Strategic Marketing Plan for Cathay Pacific Airways - Case Study Example

Strategic marketing plan for Cathay Pacific Airways Customer Inserts His/her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 07, 11, 2011 Executive Summary Cathay Pacific Airways potential is unlimited as long its market positioning and its customer service offering is always enhanced to better levels. The ability of Cathay to continuous regeneration of its corporate identity to match with the changing times coupled with its flexibility to change has endeared it to growth and expansion in its market and assets. This report analyses the history and performance of Cathay Pacific in the most recent past while reflecting on the company’s history so as to develop marketing plans relevant for the company’s mission of being the world’s best airline. The report further looks at the external environment and concentrates mainly on the direct competitors to Cathay Pacific. This will ensure that the developed strategies takes into consideration competitors actions while enable Cathay Pacific to differentiate itself further and consequently providing the necessary market leadership. Table of Contents Executive Summary 2 Mission Statement, Vision Statement and/or corporate values 5 PESTEL Analysis 6 Political 6 Economic 7 Social 7 Technological 8 Environmental 8 Legal 8 Current Competitor Analysis 10 Similarities between Cathay pacific and its competitors 12 Differences 13 Current Market Analysis 13 Current Marketing Mix 15 Product 15 Price 16 Place 16 Promotion 16 SWOT Analysis 17 Strengths 17 Weaknesses 17 Opportunities 18 Threats 18 Future Marketing Strategy (Objectives/Activities) 18 Conclusion 20 General Company Background Cathay pacific began its operations in 1946 as regional airline for Asia based in Hong Kong international Airport but currently one of the world leading airline companies providing cargo and passenger transport services across more than 149 destinations in 39 countries. The growth over the years of Cathay pacific has been associated with the concerted efforts in the past of building a future investment while excelling in all its endeavors 9 (Berdy, 2000). The invaluable contribution of Cathay Pacific Airlines has enabled the development of Honk Kong as one of the world’s leading aviation hub. Currently Cathay Pacific Airways is ranked second most profitable airline company globally by net profit and world leader in international cargo traffic as at 2010 Air Transport World’s Airline report July 2011. The airline company has an operating fleet of over 122 and 64 firm orders as at January 2011 with Boeing and Airbus aeroplane manufacturers. Cathay Airways Limited is a public company in China and has three major shareholders; Swire pacific, CITIC pacific and Air china. The airline company also do have four fully owner subsidiaries in the airline industry mainly providing complimentary airline services like catering, laundry, airport cargo handling and also regional passenger transport services. It also has associates mainly in the airline industry and this in addition to the core subsidiaries of the group makes Cathay Pacific Airways one of Hong Kong’s largest employers by employee numbers. Cathay pacific and its subsidiary Dragonair are members of oneworld alliance whose membership constitutes the major global airline companies serving over 900 global destinations in over 150 countries. Cathay pacific is the one of the founders of this alliance. Cathay Pacific airways is also a member of Asia miles travel reward scheme having over 400 hundred partners and 20 airline companies. According to Skytrax ranking 2011, Cathay pacific Airways was ranked the forth best Airline globally and the best transpacific airline. Cathay pacific was also ranked as being with the most comfortable first class seats. Mission Statement, Vision Statement and/or corporate values Cathay Pacific Airways has its driving force generated by its vision statement of being the world’s best airline company. This statement has been interred in the airlines’ operations and therefore has seen through the consistent transformation of the company over years in order to achieve its strategic goals. In order to achieve this vision the company’s philosophy has therefore been solidified around the area of excellent service to its customers. The airline company provides high quality service to its clients as it strives to achieve their vision of excellence. Other core values of Cathay pacific airways include; First priority to passenger safety This value has been upheld in all the company operation from the acquisition of modern fleet to its maintenance and also in seat design (Stavros & Winzar, 2008). All have been geared towards making the customer Provision outstanding and award winning products and services Cathay Pacific lounges and its travel products have a sense of novelty and hence have in most cases been rewarded with regional and global awards. High quality customer service offering Custer service offering by Cathay Pacific has been one of its core pillars having its “service from the heart” campaign being its foundations. Customers services is much to do with friendliness and great hospitality which has Cathay has perfected