Cathay Pacific Airlines - Essay Example

Market Analysis: Cathay Pacific Executive Summary Marketing management is arguable one of the most important activities conducted by an organization. Companies formulate and afterwards implement efficient and effective marketing management strategies with the underlying aim of adding value to the investments made by customers. This involves managing and conducting activities related to marketing and promotion in an effective manner. STP, otherwise known as segmentation, targeting and positioning are relevant strategies associated with marketing that enables a company to establish robust and long lasting customer relationships thereby increasing the customer loyalty and satisfaction level. It is with regards to this fact that the research has endeavoured to conduct a thorough analysis of the STP strategies that have been adopted by Cathay Pacific Airlines till date. This allowed the researcher to analyze the effectiveness of these strategies as far as adding customer value is concerned. This analysis has been grounded on the basis of situation evaluation that enabled the researcher to explain the environment (both macro and micro) in which Cathay Pacific has been operating. By doing so, the researcher was able to justify the strategies adopted by the airline in accordance with the macro as well as micro environment within which the company operates. The nature of this research is purely qualitative in nature where the researcher has attempted to analyse secondary information that is available over different scholarly journals, online databases and other websites relevant to the company of choice. The conclusions and recommendations pertaining to the research have been stated accordingly. Table of Contents 1.Introduction 3 2.Situation analysis 3 2.1. PESTEL analysis 3 2.2. Value chain analysis 5 3.Marketing strategy analysis 9 3.1. STP analysis 9 3.2. 4P analysis 12 4.Conclusion 14 5.Recommendation 14 1. Introduction It is a widely known fact that the world of business is an ever changing environment. In such an intensely competitive environment, a leading business sometimes fails to maintain its position as the market leader as a result of inappropriateness in terms of adapting to the dynamic world (G. T. Haley, U. C. Haley and Tan, 2012; Markus and Loebbecke, 2013). There are certain exceptions where companies adopt prudent strategies that provide them with the necessary ammunition to stay ahead in the race. One such company is the Hong Kong based airline and cargo carrier, Cathay Pacific. The company has long been known to adopt and implement proper strategies which have helped the organizational managers to compete with the likes of airline giants such as Air China, Singapore Airlines, Dragon Air, Emirates and Lufthansa (CAPA Centre for Aviation, 2014). World leaders and academic scholars have been noted praising the market strategies in particular adopted by the company that has enhanced its competency in this fiercely competitive industry. In such a context, the researcher has attempted to understand and analyse the marketing strategies that have been put on place by the company over the last decade or so. The marketing strategy analysis will also encompass a situation analysis of the company thereby allowing the researcher to add more depth and detail to the study. A qualitative study has been prepared in order to document the findings from secondary sources of information. The conclusion and recommendation are purely based upon the analysis and have been thoroughly stated within the study. 2. Situation analysis 2.1. PESTEL analysis Political factor Given the fact that the company operates on a worldwide basis, the factor that affects the company’s operations on a global scale are governmental regulations. Cathay Pacific has to deal with different policies enacted by Governments all over the world and the company has done exceedingly well to surpass any barriers that have been posed by such policies. The managers of this airline have been known to adopt prudent strategies that put them in a position to assess the political scenario of various countries in a better manner and subsequently prepare themselves for any issues related to the political environment (Keller, 2012). Economic factor Economic factors associated with countries also have a certain degree of impact on the strategies adopted by companies as well as the performance exhibited by them. The drastic plunge in the trade of commodities as well as exchange rate fluctuations in Hong Kong had a severe impact on the financial performance of Cathay Pacific. Over the last decade or so, Hong Kong and several other emerging countries experienced unprecedented economic growth. This prompted Cathay Pacific’s managers to expand the company’s operations to the major Asian countries (Keller, 2012). Social factor Enhanced customer relationship management as well as corporate social responsibility is a core ingredient of Cathay Pacific’s business model. The products and services offered by the company are meticulously designed in order to satisfy each and every need of the customers. This enables the company to make sure that the services and products are widely accepted. Provided that, the company values its customers immensely, the managers give their optimum effort in order to ensure that