How Far Does Cathay Pacific Impact the Airline Market - Research Proposal Example

HOW FAR DOES CATHAY PACIFIC IMPACT THE AIRLINE MARKET Student’s Name Course Professor’s Name University City (State) Date How Far Does Cathay Pacific Impact the Airline Market Table of Contents 1.0 INTRODUCTION 3 1.1 Cathay Pacific Airline 3 1.2 Industrial Environment 4 1.3 Research Objectives 5 1.4 Research Questions 5 2.0 LITERATURE REVIEW 6 2.1 Competitive Rivalry 6 2.2 Threats of New Entrants 7 2.3 Threats of Substitutes 8 2.4 Bargaining Power of Buyers 8 2.5 Bargaining Power of Suppliers 9 3.0 RESEARCH METHODOLOGY 10 3.1 Research Design 10 3.2 Research Methodology 10 3.3 Data Collection and Analysis 10 3.4 Action Plan 11 Reference List 12 1.0 INTRODUCTION 1.1 Cathay Pacific Airline Cathay Pacific airline was developed on 24 September 1946 (Funding Universe n.d.). The founders of the airline was two an Australian Sydney H. de Kanyzow and American Roy C. Farrell with each contributing HK$ 1 for registration. Cathay Pacific is a flag career airline of Hong Kong. Its main hub and head office is located at Hong Kong International Airport. The operations of the airline entail cargo and passenger services with two hundred destinations located in the fifty-two countries all over the world, joint ventures and code shares. The airlines also have a wide-body aircrafts that consist of Boeing 777, Airbus A350, Airbus A340, and Airbus A330 equipments. The airline owns Dragonair subsidiary which operates in forty-four destinations in the region of Asia-Pacific. After the Second World War, Cathay Pacific Airways Limited grew from a minor regional airline to a stable international carrier due to tourism and trade. After the transition to the rule of Chinese in Hong Kong in 1997, the carrier was forced to redefine its function at Southern China. It shifted its determination from doing it all alone to joining a one-world alliance which is spearheaded by British Airways and American Airlines. The move was aimed at economically maintaining the global presence of the company. In July 1998, the airline was the leading non-stop transpolar flights that were flying over the North Pole. The perspective of Cathay Pacific Airlines is what has made it outstanding over years. It believes that a great flight should have the capability of anticipating the wants of its customers before they ask (Funding Universe n.d). In explanation, the company argues that a flight should not be only about ensuring a smooth check-in, comfortable seats, and good food. The difference between Cathay Pacific and other airlines is the unique services that its staff provides. The company believes that service has a larger impact on the perceptions of the passengers. 1.2 Industrial Environment Industrial environment help determine the impact that an airline has on the market. It is important to understand the competitive forces in the airline industry since it is the determinant of success or failure of a given firm within it. For the basis of Cathay Pacific and airline industry, Michael Porter’s five forces are important for the analysis (Dobbs 2014). The industry analysis using the five forces will help determine the implications and intensity of different issues concerning Cathay Pacific airlines and how it affects the industry. The fives elements or forces of analysis include competitive rivalry, new entrants threats, substitute threats, the buyer’s bargaining power, and the suppliers bargaining power. Competitive rivalry entails the existing competition between the low budget and national careers. Cathay Pacific Airline affects the share market of the national and low budget carriers. The company influences on the margins and prices thus profitability in the market. Any airline that is in the market will always be a threat of new entrant. In explanation, a new entrant will require a high capital investment to enter into an already inhabited market (Orhan & Gerede 2013). Furthermore, presence of firms in the market makes it difficult to find suitable airports. As a result, it is difficult for new entrants to challenge the already existing airlines due to their experience and solid name in the market. The substitutes that act as threats to an airline include other short and long haul airlines. In addition, the airline can be impacted with the land travels or an indirect substitute such as video conferencing that eliminates or minimizes the need to travel. However, all the cases named do not entail switching of costs on part of the customers thus no hesitation to choose. The bargaining power of the buyers can be affected by the level of awareness of the customers. For example, today people are well informed of the deals and prices via several sources including the internet thus can affect the performance of airline if its prices are unfavourable. Most