Strategic Marketing in Asia Essay

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As its establishment in 1946, Cathay Pacific has been a profitable air travel company, which usually experienced regular growth. Over 10 years ago however , the airline knowledgeable a lack of US seventy dollars million, a stark contrast from getting $218 , 000, 000 in earnings in the previous year. For Cathay Pacific, it was the initially loss skilled by the atmosphere carrier since 1963. Cathay Pacific’s monetary hardship was mainly the result of a financial turmoil, which afflicted the Asia-Pacific region during that time. As a result of this crisis, air travel heavily decreased, resulting in low passenger lots and brings.

For Cathay Pacific, this kind of translated in a decline of 12. 9% in earnings. Additionally , Cathay Pacific as well faced several problems with its labor section due to arguments over negotiations and the handling of in-flight operations.

This kind of conflict led to strikes and delays intended for the air travel. Cathay Pacific’s problems had been exacerbated by media, which in turn closely scrutinized the airline’s actions. Therefore, Cathay Pacific cycles also had a crisis in public places Relations.

This kind of report covers the key issues that have encircled Cathay Pacific and provides an analysis with some recommendations to tackle the problem at hand. ANALYSIS Despite their well-known reputation in the Asia-Pacific region, Cathay Pacific encountered many challenges that would have a significant impact on its organization. By examining the changes that contain taken place in the company and the airline sector over the years, the subsequent key problems can be recognized. Cathay Pacific needs to address these key issues in order to be successful in the near future.

UPDATE – WHAT FEATURES HAPPENED AS 1999 In a bid to escape its 18-month financial decline, Cathay Pacific cycles strategically utilized Hong Kong while the main centre for air transport in Asia. In addition , the company’s performance in Europe and North America surely could compensate for the airline’s poor performance in Asia. These types of initiatives repaid as Cathay Pacific attained a profit of $285 million in 1999.

Cathay Pacific was also privileged in its timing, as its involvement in the “One World Alliance” began to increase traffic for the at that moment. “One World Alliance” is a joint hard work among different airlines to share frequent flier points and promotions within a bid to attract fliers. 2000 was a good year for Cathay Pacific cycles for several reasons. Firstly, the Asian economy was slowly but surely improving which will resulted in even more passengers time for travel. Secondly, Cathay Pacific’s continued price cutting and capital purchase strategy began to show significant results. The organization posted income of $642 million, a jump of 130%.

In 2001, the whole air sector suffered a huge blow in the September eleventh terrorist acts. As a result, flight travel drastically declined, influencing all the businesses. Cathay Pacific’s response to this business weather was to maintain its strategy of cost reducing and purchase. In 2003, Cathay Pacific cycles encountered another catastrophe in the form of the SARS crisis.

The SARS problems was specifically troublesome to get Cathay Pacific because Hong Kong was referred to as “ground zero” for the syndrome. Travel and leisure and flights to Hk rapidly rejected. As a result, the company lost up to $3 mil a day. Reacting, Cathay Pacific dramatically slice services around its network by a lot more than 45%. The company also grounded 40% of its routes.

In 2005, the SARS crisis experienced died straight down and standard air travel experienced resumed. Cathay Pacific proceeded to invest intensely in upgrading its in-flight services. Such upgrades included: new in-flight entertainment and greater, comfortable business class and first class cabin rentals. As a result of the prior years, the airline likewise decided to redouble on the freight section in a bid to hedge the risk of abrupt declines in passenger travel and leisure. From 2005 and onwards, Cathay Pacific cycles saw a 60% increase in passenger traffic (in comparison to 2003) and its cargo volume level also elevated by 12-15.

8%. At the same time however , Cathay Pacific also saw it is costs embrace terms of in-flight solutions, labor and landing expenses. Additionally , the overall rise in energy resulted in a cost increase of 25% pertaining to the flight.

TAKING A LOOK AT THE COMPANY AND AIRLINE INDUSTRY By making use of various tools to assess the external environment and inner attributes of Cathay Pacific it really is clear that there a few peculiar issues in the aircarrier business (refer to Appendices A – C). Rising fuel costs, natural problems and diseases and deregulation of the industry can pose critical threats for this business. However , Cathay Pacific enjoys a top reputation and a strong Asian economy exactly where consumers are flying more frequently due to increasing throw away income. Collectively, Cathay Pacific cycles needs to assess the opportunities which might be presented to it in a highly competitive industry by simply focusing on the real key issues as discussed eventually.