so well. Information Communication technology leadership Cathay Pacific has extended its services by use of information communication technologies like internet base e-ticketing, Ipad application for booking, reservation and payment, mobile phones applications facilitating efficient customer service. According to Govindarajan (2007), this entire technological enhancement to customer service offering and products are geared to provide competitive advantage to Cathay over its competitors. Continuous fleet development program Cathay Pacific service positioning an airline with high safety standards is always backed by continuous renewal of its fleet of passenger aircrafts and therefore operating a fleet with the younger average age as compared to its competitors. Provision of high financial returns to its shareholders Strategic partnerships through code sharing and rewards schemes Being a socially and environmentally responsible company Hong Kong’s hub development Commitment to developing and maintaining human resources PESTEL Analysis Airline industry has been a rapidly changing industry where environmental variables might outweigh the business goals if not checked or complied with. It is the responsibility of the company management to make strategic decisions which are always founded upon a deep understanding of the environment. With the growth path of Cathay Pacific still fresh in our memories, the most important decisions made by the management of Cathay pacific are those relating to change in order to foster the business goals of the company and are mostly related to the environmental factors. Pestle tool will provide a platform for analyzing the current environment of Cathay pacific in order to development relevant marketing strategy that will incorporate environmental changes. Political Cathay pacific operations are currently global and therefore global political and even Hong Kong’s Political variables shall always affect its operations. Cathay pacific’s management are not politically aligned to a political party in China or any other nations where it has it operations. Economic Global and China’s economic status will always have effects on operations of such airline company as Cathay pacific. Currently Chinese economic boom has been positively been a driving force to the growth of Cathay Pacific’s profitability mainly anchored by increases in both cargo and passengers. The economic recession on other regions served by the airline have had impacts on the company’s profitability especially the European and American markets where there was a major economic depression. In order to avoid consequences of severe economic depressions, Cathay pacific airline has entered into cash flow hedge as a strategy to militate against foreign exchange variations. In the financial year ending 2010, the performance of the company has been attributed to the improvements on the global economy after the 2008 recession. Social Cathay pacific social responsibility is one of the key values of the company especially relating to the development of Hong Kong as an Aviation hub of Asia. Cathay Pacific’s social responsibility does not only relation to the development of Hong Kong but also extends to the areas of health, education and environment. Corporate social responsibility though not legal obligation of companies is a critical part contributing to sustainable development. Cathay Pacific Airways is one of the major employers in Hong Kong proving employment to over 20,000 persons. The airline company has always partnered with Hong Kong’s NGO’s and education institution in providing critical community services. It also has a school of Aviation in China consequently providing for the development of China’s overall aviation manpower. Cathay Pacific’s contribution to the community health ranges from funding of UNCEF, Medical education institutions and hospitals and the disable through wheelchair donations. Cathay has been one of the major sponsors of the project ORBIS the only flying eye hospitals serving remote places of China and several developing nations. Cathay’s social responsibility has been global and this has been one of the critical factors that has contributed to its large customer base and beneficial code sharing arrangements. Technological Airline industry technologies ranging from the aircrafts efficiency and capacity, information communication technologies, security systems and cargo handling has always been in continuous improvements. Currently, Cathay Pacific airways has always been in continuous technology upgrades; its average age for the passenger aircraft for example has always been one of the smallest globally. Technological advancement has allowed Cathay pacific to introduce a new broadband service that will allow passengers to use their mobile devices on board its aircrafts against the closely held airline culture against it. Cathay has also been pioneering in the area of electronic billing, and online ticketing and other mobile airline applications for Ipad. Environmental Cathay Pacific Airways environmental policies have been heavily been founded upon compliance to the global efforts geared towards mitigation of climate change and emissions of greenhouse gases (Cervino & Cubillo, 