world class travelling experience is provided to the passengers. In addition to that, Cathay Pacific is also known to work on innovative strategies in order to ensure a sustainable environment (Keller, 2012; Loorbach, et al., 2010). Technological factors Given the fact that, technology is undergoing groundbreaking developments over the last decade or so, Cathay Pacific’s managers are increasingly resorting to the use of technology in order to make sure that their products and services are best and unique within the industry. The underlying aim behind such rigorous implementation of technology is to attain considerable competitive advantage. One such use of technology has been to increase the fuel efficiency of aircraft engines in order to cut down on the cost incurred due to the rising cost of fuel (Keller, 2012). Environmental factors Over the last few years, the degree of acceptability of sustainable business has increased by a drastic margin. Governments are enacting new legislations that are aimed towards ensuring that a business is environmentally sustainable. Cathay Pacific is known to be a company that assumes a lot of responsibility concerning the environment in which it is operating and this is one factor that has enhanced the position of this company in the industry (Keller, 2012). Legal factors Cathay Pacific’s business operations are highly regulated and subsequently impacted due to various global legislations. This compels the organizational managers to constantly modify its operational procedures in order to make them adaptable to the newly enacted legislations. The legislations in Hong Kong are quite liberal and are extremely favourable for conducting business as far as operating an airline is concerned (Keller, 2012). 2.2. Value chain analysis Inbound logistics Maintaining steady supplier integration has always been a strategy integrated within the core business model of Cathay Pacific. The underlying rationale behind maintaining such level of integration is to make sure that the raw materials are procured in a timely and proper manner (Voorhees, McCall and Calantone, 2011). The primary materials procured by the Hong Kong based airline are fuel, catering stuff, food products and hospitality equipments. As far as the delivery of beverage and food products to the aircraft is concerned, it is done by a subsidiary of Cathay Pacific Airways known as Cathay Pacific Catering Services (CPCS, 2007). The intensity of competition between suppliers is fairly low in Hong Kong because, the every airline in Hong Kong accrues equivalent benefits from the procurement services provided by the suppliers (UK Essays, 2014a). The inbound logistics has proven to be a significant determinant of the airline’s success. Given the fact that timely delivery of products is of extreme importance in the airline industry, the airline company has made sure that every possible measure are adopted that enhances the overall inbound logistics process. Managers of Cathay pacific Airways have always emphasized extremely towards activities that are integral to the organization and the ones that are primarily responsible for adding value for the price paid by the customers. The organization’s inbound logistics department has adopted effective strategies that have enabled them to align the distribution and delivery of required materials within every functional department (Type Pad, 2008). Operations Cathay Pacific has always endeavoured to provide superior travelling experience to its customers. It begins with making sure that the reservation process is convenient for the customers and ends with collecting valuable feedback from the customers post journey. The underlying rationale behind this strategy is to make sure that every valuable opinion is regarded as an improvement factor and the same can be incorporated within the services provided henceforth (Cronin Jr, et al., 2011). The organizational managers emphasize a lot on effective customer relationship management, to convey the importance that is given to the customers. They believe in establishing robust bond with their passengers so as to enhance their loyalty towards the airline (Hinz, et al., 2011). The officials are trained effectively in order to make them stand up to the expectation of people regarding the services provided by this airline. The advent of information technology has enabled the airline company to conduct its operations more efficiently and effectively. Processing the booking request of customers and dealing with customer complaints and issues have become easy now more than ever before. The implementation of information technology platforms has enabled the organizational managers to enhance the efficiency of their business operations. Cathay Pacific Airlines have their own ticket booking website which offers customers with the option of reserving their seats at their own convenience. All these come under business operations conducted by the airline company and till data they have made sure that their operational strategies are directed towards the best interest of their stakeholders. Given the fact that the airline is known for providing a world class flying experience to their customers, the managers have always given their best effort in making sure that every requirement of customers are met with accordingly. Technological development