of the airlines today try to reach market segment through lowering their fares with the intention to acquire more shares in the market. The plan has always worked since the customers are sensitive to prices and will always switch to the airline that offers lowest prices. Lastly, the bargaining power of the suppliers is very critical determining the capability of an airline to influence its market. The suppliers can be in the form of regional airports, fuel, and aircrafts (Porter 2008). Some of the main aircraft suppliers in the market are Airbus and Boeing. It is, therefore, important for an aircraft to have a good relationship with the suppliers for the purposes of training and technical support since the alternatives are limited. Suppliers also have the bargaining power of the fuel prices since the fuel prices are governed by the Middle Eastern countries and world trade that dominate the market. Even though the regional airports were once deemed to have low bargaining power, the competition between the low cost airlines has been increasing thus heightening their bargaining power. 1.3 Research Objectives The research objectives of the study will include; i. To determine the impacts of Cathay Pacific airline on airline competitive rivalry ii. To assess the threats of Cathay Pacific airline on new entrants on the airline market iii. To evaluate the threats of Cathay Pacific airline on substitute airlines in the airline market iv. To investigate the effects of Cathay Pacific airline on the bargaining power of the buyers in the airline market v. To determine the influence of Cathay Pacific airline on the supplier’s bargaining power in the airline market 1.4 Research Questions The research questions of the study are; i. What impacts does Cathay Pacific airline have on airline competitive rivalry? ii. What are the threats of Cathay Pacific airline have on the new entrants in the airline market? iii. What threats do Cathay Pacific airline exposes its substitute airlines in the market? iv. Does Cathay Pacific airline affect the bargaining power of the buyers in the airline market? v. Does Cathay Pacific influence the bargaining power of the suppliers in the airline market? 2.0 LITERATURE REVIEW 2.1 Competitive Rivalry According to Pulaj and Kume (2013), there is a relationship between competition and sustainable growth is still the main argument in which strategic adaptation, strategies, and policies are based. The competition has developed to become dangerous in the today’s markets. Increase in competition has been due to globalization and its related need for survival among the firms thus need for competitive management. Competitiveness is a critical element in the determination of firms and industries. It is, therefore, important that the companies and industries increase their knowledge on competitiveness. To determine competitiveness of a firm, it is important to identify the variables that influence the expected results and how they link to one another. It is important to develop appropriate infrastructure that helps measure and understand companies’ strategic choices, industry positioning, competitive rivalry, and attractiveness of the industry. In addition, Nhuta (2012) argues that an airline industry has the capacity to influence the rivalry within its market. The ultimate determinant of the business rivalry is the strategic choice that the company opts to engage. The study indicates that the airline business is complex and dynamic thus making effective strategy important. The effective strategy is based on its match between the activities and capabilities. The most important competence in such a scenario is the ability of the given airline to innovate and participate. The intense rivalry and competition leads to the slow market growth, chasing of flighty customers among the competitors, and unattractive levels driving down the profit margins. In agreement, study conducted by Kilinc, Oncu, and Tasgit (2012) in Turkey indicates that different airlines have different competition strategies. However, most of the competitive strategies focus on obtaining the leadership criteria when it comes to cost. The main factors that affect the competitive strategies include the technological changes, innovation, employees, service quality, customers’ satisfaction, and costs. 