2004). Cathay pacific is an active member of a number of organizations advocating for cleaner production and implementation of technologies geared towards minimization of global environmental change and greenhouse gas emissions. These organizations include; International Civil aviation Authority, International Air transport Association (IATA), Aviation Global Deal (AGD), Climate Change Business Forum (CCBF) and Sustainable Aviation Fuel Users Group (SAFUG). All these organization have created an environmental commitment on the part of Cathay Pacific’s airways and consequently will forced the organization to undertake to purchase green technologies and aircrafts like the new Boeing 777-300 ER and Airbus A330 which are fuel efficient as compared to other series. Legal The legal environment for an airline company relates to issues touching on every aspect of their core business. Where there are non-compliance to legal provisions for the various countries and global airline regulations, extreme legal liabilities and physical risks can be exposed to the airline. With regards to the various legal requirements that Cathay Pacific airways operate under includes passenger and operations safety regulations, occupational health, Food safety, Alcohol and other drugs policy and employment regulations. There is no way to avoid liabilities to non-compliance to these legal regulations other than compliance. Cathay pacific has had a good record with regards to legal compliance except a few incidences of where they have been fined by European regulatory oversight authority for air transport and the same spirit should be maintained by the company. Current Competitor Analysis In today’s very competitive airline industry and especially for international airline companies like Cathay Pacific competition is fierce and the competitors are all airline companies on the same routes. For the case of Cathay pacific Airways, competitors include Lufthansa Airlines, British Airways plc, China Airlines and Singapore Airline Ltd. Apart from China airline operating in the Chinese market and consequently not being a direct competitor of Cathay pacific since it has limited international market destinations and mainly competes with the Dragonair and Air China which are affiliated with Cathay Pacific. The main competitors of Cathay Pacific are British airways Plc, Lufthansa and Singapore airline. These are all international long haul and aggressive airlines consequently posing a direct challenge to Cathay pacific core market. Lufthansa, Lufthansa deals with mainly international business and leisure travelers mostly from Germany. Its major Asian routes includes from Munich to Honk Kong, Shanghai and Beijing. These the same route Cathay Pacific takes consequently making it one of the fiercest competitors. British Airways Ltd This is one of the worlds’ largest airlines serving several global destinations with its regional market in England. It focuses mainly on passenger transport but also has a cargo transport subsidiary called British world cargo. It has a fleet size of approximately 240 and 169 global destinations. It core business in on passenger transport but with a number of affiliated companies globally. It’s a member of oneworld alliance just like Cathay pacific. Singapore airlines This is one of the global airline giants with one of the largest market capitalization and extensive network of affiliates and subsidiaries within its network. It has a fleet of approximately 108 aircrafts and 62 destinations in 35 countries globally. It is a member of star alliance and its core business in passenger transport and cargo. China Airlines This is one the regional airlines in Asia based in Taiwan and mainly operates to the cities of Hong Kong, Kaohsiung and Suvarnabhumi. It has a fleet of 68 aircrafts 98 destinations in Asia, Europe and North America. It is a member of the SkyTeam alliance. It core business is mainly passenger transport. The perceptual map below summarizes the positioning of the various competitors of Cathay pacific as analyzed within the variables of pricing policy, safety and Comfort. Similarities between Cathay pacific and its competitors All the competitors of Cathay pacific have their similarities being theirs products and but also their long term competitiveness is very much visible in their marketing strategies. British Airways, Lufthansa and china airlines all have in common a location of their hubs being in their mother country and almost all of them have their subsidiaries handling their local market consequently making them concentrate on the international market except china airlines which still undertakes its local flights within its country of origin. With regards to products all the three airlines operate long haul flights and they have been able to maintain their customers through focus and consistency in providing their services in particular destinations. In order to save on their operations cost all the competitors of Cathay Pacific have joined various strategic alliances so as to enlarge their market. Also their services have gone a note higher by their provision of cutting edge technology enabled services and other internet based Computing solutions like e-ticketing, booking and