Cathay Pacific has made significant investments behind research and development in order to ensure that their aircrafts are best in line when compared with its customers. The same were ensured by acquiring technological prowess and incorporating the same in order to make the aircrafts fuel efficient. The company has also seen technological development in the form of enhanced aerodynamics as far as the design of their aircrafts is concerned. This enables them to ensure a steady flight for the passengers thereby, making sure that the whole journey is hassle free. Cathay Pacific has also undergone a lot of developments in terms of technology that their aircrafts are environmentally sustainable. Such initiatives have put the company in the forefront amongst the companies who have been known to have indulged rigorously in order to improve the condition of environment (Cathay Pacific, 2012a). Sales and marketing Cathay Pacific has always been known as a company that sells experience and not tickets to its customers. In order to make sure that passengers are able to have such form of experience, the airline comes up with different tour programs that attract passengers from across the world. Ticket prices are set considerably high when compared to other airlines based in Hong Kong in order to attract premium customers. Tickets are also sometimes sold at discounted price with the underlying aim of attracting more and more customers thereby, boosting sales (Kozinets, et al., 2010). This has enabled the company to increase its market share by a considerable level over the past few years (Cathay Pacific, 2013; 2012b). Figure 1: Cathay Pacific Airlines market share (Source: CAPA, 2014) Figure 2: Cathay Pacific Airlines profit margin (Source: CAPA, 2014b) Human resource management Proper management of Human resource is extremely important as the services offered by the workforce has s direct impact a customer’s perception about a particular company which in turn influences their buying behaviour. The service provided by Cathay Pacific’s staff has been considered unique by a considerable number of their customers and this quality of service has proven to be a sustainable source of competitive advantage for the airline company making its superior than the competing companies. That is why Cathay Pacific managers have always given their optimal effort in ensuring that a favourable working environment is provided to the workforce, and consequently make them able to attain self development (Korschun, Bhattacharya and Swain, 2014; Sheth, 2011). Adequate training is provided to the employees in order to make sure that they are properly equipped in providing the best quality services to the customers (Ulinh, 2011). Attaining competitive advantage and enhancing strategic ability has been core idea within the business model of Cathay Pacific. That is why the airline company has designed intensive development programmes for their employees in order to make sure that their services of supreme quality and considered the best in the international market. 3. Marketing strategy analysis 3.1. STP analysis Segmentation Strategy As far as segmentation strategy is concerned, Cathay Pacific Airlines mainly uses as customer behaviour as the primary basis for segmentation. The premium airline company is known to identify three fundamental segments which are: Vacation tourist, corporate executives taking a business trip and MICE travellers (passengers taking trips to attend meetings or for incentive trips or to attend conventions/exhibitions). Therefore it can be seen that the primary basis for segmentation is customer behaviour. Cathay Pacific Airlines’ Preferred Account Program (PAP), MICE endorsement program and Cathay Pacific holiday’s program are the main primary marketing campaign and functional units used to serve the corporate executives, MICE tourists and vacation tourists respectively. Cathay Pacific basically uses behavioural segmentation in order to segment its target market. However, when the market is categorized in terms of geographic segment it is observed that a majority of the airline’s customer belong from Hong Kong and China. A detailed turnover by geographic segment has been provided in the following figure. Figure 3: Turnover by geographic segment (% of total) (Source: Cathay Pacific, 2013) It is believed that Cathay Pacific also adopts a demographic segmentation basis by following a premium pricing strategy in order to target higher income households where passengers prefer comfort in their journey over anything (Kotler, 2011). That is why; the company sets its ticket prices relatively high so as to convey the quality of services that can be expected by the customers. The following is a table that depicts the ticket prices for a one way journey from Hong Kong to London Heathrow for all the classes. Figure 4: Ticket prices of Cathay Pacific and Emirates (Source: Cathay Pacific, 2014; Emirates, 2014; Oanda, 2014) The ticket prices depicted above are considerably high when compared to Emirates which is also an internationally operating airline. Given the fact that Emirates is one of the most reputed airlines in the world, the ticket prices charged by this airline is relatively lower than Cathay Pacific for each of the three travelling classes mentioned above. This justifies the segmentation strategy