International Management at Cathay Pacific Airline - Research Paper Example

International Management at Cathay Pacific Airline Introduction Strategic management processes are important for management of organizations. Management teams in organizations need to draft strategic management goals. These goals need to be in line with firm’s mission and vision statements. On the other hand, strategic management process requires drafting organizational policies in line with government policies on the industry. Further, such strategies need to benefit organizations stakeholders, management teams, customers and other players. Strategic management in organizations assists in decision-making. Strategies additionally, assist in developing long-term as well as short plans (Kärcher,1996). Cathay Pacific Airline has undergone various transformations over the years. The company has seen better and worse economic days. The company’s strategic goals over the year have seen the company increase its market share. The company has further ensured an observation of its corporate responsibility objectives. Through its undertaking in the market, Cathay Pacific has been able to meet its mission and vision needs, overcome challenges of its internal and external environment. The company’s strategy moreover ensures that the firm provides efficient services to customers (Peng and Yadong, 2000). Strategic influence of this company ensures that the company apportions resources appropriately. Such strategies ensure that organizations meet its advertising and marketing goals. Strategies ensure beneficial organization culture transformation. Proper strategies on human resource departments assist organization manage employee needs as well as organizational needs. However, for strategies to have positive impacts on organizations, managers need to consider undertaking SWOT analysis in organizations (Teece, Gary and Amy, 1997). SWOT analysis as a tool in organizations assist in providing information on organizations strength, weakness, market opportunities and threats. 1: Strategy management process However, for organizations to draft proper strategies, a number of stages need to be surpassed. These stages are important to strategic management teams since it provides a clear understanding of goals. Goal setting is the first of these stages. Goal setting stage in strategy formulation involves clarification of business vision and mission. At this stage, organizational strategy formulation teams define long term and short-term goals (Helfat, 2009). Strategic formulation process need to ensure that goals set is understood by every member in the organization Cathy Pacific Airline understands that strategies are not set of rules and procedure. The organization understands that there is a psychological basis to strategies. Therefore, organizational strategy formulation teams at the organization observe these processes of strategy formulation. The next step after goal setting relates to the analysis. The analysis stage of strategy formulation shapes other stages to strategy formulation. Analysis ensures that organizations gather adequate data relevant in the accomplishment of corporate vision. The focus of this stage is to ensure that individuals understand the organization as a sustainable person (Doganis, 2002). Such analysis will venture on internal as well as external influences. While analyzing organizational strategies different attributes surfaces. These attributes relates to companies weakness and strengths treats and opportunities. The next stage to strategy formation is strategy formulation. At the formulation stage, organizations need to evaluate their potential to reaching corporate set goals. Such evaluations will assist the organization identify its financial strength. Cathy Pacific Airline observes this step with caution. For an organization, strategy formulation for decades has led to proper management of activities. This stage assists the organization fund different department activities. It also assists in analyzing needs for external funding (Cathy, 2012). The next stage to strategy formulation involves strategy implementation, evaluation and control. Strategy implementation is concerned with action. At this stage, strategies are put into action. It involves the management of employees’ actions, directing of funds and the execution of plans (Freeman, 2010). Evaluation and control step assist in providing corrective measures to wrong moves. Controlling, therefore, involves monitoring activities. Controlling of strategies is important because it provides for a repeat of strategy in cases of failure. 1: Cathy Pacific History Cathy Pacific Airline began operation in the year 1946. Two ex-air force pilots founded the organization, one an American known as Roy Farrell and an Australian by the name Kantzow. The organization began its operation in the city of Hongkong. With a starting capital of HK$1 from both men, the organization was registered to start operation in Shanghai. It is important to note that the company initially started in its operations, in Shanghai. It was during a move to Hong Kong that the firm began formally. The company flights saw planes fly on routes between Sydney, Singapore, manila and Bangkok. In the year 1948, the management team of Cathy Pacific implemented a financial strategy. It was during this year that Butterfield & Swire bought 45% of company’s shares. It was also during this year that the company was registered under the name Cathy Pacific Ltd. Later on during their business interaction, Swire acquired 52% of the company. The change in ownership of Cathy Pacific had its implications on the company. The company had to change its management perspectives, organization culture and strategy. The addition of new shareholders in organizations causes a shift in the management of organizations. New