Contents
1. Introduction
2. Background of the organization
3. Main Body of the Report
3.1. External Analysis
3.2. Internal Analysis
3.3. Analysis of the country
3.4. Possible strategic alternatives
4. Recommendations
5. References
Introduction
The airline industry presents a paradox. For the last fifty years it has been characterized by continued and rapid growth in demand for its services. Yet it has remained only marginally profitable. Inevitably growth was much faster in the 1950s and 1960s when aviation was a new industry than it is today when it is reaching maturity. But growth rates are still impressive. In the 1950s and 1960s the world’s air traffic grew on average at around 14-15 per cent each year ( 2002). In the decade 1970-79 the annual growth was close to 10 per cent. This still meant that air traffic, and the airlines with it, doubled in size every seven years or so. In the following ten years to 1989 growth declined to around 6 per cent annually and in the decade up to 1999 growth was down slightly at 5.2 per cent. In absolute terms, because of the much higher base, a 5 per cent jump in recent years represents a much greater surge in demand than a 10 per cent annual growth thirty years ago ( 2002).
The airline industry appears to be cyclical and this inevitably impacts on growth rates from year to year. Nevertheless the underlying trend has been one of declining but consistently good growth in demand. Most industries or businesses faced with continued and high growth of demand for their products or services would be basking in substantial profits. Not so the airlines. This is the paradox. The financial performance of the world’s airlines taken as a whole has been very marginal, even in the years when the industry was highly regulated and largely protected from internal competition. The traditional measure of profitability, namely the rate of return on assets employed, cannot be applied to the airline industry as a whole ( 2002). Another measure of profitability commonly used among airlines is the operating ratio, which is the annual operating or net profit or loss expressed as a percentage of the total annual revenue. Four to five years of poor or bad performance are generally followed by an upturn and five or six years of improving results ( 2002).
The airline industry is has its own share of problems over the years, this does not mean that companies in this industry should be affected by such situation. To conquer the problems, the industry influences companies belonging to it alter their strategies and relate it to strategies used by other industries. One company trying to succeed in the industry is Cathay Pacific. This company has changed its strategies in accordance to the changes in its environment and the industry it belongs to. It has gone through various barriers and problems but it managed to survive up to this very day. The paper will discuss about the company, its strategies, the trends and issues in its business environment. The paper will conduct an external analysis of the company using the 5 forces analysis The paper will conduct an Internal analysis that will determine the strength of the company, its weakness, the company’s organization structure and culture, and the company’s human resources. The paper will perform an analysis of the country in terms of PEST analysis. The paper will include the possible strategic alternatives and the best strategic option/s to use over the next five to ten years.
Main Body
Cathay Pacific
Cathay Pacific was generally seen as a quality airline, but one strongly associated with Hong Kong’s colonial past. A major challenge for the future was for Cathay Pacific to be perceived as more Asian rather than British/Asian in order to strengthen its market abilities in Asia including attracting a wider Asian customer base, as well as to reflect the changed political realities in Hong Kong. In short, the company needed to align its Conceived Identity with its new Identity. Cathay Pacific chose to undertake this identity realignment through a massive coordinated set of initiatives intended to transform the reality of the company to achieve the new perceptions that would reflect the new strategy and permit communications based on the substantive changes ( & 2003). Among the initiatives were: adding aircraft capable of operating in medium-sized airports in Asian markets previously underserved by Cathay Pacific, appointing an increased proportion of Asian nationals, and changing the on-board food and service to reflect more closely the wider Asian customer base ( & 2003).
Cathay pacific is one of the most well known airline company in the world. It competes with different airline companies for prestige and notoriety in the airline industry. Recently the company underwent a change in image and strategies to counter the problems its industry has. It shifted the focus of its strategy into making sure that their will be an increase of clients who demanded their services, it also made sure that the services and technologies they use can be competitive to other airlines company. In 2006 the company was acquired by Dragon air but it still continues to operate in its own brand. This does not hamper it from continuously trying to provide the best service to its clients. This shows that with proper strategies used, a company can stay in the industry for a longer period of time.
Step 1 External analysis
Potential Entrants
The company has been around for a quite some time and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak. But to ensure that no other problem arise the company maintains low cost for the different expenses they make, this helps in making sure that the new entrant will not have advantage over them and it makes sure that the company cannot be outrun by this new competitor.
Competitive rivalry
Competitive rivalry highly influences the company. Different things are done by the company to ensure that they have advantage over their competitors one is a strategy wherein they give the best kind of service to clients. This kind of strategy gives the company a better relationship with the clients. The company also offers unique flying experience to the clients thus giving the company’s rivals additional worries.