reservations and in flight internal and email services. Most their hub’s airport lounges are currently offering internet access services via personal computers and also hotspots accessible and open to commuter laptops and other mobile devices. The place of offering for airline companies is almost the same and for all these airline competing with Cathay Pacific they all share a similar approach in their distribution channels focusing mainly advance IT infrastructures that ensure the existence of virtual kiosks for booking and reservations and even extending to online payment services. The airlines still have a working connection with travel agencies and also use of airport based branded kiosks for walk in Customers. Customer preferential treatment and service offering though an area of differentiation for airline are all based on the same concept of ensuring customers satisfaction. Each of the airline companies has developed or joined a customer loyalty programs for corporate and frequent flyers. Differences Lufthansa Lufthansa is one of the leading airlines globally. It is larger as compared to Cathay pacific and has several destinations and large fleet of aircrafts. It is one of the fiercest competitors since as much as it concentrates on global markets it has high quality standards almost comparable to Cathay’s but has a low quality customer service as compared to Cathay. It is also in the same segment as Cathay but with lower pricing policy but dealing in the same customers; Corporate and Business class. British Airways This airline company as a double the fleet size as Cathay Pacific and cover almost the airports globally though in the same alliance. Is has been ranked a 4-star airline by Skytrax and compared to Cathay ranking of 5-star there seem to have a lower quality service always associated to large organizations. It has poorly ranked business class product yet in this is their main product. China Airlines This is a 4-star airline just like British Airways but posing a great challenge to Cathay in their base regional market and American market. Unlike Cathay Pacific, China Airlines has comparably lower suitability for long haul business class products as it has lower quality seat arrangement and comfort. It has therefore concentrated on regional market of Asia due to its inability to adequately meet the threshold quality requirements of international market consequently becoming an indirect competitor to Cathay pacific. Current Market Analysis The airline industry market can be segmented in order to ensure that in reference to an airlines strategic positioning. Customers in the airline market ranges from large corporate customers, Small and medium size customers and tourists. For the case of Cathay Pacific, it focus mainly has been with corporate customers whose interests are service, comfort, entertainment and safety. This customer group has low airline fare sensitivity and therefore airline fares in not a problem but airline reservation system and payment systems should meet their demands. This makes them willing to pay comparably higher prices as long as their business communication and other services facilitation are enhanced. Cathay pacific has therefore been able to provide services such as in-flight email access services and internet access in their lounges since it understands their customers. Cathay service quality has also being targeted to tourist who also value prestige and comfort and coupled with their Holiday packages these customers interests have been met. Cathay Pacific market segmentation is unique but has all the segments performances are almost equal. Market segmentation is a concept is achieved through delineation of the Cathay’s current situation, determining consumer interest, dividing the markets on relevant attributes, developing strategic product positioning, deciding segmentations strategy and finally designing and implementing a proper marketing mix. Cathay Pacific serves the following regional markets; India Middle East, Pakistan and Sri Lanka region, Southeast Asia, Southwest Pacific and South Africa region, Europe, North Asia and North America. Apparently the most performing region as per the year ending 2010 financial result is North America. The main market segments for Cathay Pacific are all business and holiday destinations consequently are very profitable but requiring quality customers service offering. Some of the major customers for Cathy are Hong Kong based international business organization and one of them; PetroChina International (Hong Kong) Corporation Limited. All the customers of Cathay pacific have enrolled in their Asian miles loyalty scheme consequently able to enjoy the services of Cathay knowing that their rewards will be due after a while. Current Marketing Mix Marketing mix determines the combination of product, price, place, and promotion to be used inline with the marketing strategy. Cathay pacific has positioned itself to offer a High quality, safety and outstanding customer service product targeting business and leisure customers. The following marketing mix strategies have been applied in Cathay Pacific Airways; Product Cathay Pacific is one of the main airlines in Asia offering a wide range of Asian destinations