shareholders might enter organization’s transforming strategies and instituting new procedures. For Cathy Pacific Airline, the acquisition of ownership by Swine Group led to a shift in strategy. The introduction of a new shareholder to the Airline meant that the organization had to evaluate its mission and vision. New shareholders, on the other hand, enter organizations with additional funds (Freeman, 2010). These funds are essential in fulfilling company’s goals as well as meet expansion needs. Cathy Pacific Airline has undergone a lot of challenges and expansions over the 60s, 70s and 80s. The company prospered largely in the year 1960s. This prosperity ensured the company attained its expansion strategy by buying its rival Hong Kong Airways. Between the years, 1962 and 1967 the company experienced double-digit growth rates. It was during these years that the Airline made its first international flight to Osaka Japan. In the year, 1964 Cathy Pacific Airline acquires its first jet engine Aircraft. Therefore, one can say the Airline progression in the market took several years at a steady rate. Even though one can concentrate on the positive development of the organization, Cathy Pacific underwent diverse challenges. The company survived labour relation issues, financial pressures and treats from terrorists’ attacks. Therefore, with all of these influences, the organization transformed its strategies and policies. Such strategies saw the organization deal with an employment dispute, ensured that organization had adequate funding and that new Aircrafts acquisition to meet market needs (Helfat, 2009). These changes in strategies have had long-term implications on the firm. Some of such implications relates to the organization-changing employee’s compensation structure, additional cost of operation and management. 2: Cathy Pacific Mission and Target Market Cathy pacific Airline vision and mission statements concentrate on the business aspects of the organization, the environment and safety of passengers. The mission of the organization is to provide excellent high-class air transport. In doing these, the organization wish to observe stakeholder and community needs. The vision of Cathy Pacific is to be the most admired company in terms of air travel (Doganis, 2002). Therefore, Cathy Pacific has endeavoured to provide passenger and cargo services from its Hong Kong branch. In this target market of the company, together with Hong Kong Dragon Airlines the airline has an extension of networks covering over 60 destinations around the globe. The target group for the organization include corporate entities, upper, middle class and upper middle class of customers. The company has been one of the best airlines in the Asian as it was voted second best airline in the year 2002 by Skytrax. The target market for the organization is based on the Asian market with new possibilities opening up in other regions. In relation to the current market portfolio of the organization, Cathy pacific offer cargo as well as passenger air transport to over 60 destinations (CAPA, 2012). As a strategic management approach, the organization has linked its mission towards organizational practice. Employees of the airlines understand their roles in line to company’s overall strategies. Individual strategy goals in the organization has increased motivation rate, promoted efficient service delivery and better returns on investments. 3: Micro and Macro Environments for Cathy Pacific Airline Cathy Pacific Airline has its own challenges in relation to internal environments as well as external environments. Microenvironment for the organizations relates to company’s internal affairs. These environmental challenges arise as because of organizational structural architecture, influence of employees (Ruske, 2011). The microenvironment for Cathy relates to its mode of operation, internal management structure and policy statements of the organization. The airline operates Boeing and Airbus aircrafts. Therefore, Cathy Pacific needs to have competent management teams as well as workers. The airlines microenvironment aspect consists of management influences, employee interactions and stakeholder interactions (Teece et al 1997). Microenvironments for the organization relates to its strong financial position. The organization uses sophisticate innovative processes and products. Such influences have made the airline enjoy higher profits as well as increase its market position. The organization moreover has strengthened its ties with other market players. This strategy has ensured the airline penetrates markets easier. Its strategic manoeuvres have seen the company create a brand, which attracts investors as well as customers (Cathay, 2011). In the Asian market, the airline has experienced labour relations in relation to the acquisition of Dragonair. Another internal environmental factor for the organization relates to funding of operations and new products. In relation to the company’s external factors, the organization faces the hurdle of various regulations. Since its aircrafts traverses over wide regions, foreign laws and policies bind the organization. The organization further faces the challenge of terrorism attacks and world financial difficulties (Ben-Yosef, 2006). Other external environment challenge for the organization relates to competitions from other players in the Airline industry. Environment also relates to the climatic changes that at times affect flight takeoff or landing for airplanes. In relation to the Airline business, customers are divided into various groups. These passengers may be corporate customers, tourists, students and other passengers. In this business, organizations need to provide high quality services in flight and other safety services. Cathy Pacific offered great services in flight as well as