Cathay Pacific Airways: PESTLE Analysis & Impact on Globalization - Essay Sample

Introduction

Cathay Pacific Airways Limited further referred to as Cathay Pacific, is a flag carrier based in Hong Kong, with its central hub placed at Hong Kong International Airport. The airline provides scheduled cargo service, passenger handling, airline catering, and maintenance services. Cathay Pacific plays a fundamental responsibility in globalization and adds to the expansion of national economies. The PESTLE assessment manifests a debate on other external influences, specifically economic, political, social, technological, legal, and technological.

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It should be noted that the PESTLE assessment represents a critical approach studying the effect of influencers on the Cathay Pacific's business case. Such factors played a role in the airline suffering a 38 percent plunge in passengers journeying to Hong Kong in August. As such, this is an external analysis of Cathay Pacific, with the inclusion of how PESTLE factors resulted in the current issues the airline faces (Barney, 1995).

The PESTLE analysis, in this case, will be used to assess the external environment that leverages the success and current drop in the number of passengers.

Political Analysis

Politics is the key external factor that influences the airline. In September, there Hong Kong witnessed numerous anti-government protests hence scaring away tourists traveling into the country. Principally, with protests over the current government, visitors were wary that chaos might plunge any time, therefore sitting back to watch the show. It should be noted that tourists cannot visit a region with political unrest for fear of danger. Political turmoil in the Hong Kong market on the government caused this decrease in traffic of people using Cathay Pacific. Lack of government stabilization and the policies put in place to manage the business and other human affairs were not well received by people hence triggering the protests to the detriment of Cathay Pacific. With such demonstrations in the area, the government sluggishly took measures to amend the situation (Bhasin, 2018, May 8).

Nonetheless, current times have witnessed the stabilization of its politics and have seen more visitors using Cathay Pacific. The size of the government budget favors Cathay Pacific as both the national and federal governments provide enough budgets that boost the economy in the short run. With the political unrest in Hong Kong, the currency rating also dropped, making it more expensive for visitors to tour the region. The information is summarized in Figure 1 below.

Figure 1: Political Analysis

Economic Analysis

The economic factors of a region and a country may have direct and long-lasting impacts on the firm's potential to attract given markets. For instance, some economic-related factors that Cathay Airlines should investigate include inflation rates, GDP growth, and disposable income levels. The price fluctuations in the local and international markets have led to the rampant inflation and currency depreciations that have negatively affected the airlines competitive nature. However, the airline has also derived benefits from reduced oil prices. Low oil prices in Hong Kong reduces fuel costs significantly. Tourists have the chance to enjoy reduced rates hence prefer the region to others.

Moreover, the scraping of the carbon emission policies allowed the company to receive grants and benefits that have boosted its global standings. With the economy of the region plunging during the protests, Cathay Airlines further had concerns since tourists opted for alternative destinations. The strong dollar is believed to be making Hong Kong an expensive destination. Cathay Pacific, therefore, uses this option to garner more tourists from destinations across the world. Figure 2 summarizes the economic assessment of Cathay Pacific.

Figure 2: Economic Assessment

Social-Cultural Assessment

The socio-cultural organization of the company is impacted by the culture or norms of the social environment that surrounds the company. The population demographics are one of the most influencing socio-cultural factors for the firm (Bart, 2018, March 30). The firm chose older travelers with vast travel experiences as its core market segment. Therefore, the firm targets this market base. There are training programs alongside workshops meant for young graduates. Such programs are aimed at enhancing the level to which Cathy Pacific airline provides services to its clients on a routine basis. During the protests that witnessed a reduction in the number of travelers, the airline took the initiative of training its workforce on best approaches to serve clients. Considering that such time clients and travelers were on the low, training programs were provided using both on-the-job and off-the-job bases. Employees are trained on how to handle people from different cultural backgrounds since it receives visitors from almost all parts of the world on a routine basis. The socio-cultural factors, therefore, represent some of the essential elements for the management and operations of Cathy Pacific. Figure 3 illustrates an overview of the socio-cultural assessment of international airlines (Jacobs, 2018).

Figure 3: Social-Cultural Assessment

Technological Assessment

The technological factor is yet another external factor that is slowly but steadily gaining attention from business leaders (Mix & Match, 2018). Technology is causing both threats as well as creating opportunities for businesses in the aviation industry. For Cathay Pacific to attain a competitive advantage over its rival firms, it should follow the trends of updating kit technology tables.

Further, the international airline has invested in data analytics alongside mobility to enhance the traveler experience. Clients use technological approaches put in place by the airline to make bookings and all related inquiries. Further, when travels are canceled, Cathay Pacific informs travelers using online methods. Additionally, there is the involvement of social media platforms. When the airline experienced a shortage of travelers in September, the management took to social media to interact with clients in informing them that the issue will be resolved and normalcy restored. In so doing, it ensures that technology influences how the airline conducts its operations on a routine basis. Figure 4 below offers a summary of the technological assessment.

Figure 4: Technological Assessment

Legal Analysis

There are rules and regulations regarding how business should be managed in Hong Kong. Companies, including Cathay Pacific Airlines, have to adhere to such regulations, otherwise would be permitted to operate. It should be noted both the federal and state government require Cathay Pacific to work in a specific routine that is under its jurisdiction. Essentially, there are some nations that the airline cannot fly. Such is because of antitrust proceedings in several domains. Adhering to all the rules requires that so many resources are spent in implementing the policies that ensure that the airline adheres to the standards.

Rivalry Between Competitors

In general terms, the fiercest competition is between rival firms that are competing directly in the same industry and are offering the same products to their consumers. The rivalry in the market increases in the competition as Cathay increases its number of operations, size, and capacity. As the rivalry intensifies, the firm will experience less revenue since the revenues decrease. As the competition between competitors becomes more intense, the airline industry profits decline, causing it to become less attractive and, therefore, reduce the entry of new competitors.

The threat of new entrants refers to the possibility of new market entries due to the potential opportunities that new businesses have seen lying waste. There is no threat of new market entrants in the airline's activities because of the massive investments. To be able to remain relevant in the market, the airline undertakes some marketing strategies and also try to do market analysis to gain competitive advantage (Fredrick,2017, February 9). The VRIO framework is a useful strategy for analyzing the airline's ability to transferring its resources and capabilities to sustainable competitive advantages.

The VRIO model of the Cathay Company reveals that the airline has obtained sustainable competitive advantage through the provision of safe, secure, and comfortable fleet services. For instance, the acquiring of the new and modern Airbus 350- 900 fleets provides comfort to its passengers. Besides, these acquisitions have helped the company learn hard and inimitable resources. Furthermore, the airline also has unused resources in the form of long journey flights to other destinations. The company is famous and can exploit such travels.

References

Barney, J. B. (1995). Looking inside for Competitive Advantage. Academy of Management Executive, 9(4), 49-61.

Bart, J. (2018, March 30). Dot fines Qantas up to $125K for its intra-U.S. flights. USA Today. Retrieved from https://www.usatoday.com/story/travel/flights/todayinthesky/2018/03/30/dot-fines-qantas/472821002/

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Morris, H. (2018, August 17). Revealed: How many passengers on Qantas' 17 hour non-stop flights from Perth to London. Traveller. Retrieved from http://www.traveller.com.au/revealed-how-many-people-are-flying-on-qantas-17-hour-nonstop-flights-from-perth-to-uk-h14144