KEY PROBLEMS _HOW TO HANDLE COST DECREASE WITH THE PROS AND CONS IN THE FLIGHT INDUSTRY WITH NO COMPROMISING ASSISTANCE OR TOP QUALITY? _ This issue is the main concern for Cathay Pacific considering that the airline prides itself in featuring “Service from the Heart”. Best Cathay representatives have seriously endorsed this provider mission declaration and as a result, the company has been the person receiving several sector awards, which recognized Cathay Pacific intended for quality assistance. This is Cathay Pacific’s differentiating factor in a heavily competitive industry.

The company has used several years to form american presto association and must as a result strive to keep this association inside the consumer’s thoughts to remain competitive. RECOMMENDATIONS: Controlling and respecting the Union, working with those to cut costs, etc . This will make sure that employee morale is not really affected by any kind of cost cutting initiatives and employees continue to be motivated to provide top quality in order to Cathay individuals. This will as well avoid interruptions in service and cancellations of flight as a result of personnel attacks.

Employ part time positions to take care of fluctuations inside the market and also to handle seasonality. This will help to reduce overall labour costs. Debordement staff among different spots at diverse peak times. This will raise the efficiency of Cathay Pacific’s labour pressure and arranging. Reduce fleets during high and low seasons.

Purchase aircrafts with newer gas efficient technology Government partnership to subsidize fuel costs (leverage Cathay’s government relations). Point to point vs . Link spoke (if possible -forecasting which areas will be applicable) Allocation of some personnel to Monster Air during low season. Leveraging strong dedication programs to make it more desirable for flyers to stay together with the airline _HOW CAN CATHAY PACIFIC KEEP GOOD CONTACT WITH ITS PERSONNEL? _ This is certainly a critical issue for Cathay Pacific because the company relies on its award-winning customer service to differentiate on its own from other air carriers.

 Staff people are Cathay’s front-line staff to the clients therefore retaining good staff morale and attitude is a critical issue. Simply stated, in case the staff is not happy, income will drop. Cathay Pacific cycles needs to invest equally into their staff and as much as it does into its mechanical updates.

Cathay Pacific cycles has had as well as of strained relations using its labour supervision. It should consider adopting the next recommendations: RECOMMENDATIONS Leverage Asia’s large labour market to recruit people who have lower wage expectations. Utilize training methods from other companies in other companies known for quality service, just like allowing fresh trainees to fly on side Cathay Pacific cycles as a customer to get a different perspective and give suggestions for improvement (Practiced by Ritz Carlton).

Reconfigure arranging that allows personnel who fly long ways to stay in the destination city for several days to relax, instead of flying again right away. Provide employee advantages such as health spa discounts/packages in partnership with hotels Work with an ombudsman as a neutral party to help employee difficulties with the company. Offer continuing studies in dialect courses for employees to update themselves (In order to showcase a long lasting career progress and richness with Cathay) Promote the “personalization” of in-flight personnel (such as including staff profiles in gossip columns in flight) and designate staff to specific areas to get familiar passengers with his/her steward/stewardess.

Employ “ownership” and earnings sharing principle similar to Westjet and South west Airlines to encourage personnel to take take great pride in in the business and to be accountable for benefits. Group overall performance incentives in order to promote teamwork (leverage Asian collectivist culture) and incentive the entire crew’s performance together. _HOW SHOULD CERTAINLY CATHAY DISTINGUISH ITSELF FROM THE OTHER AIRLINES? _ The combination of the developing popularity in air travel and the “deregulation with the skies” simply by governments (e. g. India) has led to a growing number of direct and indirect competitors (see Competitor Evaluation in Appendix D) for the at that moment, such as fresh alliances and low-cost service providers.

Cathay Pacific cycles must therefore find a way to keep its relevance to the market and still appeal to air tourists. RECOMMENDATIONS: Innovative partnerships with popular high end companies including Louis Vuitton. Cathay could design the interior of any plane in partnership with Louis Vuitton to reinforce its high quality image and appeal to the tastes of local people who also love luxury brands.