other support services. There are those customers who place emphasis on reliability, prestige and safety (Holloway, 2008). The airline satisfies these needs through its qualified workforce and procedures. The company’s strategies of attracting more passengers have led to it offering special promotional offers and packages (Briscoe and Randall, 2004). This has led to an increase in the number of tourists travelling and other passengers. The macro environment for Cathy Airline affecting its strategy includes the market growth within Asian economies, high competition within the industry. These competitions have led to rivalry between the firm and government sponsored airlines, competition on the quality of services and from five star airlines (Cathay, 2014). These strategies are essential for the organization in the development of various growth strategies. Other macro environmental pressures include product development differentiation and market penetration. 4: Company’s resources and competencies Cathy sources of finance come from profit from its flights and from floatation of shares in the stock exchange. The company wished to fund its development projects and the management team saw it fit to float shares over the security exchange. According to statistics of the year, 2010 Cathy Pacific Airline gained a profit of HK$ 14,048 million. Although in the subsequent year, the company made a loss. This loss comes from the influence of the global major economies. There has been a demand for premium class travel, which has brought funds for the organization. However, fuel is perhaps the most expensive commodity for the organization. This, therefore, has had an impact on the operating cost of the organization. By the end of the year 2011, passenger revenue for the organization had increased by 14.2% compared to the previous year CAPA, 2012). On the other hand, cargo revenue increased by 0.3%. These revenues have been of great assistance to the organization. With these funds, Cathy Pacific has been able to replace older aircrafts and to increase its revenues substantially. Although in order for organizations to perform their tasks effectively, strategic considerations need to be placed on organizational competencies. In relation to competencies, organizations need to have adequate machinery and people (Helfat, 2009). Organizations additionally need to have strong organizational culture and observe its corporate responsibilities. According to a report by Cathay (2014), Cathy Pacific Airline’s culture ensures that the organization meets its vision of being the best airline in the market. The organization management teams understand that the industry undergoes various transformations. It has come to the realization of these team members that when team members get the support of the organization they grow and excel. Cathy organizational cultural perspective bases on the principle of collaboration (Lovelock, 2004). The teams in the organization cooperate in their tasks just as families would do. Team members in the organization assist one another overcome challenges. Professionals get a chance to share their experiences and the organization supports employee’s personal growth initiatives. In Order to increase its competitive level in the market, Cathy Airlines has teams of competent employees. These employees start from the pilots to those offering support services. Cathy Airline’s competency level ranks in the market. This is attributed to the fact that the organization utilizes the services of competent managers, pilots and other support services. The Airline industry is a capital-intensive venture and vulnerable to external environments (Kärcher, 1996). The organization had to scale up its employees levels of competencies to meet its current 110 destinations. The airline has traditionally trained pilots for 200 hour in flight times and in jet simulators. To ensure that the organization has competent employees, the organization has ensured that graduates for the program undergo restricted type rating. Such employees undertake 3 to 5 years training as cruise co pilots before being enlisted as first officers. Cathy Airline’s key competencies include knowledge on Aviation, aircraft control, workload management, communication, problem solving, situational awareness professional responsibility and leadership (Teece et al 1997). The Airline has several department heads with diverse duties. In order one to serve in the management positions one need to be competent and experienced. In relation to its corporate responsibilities, Cathy Pacific Airline is committed to performing its corporate responsibility task. The organization has invested heavily on the community. The organization agrees to the fact that communities share in their success. The organization has gone ahead to promoting endeavours that ensure communities assist the organization meet environmental, operational and social goals (Cathy, 2012). The organization further encourages its teams to fully participate and support Corporate Social Responsibility endeavours. 