Introduction Cathay Pacific, based in Hong Kong, is an Asian commercial airline founded in 1946. The company offers passenger services and cargo services to 120 destinations world-wide (Cathay Pacific, 2010). Airline business has been noted to be the most competitive business in the world. Market executives should be competitive to cope with the challenges of this kind of business. Porter’s Five Forces model applied to the organization 1. Traditional Competitors Airline business is a challenging business.
Highly competitive industries generally earn low returns. A highly competitive market might result from sharing market space with competitors (Laudon, 2010). The development of key marketing capabilities has been identified as one of the primary ways firms can achieve the competitive advantage. Cathay Pacific is able to determine and segment its target market. The airline, through information such as the customers’ behavior, preference and backgrounds, makes its products and services more attractive.
For example, the company is committed to increase flight frequencies, meet on-time performance goals and growth international route network to meet market demand (Cathay Pacific, 2009). 2. Customers “A profitable company depends in large measure on its ability to attract and retain customers” (Laudon, 2010, p. 97). More and more corporations are adding value to their corporate offering through services. Cathay pacific uses differentiation as its target market position strategy.
A differentiation strategy is one where wide product ranges and higher quality offered for the convenience of customer as well as added services (Porctor, 2000). The company is determined to provide their customers with greater ease and conveniences. According to the Cathay Pacific, it was the world’s first airline to offer an online air ticket auction in late 2000 and first in Asia to enable to change booking online in 2010, allowing frequent flyer members of its Marco Polo Club and Asia Miles program to bid for exciting offers through the Web site (www. cathaypacific. om) . 3. New Market Entrants The airline industry has proceeded along the path towards globalization. New companies are entering the marketplace easily. Many airlines entered into alliances, ranging from marketing agreements and code-shares to franchises and equity transfers to open up new markets, epically developing countries. Cathay Pacific is known to be Hong Kong’s leading airlines gives them the opportunity to acquire more customers and generate more revenue. Cathay Pacific uses information system to tighten linkage with customers (Cathay Pacific 2010).
The airline’s online booking gives more convenience to their customer and attract people who have no time to go to airlines branches for booking. 4. Substitute Products and Services Customers may use substitutes if the prices are lower (Laudon, 2010). Competition between high-speed train and airplanes is becoming a hot issue nowadays. Barron reports market share ranging from 10% to 97% for high-speed rail compared to the airplane. Cathay Pacific plans to expand its service across China by increasing the frequency of its flights and adding new routes, Chief Executive Tony Tyler told.
On the other hand, the Ministry Railways is planning to build 16,000 kilometers of new high-speed railways to provide high-speed rail access to over 70% of key cities in China by 2020 (Wikipedia, 2010). Cathay rather focuses on the quality of service rather the price competitive strategy. The airline made repaid progress towards its aim of becoming Asia’s leading e-Business airline. Passengers enjoy state of the art services throughout their journey. The technological advancement will improve the quality of passenger services and increase its efficiency and effectiveness. . Suppliers The market power of supplier is one of the factors the impact on the firm profits (Laudon, 2010). Cathay Pacific uses technology and the power of the Internet to build an effective procurement platform. In 2001, the company invested over $250m in e-business (Oracle Corp. , 2001). Internet Procurement helps to reduce the airline’s total expenditure with much of the savings coming from online purchasing and a substantial reduction in inventory carrying. Conclusion/Recommendation
The delivery of supporting technology across Cathay Pacific has been improved by a more adequate IT infrastructure and the airline uses the power of the internet to reduce communication costs and increase the flexibility of its operations. The airline continues to increase its competitive advantages through updating the Internet technology.
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