Leveraging its unique Oriental and United kingdom history by providing fusion-type services (East fulfills West) such as dim amount meals and British design tea times in-flight Enhance the appearance of in-flight staff through redesigned outfits that are unique to Cathay Pacific and the Hk area. New types of in-flight entertainment such as trend shows on board Maintain an in depth customer associations marketing databases that can customise a traveler’s experience based upon their person preferences (e. g. if a passenger loves drinks wine beverage on their travel arrangements, a member from the crew will record this in the passenger’s profile and ensure a glass of wine beverage is waiting for them when they board the plane).

Strengthen customer service simply by starting a survey motivation during the airline flight with bonuses to individuals for participation (a small gift for example a keychain, suitcases tag, good fortune draw) Supply a “stretching room” during very long hauls, which allows passengers to exercise although on-board. APPENDIX A: INFESTATIONS ANALYSIS: AIR TRAVEL INDUSTRY IN ASIA-PACIFIC POLITICS & REGULATORY The flight industry is usually heavily controlled by the authorities and the surroundings services negotiating (ASAs) in each country. In the past governments favoured countrywide flag carrier airline.

Governments still go towards safeguard of nationwide airlines and sometimes support these types of airlines through economic hardship and recession. Airline market is beginning to open up. Internationally low-cost service providers have begun to emerge available in the market as they are today able to services domestic tracks.

Fairs are regulated by the Orient Air carriers Association (OAA) in Asia. Discussion of wide open skies contract between the U. S. and China provides in more competition for regional aircraft companies. ECONOMIC Strong Asian overall economy, especially with the economic growth in Chinese suppliers. Increasing gasoline costs which in turn represent thirty percent of flight operating costs are appearing a menace to working margins.

Growing industry in Asia likely to grow at a substance annual growth rate of 9. 3% between 2005-2010. The career levels in Asia continue being very strong, consequently people have more disposable profits for travel around. Asia Pacific carriers managed the biggest increase in load elements of 1. 9 ppts, to 74. 6%, well above the next-best place, North America (+0. 7 ppts) and European countries (+0.

6th ppts) plus the global typical +0. on the lookout for ppts Craze towards tactical global complicite between airlines continues to boost. SOCIO-DEMOGRAPHIC Travelling in Asia and Malaysia have increased in popularity as the Asian overall economy continues to growth. There is more international travel around, 134 , 000, 000 international travellers were carried on Asian Pacific airlines in the past year, up 4. 5%. Traffic in earnings passenger kms (RPK) conditions rose 3. 9%.

Since the baby boomer generation age range they will have got time and disposable income pertaining to travel in retirement. The fear of terrorist attacks has increased airport safety measures around the world. Frighten of the Avian flu vulnerable to impact the airline market, but hasn’t had a serious impact on the industry. The International Surroundings Transport Association has been around close contact with the WTO to manage the problem to avoid one more crisis like SARS.

Craze towards both super-premium flight companies or low-cost carriers on the market. Consumers are buying a luxury knowledge or a low-cost experience “Demand for high-class travel is strong, propelled by global wealth, robust business travel around and growing desire to circumvent the hassles of long reliability lines, crowded seating and greasy international airport food. While airplane cabins and in-flight service might be similar, there’s more differentiation on the ground — and more require from people willing to pay for speed, comfort and efficiency. ” Loyalty courses and atmosphere miles will be growing in popularity. TECHNICAL Technological developments in on-line ticketing and e-tickets possess virtually removed traditional, imprinted tickets in the industry.

Online check-in software has reduced a lot of overhead costs and also have helped to enhance traffic flow at airports. In-flight entertainment, internet is now provided on-board the aircraft and also fax, telephone and satellite television for business travellers. APPENDIX N: PORTER’S FIVE FORCES FOR THE AIRLINE SECTOR STRENGTHS WEAKNESSES Strong brand name in Asia as a best airline – received air travel of the season award 5 years ago from the OAG.