of Cathay Pacific where the company sets its price relatively high in order to target upper middle to high income customers so as to make sure a gradual increase in their market share. Moreover, the airline also enjoys less competition in its home country precisely because of the fact that, its competitors are not much internationally established. This provides a monopolistic opportunity to Cathay Pacific where the airline has the flexibility to set higher prices knowing that the tickets will be sold regardless of its high price. Targeting strategy The primary target group for Cathay Pacific airlines are corporate electives and the upper middle income households. One of the primary targeting strategies adopted by the airline in order to target the high end customers is to design attractive tour packages for them. The facilities offered in the business class cabins as well as the first class cabins are of superior quality that appeals to the high end customers who avail Cathay pacific flights for long journeys. The airline also sometimes offers these tour packages at discounted price in order to boost the sales of their tickets. Offering superior quality waiting lounges with free Wi-Fi, private escort service for passengers from hotels to airports and vice versa are some other targeting strategies adopted by Cathay Pacific in order to grab the attention of its target customers (Cathay Pacific, 2014). Positioning Strategy Cathay Pacific has positioned itself as a premium brand in front of its customer base. The company follows a premium pricing strategy with the underlying aim of targeting high income households. The prices are set relatively higher than other airlines as it is associated with the airline’s brand image (MacInnis, 2011). Setting a higher price differentiates Cathay Pacific from other contemporary airlines which in turn allow the company to attain a significant competitive advantage over the competing airlines (UK Essays, 2014b). 3.2. 4P analysis Product Given the fact that Cathay Pacific is an airline company, the main products associated with it are the travelling classes offered to the passengers. The airline offers tickets for economy class, premium economy class, business class and first class. Each and every class have their own attributes with first class having the most advanced arrangements. The arrangements come in form of private sleeping beds, private washroom, beverage counter and many more. The first class arrangements have been particularly designed for high end corporate executives mostly. The business class has been arranged for high income holders who have to travel very frequently. It comes with private sleeping pods but have shared washroom and beverage counter (Cathay Pacific, 2014). The products are carefully designed in order to suit the tastes and preferences of the passengers. Cathay Pacific values the loyalty shown by their customers and that is why they always endeavour to collect valuable feedbacks from their passengers in order to learn about the areas that they think needs to be improved. By doing so, the employees are able to make sure that the required improvements are brought about within the products. This helps them to enhance the flying experience of their customers next time. Price Cathay Pacific Airways is known to provide a very good price to quality ratio for their services as far as the feedbacks of their passengers are concerned. This is also evident from the company’s increasing market share over the past few years as well as its competitively advantageous position in the market even though the ticket prices charged by this airline is considerably more than the ticket prices charged by Dragon Air, Emirates, Lufthansa and so on and so forth. One of the underlying reasons behind the high ticket prices charged by Cathay Pacific Airways is the fact that it is a fundamental determinant of their brand image. As mentioned earlier, the airline company has been following a premium pricing strategy in order to cater to upper middle to high income households. The price serves as the differentiating factor as far as the type of services provided in each of those travelling classes are concerned. However, the airline has been known to give its optimum efforts in order to ensure that the quality of services is not compromised (Cathay Pacific, 2013). Place The main international hub of Cathay Pacific Airways is based in Hong Kong international airport. This hub serves as the major distribution point whereby, the airline is able to sell tickets as well as deal with various form of customer complaints and issues. The company has its regional headquarters based in various Asian as well as European countries with the underlying aim of expanding its reach and increasing its flying destinations. In that way, the airline has largely been successful in expanding its base of customers. The company also has an extensive presence in the digital platform whereby, customers are able to buy tickets as well as convey their issues with the help of internet technology (Cathay Pacific, 2012b). Promotion Cathay Pacific Airways conducts the promotion of its products and services effectively via promotional events, social media, TV advertisements, pay per click advertisements. The airline is also associated with a number of travels booking websites who are primarily