Political Environment of Cx

Topics: Airline, Emissions trading, Kyoto Protocol Pages: 4 (1281 words) Published: April 13, 2013
Political factor is one of the factors of remote environment. Political factors are legal and regulatory parameters that firms must abide by. Since those factors can affect the whole business environment such as tax rate, minimum wage etc. When designing the strategy, political factors are the major considerations of managers. Cathay Pacific, one of the largest airlines in the world, has also been affected by political factors. The first political factors is export control. In the recent years, the operation costs of Cathay Pacific have risen continuously. This year, Cathay pacific has recorded the decrease in profit by over 80%. The main reason causing the plunging of profit is the high fuel price. OPEC is the organization to protect the profit of the petroleum exporting countries. It consists of 12 countries and those countries produce 40% of the world total crude oil production. In order to maximize the return of exporting petroleum and protect important natural resource, OPEC restricts the total quantity of petroleum exportation. This a kind of supplier functions. Since petroleum is necessary, the growth in demand of petroleum is larger than the growth of supply. Also, OPEC refuses to increase the quantity of crude oil exportation to meet the demand. For the above reasons, the price of petroleum has increased unreasonably. The abnormal fuel price has done great damage to Cathay Pacific and also the airline in the world. The second factor is tax. Tax is not only an effective way to increase government revenue, but also a method to control the business activities. Recently, OPEC decided to impose small carbon tax on petroleum exported to rich countries. The purpose of imposing carbon tax is funding. The revenue will be transferred to the Green Climate Fund directly. The idea of imposing this tax is good but this decision will cause heavy burden on many industry especially aviation. As petroleum is the only fuel of aircrafts unlike vehicles having other...
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