Hong Kong and China are the cause of 40% from the company’s revenue. Well located for future growth. A diversified collection of sections, has bought business to attain forward and backward the usage along the source chain (see Appendix Back button on organization units). Solid business growth, especially in providing, laundry, and other services portion +46% more than 2005. A geographically different portfolio of routes, spans the globe.

A diversified portfolio of food brands around multiple categories. Strong embrace passenger and cargo expansion indicating growth in market share. One of the best frequent flyer applications in the world. Speedily decreasing margins and a decline in operating effectiveness.

The company’s operating margins have lowered from doze. 3% in 2004 to eight. 6% in 2006. The company’s net margins have reduced from 10. 3% to 7% from 2004 to 2006.

Weakened employee contact continue to problem the organization. Business has a good poor staff relations since the 1993 affect. In 1999 aviators revolted against management leading to the cancelling of 1, 500 flights following management declined to discuss on pilots’ demands pertaining to improved doing work conditions and increased pay. In 2006, the company dropped two rules suites associated with a breach in contract for increased cottage crew pay out. OPPORTUNITIES DANGERS Leverage shipment business as the Asia Pacific freight market continually show double-digit growth and accounts for 15-20% of the world shipment market.

Financial growth in Asia, specifically China and India, in which Cathay Pacific has a well-established brand name. Discuss of worldwide travel to get Asia Pacific is supposed to grow from 25% in 2003 to 31% in 2023. Enormous opportunity for income growth.

Growth in Cookware tourism because the economy continue to be rise plus the region becomes more travelling friendly and popular with tourists from all over the world. Rising gas prices, which in turn account for thirty percent of working costs in the marketplace. This could considerably affect Cathay’s profitability. Continued de-regulation inside the airline market. Competition by low cost providers in the US and Europe continues to rise.

Affordable carriers are usually growing in popularity in Africa as well as the Middle-East. This might result in loss of revenues and increased selling price competition available in the market which could additional depress margins. Foreign currency changes may affect the company’s profits.

The company need to make sure that it hedges against any kind of currency risk in the future to maintain profitability. Labor Costs will be higher than the industry average which could possess a profound effect on earnings in an downturn in the economy. Unpredictable, intense weather could threaten earnings.

Fluctuations throughout the economy and the threat of terrorism and illnesses (Avian Flu). The airline sector is particularly susceptible to world catastrophes and downturns in the economy. APPENDIX C: SWOT ANALYSIS CATHAY PACIFIC 3 years ago APPENDIX M: COMPETITOR RESEARCH COMPETITOR # 1 – SINGAPORE AIRLINES (DIRECT COMPETITOR) Singapore Airlines is a direct competitor of Cathay Pacific cycles.

Both companies are based in Asia and appeal to a market segment that is offering a premium pertaining to excellent assistance. The following is a brief overview of Singapore Airlines. SINGAPORE AIRLINES WOULD NOT DO WELL MONETARILY IN 2006 WHEN COMPARED WITH 2005 The organization recorded earnings of approximately $8, 233. 6th million during the fiscal year ended March 2006, a boost of eleven.

1% more than 2005. The operating earnings of the organization was about $748. eight million during fiscal 12 months 2006, a decrease of 7. 9% more than 2005. The internet profit was approximately $765.

7 mil in financial year 06\, a loss of 8. 3% over june 2006. MARKET SHARE -DEMAND FOR SINGAPORE AIRLINES IS GROWING EVERYWHERE…EXCEPT FOR EUROPE… Singapore Airlines works 669 every week flights to 64 urban centers in thirty-five countries. East Asia, SIA’s largest geographical market, made up 51. 1% of the total revenues inside the fiscal yr 2006. Revenues from East Asia come to approximately $3, 429.

1 million 5 years ago, an increase of 6. 5% over 2006. Europe made up 17. 3% of the total revenues inside the fiscal 12 months 2006. Income from The european union reached roughly $1, 162. 1 mil in 2006, a decrease of 0. 6% over 2005.

The west Pacific accounted for 14. 1% of the total revenues inside the fiscal 12 months 2006. Profits from The west Pacific reached approximately $947. 9 mil in 2006, a growth of 6. 7% above 2005. Americas accounted for on the lookout for.

