Foundations of Management

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1.0Introduction

This paper deals with the strategic review of Cathay Pacific Airways Ltd (CX), an airline which operates passenger and cargo flights to and from Hong Kong. For the purpose of this paper, only the passenger operation is reviewed.

The review will analyse the strategy and direction of the company, its strengths and weaknesses, the state of the company and the market in which it operates. Based on the review, recommendations will be made for the future of CX.

2.0CX described and analysed

2.1Brief background to CX

CX started business in 1946 with two small aircraft. In a matter of two years the airline was operating to five destinations around Asia. Then, in 1986, CX was listed on the Hong Kong Stock Exchange. Now, some 50 plus years on, CX owns 64 aircraft and flies to 50 cities around the world.

Being Hong Kong's de facto national carrier CX invested US$1 billion in setting up its headquarters and infrastructure at Hong Kong International Airport (HKIA) at Chek Lap Kok[1]. The headquarter complex, Cathay Pacific City, centralised staff who had been scattered over 19 sites in Hong Kong and provides an environment for staff to work, rest and play. (CX Inflight magazine, Discovery)

2.2CX Mission, Objective, Strategy and Tactic

CX does not have a mission statement as such but its vision is to become the most admired airline in the world. CX will strive for:- • Ensuring safety comes first
• Providing service straight from the heart
• Encouraging product leadership
• Delivering superior financial returns
• Providing rewarding career opportunities
(http://www.cathaypacific.com/aboutus/story)

Management objectives of CX, promulgated to staff via news letters and posters, have been split into external and internal: i.e for the business and for the organisation respectively.

The external management aims are to:-
• Put safety and security first
• Reduce costs to HK$2 per available tonne kilometres[2] (ATK) by end 2001 • Create a clear and simple customer focused service ethic • Pursue oneworld[3] opportunities
• Develop Hong Kong International Airport (HKIA) as Asia's premier hub • Lead Asian airlines in e-commerce

The internal management aims are to:-
• Admire excellence
• Remove bureaucracy
• Trust and support each other
• Set and reach aggressive targets and individually assume responsibility for meeting those targets • Be open to ideas and welcome change
• Drive quality, cost & speed for competitive advantage

Product differentiation in the airline business is small. Recognising this, CX adopts a short term strategy of repeatedly emphasising the service to the public. Based on firm orders of aircraft it is without doubt that CX is looking to expand its capacity looking into new routes in addition to enhancing its present ones.

The long term strategy of the company is to create an image that CX is Hong Kong and vice versa. The rationale is to maintain the status of Hong Kong’s national carrier and protect the routes which CX has established. In time CX wishes to create Hong Kong as a hub ensuring that oneworld opportunities are maximised.

In the early 90’s CX created a slogan “Service Straight From The Heart” (SSFTH) which worked well for CX. With loyal customers in hand (obtained through the airline’s loyalty programme) CX is building on the SSFTH promotion programme and is now marketing “Same Team, Same Dream”. Clearly, the tactic is not to come up with something new but to emphasise the consistency. Although this is the message conveyed, CX does constantly change the product to be in line with that of competitors in order to remain competitive. This also ensures that customer loyalty obtained through the mileage incentive scheme do not get attracted to competitors.

In attempts to meet the long term strategy, CX invests heavily in the...
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