Value Chain Analysis: Cathay Pacific Airways

Value Chain Analysis

            The value chain analysis describes the activities the organization performs and links them

to the organization’s competitive position. Value chain analysis describes the activities within

and around an organization, and relates them on analysis of the competitive strength of the

organization. Therefore, it evaluates which value each particular activity adds to the

organization’s products or services (Recklies 2001). Value chain analysis can be used to describe

the activities within and around the organization, and relate them to the competitive strength of

the firm (its ability to provide value for money products and services). Thus, the approach rests

upon the need to identify separate organizational activities and assess their value added. The

importance of organized activities and systems becomes clear. The various resources (people,

machinery, information, etc.) must be deployed into activities, routines and systems that produce

the necessary value. The ability to perform particular activities and manage the linkages between

activities is the key source of competitive advantage (Lowson 2002). Activities that add value

are divided into two categories. These are primary and support.

Primary Activities

            Primary activities are primarily concerned with the creation or delivery of a product or

service. They can be grouped into five main areas:

o Inbound logistics (receiving, storing and distributing the inputs to an organization)

o Operations (transforming inputs into outputs)

o Outbound logistics (storing and distribution and delivery of product and service

combinations)

o Marketing and sales (means by which consumers are made aware of an can purchase

products and services)

o Service (activities that enhance the value of a product or service)

Support Activities

            Each primary activity is linked to support activities, which help to improve their

effectiveness or efficiency.

o Procurement (the process of acquiring the resource inputs to all the primary activities

across the whole organization)

o Technology development (all activities have a technology – including know-how and

knowledge, whether concerned directly with products and services or processes)

o Human resource management (those activities involved in recruitment, managing,

training, developing and rewarding people)

o Infrastructure (systems of planning, finance, quality control, information management

and others)

Cathay Pacific’s Value Chain

            Cathay Pacific Airways is a Hong-Kong based airline that has a comprehensive network

of flights to over 90 destinations around the world. It is considered as one of Asia’s biggest and

most regarded airlines. The company was founded in 1946 in Hong Kong. The company since

then has continued to develop Hong Kong’s airline industry and supported Hong Kong’s position

as a major transportation center in the region. The airline company was founded by  (American)

and   (Australian). Cathay Pacific was founded in Hong Kong on the 24th of September, 1946.

Cathay pacific is one of the most well known airline company in the world. It competes

with different airline companies for prestige and notoriety in the airline industry. Recently the

company underwent a change in image and strategies to counter the problems its industry has. It

shifted the focus of its strategy into making sure that there will be an increase of clients who

demanded their services, it also made sure that the services and technologies they use can be

competitive to other airlines company. 

 

Operations

            Cathay Pacific believes that their business is selling experience to the passengers. The

emotional bonding with the passengers is the key to building loyalty and one of the major factors

that encourage the customers to repurchase the airline products. The biggest difference of Cathay

Pacific to its competitors is its people. The employees at Cathay Pacific are the ones who bridge

the gap between product development and customer expectation. The passengers in Cathay

Pacific always feel welcomed, appreciated and reassured. Passengers that travel with Cathay

Pacific know that they are in good hands. Service Straight from the Heart is a programme that

aims to develop cultural change within the airline focused on improving customer service.

Service is the principal means of differentiating between airlines and is highly influential in

customer choice.  Cathay Pacific has expressed within its programme its understanding of the

importance of the people within the organization and its recognition of the contribution of those

people to its success. Cathay Pacific provides excellent customer service by:

1. Creating a climate for positive behaviour

            Cathay Pacific’s corporate culture instills in the employees the understanding of the

company’s big picture. The corporate culture that the company has encourages innovation,

constant improvement and personal responsibility. The service philosophy of Cathay Pacific –

Service Straight from the Heart, encourages the employees to render quality service with human

touch

2. Recruiting the right people and offering proper Training

            Cathay Pacific uses a holistic approach for managing its people. Better understanding and

continuous learning are achieved by involving the staff in the job rotation scheme. Each

employee in Cathay Pacific is a flag barer of the company. Every member of the Cathay Pacific

family can represent the whole company

3. Continuous Improvement        

Service

            More and more corporations throughout the world are adding value to their core

corporate offerings through services. Modern corporations are increasingly offering fuller market

packages of consumer focused combinations of goods, services, support, self-service, and

knowledge. 