1% of the total earnings in the money year 2006. Revenues coming from Americas reached approximately $611. 8 , 000, 000 in 2006, an increase of 7. 8% over 2006.

West Asia and The african continent accounted for almost eight. 3% from the total earnings in the money year 2006. Revenues by West Asia and Africa reached roughly $553. three or more million in 2006, an increase of seven.

5% over 2005. The organization extended the network to Abu Dhabi, Hyderabad, Karachi, Lahore and Moscow. In addition , frequencies were increased to Adelaide, Bangalore, Beijing, Guangzhou, Ho Chi Minh Town, Hong Kong, Kolkata, Penang, Perth and Taipei.



SIA has a most youthful fleet of aircrafts. The company operates 90 traveler aircraft with an average associated with its fast is about half a dozen years. The company has also recently taken the delivery of its 61st Boeing 777 aircraft, making the flight the owner of the youngest fleet of aircrafts.

A young number of aircrafts features immense importance in the aircarrier industry since it keeps protection costs reduced in addition to lessening security concerns related to the performance from the fleet. FUEL COSTS CERTAINLY ARE A LONG-TERM PROBLEM The Group’s expenditure about fuel was over $4. 2 billion in 2005-06: 35% of total expenditure.

This pertains to an increase of around $1. a few billion over the previous 12 months. Before that, the average expenditure on gasoline was about $1. 8 billion dollars a year for 3 years. Small can be done by airline market about energy costs.

One option for Singapore airlines should be to strive for savings at the margin, through advancements in soaring practices, quest for new plus more direct soaring routes, extension of fat loss programs to hold aircraft lumination, and creating more cost-effective hedge programs. The business will also continue the plan of retaining a young fleet of aircraft, to benefit from the most advanced technology in the area of fuel consumption.

Every facts extracted from Marketline (Datamonitor) Website: COMPETITOR RESEARCH – SURROUNDINGS INDIA You ought to conduct a competitor examination involving Atmosphere India since analysts forecast that India will become one of the largest industry for flights within the forseeable future. India, together with China, can be projected to become major monetary power in the world therefore Cathay Pacific should be diligent in capturing the Indian market early in order to capitalize a few years down the road. INTRO Air India is national flag jar of India, with its headquarters located at Mumbai, India.

It offers a comprehensive portfolio of services, which include passenger vehicles, cargo, surface service, engine overhaul solutions, etc . Presently, Air India and its additional have forty seven aircrafts altogether. Air India merged with Indian Airlines, using the brand “Air India”. In 2004, the air travel expanded the organization to cover even more market to low-cost place by starting Air India Express.

Presently, the aircarrier is considering merging with Jet Air carriers, another American indian carrier, to be able to increase market share of general Indian flight companies and remain competitive in global market. Additionally , Air India is taking a chance to join Star Alliance, the most important alliance, to expand it is network. SPOTS At this moment, Air India lures to 95 destinations around the globe.

Africa: Kenya, Tanzania Asia: China (HK, Shanghai), Japan (Osaka, Tokyo), South Korea South Asia: Bangladesh, India, Pakistan Southeast Asia: Dalam negri, Malaysia, Singapore, Thailand South west Asia: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arabic Emirates European countries: France, Indonesia, UK America: Canada (Toronto), US (Chicago, LA, BIG APPLE, Newark) It includes nonstop plane tickets between India and London, India and New York, and in addition has programs to broaden more non-stop flights to other parts individuals such as Bay area, Washington POWER. CODESHARE AGREEMENT Air India has several codeshare arrangement with other airlines, such as Air flow France, Air Mauritius, Aeroflot, Emirates, Kuwait Airways, Kranich-konzern (umgangssprachlich), Malaysia Flight companies, Singapore Air carriers, Swiss, Thai Airways, European Airlines.

These kinds of codeshare deals allow the aircarrier to grow its network to cover many parts of the earth. ISD Air flow India features three assistance classes: top class, executive class and overall economy class. The airline is promoting seats for people who do buiness class and economy school on 747 aircraft. Almost all classes possess personal TV, including two TVs in walkway and projector screen around the wall. Additionally, it has flat bed chair for top notch passengers.