5: SWOT analysis of Cathy Pacific A closer look at the swot analysis of the airline reveals the company’s strength, weakness its opportunities in the market as well as treats. Cathy Pacific’s strength on the market relate to its presence in the market for a long time. This attribute promotes the organization in the market since it has already established its customer base. The organization also has a satisfied customer base with nearly 30 million using its services on a yearly basis. According to the annual report on the company for the year 2011, the airline has over one hundred and forty fleet of aircrafts (Cathay, 2014). Another important strengthening aspect for the organization, relates to its ability to traverse a 110 destinations and 35 countries. In response to organizations weakness, Cathy Pacific airline the organization relies heavily on international onward moving traffic. This strategy has an impact on organizational management and strategy implementation. The organization faces the challenge of work economic transformation. In relation to its weakness, the organization faces diverse policy and regulation in countries of operation. According to the annual report on the organization of the year 2011, the organization faces the challenge of new emission policies by the European market (Cathay, 2014). It is imperative to not that the organization faces stiff challenges in relation to tough competition in the airline industry. Some of its competitors include Air India, Singapore Airlines and Jet airways. In relation to company’s opportunities in the market, Cathy airline may use different approaches in approaching market needs. The organization has the opportunity to open new branches and acquire new planes. This is possible since the air transport has been on demand. The organization in order to maximize on its potential may wish to leverage on special customers the organization has the potential of increasing its presence in most popular travel destination (Lovelock, 2004). According to an annual report by Cathy Pacific, it is prudent to note that there has been an increase in fuel costs. This increase has negative implication on the profits of airlines and the cost may pass to consumers. The global economy on the other hand has had an influence on the airline (Ben-Yosef, 2006). The decreasing value of investments, interest rates and other policies promote additional cost to an organization. Additional costs have led to an increase in labour costs. The organization further faces the challenge of treats from competitors in the market. 6: Business level and corporate level strategies Strategic Alliances/ market penetration Cathy Pacific Airline has had various business and corporate level strategies. These strategies have assisted the organization maintain a competitive edge in the market. Some of these strategies by the organization include the formation of strategic alliances. The other strategy the organization uses is the management of human resources, thus promoting competencies and efficiency within the organization (Cathay, 2014). Strategic alliances has been beneficial to the organization, since it provides opening for new markets, allows for easier access of customer base and in improving market awareness. In response to employee needs and those of the organization, the organization has developed business strategic goals. These goals influence the performance of workforce and in the attainment of corporate goals (Kärcher, 1996). Global Brand Another important corporate level strategy for the airline is the development of a global brand. The organization though its C.E.O and the management team strive to provide global recognizable brand. Cathy airline takes pride to be “Asian Heart’. The organization has established itself as a premium carrier in the market. Despite various competitions from other low cost airlines, Cathy maintains its global brand status (Cathay, 2014). One of its strategy in terms on maintain global status, the organization implemented the management of revenue. This strategy has been of great benefit to premium economy flights. The strategy was effective since the organization reformed its fare policy and even introduced promotions and fan fares. Introduction of modern fleets On a business level of strategy formulation, Cathy Airline owns over 130 modern aircrafts. Modernization of its aircraft fleet is perhaps one of the company’s strategic goals. Despite these aircrafts being in the market for only 10 years, Cathy Pacific Airline wishes to add more modern aircrafts to its fleet. According to reports by the NYC Aviation, Cathy Pacific airline was among the first organization to order for Boeing Aircrafts. The deal for these transactions has a cost of $7 billion (Cathay, 2011). Cathy Pacific airline management teams understand the importance of having modern aircrafts in their fleet. Modern aircrafts are more equipped in terms of efficiency, technology and offer better safety services. On the other side modern fleet of Aircrafts result in the reduction of fuel consumption, increased carrying capacity and seats capacity. Advertising Advertising is another important strategic manoeuvre for organizations. Advertising is important for transmitting information regarding global market information. Through advertising Cathy airline has been able to reach a global audience. Their advertising strategy has seen the organization advertise its services over the internet, on print media and through other forms (Ruske, 2011). Social media platforms as well as using the internet provide organizations ample space to advertise their products and services. These platforms have an advantage over traditional system in the sense that there is a faster response to queries. 7: Company International Strategy Cathy Pacific Airline has developed diverse international strategies to meet global demand and ensure a competitive edge. These international strategies include international alliances, advertising to global platforms. The other strategy involves the observance of social responsibility functions as well as international stakeholder needs (Swayne and Peter , 2012). In relation to formulation of international alliances, Cathy Pacific entered into strategic agreements with Qatar airways. The alliance coded “oneworld” alliance, benefits passengers between Doha and Hong Kong. This strategy under the ownership of two Airlines will see passenger travelled the route at fair prices (Holloway, 2008). The strategy involves institution of daily flights from Doha to Hong Kong. Passengers travelling on business, economy, and premium economy have a chance to earn and redeem flights. Other important strategies for the organization involve promotion of international standards on emissions and in fulfilling international corporate responsibilities (Teece et al 1997). The organization strives to acquire modern aircrafts. Such aircrafts are advantageous to the organization in terms of fuel consumption. On the other hand, such aircrafts assist meet global standards on emissions. New aircrafts further have better technology and safety standards. On the global arena, Cathy Pacific airline has made strategic investment decisions. Such decisions have seen the organization invest in ground handling, maintenance and in catering. 