            Cathay Pacific’s goal is to deliver superior service and value to its customers and to

become the world’s most admired airline. The organization recognizes that the quality of service

sets it apart from its competitors. The organization is committed to meeting on-time performance

goals, maintaining and growing international route network, and increasing flight frequencies to

meet market demand. Cathay Pacific strives to deliver Service Straight from the Heart and takes

pride in making its customers feel safe, welcome, comfortable and above all, reassured. Cathay

Pacific anticipates the customers’ needs and aims not just to meet, but surpass their expectations.

Cathay Pacific go beyond ensuring satisfaction in order to strengthen customer loyalty and

enhance the profitability of the airline (Cathay Pacific Annual Report 2006).

            Cathay Pacific uses Differentiation as its target market positiong strategy. According to

Proctor (2000), a differentiation strategy is one where wide product ranges and higher quality

products are offered for the convenience of customers as well as added services. A

differentiation strategy in which a product offering is different forms that of one or more

competitors in a way that is valued by the customers. The emergence of cheap long-haul airlines

does not bother Cathay Pacific Airways. The company maintains that they cater to a different

market which values service and product features more than price. Cathay Pacific offers quality

service and luxurious features and amenities. Interior layout and configuration of the aircraft is

Another competitive advantage of Cathay Pacific is the services offered to passengers on the

ground. Cathay Pacific’s super hub at Hong Kong International Airport offers a wide range of

services and benefits aimed at making the passengers’ arrival, departure and connections as

smooth, convenient and pleasurable as possible.

            Other intangible aspects of comfort and source of differentiation that Cathay Pacific is

offering are efficiency, helpfulness and friendliness of staff, both the cabin crew in the air and

the ground staff at check-in, in the airline lounges and at the boarding gates.

Technology Development

            Cathay Pacific become Asia’s leading e-business airline by implementing ambiguous

strategy and fully harnessing state-of-the-art technology. The company is determined to provide

their customers and business partners with greater ease and convenience, as well as to create new

business opportunities for business growth and to enhance efficiency and economic benefits.

            The company has unveiled a series of e-business initiatives in the areas of passengers,

cargo, procurement and internal procedures. For example, Cathay Pacific was the world's first

airline to offer an online air ticket auction in late 2000, allowing frequent flyer members of its

Marco Polo Club and Asia Miles program to bid for exciting offers through the Web site.

Another innovative service was introduced by Cathay Pacific in January of 2001, this is the

comprehensive Online Check-in Service, which allows passenger to check in for flights and

reserve their favorite seat by using the Internet. Today, Cathay pacific is the leading Airline

Company in Asia, and respected around the world.

            Cathay Pacific Airways is known for its leadership in the adoption of new technologies.

The airline was the first in the world to announce plans to install in-flight e-mail, the first to link

Airbus aircraft to its maintenance centers electronically, and the first in the world to auction air

tickets online. Cathay Pacific also invested over $250 million in e-business as part of its plan to

become Asia’s leading e-business airline. A key element in this strategy was the development of

a company-wide e-learning environment that Cathay Pacific calls Learners World .  Cathay

Pacific made rapid progress towards its aim of becoming Asia’s leading e-Business airline. The

passengers enjoy state of the art services throughout their journey. Among the technologies that

Cathay Pacific introduced in order to enhance passenger experience are:

1. Online Check-in

Passengers can check in and select their seats on Cathay Pacific flights from the comfort of their

home with the airline’s comprehensive Online Check-In service from 48 hours up to 90 minutes

before departure.

2. NotiFly

            By registering for Cathay Pacific notiFLY Paging service, travelers can have the latest

flight information sent directly to them via mobile phone or email account. They can also check

the latest flight status on Cathay Pacific’ website.

3. Airport Lounges

Cathay Pacific’s luxurious airport lounges in Hong Kong offer free internet access and wireless

Internet access for travelers with laptop computers. Desktop computers at The Wing are installed

with broadband, high speed internet access. These facilities have been introduced at Cathay

Pacific lounges around the world (Cathay Pacific Annual Report 2000).

4. In-flight E-mail System

            With Cathay Pacific’s in-flight email system, passengers are able to send and receive

emails on board using their lap top computers. Passengers are able to surf net. In-seat power

keeps laptop batteries charged throughout the flight.