engaged in promoting the products and services offered by Cathay Pacific. As far as marketing is concerned, Cathay Pacific Airlines emphasizes a lot on the marketing strategies that need to be adopted in order to attract its target customers. Effective promotion of the services provided by the airline is one of the integral strategies adopted by the company. For example, the airline company have gone beyond traditional modes of marketing and have used the newly developed social media marketing platforms to a huge extent. The airline has its own Face-book page whereby they are able to convey their messages and advertisements in order to target business executives. Cathay Pacific marketing team has also adopted another innovative strategy which is to upload their advertisements in YouTube. YouTube serves as a big platform whereby the company can attract millions of viewers all over the world. For example, Cathay Pacific’s marketing has made a new advertisement which includes a documentary regarding the everyday life of one of its flight attendants. The underlying strategy behind the creation of this advertisement was to convey a message regarding the professionalism exhibited by their staffs before, during the flight. The video demonstrates the integrity with which the company’s staffs work in order to ensure that the passengers (customers) are always satisfied (HubPages Inc, 2014). 4. Conclusion Cathay Pacific Airways is an internationally recognized airline that has its operations based in all the major economies in the world. The airline operates in a relatively favourable yet competitive business environment in its home country, Hong Kong. The organizational managers have done exceedingly well in adopting appropriate strategies so as to counter the negative impact of various political and economic factors assorted with various countries. Cathay Pacific has proven to be a highly sustainable business where the managers place equal importance to its corporate social as well as environmental responsibilities. That is why; the company has been noted indulging in various research and development activities aimed towards creating a business that is environmentally sustainable. Cathay Pacific Airways is a premium airline that follows a premium pricing strategy in order to target passengers who belong to the upper middle to high income households as well as corporate level executives. The prices of the tickets are set considerably high compared to other airlines as setting a high ticket price is associated with the airline’s brand value as well as its reputation to provide superior quality services. The strategies adopted by the airline are specific to its customer segment and with the help of that the company has proven to be largely successful in meeting the needs and requirements of its target customers thereby enhancing their satisfaction and loyalty index. 5. Recommendation Over the next three years, Cathay Pacific is recommended to adopt the following strategies. First of all Cathay Pacific Airline is strongly recommended to modify its pricing strategy in order to cater to the passengers in the developed as well as the emerging markets. The company should follow a competitive pricing strategy in order to cater to the middle income households in the major regions of operation. This will enable the airline to expand its customer base by a considerable level. In that way, the airline will be able to strengthen its foundation in the international arena thereby, acquiring the competency to match with the likes of Emirates, Qantas and Lufthansa. Secondly, the airline needs to enhance its physical evidence in the region of operations. This can be done through the placement of ticket selling outlets as well as customer complaint desks in several commercial areas. This will enable the company to achieve a twofold objective; one is to reach out to the maximum number of customers as well as the other is to make ticket convenient for those customers who are not well equipped with using internet technology to do the same. Cathay Pacific Airways can also establish business tie up with renowned tour and travel agencies such as Thomas Cook who will be majorly responsible for selling their tickets from their outlets. This will enable the airline company to achieve a twofold objective. First of all tie up with a renowned travel agency like the one mentioned above will enable the company managers to promote the products to a huge base of customers which includes independent customers of Cathay Pacific as well as the customers of Thomas Cook. On the other hand it will also increase their physical evidence at a lower cost of establishment. Thirdly, Cathay Pacific Airways should invest a considerable proportion of its proceeds behind research and development in order to make sure that their products and services are consistently upgraded with the latest technology. This will allow the company to make sure that their business is environmentally sustainable. This in turn, will enable the managers to enhance their brand image in front of the world. References List CAPA Centre for Aviation, 2014. Hong Kong Airlines, Asia's fastest growing carrier, looks to become reckoning force in the region. [online] Available at: [Accessed 27 October 2014]. CAPA, 2014a. 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