Reality of Open Skies and Its Relevance for Hong Kong, 2000, HKTDC, Retrieved: 25 November 2012 The World s Official 5Star Airlines ". Airlinequality.com. Retrieved: 25 November

10 7 Appendix 7.1 Index of Figures Figure 1: Cathay Pacific Index of Tables Table 1: PESTEL Analysis... 1 Table 2: Porter s five forces analysis Table 3: SWOT Analysis Table 4: PESTEL Politics Table 5: PESTEL Economic Table 6: PESTEL Social Table 7: PESTEL Technological Table 8: PESTEL Enviromental Table 9: PESTEL Legal

11 7.3 PESTEL Analysis template for Cathay Pacific PESTEL Analysis Politics Government policies Impact Implication and importance Time (mth) Type Impact Importance Critical International pressure groups Wars and conflict, terrorism Low 0 12 Unknown Intercountry relationships Low < Unimportant Political trends < Unknown Internal political issues Low < Shareholder/ stakeholder demands Table 4: PESTEL Politics PESTEL Analysis Economic Home economy situation Impact Low Implication and importance Time (mth) Type Impact Importance = Unimportant Overseas economies and trends (trade) Critical General taxation issues Weather issues Unknown Customer drivers < Exchange rates Table 5: PESTEL Economic 0 12 Critical PESTEL Analysis Social Consumer attitudes Impact Implication and importance Time (mth) Type Impact Importance Media views Brand, company, technology image organizational culture Table 6: PESTEL Social = 15

12 PESTEL Analysis Technological Competing technology development Impact Implication and importance Time (mth) Type Impact Importance Manufacturing maturity and capacity Critical Information and communications Technology access, licensing Table 7: PESTEL Technological Critical PESTEL Analysis Environmental Environmental regulations Impact Implication and importance Time (mth) Type Impact Importance Customer values Market values = Global factors Table 8: PESTEL Enviromental Unknown PESTEL Analysis Legal International legislation Impact Implication and importance Time (mth) Type Impact Importance Regulatory bodies and processes Critical Industryspecific regulations Unknown Table 9: PESTEL Legal 16