Technology refers to the employment of mechanical means especially scientific and

computer related, to perform tasks and manage information (Davenport 1999). Cathay Pacific

has decided to Internet-enable its entire global business operations. This advancement in

technology is expected to provide a global internet platform for Cathay Pacific’s e-business

applications in the future. The new internetworking infrastructure that Cathay Pacific uses will

provide a cost-effective platform with global connectivity. The infrastructure will also support

the company’s e-business strategy and will make Cathay Pacific the major e-business airline in

Asia. The new technological advancement will initiate the company’s development and

deployment of e-business initiatives that will improve the quality of passenger services and

increase its efficiency and effectiveness. Cathay Pacific uses the power of the internet to reduce

communication costs and increase the flexibility of its operations. The delivery of supporting

technology across Cathay Pacific has been improved by a more adequate IT infrastructure.

 

Human Resource Management

            Human resources or human capital is the intangible resources of abilities, effort, and time

that workers bring to invest in their work (Davenport 1999). The people at Cathay Pacific are the

major contributors of strategic capability to the company. One of the advantages of Cathay

Pacific over its competitors is the quality of service that the staff provide to its customers.

Service has a big impact on the customers’ perceptions about the company’s product. Because of

the importance of its people, Cathay pacific formulated an employee development strategy

through proper and effective training. This strategy is expected to strengthen Cathay Pacific’s

position in the marketplace.  Employee development can be an essential ingredient of an

organization’s competitive advantage. Employee development includes all of the education and

training that organizations might invest in their employees such as training employees to perform

effectively in their current jobs, orienting employees to the workplace, developing them for

advanced positions or programs, and building organizational capability for future success.

Cathay Pacific promotes a working environment wherein the employees are free to act in both

the company’s and passengers’ best interests.

One of the keys to successful competition in the global market is the effective

deployment of human resources to achieve strategic capability and competitive advantage. 

Human resources as an internal resource of a firm are one of the sources of strategic capability.

Human resources are among the top contributors to Cathay Pacific’s strategic capability.

Effective management of an organization’s human resources according to Sims (2002) is a major

source of competitive advantage and may even be the single most important determinant of an

organization’s performance over the long term.

 

What is a Critical Success Factor?Critical Success Factors (CSF’s) are the critical factors or activities required for

ensuring the success your business. The term was initially used in the world of

data analysis, and business analysis.

Critical Success Factors have been used significantly to present or identify a few key

factors that organizations should focus on to be successful.

As a definition, critical success factors refer to “the limited number of areas in which

satisfactory results will ensure successful competitive performance for the individual,

department, or organization”.

 There are four basic types of critical success factors CSF’s1. Industry critical success factors (CSF’s) resulting from specific

industry characteristics;2. Strategy critical success factors (CSF’s) resulting from the chosen

competitive strategy of the business;3. Environmental critical success factors (CSF’s) resulting from

economic or technological changes; and4. Temporal critical success factors (CSF’s) resulting from internal

organizational needs and changes.

Things that are measured get done more often than things that are not

measured.

Each  critical success factors (CSF’s)  should be measurable and associated

with a target goal. You don’t need exact measures to manage. Primary

measures that should be listed include critical success levels (such as number

of transactions per month) or, in cases where specific measurements are

more difficult, general goals should be specified (such as moving up in an

industry customer service survey)Examples of Critical Success factors

Statistical research into CSF’s on organizations has shown there to be seven

key areas.  These CSF’s are:

1. Training and education2. Quality data and reporting

3. Management commitment, customer satisfaction

4. Staff Orientation

5. Role of the quality department

6. Communication to improve quality, and

7. Continuous improvement

These were identified when Total Quality was at its peak, so as you can see have a bias towards quality matters.  You may or may not feel that these are right or indeed critical for your organization.

The Critical Success Factors we have identified and use in the BIR process are

captured in the mnemonic PRIMO-F1. People – availability, skills and attitude2. Resources – People, equipment, etc

3. Innovation – ideas and development

4. Marketing – supplier relation, customer satisfaction, etc

5. Operations – continuous improvement, quality,

6. Finance- cash flow, available investment etc

Examples of Critical Success factors These CSF’s are:1. Training and education2. Quality data and reporting

3. Management commitment, customer satisfaction

4. Staff Orientation

5. Role of the quality department

6. Communication to improve quality, and

7. Continuous improvement

These were identified when Total Quality was at its peak, so as you can see have a bias towards quality matters.  You may or may not feel that these are right or indeed critical for your organization.