2.2 Threats of New Entrants The possibility of a new entrant in the market depends on the profitability of the existing market. The high returns in the market translate to entry of new firms. The entry of additional new firms translates to decrease in profitability in the market thus affecting all the firms in the industry (Moreira 2014). However, the incumbent firms such as the Cathay Pacific Airline Limited have the capacity to block the new firms from entering the market. The incumbents are the largest companies in a given industry. Failure of the incumbent to limit the entry of the new players in the market will see the profit trending towards zero in the case of perfect competition. There are a number of factors that will determine the threat posed by new entrants in the market. For example, the existence of entry barriers such as rights and patents has impact on the market. Attractive business segments have higher entry barriers and lower exit barriers. Such a scenario allows easy entry of a few new firms and exit of the non-performing ones. Other factors that might affect entry of new players include absolute cost, capital requirements, government policy, economies of scale and product differences, product differentiation, and brand equity. In addition, new players can be influenced by switching costs, expected retaliation, distribution access, customers’ loyalty to the established brands, and profitability of the industry (Moreira, O’Connell, & Williams 2011). In explanation of the last point, the higher profits in the industries translate to more attraction of the new competitors. 2.3 Threats of Substitutes The presence of other service providers in the industry means the customers have the right to choose from alternatives. For instance, British Airways can be considered the substitute of Cathay Pacific Airlines. Increased marketing for the use of railway lines might shrink the market as it reduces the number of customers present in the market (Man, MK & Justine, JB 201). There are a number of factors that might affect the threats of substitutes include the propensity of the buyer to the substitute, substitute’s relative price performance, switching costs of the buyer, product differentiation perceived level, and the number of products in the market that can be used as substitutes. Other factors include sub-standard product, quality depreciation, and close substitute availability. 2.4 Bargaining Power of Buyers The buyers also have the capacity to influence the airline industry. In explanation, they have the bargaining power that is also called the outputs market. This is the ability of the buyers to put the firms under pressure that also affects the sensitivity of the customers to changes in price (Yashodha 2012). However, firms can put in measures that will ensure the buyer’s power is minimized. Example of such measures includes the loyalty program. Presence of several alternatives increases the power of the buyer in the industry. But when the buyers act independently, there power becomes low. For example, if the customers will come together and ask for lower traveling prices, the companies will have no choice but to grant them due to pressure. Potential factors that might affect the bargaining powers of buyers include the buyer to firm concentration ratio, dependence level upon the distribution channels, bargaining leverage, more so in the industries that have high fixed costs, and information available to the buyer. Other factors include the total amount of trading, analysis of customer value, uniqueness of the products in the industry, sensitivity of the buyer price, availability of the substitute products, and force down prices (Roy 2009). 2.5 Bargaining Power of Suppliers The suppliers’ bargaining power is also known as the market of inputs. The bargaining power of the suppliers is indirectly proportional to the number of similar goods or services in the market. Some of the factors that can influence the bargaining power of the suppliers include the relationship between the switching costs of a supplier and firm, degree of inputs differentiation, effects of inputs on differentiation or costs, distribution channel strength, availability of substitute inputs, and supplier competition. According to Al-Abdallah, Abdallah, and Hamdan (2014), supplier partnership or development and supplier lead-time reduction positively and significantly affects the competitive performance of the companies that buy. In agreement, Song et al. (2012) quality of the goods provided by the suppliers is great determinants to the performance of a business. The business relationship is of great influence on the quality of the goods and services. Presence of alternative suppliers, therefore, weakens the influence of business relationship with quality. 3.0 RESEARCH METHODOLOGY 3.1 Research Design The study will use a case study research design. The research design is an in-depth study of a given research problem (Creswell 2014). For instance, the study will focus on the impact of the Cathay Pacific Airline Limited on the airline market. The research design will help in the testing of the Michael Porter’s five forces theory and how it applies in the airline industry. It will help elaborate on the impacts of the Cathay Pacific Airline on the market. 