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Value Chain analysis of Cathay pacific

Paper Type: Free Essay Subject: Marketing
Wordcount: 2524 words Published: 1st Jan 2015

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Cathay Pacific is an international airline registered and based in Hong Kong, offering scheduled passenger and cargo services to 117 destination in 36 countries and territories .

The company was founded in 1946 and remains deeply committed to its home base, making substantial investments to develop Hong Kong as one of the world’s leading global transportation hubs. In addition to fleet of 128 wide-bodied aircraft, these investments include catering, aircraft maintenance, ground handling companies and the corporate headquarters, Cathay Pacific city at Hong Kong airport.

In year 2007 Cathay Pacific increasing their customers year by year. They got highest passenger load and they record passenger numbers with an average load factor of 81.1%. The capacity is increase by 3.9% with the most of the increase towards the end of the year.

2008 was a difficult year for the company. While the business picture was in first half of the year was positive but other half was not successful due to some political reason and higher fuel cost. Because of this reason company got loss in year 2008.

In year 2009 was quite good for the company environment. They got profit of HK$4,694. This compares to the loss of HK$8696 from the previous year. In 2009 they try to ensure that standard the face of an unprecedented downturn in business.

Let’s see the internal and external environment changes in company environment. During current era they made some changes their strategy and services.

Value Chain analysis of Cathay pacific

C.P.(Cathay pacific) is one of the branded airline company in air line industry. It always competes with different airline company. It competes with different airlines company for its status and notoriety. Now a days C.P. is underwent for changes its image in market and also try to solve problem. So C.P. is made new strategies to solve problem which they are facing. The main concepts of new strategies are to increase a number of clients and also try to full fill services which demanded by the clients. C.p. management also sure about that this strategies related to services and technologies can be useful to compete against other airlines company.

Inbound(internal) logistics:

Related to its internal logistics C.P. builds good relationship and mutual aid with its suppliers. Related to this point internal logistics does not affect to its market position so positively. The main reason is that all airlines industry are getting same benefit from its suppliers.


Cathay Pacific providing a facility to passengers and they believes that their business are selling experience to the passengers. Loyalty is a main key factor for every business. The main key factor for loyalty is emotional bonding with passengers and this factor is helpful for C.P. to attract customers for repurchase airline products. The biggest dissimilarity of C.P. to its competitors is its people. The C.P. management is always trying to build bond between product development and customer’s expectation. C.P. is always trying to give good services to its passengers and passengers always feel welcomed, respected. The passengers always feel that they are travel in good and safe services.

For improving customers services C.P. develop cultural changes within airline. They develop new program like ‘service straight from heart’ for improving customer services. In this program they try to express about its understanding related importance of the people in organization and their contribution in their success. For providing a excellent customer service they using following steps.

Generating a atmosphere for positive performance.

Recruiting the accurate people and train properly

Continual enhancement


Throughout the world service is main key factor which can adding value of core corporate. All corporations throughout the world are increasing their value by offering various services.

Cathay Pacific is always focusing on their services. Main aim of the C.P. is to provide superior services to their customers and to turn in to world most well liked airline. C.P. aware about that quality of service set them in good position from its competitors. C.P. also committed about on time performance to aim, maintaining and growing international route network, and increasing flight frequency to make their position in market

They providing their services according to their strategy like “services straight from heart” and they are quite successful in their market. C.P.. Not only fulfill the costumers needs and aims not just to meet, Cathay Pacific goes beyond ensuring satisfaction to strengthen the loyalty of costumers and enhance the profit-ratio of the airline.

For achieving a target market position C.P. uses Differentiation. According to this strategy C.P. offers to their customers wide product ranges and higher quality products to customer’s convenience.

Technology development:

As a technological point of view C.P. is also same as its competitors. C.P. was the first airline who announced to plans to install internet in flight. Then they go for their process and now a days they providing internet to all flights. C.P. was the first to electronically link airbus air craft to its maintenance center. C.P. also invested their money in e-business to become a Asia’s leading e-business airline company.

The main idea behind this technology for C.P. is development of e-learning environment of company. Cathay Pacific made rapid progress to becoming Asia’s largest e-business airline. In all this technology C.P. introduced about improvement of passengers experience in three different way

Online check in


Airport lounges

In flight e-mail system

Marketing and Sales

C.P. always trying to attract new as well as their regular clients by providing them different tour package. Their services always attract customers to travel by C.P. They always try to providing cheap tickets. They generate different discount rate on their tickets.

Human resource management

The employees in Cathay Pacific are contributing in all new strategy which is developed by company. C.P. have main advantages against its competitors are its quality of services which are providing by its employees. C.P. promotes appropriate training to their staff to develop their employment strategy. C.P. also develop working environment for their staff. Company motivates their staff for their works. Company promote good leader for particular task to achieving a target.

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Porter’s five analysis

Potential Entrants

C.P. is prepared for new entrants and they are not greatly affected by new market entrants. The power of potential comers to C.P. is too weak. The main advantage for C.P. against new comers is government policies. They have to only focus their maintenance and low cost for their other expanses. These things are useful for C.P. against new comers in airlines market.