apart from its global ones. Its fleet is among the youngest worldwide and this is in line with its safety standards. And in the same breath, the airline has committed itself to applying technological innovations to enhance its passenger services through in-flight email and online check in service, mobile applications and Ipad applications. Cathay Pacific operates with its associate Dragon Airlines Limited 141 destinations worldwide. Cathay pacific products have been positioned as of being of high quality through internal campaigns; “Service Straight from the Heart”, where employees are intensively trained during workshops to learn and understand this new concept. This positioning has helped Cathay Pacific to create a customer perception of safety, comfort and trust which is very critical for holding clients attached to a brand (Kapferer, 2002). Cathy has also invested heavily on novel designs and concepts relating to its service products such as seats and entertainment consequently making it hard to be replicated and therefore define its products perfectly. The top management feels that Service Style should be relatively difficult to imitate. Cathay Pacific lounges are of its own class with its novel and serene bar designs and available business communication services. Cathay Pacific’s Business Class product that features one of the longest and widest stretch-flat seats in the airline business has the following features; bed extension, Retractable armrest, in-flight entertainment, personal TV, Personal Reading light, Multiport connector for IPod and iphone, seat controller, private dressing room, meal table, cocktail table, side storage and is also equipped with AVOD (Audio & Video on Demand). It first Class product is entail much of a travel suite than an enhance seat with features of entertainment and leisure at it fullest while enhancing business communications too. Price Cathy pacific pricing targets people who mind less on price elastic of demand but much on the service provision. It products targets people with means but also its economy class product demand has increased substantially because of the position as an airline valuing safety and high quality standards. Besides the usual frequent flyer programs of Asian Mile and Marco Polo, Cathay Pacific offers a special pass which passengers can use to travel inside Asia (Asia pass) and around the world (World pass) under certain conditions. Cathy also sometimes provides special discounts to citizens of Hong Kong in line with its obligation to upholding its hub. Place Cathy Pacific uses several distribution channels to ensure that its products and services are constantly available to its customers. It has collaborations with travel agencies while operation online kiosks where e-ticketing, reservations and booking and even payment are done. It has also incorporated mobile applications for e-ticketing and booking plus an Ipad app integrated to the same reservation and billing system. This entire customer interaction environment has been developed on a convenient leverage on technology consequently indicating the benefits of installing progressive technologies in order to achieve competitive edge. Promotion Cathay Pacific’s marketing slogan “The Heart of Asia” has elicited foundations of the airline being based on support to Hong Kong being the economic and logistical heart of South-East Asia and also the airline offering excellent and outstanding service to its clients. Also “Service straight from the Heart” campaign by the Hong Kong flag carrier depicted and enhance the best reputation of service in terms of efficiency, hospitality, passenger-oriented convenience and comfort the airline. Cathay sponsors Hong Kong community activities as Chinese New Year Parade, environment conservation initiative and mitigation measures against global warming, Solutes the World, and Wilderness Experience of Hong Kong Youth Federation and has developed an environment friendly, healthy, contributing and efficient image in Hong Kong. SWOT Analysis Cathay pacific current performance is absolutely desirable by most airline companies in the same market. Having been ranked the third most profitable company globally on the basis of net profit and given its fleet size as compare to other giant airline companies is an indication of great performance and high rate of market capitalization. All in all in order to further stretch the performance of the company in order to outstanding globally SWOT analysis will provide the necessary tool for this kind of strategic positioning; Strengths It has one of the world youngest passenger fleet. High number of established, high-frequency routes. Operational efficiencies are very outstanding compared to carriers with even same or larger fleet. It’s positioning as offering safety and actual accident incidences do match since the last incidence happed in 1972. Award winning products and services like the new lounge at Hong Kong, the Cabin and also the Airline has ranked as the most admired company in Asia. Innovative products and services like the Ipad and mobile integration of its systems. Weaknesses High passenger prices as compared to most of its competitors Lesser destinations as compared to their rival, British