The Critical Success Factors we have identified and use in the BIR process are captured in the mnemonic PRIMO-1. People – availability, skills and attitude2. Resources – People, equipment, etc

3. Innovation – ideas and development

4. Marketing – supplier relation, customer satisfaction, etc

5. Operations – continuous improvement, quality,

6. Finance- cash flow, available investment etc.

Examples of Success Factors: Understanding of Market: Sensitivity to changing market needs Understanding of how and why customers buy

Innovative response to customer needs

Consumer loyalty

Linkage of technology to market demand

Link marketing to production

Investment in growth markets

Long-term view of market-development and resources

Ability to target and reach segments of market

Product-line coverage

Short time to market for new products

Lack of product-line overlap

Identification and positioning to fulfill customer needs

Unique positioning advantage

Strong brand image and awareness

Understanding of competitors’ capabilities and decision rules

Marketing Variables: Distribution coverage, delivery speed, and prominence Co-operative trade relations

Advertising budget and copy effectiveness

Promotion magnitude and impact

Sales force size and productivity

Customer service and feedback

High product quality

Patent protection

Low product cost

Ability to deliver high value to user

Large marketing resource budget

Decision making: Marketing research quality Information system power

Analytic support capability

Develop human resources

Attract the best personnel

What are the most important management functions? What kind of cost management function information is needed for these functions?

Within every business structure are managers. No matter the type of business, a manager’s job is essentially the same across the board but there are four functions of management to consider regardless of the leadership style. In short, those four functions are to plan and implement plans to achieve the organization’s goals, to organize those plans while directing employees in their own roles and ultimately controlling the plan to function as an effective manager.Management is the process of reaching organizational goals by working with and through people and other organizational resources. 

Planning

Planning is deciding in advance what to do and how to do.It is one of the basic managerial functions. Before doing something, the manager must formulate an idea of how to work on a particular task. Thus, planning is closely connected with creativity and innovation. It involves setting objectives and developing appropriate courses of action to achieve these objectives.

Planning Definition

"Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen"

Importance of Planning

Planning provides directions

Planning reduces the risks of uncertainty

Planning reduces overlapping and wasteful activities

Planning promotes innovative ideas

Organizing : Organizing is the process of defining and grouping activities and establishing authority relationships among them to attain organizational objectives.

"Organisation is the process of identifying and grouping of the works to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most efficiently".

Importance of Organising

Organising helps Organisations to reap the benefit of specialization.

Organising provides for Optimum utilization of resources.

Directing

Communication, leadership and supervision and last but not the least motivation are the elements come under the function of management, directing. Directing is nothing but guiding and leading the people in an organization. It is not just giving instructions by a superior to the sub-ordinates but also is a process of supervising, guiding and motivating the latter to achieve the organizational goals. It is a complex function of management that ensures the employees work effectively and efficiently

Staffing

The process of making out, assessing, appointing, evaluating and developing the employees at work in an organization is staffing. In here the characteristics of a job are determined primarily. It is followed by ensuring of the right number of and kind of employees are placed at the right places and at the right time when organization is in need of them. Staffing function of management begins with

Controlling :

The managerial function controlling always maximise the use of scarce resources to achieve the purposeful behaviour of employees in an organisation. In planningstage, it is decided that how the resources would be utilised but where as in the controlling stage it is observed that whether the resources are being utilised in the same way as planned or not. Thus, control completes the whole sequence of management process.

"Controlling is determining what is being accomplished - that is, evaluating performance and, if necessary, applying corrective measures so that performance takes place according to plans".

Importance of Controlling

Control system acts as an adjustment in organisational operations. It mainly checks whether plans are being observed and suitable progress towards the objectives is being made or not, and if necessary any action to control the deviations.

Policies and other planning elements set by the managers become the basis and reason for control. Through control it is monitored whether the individuals adhere to those frameworks or not so that organisation and management can verify the quality of various policies.

Exercising some authority and forming superior-subordinate relationship throughout the organisation can be established through controlling.

With the presence of authority or control the individuals will work properly and exhibit better performance to reach the targets set for them.

Control system ensures the organisational efficiency and effectiveness. When Proper system exists the organisation effectively achieves its objectives.