Substitutes
Substitutes give high influence to the company since substitutes can make a company lose the clients it has. The company makes sure that the substitutes won’t give them much problem. They do this by proving that the service they offer and the technologies they use to provide the service are the best quality and are better than substitutes.
Bargaining power of buyers
The bargaining power of buyers highly influences the company and the industry. It shows how good the company and industry is doing in serving the clients. It also helps in determining how known the company is. The company makes sure that the bargaining power of buyers is high. They do this by making sure that buyers are concentrated and there are few buyers in a significant market share.
Bargaining power of sellers
The bargaining power of sellers highly influences the company and the industry. The company and the industry make sure that their suppliers have high bargaining power through helping them show their importance in the industry. The company makes sure that the suppliers of the product to be put up on the site will be convinced that the products they intend to sell are the best they can offer and these products are highly competitive, it also makes sure that the products will be highly buyable.
Step 2 Internal analysis
Strengths
A strength of the company is the cutting edge quality service they offer. Cathay pacific constantly checks for new technologies that the suppliers can provide to them, this is done for the company to meet the needs of their clients. The company makes sure that the technologies they use to provide the service are updated. Employees are an important part of a company. They should be well taken care of. In relation to such one of the strengths of the company is the way it treats its employees. The company gives special recognition to those who did well and served the consumers well. Recognition boosts the employees’ confidence and makes the employees work harder and it brings a sense of competition between the employees.
Cathay pacific strength with regards to its employees is the way their workers are selected and trained. The company makes sure that the employees are well selected and trained for them to produce well and achieve the goals of the company. These employees passed certain entrance tests and meet certain requirements, these test are used to know the capabilities of the people. A strength of the company is being in the top position in international airline surveys. These surveys have different aspects like in comfort, service, food and overall service. Lastly a strength of the company is the modernized and big in size fleet of plane it has. They have an considerable number of aircraft fleet that are maintained properly and replaced abruptly when there is a need for it.
Weakness
The main weakness Cathay pacific has is they tend to dispose aircraft while such aircraft has still high resale value. The company fails to see the use of the aircraft that they may not need but can be sold to other organizations. The company is not able to see the capabilities of other things that the company deems as unusable. This weakness if not given proper attention and immediate action can lead to the downfall of the company.
Organizational structure
The company‘s top man is the Chairman . The CEO of the company is . The finance director is . They are the ones that lead the company; underneath them are department heads, sector managers and other personnel that work in different locations. This structure of the company intends to promote teamwork and camaraderie amongst the members of the organization. The people responsible for decisions on strategies the company intends to use include the Chairman and the CEO.
Organizational culture
Organizational culture instills in the organization a common sense of identity. This kind of culture helps in aligning the values and norms of the employees to the values and norms of the organization. Organizational culture instructs a company to work as a social system. Moreover this kind of culture serves as a reference for employees whenever they have to undertake productive activities and this will help to behave better in doing the productive activities. Organizational culture gives guidance for the employees to act accordingly in various situations in the company. The organizational culture of Cathay Pacific is concentrated on making sure that their missions will be attainable. The missions include providing service straight from the heart, make sure that clients are safe whenever they are using the transportation services of the company, encourage to their employees product leadership, make sure financial returns are made and provide beneficial career opportunities to willing and acceptable employees.
Human resources of the company
To have competitive advantage over competitors means that a company must have a good relationship with the personnel. To maintain good relationship with employees means that the company makes sure that the welfare of the employees are protected. Employees who are properly cared for can be competitive with employees of rival firms. Cathay Pacific makes sure that the employees they hire will be an asset to the company. They hire the best people for a specific job. This people are trained well by the company so that each employee will have an important role to play in the company. The company provides various financial and compensation packages to their employees. This ensures that for every effective service the employees do they are greatly rewarded. The company also recognizes and gives awards to employees who perform above standards.
Step 3 Analysis of the country
Political
The company will not get any good reputation, trust and success if it will not be aware of what is happening in the political sector of the country. The company and the airline industry make sure they are aware of the political situation of the country and the company has its position with regards to political issues. The company is prepared for any problems concerning the political sector. Viet Nam’s politics concentrate on the framework of single party socialist republic. The communist party of Vietnam has the central role in the politics of the country and its societal issues. The new constitution reaffirms the country’s goal of reorganization in the government and increased economic reforms. The economic reforms have become the primary concern for the country rather than ideological orthodoxy. This is a good thing for Cathay pacific because they will have lesser problems in entering such market.