Competitive rivalry

The main competitors of C.P. are China airlines, Singapore airlines. C.P. is maintain their status in market by providing a best services, services are the main key element for C.P. this strategy gives C.P. to emotional bonding as well as better business relationship. C.P. implemented new strategy by providing a unique flying experience to their clients.


In this part of the analysis, clients are mainly looking for products in lowest prizes which are introduced by company. Substitute can also in the form of another services that a consumer deems suitable for them necessitate and capabilities. Substitutes can providing high power to company. For C.P. makes substitutes in its different department and it will help to lose other company’s client. C.P. is sure about those substitutes that they won’t give them more problems.

Buyer power

The main advantage for all consumers in this industry is that buying power. There are lots of companies available in airline industry. So individual buyers have so many options to buy tickets. So C.P. has only the option that they must have to providing tickets in low prices.

Supplier power

Supplier power is also highly influence in airline industry. Cathay Pacific also concern about this factor. Let’s understand by example. If the fuel price is increases then C.P. have no other choice. C.P. is also increasing their fuel surcharge for each ticket.

Mckinsey 7s model:

Shared value

C.P. always tries to make some innovative in their customers services so customers will take so less time in using their services as a process of transportation. The company sure that some services providing by them is never forgotten by their customers.


C.P. management is always trying to learn from its previous. The only reason is behind is that they want to make their position in market. They always tries to not repeat their past mistake. The other strategy is they make their relation with their customers. They try to make emotional bonding with their consumers so that they can provide services that people will purchase. The other strategy is investing in new and better equipments.


Cathay pacific company structure is decentralized. In C.P. company each and every decision are not made by only one person. Each and every department has an authority to contribute their idea on decision. Each and every department shares their ideas before the decision. This decentralized structure helps to take a complete decision that will helps to provide best services.


C.P have reconfigure their system to check that weather new system are work as on their planning. And they also get conformed about that they providing services are in positive way. They also changes their system according to their departmental need.


Cathay pacific always keeps in their mind that the employees are main need for the company. They consider them as an asset of company. They hire employee according to job needs. They are providing proper and appropriate training to their employee. They also providing good financial and reward to their employee.


C.P. Accommodate a particular staff for particular services and the staff have ideas about how to provide best services. Company first checks their performance before providing them job. They also got conformed about all staff member have enough skill to use particular materials during their services.

Ansoff analysis:

Here is short view of ansoff analysis of C.P. According to this analysis market development is suit their business. Product development is also good for their business. According to analysis, they can maximize their profit ratio in market development and product development.

Market development.

Market development is mainly define by business aims to sell its existing product in new market.

C.P. also made some changes with their product in existing market. They change in interior lay out and configuration of air craft. According to their strategy space is a key comfort variable.



Product development:

Product development mainly defines by the business aims to sell new product in existing market..

For increasing their customers and loyalty they trying provide more flights with more facilities. Before some time they announced that they will starts flights to Moscow. They also announced that they will starts three flights in a week. They also announced that they will start flight Auckland to Moscow. They also try to develop fastest as well as more convenient flights to their customers.

Cathay pacific is also investing into product improvement across the fleet to enhance passenger satisfaction and long term product competitiveness.


Market penitration

Market penitration is mainly define by business aim to sell their exisiting product in to existing market.

For increasing their sells in the competitive market they make some discount rate on different product. C.P. is the first company who put their airline ticket in auction.

They introduce new travel package for their customers. They are trying to introduce to their customers that they are selling complete tour package in low cost.


Hong Kong Dragon Airlines Limited(“Dragonair”),an Asian regional airline registered and based in Hong Kong offering scheduled passenger and cargo services to 30 destinations in 10 countries with a fleet of 29 aircraft, is wholly subsidiary of Cathay Pacific. C.P. owns 18.1% of Air China.

Twos analysis:

Tows analysis is mainly concern with internal analysis of the company.


Diversified geographical spread

Youngest fleet of aircraft

Strong financial performance


Weak turnover ratio

Unbalanced business portfolio


Growing Asia pacific market

Global airline market


Fuel prices

Increasing competition from low cost airlines


Cost leadership

Merge & Acquisition

Internal development


Now days the competition in airline industry is very high. There are lots of airlines operated in Asia region. The main competitors for Cathay Pacific are Air Asia and Singapore airlines. Air Asia currently operates on 86 routes and its no frills service has obtained wide range in china market. And Singapore Airlines operates 88 destinations in 38 countries. Cathay Pacific should emphasize to diversify their routes.

Merge & Acquisition:

Cathay pacific has to merge with different airlines to avoid future threats. Merge and acquisition is one of the best choices. To avoid their threats Cathay Pacific has recently merge with Air China. C.P. merge with Air China for cargo services.

Internal development:

For internal development concern Cathay Pacific is higher then their competitors. It mainly consists with their internal asset. In year 2007 some of the prime competitors are Singapore Airlines, SAS. During this year the asset turn over ratio was 1.15 times higher then C.P. and the same year Singapore Airlines consist the asset turn over ratio is 0.59 times lower then Cathay Pacific. But in an Asian region Cathay Pacific hae good market and they have good internal development.


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