3.2 Research Methodology The research methodology to be used during the study will be empirical analytical method. In explanation, the study will focus on the objective knowledge that Cathay Pacific Airline Limited has impacts on the airline market. The study has got closed research questions and variables can be measured (Creswell 2014). It will employ a deductive theory that entails the use of an already existing theory to help develop research objectives and questions. The main focus of the study approach is the explanation of the impacts of Cathay pacific on the airline market. 3.3 Data Collection and Analysis The study will use secondary data analysis to collect both qualitative and quantitative data. The secondary data analysis is based on the already existing data and conducted to pursue an interest different from the already existing work. As a result, the study will entail the use of already existing qualitative and quantitative data sets. Secondary data analysis can be in form of additional in-depth analysis, sub-set analysis, or new perspective or conceptual analysis. The study will be based on the new perspective analysis (Creswell 2014). It is a retrospective analysis of the data or part of it on a different perspective. The analysis aims to analyze data based on the concepts that were not central to the original study. The secondary data analysis method will be used because it is tenable. 3.4 Action Plan The action plan below illustrates the timing of the specific activities of the project. The activities are presented in the form of a Gantt chart. No. Activities TIME (Months) Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. 1. Problem Identification 2. Development of a Research Topic 3. Concept Note Formation and Defence 4. Proposal Development 5. Proposal Submission 6. Proposal Defence and Correction 7. Data Collection 8. Data Analysis 9. Project Writing 10. Project Submission 11. Project Defence and Correction The action plan is made in eleven main areas. These are problem identification, research topic formation, and concept note development and defence. Furthermore, there is proposal development, submission, defence and correction, data collection, data analysis and project writing. Lastly, there is the project submission, defence, and correction before resubmission. Reference List Al-Abdallah, GM, Abdallah, AB & Hamdan, KB 2014, ‘The impact of supplier relationship management on competitive performance of manufacturing firms’, International Journal of Business and Management, vol. 9, no. 2, pp.192. Creswell, JW 2014, Research design: Qualitative, quantitative, and mixed methods approaches, SAGE Publications, Thousand Oaks, California. Dobbs, M 2014, ‘Guidelines for applying Porter's five forces framework: a set of industry analysis templates’, Competitiveness Review, vol. 24, no. 1, pp.32-45. Funding Universe n.d., Cathay Pacific Airways limited history. Available from: < http://www.fundinguniverse.com/company-histories/cathay-pacific-airways-limited- history/ >. [ 16 Nov. 2016]. Kilinc, I, Oncu, MA & Tasgit, YE 2012, ‘A study on the competition strategies of the airline companies in Turkey’, Tourismos: an international multidisciplinary Journal of Tourism, vol. 7, no. 1, pp.325-338. Man, MK & Justine, JB 2011, ‘AirAsia in the Malaysian domestic airline market: empirical analysis of strategy’ International Business & Economics Research Journal (IBER), vol. 4, no. 12. Moreira, ME 2014, ‘An analytical model for the assessment of airline expansion strategies’, Journal of Airline and Airport Management, vol. 4, no. 1, pp.48-77. Moreira, ME, O’Connell, JF & Williams, G 2011, ‘The viability of long-haul, low cost business models’, Journal of Air Transport Studies, vol. 2, no. 1, pp.69-91. Nhuta, S 2012, ‘An analysis of the forces that determine the competitive intensity in the airline industry and the implications for strategy’, International Journal of Physical and Social Sciences, vol. 2, no. 9, pp.433-469. Orhan, G & Gerede, E 2013, ‘A study of the strategic responses of Turkish airline companies to the deregulation in Turkey’, Journal of Management Research, vol. 5, no. 4, p.34. Porter, ME 2008, Competitive strategy: Techniques for analyzing industries and competitors, Simon and Schuster, New York. Pulaj, E & Kume, V 2013, ‘The competitive analysis- The appropriate instrument towards a successful development’, European Scientific Journal, pp. 65-70. Roy, D 2009, Strategic foresight and Porter's five forces: Towards a synproject, GRIN, München. Song, Y, Su, Q, Liu, Q & Wang, T 2012, ‘Impact of business relationship functions on relationship quality and buyer's performance’, Journal of Business & Industrial Marketing, vol. 27, no. 4, pp.286-298. Yashodha, Y 2012, ‘AirAsia Berhad: Strategic analysis of a leading low cost carrier in the Asian region’, Elixir International Journal of Management Arts, vol. 51, pp.11164-11171. Read More