Economic
The Vietnam War is said to be one of the causes of the economic problems the company is facing. The economy of Viet Nam was plagued with problems such as inefficiency, corruption, poor products, underproduction and various restrictions on economic activities and trade. After some time the sixth party congress started to introduce reforms. Private ownership was started to be encouraged in industries, commerce and agriculture. The annual Gross Domestic Product (GDP) of the country started to grow and this made the county be recognized as the second fastest growing economy. During such time the country’s foreign investment became threefold and the domestic savings grew 4 times faster. Industries that concentrate on Manufacturing, Internet technologies and other high tech industries suddenly grew and became an important part of the country’s economy. Vietnam has changed from a country that has no idea about the Oil business into the third largest Oil producer in Southeast Asia. The country has made use of the economic growth to lower poverty rates and it made the unemployment rate one of the lowest in the world. Although the country is experiencing such economic growth; it remains a relatively poor country. The economy of Vietnam is a promising one, Cathay pacific should take a chance at taking a risk in investing in the country because the economic changes done by Vietnam can greatly affect and benefit the company.
Social
Vietnam’s population as of 2006 is said to reach 84,402, 966, most of the people live near rivers and deltas. Kinship plays a role in the rural areas of the country. Amongst the different religion found in the country, Buddhism is the most popular to the people. The society of Viet Nam was influenced in culture by its neighboring country China. The main characteristic of the culture of the country is financial duty. Other characteristics of the culture of the country are education and betterment of oneself. Currently the country has exposure to the cultures of different regions. The country has a special garment that should be used on special occasions. The cuisine of the country makes use of less oil and majority of the dishes use higher volume of vegetables. Soccer is the most popular sport in the country. Other popular sports in the country include badminton, tennis, ping pong, chess and volleyball. Cathay pacific can help in merging the culture of Vietnam with other cultures. This would slowly help the country in adjusting to the global changes.
Technological
The country is slowly allowing innovations in its technological aspect and introduced new concepts that the different industries in the country may use. Since technology rapidly changes the country has been more open to gaining updates to what is happening in the technological sector. Vietnam wants to makes sure that the industries located in their country provide services that make use of new and useable technologies. Vietnam also wants to make sure that if other companies in other countries use new technologies to provide services, the companies in the country have the technology capable of competing with such technologies. Cathay pacific can make use of the innovation in technologies to provide alternative transportation services to the citizens of the country. The company can also use the technology to speed up the delivery of Vietnam products domestically and internationally.
Step 4 Possible Strategic alternatives
A key challenge for any organization in the twenty-first century is to seek to maintain and improve its performance in an increasingly complex and competitive global operating environment, where change pressures appear to offer the only certainty ( 2000).The challenge presented here is to move to define such assets, particularly in relation to a public sector context, and through an investigation of the benefits which can accrue from the successful management of information and knowledge, to dispel much of the disquiet and cynicism surrounding this potentially important area of organizational improvement ( 2000).Companies cannot survive without an effective competitive strategy; an effective competitive strategy gives a company an easier chance of attaining its goal with lesser focus on the problems they have. A company that is wiling to use a competitive strategy must create changes in its internal environment. In doing this every aspect of the business can be checked before the strategies can be used for success in the firm. The service strategies will depend on the situation in the environment and the different barriers that may hinder the delivery of an effective strategy. The service strategy may go into waste if there are still certain barriers and environmental condition left unsolved since the effect of the strategy may not be felt by clients.
Cathay Pacific makes use of the best service strategies that intends to make an identity separate from the competitors. It concentrates on providing excellent service to clients. It intends to use the best service strategies so that they will have advantage over the competitors. The company has a code of service that the company and its employees use whenever they are having conversations with their clients. There are other strategic alternatives for the company one of which is the further improvement of technologies used in delivering the services. The technologies used by the industry may be better and more adaptable to the needs of the clients. The technologies may be so advanced that travel time from one country to another may be lessened. Another strategic alternative for the company is better security measures that will ensure the safety for both clients and personnel of the company. The future may be a time for safer skies and lesser concerns for terrorist attacks.
Recommendations
The first thing the company should do is continue to improve the services they have by doing so they can have advantage against competitors. The company can also find ways to lower its prices without having some financial problems. By doing this more clients can be attracted to avail the company’s service. Moreover the company should provide additional knowledge to their employees regarding how to deal with clients. Customer service involves the relationship between the employees and the clients. A healthy relationship between the two helps in giving the company success. The company should focus on the strategic alternative of further improvement to the technologies they use. By doing so the company can make sure that the clients will be have comfort while availing the service and they will be safer as they travel. The advancement in technology will not only make the company competitive, it will make the clients avail the company’s services more often since the travel time will be shorter and more relaxing.
References
Credit:ivythesis.typepad.com
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