Airways and Lufthansa Fleet size is a limitation to its profitability Opportunities Sustained growth and expansion of most of Asia’s economy especially China provides an opportunity for passenger transport and cargo. Greater investor confidence and high levels of corporate governance Hong Kong’s non-aligned political stance and neutral participation in world politics. Threats Increased local completion to its local subsidiary Dragon Air and also international routes like Singapore. International terrorism New low cost carriers in almost all it local and international routes Rising fuel and labour costs Future Marketing Strategy (Objectives/Activities) Cathay Pacific Airways has a great potential in its market positions as an airline company offering safety, high quality products and services since these are the core attributes being sought by business and tour passengers globally. Cathay Pacific’s strategic plan should be geared towards achieving the following marketing objectives; Increased its global market share by 20% so as to stamp it global dominance in passenger and cargo transport. Establish a penetration plan to North and central Africa since it has not been ventured into by the airline yet is a highly lucrative business and tourist destination. Increased its revenue and breakeven load factor for all market segments to above 80% Activities Continue with its innovative products and partake in price discrimination in order not to exclude the economy class passengers in their market position Its pricing policy should be reviewed for the new markets where low cost airlines operate so as to meet the needs of the market. Continue to invest in other carriers where its market penetration may be hard through acquisitions affiliations. Enhanced community services through its CSR programmes targeting health, education and environment so as to position itself as reliable and trustworthy partner. Based on ansoff matrix and the current scenario in Cathay pacific airways, the only common and relevant strategies shall be further diversification and investments through acquisition and mergers as indicated below; Existing products New products Existing market Market Penetration and customer services like Asia Miles and other reward schemes Continuous product development to keep up with technology and customer demands New markets Market development and ventures into new segments Diversification through further investments in subsidiaries and other affiliates Conclusion The future prospects of Cathay Pacific can be further enhanced through further expansions of the airline and continuous improvements with regards to customer service and safety. This possibilities can only be achieved it maintains its current market positioning and persistently differentiates itself from its competitors. Furthermore, Cathay Pacific’s continuous financial performance can be providing the necessary financial muscle to anchor its marketing strategies. This will further facilitate revenue growth and expansion of the company which is a major goal for all investors. References Berdy, M 2000, ‘Testing Test Market Predictions: Comments’, Journal of Marketing Research, Vol. 2 no. 4, pp. 196–200. Berthon, P & Napoli, J 2008. ‘Brand management in small to medium-sized enterprises’, Journal of Small Business Management. Vol. 46 no. 3, pp. 33-36. Bjerre, M, Knudtzen, C, & Heding, C 2009, Brand management: research, theory and practice, Taylor & Francis, London. Cathay Pacific Airways website viewed on 14th November 2011, http://www.cathaypacific.com/cpa/en_INTL/homepage Cervino, J & Cubillo, J 2004, ‘ A Resource-based Perspective on Global Branding: an Analysis of Trademark Registration Data’, International Journal of Management. Vol. 21 no. 5, pp.42-50. Chen, C & Hu, H 2006, ‘ The attitudes of university students to classical music concerts: A study in consumer behavior’, International Journal of Management. Vol. 23 no. 11, pp.15-16. Curry D. J 1993, The New Marketing Research Systems, John Wiley & Sons, New York. DeBonis, J, Balinski, EW & Allen, P 2003, Value-based marketing for bottom-line success: 5 steps to creating customer value, McGraw-Hill Professional, Sydney. Glynn, M 2009, Business-to-business brand management: theory, research and executive case study exercises, Emerald Group, London. Govindarajan 2007, Marketing Management: Concepts true Challenges And Trends 2Nd Ed, PHI Learning Pvt. Ltd, London. Hanssens, DM & Parsons, LJ 2003, Market Response Models: Econometric and Time Series Analysis, Springer, Canberra. Kapferer, J 2002, Strategic Brand Management: creating and Sustaining Brand Equity Long Term, Kogan Page, London. Kasper, H & Piet, VW 2000, Services Marketing Management: An International Perspective, John Wiley & Sons, Sydney. Keller, KL 2001, ‘Building Customer based Brand Equity’, Marketing management, Vol. 10, no.2, pp. 14-19. Kitchen PJ & De Pelsmacker, P 2004, Integrated Marketing Communications: A Primer, Routledge, Sydney. Malhotra, N 2006, Marketing Research, 2nd ed, Prentice Hall, New Jersey. Stavros, NK & Winzar LP 2008, ‘Human Relationship Marketing in Australian Professional Sport: an Extension of the Shani Framework’, Sport Marketing Quarterly. Vol. 17 no. 4, pp. 34-56. Read More