8: Conclusion Since Hong Kong is a global financial hub, what goes on in the country has an impact on the global economy. Transportation for this country is, therefore, of great importance. Cathy Pacific Airline a local airline company in Hong Kong employs various strategic decisions in meeting local market needs as well as international market. The company management team and the C.E.O are held responsible for any strategic mistakes. In traditional organizations, strategic management involves only top-notch executives. However, new approaches to strategic management promote sharing of information and ideas (Findlay et al. 1997). Cathy pacific Airline is an international airline operating over 48 destinations. The organization has a history in being an important provider of cargo and passenger air transport over Hong Kong. However, the organization faces various challenges in its environment. These challenges relate to the level of competition, influence of policies and global economic conditions. Over the last decades, Cathy Pacific has made various investment decisions (Peng and Yadong, 2000). Such decisions represent the organization’s strategic goals. The company concentrates more on cargo services, which takes 75% of all shares. However, there has been an increase in competition in the Aircraft market. These competitions have led to reduction of market share for Airlines. With such events, competitors are likely to limit their fares. Such an influence would lead to a reduction of market share for other players. Other might reduce their prices at the expense of operational management. In order to limit such competitive firms Cathy Pacific Airline need to ensure that their services are reliable. The quality of such services needs to surpass competitors to maximize on returns. Terrorist attacks in the United States of America led to a decline in passengers and cargo (CAPA, 2012). Individuals were worried about their security and safety. To limit such incidences, Cathy Pacific Airlines management need to assure passengers of their safety. The organization might even seek for services of Air marshals in preventing such attacks. Industrial action is an internal influence on organization. Organizations need to limit internal conflict and grievances. The organization needs to have clear compensation strategies. Cathy Pacific Airline on the other hand needs to have dispute resolution mechanisms. The future strategic policies for the airline needs to focus on Advertising, labour relations and on corporate responsibility (Mutzabaugh, 2010). Individuals now wish to practice green organizational practices. Labour relation strategies assist organizations meet its corporate mission and vision. References Freeman, R 2010, Strategic management: A stakeholder approach, Cambridge University Press, Cambridge. Teece, D., Gary P, and Amy S. 1997 "Dynamic capabilities and strategic management," Tyler and Francis, Abingdon CAPA. 2012, Cathy Pacific explores New Growth Opportunities as Pressure mounts in Traditional Markets Airports Data: Centre For Aviation. Accessed from www.centreforaviation.com. Cathay, P. 2014, Customers to benefit from Cathay Pacific/ Qatar Airways Strategic Agreement Between Hong Kong and Doha, Press Releases. Accesed from www.Cathypacific .com Cathay,P 2011, Cathay Pacific Airways Limited: Interim reports, Accessed from www.cathaypacific.com. Findlay, C., Chia, L. S., Singh, K., Australia-Japan Research Centre., Chartered Institute of Transport., Singapore National Committee for Pacific Economic Cooperation., & Institute of Southeast Asian Studies.1997, Asia Pacific air transport: Challenges and policy reforms. Institute of Southeast Asian Studies, Singapore Briscoe, D. and Randall S 2004, International human resource management: policy and practice for the global enterprise, Psychology Press, London Mutzabaugh, B 2010, U.S., European Airlines no Longer world’s Biggest, IATA says. Accessed from www.travel.ustoday.com Swayne, L and Peter M. G.2012, Strategic management of health care organizations, John Wiley & Sons, San Francisco. Lovelock, C., H.2004, Services marketing in Asia: managing people, technology, and strategy, Prentice Hall, Singapore Peng, M W., and Yadong L. 2000 "Managerial ties and firm performance in a transition economy: The nature of a micro-macro link." Academy of management journa,l Vol.43, No.3,pp. 486-501. Ruske, K 2011,Building Trust in the Air: is airline corporate sustainability Reporting take off, accessed from www.pwc.com Cathy, P.2012, En route to sustainability: sustainability report 2011. Accesed from www.caring .org. Doganis, R. 2002, Flying off course: The economics of international airlines. Psychology Press, london Ben-Yosef, E.2006, The evolution of the US airline industry: Theory, strategy and policy, Springer, Dordrecht Holloway, S. 2008, Straight and level: practical airline economics, Ashgate Publishing, Ltd, Burlington Kärcher, K.1996. "The four Global Distribution Systems in the travel and tourism industry." Information Technology, Vol.6 No.2, pp. 20-24 Helfat, C.2009. Dynamic capabilities: Understanding strategic change in organizations. John Wiley & Sons, Malden Read More