Meals on board was awarded since finest in flight cuisine in 1994 and 2003. There are numerous choices of meals for individuals. REFERENCES APPENDIX At the – ADVICE TO FIGHT NEW COMPETITION FROM CHINA As mentioned earlier, analysts predict Chinese language travellers for making up the bulk of new vacationers as a result of the country’s flourishing economy.

As a result, it can be presumed that new players in the airline sector will come out and sign up for the current fray. In anticipation of this event, the following recommendations are made to Cathay Pacific. These types of recommendations keep pace with allow the at that moment to protect the current consumer bottom while attracting new vacationers as well. SUGGESTIONS: As many Chinese language flyers will probably be flying for the first time in their lives, Cathay Pacific cycles can goal this section through advertising and advertising campaign.

Cathay can promote the expertise of flying as a rite of passage – something critical that should be kept in mind. Since these types of first timers could be anxious, Cathay Pacific can run a group of programs/commercials upon “How to fly” – to educate and attract potential travellers. Cathay Pacific should also hire more Mainland Oriental workers to cater to the increasing number of Mandarin vacationers. Cathay can take out promotional pricing during peak getaway seasons in China (Golden Week). The actual market pertaining to offering affordable, short-haul travel arrangements is huge.

If Cathay can deliver good value and good encounter, it can present itself as a very hostile substitute to railway travel (the current preference of Mainland Oriental travellers) To diversify passenger’s culinary likes, Cathay can offer cuisines motivated by distinct Chinese pays In addition , Cathay Pacific can take culturally motivated promotional prices such as $888, etc . Cathay Pacific may capitalize inside the proximity between Hong Kong and Mainland China and the sum of business between the two regions. Therefore, the company can provide “All you can travel” deals, which are restricted to certain spots between the two regions.

Repeated HK – China travelling – any girl travel (restricted locations) Promotional pricing $888, etc . Purchasers (Low – Med) Bargaining power of buyers is low to medium. Although there are many different airlines to choose from, travellers are constrained by period and the routes of each airline. Frequent flyer points have made switching costs relatively loaded with some cases. Ahead integration is definitely impossible as a result of barriers of entry. Suppliers (Med-High) Bargaining power of suppliers is med-high.

Supply of aircrafts is focused by two companies, Boeing and Airbus. The limited number of players lends large power on the market to both of these companies. The potency of supplier just like caterers, and launderers happen to be low, because airlines can easily combine backwards to supply these solutions. Substitute Items (Low) To get regional flight companies the threat of alternatives is high, because the length is shorter.

For intercontinental carriers due to the speed, time and cost savings the threat of substitutes is incredibly low. Limitations to Access (High) Obstacles to entry are substantial, as the industry needs high capital start up costs and authorities regulation awards regulates the routes and prices for the airline market. Economies of scale happen to be beneficial to accomplish lower prices when ever purchasing energy and aircrafts.

Frequent flier points and brand loyalty is another hurdle to access for new firms. Firm Competition (High) Competition is excessive amongst organizations. Differentiation can be increasingly hard, especially with the emergence of low cost companies. High competition leads to cost competition containing kept profitability low in the industry. Cathay Pacific decreases 55% in year AIR CARRIERS HONG KONG COMPANY WARNS OF TOUGH 1998 AS HARD ANODIZED COOKWARE DOWNTURN MINIMIZES PASSENGER A LOT:; [London edition], Ridding, John.

Monetary Times. Birmingham (UK): Scar 12, 1998. pg. thirty seven Mecham (2000) Jacob, Rahul. Financial Times. London (UK): Aug on the lookout for, 2001.; s. 25 Mecham, Dennis (2003) EPIDEMICS & ECONOMICS Recently, Asia’s frontrunners thought SARS would go. Now, they are really settling set for a long, unhealthy struggle.

At risk is the energetic economic version that made the region these kinds of a development powerhouse. Business Week. New york city: Apr twenty-eight, 2003.; p. 44 Gasoline price will certainly ‘hurt’ Cathay AIRLINES:; [LONDON FIRST EDITION], LATER ON LEAHY and ENID TSUI.

Financial Occasions. London (UK): Aug doze, 2004.; g. 25 IBID Datamonitor on Cathay Pacific Datamonitor, Asia-Pacific Air travel Industry

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